UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 28, 1997
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number: 000-17962
Applebee's International, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 43-1461763
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(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or
organization)
4551 W. 107th Street, Suite 100, Overland Park, Kansas 66207
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(Address of principal executive offices and zip code)
(913) 967-4000
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(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock,
par value $.01
per share
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
---- ----
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. |_|
The aggregate market value of the voting stock held by non-affiliates of the
registrant as of March 9, 1998 was $697,802,316 based upon the closing sale
price on March 9, 1998.
The number of shares of the registrant's common stock outstanding as of March 9,
1998 was 30,257,011.
DOCUMENTS INCORPORATED BY REFERENCE
Proxy statement to be filed pursuant to Regulation 14A under the Securities
Exchange Act of 1934 is incorporated into Part III hereof.
1
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APPLEBEE'S INTERNATIONAL, INC.
FORM 10-K
FISCAL YEAR ENDED DECEMBER 28, 1997
INDEX
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Page
PART I
<S> <C> <C>
Item 1. Business................................................................................ 3
Item 2. Properties.............................................................................. 16
Item 3. Legal Proceedings....................................................................... 18
Item 4. Submission of Matters to a Vote of Security Holders..................................... 18
PART II
Item 5. Market for Registrant's Common Equity and
Related Stockholder Matters...................................................... 19
Item 6. Selected Financial Data................................................................. 20
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations..................................... 21
Item 8. Financial Statements and Supplementary Data............................................. 29
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure............................................ 29
PART III
Item 10. Directors and Executive Officers of the Registrant...................................... 30
Item 11. Executive Compensation.................................................................. 30
Item 12. Security Ownership of Certain Beneficial Owners and Management.......................... 30
Item 13. Certain Relationships and Related Transactions.......................................... 30
PART IV
Item 14. Exhibits and Reports on Form 8-K........................................................ 31
Signatures.............................................................................................. 32
</TABLE>
2
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PART I
Item 1. Business
General
Applebee's International, Inc. and its subsidiaries (the "Company") develops,
franchises and operates casual dining restaurants principally under the names
"Applebee's Neighborhood Grill & Bar" and "Rio Bravo Cantina."
The Company opened its first restaurant in 1986 and initially developed and
operated six restaurants as a franchisee of the Applebee's Neighborhood Grill &
Bar Division (the "Applebee's Division") of an indirect subsidiary of W.R. Grace
& Co. In March 1988, the Company acquired substantially all the assets of its
franchisor. At the time of this acquisition, the Applebee's Division operated 14
restaurants and had ten franchisees, including the Company, operating 41
franchise restaurants.
As of December 28, 1997, there were 960 Applebee's restaurants, of which 770
were operated by franchisees and 190 were owned or operated by the Company. The
restaurants were located in 48 states, Canada, Europe, and the Caribbean. During
1997, 145 new restaurants were opened, including 113 franchise restaurants and
32 Company restaurants.
The Company acquired the Rio Bravo Cantina chain of Mexican casual dining
restaurants in March 1995 and began franchise expansion in 1996. As of December
28, 1997, there were 55 Rio Bravo Cantina restaurants located in 18 states, of
which 24 were operated by franchisees and 31 were owned by the Company. During
1997, 26 new restaurants were opened, including 16 franchise restaurants and 10
Company restaurants. The Company also owns four other specialty restaurants.
3
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The following table sets forth certain unaudited financial information and other
restaurant data relating to Company and franchise restaurants, as reported to
the Company by franchisees.
<TABLE>
<CAPTION>
Fiscal Year Ended
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December 28, December 29, December 31,
1997 1996 1995
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<S> <C> <C> <C>
Number of restaurants:
Applebee's:
Company(1):
Beginning of year............................ 148 128 97
Restaurant openings.......................... 32 29 27
Restaurant closings.......................... (1) (3) (1)
Restaurants acquired from (by) franchisees... 11 (6) 5
----------------- ---------------- -----------------
End of year.................................. 190 148 128
----------------- ---------------- -----------------
Franchise:
Beginning of year............................ 671 538 408
Restaurant openings.......................... 113 134 135
Restaurant closings.......................... (3) (7) --
Restaurants acquired by (from) franchisees... (11) 6 (5)
----------------- ---------------- -----------------
End of year.................................. 770 671 538
----------------- ---------------- -----------------
Total Applebee's:
Beginning of year............................ 819 666 505
Restaurant openings.......................... 145 163 162
Restaurant closings.......................... (4) (10) (1)
----------------- ---------------- -----------------
End of year.................................. 960 819 666
================= ================ =================
Rio Bravo Cantinas:
Company:
Beginning of year............................ 21 16 12
Restaurant openings.......................... 10 5 4
----------------- ---------------- -----------------
End of year.................................. 31 21 16
----------------- ---------------- -----------------
Franchise:
Beginning of year............................ 9 -- --
Restaurant openings.......................... 16 9 --
Restaurant closings.......................... (1) -- --
----------------- ---------------- -----------------
End of year.................................. 24 9 --
----------------- ---------------- -----------------
Total Rio Bravo Cantinas:
Beginning of year............................ 30 16 12
Restaurant openings.......................... 26 14 4
Restaurant closings.......................... (1) -- --
----------------- ---------------- -----------------
End of year.................................. 55 30 16
================= ================ =================
Specialty Restaurants................................ 4 4 4
================= ================ =================
Total number of restaurants:
Beginning of year............................ 853 686 521
Restaurant openings.......................... 171 177 166
Restaurant closings.......................... (5) (10) (1)
----------------- ---------------- -----------------
End of year.................................. 1,019 853 686
================= ================ =================
</TABLE>
4
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<TABLE>
<CAPTION>
Fiscal Year Ended
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December 28, December 29, December 31,
1997 1996 1995
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<S> <C> <C> <C>
Weighted average weekly sales per restaurant:
Applebee's:
Company(1).................................. $ 41,176 $ 40,366 $ 39,977
Franchise................................... $ 39,513 $ 39,870 $ 40,922
Total Applebee's............................ $ 39,826 $ 39,961 $ 40,737
Rio Bravo Cantinas:
Company(2).................................. $ 60,946 $ 66,743 $ 66,158
Franchise................................... $ 49,288 $ 67,371 $ --
Total Rio Bravo Cantinas.................... $ 56,206 $ 66,741 $ 66,158
Change in comparable restaurant sales:(3) Applebee's:
Company(1).................................. 0.1 % 1.1 % 0.3%
Franchise................................... 0.6 % (1.2)% 0.5%
Total Applebee's............................ 0.5 % (0.8)% 0.5%
Rio Bravo Cantinas (Company).................... (1.6)% 3.9 % 0.9%
Total system sales (in thousands):
Applebee's...................................... $ 1,818,503 $ 1,539,277 $ 1,248,383
Rio Bravo Cantinas.............................. 128,196 66,663 48,135
Specialty restaurants........................... 14,435 14,374 14,339
----------------- ---------------- -----------------
Total system sales.......................... $ 1,961,134 $ 1,620,314 $ 1,310,857
================= ================ =================
</TABLE>
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(1)Includes certain Texas restaurants operated by the Company under a
management agreement since July 1990 (two at the end of 1995 and one at
the end of 1996 and 1997).
(2)Excludes one restaurant which is open for dinner only.
(3)When computing comparable restaurant sales, restaurants open for at
east 18 months are compared from period to period.
5
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The Applebee's System
Concept. Each Applebee's restaurant is designed as an attractive, friendly,
neighborhood establishment featuring moderately priced, high quality food and
beverage items, table service and a comfortable atmosphere. Applebee's
restaurants appeal to a wide range of customers including families with
children, young adults and senior citizens.
Applebee's restaurants are designed according to Company specifications and are
located in free-standing buildings, end caps of strip shopping centers, and
shopping malls. The Company's two current free-standing restaurant prototypes,
which were introduced during 1997, are approximately 4,700 and 5,000 square feet
and seat approximately 165 and 200 patrons, respectively. Each Applebee's
restaurant has a centrally located bar and many restaurants offer patio seating.
The decor of each restaurant incorporates artifacts and memorabilia such as old
movie posters, musical instruments and sports equipment along with photographs
and magazine and newspaper articles highlighting local history and
personalities, giving each restaurant an individual, neighborhood identity. Each
Applebee's restaurant is required to be remodeled every six years to embody the
design elements of the current prototype.
Menu. Each Applebee's restaurant offers a diverse menu of high quality,
moderately priced food and beverage items consisting of traditional favorites
and innovative dishes. The restaurants feature a broad selection of entrees,
including beef, chicken, seafood and pasta items prepared in a variety of
cuisines, as well as appetizers, salads, sandwiches, specialty drinks and
desserts. Substantially all restaurants offer beer, wine, liquor and premium
specialty drinks. During 1997, alcoholic beverages accounted for 15.2% of
Company owned Applebee's restaurant sales. The Company continuously develops and
tests new menu items through regional consumer tastings and additional tests in
selected Company and franchise restaurants. Franchisees are required to present
a menu consisting of approximately 65% of selections from the Company approved
list of national core items and approximately 35% of additional items selected
from the Company approved list of optional items. The Company launched a major
new food and menu initiative in 1997 for all Applebee's restaurants which was
designed to enhance both food quality and presentation. The initiative included
enhanced food offerings and upgraded food specifications, new plateware,
additional menu item selections and side dish alternatives. The rollout of this
initiative was completed for most Applebee's restaurants in the system by the
end of November 1997.
Restaurant Operations. All restaurants are operated in accordance with uniform
operating standards and specifications relating to the quality and preparation
of menu items, selection of menu items, maintenance and cleanliness of premises,
and employee conduct. All standards and specifications are developed by the
Company, with input from franchisees, and applied on a system-wide basis.
Training. The Company has an operations training course for general managers,
kitchen managers and other restaurant managers. The course consists of in-store
task-oriented training and formal administrative, customer service, and
financial training which may last from 10 to 12 weeks. A team of Company
employed trainers is provided for new restaurants to conduct hands-on training
for all restaurant employees to ensure compliance with Company standards.
The Company also operates Applebee University, which offers restaurant managers
specialized training programs, and conducts regular meetings that emphasize
leadership, quality of food preparation, and service. In 1997, the Company
conducted 110 Applebee University sessions consisting of one day of continuing
education in a classroom setting. The Company, generally through in-restaurant
seminars and video presentations, provides periodic training for its restaurant
employees regarding topics such as the responsible service of alcohol and food
sanitation and storage.
6
<PAGE>
Advertising. The Company has historically concentrated its advertising and
marketing efforts primarily on four food-specific promotions each year, with
each promotion featuring a specific theme or ethnic cuisine. The Company added
two optional promotions in 1997 and will add an additional food promotion in
1998. The Company advertises on a national, regional and local basis, utilizing
primarily television, radio and print media. In 1997, approximately 4.0% of
sales for Company Applebee's restaurants was spent on advertising, including
1.5% contributed to the national advertising pool which develops and funds the
specific national promotions. All franchisees are also required to contribute
1.5% of sales to the national advertising pool. The remainder of the Company's
advertising expenditures are focused on local advertising in areas with Company
owned restaurants.
Purchasing. Maintaining high food quality and system-wide consistency is a
central focus of the Company's purchasing program. The Company mandates quality
standards for all products used in the restaurants and maintains a limited list
of approved suppliers from which the Company and its franchisees must select.
The Company has negotiated purchasing agreements with most of its approved
suppliers which result in volume discounts for the Company and its franchisees,
and when necessary, purchases and maintains inventories of Riblets, a specialty
item on the Applebee's menu, to assure sufficient supplies for the system.
Company Applebee's Restaurants
Company Restaurant Openings and Acquisitions. The Company's expansion strategy
is to cluster restaurants in targeted markets, thereby increasing consumer
awareness and enabling the Company to take advantage of operational,
distribution, and advertising efficiencies. The Company's experience in
developing markets indicates that the opening of multiple restaurants within a
particular market results in increased market share.
In order to maximize overall system growth, the Company's expansion strategy
through 1992 emphasized franchise arrangements with experienced, successful and
financially capable restaurant operators. Although the Company continues to
expand the Applebee's system across the United States through franchise
operations, commencing in 1992, the system growth strategy also included
increasing the number of Company restaurants through the direct development of
strategic territories and, if available under acceptable financial terms, by
selectively acquiring existing franchise restaurants and terminating related
development rights held by the selling franchisee. In that regard, the Company
has expanded from a total of 31 owned or operated restaurants as of December 27,
1992 to a total of 190 as of December 28, 1997 through the opening of 125 new
restaurants and the acquisition of 48 franchise restaurants over the last five
years, including 11 franchise restaurants in the St. Louis metropolitan area
that were acquired during 1997.
On December 23, 1997, the Company entered into an agreement with Apple South,
Inc. ("Apple South"), its largest franchisee, to acquire 31 Applebee's
restaurants plus one restaurant under construction in the Virginia markets of
Norfolk, Richmond, Roanoke and Charlottesville for approximately $93,400,000,
subject to certain closing adjustments, referred to herein as the "Virginia
Acquisition." The Virginia Acquisition is anticipated to close in late March
1998, subject to obtaining financing, operating licenses and third-party
consents.
7
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In addition to the pending acquisition of the Virginia restaurants, the Company
anticipates opening approximately 32 new Applebee's restaurants in 1998,
although it may open more restaurants depending upon the availability of
appropriate new sites. The areas in which the Company's restaurants are located
and the areas where the Company opened new restaurants during 1997 are set forth
in the following table.
<TABLE>
<CAPTION>
Company
Company Restaurants
Restaurants as of
Opened in December 28,
Area 1997 1997
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<S> <C> <C> <C>
New England (includes Massachusetts, Vermont,
New Hampshire, Rhode Island and Maine).................... 9 33
Detroit/Southern Michigan................................... 6 29
Minneapolis/St. Paul, Minnesota............................. 3 28
North/Central Texas......................................... 1 21
Kansas City, Missouri/Kansas................................ 2 20
St. Louis, Missouri/Illinois................................ 3 14
Las Vegas/Reno, Nevada...................................... 1 10
Philadelphia, Pennsylvania.................................. 2 8
San Diego/Southern California............................... 1 8
Atlanta, Georgia............................................ -- 7
Albuquerque, New Mexico..................................... 2 6
Long Island, New York....................................... 2 6
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32 190
==================== ==================
</TABLE>
In February 1998, the Company entered into an agreement to sell its six
restaurants located in the Long Island, New York area for approximately
$10,000,000 in cash. The operations of the restaurants and future restaurant
development in the market area will be assumed by an existing Applebee's
franchisee. The Company expects the sale to close in the second quarter of 1998
with minimal effect, if any, on its consolidated net earnings or financial
position.
The Company continues to assess its strategic direction with respect to the
operations of its seven Company owned Applebee's restaurants in the San Diego
market area, and future restaurant development in this territory. The Company's
alternatives for the San Diego market may include continued operation of the
restaurants and development of new restaurants, a franchisee alliance for future
development of the remainder of the market, or the possible sale of the existing
restaurants to a franchisee.
Restaurant Operations. The staff for a typical Applebee's restaurant consists of
one general manager, one kitchen manager, two or three assistant managers and
approximately 75 hourly employees. All managers of Company owned restaurants
receive a salary and performance bonus based on restaurant sales, profits and
adherence to Company standards. As of December 28, 1997, the Company employed
eight regional Directors of Operations and 31 District Managers, whose duties
include regular restaurant visits and inspections and the ongoing maintenance of
the Company standards of quality, service, cleanliness, value, and courtesy. In
addition to providing a significant contribution to revenues and operating
earnings, Company restaurants are used for many purposes which are integral to
the development of the entire system, including testing of new menu items and
training of franchise restaurant managers and operating personnel. In addition,
the operation of Company restaurants enables the Company to develop and refine
its operating standards and specifications further and to understand and better
respond to day-to-day management and operating concerns of franchisees.
8
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The Applebee's Franchise System
Franchise Territory and Restaurant Openings. The Company currently has exclusive
franchise arrangements with approximately 55 franchise groups, including nine
international franchisees. The Company has generally selected franchisees that
are experienced multi-unit restaurant operators who have been involved with
other restaurant concepts. The Company's franchisees operate Applebee's
restaurants in 41 states, Canada, Europe, and the Caribbean. Virtually all
territories in the contiguous 48 states have been granted to franchisees or
designated for Company development.
As of December 28, 1997, there were 770 franchise restaurants. Franchisees
opened 135 restaurants in 1995, 134 restaurants in 1996, and 113 restaurants in
1997. The Company anticipates between 85 to 100 franchise restaurant openings in
1998.
As part of the agreement with Apple South relating to the Virginia Acquisition,
Apple South has also agreed to use its best efforts to sell its other Applebee's
restaurants as soon as practical, resulting in its exit as an Applebee's
franchisee. The reduction in expected franchise restaurant openings in 1998 is a
result of probable delays in development that will occur during the transition
of restaurants and territories from Apple South to new franchisees. To the
extent any restaurants are not divested by Apple South by December 31, 1999, the
Company has an option to purchase the remaining restaurants at a predetermined
formula. The Company and Apple South have committed to work together to identify
and approve qualified franchise groups to acquire the remaining Apple South
restaurants and to effect an efficient transition of ownership.
Development of Restaurants. The Company makes available to franchisees the
physical specifications for a typical restaurant, retaining the right to
prohibit or modify the use of any plan. Each franchisee, with assistance from
the Company, is responsible for selecting the site for each restaurant within
its territory, subject to Company approval. The Company conducts a physical
inspection, reviews any proposed lease or purchase agreement, and makes
available demographic studies.
Domestic Franchise Arrangements. Each Applebee's franchise arrangement consists
of a development agreement and separate franchise agreements. Development
agreements grant the exclusive right to develop a number of restaurants in a
designated geographical area. The term of a domestic development agreement is
generally 20 years. A separate franchise agreement is entered into by the
franchisee relating to the operation of each restaurant which has a term of 20
years and permits renewal for up to an additional 20 years in accordance with
the terms contained in the then current franchise agreement (including the then
current royalty rates and advertising fees) and upon payment of an additional
franchise fee.
For each restaurant developed, a franchisee is currently obligated to pay to the
Company a royalty fee equal to 4% of the restaurant's monthly gross sales. The
Company's current form of development agreement requires an initial franchise
fee of $35,000 for each restaurant developed during its term. The terms,
royalties and advertising fees under a limited number of franchise agreements
and the franchise fees under older development agreements vary from the
currently offered arrangements.
9
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Advertising. Domestic franchisees are required to spend at least 1.5% of gross
sales on local advertising and promotional activities, in addition to their
contribution of 1.5% of gross sales to the national advertising account.
Franchisees also promote the opening of each restaurant and the Company, subject
to certain conditions, reimburses the franchisee for 50% of the out-of-pocket
opening advertising expenditures, up to a maximum of $2,500. The Company can
increase the combined amount of the advertising fee and the amount required to
be spent on local advertising and promotional activities to a maximum of 5% of
gross sales.
Training and Support. The Company provides ongoing advice and assistance to
franchisees in connection with the operation and management of each restaurant
through training sessions, meetings, seminars, on-premises visits, and by
written or other material. Such advice and assistance relates to revisions to
operating manual policies and procedures, and new developments, techniques, and
improvements in restaurant management, food and beverage preparation, sales
promotion, and service concepts.
Quality Control. The Company continuously monitors franchisee operations and
inspects restaurants, principally through its full-time franchise consultants
(24 at December 28, 1997) who report to the Company's Executive Director of
Franchise Operations. The Company makes both scheduled and unannounced
inspections of restaurants to ensure that only approved products are in use and
that Company prescribed practices and procedures are being followed. A minimum
of three planned visits are made each year, during which a representative of the
Company conducts an inspection and consultation at each restaurant. The Company
has the right to terminate a franchise if a franchisee does not operate and
maintain a restaurant in accordance with the Company's requirements.
Franchise Business Council. The Company maintains a Franchise Business Council
which provides advice to the Company regarding operations, marketing, product
development and other aspects of restaurant operations for the purpose of
improving the franchise system. As of December 28, 1997, the Franchise Business
Council consisted of eight franchisee representatives and three members of the
Company's senior management. One franchisee representative is a permanent
member, one franchisee representative must be a franchisee with five or less
restaurants, and any franchisee who operates 10% or more of the total number of
system restaurants is reserved a seat. Although Apple South operates more than
10% of the total number of system restaurants, in connection with the Virginia
Acquisition, it relinquished its seat on the Franchise Business Council as of
December 23, 1997. The remaining franchisee representatives are elected by
franchisees prior to and announced at the annual franchise convention.
International Franchise Agreements. The Company has begun pursuing international
franchising of the Applebee's concept under a long-term strategy of controlled
expansion. This strategy includes seeking highly qualified franchisees with the
resources to open multiple restaurants in each territory and the familiarity
with the specific local business environment. The Company is currently focusing
on international franchising in Canada, the United Kingdom, Australia,
continental Europe and the Mediterranean region. In this regard, the Company
currently has development agreements with nine international franchisees. Seven
restaurants were opened during 1997 - two each in Canada and the Netherlands,
and one each in Germany, Greece and Sweden. The success of further international
expansion will be dependent upon, among other things, local acceptance of the
Applebee's concept, and the Company's ability to attract qualified franchisees
and operating personnel, to comply with the regulatory requirements of the local
jurisdictions, and to supervise international franchisee operations effectively.
10
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Franchise Financing. Although financing is the sole responsibility of the
franchisee, the Company makes available to franchisees the names and addresses
of financial institutions interested in financing the costs of restaurant
development for qualified franchisees. None of these financial institutions is
an affiliate or agent of the Company, and the Company has no control over the
terms or conditions of any financing arrangement offered by these financial
institutions. Under a previous franchise financing program, the Company provided
a limited guaranty of loans made to certain franchisees. To assist in the
transition of the Apple South restaurants to other franchisees, the Company has
agreed to provide the availability of guarantees up to 10% of the borrowings of
qualified franchise groups, up to a maximum of $10,000,000 in the aggregate. See
Notes to Consolidated Financial Statements of the Company included elsewhere
herein. On infrequent occasions, when the Company believes it is necessary to
support franchise development in a strategic territory, the Company has made
secured loans to franchisees, agreed to defer collection of royalties, or
guaranteed equipment leases.
Rio Bravo Cantina Restaurants
General. In March 1995, a wholly-owned subsidiary of the Company merged with and
into Innovative Restaurant Concepts, Inc. ("IRC"), referred to herein as the
"IRC Merger," through which the Company acquired the Rio Bravo Cantina chain of
Mexican casual dining restaurants. As a result of the IRC Merger, IRC became a
wholly-owned subsidiary of the Company. At the time of the IRC Merger, IRC
operated 17 restaurants, including 13 Rio Bravo Cantina restaurants, and four
other specialty restaurants.
Expansion. As of December 28, 1997, the Company operated 31 Rio Bravo Cantina
restaurants and franchisees operated 24 Rio Bravo Cantina restaurants in 18
states. During 1997, the Rio Bravo Cantina concept was expanded into seven new
states. The Company opened ten Rio Bravo Cantina restaurants in 1997, and
expects to open 11 Rio Bravo Cantina restaurants in 1998. In addition, the
Company has identified 17 Rio Bravo Cantina franchisees, all of whom are
experienced Applebee's franchisees. The development territories of the 17
franchisees encompass all or parts of 28 states. The Company expects between 8
to 10 franchise Rio Bravo Cantina restaurants to open in 1998.
Concept. Rio Bravo Cantina restaurants offer generous portions of Mexican
cuisine at attractive prices. The restaurants feature tortillas made on the
premises, fresh daily specials, a variety of signature margaritas and
distinctive Mexican architecture and interior decor which create a festive
atmosphere reminiscent of an authentic Mexican cantina. The design of the
restaurants incorporates materials such as exposed brick, barn wood, Mexican
tile floors and stucco walls embellished with various signs, inscriptions and
other items depicting a rustic border motif.
Rio Bravo Cantina restaurants can be located in either free-standing buildings,
strip shopping centers, or shopping malls. Existing locations, many of which are
conversions of other restaurants, range in size from 5,600 to 10,300 square feet
and seat between 210 and 450 customers. Most of the restaurants have a patio
area providing additional seating during much of the year. The current
free-standing prototype, which was introduced during 1997, is approximately
5,600 square feet and seats approximately 210 people with an optional outdoor
patio area that seats 36 patrons.
Menu. All but one Rio Bravo Cantina restaurant are open for lunch and dinner
seven days a week. The menu includes traditional Mexican food items such as
burritos, enchiladas, tamales and tacos. In addition, the menu offers a wide
variety of other favorites such as beef, chicken and shrimp fajitas,
quesadillas, shrimp dishes, and a variety of salads and desserts. A large
variety of Mexican and domestic beers, Sangria, and signature margaritas are
also featured. The menu offers lunch entrees priced from $4.79 to $7.79 and
dinner entrees priced from $5.99 to $12.99. During 1997, alcoholic beverages
accounted for approximately 29% of total Company restaurant sales.
11
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The Rio Bravo Franchise System
Franchise Arrangements. Each Rio Bravo Cantina franchise arrangement consists of
a development agreement and separate franchise agreements. Development
agreements grant the exclusive right to develop a number of restaurants in a
designated geographical area. The term of a domestic development agreement is
generally 15 years. A separate franchise agreement is entered into by the
franchisee relating to the operation of each restaurant which has a term of 15
years and permits renewal for up to an additional 15 years in accordance with
the terms contained in the then current franchise agreement (including the then
current royalty rates and advertising fees) and upon payment of an additional
franchise fee.
For each restaurant developed, a franchisee is obligated to pay to the Company a
royalty fee equal to 4% of the restaurant's gross sales. Beginning in 2000, the
royalty fee will increase to 4.25%. The development agreement requires an
initial franchise fee of $40,000 for each restaurant developed during its term.
Franchisees are currently required to spend at least 1.5% of gross sales on
local advertising and promotional activities, in addition to a contribution of
2.0% of gross sales to the national advertising account.
Rio Bravo Roundtable. The Company maintains a Rio Bravo Roundtable which
provides advice to the Company regarding operations, marketing, product
development, and other aspects of restaurant operations for the purpose of
improving the franchise system. As of December 28, 1997, the Rio Bravo
Roundtable consisted of five franchisee representatives and two members of the
Company's senior management. Franchisee representatives are elected by
franchisees at an annual meeting.
Specialty Restaurants
In connection with the acquisition of the Rio Bravo Cantina concept, the Company
also acquired four specialty restaurants, comprised of two Green Hills Grille
restaurants in Nashville, Tennessee and Huntsville, Alabama, an upscale Rio
Bravo Cantina called the Rio Bravo Grill in Atlanta, Georgia and Ray's on the
River in Atlanta, Georgia. The Company currently has no expansion plan for these
specialty restaurant concepts.
Competition
Competition in the casual dining segment of the restaurant industry is expected
to remain intense with respect to price, service, location, concept, and the
type and quality of food. There is also intense competition for real estate
sites, qualified management personnel, and hourly restaurant staff. The
Company's competitors include national, regional and local chains, as well as
local owner-operated restaurants. There are a number of well-established
competitors, some of which have been in existence for a longer period than the
Company and may be better established in the markets where the Company's
restaurants are or may be located. The Company has begun to experience increased
competition in attracting and retaining qualified management level operating
personnel.
Service Marks
The Company owns the rights to the "Applebee's Neighborhood Grill & Bar(R)" and
"Rio Bravo Cantina(R)" service marks and certain variations thereof in the
United States and, with respect to the Applebee's mark, in various foreign
countries. The Company is aware of names and marks similar to the service marks
of the Company used by third parties in certain limited geographical areas. The
Company intends to protect its service marks by appropriate legal action where
and when necessary.
12
<PAGE>
Government Regulation
The Company's restaurants are subject to numerous federal, state, and local laws
affecting health, sanitation and safety standards, as well as to state and local
licensing regulation of the sale of alcoholic beverages. Each restaurant
requires appropriate licenses from regulatory authorities allowing it to sell
liquor, beer, and wine, and each restaurant requires food service licenses from
local health authorities. The Company's licenses to sell alcoholic beverages
must be renewed annually and may be suspended or revoked at any time for cause,
including violation by the Company or its employees of any law or regulation
pertaining to alcoholic beverage control, such as those regulating the minimum
age of patrons or employees, advertising, wholesale purchasing, and inventory
control. The failure of a restaurant to obtain or retain liquor or food service
licenses could have a material adverse effect on its operations. In order to
reduce this risk, each restaurant is operated in accordance with standardized
procedures designed to facilitate compliance with all applicable codes and
regulations.
The Company's employment practices are governed by various governmental
employment regulations, including minimum wage, overtime, immigration, family
leave and working condition regulations.
The Company is subject to a variety of federal and state laws governing
franchise sales and the franchise relationship. In general, these laws and
regulations impose certain disclosure and registration requirements prior to the
sale and marketing of franchises. Recent decisions of several state and federal
courts and recently enacted or proposed federal and state laws demonstrate a
trend toward increased protection of the rights and interests of franchisees
against franchisors. Such decisions and laws may limit the ability of
franchisors to enforce certain provisions of franchise agreements or to alter or
terminate franchise agreements. Due to the scope of the Company's business and
the complexity of franchise regulations, minor compliance issues may be
encountered from time to time; however, the Company does not believe any such
issues will have a material adverse effect on its business.
Under certain court decisions and statutes, owners of restaurants and bars in
some states in which the Company owns or operates restaurants may be held liable
for serving alcohol to intoxicated customers whose subsequent conduct results in
injury or death to a third party, and no assurance can be given that the Company
will not be subject to such liability. The Company believes its insurance
presently provides adequate coverage for such liability.
Employees
At December 28, 1997, the Company employed approximately 18,150 full and
part-time employees, of whom approximately 370 were corporate personnel, 1,130
were restaurant managers or managers in training and 16,650 were employed in
non-management full and part-time restaurant positions. Of the 370 corporate
employees, 100 were in management positions and 270 were general office
employees, including part-time employees.
The Company considers its employee relations to be good. Most employees, other
than restaurant management and corporate personnel, are paid on an hourly basis.
The Company believes that it provides working conditions and wages that compare
favorably with those of its competition. The Company has never experienced a
work stoppage due to labor difficulty and the Company's employees are not
covered by a collective bargaining agreement.
13
<PAGE>
Executive Officers of the Registrant
The executive officers of the Company as of December 28, 1997 are shown below.
<TABLE>
<CAPTION>
Name Age Position
<S> <C> <C>
Abe J. Gustin, Jr................63 Chairman of the Board of Directors and Co-Chief Executive Officer
(Chairman effective January 1, 1998)
Lloyd L. Hill....................53 Co-Chief Executive Officer (Chief Executive Officer effective
January 1, 1998), President, Chief Operating Officer and Member
of the Board of Directors
George D. Shadid.................43 Executive Vice President, Chief Financial Officer and Treasurer
Robert A. Martin.................67 Executive Vice President of Marketing and Member of the Board of
Directors
Louis A. Kaucic..................46 Senior Vice President of Human Resources
Steven K. Lumpkin................43 Senior Vice President of Strategic Development
Ronald J. Marks..................42 Senior Vice President of Research & Development (resigned in March
1998)
Stuart F. Waggoner...............52 President and Chief Executive Officer of Rio Bravo International,
Inc. (a wholly-owned subsidiary of Applebee's International, Inc.)
</TABLE>
Abe J. Gustin, Jr. 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 served as Chief Executive Officer of the Company through 1996, and
effective January 1, 1997, became Co-Chief Executive Officer along with Lloyd L.
Hill. In January 1998, Mr. Gustin retained his position as the Chairman of the
Board and Mr. Hill assumed the full duties of Chief Executive Officer. From 1983
to 1990, he also served as Chairman of Juneau Holding Co., a Kansas City,
Missouri-based franchisee which operated Taco Bell restaurants.
Lloyd L. 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. Effective January 1, 1997, Mr. Hill assumed
the role of Co-Chief Executive Officer along with Mr. Gustin. In January 1998,
Mr. Gustin retained his position as the Chairman of the Board and Mr. Hill
assumed the full duties of Chief Executive Officer. From 1990 to 1994, he served
as President of Kimberly Quality Care, a home health care and nurse personnel
staffing company, where he also served as a director from 1988 to 1994, having
joined that organization in 1980.
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 also 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. From 1976 until 1985, Mr.Shadid was employed
by Deloitte & Touche LLP.
