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 27, 1998
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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 of (I.R.S. Employer Identification No.)
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 19, 1999 was $779,826,709 based upon the closing sale
price on March 19, 1999.
The number of shares of the registrant's common stock outstanding as of March
19, 1999 was 29,358,182.
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 27, 1998
INDEX
<TABLE>
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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." With nearly 1,100
restaurants and over $2.0 billion in annual system sales, Applebee's
Neighborhood Grill and Bar is the largest casual dining concept in America, both
in terms of number of restaurants and market share.
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 27, 1998, there were 1,064 Applebee's restaurants, of which 817
were operated by franchisees and 247 were owned or operated by the Company. The
restaurants were located in 48 states, Canada, Europe, and Mexico. During 1998,
116 new restaurants were opened, including 84 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
27, 1998, there were 66 Rio Bravo Cantina restaurants located in 19 states, of
which 26 were operated by franchisees and 40 were owned by the Company. The
Company also owns four other specialty restaurants. In February 1999, the
Company entered into agreements to sell its Rio Bravo Cantina concept and the
four specialty restaurants.
With the announced divestiture of the Rio Bravo Cantina concept, the Company's
strategy is to focus singularly on the Applebee's concept. During 1998, the
Company introduced a new "small-town" restaurant prototype developed for
communities of less than 25,000 population. The Company expects the long-term
potential development of the small-town prototype to be at least 150
restaurants. Based on continued successful market penetration of the Applebee's
concept as well as the new potential for small-towns, the Company now expects
the ultimate domestic potential of the Applebee's system to be at least 1,800
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 27, December 28, December 29,
1998 1997 1996
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<S> <C> <C> <C>
Number of restaurants:
Applebee's:
Company(1):
Beginning of year............................ 190 148 128
Restaurant openings.......................... 32 32 29
Restaurant closings.......................... (2) (1) (3)
Restaurants acquired from (by) franchisees... 27 11 (6)
----------------- ---------------- -----------------
End of year.................................. 247 190 148
----------------- ---------------- -----------------
Franchise:
Beginning of year............................ 770 671 538
Restaurant openings.......................... 84 113 134
Restaurant closings.......................... (10) (3) (7)
Restaurants acquired by (from) franchisees... (27) (11) 6
----------------- ---------------- -----------------
End of year.................................. 817 770 671
----------------- ---------------- -----------------
Total Applebee's:
Beginning of year............................ 960 819 666
Restaurant openings.......................... 116 145 163
Restaurant closings.......................... (12) (4) (10)
----------------- ---------------- -----------------
End of year.................................. 1,064 960 819
================= ================ =================
Rio Bravo Cantinas:
Company:
Beginning of year............................ 31 21 16
Restaurant openings.......................... 9 10 5
----------------- ---------------- -----------------
End of year.................................. 40 31 21
----------------- ---------------- -----------------
Franchise:
Beginning of year............................ 24 9 --
Restaurant openings.......................... 4 16 9
Restaurant closings.......................... (2) (1) --
----------------- ---------------- -----------------
End of year.................................. 26 24 9
----------------- ---------------- -----------------
Total Rio Bravo Cantinas:
Beginning of year............................ 55 30 16
Restaurant openings.......................... 13 26 14
Restaurant closings.......................... (2) (1) --
----------------- ---------------- -----------------
End of year.................................. 66 55 30
================= ================ =================
Specialty Restaurants................................. 4 4 4
================= ================ =================
Total number of restaurants:
Beginning of year............................ 1,019 853 686
Restaurant openings.......................... 129 171 177
Restaurant closings.......................... (14) (5) (10)
----------------- ---------------- -----------------
End of year.................................. 1,134 1,019 853
================= ================ =================
</TABLE>
4
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<TABLE>
<CAPTION>
Fiscal Year Ended
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December 27, December 28, December 29,
1998 1997 1996
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<S> <C> <C> <C>
Weighted average weekly sales per restaurant:
Applebee's:
Company(1).................................. $ 40,664 $ 41,176 $ 40,366
Franchise................................... $ 39,077 $ 39,513 $ 39,870
Total Applebee's............................ $ 39,428 $ 39,826 $ 39,961
Rio Bravo Cantinas:
Company(2).................................. $ 52,789 $ 60,946 $ 66,743
Franchise................................... $ 41,675 $ 49,288 $ 67,371
Total Rio Bravo Cantinas.................... $ 47,966 $ 56,206 $ 66,741
Change in comparable restaurant sales:(3)
Applebee's:
Company(1).................................. (0.4)% 0.1 % 1.1 %
Franchise................................... (0.1)% 0.6 % (1.2)%
Total Applebee's............................ (0.2)% 0.5 % (0.8)%
Rio Bravo Cantinas (Company).................... (6.8)% (1.6)% 3.9 %
Total system sales (in thousands):
Applebee's...................................... $ 2,066,273 $ 1,818,503 $ 1,539,277
Rio Bravo Cantinas.............................. 150,899 128,196 66,663
Specialty restaurants........................... 14,373 14,435 14,374
----------------- ---------------- -----------------
Total system sales.......................... $ 2,231,545 $ 1,961,134 $ 1,620,314
================= ================ =================
</TABLE>
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(1) Includes one Texas restaurant operated by the Company under a management
agreement since July 1990.