14
<PAGE>
Robert A. 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. In January 1996, Mr. Martin was
promoted to Executive 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 Mr. Gustin 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.
Louis A. Kaucic was employed by the Company in November 1997 as Senior Vice
President of Human Resources. From July 1992 until November 1997, Mr. Kaucic was
Vice President of Human Resources and later promoted to Senior Vice President of
Human Resources with DAKA International which operates several restaurant
concepts. From 1982 to 1992, he was employed by Pizza Hut in a variety of
positions, including Director of Employee Relations. From 1978 to 1982, Mr.
Kaucic was employed by Kellogg's as an Industrial Relations Manager.
Steven K. Lumpkin was employed by the Company in May 1995 as Vice President of
Administration. In January 1996, he was promoted to Senior Vice President of
Administration. In November 1997, he assumed the position of Senior Vice
President of Strategic Development. From July 1993 until January 1995, Mr.
Lumpkin was a Senior Vice President with a division of the Olsten Corporation,
Olsten Kimberly Quality Care. From June 1990 until July 1993, Mr. Lumpkin was an
Executive Vice President and a member of the board of directors of Kimberly
Quality Care. From January 1978 until June 1990, Mr. Lumpkin was employed by
Price Waterhouse LLP, where he served as a management consulting partner and
certified public accountant.
Ronald J. Marks has been an employee of the Company since March 1988 and served
as Director of Product Development until March 1991, when he became Director of
Menu Development. In February 1992, he was promoted to Executive Director of
Research and Development, and in February 1993, Mr. Marks was promoted to Vice
President of Research and Development. He was promoted to Senior Vice President
of Research and Development in January 1997. Mr. Marks resigned as an officer
and employee of the Company in March 1998.
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. In October 1997, Mr. Waggoner was appointed President and Chief
Executive Officer of Rio Bravo International, Inc., a wholly-owned subsidiary of
Applebee's International, Inc. 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.
15
<PAGE>
Item 2. Properties
At December 28, 1997, the Company owned or operated 225 restaurants, of which it
leased the land and building for 70 sites, owned the building and leased the
land for 78 sites, and owned the land and building for 77 sites. In addition, as
of December 28, 1997, the Company owned 13 sites for future development of
restaurants and had entered into 24 lease agreements for restaurant sites the
Company plans to open during 1998. The Company's leases generally have an
initial term of 15 to 20 years, with renewal terms of 5 to 20 years, and provide
for a fixed rental plus, in certain instances, percentage rentals based on gross
sales.
The Company owns an 80,000 square foot office building in which its corporate
offices are headquartered in Overland Park, Kansas, located in the metropolitan
Kansas City area. The Company also leases office space in certain of the regions
in which it operates restaurants.
Under its franchise agreements, the Company has certain rights to gain control
of a restaurant site in the event of default under the lease or the franchise
agreement.
The following table sets forth the 48 states and the six international countries
in which Applebee's and Rio Bravo Cantina restaurants are located and the number
of restaurants operating in each state or country as of December 28, 1997:
16
<PAGE>
<TABLE>
<CAPTION>
Number of Restaurants
----------------------------------------------------------------------------------------
State or Country Franchise Company Total System
- ----------------------- ----------------------------- ----------------------------- -----------------------------
Applebee's Rio Bravo Applebee's Rio Bravo Applebee's Rio Bravo
-------------- -------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Domestic:
Alabama................ 15 1 -- -- 15 1
Arizona................ 17 -- -- -- 17 --
Arkansas............... 6 1 -- -- 6 1
California............. 48 -- 8 -- 56 --
Colorado............... 22 -- -- -- 22 --
Connecticut............ 1 -- -- -- 1 --
Delaware............... 3 -- -- -- 3 --
Florida................ 62 1 -- 10 62 11
Georgia................ 37 4 7 8 44 12
Idaho.................. 3 -- -- -- 3 --
Illinois............... 39 1 3 -- 42 1
Indiana................ 36 2 -- -- 36 2
Iowa................... 17 -- -- -- 17 --
Kansas................. 8 2 9 2 17 4
Kentucky............... 21 1 -- -- 21 1
Louisiana.............. 15 -- -- -- 15 --
Maine.................. -- -- 2 -- 2 --
Maryland............... 14 -- -- -- 14 --
Massachusetts.......... -- -- 16 -- 16 --
Michigan............... 6 -- 29 4 35 4
Minnesota.............. -- -- 28 2 28 2
Mississippi............ 10 -- -- -- 10 --
Missouri............... 7 1 22 1 29 2
Montana................ 5 -- -- -- 5 --
Nebraska............... 8 -- -- -- 8 --
Nevada................. -- -- 10 -- 10 --
New Hampshire.......... -- -- 9 -- 9 --
New Jersey............. 12 -- -- -- 12 --
New Mexico............. 4 -- 6 -- 10 --
New York............... 27 2 6 -- 33 2
North Carolina......... 34 2 -- -- 34 2
North Dakota........... 5 1 -- -- 5 1
Ohio................... 50 3 -- -- 50 3
Oklahoma............... 9 -- -- -- 9 --
Oregon................. 7 -- -- -- 7 --
Pennsylvania........... 17 -- 8 -- 25 --
Rhode Island........... -- -- 4 -- 4 --
South Carolina......... 35 1 -- -- 35 1
South Dakota........... 2 -- -- -- 2 --
Tennessee.............. 40 -- -- 4 40 4
Texas.................. 20 -- 21 -- 41 --
Utah................... 6 -- -- -- 6 --
Vermont................ -- -- 2 -- 2 --
Virginia............... 41 1 -- -- 41 1
Washington............. 11 -- -- -- 11 --
West Virginia.......... 9 -- -- -- 9 --
Wisconsin.............. 23 -- -- -- 23 --
Wyoming................ 2 -- -- -- 2 --
International:
Canada................. 6 -- -- -- 6 --
Germany................ 3 -- -- -- 3 --
Greece................. 1 -- -- -- 1
The Netherlands........ 4 -- -- -- 4 --
Sweden................. 1 -- -- -- 1
Curacao................ 1 -- -- -- 1 --
-------------- -------------- ------------- -------------- --------------- --------------
770 24 190 31 960 55
============== ============== ============== ============== ============== ==============
</TABLE>
17
<PAGE>
Item 3. Legal Proceedings
As of December 28, 1997, the Company was using assets owned by a former
franchisee in the operation of one restaurant under a purchase rights agreement
which required the Company to make certain payments to the franchisee's lender.
In 1991, a dispute arose between the lender and the Company over the amount of
the payments due the lender. Based upon a then current independent appraisal,
the Company offered to settle the dispute and purchase the assets for $1,000,000
in 1991. In November 1992, the lender was declared insolvent by the FDIC and has
since been liquidated. The Company closed one of the three restaurants in 1994
and one of the two remaining restaurants in February 1996. In the fourth quarter
of 1996, the Company received information indicating that the franchisee's
indebtedness to the FDIC had been acquired by a third party. In June 1997, the
third party filed a lawsuit against the Company seeking approximately
$3,800,000. The lawsuit remains in the discovery phase. The Company believes it
has meritorious defenses and will vigorously defend this lawsuit. In the event
that the Company were to pay an amount determined to be in excess of the fair
market value of the assets, the Company will recognize a loss at the time of
such payment.
In addition, the Company is involved in various legal actions arising in the
normal course of business. While the resolution of any of such actions or the
matter described above may have an impact on the financial results for the
period in which it is resolved, the Company believes that the ultimate
disposition of these matters will not, in the aggregate, have a material adverse
effect upon its business or consolidated financial position.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
18
<PAGE>
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
1. The Company's common stock trades on the Nasdaq National Market tier of
The Nasdaq Stock Market under the symbol APPB.
The table below sets forth for the fiscal quarters indicated the
reported high and low sale prices of the Company's common stock, as
reported on The Nasdaq Stock Market.
<TABLE>
<CAPTION>
1997 1996
------------------------------- -------------------------------
High Low High Low
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
First Quarter $ 31.13 $ 23.88 $ 25.75 $ 17.75
Second Quarter $ 27.50 $ 20.13 $ 32.50 $ 25.00
Third Quarter $ 30.38 $ 24.00 $ 34.25 $ 25.00
Fourth Quarter $ 25.44 $ 18.00 $ 30.00 $ 23.12
</TABLE>
2. Number of stockholders of record at December 28, 1997: 1,282
3. An annual dividend of $0.07 per common share was declared on November
25, 1996 for stockholders of record on December 6, 1996, and the
dividend was payable on January 13, 1997. An annual dividend of $0.08
per common share was declared on December 10, 1997 for stockholders of
record on December 22, 1997, and the dividend was payable on January
26, 1998.
The Company presently anticipates continuing the payment of cash
dividends based upon its annual net income. The actual amount of such
dividends will depend upon future earnings, results of operations,
capital requirements, the financial condition of the Company and
certain other factors. There can be no assurance as to the amount of
net income that the Company will generate in 1998 or future years and,
accordingly, there can be no assurance as to the amount that will be
available for the declaration of dividends, if any.
19
<PAGE>
Item 6. Selected Financial Data
The following table sets forth for the periods and the dates indicated selected
financial data of the Company. All amounts reflect the mergers with Pub Ventures
of New England, Inc. and Innovative Restaurant Concepts, Inc., which were
accounted for as poolings of interests. The fiscal year ended December 31, 1995
contained 53 weeks, and all other periods presented contained 52 weeks. The
following should be read in conjunction with the Consolidated Financial
Statements and Notes thereto and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" appearing elsewhere in this Form
10-K.
<TABLE>
<CAPTION>
Fiscal Year Ended
--------------------------------------------------------------------------------
December 28, December 29, December 31, December 25, December 26,
1997 1996 1995 1994 1993
--------------- --------------- --------------- ---------------- ---------------
(in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
STATEMENT OF
EARNINGS DATA:
Company restaurant sales.............. $ 452,173 $ 358,990 $ 299,824 $ 222,445 $ 159,482
Franchise income...................... 63,647 54,141 43,739 31,419 21,324
--------------- --------------- --------------- ---------------- ---------------
Total operating revenues......... $ 515,820 $ 413,131 $ 343,563 $ 253,864 $ 180,806
=============== =============== =============== ================ ===============
Operating earnings.................... $ 71,283 $ 58,833 $ 45,712 $ 29,311 $ 19,677
Net earnings.......................... $ 45,091 $ 38,014 $ 27,420 $ 17,823 $ 12,551
Basic net earnings per common
share.............................. $ 1.44 $ 1.22 $ 0.94 $ 0.64 $ 0.46
Diluted net earnings per common
share.............................. $ 1.43 $ 1.21 $ 0.92 $ 0.63 $ 0.45
Dividends per share................... $ 0.08 $ 0.07 $ 0.06 $ 0.05 $ 0.04
Basic weighted average shares
outstanding........................ 31,401 31,188 29,319 27,970 27,543
Diluted weighted average shares
outstanding........................ 31,640 31,533 29,860 28,472 27,932
BALANCE SHEET DATA
(AT END OF FISCAL YEAR):
Total assets.......................... $ 377,474 $ 314,111 $ 270,680 $ 180,014 $ 138,680
Long-term obligations, including
current portion..................... $ 29,105 $ 25,843 $ 27,427 $ 38,697 $ 19,845
Stockholders' equity.................. $ 290,443 $ 244,764 $ 203,993 $ 108,788 $ 92,680
</TABLE>
20
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
General
The Company's revenues are generated from two primary sources: Company
restaurant sales (food and beverage sales) and franchise income consisting of
franchise restaurant royalties (generally 4% of each franchise restaurant's
monthly gross sales) and franchise fees (which typically range from $30,000 to
$35,000 for each Applebee's restaurant opened and $40,000 for each Rio Bravo
Cantina restaurant opened). Beverage sales include sales of alcoholic beverages,
while non-alcoholic beverages are included in food sales. Certain expenses (food
and beverage, labor, direct and occupancy costs, and pre-opening expenses)
relate directly to Company restaurants, and other expenses (general and
administrative and amortization expenses) relate to both Company restaurants and
franchise operations.
The Company operates on a 52 or 53 week fiscal year ending on the last Sunday in
December. The Company's fiscal years ended December 28, 1997 and December 29,
1996 contained 52 weeks, and the fiscal year ended December 31, 1995 contained
53 weeks, and are referred to hereafter as 1997, 1996 and 1995, respectively.
Acquisitions
On March 23, 1995, a wholly-owned subsidiary of the Company merged with and into
Innovative Restaurant Concepts, Inc. ("IRC"), referred to herein as the "IRC
Merger." As a result of the IRC Merger, IRC became a wholly-owned subsidiary of
the Company. The IRC Merger was accounted for as a pooling of interests and,
accordingly, the accompanying consolidated financial statements include the
accounts and operations of the merged entities for all periods presented. At the
time of the IRC Merger, IRC operated 17 restaurants, including 13 Rio Bravo
Cantina restaurants, and four other specialty restaurants, comprised of Ray's on
the River, two Green Hills Grille restaurants, and the Rio Bravo Grill.
The combined earnings of IRC included earnings of limited partnerships which
were not taxable entities for federal and state income tax purposes. The
accompanying consolidated statements of earnings reflect provisions for income
taxes on a pro forma basis as if the Company had been liable for federal and
state income taxes on the earnings of IRC's limited partnerships at statutory
rates.
On April 3, 1995, the Company acquired the operations and assets of five
franchise restaurants in the Philadelphia metropolitan area, referred to herein
as the "Philadelphia Acquisition." The Philadelphia Acquisition was accounted
for as a purchase and, accordingly, the results of operations of such
restaurants have been reflected in the consolidated financial statements
subsequent to the date of acquisition.
On April 14, 1997, the Company acquired the operations and assets of 11
franchise restaurants in the St. Louis metropolitan area, referred to herein as
the "St. Louis Acquisition." The St. Louis Acquisition was accounted for as a
purchase and, accordingly, the results of operations of such restaurants have
been reflected in the consolidated financial statements subsequent to the date
of acquisition.
21
<PAGE>
On December 23, 1997, the Company entered into an agreement with Apple South,
Inc. ("Apple South"), its largest franchisee, to acquire 31 Applebee's
restaurants plus one restaurant under construction in the Virginia markets of
Norfolk, Richmond, Roanoke and Charlottesville for approximately $93,400,000,
subject to certain closing adjustments, referred to herein as the "Virginia
Acquisition." The Virginia Acquisition is anticipated to close in late March
1998, subject to obtaining financing, operating licenses and third-party
consents, and will be accounted for as a purchase.
Results of Operations
The following table sets forth, for the periods indicated, information derived
from the Company's consolidated statements of earnings expressed as a percentage
of total operating revenues, except where otherwise noted.
Percentages may not add due to rounding.
<TABLE>
<CAPTION>
Fiscal Year Ended
------------------------------------------------
December 28, December 29, December 31,
1997 1996 1995
--------------- --------------- ---------------
<S> <C> <C> <C>
Revenues:
Company restaurant sales......................... 87.7% 86.9% 87.3%
Franchise income................................. 12.3 13.1 12.7
--------------- --------------- ---------------
Total operating revenues...................... 100.0% 100.0% 100.0%
=============== =============== ===============
Cost of sales (as a percentage of Company restaurant sales):
Food and beverage................................ 27.5% 28.0% 28.3%
Labor............................................ 32.1 31.5 31.7
Direct and occupancy............................. 25.3 24.4 24.1
Pre-opening expense.............................. 0.8 1.0 0.8
--------------- --------------- ---------------
Total cost of sales........................... 85.7% 84.9% 84.8%
=============== =============== ===============
General and administrative expenses................... 10.2% 10.6% 11.3%
Merger costs.......................................... -- -- 0.5
Amortization of intangible assets..................... 0.6 0.6 0.7
Loss on disposition of restaurants and equipment...... 0.2 0.8 0.2
--------------- --------------- ---------------
Operating earnings.................................... 13.8 14.2 13.3
--------------- --------------- ---------------
Other income (expense):
Investment income................................ 0.4 0.7 0.5
Interest expense................................. (0.3) (0.4) (0.7)
Other income..................................... 0.1 0.1 0.1
--------------- --------------- ---------------
Total other income (expense).................. 0.1 0.5 (0.1)
--------------- --------------- ---------------
Earnings before income taxes.......................... 13.9 14.7 13.2
Income taxes (including pro forma provision for
income taxes).................................... 5.2 5.5 5.2
--------------- --------------- ---------------
Net earnings.......................................... 8.7% 9.2% 8.0%
=============== =============== ===============
</TABLE>
22
<PAGE>
Fiscal Year Ended December 28, 1997 Compared With Fiscal Year Ended December 29,
1996
Company Restaurant Sales. Overall Company restaurant sales increased $93,183,000
(26%) from $358,990,000 in 1996 to $452,173,000 in 1997. Sales for Company
Applebee's restaurants increased $69,350,000 (24%) from $285,093,000 in 1996 to
$354,443,000 in 1997, due primarily to Company restaurant openings and sales
from the 11 St. Louis restaurants acquired in April 1997. Sales for Company Rio
Bravo Cantina restaurants were $59,523,000 and $83,295,000 in 1996 and 1997,
respectively, and sales for the specialty restaurants were $14,374,000 and
$14,435,000 in 1996 and 1997, respectively. The increase in sales for the Rio
Bravo Cantina restaurants resulted primarily from Company restaurant openings.
Comparable restaurant sales at Company Applebee's restaurants increased by 0.1%
in 1997. Weighted average weekly sales at Company Applebee's restaurants
increased 2.0% from $40,366 in 1996 to $41,176 in 1997. Comparable restaurant
sales and weighted average weekly sales at Company Applebee's restaurants in
1997 were positively affected by menu price increases. In addition, weighted
average weekly sales in 1997 increased as a result of the sale of six lower than
average volume restaurants in southern California in October 1996 and the
purchase of 11 higher than average volume restaurants in St. Louis in April
1997. Excluding these restaurants, weighted average weekly sales decreased 0.2%
in 1997.
Price increases were implemented during the fourth quarter of 1996 and the
fourth quarter of 1997 for certain menu items. The Company does not expect
significant comparable restaurant sales increases and may experience comparable
restaurant sales decreases for the 1998 fiscal year for Company Applebee's
restaurants, as many of its restaurants operate near sales capacity and various
markets continue to experience competitive pressures. Although the Company's
experience in developing markets indicates that the opening of multiple
restaurants within a particular market results in increased market share,
decreases in comparable restaurant sales may result.
Comparable restaurant sales for Company Rio Bravo Cantina restaurants decreased
by 1.6% in 1997 due primarily to increased competition in the Atlanta market.
Weighted average weekly sales (excluding one restaurant that is open for dinner
only) decreased from $66,743 in 1996 to $60,946 in 1997. Weighted average weekly
sales in 1997 were impacted by new restaurant openings in new markets, as well
as the addition of a new smaller prototype restaurant. When entering new markets
where the Company has not yet established a market presence, sales levels are
expected to be lower than in the Georgia and Florida markets where the Company
has a concentration of Rio Bravo Cantina restaurants and high customer
awareness.
Franchise Income. Overall franchise income increased $9,506,000 (18%) from
$54,141,000 in 1996 to $63,647,000 in 1997. This increase was due primarily to
the increased number of franchise Applebee's and Rio Bravo Cantina restaurants
operating during 1997 as compared to 1996. In addition, comparable restaurant
sales for franchise Applebee's restaurants increased 0.6% in 1997. Such
increases were partially offset by a decrease in weighted average weekly sales
for franchise Applebee's restaurants of 0.9% in 1997.
23
<PAGE>
Cost of Company Restaurant Sales. Food and beverage costs decreased from 28.0%
in 1996 to 27.5% in 1997 due primarily to operational improvements, purchasing
efficiencies resulting from the Company's rapid growth, and menu price
increases. Such decreases were partially offset by an increase in food costs
during the implementation of the Company's food and menu initiative. Beverage
sales, as a percentage of Company restaurant sales, declined from 18.3% in 1996
to 17.8% in 1997 which had a negative impact on overall food and beverage costs,
as a percentage of Company restaurant sales. Management believes that the
reduction in beverage sales is due in part to the continuation of the overall
trend toward increased awareness of responsible alcohol consumption.
Labor costs increased from 31.5% in 1996 to 32.1% in 1997. Such increases were
due primarily to the adverse impact on restaurant labor costs during, and for a
number of months following, the implementation of the Company's food and menu
enhancement initiative in its Applebee's restaurants. The Company expects labor
costs, as a percentage of sales, to continue to be impacted during the first
half of the 1998 fiscal year as a result of this implementation. Increases in
the minimum wage as well as the highly competitive nature of the restaurant
industry continue to exert pressure on both hourly labor and management costs.
An increase in the Federal minimum wage went into effect on October 1, 1996, and
a second increase became effective on September 1, 1997. In addition, the 1997
fiscal year was negatively impacted by an increase in group medical insurance
costs.
Direct and occupancy costs increased from 24.4% in 1996 to 25.3% in 1997. Such
increases were due, in part, to the new plateware costs relating to the
Company's food and menu enhancement initiative in its Applebee's restaurants. In
addition, such increases were partially due to an increase in repairs and
maintenance expense relating to maintenance contracts on restaurant
point-of-sale systems as well as the aging of the Company's restaurants, higher
depreciation expense associated with new restaurants, and increases in utility
costs and property taxes.
General and Administrative Expenses. General and administrative expenses
decreased from 10.6% in 1996 to 10.2% in 1997 due primarily to the absorption of
general and administrative expenses over a larger revenue base as well as the
additional leverage resulting from the St. Louis Acquisition. A portion of the
decrease in 1997 was due to a decrease in executive bonuses. General and
administrative expenses increased by $8,692,000 during 1997 compared to 1996 due
primarily to the costs of additional personnel associated with the Company's
development efforts and system-wide expansion, including costs related to the
franchising and expansion of the Rio Bravo Cantina concept.
Loss on Disposition of Restaurants and Equipment. Loss on disposition of
restaurants and equipment decreased from $3,318,000 in 1996 to $1,209,000 in
1997. In October 1996, the Company completed the sale of six of its eight
Company owned Applebee's restaurants located in the San Bernardino and Riverside
counties of southern California. The operations of the six restaurants and
future restaurant development in the market area were assumed by an existing
Applebee's franchisee. The sales price was $8,500,000 and a loss on the
disposition of the properties of $75,000 was recorded in the third quarter of
1996. During the fourth quarter of 1996, the Company recognized a loss of
$2,500,000 primarily relating to the intended disposition of the two remaining
restaurants in the territory.
Investment Income. Investment income decreased in 1997 compared to 1996
primarily as a result of decreases in cash and cash equivalents and short-term
investments due to capital expenditures and acquisitions.
Interest Expense. Interest expense increased in 1997 compared to 1996 primarily
as a result of interest on capitalized leases associated with the St. Louis
Acquisition.
Income Taxes. The effective income tax rate, as a percentage of earnings before
income taxes, was 37.2% in 1997 compared to 37.4% in 1996. The decrease in the
Company's overall effective tax rate in 1997 was due primarily to a reduction in
state income taxes and an increase in credits resulting from FICA taxes on tips.
24
<PAGE>
Fiscal Year Ended December 29, 1996 Compared With Fiscal Year Ended December 31,
1995
Company Restaurant Sales. Overall Company restaurant sales increased $59,166,000
(20%) from $299,824,000 in 1995 to $358,990,000 in 1996. Sales for Company
Applebee's restaurants increased $47,743,000 (20%) from $237,350,000 in 1995 to
$285,093,000 in 1996, due primarily to Company restaurant openings and sales
from the five Philadelphia restaurants acquired in April 1995, as well as an
increase in comparable restaurant sales. Sales for Company Rio Bravo Cantina
restaurants were $48,135,000 and $59,523,000 in 1995 and 1996, respectively, and
sales for the specialty restaurants were $14,339,000 and $14,374,000 in 1995 and
1996, respectively. The increase in sales for the Rio Bravo Cantina restaurants
resulted primarily from Company restaurant openings and an increase in
comparable restaurant sales.
Comparable restaurant sales at Company owned or operated Applebee's restaurants
increased by 1.1% in 1996. Weighted average weekly sales at Company owned or
operated Applebee's restaurants increased 1.0% from $39,977 in 1995 to $40,366
in 1996. The Company believes these increases were due, in part, to successful
food-specific promotions backed by an increase in advertising spending, as a
percentage of sales, in 1996. A menu price increase was implemented during the
fourth quarter of 1996 for certain menu items. Although the Company's experience
in developing markets indicates that the opening of multiple restaurants within
a particular market results in increased market share, decreases in comparable
restaurant sales may result.
Comparable restaurant sales for Company owned Rio Bravo Cantina restaurants
increased by 3.9% in 1996. Weighted average weekly sales (excluding one
restaurant that is open for dinner only) increased slightly from $66,158 in 1995
to $66,743 in 1996 and were impacted by the expected lower sales volumes at new
restaurants.
Franchise Income. Overall franchise income increased $10,402,000 (24%) from
$43,739,000 in 1995 to $54,141,000 in 1996. This increase was due primarily to
the increased number of franchise Applebee's restaurants operating during 1996
as compared to 1995. The remaining increase in franchise income resulted
primarily from franchise fees earned relating to the opening of the first nine
franchise Rio Bravo Cantina restaurants during 1996. These increases were
partially offset by decreases in weighted average weekly sales and comparable
sales for franchise Applebee's restaurants which decreased 2.6% and 1.2%,
respectively, in 1996.
Cost of Company Restaurant Sales. Food and beverage costs decreased from 28.3%
in 1995 to 28.0% in 1996, due primarily to operational improvements, purchasing
efficiencies resulting from the Company's rapid growth and early payment
discounts, and the menu price increase implemented in the fourth quarter of
1996. In addition, the Company experienced an increase in food costs in the
second quarter of 1995 as a result of winter flooding in California which caused
shortages of certain produce items and a significant increase in related costs.
Beverage sales, as a percentage of Company restaurant sales, declined from 18.9%
in 1995 to 18.3% in 1996, which had a negative impact on overall food and
beverage costs. Management believes that the reduction in beverage sales is due
in part to the continuation of the overall trend toward increased awareness of
responsible alcohol consumption.
25
<PAGE>
Labor costs decreased from 31.7% in 1995 to 31.5% in 1996. Labor costs, as a
percentage of sales, were positively affected by an overall reduction in
workers' compensation costs due to favorable historical claims experience and
improved hourly labor efficiency. Such decreases were partially offset by higher
management costs in 1996. Overall labor costs continue to be adversely affected
by the lower sales volumes in the southern California market.
Direct and occupancy costs increased from 24.1% in 1995 to 24.4% in 1996 due
primarily to higher advertising expense and depreciation expense which were
partially offset by lower rent expense. The southern California market continues
to have a negative impact on overall direct and occupancy costs due to the
absorption of such expenses, which are primarily fixed in nature, over a lower
sales base in those markets.
Pre-opening expense increased from $2,234,000 in 1995 to $3,557,000 in 1996 due
primarily to the opening of two additional Applebee's restaurants and one
additional Rio Bravo Cantina restaurant in 1996 and costs incurred relating to
the reopening of two Applebee's restaurants after being rebuilt. The Company
also incurred higher pre-opening costs for each of the five Rio Bravo Cantina
restaurants that were opened in 1996 as compared to those opened in 1995.
General and Administrative Expenses. General and administrative expenses
decreased in 1996 to 10.6% from 11.3% in 1995, due primarily to the absorption
of general and administrative expenses over a larger revenue base. General and
administrative expenses increased by $5,134,000 during 1996 compared to 1995 due
primarily to the costs of additional personnel associated with the Company's
development efforts and system-wide expansion, including costs related to the
franchising and expansion of the Rio Bravo Cantina concept.
Merger Costs. The Company incurred merger costs of $1,770,000 in 1995 relating
to the IRC Merger. The impact of these costs on net earnings per common share
was approximately $0.06 in 1995.
Loss on Disposition of Restaurants and Equipment. In October 1996, the Company
completed the sale of six of its eight Company owned Applebee's restaurants
located in the San Bernardino and Riverside counties of southern California. The
operations of the six restaurants and future restaurant development in the
market area were assumed by an existing Applebee's franchisee. The sales price
was $8,500,000 and a loss on the disposition of the properties of $75,000 was
recorded in the third quarter of 1996. During the fourth quarter of 1996, the
Company recognized a loss of $2,500,000 primarily relating to the intended
disposition of the two remaining restaurants in the territory.
During 1995, the Company recognized a loss of $615,000 relating to the planned
disposition of two restaurants in 1996, including $275,000 relating to one
restaurant managed under a purchase rights agreement. The Company continues to
operate one restaurant under this agreement.
Investment Income. Investment income increased in 1996 compared to 1995
primarily as a result of increases in cash and cash equivalents and short-term
investments resulting from the proceeds of the Company's stock offering in July
1995.
Interest Expense. Interest expense decreased in 1996 compared to 1995 primarily
as a result of a decrease in interest related to the revolving credit facility
incurred in 1995 and a decrease in long-term debt resulting from the payoff in
August 1995 of the debt assumed in connection with the IRC Merger.
Income Taxes. The effective income tax rate, as a percentage of earnings before
income taxes, was 37.4% in 1996 compared to 39.5% in 1995. Excluding
non-deductible merger costs, the effective income tax rate would have been 38.0%
in 1995. The remaining decrease in the Company's overall effective tax rate in
1996 was due primarily to a reduction in state income taxes.
26
<PAGE>
Liquidity and Capital Resources
The Company's need for capital resources historically has resulted from, and for
the foreseeable future is expected to relate primarily to, the construction and
acquisition of restaurants. Such capital has been provided by public stock
offerings, debt financing, and ongoing Company operations, including cash
generated from Company and franchise operations, credit from trade suppliers,
real estate lease financing, and landlord contributions to leasehold
improvements. The Company has also used its common stock as consideration in the
acquisition of restaurants. In addition, the Company assumed debt or issued new
debt in connection with certain mergers and acquisitions.
Capital expenditures were $65,672,000 in 1996 and $128,155,000 in 1997 (which
includes $36,150,000 related to the St. Louis Acquisition and $1,525,000 related
to the purchase of the remaining 50% interest in a joint venture arrangement
with the Company's franchisee in Nevada). The Company currently expects to open
32 Applebee's restaurants and 11 Rio Bravo Cantina restaurants in 1998. Capital
expenditures in fiscal 1998 are expected to be between $85,000,000 and
$90,000,000 (excluding $93,400,000 relating to the Virginia Acquisition),
primarily for the development of new restaurants, refurbishments of and capital
replacements for existing restaurants, and enhancements to information systems
for the Company's restaurants and corporate office. The amount of actual capital
expenditures will be dependent upon, among other things, the proportion of
leased versus owned properties as the Company expects to continue to purchase a
portion of its sites. In addition, if the Company opens more restaurants than it
currently anticipates or acquires additional restaurants, its capital
requirements will increase accordingly.
The Company has certain debt agreements containing various covenants and
restrictions which, among other things, require the maintenance of a stipulated
fixed charge coverage ratio and minimum consolidated net worth, as defined, and
also limit additional indebtedness in excess of specified amounts. The debt
agreements also restrict the amount of retained earnings available for the
payment of cash dividends. At December 28, 1997, retained earnings were not
restricted for the payment of cash dividends. The Company is currently in
compliance with the covenants of all of its debt agreements.
As of December 28, 1997, the Company held liquid assets totaling $19,814,000,
consisting of cash and cash equivalents ($8,908,000) and short-term investments
($10,906,000). No amounts were outstanding under the revolving credit facility;
however, standby letters of credit issued under the facility totaling $1,887,000
were outstanding as of December 28, 1997.
On January 22, 1998, the Company entered into a loan commitment with Merrill
Lynch Capital Corporation to provide $225,000,000 in senior secured credit
facilities, consisting of an eight-year senior secured term loan of $125,000,000
and a five-year secured revolving credit facility of $100,000,000.
27
<PAGE>
The Company anticipates that it will use the proceeds of the facilities
approximately as follows:
(i) $105,000,000 to fund the Virginia Acquisition (including
related transaction fees and expenses);
(ii) $20,000,000 to refinance certain existing indebtedness
currently bearing interest at 7.70%; and
(iii) $100,000,000 for ongoing working capital needs and general
corporate purposes (including stock repurchases as described
below).
Up to $50,000,000 of the facilities will be available to fund repurchases of the
Company's common stock. Since December 28, 1997 and through March 9, 1998, the
Company has repurchased 1,270,000 shares of its common stock at an aggregate
value of $25,000,000, pursuant to plans approved by the Company's Board of
Directors. The Company contemplates further purchases of up to $25,000,000
subject to the completion of the financing discussed above.
The senior term loan is expected to bear interest at LIBOR plus 2.25% and
require semi-annual principal payments aggregating $1,250,000 per year for each
of the first seven years, with the remaining $116,250,000 due during the eighth
year. The revolving credit facility is expected to bear interest at LIBOR plus
1.375%.
Both the senior term loan and the revolving credit facility will be subject to
standard other terms, conditions, covenants, and fees and will be secured by the
stock of each of the Company's present and future subsidiaries and all
intercompany debt of the Company and such subsidiaries. The loan commitment is
anticipated to close concurrently with the Virginia Acquisition.
The Company believes that its liquid assets and cash generated from operations,
combined with borrowings available under its new $225,000,000 senior secured
credit facilities, will provide sufficient funds for its capital requirements
for the foreseeable future.
Inflation
Substantial increases in costs and expenses, particularly food, supplies, labor
and operating expenses, could have a significant impact on the Company's
operating results to the extent that such increases cannot be passed along to
customers. The Company does not believe that inflation has materially affected
its operating results during the past three years.
A majority of the Company's employees are paid hourly rates related to federal
and state minimum wage laws and various laws that allow for credits to that
wage. An increase in the Federal minimum wage went into effect on October 1,
1996, and a second increase became effective on September 1, 1997. In addition,
increases in the minimum wage are also being discussed by various state
governments. Although the Company has been able to and will continue to attempt
to pass along increases in costs through food and beverage price increases,
there can be no assurance that all such increases can be reflected in its prices
or that increased prices will be absorbed by customers without diminishing, to
some degree, customer spending at its restaurants.
28
<PAGE>
New Accounting Pronouncements
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive
Income." SFAS No. 130 establishes standards for reporting and display of
comprehensive income and its components (revenues, expenses, gains and losses)
in a full set of general-purpose financial statements. This statement is
effective for fiscal years beginning after December 15, 1997. The Company does
not believe the reporting and display of comprehensive income will materially
impact the financial statements.
In June 1997, the Financial Accounting Standards Board issued SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information." SFAS No.
131 establishes standards for the way public business enterprises report
information about operating segments in annual financial statements and requires
that those enterprises report selected information about operating segments in
interim financial reports issued to shareholders. It also establishes standards
for related disclosures about products and services, geographic areas, and major
customers. This statement is effective for financial statements for periods
beginning after December 15, 1997. In the initial year of application,
comparative information for earlier years is to be presented. This statement
need not be applied to interim financial statements in the initial year of its
application, but comparative information for interim periods in the initial year
of application is to be reported in financial statements for interim periods in
the second year of application.
Forward-Looking Statements
The statements contained herein regarding future sales, operating costs,
restaurant development and capital expenditures are forward-looking and based on
current expectations. There are several risks and uncertainties that could cause
actual results to differ materially from those described. For a discussion of
the principal factors that could cause actual results to be materially
different, refer to the Company's current report on Form 8-K filed with the
Securities and Exchange Commission on February 9, 1998.
Impact of the Year 2000
The Year 2000 will have a broad impact on the business environment in which the
Company operates due to the possibility that many computer systems across all
industries will be unable to process information containing dates beginning in
the Year 2000. The Company has conducted a preliminary assessment of the impact
of the Year 2000 on its accounting, finance, and other systems, as well as the
impact on its external business partners, in order to identify and address
potential business issues relating to the Year 2000. Based on this preliminary
assessment, the Company believes that its significant systems are Year 2000
compliant, and the costs associated with such compliance have not had, and will
not have, a material impact on the Company's results of operations.
Item 8. Financial Statements and Supplementary Data
See the Index to Consolidated Financial Statements on Page F-1.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Not applicable.
29
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant
For information with respect to the executive officers of the Company, see
"Executive Officers of the Registrant" in Part I of this report. For information
with respect to the Directors of the Company, see the Proxy Statement for the
Annual Meeting of Stockholders to be held on or about May 6, 1998, which is
incorporated herein by reference.
Item 11. Executive Compensation
The information set forth under the caption "Executive Compensation" in the
Proxy Statement for the Annual Meeting of Stockholders to be held on or about
May 6, 1998, is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information set forth under the caption "Security Ownership of Officers,
Directors and Certain Beneficial Owners" in the Proxy Statement for the Annual
Meeting of Stockholders to be held on or about May 6, 1998, is incorporated
herein by reference.
Item 13. Certain Relationships and Related Transactions
The information set forth under the caption "Certain Transactions" in the Proxy
Statement for the Annual Meeting of Stockholders to be held on or about May 6,
1998, is incorporated herein by reference.
30
<PAGE>
PART IV
Item 14. Exhibits and Reports on Form 8-K
(a) List of documents filed as part of this report:
1. Financial Statements:
The financial statements are listed in the accompanying "Index
to Financial Statements" on Page F-1.
2. Exhibits:
The exhibits filed with or incorporated by reference in this
report are listed on the Exhibit Index beginning on page E-1.
(b) Reports on Form 8-K:
The Company filed a report on Form 8-K on October 7, 1997 in accordance
with the Private Securities Litigation Reform Act of 1995 listing
factors that could cause actual results to differ materially from those
projected in forward-looking statements made by the Company.
The Company filed a report on Form 8-K on December 11, 1997, announcing
the declaration of a dividend on its common stock to stockholders of
record as of December 22, 1997, payable on January 26, 1998.
31
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
APPLEBEE'S INTERNATIONAL, INC.
Date: March 17, 1998 By: /s/ Lloyd L. Hill
----------------- -----------------------------------
Lloyd L. Hill
Chief Executive Officer
POWER OF ATTORNEY
KNOWN TO ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Lloyd L. Hill and Robert T. Steinkamp, and each
of them, his true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any amendments to this Form 10-K, and to file
the same, with exhibits thereto and other documents in connection therewith,
with the Securities and Exchange Commission, hereby ratifying and confirming all
that said attorney-in-fact or his substitute or substitutes, may do or cause to
be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
By: /s/ Lloyd L. Hill Date: March 17, 1998
---------------------------- -----------------
Lloyd L. Hill
Director and Chief Executive Officer
(principal executive officer)
By: /s/ George D. Shadid Date: March 17, 1998
---------------------------- -----------------
George D. Shadid
Executive Vice President and Chief Financial Officer
(principal financial officer)
By: /s/ Mark A. Peterson Date: March 13, 1998
---------------------------- -----------------
Mark A. Peterson
Vice President and Controller
(principal accounting officer)
By: /s/ Abe J. Gustin, Jr. Date: March 17, 1998
---------------------------- -----------------
Abe J. Gustin, Jr.
Director, Chairman of the Board
32
<PAGE>
By: /s/ D. Patrick Curran Date: March 11, 1998
---------------------------- -----------------
D. Patrick Curran
Director
By: /s/ Eric L. Hansen Date: March 15, 1998
---------------------------- -----------------
Eric L. Hansen
Director
By: /s/ Jack P. Helms Date: March 17, 1998
---------------------------- -----------------
Jack P. Helms
Director
By: /s/ Kenneth D. Hill Date: March 11, 1998
---------------------------- -----------------
Kenneth D. Hill
Director
By: /s/ Robert A. Martin Date: March 13, 1998
---------------------------- -----------------
Robert A. Martin
Director
By: /s/ Burton M. Sack Date: March 11, 1998
---------------------------- -----------------
Burton M. Sack
Director
33
<PAGE>
APPLEBEE'S INTERNATIONAL, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Independent Auditors' Report............................................................................. F-2
Consolidated Balance Sheets as of December 28, 1997 and
December 29, 1996 .................................................................................. F-3
Consolidated Statements of Earnings for the Fiscal Years Ended
December 28, 1997, December 29, 1996 and December 31, 1995.......................................... F-4
Consolidated Statements of Stockholders' Equity for the Fiscal Years
Ended December 28, 1997, December 29, 1996 and December 31, 1995..................................... F-5
Consolidated Statements of Cash Flows for the Fiscal Years Ended
December 28, 1997, December 29, 1996 and December 31, 1995........................................... F-6
Notes to Consolidated Financial Statements............................................................... F-8
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
Applebee's International, Inc.:
We have audited the accompanying consolidated balance sheets of Applebee's
International, Inc. and subsidiaries (the "Company") as of December 28, 1997 and
December 29, 1996, and the related consolidated statements of earnings,
stockholders' equity and cash flows for each of the three fiscal years in the
period ended December 28, 1997. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Applebee's International, Inc. and subsidiaries at December 28, 1997 and
December 29, 1996, and the consolidated results of their operations and cash
flows for each of the three fiscal years in the period ended December 28, 1997
in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Kansas City, Missouri
February 13, 1998
(March 9, 1998 as to the
third paragraph of Note 16)
F-2
<PAGE>
APPLEBEE'S INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
December 28, December 29,
1997 1996
------------- --------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................................... $ 8,908 $ 17,346
Short-term investments, at market value..................................... 10,906 40,064
Receivables, net of allowance............................................... 16,390 19,245
Inventories................................................................. 4,788 4,557
Prepaid and other current assets............................................ 2,962 2,780
------------- --------------
Total current assets..................................................... 43,954 83,992
Property and equipment, net...................................................... 276,082 196,950
Goodwill, net.................................................................... 48,065 22,607
Franchise interest and rights, net............................................... 4,667 5,236
Deferred income taxes............................................................ -- 1,366
Other assets..................................................................... 4,706 3,960
------------- --------------
$ 377,474 $ 314,111
============= ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt........................................... $ 6,306 $ 968
Current portion of obligations under noncompetition and consulting agreement 220 220
Accounts payable............................................................ 19,731 11,949
Accrued expenses and other current liabilities.............................. 28,547 25,597
Accrued dividends........................................................... 2,518 2,191
Accrued income taxes........................................................ 5,166 918
------------- --------------
Total current liabilities................................................ 62,488 41,843
------------- --------------
Non-current liabilities:
Long-term debt - less current portion....................................... 22,579 24,435
Franchise deposits.......................................................... 1,532 1,793
Obligations under noncompetition and consulting agreement - less current
portion.................................................................. -- 220
Deferred income taxes....................................................... 432 --
------------- --------------
Total non-current liabilities............................................ 24,543 26,448
------------- --------------
Total liabilities........................................................ 87,031 68,291
Minority interest in joint venture............................................... -- 1,056
Commitments and contingencies (Notes 7, 8 and 12)
Stockholders' equity:
Preferred stock - par value $0.01 per share: authorized - 1,000,000 shares;
no shares issued......................................................... -- --
Common stock - par value $0.01 per share: authorized - 125,000,000 shares;
issued - 31,744,009 shares in 1997 and 31,580,955 shares in 1996......... 317 316
Additional paid-in capital.................................................. 156,165 153,028
Retained earnings........................................................... 134,654 92,081
Unrealized gain on short-term investments, net of income taxes.............. 95 188
------------- --------------
291,231 245,613
Treasury stock - 261,629 shares in 1997 and 281,772 shares in 1996, at cost. (788) (849)
------------- --------------
Total stockholders' equity............................................... 290,443 244,764
------------- --------------
$ 377,474 $ 314,111
============= ==============
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE>
APPLEBEE'S INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Fiscal Year Ended
--------------------------------------------------
December 28, December 29, December 31,
1997 1996 1995
------------- ------------- -------------
<S> <C> <C> <C>
Revenues:
Company restaurant sales................................ $ 452,173 $ 358,990 $ 299,824
Franchise income........................................ 63,647 54,141 43,739
------------- ------------- -------------
Total operating revenues............................. 515,820 413,131 343,563
------------- ------------- -------------
Cost of Company restaurant sales:
Food and beverage....................................... 124,469 100,534 84,776
Labor................................................... 145,165 112,969 94,935
Direct and occupancy.................................... 114,196 87,740 72,228
Pre-opening expense..................................... 3,661 3,557 2,234
------------- ------------- -------------
Total cost of Company restaurant sales............... 387,491 304,800 254,173
------------- ------------- -------------
General and administrative expenses.......................... 52,579 43,887 38,753
Merger costs................................................. -- -- 1,770
Amortization of intangible assets............................ 3,258 2,293 2,305
Loss on disposition of restaurants and equipment............. 1,209 3,318 850
------------- ------------- -------------
Operating earnings........................................... 71,283 58,833 45,712
------------- ------------- -------------
Other income (expense):
Investment income....................................... 1,834 2,863 1,764
Interest expense........................................ (1,705) (1,571) (2,507)
Other income............................................ 389 600 357
------------- ------------- -------------
Total other income (expense)......................... 518 1,892 (386)
------------- ------------- -------------
Earnings before income taxes................................. 71,801 60,725 45,326
Income taxes................................................. 26,710 22,711 17,906
------------- ------------- -------------
Net earnings................................................. $ 45,091 $ 38,014 $ 27,420
============= ============= ==============
Basic net earnings per common share.......................... $ 1.44 $ 1.22 $ 0.94
============= ============= =============
Diluted net earnings per common share........................ $ 1.43 $ 1.21 $ 0.92
============= ============= =============
Basic weighted average shares outstanding.................... 31,401 31,188 29,319
============= ============= =============
Diluted weighted average shares outstanding.................. 31,640 31,533 29,860
============= ============= =============
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE>
APPLEBEE'S INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
Unrealized
Gain (Loss)
Common Stock Additional on Total
------------------------- Paid-In Retained Short-Term Treasury Stockholders'
Shares Amount Capital Earnings Investments Stock Equity
-------------- ---------- ------------ ----------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 25, 1994......... 28,295,479 $ 283 $ 78,675 $ 30,775 $ (96) $ (849) $ 108,788
Issuance of common stock from
public offering............... 2,415,000 24 60,410 -- -- -- 60,434
Dividends on common stock,
$0.06 per share............... -- -- -- (1,861) -- -- (1,861)
Stock options exercised:
Company....................... 588,038 6 4,649 -- -- -- 4,655
IRC........................... -- -- 1,333 -- -- -- 1,333
Income tax benefit upon exercise
of stock options.............. -- -- 2,615 -- -- -- 2,615
Change in unrealized gain on
short-term investments, net of
income taxes.................. -- -- -- -- 286 -- 286
Adjustment related to tax basis
of pooled entities............ -- -- 250 -- -- -- 250
Pro forma provision for income
taxes of pooled company....... -- -- -- 73 -- -- 73
Reclassification of net income
of IRC partnerships........... -- -- 149 (149) -- -- --
Net earnings.................... -- -- -- 27,420 -- -- 27,420
-------------- ---------- ------------ ----------- ---------- ----------- -------------
Balance, December 31, 1995......... 31,298,517 313 148,081 56,258 190 (849) 203,993
Dividends on common stock,
$0.07 per share............... -- -- -- (2,191) -- -- (2,191)
Stock options exercised......... 282,438 3 3,798 -- -- -- 3,801
Income tax benefit upon exercise
of stock options.............. -- -- 1,149 -- -- -- 1,149
Change in unrealized gain on
short-term investments, net of
income taxes.................. -- -- -- -- (2) -- (2)
Net earnings.................... -- -- -- 38,014 -- -- 38,014
-------------- ---------- ------------ ----------- ---------- -------------------------
Balance, December 29, 1996......... 31,580,955 316 153,028 92,081 188 (849) 244,764
Dividends on common stock,
$0.08 per share............... -- -- -- (2,518) -- -- (2,518)
Stock options exercised......... 163,054 1 2,193 -- -- -- 2,194
Shares sold under employee
stock purchase plan........... -- -- 396 -- -- 61 457
Income tax benefit upon exercise
of stock options.............. -- -- 548 -- -- -- 548
Change in unrealized gain on
short-term investments, net of
income taxes.................. -- -- -- -- (93) -- (93)
Net earnings.................... -- -- -- 45,091 -- -- 45,091
-------------- ---------- ------------ ----------- ---------- ----------- -------------
Balance, December 28, 1997......... 31,744,009 $ 317 $ 156,165 $134,654 $ 95 $ (788) $ 290,443
============== ========== ============ =========== ========== =========== =============
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE>
APPLEBEE'S INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
<TABLE>
<CAPTION>
Fiscal Year Ended
----------------------------------------------
December 28, December 29, December 31,
1997 1996 1995
--------------- --------------- ---------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings.................................................. $ 45,091 $ 38,014 $ 27,420
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization.............................. 20,877 15,652 11,964
Amortization of intangible assets.......................... 3,258 2,293 2,305
Loss (gain) on sale of investments......................... 20 27 (67)
Deferred income tax provision (benefit).................... 1,001 128 (179)
Loss on disposition of restaurants and equipment........... 1,209 3,318 850
Pro forma provision for income taxes of pooled company..... -- -- 73
Changes in assets and liabilities (exclusive of effects of
acquisitions other than pooled company):
Receivables................................................ 2,451 (2,702) (2,447)
Inventories................................................ (66) 5,479 (4,877)
Prepaid and other current assets........................... 671 (898) 155
Accounts payable........................................... 7,782 766 433
Accrued expenses and other current liabilities............. 2,400 2,806 5,307
Accrued income taxes....................................... 4,248 (723) (328)
Franchise deposits......................................... (261) 625 (187)
Other...................................................... (1,302) (139) 356
--------------- --------------- ---------------
NET CASH PROVIDED BY OPERATING ACTIVITIES.................. 87,379 64,646 40,778
--------------- --------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of short-term investments........................... (19,150) (49,487) (16,809)
Maturities and sales of short-term investments................ 48,117 31,149 4,392
Purchases of property and equipment........................... (90,480) (65,672) (51,899)
Acquisitions of restaurants................................... (33,650) -- (9,682)
Acquisition of minority interest in joint venture............. (1,525) -- --
Proceeds from sale of restaurants and equipment............... 988 4,314 104
--------------- --------------- ---------------
NET CASH USED BY INVESTING ACTIVITIES...................... (95,700) (79,696) (73,894)
--------------- --------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock........................ -- -- 60,434
Dividends paid................................................ (2,191) (1,861) (1,269)
Issuance of common stock upon exercise of stock options....... 2,194 3,801 5,988
Income tax benefit upon exercise of stock options............. 548 1,149 2,615
Shares sold under employee stock purchase plan................ 457 -- --
Proceeds from issuance of long-term debt...................... -- -- 8,087
Payments on long-term debt.................................... (974) (945) (22,179)
Payments under noncompetition and consulting agreement........ (220) (220) (220)
Minority interest in net earnings of joint venture............ 69 284 214
--------------- --------------- ---------------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES........... (117) 2,208 53,670
--------------- --------------- ---------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS............... (8,438) (12,842) 20,554
CASH AND CASH EQUIVALENTS, beginning of period..................... 17,346 30,188 9,634
--------------- --------------- ---------------
CASH AND CASH EQUIVALENTS, end of period........................... $ 8,908 $ 17,346 $ 30,188
=============== =============== ===============
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE>
APPLEBEE'S INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS - (Continued)
(dollars in thousands)
<TABLE>
<CAPTION>
Fiscal Year Ended
-----------------------------------------------------
December 28, December 29, December 31,
1997 1996 1995
----------------- ----------------- -----------------
<S> <C> <C> <C>
SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION:
Cash paid during the year for:
Income taxes.................................... $ 20,613 $ 22,437 $ 15,537
================= ================= =================
Interest........................................ $ 2,573 $ 1,061 $ 3,060
================= ================= =================
</TABLE>
SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Capitalized leases of $2,610,000 were recorded in April 1995 when the Company
acquired the operations and assets of five franchise restaurants (see Note 4). A
capitalized lease of $424,000 was recorded in July 1995 when the Company entered
into a lease for a new restaurant. This lease was transferred to a franchisee in
connection with the sale of six restaurants in October 1996.
The Company received a $5,000,000 promissory note in connection with the sale of
six restaurants in October 1996 (see Note 10), which was paid in full in January
1997.
Capitalized leases of $4,055,000 were recorded in April 1997 when the Company
acquired the operations and assets of 11 franchise restaurants. In connection
with this acquisition, the Company issued $2,500,000 of promissory notes (see
Note 4).
DISCLOSURE OF ACCOUNTING POLICY:
For purposes of the consolidated statements of cash flows, the Company considers
all highly liquid investments purchased with a maturity of three months or less
to be cash equivalents.
See notes to consolidated financial statements.
F-7
<PAGE>
APPLEBEE'S INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Organization
Applebee's International, Inc. and its subsidiaries (the "Company") develops,
franchises and operates casual dining restaurants principally under the names
"Applebee's Neighborhood Grill & Bar" and "Rio Bravo Cantina." As of December
28, 1997, there were 960 Applebee's restaurants, of which 770 were operated by
franchisees and 190 were operated by the Company, and 55 Rio Bravo Cantina
restaurants, of which 24 were operated by franchisees and 31 were operated by
the Company. The Company also operated four other specialty restaurants. Such
restaurants were located in 48 states, Canada, Europe and the Caribbean.
2. Summary of Significant Accounting Policies
Principles of consolidation: The consolidated financial statements include the
accounts of the Company and its wholly-owned subsidiaries. All material
intercompany profits, transactions and balances have been eliminated.
Fiscal year: The Company's fiscal year ends on the last Sunday of the calendar
year. The fiscal years ended December 28, 1997 and December 29, 1996 contained
52 weeks, and the fiscal year ended December 31, 1995 contained 53 weeks, and
are referred to hereafter as 1997, 1996 and 1995, respectively.
Short-term investments: Short-term investments are comprised of U.S. government
and agency securities, certificates of deposit, state and municipal bonds, and
preferred stocks. Gains and losses from sales are determined using the specific
identification method. As of December 28, 1997, all short-term investments have
been classified as available-for-sale.
Inventories: Inventories are stated at the lower of cost (first-in, first-out
method) or market.
Pre-opening expense: The Company expenses direct training and other costs
related to opening new or relocated restaurants in the month of opening.
Property and equipment: Property and equipment are stated at cost. Depreciation
is provided primarily on a straight-line method over the estimated useful lives
of the assets. Leasehold improvements are amortized over the lesser of the lease
term, including renewal options, or the estimated useful life of the related
asset. The general ranges of original depreciable lives are as follows:
Years
Buildings.................................................... 20
Leasehold improvements....................................... 15-20
Furniture and equipment...................................... 3-7
Interest has been capitalized in connection with the development of new
restaurants and is amortized over the estimated useful life of the related
asset. Interest costs of $755,000, $618,000 and $624,000 were capitalized during
1997, 1996 and 1995, respectively.
Goodwill: Goodwill represents the excess of cost over fair market value of net
assets acquired by the Company. Goodwill is being amortized over periods ranging
from 15 to 20 years on a straight-line basis. Accumulated amortization at
December 28, 1997 and December 29, 1996 was $7,595,000 and $5,155,000,
respectively.
F-8
<PAGE>
Impairment of long-lived assets: Long-lived assets are reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount
may not be recoverable.
Franchise interest and rights: Franchise interest and rights represent
allocations of purchase price to either the purchased restaurants or franchise
operations acquired. The allocated costs are amortized over the estimated life
of the restaurants or the franchise agreements on a straight-line basis ranging
from 7 to 20 years. Accumulated amortization at December 28, 1997 and December
29, 1996 was $6,263,000 and $5,695,000, respectively.
Franchise revenues: Franchise revenues are deferred until substantial
performance of franchisor obligations is complete. Initial franchise fees,
included in franchise income in the consolidated statements of earnings, totaled
$4,263,000, $4,615,000 and $4,162,000 for 1997, 1996 and 1995, respectively.
Advertising costs: The Company expenses advertising costs for Company owned
restaurants as incurred except for production costs of advertising which are
expensed the first time the advertising takes place. Advertising expense related
to Company restaurants was $20,752,000, $16,470,000 and $12,749,000 for 1997,
1996 and 1995, respectively.
Stock-based compensation: The Company has adopted the disclosure provisions of
Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting for
Stock-Based Compensation." The Statement encourages rather than requires
companies to adopt a method that accounts for stock compensation awards based on
their estimated fair value at the date they are granted. Companies are
permitted, however, to account for stock compensation awards under Accounting
Principles Board ("APB") Opinion No. 25 which requires compensation cost to be
recognized based on the excess, if any, between the quoted market price of the
stock at the date of grant and the amount an employee must pay to acquire the
stock. The Company has elected to continue to apply APB Opinion No. 25 and has
disclosed the pro forma net earnings and earnings per share, determined as if
the fair value method had been applied, in Note 14.
Earnings per share: The Company adopted SFAS No. 128, "Earnings Per Share,"
during 1997. SFAS No. 128 requires presentation of basic and diluted earnings
per share. Basic earnings per share is computed by dividing income available to
common shareholders by the weighted average number of common shares outstanding
for the reporting period. Diluted earnings per share reflects the potential
dilution that could occur if securities or other contracts to issue common stock
were exercised or converted into common stock. All prior period weighted average
and per share information has been restated in accordance with SFAS No. 128.
Outstanding stock options issued by the Company represent the only dilutive
effect on weighted average shares. A reconciliation between basic and diluted
weighted average shares outstanding and the related earnings per share
calculation is presented below (in thousands, except per share amounts):
<TABLE>
<CAPTION>
1997 1996 1995
--------------- ---------------- -----------------
<S> <C> <C> <C>
Net earnings....................................... $ 45,091 $ 38,014 $ 27,420
================ ================ ================
Basic weighted average shares outstanding.......... 31,401 31,188 29,319
Dilutive effect of stock options................... 239 345 541
---------------- ---------------- ----------------
Diluted weighted average shares outstanding........ 31,640 31,533 29,860
================ ================ ================
Basic net earnings per common share................ $ 1.44 $ 1.22 $ 0.94
================ ================ ================
Diluted net earnings per common share.............. $ 1.43 $ 1.21 $ 0.92
================ ================ ================
</TABLE>
F-9
<PAGE>
Stock options with exercise prices greater than the average market price of the
Company's common stock for the applicable periods are excluded from the
computation of diluted weighted average shares outstanding. Such options totaled
approximately 1,625,000, 1,368,000 and 374,000 for 1997, 1996 and 1995,
respectively.
Pervasiveness of estimates: The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
New accounting pronouncements: In June 1997, the Financial Accounting Standards
Board issued SFAS No. 130, "Reporting Comprehensive Income." SFAS No. 130
establishes standards for reporting and display of comprehensive income and its
components (revenues, expenses, gains and losses) in a full set of
general-purpose financial statements. This statement is effective for fiscal
years beginning after December 15, 1997. The Company does not believe the
reporting and display of comprehensive income will materially impact the
financial statements.
In June 1997, the Financial Accounting Standards Board issued SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information." SFAS No.
131 establishes standards for the way public business enterprises report
information about operating segments in annual financial statements and requires
that those enterprises report selected information about operating segments in
interim financial reports issued to shareholders. It also establishes standards
for related disclosures about products and services, geographic areas, and major
customers. This statement is effective for financial statements for periods
beginning after December 15, 1997. In the initial year of application,
comparative information for earlier years is to be presented. This statement
need not be applied to interim financial statements in the initial year of its
application, but comparative information for interim periods in the initial year
of application is to be reported in financial statements for interim periods in
the second year of application.
3. Disclosures about Fair Value of Financial Instruments
The following methods were used in estimating fair value disclosures for
significant financial instruments of the Company. The carrying amount of cash
and cash equivalents approximates fair value because of the short maturity of
those instruments. The carrying amount of short-term investments is based on
quoted market prices. The fair value of the Company's long-term debt, excluding
capitalized lease obligations, is estimated based on quotations made on similar
issues.
The estimated fair values of the Company's financial instruments are as follows
(in thousands):
<TABLE>
<CAPTION>
December 28, 1997 December 29, 1996
----------------------------------- ----------------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
----------------- ----------------- ----------------- ----------------
<S> <C> <C> <C> <C>
Short-term investments................. $ 10,906 $ 10,906 $ 40,064 $ 40,064
Long-term debt, excluding
capitalized lease obligations........ $ 24,306 $ 24,941 $ 22,780 $ 23,099
</TABLE>
F-10
<PAGE>
4. Acquisitions
IRC Merger: On March 23, 1995, a wholly-owned subsidiary of the Company merged
with and into Innovative Restaurant Concepts, Inc. ("IRC"), referred to herein
as the "IRC Merger." Immediately prior to the IRC Merger, IRC's affiliated
limited partnerships, Cobb/Gwinnett Rio, Ltd., Rio Real Estate, L.P. and CG
Restaurant Partners, Ltd., were liquidated, and contemporaneously with the IRC
Merger, the Company acquired the interests of the limited partners in the
distributed assets of these partnerships. As a result of the IRC Merger, IRC
became a wholly-owned subsidiary of the Company. A total of approximately
2,630,000 shares of the Company's newly-issued common stock was issued to the
shareholders and limited partners of IRC, including IRC shares issued in 1995
upon the exercise of IRC stock options prior to the IRC Merger. IRC employees
also exchanged pre-existing stock options for options to purchase approximately
147,000 shares of the Company's common stock. In addition, the Company assumed
approximately $13,700,000 of IRC indebtedness, of which $1,270,000 was repaid at
closing and the remainder was repaid during 1995. At the time of the IRC Merger,
IRC operated 17 restaurants, 13 of which were Rio Bravo Cantinas, a Mexican
restaurant concept, and four were other specialty restaurants. The IRC Merger
was accounted for as a pooling of interests. Merger costs of $1,770,000 relating
to the IRC Merger were expensed in 1995. Merger costs include investment banking
fees, legal and accounting fees, and other merger related expenses. The impact
of these costs on net earnings per common share was approximately $0.06 in 1995.
Other restaurant acquisitions: On April 3, 1995, the Company acquired the
operations of five franchise restaurants and the related furniture and fixtures,
certain land and leasehold improvements, and rights to future development of
restaurants for a total purchase price of $9,682,000. The acquisition was
accounted for as a purchase, and accordingly, the purchase price has been
allocated to the fair value of net assets acquired and resulted in an allocation
to goodwill of $6,432,000. In connection with this acquisition, the Company also
recorded capitalized leases of $2,610,000. The 1995 financial statements reflect
the results of operations of such restaurants subsequent to the date of
acquisition. Results of operations of such restaurants prior to acquisition were
not material in relation to the Company's operating results for the periods
shown.
In 1997, the Company exercised its option to purchase the remaining 50% interest
in a joint venture arrangement with its franchisee in Nevada for $1,525,000.
On April 14, 1997, the Company acquired the operations of 11 franchise
Applebee's restaurants located in the St. Louis metropolitan area and the
related furniture and fixtures, certain land and leasehold improvements, and
rights to future development of restaurants for a total purchase price of
$36,150,000. The purchase price was paid in a combination of $33,650,000 in cash
and $2,500,000 of promissory notes, of which $1,500,000 was payable in January
1998 and $1,000,000 is payable in December 1998. One of the principals of the
franchisee was related to a person who was a director of the Company until May
1997. The acquisition was accounted for as a purchase, and accordingly, the
purchase price has been allocated to the fair value of net assets acquired and
resulted in an allocation to goodwill of approximately $27,000,000 which is
being amortized on a straight-line basis over 20 years. In connection with this
acquisition, the Company also recorded capitalized leases of $4,055,000. The
results of operations of such restaurants have been reflected in the
consolidated financial statements subsequent to the date of acquisition. Results
of operations of such restaurants prior to acquisition were not material in
relation to the Company's operating results for the periods shown.
On December 23, 1997, the Company entered into an agreement with Apple South,
Inc. ("Apple South"), its largest franchisee, to acquire 31 Applebee's
restaurants plus one restaurant under construction in the Virginia markets of
Norfolk, Richmond, Roanoke and Charlottesville for approximately $93,400,000,
subject to certain closing adjustments, referred to herein as the "Virginia
Acquisition." The Virginia Acquisition is anticipated to close in late March
1998, subject to obtaining financing, operating licenses and third-party
consents, and will be accounted for as a purchase. See Note 12 for additional
commitments and contingencies relating to the agreement with Apple South.