(2) Excludes one restaurant which is open for dinner only.
(3) When computing comparable restaurant sales, restaurants open for at least
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. During 1997, the Company introduced two free-standing restaurant
prototypes, which are approximately 4,700 and 5,000 square feet and seat
approximately 165 and 200 patrons, respectively. During 1998, the Company
introduced a new "small-town" restaurant prototype developed for communities of
less than 25,000 population. There are currently two small-town prototypes which
are approximately 3,800 and 4,300 square feet and seat approximately 135 and 145
patrons, respectively. Seven test units of the new small-town designs were
opened in 1998, two by the Company and five by a franchisee, and additional
units are in the development pipeline for both the Company and selected
franchisees. The Company expects the long-term potential development of the
small-town prototype to be at least 150 restaurants. Based on continued
successful market penetration of the Applebee's concept as well as the new
potential for small-towns, the Company now expects the ultimate domestic
potential of the Applebee's system to be at least 1,800 restaurants.
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 1998, alcoholic beverages accounted for 14.4% 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.
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 are 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, 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
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Advertising. The Company has historically concentrated its advertising and
marketing efforts primarily on food-specific promotions, with each promotion
featuring a specific theme or ethnic cuisine. The Company advertises on a
national, regional and local basis, utilizing primarily television, radio and
print media. In 1998, approximately 4.3% 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 247 as of December 27, 1998 through the opening of 157 new
restaurants and the acquisition of 81 franchise restaurants over the last five
years, including 33 franchise restaurants in the Virginia market that were
acquired during 1998. On March 30, 1998, the Company acquired the operations and
assets of 33 restaurants in the Virginia markets of Norfolk, Richmond, Roanoke
and Charlottesville, from Apple South, Inc. ("Apple South"), now Avado Brands,
Inc., referred to herein as the "Virginia Acquisition."
The Company opened 32 new Applebee's restaurants in 1998 and anticipates opening
approximately 28 new Applebee's restaurants in 1999, although it may open more
or less 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 1998 are set forth in the following table.
7
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<TABLE>
<CAPTION>
Company
Company Restaurants
Restaurants as of
Opened in December 27,
Area 1998 1998
--------------------------------------------------------------- ---------------- ---------------------
<S> <C> <C>
New England (includes Massachusetts, Vermont,
New Hampshire, Rhode Island and Maine).................... 3 35
Virginia.................................................... 2 35
Detroit/Southern Michigan................................... 5 34
Minneapolis/St. Paul, Minnesota............................. 4 32
North/Central Texas......................................... 3 24
Kansas City, Missouri/Kansas................................ 2 22
St. Louis, Missouri/Illinois................................ 7 21
Las Vegas/Reno, Nevada...................................... 2 12
Philadelphia, Pennsylvania.................................. 3 11
Atlanta, Georgia............................................ 1 8
San Diego/Southern California............................... -- 7
Albuquerque, New Mexico..................................... -- 6
----------------- ---------------------
32 247
================= =====================
</TABLE>
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 60 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 27, 1998, the Company employed
nine regional Directors of Operations and 39 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.