F-11
<PAGE>
5. Short-Term Investments
The amortized cost, estimated market value and unrealized gains or losses on
short-term investments are as follows (in thousands):
<TABLE>
<CAPTION>
December 28, 1997 December 29, 1996
------------------------------------------ ------------------------------------------
Amortized Unrealized Market Amortized Unrealized Market
Cost Gain Value Cost Gain Value
-------------- ------------- ------------- ------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Certificates of deposit........ $ 19 $ -- $ 19 $ 19 $ -- $ 19
Preferred stocks............... 402 56 458 1,374 52 1,426
U.S. government and
agency securities........... 4,496 -- 4,496 19,829 150 19,979
State and local
municipal securities........ 5,837 96 5,933 18,541 99 18,640
-------------- ------------- ------------- ------------- ------------- --------------
$ 10,754 $ 152 $ 10,906 $ 39,763 $ 301 $ 40,064
============== ============= ============= ============= ============= ==============
</TABLE>
The amortized cost and estimated market value of debt securities as of December
28, 1997, by contractual maturity, are shown below (in thousands). Expected
maturities will differ from contractual maturities because issuers may have the
right to call or prepay obligations with or without call or prepayment
penalties.
<TABLE>
<CAPTION>
Amortized Market
Cost Value
------------------ -----------------
<S> <C> <C>
Due within one year or less...................................... $ 2,911 $ 2,911
Due after one year through five years............................ 7,422 7,518
------------------ -----------------
$ 10,333 $ 10,429
================== =================
</TABLE>
6. Receivables
Receivables are comprised of the following (in thousands):
<TABLE>
<CAPTION>
December 28, December 29,
1997 1996
----------------- -----------------
<S> <C> <C>
Franchise royalty, advertising and trade receivables............. $ 12,406 $ 9,801
Notes receivable................................................. 1,150 6,305
Credit card receivables.......................................... 2,272 1,636
Interest and dividends receivable................................ 288 833
Franchise fee receivables........................................ 743 425
Other............................................................ 368 515
----------------- -----------------
17,227 19,515
Less allowance for bad debts..................................... 837 270
----------------- -----------------
$ 16,390 $ 19,245
================= =================
</TABLE>
Included in notes receivable as of December 29, 1996 was a $5,000,000 promissory
note which was received from a franchisee in connection with the sale of six
restaurants in October 1996 (see Note 10), which was paid in full in January
1997.
The provision for bad debts totaled $635,000 for 1997 and $250,000 for 1995. No
provision for bad debts was recorded during 1996. Write-offs against the
allowance for bad debts totaled $68,000, $453,000 and $267,000 during 1997, 1996
and 1995, respectively.
F-12
<PAGE>
7. Property and Equipment
Property and equipment, net is comprised of the following (in thousands):
<TABLE>
<CAPTION>
December 28, December 29,
1997 1996
----------------- ------------------
<S> <C> <C>
Land............................................................. $ 52,638 $ 38,340
Buildings and leasehold improvements............................. 176,517 125,486
Furniture and equipment.......................................... 106,125 77,034
Construction in progress......................................... 10,238 7,882
----------------- ------------------
345,518 248,742
Less accumulated depreciation and capitalized
lease amortization............................................ 69,436 51,792
----------------- ------------------
$ 276,082 $ 196,950
================= ==================
</TABLE>
Property under capitalized leases in the amount of $4,540,000 and $2,610,000 at
December 28, 1997 and December 29, 1996, respectively, is included in buildings
and leasehold improvements. Accumulated amortization of such property amounted
to $235,000 and $225,000 at December 28, 1997 and December 29, 1996,
respectively. Capitalized leases relate to the buildings on certain restaurant
properties. The land portions of the restaurant property leases are accounted
for as operating leases.
Depreciation and capitalized lease amortization expense relating to property and
equipment totaled $20,877,000, $15,652,000 and $11,964,000 for 1997, 1996 and
1995, respectively. Of these amounts, $210,000, $145,000 and $105,000 related to
capitalized lease amortization during 1997, 1996 and 1995, respectively.
The Company leases certain of its restaurants. The leases generally provide for
payment of minimum annual rent, real estate taxes, insurance and maintenance
and, in some cases, contingent rent (calculated as a percentage of sales) in
excess of minimum rent. Total rental expense for all operating leases is
comprised of the following (in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
------------------ ------------------ -----------------
<S> <C> <C> <C>
Minimum rent................................. $ 10,452 $ 8,138 $ 7,300
Contingent rent.............................. 1,298 1,451 1,520
------------------ ------------------ -----------------
$ 11,750 $ 9,589 $ 8,820
================== ================== =================
</TABLE>
The present value of capitalized lease payments and the future minimum lease
payments under noncancelable operating leases (including leases executed for
sites to be developed in 1998) as of December 28, 1997 are as follows (in
thousands):
<TABLE>
<CAPTION>
Capitalized Operating
Leases Leases
------------------ -----------------
<S> <C> <C>
1998............................................................. $ 642 $ 12,483
1999............................................................. 664 12,754
2000............................................................. 691 12,159
2001............................................................. 717 11,900
2002............................................................. 741 11,764
Thereafter....................................................... 11,308 103,691
------------------ ------------------
Total minimum lease payments..................................... 14,763 $ 164,751
==================
Less amounts representing interest............................... 10,184
------------------
Present value of minimum lease payments.......................... $ 4,579
==================
</TABLE>
F-13
<PAGE>
8. Long-Term Debt
Long-term debt, including capitalized lease obligations, is comprised of the
following (in thousands):
<TABLE>
<CAPTION>
December 28, December 29,
1997 1996
------------------ ------------------
<S> <C> <C>
Unsecured notes payable; 7.70% interest per annum, with
principal payments beginning in 1998; due May 2004........... $ 20,000 $ 20,000
Secured bank note; 6.69% interest per annum; due in
quarterly installments of principal and interest through
October 1998................................................. 600 1,200
Unsecured promissory notes issued in connection with the
acquisition of restaurants; 8.00% interest per annum; due
in annual installments of principal and interest through
February 2000................................................ 1,187 1,544
Unsecured promissory notes issued in connection with the
acquisition of restaurants; 8.00% interest per annum; due
in two installments of principal and interest in January
and December 1998............................................ 2,500 --
Capitalized lease obligations.................................... 4,579 2,623
Other............................................................ 19 36
------------------ ------------------
Total long-term debt............................................. 28,885 25,403
Less current portion of long-term debt........................... 6,306 968
------------------ ------------------
Long-term debt - less current portion............................ $ 22,579 $ 24,435
================== ==================
</TABLE>
During 1995, the Company obtained a $20,000,000 unsecured bank revolving credit
facility that was to expire on December 31, 1997. In September 1997, the terms
of the facility were amended to extend the expiration date to December 31, 1998.
Of this amount, $5,000,000 can be utilized for standby letters of credit. The
revolving credit facility bears interest at LIBOR plus 0.60% or the prime rate,
at the Company's option, and requires the Company to pay a commitment fee of
0.15% on any unused portion of the facility. As of December 28, 1997, no amounts
were outstanding under the facility. Standby letters of credit issued under the
facility totaling $1,887,000 and $1,324,000 were outstanding as of December 28,
1997 and December 29, 1996, respectively.
The debt agreements contain various covenants and restrictions which, among
other things, require the maintenance of a stipulated fixed charge coverage
ratio and minimum consolidated net worth, as defined, and limit additional
indebtedness in excess of specified amounts. The debt agreements also restrict
the amount available for the payment of cash dividends. At December 28, 1997,
retained earnings were not restricted for the payment of cash dividends. The
Company is currently in compliance with the covenants of all of its debt
agreements.
Maturities of long-term debt, including capitalized lease obligations, for each
of the five fiscal years subsequent to December 28, 1997, ending during the
years indicated, are as follows (in thousands):
1998.................................................. $ 6,306
1999.................................................. 3,199
2000.................................................. 3,249
2001.................................................. 2,853
2002.................................................. 2,874
F-14
<PAGE>
The Company entered into a financing commitment in January 1998 (see Note 16).
As a result of this commitment, the Company expects to refinance the $20,000,000
unsecured notes payable due in 2004, and to cancel the $20,000,000 unsecured
bank revolving credit facility.
9. Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities are comprised of the following
(in thousands):
<TABLE>
<CAPTION>
December 28, December 29,
1997 1996
------------------ -----------------
<S> <C> <C>
Compensation and related taxes.................................... $ 9,060 $ 9,828
Gift certificates................................................. 4,129 3,826
Sales and use taxes............................................... 2,790 2,006
Insurance......................................................... 4,473 1,596
Rent.............................................................. 2,782 2,477
Other............................................................. 5,313 5,864
------------------ ------------------
$ 28,547 $ 25,597
================== =================
</TABLE>
10. Loss on Disposition of Restaurants and Equipment
In October 1996, the Company completed the sale of six of its eight Company
owned Applebee's restaurants located in the San Bernardino and Riverside
counties of southern California. The operations of the six restaurants and
future restaurant development in the market area were assumed by an existing
Applebee's franchisee. The sales price was $8,500,000 and a loss on the
disposition of the properties of $75,000 was recorded in the third quarter of
1996. During the fourth quarter of 1996, the Company recognized a loss of
$2,500,000 primarily relating to the intended disposition of the two remaining
restaurants in the territory.
11. Income Taxes
The Company and its subsidiaries file a consolidated federal income tax return.
The combined earnings of IRC, a pooled company, included earnings of limited
partnerships which were not taxable entities for federal and state income tax
purposes. The accompanying consolidated statements of earnings reflect
provisions for income taxes on a pro forma basis as if the Company were liable
for federal and state income taxes on the earnings of IRC's limited partnerships
for periods prior to the IRC Merger at a statutory rate of 39%.
The income tax provision consists of the following (in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
--------------- --------------- ----------------
<S> <C> <C> <C>
Current provision:
Federal............................................ $ 22,016 $ 18,783 $ 15,163
State.............................................. 3,693 3,800 2,849
Deferred provision (benefit)........................... 1,001 128 (179)
Pro forma provision for income taxes
of pooled company.................................. -- -- 73
-------------- --------------- ----------------
Income taxes........................................... $ 26,710 $ 22,711 $ 17,906
=============== =============== ================
</TABLE>
F-15
<PAGE>
The deferred income tax provision is comprised of the following (in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
--------------- --------------- ----------------
<S> <C> <C> <C>
Depreciation........................................... $ 2,270 $ 617 $ 13
Franchise deposits..................................... (534) 77 85
Allowance for bad debts................................ (111) 345 (72)
Accrued expenses....................................... (758) 203 (125)
Property and equipment writedown....................... 671 (935) --
Other.................................................. (537) (179) (80)
--------------- --------------- ----------------
Deferred income tax provision (benefit)................ 1,001 128 (179)
Adjustment to tax basis of pooled company.............. -- -- (1,350)
Deferred income taxes related to change in
unrealized gain (loss) on investments.............. 57 (3) 173
--------------- --------------- ----------------
Net change in deferred income taxes.................... $ 1,058 $ 125 $ (1,356)
=============== =============== ================
</TABLE>
A reconciliation between the income tax provision and the expected tax
determined by applying the statutory federal income tax rates to earnings before
income taxes follows (in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
--------------- --------------- ----------------
<S> <C> <C> <C>
Federal income tax at statutory rates.................. $ 25,130 $ 21,254 $ 15,864
Increase (decrease) to income tax expense:
Amortization of goodwill .......................... 280 276 281
State income taxes, net of federal benefit......... 2,625 2,470 1,852
Merger costs....................................... -- -- 625
Tax exempt investment income....................... (310) (338) (169)
Meals and entertainment disallowance............... 278 317 258
FICA tip tax credit................................ (1,598) (1,136) (985)
Other.............................................. 305 (132) 180
--------------- --------------- ----------------
Income taxes........................................... $ 26,710 $ 22,711 $ 17,906
=============== =============== ================
</TABLE>
The net current deferred income tax asset amounts are included in "prepaid and
other current assets" in the accompanying consolidated balance sheets. The
significant components of deferred income tax assets and liabilities and the
related balance sheet classifications are as follows (in thousands):
<TABLE>
<CAPTION>
December 28, December 29,
1997 1996
----------------- ------------------
<S> <C> <C>
Classified as current:
Allowance for bad debts..................................... $ 126 $ 15
Accrued expenses............................................ 1,003 245
Other, net.................................................. (624) (495)
----------------- ------------------
Net deferred income tax asset (liability)................... $ 505 $ (235)
================= ==================
Classified as non-current:
Depreciation................................................ $ (1,786) $ 484
Franchise deposits.......................................... 900 366
Other, net.................................................. 454 516
----------------- ------------------
Net deferred income tax asset (liability)................... $ (432) $ 1,366
================= ==================
</TABLE>
F-16
<PAGE>
12. Commitments and Contingencies
Litigation, claims and disputes: As of December 28, 1997, the Company was using
assets owned by a former franchisee in the operation of one restaurant under a
purchase rights agreement which required the Company to make certain payments to
the franchisee's lender. In 1991, a dispute arose between the lender and the
Company over the amount of the payments due the lender. Based upon a then
current independent appraisal, the Company offered to settle the dispute and
purchase the assets for $1,000,000 in 1991. In November 1992, the lender was
declared insolvent by the FDIC and has since been liquidated. The Company closed
one of the three restaurants in 1994 and one of the two remaining restaurants in
February 1996. In the fourth quarter of 1996, the Company received information
indicating that the franchisee's indebtedness to the FDIC had been acquired by a
third party. In June 1997, the third party filed a lawsuit against the Company
seeking approximately $3,800,000. The lawsuit remains in the discovery phase.
The Company believes it has meritorious defenses and will vigorously defend this
lawsuit. In the event that the Company were to pay an amount determined to be in
excess of the fair market value of the assets, the Company will recognize a loss
at the time of such payment.
In addition, the Company is involved in various legal actions arising in the
normal course of business. While the resolution of any of such actions or the
matter described above may have an impact on the financial results for the
period in which it is resolved, the Company believes that the ultimate
disposition of these matters will not, in the aggregate, have a material adverse
effect upon its business or consolidated financial position.
Franchise financing: The Company entered into an agreement in 1992 with a
financing source to provide up to $75,000,000 of financing to Company
franchisees to fund development of new franchise restaurants. The Company
provided a limited guaranty of loans made under the agreement. The Company's
maximum recourse obligation of 10% of the amount funded is reduced beginning in
the second year of each long-term loan and thereafter decreases ratably to zero
after the seventh year of each loan. At December 28, 1997, approximately
$48,000,000 had been funded through this financing source, of which
approximately $19,000,000 was outstanding. This agreement expired on December
31, 1994 and was not renewed, although some loan commitments as of the
termination date were thereafter funded through December 31, 1995.
Severance agreements: The Company has severance and employment agreements with
certain officers providing for severance payments to be made in the event the
employee resigns or is terminated related to a change in control (as defined in
the agreements). If the severance payments had been due as of December 28, 1997,
the Company would have been required to make payments aggregating approximately
$4,900,000. In addition, the Company has severance and employment agreements
with certain officers which contain severance provisions not related to a change
in control, and such provisions would have required aggregate payments of
approximately $3,900,000 if such officers had been terminated as of December 28,
1997.
Apple South divestiture plan: As part of the agreement with Apple South relating
to the Virginia Acquisition (see Note 4), Apple South has also agreed to use its
best efforts to sell its other Applebee's restaurants as soon as practical,
resulting in its exit as an Applebee's franchisee. To the extent any restaurants
are not divested by Apple South by December 31, 1999, the Company has an option
to purchase the remaining restaurants at a predetermined formula. The Company
and Apple South have committed to work together to identify and approve
qualified franchise groups to acquire the remaining Apple South restaurants and
to effect an efficient transition of ownership. To assist in this transition,
the Company has agreed to provide the availability of guarantees up to 10% of
the borrowings of qualified franchise groups, up to a maximum of $10,000,000 in
the aggregate.
F-17
<PAGE>
13. Stockholders' Equity
On July 28, 1995, the Company completed a public offering of its common stock
consisting of 2,100,000 shares sold by the Company and 300,000 shares sold by
certain stockholders of the Company. In addition, the Company and the selling
stockholders granted the underwriters an option to purchase 315,000 and 45,000
shares, respectively, to cover over-allotments, which was exercised on August 9,
1995. Net proceeds of $60,434,000, after expenses, were received from the
offering. A portion of the net proceeds of the offering was used to retire
approximately $12,500,000 of secured debt assumed in certain acquisitions and to
repay the outstanding balance of the Company's revolving credit facility of
$5,000,000.
On September 7, 1994, the Company's Board of Directors adopted a Shareholder
Rights Plan (the "Rights Plan") and declared a dividend, issued on September 19,
1994, of one Right for each outstanding share of Common Stock of the Company
(the "Common Shares"). The Rights become exercisable if a person or group
acquires more than 15% of the outstanding Common Shares, other than pursuant to
a Qualifying Offer (as defined) or makes a tender offer for more than 15% of the
outstanding Common Shares, other than pursuant to a Qualifying Offer. Upon the
occurrence of such an event, each Right entitles the holder (other than the
acquiror) to purchase for $75 the economic equivalent of Common Shares, or in
certain circumstances, stock of the acquiring entity, worth twice as much. The
Rights will expire on September 7, 2004 unless earlier redeemed by the Company,
and are redeemable prior to becoming exercisable at $0.01 per Right.
14. Employee Benefit Plans
Employee stock option plan: During 1989, the Company's Board of Directors
approved the 1989 Employee Stock Option Plan (the "1989 Plan") which provided
for the grant of both qualified and nonqualified options as determined by a
committee appointed by the Board of Directors. At the 1995 Annual Meeting of
Stockholders, the 1989 Employee Stock Option Plan was terminated, and the 1995
Equity Incentive Plan (the "1995 Plan") was approved. Stock options outstanding
under the existing 1989 Stock Option Plan were not affected by the termination
of that plan.
Options under the 1989 Plan were granted for a term of three to ten years and
were generally exercisable one year from date of grant. The 1995 Plan allows the
granting of stock options, stock appreciation rights, restricted stock awards,
performance unit awards and performance share awards (collectively, "Awards") to
eligible participants. The number of shares authorized to be issued pursuant to
the 1995 Plan is 2,300,000. Options granted under the 1995 Plan during 1995 have
a term of five to ten years and are generally exercisable three years from date
of grant. Options granted under the 1995 Plan during 1996 and 1997 have a term
of ten years and are generally 50% exercisable three years from date of grant,
25% exercisable four years from date of grant, and 25% exercisable five years
from date of grant. Subject to the terms of the 1995 Plan, the Committee has the
sole discretion to determine the employees who shall be granted Awards, the size
and types of such Awards, and the terms and conditions of such Awards. Under
both plans, the option price for both qualified and nonqualified options as of
the date granted cannot be less than the fair market value of the Company's
common stock.
The Company accounts for both plans in accordance with APB Opinion No. 25 which
requires compensation cost to be recognized based on the excess, if any, between
the quoted market price of the stock at the date of grant and the amount an
employee must pay to acquire the stock. Under this method, no compensation cost
has been recognized for stock option awards.
F-18
<PAGE>
Had compensation cost for the Company's stock-based compensation plans been
determined based on the fair value as prescribed by SFAS No. 123 (see Note 2),
the Company's net earnings and net earnings per common share would have been
reduced to the pro forma amounts indicated below (in thousands, except per share
amounts):
<TABLE>
<CAPTION>
1997 1996 1995
--------------- --------------- --------------
<S> <C> <C> <C>
Net earnings, as reported................................ $ 45,091 $ 38,014 $ 27,420
Net earnings, pro forma.................................. $ 41,119 $ 32,863 $ 25,613
Basic net earnings per common share, as reported......... $ 1.44 $ 1.22 $ 0.94
Basic net earnings per common share, pro forma........... $ 1.31 $ 1.05 $ 0.87
Diluted net earnings per common share, as reported....... $ 1.43 $ 1.21 $ 0.92
Diluted net earnings per common share, pro forma......... $ 1.30 $ 1.04 $ 0.86
</TABLE>
The weighted average fair value at date of grant for options granted during
1997, 1996 and 1995 was $12.76, $15.14 and $14.77 per share, respectively,
which, for the purposes of this disclosure, is assumed to be amortized over the
respective vesting period of the grants. The fair value of each option grant is
estimated on the date of grant using the Black-Scholes option-pricing model with
the following weighted average assumptions used for grants in 1997, 1996 and
1995: dividend yield of 0.3% for all years; expected volatility of 56.0%, 58.1%
and 63.4%, respectively; risk-free interest rate of 5.7%, 6.2% and 6.4%,
respectively; and expected lives of 4.6, 4.9 and 4.0 years, respectively.
Transactions relative to both plans are as follows:
<TABLE>
<CAPTION>
1995 Plan 1989 Plan
------------------------------------- -------------------------------------
Weighted Weighted
Number of Average Number of Average
Options Exercise Price Options Exercise Price
------------------ ----------------- ----------------- ------------------
<S> <C> <C> <C> <C>
Options outstanding at
December 25, 1994............ -- -- 1,594,679 $ 11.29
Granted.................. 891,300 $ 28.01 163,000 $ 18.80
Exercised................. -- -- (588,038) $ 7.92
Canceled.................. (15,000) $ 28.50 (71,100) $ 15.59
------------------ -----------------
Options outstanding at
December 31, 1995............ 876,300 $ 28.00 1,098,541 $ 13.92
Granted.................. 1,073,701 $ 27.99 -- --
Exercised................. -- -- (282,438) $ 27.46
Canceled.................. (120,658) $ 28.39 (4,400) $ 13.73
------------------ -----------------
Options outstanding at
December 29, 1996............ 1,829,343 $ 27.97 811,703 $ 14.09
Granted.................. 142,825 $ 24.98 -- --
Exercised................. (2,167) $ 25.88 (160,887) $ 13.29
Canceled.................. (228,902) $ 28.03 (10,804) $ 20.52
------------------ -----------------
Options outstanding at
December 28, 1997............ 1,741,099 $ 27.72 640,012 $ 14.17
================== =================
Options exercisable at
December 28, 1997............ 214,000 $ 26.23 640,012 $ 14.17
================== =================
Options available for grant at
December 28, 1997............ 556,734 --
================== =================
</TABLE>
F-19
<PAGE>
The following table summarizes information relating to fixed-priced stock
options outstanding for both plans at December 28, 1997:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
------------------------------------------------ --------------------------------
Weighted
Average Weighted Weighted
Remaining Average Average
Number Contractual Exercise Number Exercise
Range of Exercise Prices Outstanding Life Price Exercisable Price
-------------------------- --------------- --------------- -------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
1989 Plan:
$ 3.02 to $ 7.63 28,562 3.9 years $ 4.62 28,562 $ 4.62
$ 11.83 to $ 14.69 521,950 3.7 years $ 13.74 521,950 $ 13.74
$ 19.25 to $ 21.88 89,500 2.6 years $ 19.78 89,500 $ 19.78
--------------- ---------------
$ 3.02 to $ 21.88 640,012 3.5 years $ 14.17 640,012 $ 14.17
=============== ===============
1995 Plan:
$ 22.75 to $ 25.75 258,358 6.0 years $ 24.98 130,000 $ 24.97
$ 28.00 to $ 29.25 1,482,741 8.1 years $ 28.19 84,000 $ 28.18
--------------- ---------------
$ 22.75 to $ 29.25 1,741,099 7.8 years $ 27.72 214,000 $ 26.23
=============== ===============
</TABLE>
Employee retirement plans: During 1992, the Company established a profit sharing
plan and trust in accordance with Section 401(k) of the Internal Revenue Code.
Prior to 1997, the Company matched 25% of employee contributions, not to exceed
2% of the employee's total annual compensation, with the Company contributions
vesting at the rate of 20% each year beginning after the employee's second year
of service. The Company adopted amendments to the 401(k) plan which were
effective beginning in 1997. The Company's matching contributions were increased
to 35% and 50% of employee contributions in 1997 and 1998, respectively, not to
exceed 2.8% and 4.0%, respectively, of the employee's total annual compensation,
and will be made in shares of the Company's common stock. The Company's
contributions vest at the rate of 60% after the employee's third year of
service, 80% after four years of service and 100% after five years of service.
The number of common shares authorized pursuant to the 401(k) plan is 50,000.
During 1994, the Company established a non-qualified defined contribution
retirement plan for key employees. The Company's contributions under both plans
in 1997, 1996 and 1995 were $702,000, $570,000 and $312,000, respectively.
Employee stock purchase plan: During 1996, the Company established an employee
stock purchase plan in accordance with Section 423 of the Internal Revenue Code,
and the plan was approved at the 1997 Annual Meeting of Stockholders. The plan
allows employees to purchase shares of the Company's common stock at a 10%
discount through payroll deductions. The number of common shares authorized
pursuant to the plan is 200,000. During 1997, employees purchased 20,143 shares
under this plan.
Employee stock ownership plan: The Company's Board of Directors approved an
employee stock ownership plan in January 1997. The Company's contributions to
this plan are completely discretionary and will be made in shares of the
Company's common stock. The Company's contribution to the plan was $500,000 for
1997.
15. Related Party Transactions
The Company and certain franchisees have obtained restaurant equipment from a
company owned by an individual who is related to a person who was a director of
the Company until May 1997. During 1997, 1996 and 1995, the Company paid
$264,000, $426,000 and $3,128,000, respectively, for equipment and services
purchased from this company.
F-20
<PAGE>
The Company leases a restaurant site from a corporation whose ownership is
composed of certain current and former stockholders, directors and officers of
the Company. The lease has a term of 20 years with two renewal options. The
lease provides for rentals in an amount equal to approximately 7% of gross sales
of the restaurants. During 1995, the Company entered into an agreement with this
party to lease additional parking space at the same site. Rents incurred under
both leases totaled $166,000, $185,000 and $186,000 for 1997, 1996 and 1995,
respectively, and are included in direct and occupancy costs in the consolidated
statements of earnings.
The Company leases a restaurant site from a partnership in which a former
director, who is related to a person who was a director of the Company until May
1997, holds a 50% interest. The lease has a term of 20 years with two options to
renew. The lease provides for rentals in an amount equal to approximately 7% of
gross sales of the restaurant. Rents incurred under the lease were $128,000 for
1997 and $113,000 for both 1996 and 1995, and are included in direct and
occupancy costs in the consolidated statements of earnings.
The Company leases certain office space under an operating lease from a
partnership in which a person, who was a director of the Company until August
1997 and who remains a significant stockholder of the Company, holds a 37.5%
interest. The lease expires in December 1998 and is renewable for one-year terms
at the Company's option. Rents incurred under the lease were $120,000, $104,000,
and $84,000 for 1997, 1996 and 1995, respectively, and are included in general
and administrative expenses in the consolidated statements of earnings.
16. Subsequent Events
On January 22, 1998, the Company entered into a loan commitment with Merrill
Lynch Capital Corporation to provide $225,000,000 in senior secured credit
facilities, consisting of an eight-year senior secured term loan of $125,000,000
and a five-year secured revolving credit facility of $100,000,000.
The Company anticipates that it will use the proceeds of the facilities
approximately as follows:
(i) $105,000,000 to fund the Virginia Acquisition (including
related transaction fees and expenses);
(ii) $20,000,000 to refinance certain existing indebtedness
currently bearing interest at 7.70% (see Note 8); and
(iii) $100,000,000 for ongoing working capital needs and general
corporate purposes (including stock repurchases as described
below).
Up to $50,000,000 of the facilities will be available to fund repurchases of the
Company's common stock. Since December 28, 1997 and through March 9, 1998, the
Company has repurchased 1,270,000 shares of its common stock at an aggregate
value of $25,000,000, pursuant to plans approved by the Company's Board of
Directors. The Company contemplates additional purchases of up to $25,000,000
subject to the completion of the financing discussed above.
The senior term loan is expected to bear interest at LIBOR plus 2.25% and
require semi-annual principal payments aggregating $1,250,000 per year for each
of the first seven years, with the remaining $116,250,000 due during the eighth
year. The revolving credit facility is expected to bear interest at LIBOR plus
1.375%.
Both the senior term loan and the revolving credit facility will be subject to
standard other terms, conditions, covenants, and fees and will be secured by the
common stock of each of the Company's present and future subsidiaries and all
intercompany debt of the Company and such subsidiaries. The loan commitment is
anticipated to close concurrently with the Virginia Acquisition (see Note 4).
F-21
<PAGE>
In February 1998, the Company entered into an agreement to sell its six
restaurants located in the Long Island, New York area for approximately
$10,000,000 in cash. The operations of the restaurants and future restaurant
development in the market area will be assumed by an existing Applebee's
franchisee. The Company expects the sale to close in the second quarter of 1998
with minimal effect, if any, on its consolidated net earnings or financial
position.
17. Quarterly Results of Operations (Unaudited)
The following presents the unaudited consolidated quarterly results of
operations for 1997 and 1996 (in thousands, except per share amounts).
<TABLE>
<CAPTION>
1997
---------------------------------------------------------------
Fiscal Quarter Ended
---------------------------------------------------------------
March 30, June 29, September 28, December 28,
1997 1997 1997 1997
------------- -------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues:
Company restaurant sales....................... $100,843 $ 114,775 $117,607 $118,948
Franchise income............................... 15,409 15,917 16,260 16,061
------------- -------------- ------------- -------------
Total operating revenues.................... 116,252 130,692 133,867 135,009
------------- -------------- ------------- -------------
Cost of Company restaurant sales:
Food and beverage.............................. 27,721 31,661 32,228 32,859
Labor.......................................... 32,101 36,025 37,914 39,125
Direct and occupancy........................... 26,022 28,419 28,884 30,871
Pre-opening expense............................ 510 902 864 1,385
------------- -------------- ------------- -------------
Total cost of Company restaurant sales...... 86,354 97,007 99,890 104,240
------------- -------------- ------------- -------------
General and administrative expenses................. 12,446 13,109 13,060 13,964
Amortization of intangible assets................... 568 857 913 920
Loss on disposition of restaurants and equipment.... 233 251 262 463
------------- -------------- ------------- -------------
Operating earnings.................................. 16,651 19,468 19,742 15,422
------------- -------------- ------------- -------------
Other income (expense):
Investment income.............................. 933 446 180 275
Interest expense............................... (359) (473) (407) (466)
Other income................................... 148 90 58 93
------------- -------------- ------------- -------------
Total other income (expense)................ 722 63 (169) (98)
------------- -------------- ------------- -------------
Earnings before income taxes........................ 17,373 19,531 19,573 15,324
Income taxes........................................ 6,497 7,305 7,320 5,588
------------- -------------- ------------- -------------
Net earnings........................................ $ 10,876 $ 12,226 $ 12,253 $ 9,736
============= ============== ============= =============
Basic net earnings per common share................. $ 0.35 $ 0.39 $ 0.39 $ 0.31
============= ============== ============= =============
Diluted net earnings per common share............... $ 0.34 $ 0.39 $ 0.39 $ 0.31
============= ============== ============= =============
Basic weighted average shares outstanding........... 31,310 31,370 31,444 31,478
============= ============== ============= =============
Diluted weighted average shares outstanding......... 31,606 31,611 31,692 31,654
============= ============== ============= =============
</TABLE>
F-22
<PAGE>
<TABLE>
<CAPTION>
1996
---------------------------------------------------------------
Fiscal Quarter Ended
---------------------------------------------------------------
March 31, June 30, September 29, December 29,
1996 1996 1996 1996
------------- -------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues:
Company restaurant sales....................... $ 82,640 $ 91,116 $ 92,969 $ 92,265
Franchise income............................... 12,401 13,469 14,105 14,166
------------- -------------- ------------- -------------
Total operating revenues.................... 95,041 104,585 107,074 106,431
------------- -------------- ------------- -------------
Cost of Company restaurant sales:
Food and beverage.............................. 23,351 25,549 26,172 25,462
Labor.......................................... 26,859 28,292 29,027 28,791
Direct and occupancy........................... 20,463 22,865 22,049 22,363
Pre-opening expense............................ 249 925 865 1,518
------------- -------------- ------------- -------------
Total cost of Company restaurant sales...... 70,922 77,631 78,113 78,134
------------- -------------- ------------- -------------
General and administrative expenses................. 10,385 11,109 11,152 11,241
Amortization of intangible assets................... 588 570 570 565
Loss on disposition of restaurants and equipment.... 115 424 183 2,596
------------- -------------- ------------- -------------
Operating earnings.................................. 13,031 14,851 17,056 13,895
------------- -------------- ------------- -------------
Other income (expense):
Investment income.............................. 801 597 694 771
Interest expense............................... (446) (434) (363) (328)
Other income................................... 105 200 205 90
------------- -------------- ------------- -------------
Total other income (expense)................ 460 363 536 533
------------- -------------- ------------- -------------
Earnings before income taxes........................ 13,491 15,214 17,592 14,428
Income taxes........................................ 5,126 5,639 6,598 5,348
------------- -------------- ------------- -------------
Net earnings........................................ $ 8,365 $ 9,575 $ 10,994 $ 9,080
============= ============== ============= =============
Basic net earnings per common share................. $ 0.27 $ 0.31 $ 0.35 $ 0.29
============= ============== ============= =============
Diluted net earnings per common share............... $ 0.27 $ 0.30 $ 0.35 $ 0.29
============= ============== ============= =============
Basic weighted average shares outstanding........... 31,033 31,148 31,277 31,295
============= ============== ============= =============
Diluted weighted average shares outstanding......... 31,338 31,553 31,680 31,600
============= ============== ============= =============
</TABLE>
-------------------------
F-23
<PAGE>
APPLEBEE'S INTERNATIONAL, INC.