The Applebee's Franchise System
Franchise Territory and Restaurant Openings. The Company currently has exclusive
franchise arrangements with approximately 66 franchise groups, including 12
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 Mexico. Virtually all territories
in the contiguous 48 states have been granted to franchisees or designated for
Company development.
As of December 27, 1998, there were 817 franchise restaurants. Franchisees
opened 134 restaurants in 1996, 113 restaurants in 1997, and 84 restaurants in
1998. The Company anticipates between 75 to 90 franchise restaurant openings in
1999.
8
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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 franchise restaurant openings in 1998 and expected
openings in 1999 is, in part, a result of anticipated delays in development that
will occur during the transition of restaurants and territories from Apple South
to new franchisees. As of February 22, 1999, Apple South had completed the sale
of 243 of its restaurants (89% of its total), and there are signed contracts on
the two remaining territories. To the extent any of the 31 remaining 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.
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
franchise agreements for many franchisees allow the Company to increase royalty
fees up to 5% of gross sales; however, the Company has agreed to withhold
consideration of such action until on or after January 1, 2003. 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.
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 fund.
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
(25 at December 27, 1998) who report to the Company's Executive Director of
Franchise Operations and Vice President of Franchise Partnerships. 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.
9
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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 27, 1998, the Franchise Business
Council consisted of eight franchisee representatives, three members of the
Company's senior management, and the Company's Chairman of the Board. 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 (currently none)
is reserved a seat. In addition, the Company's Chairman has now become a
permanent member of the Franchise Business Council. 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 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 major cities in Canada, Mexico, the United
Kingdom, Central America, continental Europe and the Middle East. In this
regard, the Company currently has development agreements with 12 international
franchisees. Five restaurants were opened during 1998, and there were 18
international restaurants in operation as of December 27, 1998. The success of
current international operations and 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.
Franchise Financing. Although financing is the sole responsibility of the
franchisee, the Company makes available to franchisees information relating to
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. To date, the Company has provided a guarantee to one franchise
group totaling $1,000,000. 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. 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.
10
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As of December 27, 1998, the Company operated 40 Rio Bravo Cantina restaurants
and franchisees operated 26 Rio Bravo Cantina restaurants in 19 states. The
Company also operated the four specialty restaurants. The Company opened nine
Rio Bravo Cantina restaurants and franchisees opened four restaurants in 1998.
In February 1999, the Company entered into an agreement to sell its Rio Bravo
Cantina concept. Under the terms of the agreement, the buyer will become the
franchisor of the Rio Bravo Cantina system and will continue to operate or
franchise the Company-owned restaurants. The buyer has agreed to provide a
number of future operating alternatives for existing franchisees, including
continued operation of franchise restaurants as Rio Bravo Cantinas or, in
certain cases, conversion to the buyer's restaurant concept. The Company will
receive $53 million in consideration ($47 million in cash at closing and a $6
million subordinated note). The buyer has also committed an additional $6
million available to partially fund the strategic alternatives offered to the
current Rio Bravo Cantina franchisees. The Company also entered into a separate
definitive agreement to sell its four specialty restaurants for $12 million in
cash to an entity owned by the Company's Chairman and certain members of his
family. Both transactions are expected to close early in the second quarter of
1999, subject to customary third-party approvals.
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 1998, alcoholic beverages
accounted for approximately 26.3% of total Company restaurant sales.
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.
11
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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. The development
agreement requires an initial franchise fee of $40,000 for each restaurant
developed during its term. Franchisees are 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 fund. During
1998, the Company reduced or waived royalties for a portion of the year to
assist franchisees who were experiencing low sales volumes. In conjunction with
the announced sale of the Rio Bravo Cantina concept, all franchise royalties and
advertising fees have been waived beginning in February 1999.
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 27, 1998, 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.
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.
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.
12
<PAGE>
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 27, 1998, the Company employed approximately 20,300 full and
part-time employees, of whom approximately 390 were corporate personnel, 1,410
were restaurant managers or managers in training and 18,500 were employed in
non-management full and part-time restaurant positions. Of the 390 corporate
employees, 120 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 27, 1998 are shown below.