EXHIBIT INDEX
Exhibit
Number Description of Exhibit
- --------------- ---------------------------------------------------------------
3.1 Certificate of Incorporation, as amended, of Registrant
(incorporated by reference to Exhibit 3.1 of the Registrant's
Annual Report on Form 10-K for the fiscal year ended December
31, 1995).
3.2 Restated and Amended By-laws of the Registrant (incorporated by
reference to Exhibit 3.2 of the Registrant's Annual Report on
Form 10-K for the fiscal year ended December 29, 1996).
4.1 Shareholder Rights Plan contained in Rights Agreement dated as
of September 7, 1994, between Applebee's International, Inc.
and Chemical Bank, as Rights Agent (incorporated by reference
to Exhibit 4.1 of the Registrant's Annual Report on Form 10-K
for the fiscal year ended December 25, 1994).
4.2 Certificate of the Voting Powers, Designations, Preferences and
Relative Participating, Optional and Other Special Rights and
Qualifications of Series A Participating Cumulative Preferred
Stock of Applebee's International, Inc. (incorporated by
reference to Exhibit 4.2 of the Registrant's Annual Report on
Form 10-K for the fiscal year ended December 25, 1994).
9.1 Voting Agreement, dated as of July 15, 1989, among John Hamra,
Abe J. Gustin, Jr. and Johyne Hamra Reck, as amended by
Acknowledgment and Amendment to Stockholders' Voting Agreement
dated February 11, 1992 (incorporated by reference to Exhibit
9.1 of the Registrant's Annual Report on Form 10-K for the
fiscal year ended December 25, 1994).
9.2 Amendment to Stockholder's Voting Agreement dated March 17,
1995 (incorporated by reference to Exhibit 9.1 of the
Registrant's Quarterly Report on Form 10-Q for the fiscal
quarter ended March 26, 1995).
10.1 Indemnification Agreement, dated March 16, 1988, between John
Hamra and Applebee's International, Inc. (incorporated by
reference to Exhibit 10.1 of the Registrant's Annual Report on
Form 10-K for the fiscal year ended December 25, 1994).
10.2 Indemnification Agreement, dated March 16, 1988, between Abe J.
Gustin, Jr. and Applebee's International, Inc. (incorporated by
reference to Exhibit 10.2 of the Registrant's Annual Report on
Form 10-K for the fiscal year ended December 25, 1994).
10.3 Indemnification Agreement, dated March 16, 1988, between Johyne
Reck and Applebee's International, Inc. (incorporated by
reference to Exhibit 10.3 of the Registrant's Annual Report on
Form 10-K for the fiscal year ended December 25, 1994).
10.4 Form of Applebee's Development Agreement (incorporated by
reference to Exhibit 10.4 of the Registrant's Annual Report on
Form 10-K for the fiscal year ended December 31, 1995).
E-1
<PAGE>
Exhibit
Number Description of Exhibit
- --------------- ---------------------------------------------------------------
10.5 Form of Applebee's Franchise Agreement (incorporated by
reference to Exhibit 10.5 of the Registrant's Annual Report on
Form 10-K for the fiscal year ended December 31, 1995).
10.6 Schedule of Applebee's Development and Franchise Agreements as
of December 28, 1997.
10.7 Form of Rio Bravo Cantina Development Agreement (incorporated
by reference to Exhibit 10.7 of the Registrant's Annual Report
on Form 10-K for the fiscal year ended December 29, 1996).
10.8 Form of Rio Bravo Cantina Franchise Agreement (incorporated by
reference to Exhibit 10.8 of the Registrant's Annual Report on
Form 10-K for the fiscal year ended December 29, 1996).
10.9 Schedule of Rio Bravo Cantina Development and Franchise
Agreements as of December 28, 1997.
10.10 Purchase Rights Agreement dated January 17, 1990 by and between
Applebee's International, Inc. and Apple Star, Inc.
(incorporated by reference to Exhibit 10.7 of the Registrant's
Annual Report on Form 10-K for the fiscal year ended December
25, 1994).
10.11 Note Purchase Agreement, dated as of June 1, 1994, for
$20,000,000 7.70% Senior Notes due May 31, 2004 (incorporated
by reference to Exhibit 10.2 of the Registrant's Quarterly
Report on Form 10-Q for the fiscal quarter ended June 26,
1994).
10.12 Asset Purchase Agreement dated December 23, 1997 by and among
Applebee's International, Inc. and Apple South, Inc.
(incorporated by reference to the Registrant's Current Report
on Form 8-K dated December 23, 1997).
Management Contracts and Compensatory Plans or Arrangements
10.13 1995 Equity Incentive Plan, as amended.
10.14 Employee Stock Purchase Plan.
10.15 Employment Agreement, dated January 1, 1996, with Abe J.
Gustin, Jr. (incorporated by reference to Exhibit 10.1 of the
Registrant's Quarterly Report on Form 10-Q for the fiscal
quarter ended March 31, 1996).
10.16 Employment Agreement, dated January 27, 1994, with Lloyd L.
Hill (incorporated by reference to Exhibit 10.4 of the
Registrant's Quarterly Report on Form 10-Q for the fiscal
quarter ended March 27, 1994).
10.17 Severance and Noncompetition Agreement, dated January 27, 1994,
with Lloyd L. Hill (incorporated by reference to Exhibit 10.5
of the Registrant's Quarterly Report on Form 10-Q for the
fiscal quarter ended March 27, 1994).
E-2
<PAGE>
Exhibit
Number Description of Exhibit
- --------------- ---------------------------------------------------------------
10.18 Employment Agreement, dated March 1, 1995, with George D.
Shadid (incorporated by reference to Exhibit 10.3 of the
Registrant's Quarterly Report on Form 10-Q for the fiscal
quarter ended March 26, 1995).
10.19 Amended Consulting Agreement, dated March 1, 1996, between
Applebee's International, Inc. and Kenneth D. Hill
(incorporated by reference to Exhibit 10.2 of the Registrant's
Quarterly Report on Form 10-Q for the fiscal quarter ended
March 30, 1997).
10.20 Form of Indemnification Agreement (incorporated by reference to
Exhibit 10.29 of the Registrant's Annual Report on Form 10-K
for the fiscal year ended December 25, 1994).
10.21 Schedule of parties to Indemnification Agreement.
10.22 Form of Severance Agreement (incorporated by reference to
Exhibit 10.30 of the Registrant's Annual Report on Form 10-K
for the fiscal year ended December 25, 1994).
10.23 Schedule of parties to Severance Agreement.
21 Subsidiaries of Applebee's International, Inc.
23.1 Consent of Deloitte & Touche LLP.
24 Power of Attorney (see page 32 of the Form 10-K).
27 Financial Data Schedule.
E-3
APPLEBEE'S INTERNATIONAL, INC.
DEVELOPMENT AND FRANCHISE AGREEMENT SCHEDULE
AS OF DECEMBER 28, 1997
<TABLE>
<CAPTION>
(3) (5)
DATE OF DEVELOPMENT
DEVELOPMENT (4) SCHEDULE
(1) AGREEMENT OR TERRITORY (all or part (total
DEVELOPER NAME (2) FRANCHISE of the states/countries restaurants/
AND ADDRESS PRINCIPALS AGREEMENT listed) OR LOCATION deadline)
<S> <C> <C> <C> <C>
AB ENTERPRISES Joseph K. Wong 09-24-93 CA, OR 7/12-30-00
804 E. Cypress Anna Wong Amended: 03-10-95
Suite B
Redding, CA 96002
A. 09-20-94 1801 Hilltop Drive
Redding, CA
B. 04-30-96 2030 Business Lane
Chico, CA
C. 11-26-96 1388 Biddle Road
Medford, OR
A.N.A., INC. Glenn D. Durham 10-10-91 AL, TN 12/04-30-99
822 Columbiana Road Fred W. Gustin Amended: 06-01-93
Birmingham, AL 35209 06-06-95
05-01-97
A. 02-14-89 601 Brookwood Village Mall
Homewood, AL
B. 10-09-90 1240 Eastdale Mall
Montgomery, AL
C. 02-26-92 3028 S. Memorial Parkway
Huntsville, AL
D. 11-19-92 100 Century Plaza
7520 Crestwood Boulevard
Birmingham, AL
E. 10-12-93 1700 Rainbow Drive
Gadsden, AL
F. 05-03-94 62 McFarland Boulevard
Northport, AL
G. 10-31-94 2041-A Beltline Road, S.W.
Decatur, AL
H. 01-24-95 302 Hughes Road
Madison, AL
I. 02-28-95 3001 Carter Hill Road
-1-
<PAGE>
Montgomery, AL
J. 10-04-95 360 Cahaba Valley
Pelham, AL
APPLE AMERICAN Donald W. Strang, Jr. 04-10-96 DE 4/12-31-98
OF DELAWARE Allen S. Musikantow
8905 Lake Avenue MCM Investments of A. 04-22-97 909 N. DuPont Highway
Cleveland, OH 44102 Delaware, L.L.C. Dover, DE
APPLE AMERICAN Donald W. Strang, Jr. 06-25-89 IN 23/12-31-98
LIMITED Allen S. Musikantow Amended: 01-15-90
PARTNERSHIP OF 04-24-91
INDIANA 06-24-92
8905 Lake Avenue 07-19-93
Cleveland, OH 44102 01-01-95
01-02-97
A. 10-16-89 5046 W. Pike Plaza
Indianapolis, IN
B. 06-18-90 4040 E. 82nd Street
Indianapolis, IN
C. 12-18-90 1436 W. 86th Street
Indianapolis, IN
D. 05-12-92 1050 Broad Ripple Avenue
Indianapolis, IN
E. 08-08-92 2415 Sagamore Pkwy., South
Lafayette, IN
F. 11-10-92 1241 U.S. 31 North, #L-5
Greenwood, IN
G. 12-14-93 1900 25th Street
Columbus, IN
H. 06-08-94 14711 U.S. 31 North
Carmel, IN
I. 11-03-94 1423 W. McGalliard Road
Muncie, IN
J. 05-02-95 119 N. Baldwin
Marion, IN
K. 05-09-95 1922 E. 53rd Street
Anderson, IN
-2-
<PAGE>
L. 05-31-95 3720 S. Reed Road
Kokomo, IN
M. 06-12-95 2894 E. 3rd Street
Bloomington, IN
N. 11-21-95 5664 Crawfordsville Road
Indianapolis, IN
O. 02-13-96 700 N. Morton Street
Franklin, IN
P. 02-27-96 8310 East 96th
Fishers, IN
Q. 08-13-96 109 S. Memorial Drive
New Castle, IN
R. 10-15-96 2659 E. Main Street
Plainfield, IN
S. 12-12-96 1516 S. Washington Street
Crawfordsville, IN
T. 01-28-97 7345 E. Washington Street
Indianapolis, IN
U. 12-16-97 3009 Northwestern Avenue
West Lafayette, IN
APPLE AMERICAN Donald W. Strang, Jr. 04-10-96 NJ 8/12-31-99
LIMITED Allen S. Musikantow
PARTNERSHIP OF A. 02-04-97 880 Berlin Road
NEW JERSEY Voorhees, NJ
8905 Lake Avenue
Cleveland, OH 44102
APPLE AMERICAN Donald W. Strang, Jr. 11-11-92 OH 24/12-31-98
LIMITED Allen S. Musikantow Amended: 07-19-93
PARTNERSHIP OF 12-01-94
OHIO 03-10-95
8905 Lake Avenue 07-31-95
Cleveland, OH 44102 08-01-97
A. 04-02-90 5658 Mayfield Road
Lyndhurst, OH
B. 06-26-90 5010 Great Northern
Plaza South
North Olmstead, OH
-3-
<PAGE>
C. 11-20-91 3000 Westgate Mall
Fairview Park, OH
D. 01-19-93 4981 Dressler Road
N. Canton, OH
E. 08-31-93 508 Howe Avenue
Cuyahoga Falls, OH
F. 09-24-93 6871 Pearl Road
Middlesburg Heights, OH
G. 12-07-93 3989 Burbank Road
Wooster, OH
H. 12-06-94 8174 Mentor Avenue
Mentor, OH
I. 12-13-94 1023 N. Lexington-Springmill Rd.
Ontario, OH
J. 12-15-94 6140 S.O.M. Center Road
Solon, OH
K. 01-24-95 7159 Macedonia Commons Blvd.
Macedonia, OH
L. 05-23-95 4800 Ridge Road
Brooklyn, OH
M. 06-06-95 5503 Milan Road
Sandusky, OH
N. 10-31-95 1540 W. River Road
Elyria, OH
O. 02-20-96 4115 Pearl Street
Medina, OH
P. 03-05-96 411 Northfield Road
Bedford Heights, OH
Q. 08-07-96 233 Graff Road, S.E.
New Philadelphia, OH
R. 09-04-96 17771 S. Park Center
Strongsville, OH
S. 11-18-96 4296 Kent Road
Stow, OH
-4-
<PAGE>
T. 04-22-97 3938 W. Market Street
Copley Township, OH
U. 11-11-97 1020 High Street
Wadsworth, OH
APPLE AMERICAN Donald W. Strang, Jr. 05-07-91 WA 14/01-31-00
LIMITED Allen S. Musikantow Amended: 03-01-92
PARTNERSHIP OF 07-19-93
WASHINGTON 12-01-94
8905 Lake Avenue 02-12-96
Cleveland, OH 44102
A. 12-03-92 1842 S. SeaTac Mall
Federal Way, WA
B. 03-11-93 4626 196th Street, Southwest
Lynnwood, WA
C. 06-08-94 806 S.E. Everett Mall Way
Everett, WA
D. 11-30-94 3510 S. Meridian
Puyallup, WA
E. 07-18-95 17790 Southcenter Parkway
Tukwila, WA
F. 01-02-96 1919 S. 72nd Street
Tacoma, WA
G. 12-08-97 1300A N. Miller Street
Wenatchee, WA
APPLE Joe S. Thomson 04-09-96 AR, LA, OK, TX 8/05-31-98
ARKANSAS, INC. El Chico Restaurants
P.O. Box 1867 of Arkansas
Texarkana, TX 75504
A. 06-15-93 5110 Summerhill Road
Texarkana, TX
B. 10-19-93 9088 Mansfield Road
Shreveport, LA
C. 03-08-94 6818 Rogers Avenue
Ft. Smith, AR
D. 04-09-96 2126 Airline Drive
Bossier City, LA
-5-
<PAGE>
E. 05-29-96 4078 N. College
Fayetteville, AR
APPLE-BAY EAST, INC. Richard L. Winders 12-18-92 CA 9/12-31-99
2263 South Shore Center Howard L. Hatfield Amended: 02-19-94
Alameda, CA 94501
A. 06-14-94 2263 South Shore Center
Alameda, CA
B. 09-27-94 4301 N. 1st Street
Livermore, CA
C. 01-08-96 24041 Southland Drive
Hayward, CA
D. 12-17-96 2819 Ygnacio Valley Road
Walnut Creek, CA
E. 07-28-97 1369 Fitzgerald Drive
Pinole, CA
APPLE BY Ronald A. Caselli 12-24-92 CA 12/12-31-97
THE BAY, INC. Christian J. Knox Amended: 06-30-94
2200 Laurelwood Road 05-01-95
Santa Clara, CA 95054
A. 03-15-94 1041 Admiral Callaghan Lane
Vallejo, CA
B. 07-26-94 9105 E. Stockton Boulevard
Elk Grove, CA
C. 11-08-94 2170 Golden Centre Lane
Gold River, CA
D. 04-04-95 160 Nut Tree Parkway
Vacaville, CA
E. 10-02-95 2442 N. Kettleman Lane
Lodi, CA
F. 03-05-96 3900 Sisk Road
Modesto, CA
G. 08-18-97 6700 Stanford Ranch Road
Roseville, CA
H. 12-08-97 2659 W. March Lane
Stockton, CA
-6-
<PAGE>
APPLE BY Ronald A. Caselli 12-24-92 CA 9/12-31-98
THE BAY, INC. Christian J. Knox Amended: 02-28-94
2200 Laurelwood Road 05-01-95
Santa Clara, CA 95054
A. 05-05-94 8200 Arroyo Circle
Gilroy, CA
B. 08-22-95 84 Ranch Drive
Milpitas, CA
APPLE DESERT, L.C. Louis J. Burnett 12-07-94 AZ, CA 4/12-31-99
255 E. Brown Street Susan Burnett Amended: 05-01-95
Suite 210 David B. Pisaneschi
Birmingham, MI 48009 Glenn W. Gray
Robert L. Gray
A. 04-16-96 3101 S. Fourth Avenue
Yuma, AZ
B. 08-12-97 32400 Date Palm Drive
Cathedral City, CA
APPLE DEVELOPMENT Peter W. Feldman 06-08-92 Curacao No Development
ASSOCIATES I Henry DeRooy Amended: 01-24-94 Rights
777 Yamato Road 08-25-94
Suite 135 12-15-94
Boca Raton, FL 33431 Terminated: 12-01-95
A. 10-18-94 Oude Caracasbaaiweg NST 93
Closed Curacao, Netherlands Antilles
APPLE EAST, INC. Edwin F. Scheibel, Jr. 08-05-94 CT 4/12-01-98
89 Taunton Hill Road Cynthia H. Scheibel Amended: 02-28-95
Newtown, CT 06470 01-04-96
11-01-96
A. 10-21-97 57 Federal Road
Danbury, CT
APPLE GOLD, INC. Michael D. Olander 07-01-94 NC, VA 29/01-31-98
170 Windchime Court Amended: 02-01-96
Raleigh, NC 27615
A. 06-10-85 1389 Kildair Farm Road
Cary, NC
B. 06-28-85 7471 Six Forks Road
Raleigh, NC
-7-
<PAGE>
C. 01-28-87 4004 Capital Boulevard
Raleigh, NC
D. 01-28-87 1508 E. Franklin Road
Chapel Hill, NC
E. 08-21-87 3400 Westgate Drive
Durham, NC
F. 09-10-87 2001 N. Main
High Point, NC
G. 06-13-88 476 Western Boulevard
Jacksonville, NC
H. 02-01-89 1120 N. Wesleyan Boulevard
Rocky Mount, NC
I. 01-22-90 3103 Garden Road
Burlington, NC
J. 07-31-90 202 S.W. Greenville Blvd.
Greenville, NC
K. 12-18-90 9616 E. Independence Blvd.
Matthews, NC
L. 01-03-91 3625 Hillsborough Street
Raleigh, NC
M. 07-01-91 10921 Carolina Place Pkwy.
Pineville, NC
N. 03-24-92 4406 W. Wendover Avenue
Greensboro, NC
O. 05-18-93 2180 Highway 70, Southeast
Hickory, NC
P. 09-29-93 1115 Glenway Drive
Statesville, NC
Q. 07-19-94 901 N. Spence Avenue
Goldsboro, NC
R. 10-18-94 8700 J.W. Clay
Charlotte, NC
S. 01-10-95 3200 Battleground Avenue
Greensboro, NC
T. 05-16-95 2239 W. Roosevelt Boulevard
Monroe, NC
-8-
<PAGE>
U. 09-19-95 5120 New Center Drive
Wilmington, NC
V. 11-07-95 1990 Griffin Road
Winston-Salem, NC
W. 12-19-95 1403 N. Sand Hills Blvd.
Aberdeen, NC
X. 03-05-96 1240 U.S. Highway 29 North
Concord, NC
Y. 04-29-96 3400 Clairndon Blvd.
New Bern, NC
Z. 11-12-96 2300 Forest Hills Road
Wilson, NC
a. 02-11-97 501 E. Six Forks Road
Raleigh, NC
b. 04-22-97 2702 Raeford Road
Fayetteville, NC
c. 10-07-97 1165 Highway 70
Garner, NC
d. 12-16-97 205 Faith Road
Salisbury, NC
APPLE-METRO, INC. Roy Raeburn 03-23-94 NY 8/11-01-99
640 E. Boston Post Road Zane Tankel Amended: 04-01-95
Mamaroneck, NY 10543
A. 10-25-94 Staten Island Mall
2655 Richmond Avenue
Staten Island, NY
B. 06-06-95 640 E. Boston Post Road
Mamaroneck, NY
C. 11-07-95 430 New Dorp Lane
Staten Island, NY
D. 04-29-97 185 Bedford Road
Mt. Kisco, NY
E. 11-18-97 1 Mall Walk West
Yonkers, NY
-9-
<PAGE>
APPLE MIDDLE EAST Abdel Mohsen Al Homaizi 09-28-96 Bahrain, Egypt, Kuwait, 12/08-01-01
RESTAURANTS Apple Middle East LLC Lebanon, United Arab
COMPANY, LLC Emirates
P.O. Box 42 Safat
13001 KUWAIT A. 09-28-96 (to be determined)
APPLE NORTH, INC. Martin Hittinger 08-30-91 NY No Development
80 Palisade Avenue Eddie G. Hittinger Amended: 11-27-92 Rights
Cliffside Park, NJ 07010 Kenneth Brolin Terminated: 12-01-93
A. 03-11-92 Wappinger Plaza
1271 Route 9
Wappinger Falls, NY
B. 08-10-93 194 Colonie Center Mall
Albany, NY
C. 11-21-95 18 Park Avenue
Clifton Park, NY
APPLE PARTNERS Thomas K. DeNomme 03-15-91 IL, MO No Development
LIMITED Richard H. Adler Amended: 01-26-93 Rights
PARTNERSHIP 10-21-94
Corporate Plaza II Terminated: 04-14-97
6480 Rockside Woods
Boulevard, South
Suite 380
Cleveland, OH 44131
A. 03-15-91 Orchard Bend
11977 St. Charles Rock Road
Bridgeton, MO*
B. 03-15-91 2921 S. Service Road
St. Charles, MO*
C. 06-17-91 11077 New Halls Ferry Road
Florissant, MO*
D. 03-17-92 Fairview Heights Plaza
Shopping Center
#47 Ludwig Drive
Fairview Heights, IL*
E. 06-02-92 9031 Watson Road
St. Louis, MO*
- --------
* Acquired by Applebee's International, Inc. 04/14/97
-10-
<PAGE>
F. 09-22-92 6734 Clayton Road
Richmond Heights, MO*
G. 04-06-93 1110 Big Bill Road
Arnold, MO*
H. 12-14-93 13560 N. Barrett Pkwy. Dr.
Des Peres, MO*
I. 08-23-94 105 Potomac Boulevard
Mt. Vernon, IL*
J. 04-08-96 2309 N. U.S. Highway 67
Florissant, MO*
K. 04-22-96 14830 Manchester Road
Ballwin, MO*
APPLE PARTNERS Thomas K. DeNomme 01-26-93 OR, WA No Development
LIMITED Richard H. Adler Amended: 06-17-93 Rights
PARTNERSHIP 10-21-94
Corporate Plaza II 03-10-95
6480 Rockside Woods Terminated: 04-30-97
Boulevard, South
Suite 380
Cleveland, OH 44131
APPLE William F. Palmer 02-01-89 GA 10/08-01-94
RESTAURANTS, INC. Theresa J. Palmer Amended: 04-08-92
4219 Pleasant Hill Road 07-31-92
Building 12-D, Suite B 03-25-93
Duluth, GA 30136 04-05-94
A. 02-01-89 655 Georgia Highway 120
Lawrenceville, GA
B. 10-01-89 2445 Mall Boulevard
Kennesaw, GA
C. 10-15-90 1152 Old Salem Road
Conyers, GA
D. 03-11-91 Perimeter Mall, Suite 2054
4400 Ashford-Dunwoody Rd.
Atlanta, GA
E. 11-25-91 826 Turner McCall Boulevard
Rome, GA
F. 08-10-92 1705 Browns Bridge Road
Gainesville, GA
-11-
<PAGE>
G. 05-03-93 504 Lakeland Plaza
Cumming, GA
H. 02-21-94 2728 Spring Road
Smyrna, GA
I. 12-19-94 3676 Highway 138
Stockbridge, GA
J. 03-21-95 226 W. Broad Street
Athens, GA
K. 05-08-95 1925 Highway 124
Snellville, GA
L. 02-05-96 185 Cherokee Place
Cartersville, GA
M. 06-17-96 971 Bullsboro Drive
Newnan, GA
N. 02-24-97 1105 S. Park Street
Carrollton, GA
APPLE RESTAURANTS Benoit Wesley 07-01-94 The Netherlands, Belgium, 24/07-31-04
EUROPE, B.V. Roger L. Cohen Amended: 05-04-95 Luxembourg
One Main Plaza 12-28-95
Suite 1000 12-09-96
Kansas City, MO 64111
A. 07-04-94 In De Cramer 169
6412 PM Heerlen
The Netherlands
B. 05-17-96 Gevers Deynootplein 32
2586CK Scheveningen
HOLLAND
C. 09-03-96 Wychenseweg 174
6538SX Nijmegen
HOLLAND
D. 06-30-97 Pierre de Coubertinweg 1
6225 XT Maastricht
HOLLAND
-12-
<PAGE>
APPLE RESTAURANTS William F. Palmer 03-25-93 FL No Development
OF CENTRAL Theresa J. Palmer Amended: 04-22-93 Rights
FLORIDA, L.P., LTD. 05-01-95
4219 Pleasant Hill Road Terminated: 04-30-97
Building 12-D, Suite B
Duluth, GA 30136
APPLE SAUCE, INC. W. Curtis Smith 02-11-92 IN, OH 17/03-01-99
207 Grandview Drive James Paul Borke Amended: 10-20-92
Suite 125 08-25-94
Ft. Mitchell, KY 41017 10-05-94
03-02-97
A. 11-03-92 650 W. Lincoln Highway
Schererville, IN
B. 08-24-93 5788 Coventry Lane
Ft. Wayne, IN
C. 12-21-93 4510 N. Clinton Street
Ft. Wayne, IN
D. 11-15-94 4057 S. Franklin Street
Michigan City, IN
E. 04-25-95 670 Morthland
Valparaiso, IN
F. 07-04-95 6615 N. Main Street
Granger, IN
G. 09-19-95 266 E. Alexis Road
Toledo, OH
H. 11-07-95 3241 Interchange Drive
Elkhart, IN
I. 12-05-95 531 Dussel Road
Maumee, OH
J. 06-11-96 4702 Monroe Street
Toledo, OH
K. 06-17-96 8425 Broadway
Merrillville, IN
L. 07-30-96 3296 Elida Road
Lima, OH
M. 09-10-97 6525 Lima Road
Ft. Wayne, IN
-13-
<PAGE>
N. 10-28-97 2531 Tiffan Avenue
Findlay, OH
O. 11-25-97 1150 Ireland Road
South Bend, IN
P. 12-09-97 330 Ridge Road
Munster, IN
APPLE SAUCE, INC. W. Curtis Smith 09-09-92 FL 13/12-31-98
207 Grandview Drive James Paul Borke Amended: 09-30-93
Suite 125 10-05-94
Ft. Mitchell, KY 41017 03-28-95
A. 04-12-94 10135 Pines Boulevard
Pembroke Pines, FL
B. 07-12-94 12719 W. Sunrise Boulevard
Sunrise, FL
C. 02-15-95 1179 S. University Drive
Plantation, FL
D. 09-12-95 2729 University Drive
Coral Springs, FL
E. 10-10-96 9815 N.W. 41st Street
Miami, FL
APPLE SOUTH, INC. Tom E. DuPree, Jr. 01-06-85 GA, NC, SC */12-31-00
Hancock @ Washington Amended: 03-04-91
Madison, GA 30650 01-10-92
05-14-93
01-26-94
06-22-94
02-24-95
See Footnote Below
A. 01-13-86 430 Congaree Road
Greenville, SC
B. 07-31-86 2344 Broad River Rd. @ I-20
Columbia, SC
C. 01-28-87 7818 Rivers Avenue
N. Charleston, SC
- --------
*In the Spring of 1995, Apple South, Inc. acquired from Marcus Restaurants, Inc. territories previously held by it. As a part of the
approval of that transaction, the development obligations under the Development Agreements granted to Apple South, Inc. have been
generally combined for all territories. Apple South, Inc. is to have open for operation a total of 361 restaurants by 12/31/00.
-14-
<PAGE>
(3)
D. 01-28-87 3441 Clemson Boulevard
Anderson, SC
E. 01-28-87 9 Park Lane
Hilton Head, SC
F. 06-01-87 1859 Sam Rittenburg
Charleston, SC
G. 10-19-87 811 S. Irby Street
Florence, SC
H. 10-18-87 4505 Devine Street
Columbia, SC
I. 10-19-87 7602 Greenville Highway
Spartanburg, SC
J. 01-15-88 841 Broad Street
Sumter, SC
K. 06-01-89 24 N. Market Street
Charleston, SC
L. 04-11-89 1635 Four Seasons Boulevard
Hendersonville, NC
M. 01-08-90 1922 Augusta Street
Greenville, SC
N. 05-21-90 1360 Whiskey Road
Aiken, SC
O. 06-25-90 88 Old Trolley Road
Summerville, SC
P. 11-17-90 5055 Calhoun Memorial Blvd.
Easley, SC
Q. 12-30-90 115 Tunnel Road
Asheville, NC
R. 11-23-91 245 O'Neil Court
Columbia, SC
S. 06-27-92 704 Wade Hampton Blvd.
Greer, SC
T. 11-25-92 696 Bypass 123
Seneca, SC
U. 06-27-93 1617 Bypass 72 Northeast
Greenwood, SC
-15-
<PAGE>
V. 07-28-93 227 Dave Lyle Boulevard
Rock Hill, SC
W. 09-24-93 3944 Grandview Drive
Simpsonville, SC
X. 11-22-93 1486 Stuart Engles Boulevard
Mt. Pleasant, SC
Y. 05-23-94 7915 N. Kings Highway
Myrtle Beach, SC
Z. 05-30-94 64 Beacon Drive
Greenville, SC
a. 07-25-94 1512 W. Floyd Baker Avenue
Gaffney, SC
b. 09-12-94 1268 Highway 9 Bypass
Lancaster, SC
c. 09-26-94 5185 Fernadina Road
Columbia, SC
d. 10-31-94 605 Columbia Avenue
Lexington, SC
e. 11-07-94 1655 Hendersonville Road
Asheville, NC
f. 12-05-94 1065 S. Big A Road
Toccoa, GA
g. 01-30-95 2360 Chestnut Street
Orangeburg, SC
h. 06-19-95 2338 Boundary Street
Beaufort, SC
i. 06-26-95 1271 Folly Road
Charleston, SC
j. 08-07-95 1221 Woodruff Road
Greenville, SC
k. 07-26-96 4910 Ashley Phosphate Road
North Charleston, SC
l. 11-17-97 1647 Church Street
Conway, SC
-16-
<PAGE>
APPLE SOUTH, INC. Tom E. DuPree, Jr. 09-24-86 FL */12-31-00
Hancock @ Washington Amended: 05-31-90
Madison, GA 30650 03-04-91
01-10-92
01-26-94
A. 02-09-87 13550 S. Tamiami Trail
Ft. Myers, FL
B. 05-16-88 10501 S. U.S. Highway 1
Port St. Lucie, FL
C. 04-17-89 701 N. Congress Avenue
Boynton Beach, FL
D. 05-10-90 3971 S. Tamiami Trail
Sarasota, FL
E. 01-18-93 6775 W. Indiantown Road
Jupiter, FL
F. 10-12-93 6706 Forrest Hill Boulevard
Green Acres, FL
G. 01-31-94 4890 Okeechobee Road
Ft. Pierce, FL
H. 03-21-94 15151 N. Cleveland Avenue
N. Ft. Myers, FL
I. 03-28-94 20 Electric Drive
Sarasota, FL
J. 10-31-94 4329 S. Tamiami Trail
Venice, FL
K. 12-12-94 1975 Military Trail
W. Palm Beach, FL
L. 03-28-95 5082 Airport Pulling Rd., N.
Naples, FL
M. 05-01-95 3373 S.E. Federal Highway
Stuart, FL
N. 12-04-95 19010 Murdock Circle
Port Charlotte, FL
- --------
*See Footnote, Page 14.