<TABLE>
<CAPTION>
Name Age Position
<S> <C> <C>
Abe J. Gustin, Jr................ 64 Chairman of the Board of Directors
Lloyd L. Hill.................... 54 Chief Executive Officer, President, Chief Operating Officer and
Member of the Board of Directors
Steven K. Lumpkin................ 44 Executive Vice President of Strategic Development
Robert A. Martin................. 68 Executive Vice President of Marketing and Member of the Board of
Directors
George D. Shadid................. 44 Executive Vice President, Chief Financial Officer and Treasurer
Julia A. Stewart................. 43 President of Applebee's Division
Larry A. Cates................... 50 President of International Division
Lawrence M. Folk................. 47 President and Chief Executive Officer of Rio Bravo International,
Inc. (a wholly-owned subsidiary of Applebee's International, Inc.)
Louis A. Kaucic.................. 47 Senior Vice President of Human Resources
</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. Hill assumed the full duties of Chief Executive
Officer while Mr. Gustin retained his position as the Chairman of the Board and
continued as an active executive of the Company through December 1998. In
January 1999, Mr. Gustin retired as an active executive of the Company but
continues as Chairman of the Board and serves as a member of the Company's
Franchise Business Council.
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 December 1989 to
December 1993, 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 1993, having joined that organization in 1980.
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 and in January 1998 was promoted to Executive
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.
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.
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. In March 1999, Mr. Shadid was elected a director of the
Company. 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.
Julia A. Stewart was employed by the Company in October 1998 as President of its
Applebee's Division. From July 1991 until September 1998, Ms. Stewart held
several key executive positions with Taco Bell Corporation, a division of Tricon
Global Restaurants, Inc. Most recently, she served as National Vice President of
Franchise and License for over 5,200 Taco Bell units, and was previously Taco
Bell's Western Region Vice President of Operations with responsibility for over
1,200 company-owned restaurants. Prior to joining Taco Bell, she held key
marketing positions over a 15-year period, including Vice President of
Marketing, Research and Development with Stuart Anderson's Black Angus/Cattle
Company Restaurants.
Larry A. Cates was employed by the Company in May 1997 as President of its
International Division. Prior to joining the Company, Mr. Cates spent the
previous 17 years with PepsiCo Restaurants developing international markets for
that company's Pizza Hut, Taco Bell and KFC brands. From 1994 to 1997, Mr. Cates
was Vice President of Franchising and Development - Europe/Middle East, and from
1990 to 1994, he was Chief Executive Officer of Pizza Hut UK, Ltd., a joint
venture between PepsiCo Restaurants and Whitbread.
Lawrence M. Folk was employed by the Company in October 1998 as President and
Chief Executive Officer of Rio Bravo International, Inc., a wholly-owned
subsidiary of Applebee's International, Inc. From January 1997 until August
1998, Mr. Folk was President of Don Pablo's Mexican Kitchen, a division of Apple
South, Inc. (now Avado Brands, Inc.), and was Chief Financial Officer from
November 1995 until December 1996. Prior to Apple South's merger with DF&R
Restaurants, Inc. in November 1995, Mr. Folk had served as Chief Financial
Officer of DF&R Restaurants since February 1992.
Louis A. Kaucic was employed by the Company in October 1997 as Senior Vice
President of Human Resources. From July 1992 until October 1997, Mr. Kaucic was
Vice President of Human Resources and later promoted to Senior Vice President of
Human Resources with Unique Casual Restaurants, Inc., 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.
Mr. Kaucic is a director of the Women's Food Service Forum.