-17-
<PAGE>
O. 02-21-96 5335 20th Street
Vero Beach, FL
P. 03-05-96 2228 Del Prado Blvd. South
Cape Coral, FL
Q. 04-29-96 26801 S. Tamiami Trail
Bonita Springs, FL
R. 09-05-96 1720 S. Federal Highway
Delray Beach, FL
S. 09-05-96 100 U.S. Highway 441
Royal Palm Beach, FL
T. 05-05-97 3167 N. Lake Blvd.
Lake Park, FL
APPLE SOUTH, INC. Tom E. DuPree, Jr. 06-06-88 AL, AR, MO, MS, TN */12-31-00
Hancock @ Washington Amended: 03-04-91
Madison, GA 30650 01-10-92
01-01-94
01-26-94
A. 05-26-88 2114 Union Avenue
Memphis, TN
B. 08-15-88 6025 Winchester Road
Memphis, TN
C. 12-19-88 900 E. County Line Road
Ridgeland, MS
D. 04-15-89 4835 American Way
Memphis, TN
E. 01-02-90 3703 Hardy Street
Hattiesburg, MS
F. 06-11-90 2890 Bartlett Road
Bartlett, TN
G. 05-25-92 3448 Poplar Avenue
Memphis, TN
H. 10-19-92 584 Carriage House Drive
Jackson, TN
- --------
*See Footnote, Page 14.
-18-
<PAGE>
I. 11-16-92 1106 Germantown Parkway
Cordova, TN
J. 03-28-93 885 Barnes Crossing Road
Tupelo, MS
K. 09-10-93 2332 Highway 45 North
Columbus, MS
L. 09-24-93 6482 Poplar Avenue
Memphis, TN
M. 08-15-94 710 DeSoto Cove
Horn Lake, MS
N. 03-20-95 814 Highway 12 West
Starkville, MS
O. 04-29-95 9319 Highway 49
Gulfport, MS
P. 05-23-95 929 Poplar
Collierville, TN
Q. 08-07-95 3954 Austin Peay Highway
Memphis, TN
R. 11-06-95 2389 Lakeland Drive
Flowood, MS
S. 01-15-96 106 Hwy 11 & 80
Meridian, MS
T. 03-25-96 2700 Lake Road
Dyersburg, TN
U. 04-08-96 2019 Highway 15 North
Laurel, MS
APPLE SOUTH, INC. Tom E. DuPree, Jr. 06-19-88 IN, KY, MD, NC, OH, PA, */12-31-00
Hancock @ Washington Amended: 03-04-91 VA, WV, District of
Madison, GA 30650 01-10-92 Columbia
01-26-94
12-23-94
02-24-95
A. 06-19-88 2159 Coliseum Drive
Hampton, VA
- --------
*See Footnote, Page 14.
-19-
<PAGE>
B. 08-15-88 900 Moorefield Park Drive
Richmond, VA
C. 08-22-88 808 Lynnhaven Parkway
Virginia Beach, VA
D. 05-01-89 12235 Jefferson Avenue
Newport News, VA
E. 04-14-89 9601 W. Broad Street
Glen Allen, VA
F. 05-01-89 4535 Outer Loop
Louisville, KY
G. 04-11-89 9201 Hurstbourne Lane
Louisville, KY
H. 09-24-90 2225 Taylorsville Road
Louisville, KY
I. 07-15-91 Greentree Mall
Hwy. 131 & Greentree Blvd.
Clarksville, IN
J. 12-14-91 3624 Candlers Mountain Road
Lynchburg, VA
K. 03-27-92 4717 Dixie Highway
Louisville, KY
L. 03-29-92 5400 W. Broad Street
Richmond, VA
M. 06-27-92 4942 Valley View Blvd., N/NW
Roanoke, VA
N. 09-21-92 2611 Hundred Road West
Chester, VA
O. 09-26-92 10823 Hull Street
Richmond, VA
P. 12-21-92 449 S. Park Circle
Colonial Heights, VA
Q. 01-29-93 12913 Shelbyville Road
Louisville, KY
R. 04-09-93 Regency Square Mall
1404 Parham Road
Richmond, VA
-20-
<PAGE>
S. 06-27-93 2790 Market Street, Northeast
Christianburg, VA
T. 08-16-93 4132 Portsmouth Boulevard
Chesapeake, VA
U. 09-07-93 14441 Brookfield Tower Dr.
Chantilly, VA
V. 09-20-93 12970 Fair Lakes
Shopping Center
Fairfax, VA
W. 11-29-93 4340 Electric Road
Roanoke, VA
X. 12-13-93 5750 Virginia Beach Blvd.
Norfolk, VA
Y. 02-08-94 10600 Dixie Highway
Louisville, KY
Z. 02-28-94 1520 Sam's Circle
Chesapeake, VA
a. 02-28-94 410 Old Mountain Crossroad
Danville, VA
b. 04-18-94 281 W. Commonwealth
Martinsville, VA
c. 06-13-94 9625 Lee Highway
Fairfax, VA
d. 06-26-94 6310 Richmond Highway
Alexandria, VA
e. 07-11-94 7913 Sudley Road
Manassas, VA
f. 08-29-94 10151 Brook Road
Glen Allen, VA
g. 12-05-94 4040 Virginia Beach Blvd.
Virginia Beach, VA
h. 12-19-94 4100 N.W. Crain Highway
Bowie, MD
i. 02-06-95 3610 Crain Highway
Waldorf, MD
-21-
<PAGE>
j. 02-06-95 1426 Kempsville Road
Virginia Beach, VA
k. 05-22-95 571 Branchlands Boulevard
Charlottesville, VA
l. 05-29-95 5000 Shelbyville Road
Louisville, KY
m. 07-24-95 1496 Greenville Avenue
Staunton, VA
n. 07-31-95 755 Foxcroft Drive
Martinsburg, WV
o. 09-18-95 1206 N. Main Street
Suffolk, VA
p. 10-16-95 13850 Noblewood Plaza
Woodbridge, VA
q. 10-26-95 45480 Miramar Way
California, MD
r. 11-06-95 1756 General Booth Boulevard
Virginia Beach, VA
s. 11-13-95 4306 S. Lauburnum Avenue
Richmond, VA
t. 11-27-95 955 Edwards Ferry Road
Leesburg, VA
u. 12-04-95 1050 Wayne Avenue
Chambersburg, PA
v. 02-05-96 1481 Wesel Boulevard
Hagerstown, MD
w. 05-31-96 561 First Colonial Road
Virginia Beach, VA
x. 06-17-96 5613 Spectrum Drive
Frederick, MD
y. 06-17-96 7272 Baltimore Avenue
College Park, MD
z. 06-17-96 19 Mall Road
Barboursville, WV
AA. 09-05-96 389 S. John Scott Avenue
Steubenville, OH
-22-
<PAGE>
BB. 09-05-96 2851 Plank Road
Fredericksburg, VA
CC. 09-22-96 3 Dudley Farms Lane
Charleston, WV
DD. 10-07-96 1000 Largo Center Drive
Largo, MD
EE. 10-14-96 127 E. Broad Street
Falls Church, VA
FF. 10-14-96 50655 Valley Frontage Road
St. Clairsville, OH
GG. 10-21-96 21048 Frederick Road
Germantown, MD
HH. 11-18-96 802 Grand Central Avenue
Vienna, WV
II. 12-09-96 45979 Denizen Plaza
Sterling, VA
JJ. 05-20-97 100 Hylton Lane
Beckley, WV
KK. 05-20-97 791 N. Dual Highway
Seaford, DE
LL. 06-23-97 611 S. Hughes Blvd.
Elizabeth City, NC
MM. 06-23-97 60 Liberty Square
Hurricane, WV
NN. 07-28-97 105 West Lee Highway
Warrenton, VA
OO. 09-15-97 123 Meadowfield Lane
Princeton, WV
PP. 11-17-97 555 N. Solomons Island Road
Prince Frederick, MD
QQ. 11-24-97 1135 Third Avenue
Huntington, WV
RR. 12-15-97 1640 Richmond Road
Williamsburg, VA
SS. 12-15-97 1270 Ocean Outlet
Rehoboth Beach, DE
-23-
<PAGE>
APPLE SOUTH, INC. Tom E. DuPree, Jr. 04-24-91 KY, TN */12-31-00
Hancock @ Washington Amended: 01-10-92
Madison, GA 30650 01-26-94
07-27-94
A. 04-24-91 335 Harding Place
Nashville, TN
B. 04-24-91 718 Thompson Lane
Nashville, TN
C. 04-24-91 7645 U.S. Highway 70 South
Nashville, TN
D. 04-24-91 5270 Hickory Hollow Pkwy.
Antioch, TN
E. 12-31-91 2400 Elliston Place
(Management Nashville, TN
Agreement--
effective
01-23-92)
F. 09-14-92 1720 Old Fort Parkway
Suites C170 & C180
Murfreesboro, TN
G. 11-25-92 5055 Old Hickory Boulevard
Hermitage, TN
H. 06-07-93 1420 Interstate Drive
Cookeville, TN
I. 11-22-93 2545 Scottsville Road
Bowling Green, KY
J. 05-30-94 230 E. Main Street
Hendersonville, TN
K. 12-19-94 1915 N. Jackson Street
Tullahoma, TN
L. 03-27-95 3066 Wilma Rudolph Blvd.
Clarksville, TN
M. 06-19-95 1557 N. Gallatin Pike
Madison, TN
- --------
*See Footnote, Page 14.
-24-
<PAGE>
N. 09-26-95 1656 Westgate Circle
Brentwood, TN
O. 01-29-96 705 S. James Campbell Blvd.
Columbia, TN
P. 11-17-97 4089 Fort Campbell Blvd.
Hopkinsville, KY
APPLE SOUTH, INC. Tom E. DuPree, Jr. 05-12-92 FL, GA */12-31-00
Hancock @ Washington Amended: 01-26-94
Madison, GA 30650 07-27-94
A. 05-12-92 10502 San Jose Boulevard
Jacksonville, FL
B. 05-12-92 492 Blanding Boulevard
Orange Park, FL
C. 05-12-92 4194 S. 3rd Street
Jacksonville Beach, FL
D. 05-12-92 9498 Atlantic Boulevard
Jacksonville, FL
E. 05-12-92 9485 Bay Meadows Road
Jacksonville, FL
F. 06-07-93 225 State Road 312
St. Augustine, FL
G. 03-31-94 177 Altama Connector
Brunswick, GA
H. 09-26-94 1901 Memorial Drive
Waycross, GA
I. 03-13-95 574 Busch Drive
Jacksonville, FL
J. 05-22-95 113 The Lake Boulevard
Kingsland, GA
K. 08-16-95 Route 17, Box 2219
Lake City, FL
- --------
*See Footnote, Page 14.
-25-
<PAGE>
L. 08-16-95 6251 103rd Street
Jacksonville, FL
M. 12-02-96 13201 Atlantic Blvd.
Jacksonville, FL
APPLE SOUTH, INC. Tom E. DuPree, Jr. 11-28-89 GA, KY, NC, TN, VA */12-31-00
Hancock @ Washington Amended: 08-23-91
Madison, GA 30650 04-15-92
04-12-94
07-27-94
A. 05-17-88 261 N. Peters Road
Knoxville, TN
B. 10-01-88 6928 Kingston Pike
Knoxville, TN
C. 02-14-89 1213 Oak Ridge Turnpike
Oak Ridge, TN
D. 07-24-90 1661 E. Stone Drive
Kingsport, TN
E. 09-11-90 1322 W. Walnut Avenue
Dalton, GA
F. 02-12-91 2342 Shallowford Village Rd.
Chattanooga, TN
G. 04-14-92 2100 N. Roane Street
Johnson City, TN
H. 01-12-93 358 Northgate Mall
Chattanooga, TN
I. 08-10-93 2564 Alcoa Highway
Alcoa, TN
J. 05-23-94 5316 Central Avenue Pike
Knoxville, TN
K. 08-29-94 168 Paul Huff Parkway
Cleveland, TN
L. 02-27-95 3216 E. Towne Circle Mall
Knoxville, TN
- --------
*See Footnote, Page 14.
-26-
<PAGE>
M. 03-21-95 5536 Decatur Pike
Athens, TN
N. 03-27-95 2771 E. Andrew Johnson Hwy.
Greeneville, TN
O. 09-26-95 437 Parkway
Gatlinburg, TN
P. 10-23-95 2328 W. Andrew Jackson
Morristown, TN
Q. 09-23-97 425 Volunteer Pkwy.
Bristol, TN
APPLE SOUTH, INC. Tom E. DuPree, Jr. 04-25-95 IA, IL, MO, WI */12-31-00
Hancock @ Washington Amended: See Footnote,
Madison, GA 30650 Page 14
A. 12-27-90 6845 E. State Street
Rockford, IL
B. 03-29-92 3024 Milton Avenue
Janesville, WI
C. 01-19-93 6301 University Avenue
Cedar Falls, IA
D. 08-24-93 105 Chestnut
Ames, IA
E. 12-14-93 3838 Elmore Avenue
Davenport, IA
F. 02-08-94 11410 Forest
Clive, IA
G. 07-26-94 6301 S.E. 14th Street
W. Des Moines, IA
H. 11-01-94 303 Collins Road
Cedar Rapids, IA
I. 09-18-95 3900 Merle Hay Road
Des Moines, IA
J. 06-04-96 6844 N. War Memorial
Peoria, IL
- --------
*See Footnote, Page 14.
-27-
<PAGE>
K. 07-30-96 1771 Riverside Road
Rockford, IL
L. 08-12-96 1802 S. West Street
Freeport, IL
M. 09-05-96 1001 E. First Street
Ankeny, IA
N. 09-16-96 3805 41st Avenue
Moline, IL
O. 10-14-96 3920 E. Lincoln Way
Sterling, IL
P. 12-09-96 306 Cleveland
Muscatine, IA
Q. 01-01-97 3101 S. Center Street
Marshalltown, IA
R. 02-18-97 2810 5th Avenue South
Fort Dodge, IA
S. 07-21-97 3006 Fourth Street S.W.
Mason City, IA
T. 05-20-97 2414 Lincoln Way
Clinton, IA
U. 12-15-97 200 12th Avenue Center
Coralville, IA
APPLE SOUTH, INC. Tom E. DuPree, Jr. 07-11-90 MI, MN, WI */12-31-00
Hancock @ Washington Amended: 04-08-93
Madison, GA 30650 08-03-94
A. 09-19-90 2500 N. Mayfair Road
Wauwatosa, WI
B. 05-06-91 20101 W. Bluemound Road
Waukesha, WI
C. 09-06-91 5100 S. 76th Street
Greendale, WI
D. 08-04-92 5900 N. Port Washington Rd.
Glendale, WI
E. 04-13-93 660 S. Whitney Way
Madison, WI
- --------
*See Footnote, Page 14.
-28-
<PAGE>
F. 05-18-93 4710 E. Towne Boulevard
Madison, WI
G. 08-16-93 3730 W. College Avenue
Appleton, WI
H. 05-30-94 900 Hansen Road
Ashwaubenon, WI
I. 11-28-94 4745 Golf Road
Eau Claire, WI
J. 01-23-95 2521 S. Greenbay Road
Racine, WI
K. 06-30-95 2221 W. Stewart Avenue
Wausau, WI
L. 02-19-96 1700 S. Koeller Road
Oshkosh, WI
M. 07-29-96 2420 W. Mason Street
Greenbay, WI
N. 09-05-96 4435 Calumet Avenue
Manitowoc, WI
O. 09-16-96 5609 Hwy. 10 East
Stevens Point, WI
P. 10-28-96 841 W. Johnson Street
Fond Du Lac, WI
Q. 11-11-96 2510 W. Washington
West Bend, WI
R. 02-11-97 3040 E. College Avenue
East Appleton, WI
S. 06-23-97 526 S. Taylor Drive
Sheboygan, WI
T. 07-01-97 9364 Highway 16
Onalaska, WI
U. 11-17-97 W 180 N 9469 Premier Lane
Menomonee Falls, WI
-29-
<PAGE>
APPLE SOUTH, INC. Tom E. DuPree, Jr. IL, WI */12-31-00
Hancock @ Washington
Madison, GA 30650
A. 11-22-91 One Schaumburg Place
601 Martingale Road
Schaumburg, IL
B. 09-09-92 354 W. Army Trail Road
Bloomingdale, IL
C. 02-16-93 60 Waukegan Road
Deerfield, IL
D. 03-23-93 Randhurst Shopping Center
999 Elmhurst Road
Mt. Prospect, IL
E. 11-15-93 880 S. Barringon Road
Streamwood, IL
F. 12-16-93 9380 Joliet Road
Hodgkins, IL
G. 04-08-94 5690 Northwest Highway
Crystal Lake, IL
H. 04-08-94 1191 E. Ogden Avenue
Naperville, IL
I. 06-30-95 4937 W. Cal-Sag Road
Crestwood, IL
J. 10-30-95 1040 N. Kenzie
Bradley, IL
K. 01-29-96 2411 Sycamore Road
DeKalb, IL
L. 02-05-96 6950 75th Street
Kenosha, WI
M. 02-26-96 1296 West Booughton Road
Bolingbrook, IL
N. 03-05-96 125 S. Randall Road
Elgin, IL
O. 06-04-96 2795 Plainfield Road
Joliet, IL
- --------
*See Footnote, Page 14.
-30-
<PAGE>
P. 11-18-96 1690 S. Randall Road
Geneva, IL
Q. 12-10-96 6447 Grand Avenue
Gurnee, IL
R. 01-21-97 1700 N. Richmond Road
McHenry, IL
S. 01-21-97 251 N. Randall Road
Lake in the Hills, IL
T. 02-04-97 351 Rice Lake Square
Wheaton, IL
U. 06-24-97 16200 S. Harlem Avenue
Tinley Park, IL
V. 07-21-97 17575 Halsted
Homewood, IL
W. 08-18-97 741 E. Dundee
Palatine, IL
X. 09-22-97 400 Town Center
Matteson, IL
Y. 12-08-97 449 S. Route 59
Aurora, IL
Z. 12-16-97 6656 W. Grand Avenue
Chicago, IL
APPLEBAY Leonard E. Rhode 03-18-93 CA 5/12-31-00
FOODS, INC. Beverly A. Rhode Amended: 05-27-94
100 W. El Camino Real 07-27-94
Suite 76 03-07-95
Mountain View, CA
94040
A. 12-19-95 2250 Santa Rosa Avenue
Santa Rosa, CA
B. 06-07-96 5301 Old Redwood Hwy.
Petaluma, CA
-31-
<PAGE>
APPLEJAM, INC. Frank DeAngelo 08-01-88 AL, FL, GA 8/10-01-98
P.O. Box 956308 Amended: 11-18-91
Duluth, GA 30136-9506 08-20-93
03-10-94
10-12-94
10-01-96
A. 12-01-88 1170 Appalachee Parkway
Tallahassee, FL
B. 02-14-89 1400 Village Square Blvd.
Tallahassee, FL
C. 04-17-90 637 Westover Boulevard
Albany, GA
D. 06-25-91 678 W. 23rd Street
Panama City, FL
E. 12-08-92 3050 Ross Clark Circle, S.W.
Dothan, AL
F. 05-10-94 1301 S. Augustine Road
Valdosta, GA
G. 08-23-94 1005 N.W. 13th Street
Gainesville, FL
H. 05-21-96 1401 Capital Circle, N.W.
Tallahassee, FL
APPLEJAM, INC. Frank DeAngelo 01-15-92 TX 6/12-31-98
P.O. Box 956308 Amended: 06-24-93
Duluth, GA 30136-9506 02-28-95
02-12-96
A. 07-19-93 5809 Loop 410 Northwest
San Antonio, TX
B. 04-12-94 97 Loop 410 Northeast
San Antonio, TX
C. 09-19-95 995 I-35
New Braunfels, TX
D. 03-18-97 7880 Interstate Hwy. 35 N.
San Antonio, TX
E. 11-24-97 8224 Fredericksburg
San Antonio, TX
-32-
<PAGE>
APPLERAY, INC. E. Ray Morris 04-03-85 FL No Development
5660 Peachtree Bruce W. German Amended: 08-05-86 Rights
Industrial Boulevard Alvin G. Kruse Terminated: 03-16-88
Venture Park, Bldg. #3
Norcross, GA 30071
A. 10-18-85 220 Wekiva Springs Road
Closed: 09-23-97 Longwood, FL
APPLEROCKET Cees Toor 01-22-96 Kingdom of Sweden 04/04-01-99
FRANCHISING AB Gerard Toor
Hotel Restaurant Toor A. 01-22-96 Infra City
Stationsplein 2 Uplands-Vasby
2405 Bk Alphen a/d Rijn SWEDEN
HOLLAND
BROOKLYN- Nicholas Katos 12-07-94 NY 4/06-30-98
APPLE, LTD. Michael Katos
164-17 Union Turnpike Stephen Katos
Flushing, NY 11367
BRUNSWICK, GMbH Daniel Meyer 03-11-96 Berlin, Sachsen and 5/12-31-97
Brunswick Recreation Sachsen-Anhalt in
Centers Federal Republic of
1 North Field Court Germany
Lake Forest, IL 60045
A. 03-11-96 lm US-Play im Elebe Park
Peschel Strasse 31
Dresden, GERMANY
B. 08-26-96 AM Pfalberg 3
Magdeberg, GERMANY
C. 09-02-96 Handelsstrasse 4
Leipzig, GERMANY
B.T. WOODLIPP, INC. Larry Brown 11-15-95 PA, WV 11/12-31-98
Towne Centre Offices James T. Thomas
1789 S. Braddock Avenue Apple-Penn, Inc.
Suite 340 John L. Turley
Pittsburgh, PA 15218 Dan B. Turley, Jr.
Larry Graves
A. 06-11-90 The Bourse Shops
2101 Greentree Road
Pittsburgh, PA
-33-
<PAGE>
B. 05-28-91 North Hills Village Mall
4801 McKnight Road
Pittsburgh, PA
C. 11-12-91 Edgewood Towne Centre
1601 S. Braddock Avenue
Pittsburgh, PA
D. 08-09-93 2045 Lebanon Church Road
West Mifflin, PA
E. 01-10-94 4039 Washington Road
McMurray, PA
F. 10-21-96 425 Galleria Drive
Johnstown, PA
G. 01-13-97 110 Logan Valley Road
Altoona, PA
CAFE VENTURES, INC. William F. Palmer 04-11-83 GA 5/04-11-93
4219 Pleasant Hill Road Mickey Munir (Employment
Building 12-D, Suite B Lovay Sharif Agreement)
Duluth, GA 30136
A. 10-01-85 490 Franklin Road
Marietta, GA
B. 05-12-86 2095 Pleasant Hill
Duluth, GA
C. 07-18-87 11070 Alpharetta
Roswell, GA
D. 05-26-88 5200 Highway 78
Stone Mountain, GA
CALABEE'S, INC. John R. Bifone 08-27-92 CA 2/09-01-94
444 N. Amelia Ave., #3C Amended: 09-29-92
San Dimas, CA 91773 09-30-93
08-01-94
05-01-95
A. 08-10-93 674 W. Arrow Highway
San Dimas, CA
B. 10-31-94 300 S. California
West Covina, CA
-34-
<PAGE>
C. 09-17-96 502 W. Huntington Drive
Monrovia, CA
D. 12-16-96 9241 Monte Vista Avenue
Montclair, CA
CAN-APPLE Joseph Mandolfo 05-19-93 Manitoba, Canada 5/12-31-96
INVESTMENTS INC. Nancy Mandolfo Amended: 03-24-94
P.O. Box 280 10-24-94
Plattsmouth, NE 68048 12-30-94
02-28-95
A. 06-24-94 2065 Pembina Highway
Winnipeg, Manitoba
CANADA
B. 11-03-95 1150 Grant Avenue
Winnipeg, Manitoba
CANADA
C. 12-09-97 1598 Regent Avenue
Winnipeg, Manitoba
CANADA
CAN-APPLE Joseph Mandolfo 03-01-95 Alberta, Canada 12/06-30-01
INVESTMENTS INC. Nancy Mandolfo
P.O. Box 280
Plattsmouth, NE 68048
A. 03-01-95 10338 109th Street
Edmonton, Alberta Canada
B. 01-05-96 13006 50th Street
Edmonton, Alberta Canada
CASUAL RESTAURANT Franklin W. Carson 06-23-89 FL
CONCEPTS, INC. Terminated: 08-23-91
Tampa Bay Marina Center
205 S. Hoover St., #402
Tampa, FL 33609
A. 01-23-90 5110 East Bay Drive
Clearwater, FL
B. 05-15-90 30180 U.S. Highway 19 N.
Clearwater, FL
-35-
<PAGE>
CASUAL RESTAURANT Franklin W. Carson 08-11-92 FL 11/06-30-99
CONCEPTS, INC.* Amended: 05-14-93
Tampa Bay Marina Center 11-15-93
205 S. Hoover St., #402 02-02-94
Tampa, FL 33609 08-03-94
02-28-95
03-01-97
07-01-97
A. 06-07-93 5779 E. Fowler Avenue
Temple Terrace, FL
B. 02-02-94 4301 Cortez Road
Bradenton, FL
C. 01-16-95 4700 4th Street, North
St. Petersburg, FL
D. 07-03-95 10911 Starkey Road
Largo, FL
E. 06-18-96 3255 University Pkwy.
Bradenton, FL
F. 06-18-96 3702 W. McKay Avenue, S.
Tampa, FL
G. 04-14-97 829 Providence Road
Brandon, FL
H. 07-21-97 4835 S. Florida Avenue
Lakeland, FL
I. 09-29-97 1465 McMullen Booth Road
Clearwater, FL
CONCORD Lawrence S. Bird 07-01-91 KS, MO, NE 8/08-31-99
HOSPITALITY, INC. Amended: 07-05-91
P.O. Box 6212 11-27-94
Lincoln, NE 68516 01-31-95
09-01-95
09-01-97
A. 04-07-92 100 Manhattan Town Center
3rd & Poyntz, Suite P-5
Manhattan, KS
- --------
* Casual Restaurant Concepts II, Inc. merged into Casual Restaurant Concepts, Inc. 12/30/96
-36-
<PAGE>
B. 06-03-92 5928 S.W. 17th Street
Topeka, KS
C. 04-20-93 3730 Village Drive
Lincoln, NE
D. 08-09-94 4004 Frederick Boulevard
St. Joseph, MO
E. 08-15-95 102 Platte Oasis Parkway
North Platte, NE
F. 07-30-96 6100 O Street
Lincoln, NE
CONCORD Lawrence S. Bird 09-07-93 OK, NM, TX 5/09-30-98
HOSPITALITY, INC. Amended: 09-01-94
P.O. Box 6212 11-27-94
Lincoln, NE 68516 11-29-95
A. 04-22-94 2714 Soncy Road
Amarillo, TX
B. 05-27-94 4025 S. Loop 289
Lubbock, TX
C. 10-16-95 2911 Kemp Boulevard
Wichita Falls, TX
D. 09-16-96 6211 N.W Cache Road
Lawton, OK
CONCORD Lawrence S. Bird 10-25-95 NE, WY 3/06-30-99
HOSPITALITY, INC.