15
<PAGE>
Item 2. Properties
At December 27, 1998, the Company owned or operated 291 restaurants, of which it
leased the land and building for 78 sites, owned the building and leased the
land for 88 sites, and owned the land and building for 125 sites. In addition,
as of December 27, 1998, the Company owned 12 sites for future development of
restaurants and had entered into 9 lease agreements for restaurant sites the
Company plans to open during 1999. 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 27, 1998:
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................ 18 1 -- -- 18 1
Arizona................ 18 -- -- -- 18 --
Arkansas............... 6 1 -- -- 6 1
California............. 51 -- 7 -- 58 --
Colorado............... 25 1 -- -- 25 1
Connecticut............ 1 -- -- -- 1 --
Delaware............... 3 -- -- -- 3 --
Florida................ 66 1 -- 13 66 14
Georgia................ 45 5 8 10 53 15
Idaho.................. 5 -- -- -- 5 --
Illinois............... 40 1 5 -- 45 1
Indiana................ 40 2 -- -- 40 2
Iowa................... 17 -- -- -- 17 --
Kansas................. 10 2 9 3 19 5
Kentucky............... 23 -- -- -- 23 --
Louisiana.............. 17 -- -- -- 17 --
Maine.................. -- -- 3 -- 3 --
Maryland............... 16 -- -- -- 16 --
Massachusetts.......... -- -- 17 -- 17 --
Michigan............... 6 -- 34 5 40 5
Minnesota.............. -- -- 32 3 32 3
Mississippi............ 11 -- -- -- 11 --
Missouri............... 7 1 29 1 36 2
Montana................ 6 -- -- -- 6 --
Nebraska............... 8 -- -- -- 8 --
Nevada................. -- -- 12 -- 12 --
New Hampshire.......... -- -- 9 -- 9 --
New Jersey............. 14 -- -- -- 14 --
New Mexico............. 4 -- 6 -- 10 --
New York............... 40 2 -- -- 40 2
North Carolina......... 36 2 1 -- 37 2
North Dakota........... 5 1 -- -- 5 1
Ohio................... 54 2 -- -- 54 2
Oklahoma............... 11 -- -- -- 11 --
Oregon................. 8 -- -- -- 8 --
Pennsylvania........... 23 -- 11 -- 34 --
Rhode Island........... -- -- 4 -- 4 --
South Carolina......... 37 1 -- -- 37 1
South Dakota........... 2 1 -- -- 2 1
Tennessee.............. 40 1 -- 5 40 6
Texas.................. 21 -- 24 -- 45 --
Utah................... 7 -- -- -- 7 --
Vermont................ -- -- 2 -- 2 --
Virginia............... 9 1 34 -- 43 1
Washington............. 12 -- -- -- 12 --
West Virginia.......... 11 -- -- -- 11 --
Wisconsin.............. 24 -- -- -- 24 --
Wyoming................ 2 -- -- -- 2 --
International:
Canada................. 7 -- -- -- 7 --
Germany................ 2 -- -- -- 2 --
Greece................. 1 -- -- -- 1 --
Mexico................. 1 -- -- -- 1 --
The Netherlands........ 5 -- -- -- 5 --
Sweden................. 2 -- -- -- 2 --
-------------- -------------- -------------- -------------- -------------- --------------
817 26 247 40 1,064 66
============== ============== ============== ============== ============== ==============
</TABLE>
17
<PAGE>
Item 3. Legal Proceedings
As of December 27, 1998, the Company was using assets owned by a former
franchisee in the operation of one restaurant which remains under a purchase
rights agreement that 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 under that agreement and as to
whether the Company had agreed to guarantee the franchisee's debt. Based upon a
then current independent appraisal, the Company offered to settle the dispute
and purchase the assets of the three then existing restaurants 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 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. The lawsuit is set for trial
in October 1999.