P.O. Box 6212
Lincoln, NE 68516
A. 08-03-94 2621 5th Avenue
Scottsbluff, NE
B. 10-22-96 3209 Grand Avenue
Laramie, WY
-37-
<PAGE>
EHI REALTY, INC. Edward W. Doherty 08-30-91 NJ 10/06-30-99
7 Pearl Court William A. Johnson Amended: 12-10-92
Allendale, NJ 07401 07-31-93
08-03-94
07-01-97
A. 10-26-93 1282 Centennial Avenue
Piscataway, NJ
B. 12-07-93 14 Park Road
Tinton Falls, NJ
C. 11-09-94 Fashion Center Mall
17 North & Ridgewood East
Paramus, NJ
D. 06-13-95 1599 Route 22, West
Watchung, NJ
E. 11-21-95 52 Brick Plaza
Brick, NJ
F. 04-16-96 Rt. 46 @ Riverview Drive
Totowa, NJ
G. 11-12-96 251 Woodbridge Ctr. Drive
Woodbridge, NJ
H. 08-19-97 112 Eisenhower Parkway
Livingston, NJ
I. 08-09-96 1057 Route 46 East
Parsippany, NJ
EHI REALTY, INC. Edward W. Doherty 11-06-96 NJ 3/08-31-99
7 Pearl Court William A. Johnson
Allendale, NJ 07401
EJM Myron Thompson 06-29-90 MN, ND No Development
ENTERPRISES, INC. Joseph J. Deck Amended: 09-03-90 Rights
P.O. Box 0969 Engen Eckmann Terminated: 08-16-93
Minot, ND 58702-0969
A. 11-13-90 2302 15th Street, S.W.
Minot, ND
B. 04-14-92 434 S. 3rd
Bismarck, ND
-38-
<PAGE>
EL APPLE, INC. John M. Verlander 05-23-94 NM, TX 6/05-31-98
5835 Onix, Suite 300 James J. Gore Amended: 03-07-95
El Paso, TX 79912
A. 05-27-94 5800 N. Mesa
El Paso, TX
B. 03-13-95 1766 Airway Boulevard
El Paso, TX
C. 11-01-95 7956 Gateway East
El Paso, TX
D. 06-27-96 2501 E. Lohman
Las Cruces, NM
E. 08-29-96 4700 Woodrow Bean
El Paso, TX
F. 03-25-97 1985 George Dieter
El Paso, TX
GRANDAPPLE, L.L.C. Myron Thompson 12-07-93 MN, ND 4/10-31-98
P.O. Box 0969 Engen Eckmann Amended: 03-27-95
Minot, ND 58702-0969 03-28-95
11-01-96
A. 12-07-93 2351 S. Columbia Road
Grand Forks, ND
B. 11-08-94 2800 13th Avenue, Southwest
Fargo, ND
C. 12-19-95 289 15th Street, West
Dickinson, ND
GULF COAST Thomas G. Kellogg 04-30-96 LA, MS 7/03-31-99
RESTAURANTS, INC. Kathryn G. Kellogg Amended: 02-19-97
2320 Oak Road 04-01-97
Building G, Suite 202
Snellville, GA 30278
A. 08-14-89 1000 W. Esplanada Avenue
Kenner, LA
B. 06-18-90 3701 Veterans
Memorial Boulevard
Metarie, LA
-39-
<PAGE>
C. 04-07-92 850 I-10 Service Road
Slidell, LA
D. 03-02-93 315 N. Highway 190
Covington, LA
E. 12-21-93 5630 Johnston Street
Lafayette, LA
F. 11-14-95 4005 General DeGaulle
New Orleans, LA
G. 01-14-97 1220 Clearview Pkwy.
Harahan, LA
GULF COAST Thomas G. Kellogg 01-30-96 LA, MS 6/12-31-98
RESTAURANTS, INC. Kathryn G. Kellogg Amended: 02-19-97
2320 Oak Road
Building G, Suite 202
Snellville, GA 30278
A. 07-18-94 3006 College Drive
Baton Rouge, LA
B. 05-09-95 4808 S. Sherwood Forest
Baton Rouge, LA
C. 01-30-96 9702 Airline Highway
Baton Rouge, LA
D. 06-04-96 1500 MacArthur Drive
Alexandria, LA
E. 07-29-97 3624 Ryan
Lake Charles, LA
J.S. VENTURES, INC. James H. Stevens 10-10-92 IA, KS, MO, NE 12/12-31-98
1130 Haskell Amended: 05-14-93
Wichita, KS 67213 10-20-93
02-28-95
01-01-97
A. 08-07-89 6730 W. Central
Wichita, KS
B. 01-15-91 2035 N. Rock Road, Ste. 101
Wichita, KS
C. 09-22-92 3350 S. 143rd Place
Omaha, NE
-40-
<PAGE>
D. 12-14-93 2875 S. 9th
Salina, KS
E. 07-05-94 4760 S. Broadway
Wichita, KS
F. 11-08-94 7450 W. Dodge Street
Omaha, NE
G. 02-28-95 1609 E. 17th Street
Hutchinson, KS
H. 06-04-96 13208 W. Maple Road
Omaha, NE
I. 01-21-97 4101 N. Vine
Hays, KS
J. 08-11-97 1230 N. Washington
Omaha, NE
KEYSTONE Stephen H. Davenport 05-14-93 PA 7/12-31-00
APPLE, INC. Amended: 03-28-95
P.O. Box 616
Lemoyne, PA 17043-0616
A. 05-04-94 4401 Jonestown Road
Harrisburg, PA
B. 05-16-95 1181 Mae Street
Hummelstown, PA
C. 06-17-97 2321 Lincoln Highway
Lancaster, PA
D. 08-19-97 6055 Carlisle Pike
Mechanicsburg, PA
CHRISTIAN J. KNOX Christian J. Knox
2200 Laurelwood Road
Santa Clara, CA 95054
A. 12-19-94 311 Lake Merced
Daly City, CA
K.S. APPLE, INC. Nicholas Katos 12-07-94 NY 6/06-30-99
164-17 Union Turnpike Michael S. Shaevitz Amended: 03-07-95
Flushing, NY 11367
A. 04-30-97 213-29 26th Avenue
Bayside, NY
-41-
<PAGE>
MARANO Leon J. Marano 06-25-91 CA 5/12-31-95
ENTERPRISES, INC. Amended: 03-01-93
96 Shaw Avenue 06-30-94
Suite 232
Clovis, CA 93612
A. 06-23-92 Fig Garden Village
5126 N. Palm Avenue
Fresno, CA
B. 08-31-93 98 Shaw Avenue
Clovis, CA
C. 12-12-94 1665 W. Lacey Boulevard
Hanford, CA
D. 06-20-95 7007 N. Cedar
Fresno, CA
E. 03-05-96 3604 West Shaw
Fresno, CA
F. 06-10-97 5325 Avenida De Los Robles
Visalia, CA
G. 08-12-97 9000 Ming Avenue, Suite M
Bakersfield, CA
MERCER ROSE, L.P. Harold T. Rose 02-01-96 NJ
127 South State Street Assigned: 01-01-97
Newton, PA 18940
MILLER APPLE William M. Wentworth 07-20-92 MI, WI 9/12-31-98
LIMITED Elizabeth Wentworth Amended: 11-04-92
PARTNERSHIP 09-28-93
G-4488 Bristol Road 07-18-94
Flint, MI 48507 02-28-95
05-15-97
A. 11-16-93 G3131 Miller Road
Flint, MI
B. 12-15-94 2260 Tittabawassee
Saginaw, MI
C. 11-28-95 4135 N. Court Street
Burton, MI
D. 06-04-96 2384 U.S. 31 South
Traverse City, MI
-42-
<PAGE>
E. 07-01-97 3500 Wilder
Bay City, MI
F. 10-28-97 8800 Main Street
Birch Run, MI
MILOMEL, GEKAT General 10-27-96 Bulgaria, Serbia & 9/12-31-02
THESSALONIKI, LTD. Constructions, S.A. Scopia, Romania
1050 Crown Pointe Pkwy. Nikos Koubatis Hellenic Rep. of Greece
Crown Pointe Tower 2000 Mihalis Papaloupulos Greece controlled Island
Suite 310 Island of Cyprus
Atlanta, GA 30338
A. 10-27-96 11th Kilometer National Rd.
Thessaloniki - Airport
GREECE
O.K. APPLE, INC. Michael D. Olander 03-01-96 KS, OK 10/12-31-98
P.O. Box 1291
Lumberton, NC 28359
A. 01-26-93 3900 S. Elm Place
Broken Arrow, OK
B. 06-15-93 4733 S. Yale Avenue
Tulsa, OK
C. 09-21-93 9409 E. 71st Street
Tulsa, OK
D. 06-20-95 3521 S. Broadway
Edmond, OK
E. 05-01-96 317 N. Perkins
Stillwater, OK
F. 07-30-96 500 Ed Noble Pkwy.
Norman, OK
G. 03-04-97 415 W. Shawnee
Muskogee, OK
H. 05-13-97 3616 W. Garriot
Enid, OK
O.K. APPLE, INC. Michael D. Olander 10-29-96 AR, MO 6/12-31-99
P.O. Box 1291
Lumberton, NC 28359
-43-
<PAGE>
A. 09-13-93 4333 Warden Road
Little Rock, AR
B. 11-09-94 4426 Central Avenue
Hot Springs, AR
C. 06-19-95 12110 Chenal Parkway
Little Rock, AR
PACIFIC APPLE Joseph J. Lal 01-01-96 CA 4/12-31-98
CALIFORNIA, INC. Renu Lal
7311 Greenhaven Drive
Suite 270
Sacramento, CA 95831
A. 03-18-94 1415 S. Bradley
Santa Maria, CA
B. 09-26-95 305 Madonna Road
San Luis Obispo, CA
PACIFIC APPLE FOODS Joseph J. Lal 09-24-93 ID, OR, WA 4/04-30-96
CORPORATION Renu Lal Amended: 10-11-93
7311 Greenhaven Drive 02-28-95
Suite 270
Sacramento, CA 95831
A. 10-03-95 280 Hanley
Coeur D'Alene, ID
B. 11-10-95 12217 E. Mission Avenue
Spokane, WA
C. 01-04-96 606 N. Columbia Ctr. Blvd.
Kennewick, WA
D. 06-04-96 4007 29th Street
Spokane, WA
PACIFIC APPLE Joseph J. Lal 04-30-97 OR, WA 8/12-31-00
OREGON, INC.
7311 Greenhaven Drive A. 07-13-93 1220 N.W. 185th Avenue
Suite 270 Beaverton, OR*
Sacramento, CA 95831
B. 11-09-93 6325 S.W. Meadows Road
Lake Oswego, OR*
- --------
* Acquired from Apple Partners Limited Partnership 04/30/97
-44-
<PAGE>
C. 12-22-95 Lancaster Mall
747 Lancaster Drive, N.E.
Salem, OR*
D. 04-24-96 12717 S.E. 2nd Circle
Vancouver, MA*
E. 11-18-96 1439 N.E. Halsey
Portland, OR*
F. 04-10-97 10004 NE Halsey
Portland, OR
G. 09-08-97 10172 SE 82nd Street
Clakamas, OR
PACIFIC GOLD, INC. Michael Olander 04-03-96 CA 10/06-30-01
170 Windchime Court
Raleigh, NC 27614
A. 11-15-94 18279 Brookhurst Street
Fountain Valley, CA
B. 04-03-96 1238 W. Imperial Highway
La Habra, CA
PACIFIC GOLD, INC. Michael Olander 10-14-96 CA 11/12-31-99
170 Windchime Court
Raleigh, NC 27615
A. 01-01-96 4070 E. Highland Avenue
Highland, CA
B. 01-01-96 2046 Redlands Blvd.
Redlands, CA
C. 01-01-96 3820 Mulberry
Riverside, CA
D. 01-01-96 521 N. McKinley
Corona, CA
E. 01-01-96 3956 Grand Avenue
Chino, CA
F. 01-01-96 10709 Foothill Blvd.
Rancho Cucamonga, CA
G. 10-07-97 26531 Aliso Creek Road
Aliso Viejo, CA
-45-
<PAGE>
PORTER Todd G. Porter 10-09-92 IA, MN, MT, NE, SD, WY 5/09-29-98
APPLE COMPANY Amended: 03-28-94
4305 S. Louise Avenue 10-01-97
Suite 101-B
Sioux Falls, SD 57106
A. 06-05-91 3800 S. Louise Avenue
Sioux Falls, SD
B. 08-17-93 1700 Hamilton Boulevard
Sioux City, IA
C. 08-09-94 4555 Southern Hills Dr., #106
Sioux City, IA
D. 12-05-95 2160 Haines Avenue
Rapid City, SD
RCI IDAHO, LLC Stephen A. Grove 08-29-96 ID, OR 4/06-30-99
400 Interstate N. Parkway
Suite 1200 A. 06-02-97 635 N. Utah Avenue
Atlanta, GA 30339 Idaho Falls, ID
B. 07-28-97 1587 Blue Lake Blvd.
Twin Falls, ID
RCI NEW Stephen A. Grove 08-10-96 NM 6/07-31-99
MEXICO, LLC
400 Interstate N. Parkway
Suite 1200
Atlanta, GA 30339
A. 12-16-96 2212 North Main
Roswell, NM 88201
B. 09-22-97 4246 Cerrillos Road
Santa Fe, NM
C. 10-27-97 4601D E. Main St.
Farmington, NM
R.C.I. WEST, INC. Stephen A. Grove 12-21-88 CO 19/12-31-98
400 Interstate N. Pkwy. Amended: 03-18-91
Suite 970 01-02-92
Atlanta, GA 30339 12-04-92
01-01-95
01-01-97
-46-
<PAGE>
A. 10-02-89 3301 Tamarac Drive
Denver, CO
B. 10-23-90 5250 S. Wadsworth Boulevard
Lakewood, CO
C. 06-08-92 4306 S. College Avenue
Ft. Collins, CO
D. 09-07-92 14091 E. Iliff Avenue
Aurora, CO
E. 10-05-92 8292 S. University Boulevard
Littleton, CO
F. 04-12-93 410 S. Colorado Boulevard
Glendale, CO
G. 11-15-93 100 W. 104th Avenue
Northglenn, CO
H. 01-24-94 9010 N. Wadsworth Parkway
Westminster, CO
I. 03-21-94 6405 W. 120th Avenue
Broomfield, CO
J. 05-30-94 1250 S. Hover Road
Building 10-A
Longmont, CO
K. 08-29-94 1906 28th Street
Boulder, CO
L. 10-31-94 10625 W. Colfax Avenue
Lakewood, CO
M. 12-19-94 297 E. 120th Avenue
Thornton, CO
N. 03-13-95 592 S. McCaslin Boulevard
Louisville, CO
O. 06-26-95 10440 E. Arapahoe Road
Englewood, CO
P. 10-23-95 5265 Wadsworth Boulevard
Arvada, CO
Q. 12-08-97 213 E. 29th
Loveland, CO
-47-
<PAGE>
R.C.I. WEST, INC. Stephen A. Grove 12-22-92 CO 8/12-01-99
400 Interstate N. Pkwy. Amended: 03-19-93
Suite 970 07-19-94
Atlanta, GA 30339 03-07-95
09-01-95
09-01-97
A. 10-03-94 1360 Cragin Road
Colorado Springs, CO
B. 04-03-95 3428 N. Elizabeth
Pueblo, CO
C. 07-10-95 3708 E. Galley
Colorado Springs, CO
D. 11-27-95 711 Horizon Drive
Grand Junction, CO
E. 05-06-96 4100 West 10th Street
Greeley, CO
RENAISSANT Anthony R. Alvarez 08-27-92 TX 3/03-31-95
DEVELOPMENT Estella M. Alvarez Amended: 10-20-93
CORPORATION 05-01-95
8000 I-10 West
Suite 1150
San Antonio, TX
A. 12-07-93 514 E. Expressway 83
McAllen, TX
B. 08-25-94 4601 N. 10th Street
N. McAllen, TX
C. 10-18-94 7601 San Dario
Laredo, TX
D. 07-25-95 2960 Boca Chica Boulevard
Brownsville, TX
E. 10-23-95 1519 W. Harrison
Harlingen, TX
RENAISSANT Anthony R. Alvarez 10-23-95 TX 2/10-31-97
DEVELOPMENT Estella M. Alvarez
CORPORATION
8000 I-10 West
Suite 1150
San Antonio, TX 78230
-48-
<PAGE>
A. 12-19-95 6490 N. Navarro
Victoria, TX
RESTAURANT Stephen A. Grove 11-02-90 AL, GA 9/06-30-96
CONCEPTS, INC. Amended: 10-10-93
400 Interstate N. Pkwy. 07-01-94
Suite 970
Atlanta, GA 30339
A. 06-17-85 2301 Airport Thruway, #F-1
Columbus, GA
B. 06-17-85 3150 Wrightsboro Road
Augusta, GA
C. 01-28-87 3117 Washington Road
Augusta, GA
D. 08-21-87 480 Mall Boulevard
Savannah, GA
E. 04-01-91 595 Bobby Jones Expressway
Augusta, GA
F. 06-28-92 165 Tom Hill, Sr. Boulevard
Macon, GA
G. 05-17-93 3229 Gentian Boulevard
Columbus, GA
H. 07-26-93 1627-34 Opelika Road
Auburn, AL
I. 10-25-93 11120 Abercorn
Savannah, GA
J. 04-04-94 314 Russell Parkway
Warner Robbins, GA
K. 09-05-94 4705 Highway 80
Savannah Island, GA
L. 12-05-94 612 E. Hamric Avenue
Oxford, AL
M. 06-05-95 2574 Riverside Drive
Macon, GA
N. 10-30-95 3652 Eisenhower
Macon, GA
-49-
<PAGE>
ROSE CASUAL Harold T. Rose 08-04-93 MD 10/06-30-00
DINING, L.P. Amended: 09-09-94
127 S. State Street 02-28-95
Newtown, PA 18940
A. 01-17-95 2141 Generals Highway
Annapolis, MD
B. 10-31-95 2703 N. Salisbury Boulevard
Salisbury, MD
C. 05-13-96 6505 Baltimore National Pike
Catonsville, MD
D. 12-10-96 8610 LaSalle Road
Towson, MD
E. 11-11-97 634 Baltimore Blvd.
Westminster, MD
ROSE CASUAL Harold T. Rose *02-01-96 NJ 03/08-31-99
DINING, L.P. Amended: 09-01-97
127 S. State Street
Newtown, PA 18940 A. 01-21-97 3330 Brunswick Pike
Lawrenceville, NJ
B. 03-04-97 333 State Route 33
Trenton, NJ
ROSE CASUAL Harold T. Rose **02-01-96 PA 04/12-31-99
DINING, L.P. Amended: 09-01-97
127 S. State Street
Newtown, PA 18940 A. 06-02-97 939 New Berwick Highway
Bloomsburg, PA
RYAN RESTAURANT William O. Ryan 03-05-96 MT 5/12-31-97
CORPORATION Beverly R. Ryan
790 King Park Drive
Billings, MT 59102
A. 11-23-93 740 24th Street, West
Billings, MT
- --------
* Assigned from Mercer Rose, L.P. 01/01/97
** Assigned from Scranton Rose, L.P. 01/01/97
-50-
<PAGE>
B. 03-05-96 1108 North 7th Avenue
Bozeman, MT
C. 07-24-96 4041 Highway 93 South
Missoula, MT
D. 12-10-96 1200 E. Idaho
Kalispell, MT
E. 09-02-97 1212 Custer
Helena, MT
SCOTT'S APPLE, INC. Nicholas C. Scott 08-26-92 PA 2/10-31-94
4045 W. 12th Street Amended: 10-30-93
Erie, PA 16505
A. 01-24-94 7790 Peach Street
Erie, PA
B. 03-21-95 2911 W. 12th Street
Erie, PA
C. 12-12-97 11227 Shaw Avenue
Meadville, PA
SCRANTON ROSE, L.P. Harold T. Rose 02-01-96 PA
127 South State Street Assigned: 01-01-97
Newton, PA 18940
SPECTRUM APPLE, L.P. John D. Gantes 08-11-94 CA 10/11-30-00
P.O. Box 80340 Linda B. Gantes Amended: 03-28-95
Rancho Santa
Margarita, CA 92688
A. 09-05-95 23626 Valencia Boulevard
Santa Clarita, CA
B. 04-16-96 39720 N. 10th Street West
Palmdale, CA
C. 07-30-96 291 Ventura Blvd.
Camarillo, CA
D. 08-26-97 3980 Thousand Oaks Blvd.
Thousand Oaks, CA
-51-
<PAGE>
SUNSHINE APPLE Lois J. Sedowicz 03-20-97 FL 11/12-31-00
(GEORGIA), LIMITED
PARTNERSHIP A. 07-26-93 1545 Palm Bay Road
5555 Oakbrook Pkwy. Melbourne, FL*
Suite 355
Norcross, GA 30093 B. 11-22-93 100 Sykes Creek Pkwy. North
Merritt Island, FL*
C. 04-18-94 12103 Collegiate Way
Orlando, FL*
D. 06-26-95 2599 Enterprise Road
Orange City, FL*
E. 10-23-95 3001 W. Eau Gellie Blvd.
Melbourne, FL*
F. 02-12-96 150 Williamson Blvd.
Ormond Beach, FL*
G. 08-19-96 1390 Dunlawton Avenue
Port Orange, FL*
T.L. CANNON Matthew J. Fairbairn 06-22-90 NY, PA 13/12-01-98
CORPORATION David Stein Amended: 01-17-92
201 ATP Tour Blvd. 03-01-94
Suite 120 10-03-94
Ponte Vedra Beach, FL 32082 07-01-96
A. 03-12-91 3050 Winton Road South
Rochester, NY
B. 09-30-91 5017 Transit Road
Williamsville, NY
C. 06-23-92 3 Builders Square
4405 Milestrip Road
Hamburg, NY
D. 07-21-92 585 Moseley Road
Fairport, NY
E. 08-24-93 200 Paddy Creek Circle
Rochester, NY
F. 08-23-94 1683 E. Ridge Road
Rochester, NY
- --------
* Acquired from Apple Restaurants of Central Florida, L.P., Ltd.
-52-
<PAGE>
G. 10-04-94 1900 Military Road
Niagara Falls, NY
H. 11-22-94 1641 Niagara Falls Boulevard
Amherst, NY
I. 06-20-95 1955 Empire Boulevard
Webster, NY
J. 08-29-95 5822 S. Transit Road
Lockport, NY
K. 04-02-96 340 E. Fairmount Avenue
Lakewood, NY
L. 07-30-96 2656 Delaware Avenue
Buffalo, NY
M. 04-22-97 3637 Union Road
Checktowaga, NY
T.L. CANNON Matthew J. Fairbairn 12-22-92 NY 7/06-30-99
CORPORATION David Stein Amended: 02-03-93
201 ATP Tour Blvd. 04-08-94
Suite 120 05-01-95
Ponte Vedra Beach, FL 32082 05-15-97
A. 09-28-93 3189 Erie Boulevard, East
De Witt, NY
B. 07-06-94 628 S. Main Street
N. Syracuse, NY
C. 02-13-95 3975 Route 31
Liverpool, NY
D. 01-10-96 877 Country Route 64
Elmira, NY
T.L. CANNON Matthew J. Fairbairn 08-14-96 NY, PA 6/12-31-00
CORPORATION David Stein
201 ATP Tour Blvd. A. 09-09-97 3701 Vestal Parkway East
Suite 120 Vestal, NY
Ponte Vedra Beach, FL 32082
-53-
<PAGE>
T.L. CANNON Matthew J. Fairbairn 05-15-97 NY 4/12-31-00
CORPORATION David Stein
201 ATP Tour Blvd.
Suite 120
Ponte Vedra Beach, FL 32082
T.S.S.O., INC. Lois J. Sedowicz 01-15-92 AL, FL, MS 7/06-30-99
5555 Oakbrook Parkway Amended: 08-30-93
Suite 320 03-28-95
Norcross, GA 30093 08-01-95
07-01-97
A. 04-30-85 5760 Airport Boulevard
Mobile, AL
B. 03-31-86 5091 Bayou Boulevard
Pensacola, FL
C. 08-15-88 330 Mary Esther Cutoff
Mary Esther, FL
D. 01-24-91 5701 Emerald Coast
Parkway - Sandestin
Destin, FL
E. 12-06-93 4940 Government Boulevard
Mobile, AL
F. 07-10-95 165 E. Nine Mile Road
Pensacola, FL
T.S.S.O., INC. Frank C. Sedowicz 11-20-91 IA, IL, MO 6/12-31-97
5555 Oakbrook Parkway Lois J. Sedowicz Amended: 04-07-93
Suite 320 08-16-93
Snellville, GA 30278
A. 11-02-92 3335 Veterans Parkway
Springfield, IL
B. 08-16-93 1966 N. Henderson Street
Galesburg, IL
C. 08-29-94 405 N. Main
E. Peoria, IL
D. 10-17-94 1275 S. Route 51
Forsyth, IL
E. 11-07-94 502 N. Veterans Parkway
Bloomington, IL
-54-
<PAGE>
F. 08-28-95 116 S. Roosevelt
Burlington, IA
G. 02-26-96 3827 Broadway
Quincy, IL
H. 06-09-97 3540 Vermilion Street
Danville, IL
I. 10-27-97 3540 Court Street
Pekin, IL
THE OZARK Gregory R. Walton 05-21-92 AR, MO 5/12-31-98
APPLES, INC. Amended: 04-21-93
3252 Roanoke 07-01-93
Kansas City, MO 64111 11-15-93
01-29-96
01-01-97
A. 06-15-93 1855 E. Primrose
Springfield, MO
B. 01-03-94 2010 I-70 Drive, Southwest
Columbia, MO
C. 06-01-94 1836 W. Highway 76
Branson, MO
D. 06-27-95 2319 Missouri Boulevard
Jefferson City, MO
THE OZARK Gregory R. Walton 01-29-96 AR, KS, MO, OK 3/12-31-97
APPLES, INC.
3252 Roanoke
Kansas City, MO 64111
A. 07-19-94 2825 E. 32nd Street
Joplin, MO
B. 06-19-96 528 N. 47th Street
Rogers, AR
THOMAS & KING, INC. Michael J. Scanlon 05-31-88 IN, KY, OH 33/05-30-99
1065 Newtown Pike Ronald T. Reynolds Amended: 05-31-91
Lexington, KY 40511 Douglas M. Wilson 08-06-93
06-07-95
07-30-96
05-30-97
-55-
<PAGE>
A. 08-01-88 2573 Richmond Road
Lexington, KY
B. 11-14-88 7383 Turfway Road
Florence, KY
C. 02-24-89 105 N. Springsboro Pike
W. Carrollton, OH
D. 05-11-89 340 Glensprings Drive
Springdale, OH
E. 10-09-89 4009 Nicholasville Road
Block B
Lexington, KY
F. 04-11-89 10635 Techwood Circle
Blue Ash, OH
G. 03-12-90 9660 Mason-Montgomery
Mason, OH
H. 05-11-90 2755 Brice Road
Reynoldsburg, OH
I. 08-20-90 2555 Shiloh Springs Road
Trotwood, OH
J. 12-11-90 6669 Dublin Center Drive
Dublin, OH
K. 07-15-91 967 Hebron Road
Heath, OH
L. 12-16-91 5050 Crookshank
Cincinnati, OH
M. 08-17-92 4440 Glen Este-
Withamsville Road
Batavia, OH
N. 11-09-92 4600 East Broad Street
White Hall, OH
O. 03-01-93 1389 U.S. 127 South
Frankfort, KY
P. 04-05-93 30 Crestview Hills Mall Road
Crestview Hills, KY
Q. 06-21-93 480 Ackerman Road
Columbus, OH
-56-
<PAGE>
R. 09-06-93 700 Washington Blvd., N.W.
Hamilton, OH
S. 10-04-93 853 Eastern Bypass
Richmond, KY
T. 01-17-94 Northgate Mall
9595 Colrain Avenue
Cincinnati, OH
U. 04-11-94 910 Beaumont Center Pkwy.
Lexington, KY
V. 06-13-94 3240 Towne Boulevard
Middletown, OH
W. 10-03-94 8331 Old Troy Pike
Huber Heights, OH
X. 12-02-94 1800 W. 1st Street
Springfield, OH
Y. 05-29-95 4425 National Road East
Richmond, IN
Z. 08-07-95 1615 Rivervalley Circle North
Lancaster, OH
a. 01-29-96 1525 N. Lexington Avenue
Winchester, KY
b. 01-30-96 1 Madison Avenue
Covington, KY
c. 05-20-96 3894 Morse Road
Columbus, OH
d. 07-25-96 1759 W. Main Street
Troy, OH
e. 09-23-96 1514 Mt. Vernon Avenue
Marion, OH
THOMAS & KING, INC. Michael J. Scanlon 02-24-94 OH, PA 3/12-31-98
1065 Newtown Pike Ronald T. Reynolds Amended: 02-28-95
Lexington, KY 40511 Douglas M. Wilson 05-01-95
A. 08-28-95 904 Great East Plaza
Niles, OH
B. 02-25-97 201 S. Hermitage Road
Hermitage, PA
-57-
<PAGE>
THOMAS & KING, INC. Michael J. Scanlon 10-23-90 AZ 18/08-15-98
1065 Newtown Pike Ronald T. Reynolds Amended: 10-21-94
Lexington, KY 40511 Douglas M. Wilson 06-01-95
08-16-96
A. 03-31-93 2053 S. Alma School Road
Mesa, AZ
B. 12-18-90 2720 W. Bell Road
Phoenix, AZ
C. 07-08-91 565 E. Wetmore
Tucson, AZ
D. 12-08-92 6259 E. Southern Avenue
Mesa, AZ
E. 05-17-93 Park Mall, Building E
5870 East Broadway
Tucson, AZ
F. 06-14-93 2032 E. Baseline Road
Mesa, AZ
G. 09-27-93 8001 W. Bell Road
Peoria, AZ
H. 06-26-94 1655 W. Elliott
Tempe, AZ
I. 12-12-94 10460 N. 90th Street
Closed: 11-18-97 Scottsdale, AZ
J. 05-22-95 2547 N. 44th Street
Phoenix, AZ
K. 10-09-95 2 East Camelback
Phoenix, AZ
L. 11-20-95 4924 E. Shea Boulevard
Phoenix, AZ
M. 02-26-96 1881 West Highway 69
Prescott, AZ
N. 08-19-96 5880 W. Peoria
Glendale, AZ
O. 03-24-97 2230 W. Ina Road
Tucson, AZ
-58-
<PAGE>
P. 04-22-97 909 E. Broadway
Tempe, AZ
Q. 11-18-97 1245 W. Chandler Blvd.
Chandler, AZ
THOMAS & KING, INC. Michael J. Scanlon 11-14-94 IL, IN, KY, MO, TN 8/09-30-99
1065 Newton Pike Ronald T. Reynolds
Lexington, KY 40511 Douglas M. Wilson
A. 09-26-91 202 S. Broadview
Cape Girardeau, MO
B. 10-27-92 3990 Hinkleville Roady
Paducah, KY
C. 07-06-93 5120 Frederica
Owensboro, KY
D. 12-13-94 2506 S. 3rd Street
Terre Haute, IN
E. 04-04-95 1125 E. Main
Carbondale, IL
F. 08-01-95 5100 E. Morgan
Evansville, IN
G. 07-22-97 1475 Chelsa Drive
Madisonville, KY
THUNDER APPLE Robert A. Syroid 08-08-94 City of Thunder Bay, 1/06-29-97
NORTH, INC. Brenda Syroid Amended: 09-20-95 Ontario, Canada
920 Tungsten Street 08-29-96
Thunder Bay, ON CAN
P7B 5Z6
A. 08-08-94 1155 Alloy Drive
Thunder Bay, Ontario
CANADA
TRUE NORTH Ian A. Mackay 04-24-97 Ontario, Canada 1/12-01-97
RESTAURANTS, INC. Michael J. Lewis
46 Dawlish Avenue A. 04-24-97 (to be determined)
Toronto, Ontario M4N 1H1
Canada
-59-
<PAGE>
WILD WEST APPLE Calvin E. Keller 10-21-94 ID, NE, OR, WY No Development
VENTURES, A Linda A. Keller Amended: 02-28-95 Rights
LIMITED LIABILITY Terminated: 11-01-95
COMPANY
2220 Dell Range Blvd.
Suite 102
Cheyenne, WY 82009
A. 07-07-92 1401 Dell Range Boulevard
Cheyenne, WY
WILLIAM TELL, INC. John B. Prince 05-14-93 ID, NV, UT 8/07-01-98
71 W. Apricot Avenue Amended: 03-01-95
Salt Lake City, UT 84103 12-01-97
A. 04-12-94 6123 S. State Street
Murray, UT
B. 12-19-94 5678 S. Redwood Road
Taylorsville, UT
C. 01-22-96 1622 N. 1000 West
Layton, UT
D. 04-29-96 1125 W. Riverdale Road
Riverdale, UT
E. 08-19-96 680 West 1300 South
Orem, UT
F. 11-11-96 7047 S. 1300 East
Midvale, UT
-60-
</TABLE>
RIO BRAVO INTERNATIONAL, INC.
DEVELOPMENT AND FRANCHISE AGREEMENT SCHEDULE
AS OF DECEMBER 28, 1997
<TABLE>
<CAPTION>
(3) (5)
DATE OF DEVELOPMENT
DEVELOPMENT (4) SCHEDULE
(1) AGREEMENT OR TERRITORY (all or part (total
DEVELOPER NAME (2) FRANCHISE of the states/countries restaurants/
AND ADDRESS PRINCIPALS AGREEMENT listed) OR LOCATION deadline)
<S> <C> <C> <C> <C>
APPLE CANTINAS Frank C. Sedowicz Terminated: 11-01-97 IL, IA, MO, WI
(GEORGIA), INC. Lois J. Sedowicz
5555 Oakbrook Parkway Apple Cantinas, Inc.
Suite 355
Norcross, GA 30093
APPLE-METRO, INC. Roy Raeburn 03-26-97 NY 5/05-15-01
640 East Boston Post Rd. Zane Tankel
Mamaronek, NY 10543 A. 03-26-97 2690 Hylan Blvd.
Staten Island, NY
B. 08-26-97 2655 Richmond Ave.
Staten Island, NY
APPLE SAUCE, INC. W. Curtis Smith 08-15-96 IN, OH 5/01-31-01
207 Grandview Drive James P. Borke
Suite 125 A. 08-15-96 500 E. 81st Avenue
Ft. Mitchell, KY 41017 Merrillville, IN
APPLE SAUCE, INC. W. Curtis Smith 08-15-96 FL 5/01-31-01
207 Grandview Drive James P. Borke
Suite 125 A. 08-15-96 (to be determined)
Ft. Mitchell, KY 41017
BRAVO AMERICAN Donald W. Strang, Jr. 04-22-97 IL 5/07-15-01
CHICAGO LIMITED Allen S. Musikantow
LIABILITY COMPANY A. 04-22-97 3080 Warrenville Road
8905 Lake Avenue Lisle, IL
Cleveland, OH 44102
BRAVO AMERICAN Donald W. Strang, Jr. 11-11-96 IN 5/01-31-01
INDIANA LIMITED Allen S. Musikantow
LIABILITY COMPANY A. 11-11-96 2525 Sagamore Pkwy. S.
8905 Lake Avenue Lafayette, IN
Cleveland, OH 44102
BRAVO AMERICAN Donald W. Strang, Jr. 02-07-96 OH 5/06-30-00
OHIO LIMITED Allen S. Musikantow
LIABILITY COMPANY A. 02-07-96 1541 Golden Gate Plaza
8905 Lake Avenue Mayfield Heights, OH
Cleveland, OH 44102
1
<PAGE>
B. 03-25-97 17227 SouthPark Center
Strongsville, OH
BRAVO HOSPITALITY, Edward W. Doherty 08-06-97 NJ 4/03-31-01
LLC William A. Johnsen
7 Pearl Court A. 08-06-97 (to be determined)
Allendale, NJ 07401
CONCORD Larry S. Bird (Franchisee KS, MO, NE
HOSPITALITY, INC. withdrew)
1701 Windhoek Drive
P.O. Box 6212
Lincoln, NE 68512
DAKOTA RIO, INC. Todd G. Porter 06-25-97 SD, MT, WY, NE, MN, IA 3/08-15-99
101B Empire Office Ctr.
4305 S. Louise Avenue A. 06-25-97 2801 S. Louise Ave.
Sioux Falls, SD 57106 Sioux Falls, SD
HEARTLAND RIO, INC. James H. Stevens 01-16-96 KS, IA, MO, NE 3/10-31-98
2400 N. Woodlawn
Suite 140 A. 01-16-96 8310 E. 21st Street
Wichita, KS 67220 Wichita, KS
B. 12-09-97 8406 W. Central Avenue
Wichita, KS
MANZANA GRANDE, Myron Thompson 01-15-97 ND, SD, MN 3/08-15-99
INC. Engen Eckmann
1225 S. Broadway A. 01-15-97 3000 32nd Ave. South
Minot, ND 58701 Grand Forks, ND
MISS-ALA-RIO, INC. Glenn D. Durham 01-24-96 AL, GA, TN, FL, MS 5/06-30-00
822 Columbiana Raod Fred Gustin
Birmingham, AL 35209 A. 01-24-96 2070 Eastern Blvd.
Montgomery, AL
OZARK RIO, INC. Gregory R. Walton 02-29-96 MO, AR, OK, KS 4/08-31-99
3252 Roanoke
Kansas City, MO 64111 A. 02-29-96 2040 E. Independence Ave.
Springfield, MO
2
<PAGE>
B. 08-26-97 Hwy. 71 Bypass & College
Fayetteville, AR
RCI CANTINA, LLC Stephen A. Grove 02-01-96 AL, GA, SC 4/08-31-99
400 Interstate N. Pkwy.
Suite 1200 A. 02-01-96 2128 Washington Road
Atlanta, GA 30339 Augusta, GA
B. 12-03-96 169 Tom Hill Senior
Macon, GA
C. 06-25-97 3327 Gentian Blvd.
Columbus, GA
RIO ROSE, L.P. Harry T. Rose 09-16-97 NJ, PA 5/04-14-02
3 Terry Drive
Suite 103 A. 09-16-97 (to be determined)
Newtown, PA 18940
RIORO, INC. Michael Olander 02-29-96 NC, SC 5/06-30-00
170 Windchime Court
Raleigh, NC 27615 A. 02-29-96 US 521 & I-485
Charlotte, NC
RIORO, INC. Michael Olander 02-29-96 WV, NC 5/06-30-00
170 Windchime Court Amended: 08-29-96
Raleigh, NC 27615
A. 02-29-96 9813 South Blvd.
Pineville, NC
SOUTH COAST William F. Palmer 02-22-96 FL 5/06-30-00
CANTINAS, INC. Amended: 03-13-97
6620 McGinnis Ferry Road
Suite B A. 02-29-96 (to be determined)
Duluth, GA 30155
SOUTH COAST William F. Palmer 02-22-96 NC, SC, GA 5/06-30-00
CANTINAS, INC. Amended: 03-13-97
6620 McGinnis Ferry Road
Suite B A. 02-22-96 34 Tunnel Road
Duluth, GA 30155 Asheville, NC
B. 06-30-97 21 Roper Mountain Road
Greenville, SC
C. 09-09-97 838 Turner McCall Blvd.
Rome, GA
3
<PAGE>
T & K PARTNERS, LTD. Michael J. Scanlon 02-29-96 KY, OH, IN 5/06-30-00
249 E. Main Street Amended: 08-15-96
Suite 101
Lexington, KY A. 02-29-96 2349 Richmond Road
Lexington, KY
B. 08-15-96 7980 Hosbrook Road
Madeira, OH
T & K PARTNERS, LTD. Michael J. Scanlon 02-29-96 OH, IN, PA 5/06-30-00
249 E. Main Street Amended: 08-14-96
Suite 101
Lexington, KY A. 02-29-96
Closed: 11-24-97
THE RIO TRIO Frank DeAngelo 01-17-96 FL, GA 4/08-31-99
CORPORATION
P.O. Box 956308 A. 01-17-96 1926 Capital Circle, N.E.
Duluth, GA 30136 Tallahassee, FL
THE RIO TRIO Frank DeAngelo 08-10-96 VA, WV, NC 5/01-31-01
CORPORATION
P.O. Box 956308 A. 08-10-96 4105 Chesapeake Square Blvd.
Duluth, GA 30136 Chesapeake, VA
TLC-EAST, INC. Matthew J. Fairbairn 02-06-97 NY, PA 5/04-15-01
201 ATP Tour Blvd. David Stein
Suite 120 A. 02-06-97 (to be determined)
Ponte Vedra Beach, FL
(fka DSMF, INC.)
4
</TABLE>
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.
3
<PAGE>
"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.
4
<PAGE>
"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) "non-employee directors" under Rule 16b-3, and (b)
"outside directors" under section 162(m) of the Code.
5
<PAGE>
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
6
<PAGE>
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.
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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.
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.
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.
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.
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. The provisions of Section 5 are applicable to Options
granted to Employees and Consultants (and to the extent provided in Section
9.2.6, 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 5,000
shares of Stock. Such amount shall automatically increase (i) by 2,000
shares in the event that Net Income for the Fiscal Year immediately
preceding the year in which the Director Option is granted (the
"Measurement Year") exceeded by at least 20% the Net Income for the
Fiscal Year immediately preceding the Measurement Year, and (ii) by 100
shares for each additional increment of 1% above 20% by which the Net
Income for the Measurement Year exceeded the Net Income for the Fiscal
Year immediately preceding the Measurement Year. In no event shall the
number of Director Options granted in any Fiscal Year exceed 9,000
shares.
9.1.2 Employee Director Grants. Employee Directors shall only
receive Options in their capacity as Employees and not in their
capacity as Directors.
9.1.3 Date of Grant. All Director Options shall be granted at
the annual meeting of the Board.
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.
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9.2.4 Expiration of Options. Each Option shall terminate upon
the first to occur of the following events:
(a) The expiration of ten (10) 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.
9.2.5 Not Incentive Stock Options. Options granted pursuant to
this Section 9 shall not be designated as Incentive Stock Options.
9.2.6 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 Transferability. 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; provided, however, that an Award granted under this
Plan may be transferred to a holder's family members, to trusts created for the
benefit of the holder or the holder's family members, or to charitable entities.
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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AMENDMENT NO. 3
1995 EQUITY INCENTIVE PLAN
The following amendment to the 1995 Equity Incentive Plan was approved by the
Stockholders of Applebee's International, Inc. at their Annual Meeting of
Stockholders held on May 14, 1997:
"That Section 4.1 of the Plan be amended so that the number of shares authorized
under the Plan is increased to 2,300,000 shares."
IN WITNESS WHEREOF, I, as Secretary of Applebee's International, Inc. and as
Secretary of the aforesaid Annual Meeting of Stockholders, have executed this
amendment this 14th day of May, 1997.
Robert T. Steinkamp
Secretary
APPLEBEE'S INTERNATIONAL, INC.
EMPLOYEE STOCK PURCHASE PLAN
ARTICLE 1 - PURPOSE OF THE PLAN
The Company has established this Plan to provide eligible employees of
the Company and its Subsidiaries a method to purchase shares of common stock of
the Company by payroll deduction at a discount. The Plan is intended to qualify
as an "employee stock purchase plan" under Section 423 of the Code and shall be
construed and operated consistently with the requirements of that Section.
ARTICLE 2 - DEFINITIONS
2.1 "Beneficiary" means the person designated by the Participant on a
form provided by and acceptable to the Committee to receive the Participant's
Payroll Deduction Account in the event of his death. In the absence of any such
designation, "Beneficiary" shall mean the Participant's estate.
2.2 "Board" means the Board of Directors of the Company.
2.3 "Brokerage Account" means the general securities brokerage account,
or such other account or record determined appropriate by the Company,
established and maintained for the Plan with any entity selected by the Company,
in its discretion, to assist in the administration of, and purchase of Shares
under the Plan.
2.4 "Code" means the Internal Revenue Code of 1986, as amended.
2.5 "Commencement Date" means the January 1, April 1, July 1 or
October 1, as the case may be, on which a particular Offering begins.
2.6 "Committee" means the committee of persons appointed by
the Company for the purpose of administering the Plan.
2.7 "Company" means Applebee's International, Inc.
2.8 "Designated Person" means the person designated by the Committee to
receive any forms or agreements required or permitted under the Plan. More than
one person may be designated by the Committee. Different persons may be
designated for different forms or agreements. The Designated Person may be an
individual or an entity. The Committee shall notify Participants in writing of
the identity of each Designated Person and the forms or agreements to be sent to
each such person.
2.9 "Effective Date" means January 1, 1997.
2.10 "Ending Date" means the March 31, June 30, September 30 or
December 31, as the case may be, on which a particular Offering concludes.
2.11 "Enrollment Agreement" means the enrollment form acceptable to the
Committee that a Participant who wishes to participate in the Plan must submit
to the Designated Person prior to the Commencement Date.
<PAGE>
2.12 "Offering" means each three (3) consecutive month offering period
for the purchase and sale of Shares under the Plan.
2.13 "Participant" means an employee who has satisfied the eligibility
requirements of Article 3 and who has complied with the requirements of Article
4.
2.14 "Pay" means and includes (i) a Participant's regular salary or
earnings; (ii) a Participant's overtime pay; and (iii) bonuses designated by the
Committee as being eligible to be used to purchase Shares under this Plan. "Pay"
shall not include any other compensation, taxable or otherwise, including
without limitation employee tips, moving/relocation expenses, imputed income,
option income, tax-gross-ups and taxable benefits.
2.15 "Payroll Deduction Account" shall mean the Company's bookkeeping
entry that reflects the amount deducted from each Participant's Pay for the
purpose of purchasing Shares under the Plan, reduced by amounts refunded to the
Participant and amounts applied to purchase Shares hereunder. Amounts deducted
from each Participant's Pay may be commingled with the general funds of the
Company. No interest shall be paid or allowed on a Participant's payroll
deductions.
2.16 "Plan" means the Applebee's International, Inc. Employee Stock
Purchase Plan.
2.17 "Purchase Price" means the price per Share as set forth in Article
6 paid by a Participant to acquire Shares hereunder.
2.18 "Shares" means shares of the Company's common stock.
2.19 "Subsidiaries" shall mean any present or future domestic or
foreign corporation that would be a "subsidiary corporation" of the Company as
that term is defined in Section 424(f) of the Code.
2.20 "Withdrawal" means a Participant's election to withdraw from an
Offering pursuant to Article 11.
ARTICLE 3 - ELIGIBILITY
Any regular employee of the Company or any of its Subsidiaries shall be
eligible to participate in the Plan as of the Commencement Date coinciding with
or next following the completion of twelve (12) consecutive months of employment
following his date of hire. For the purpose of determining an employee's initial
eligibility, an employee's period of employment with any business entity, the
assets, business or stock of which has been acquired, in whole or in part by the
Company or any of its Subsidiaries through purchase, merger or otherwise
("Acquired Business"), shall be taken into account. An employee's period of
employment with the Company, any of its Subsidiaries, or any Acquired Business
prior to the Effective Date shall be taken into account. If an employee
terminates employment with the Company or any of its Subsidiaries for any reason
and is later rehired, such employee, regardless of whether he is eligible to
participate in the Plan prior to his termination, shall be treated as a new
employee and will be eligible to participate in the Plan as of the Commencement
Date coinciding with or next following the completion of twelve (12) consecutive
months of employment following his date of rehire. For purposes of this Article,
an employee's employment with the Company or any of its Subsidiaries shall not
be considered interrupted or terminated in the case of a leave of absence or
suspension, provided that such leave is approved by the Company or the
employee's reemployment with the Company or any of its Subsidiaries upon the
expiration of such leave is guaranteed by contract or statute.
ARTICLE 4 - PARTICIPATION
An eligible employee may become a Participant by completing an
Enrollment Agreement provided by the Company and filing it with the Designated
Person prior to the deadline set by the Committee that precedes the Commencement
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Date of the Offering to which it relates. Participation in one Offering under
the Plan shall neither limit, nor require, participation in any other Offering;
provided, however, that at the conclusion of each Offering, the Company shall
automatically re-enroll each Participant in the next Offering at the same rate
of payroll deduction, unless the Participant has advised the Designated Person
otherwise in a written form acceptable to the Committee.
ARTICLE 5 - OFFERINGS
Each Offering shall be for three (3) consecutive months. The first
Offering shall commence on January 1, 1997. Thereafter, Offerings shall commence
on each subsequent April 1, July 1, October 1 and January 1, and shall continue
until the Plan is terminated in accordance with Section 15.5.
ARTICLE 6 - PURCHASE PRICE
The "Purchase Price" per Share pursuant to an Offering shall be the
lesser of (a) 90% of the fair market value per Share on the Commencement Date of
such Offering or, if the Commencement Date is not a business day, the nearest
subsequent business day; or (b) 90% of the fair market value of such Share on
the Ending Date of such Offering or, if the Ending Date is not a business day,
the nearest prior business day. "Fair market value" for this purpose shall mean
the closing price as reported on the National Association of Securities Dealers
Automated Quotation National Market System (the "NASDAQ-NMS") or, if the Shares
are not reported on the NASDAQ-NMS, on the stock exchange, market, or system on
which the Shares are traded as reported that is designated by the Committee as
controlling for purposes of the Plan. In the event shares are not so traded or
reported, no purchase shall be made and each Participant's interest in the
amount credited to the Payroll Deduction Account shall be returned to each
Participant without interest.
ARTICLE 7 - LIMITATIONS ON SHARE OWNERSHIP
7.1 The maximum number of Shares that a Participant may acquire during
an Offering shall be the amount credited to such Participant's Payroll Deduction
Account as of the Ending Date of such Offering, divided by the Purchase Price
per Share.
7.2 The maximum, aggregate number of Shares that will be offered under
the Plan is two hundred thousand (200,000). If, as of any Ending Date, the total
number of Shares to be purchased exceeds the number of Shares then available
under this Article (after deduction of all Shares that have been previously
purchased under the Plan), the Committee shall make a pro rata allocation of the
Shares that remain available in as nearly a uniform manner as shall be
practicable and as it shall determine, in its sole judgment, to be equitable. In
such event, any amount credited to each Participant's Payroll Deduction Account
that remains after purchase of such reduced number of Shares shall be refunded
as soon as reasonably practicable, and no further payroll deductions or
Offerings shall occur under this Plan unless and until additional shares are
authorized.
7.3 Notwithstanding anything herein to the contrary, the maximum number
of Shares that may be purchased by any Participant as of any Ending Date shall
be reduced to that number which, when the voting power or value thereof is added
to the total combined voting power or value of all classes of shares of capital
stock of the Company or its Subsidiaries the person is already deemed to hold
(excluding any number of Shares which such person would be entitled to purchase
under the Plan), is one share less than five percent (5%) of the total combined
voting power or value of all classes of shares of capital stock of the Company
or its Subsidiaries. For purposes of the foregoing, the rules of Section 424(d)
of the Code shall apply. In addition, no Participant shall be allowed to
purchase Shares as of any Ending Date to the extent such purchase would cause
the sum of the fair market value of all Shares purchased by such Participant
under this Plan and any other plan qualified under Code Section 423 during the
calendar year during which such Ending Date occurs to exceed $25,000. For
purposes of the preceding sentence, "fair market value" shall be the value as of
the date of grant of each such Offering and the rules of Section 423(b)(8) of
the Code shall apply.
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<PAGE>
ARTICLE 8 - PAYROLL DEDUCTIONS
8.1 At the time the Enrollment Agreement is filed with the Designated
Person and for so long as a Participant participates in the Plan, each
Participant may authorize the Company to make payroll deductions of either (a) a
fixed dollar amount per pay period; or (b) a whole percentage (in 1% increments)
of Pay per pay period, provided, however, that no payroll deduction shall exceed
15% of Pay per pay period. The Committee, in its discretion, may establish from
time to time a minimum fixed dollar deduction that a Participant must authorize
under this Plan; provided, however, that a Participant's existing rights under
any Offering that has already commenced may not be adversely affected thereby.
8.2 The amount of each Participant's payroll deductions shall be
credited to his Payroll Deduction Account. No interest or other amount shall be
credited to a Payroll Deduction Account.
8.3 Commencing with respect to the first payroll period beginning on or
after the Plan's Effective Date, a Participant's authorized payroll deductions
shall be deducted from each paycheck paid during an Offering and shall continue
until changed by the Participant or by amendment or termination of this Plan. A
Participant may elect to increase or decrease his authorized payroll deductions
effective as of January 1 or July 1 of each year upon prior notice acceptable to
the Company. Except for a Withdrawal and discontinuance of payroll deductions
permitted under this Plan, no change in payroll deductions may be effective on a
date other than January 1 or July 1, including without limitation, any change in
the amount or rate of payroll deductions during an Offering.
8.4 With respect to each payroll period during an Offering, a
Participant's authorized payroll deductions shall be deducted from Pay only
after all other discretionary and nondiscretionary payroll deductions
attributable to such Participant have first been deducted from Pay for such
period. To the extent a Participant's Pay after such discretionary and
nondiscretionary payroll deductions have been deducted is less than the
Participant's authorized payroll deductions hereunder, the Participant's
remaining Pay, if any, shall be credited on his behalf to the Payroll Deduction
Account and the difference between the authorized and actual deduction shall be
disregarded and never deducted from payroll or credited to the Payroll Deduction
Account.
ARTICLE 9 - PURCHASE OF SHARES
9.1 As of the Ending Date of each Offering, each Participant shall be
deemed to have elected to purchase at the Purchase Price, the maximum number of
Shares (including fractional Shares) that may be purchased with such
Participant's Payroll Deduction Account in accordance with the terms of this
Plan, unless the Designated Person has received timely and proper notice of a
Withdrawal. The Shares purchased hereunder will be credited to the Brokerage
Account. Any cash remaining in the Participant's Payroll Deduction Account which
is not applied toward the purchase of Shares shall be carried forward and
applied in subsequent Offerings. No Participant shall have any rights of a
shareholder with respect to any Shares until the Shares have been purchased in
accordance herewith. Shares purchased hereunder may be treasury or newly issued
shares acquired from the Company or shares acquired on the open market.
9.2 Any cash dividends paid on Shares credited to the Brokerage Account
shall be automatically applied to purchase, at Company expense, additional
Shares from the Company at the fair market value (as defined in Article 6) of
such Shares as of the business day immediately preceding the date of purchase,
or on the open market at the market price at the time of purchase, and such
additional shares shall be credited to the Brokerage Account.
9.3 Notwithstanding the preceding provisions of this Article or any
other provision to the contrary, no Shares shall be purchased hereunder or
credited to the Brokerage Account until the Plan is approved by the stockholders
of the Company as provided in Section 15.1.
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ARTICLE 10 - EVIDENCE OF OWNERSHIP OF SHARES
Following the Ending Date of each Offering, the Shares that are
purchased by each Participant shall be recorded in book entry form and credited
to the Brokerage Account.
ARTICLE 11 - WITHDRAWAL
11.1 A Participant may "Withdraw" from an Offering, in whole but not in
part, by notifying the Designated Person, in writing on a form acceptable to the
Committee, in which event (i) the Participant's payroll deductions shall stop as
soon as is reasonably practicable following receipt of such notice by the
Designated Person, (ii) the Company shall refund the amount credited to the
Participant's Payroll Deduction Account as soon as reasonably practicable, and
(iii) no Shares shall be purchased on behalf of the Participant with respect to
such Offering. The notice described in this Section must be received by the
Designated Person prior to the deadline set by the Committee, provided that if
the Committee fails to set such a deadline, such notice must be received by the
Ending Date (or the immediately preceding business day if the Ending Date is not
a business day).
11.2 An eligible employee who has previously withdrawn from the Plan
may re-enter by complying with the Participation requirements. Upon compliance
with such requirements, an employee's re-entry into the Plan will be effective
as of the Commencement Date coinciding with or next following the satisfaction
of such requirements.
11.3 A Participant hereunder may elect at any time on a form acceptable
to the Committee (i) to have all or part of the Shares credited to the Brokerage
Account on his behalf (including fractional Shares) sold at the Participant's
expense and cash paid to the Participant, (ii) to have any whole Shares
transferred to the Participant's individual brokerage account established at the
Participant's expense, or (iii) to have a stock certificate issued to the
Participant or his designee for any whole Shares credited to the Brokerage
Account on his behalf.
ARTICLE 12 - RIGHTS NOT TRANSFERABLE
No Participant shall be permitted to sell, assign, transfer, pledge, or
otherwise dispose of or encumber such Participant's interest in the Payroll
Deduction Account or any rights to purchase or to receive Shares under the Plan
other than by will or the laws of descent and distribution, and such rights and
interests shall not be subject to, a Participant's debts, contracts, or
liabilities. If a Participant purports to make a transfer, or a third party
makes a claim in respect of a Participant's rights or interests, whether by
garnishment, levy, attachment or otherwise, such purported transfer or claim
shall be treated as a Withdrawal.
ARTICLE 13 - TERMINATION OF EMPLOYMENT
As soon as reasonably practicable following termination of a
Participant's employment with the Company or any of its Subsidiaries for any
reason whatsoever, including, but not limited to, by reason of death, disability
or retirement, (i) the amount credited to the Payroll Deduction Account on
behalf of the Participant shall be returned to the Participant or the
Participant's Beneficiary, as the case may be, subject to Section 15.1 and (ii)
the Participant's interest in the Brokerage Account shall be liquidated in the
manner described below. As part of the procedure to liquidate the Participant's
interest in the Brokerage Account, the Participant may elect in writing on a
form acceptable to the Committee and received by the Designated Person by the
deadline set by the Committee, to have the number of Shares credited to the
Brokerage Account on behalf of the Participant sold at the Participant's expense
and cash paid to the Participant, or to have such Shares transferred to the
Participant's individual brokerage account established at the Participant's
expense. If the Participant does not request a sale or transfer by the deadline
established by the Committee or requests to receive a stock certificate, a
certificate for the whole Shares credited to the Brokerage Account on his behalf
will be issued to the Participant and the Participant will receive cash for any
fractional Shares credited to the Brokerage Account on his behalf.
5
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ARTICLE 14 - ADMINISTRATION
The Plan shall be administered by the Committee, which may engage such
persons, entities or agents as it shall deem advisable to assist in the
administration of the Plan. The Company may from time to time appoint or dismiss
members of the Committee. A majority of the members of the Committee shall
constitute a quorum and the acts of a majority of the members present at a
meeting or the consent in writing signed by all the members of the Committee
shall constitute the acts of the Committee. The Committee shall be vested with
full authority to make, administer, and interpret such rules and regulations as
it deems necessary to administer the Plan, and any determination, decision, or
action of the Committee in connection with the construction, interpretation,
administration or application of the Plan shall be final, conclusive, and
binding upon all parties, including the Company, the Participants and any and
all persons that claim rights or interests under or through a Participant. The
Committee may delegate all or part of its authority to one or more of its
members.
AMENDMENT 15 - MISCELLANEOUS
15.1 Approval of the Plan. Notwithstanding any provision in this Plan
to the contrary, if the Plan is not approved by the stockholders of the Company
within twelve (12) months after the Effective Date of the Plan, the balance of
each Participant's Payroll Deduction Account shall be refunded in its entirety,
without interest, as soon as reasonably practicable. If an eligible employee
terminates employment after the Ending Date of any Offering but prior to the
approval of the Plan by the stockholders of the Company, then such employee may
elect in writing on a form acceptable to the Committee, which form must be
received by the Designated Person by the deadline set by the Committee, to have
the balance credited to the Payroll Deduction Account on his behalf as of any
such Ending Date retained and applied to purchase Shares following the
subsequent approval of the Plan by the stockholders of the Company, or returned
to the employee at a later date in the event the stockholders do not approve the
Plan. If such election is not timely made or if such employee elects to receive
cash, such employee shall receive the balance credited to the Payroll Deduction
Account on his behalf as of any such Ending Date as soon as reasonably
practicable after the passage of such deadline or making such election.
15.2 Amendment or Discontinuance of the Plan. The Board shall have the
right to amend, modify or terminate the Plan at any time without notice,
provided that (i) no Participant's existing rights under any Offering that is in
progress may be adversely affected thereby, and (ii) in the event that the Board
desires to retain the favorable tax treatment under Sections 421 and 423 of the
Code, no such amendment of the Plan shall increase the number of Shares that
were reserved for issuance hereunder unless the Company's shareholders approve
such an increase.
15.3 Changes in Capitalization. In the event of reorganization,
recapitalization, stock split, stock dividend, combination of shares, merger,
consolidation, offerings of rights, or any other change in the capital structure
of the Company, the number, kind and price of the Shares that are available for
purchase under the Plan and the number of Shares that an employee is entitled to
purchase shall be automatically adjusted to reflect the change in capital
structure; provided, however, that the Board shall retain the right to modify
any such adjustment in the manner it deems appropriate.
15.4 Notices. All notices or other communications by a Participant
under or in connection with the Plan, including but not limited to Enrollment
Agreements, shall be deemed to have been duly given when received by the
Designated Person in the form specified by the Committee.
15.5 Termination of the Plan. This Plan shall terminate at the earliest
of the following:
(a) The date of the filing of a "Statement of Intent to Dissolve"
by the Company or the effective date of a merger or consolidation wherein the
Company is not to be the surviving corporation, which merger or consolidation is
not between or among corporations affiliated with the Company;
6
<PAGE>
(b) The date the Board acts to terminate the Plan; and
(c) The date when all of the Shares that were reserved for
issuance hereunder have been purchased.
Prior to termination of the Plan, the Company may change the Ending
Date of a pending Offering. Upon termination of the Plan, the Company shall
refund to each Participant the remaining amount credited to each Participant's
Payroll Deduction Account after all purchases have been made.
15.6 Notice of, and Limitations on Sale of Stock Purchased Under the
Plan. The Plan is intended to provide Shares for investment and not for resale.
The Company does not, however, intend to restrict or influence the conduct of
any employee's affairs beyond established Company policies. A current or former
Participant may, therefore, sell Shares that are purchased under the Plan at any
time at his expense, subject to compliance with any applicable federal or state
securities laws and Company policies. Each current and former Participant
assumes the risk of any market fluctuations in the price of the Shares. Each
current or former Participant must notify the Company of any disposition of
Shares purchased under this Plan that is described in Section 423(a)(1) of the
Code, which is any disposition within two years after the date of grant of the
option to purchase or any disposition within one year after the transfer of the
Share to him.
15.7 Governmental Regulation. The Company's obligation to sell and
deliver Shares under this Plan is subject to any governmental approval that is
required in connection with the authorization, issuance or sale of such Shares.
15.8 No Employment Rights. This Plan does not, directly or indirectly,
create in any employee or class of employees any right with respect to
continuation of employment by the Company, and it shall not be deemed to
interfere in any way with the Company's right to terminate, or otherwise modify,
an employee's employment at any time.
15.9 Governing Law. The law of the state of Kansas shall govern all
matters that relate to this Plan except to the extent it is superseded by the
laws of the United States.
15.10 Text of Plan Documents Controls. Titles of Articles and Sections
in this Plan are inserted for convenience of reference only and in the event of
any conflict, the text of this instrument, rather than such titles, shall
control.
15.11 Non-gender Clause. Any words herein used in the masculine shall
read and be construed in the feminine where they would so apply. Words in the
singular shall be read and be construed as though used in the plural in all
cases where they would so apply.
IN WITNESS WHEREOF, Applebee's International, Inc. has caused this Plan
to be adopted effective as of January 1, 1997.
APPLEBEE'S INTERNATIONAL, INC.
"Company"
By: /s/ Abe J. Gustin, Jr.
------------------------------------
Title: Chairman and Chief Executive Officer
------------------------------------
7
SCHEDULE OF PARTIES RECEIVING INDEMNIFICATION AGREEMENTS
D. Patrick Curran
Eric L. Hansen
Jack P. Helms
Kenneth D. Hill
Lloyd L. Hill
Ronald J. Marks
Robert A. Martin
Steven K. Lumpkin
George D. Shadid
Robert T. Steinkamp
Stuart F. Waggoner
John A. Weber
SCHEDULE OF OFFICERS RECEIVING SEVERANCE AGREEMENTS
Robert A. Martin
Ronald J. Marks
Steven K. Lumpkin
Robert T. Steinkamp
Stuart F. Waggoner
John A. Weber
APPLEBEE'S INTERNATIONAL, INC. SUBSIDIARY CORPORATIONS
(100% owned unless indicated)
Revised: 1/15/98
AII Services, Inc.
1 Apple American Limited Partnership of Minnesota
2 Apple Vermont Restaurants, Inc.
3 Applebee's Beverage, Inc.
Applebee's Neighborhood Grill & Bar of Georgia, Inc.
Applebee's Northeast, Inc. (formerly known as Pub Ventures of New
England, Inc.)
Applebee's of Michigan, Inc.
Applebee's of Minnesota, Inc.
Applebee's of Nevada, Inc.
Applebee's of New Mexico, Inc.
Applebee's of New York, Inc.
Applebee's of Pennsylvania, Inc.
Applebee's of Texas, Inc.
Applebee's of Virginia, Inc.
Gourmet Systems, Inc.
Gourmet Systems of Arizona, Inc.
Gourmet Systems of California, Inc.
Gourmet Systems of Georgia, Inc.
Gourmet Systems of Kansas, Inc.
Gourmet Systems of Minnesota, Inc.
Gourmet Systems of Nevada, Inc.
Gourmet Systems of Tennessee, Inc. (formerly known as Applebee's of
Tennessee, Inc.)
4 GourmetWest of Nevada, Limited-Liability Company
5 Innovative Restaurant Concepts, Inc.
6 IRC Kansas, Inc.
Rio Bravo International, Inc.
7 Rio Bravo Restaurant, Inc.
8 Rio Bravo Services, Inc.
9 Summit Restaurants, Inc.
1 A Limited Partnership in which Gourmet Systems of Minnesota, Inc. is as
general partner and Applebee's of Minnesota, Inc. is a limited partner.
2 This company is a wholly-owned subsidiary of Applebee's Northeast, Inc.
3 49% owned by Applebee's International, Inc.
4 50% owned by Gourmet Systems of Nevada, Inc./50% owned by Applebee's of
Nevada, Inc.
5 This company is a wholly-owned subsidiary of Rio Bravo International, Inc.
6 This company is a wholly-owned subsidiary of Innovative Restaurant
Concepts, Inc.
7 This company is a wholly-owned subsidiary of Rio Bravo International, Inc.
8 This company is a wholly-owned subsidiary of Rio Bravo International, Inc.
9 This company is a wholly-owned subsidiary of Innovative Restaurant
Concepts, Inc.
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement No.
33-72282 of Applebee's International, Inc. on Form S-8 of our report dated
February 13, 1998, appearing in this Annual Report on Form 10-K of Applebee's
International, Inc. for the year ended December 28, 1997, and to the reference
to us under the heading "Experts" in such Registration Statement.
We consent to the incorporation by reference in Registration Statement No.
33-59421 of Applebee's International, Inc. on Form S-3 of our report dated
February 13, 1998, appearing in this Annual Report on Form 10-K of Applebee's
International, Inc. for the year ended December 28, 1997, and to the reference
to us under the heading "Experts" in such Registration Statement.
We consent to the incorporation by reference in Registration Statement No.
33-62419 of Applebee's International, Inc. on Form S-3 of our report dated
February 13, 1998, appearing in this Annual Report on Form 10-K of Applebee's
International, Inc. for the year ended December 28, 1997, and to the reference
to us under the heading "Experts" in such Registration Statement.
We consent to the incorporation by reference in the Registration Statement No.
333-01969 of Applebee's International, Inc. on Form S-8 of our report dated
February 13, 1998, appearing in this Annual Report on Form 10-K of Applebee's
International, Inc. for the year ended December 28, 1997, and to the reference
to us under the heading "Experts" in such Registration Statement.
We consent to the incorporation by reference in the Registration Statement No.
333-17823 of Applebee's International, Inc. on Form S-8 of our report dated
February 13, 1998, appearing in this Annual Report on Form 10-K of Applebee's
International, Inc. for the year ended December 28, 1997, and to the reference
to us under the heading "Experts" in such Registration Statement.
We consent to the incorporation by reference in the Registration Statement No.
333-17825 of Applebee's International, Inc. on Form S-8 of our report dated
February 13, 1998, appearing in this Annual Report on Form 10-K of Applebee's
International, Inc. for the year ended December 28, 1997, and to the reference
to us under the heading "Experts" in such Registration Statement.
DELOITTE & TOUCHE LLP
Kansas City, Missouri
March 17, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S CONSOLIDATED FINANCIAL STATEMENTS INCLUDED IN THIS FORM 10-K AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
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<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-28-1997
<PERIOD-START> DEC-30-1996
<PERIOD-END> DEC-28-1997
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<PP&E> 345,518
<DEPRECIATION> 69,436
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0
0
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<EPS-PRIMARY> 1.44
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