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>
1998 1997
------------------------------- -------------------------------
High Low High Low
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
First Quarter $ 23.75 $ 16.13 $ 31.13 $ 23.88
Second Quarter $ 26.00 $ 20.00 $ 27.50 $ 20.13
Third Quarter $ 24.63 $ 18.25 $ 30.38 $ 24.00
Fourth Quarter $ 22.13 $ 16.88 $ 25.44 $ 18.00
</TABLE>
2. Number of stockholders of record at December 27, 1998: 1,371
3. An annual dividend of $0.09 per common share was declared on November
19, 1998 for stockholders of record on December 16, 1998, and the
dividend was payable on January 21, 1999. 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 1999 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 27, December 28, December 29, December 31, December 25,
1998 1997 1996 1995 1994
--------------- --------------- --------------- --------------- ----------------
(in thousands, except per share amounts)
STATEMENT OF
EARNINGS DATA:
<S> <C> <C> <C> <C> <C>
Company restaurant sales................. $ 580,840 $ 452,173 $ 358,990 $ 299,824 $ 222,445
Franchise income......................... 66,722 63,647 54,141 43,739 31,419
--------------- --------------- --------------- --------------- ----------------
Total operating revenues............ $ 647,562 $ 515,820 $ 413,131 $ 343,563 $ 253,864
=============== =============== =============== =============== ================
Operating earnings....................... $ 88,562 $ 71,283 $ 58,833 $ 45,712 $ 29,311
Earnings before extraordinary item....... $ 50,656 $ 45,091 $ 38,014 $ 27,420 $ 17,823
Basic earnings per share before
extraordinary item.................... $ 1.67 $ 1.44 $ 1.22 $ 0.94 $ 0.64
Diluted earnings per share before
extraordinary item.................... $ 1.67 $ 1.43 $ 1.21 $ 0.92 $ 0.63
Net earnings............................. $ 50,015 $ 45,091 $ 38,014 $ 27,420 $ 17,823
Basic net earnings per share............. $ 1.65 $ 1.44 $ 1.22 $ 0.94 $ 0.64
Diluted net earnings per share........... $ 1.65 $ 1.43 $ 1.21 $ 0.92 $ 0.63
Dividends per share...................... $ 0.09 $ 0.08 $ 0.07 $ 0.06 $ 0.05
Basic weighted average shares
outstanding........................... 30,272 31,401 31,188 29,319 27,970
Diluted weighted average shares
outstanding........................... 30,385 31,640 31,533 29,860 28,472
BALANCE SHEET DATA
(AT END OF FISCAL YEAR):
Total assets............................. $ 510,904 $ 377,474 $ 314,111 $ 270,680 $ 180,014
Long-term obligations, including
current portion........................ $ 147,188 $ 29,105 $ 25,843 $ 27,427 $ 38,697
Stockholders' equity..................... $ 296,053 $ 290,443 $ 244,764 $ 203,993 $ 108,788
</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 27, 1998, December 28, 1997
and December 29, 1996 contained 52 weeks and are referred to hereafter as 1998,
1997 and 1996, respectively.
Acquisitions
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.
On March 30, 1998, the Company acquired the operations and assets of 33
restaurants in the Virginia markets of Norfolk, Richmond, Roanoke and
Charlottesville, referred to herein as the "Virginia Acquisition." The Virginia
Acquisition was accounted for as a purchase in the second quarter of 1998 and,
accordingly, the results of operations of such restaurants have been reflected
in the consolidated financial statements subsequent to the date of acquisition.
Subsequent Events
In February 1999, the Company entered into an agreement to sell its Rio Bravo
Cantina concept, which is comprised of 66 restaurants, including 40 Company
restaurants and 26 franchised restaurants. The Company will receive $53 million
in consideration ($47 million in cash at closing and a $6 million subordinated
note). The buyer has also committed an additional $6 million available to
partially fund the future strategic operating alternatives offered to the
current Rio Bravo Cantina franchisees. The Company also entered into a separate
definitive agreement to sell its four specialty restaurants for $12 million in
cash. Both transactions are subject to customary third-party approvals. The two
sale transactions and related expenses are expected to result in a loss on
disposition of approximately $8,000,000 before income taxes (approximately
$5,000,000 net of income taxes), which will be recognized in the first quarter
of 1999. Total Company restaurant sales, franchise income and cost of Company
restaurant sales for the fiscal year ended December 27, 1998 were $109,260,000,
$2,054,000 and $99,395,000, respectively, for both the Rio Bravo Cantina and
specialty restaurants.
21
<PAGE>
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 27, December 28, December 29,
1998 1997 1996
-------------- -------------- --------------
<S> <C> <C> <C>
Revenues:
Company restaurant sales......................... 89.7% 87.7% 86.9%
Franchise income................................. 10.3 12.3 13.1
-------------- -------------- ---------------
Total operating revenues...................... 100.0% 100.0% 100.0%
============== ============== ===============
Cost of sales (as a percentage of Company restaurant sales):
Food and beverage................................ 27.4% 27.5% 28.0%
Labor............................................ 31.9 32.1 31.5
Direct and occupancy............................. 25.3 25.3 24.4
Pre-opening expense.............................. 0.5 0.8 1.0
-------------- -------------- ---------------
Total cost of sales........................... 85.1% 85.7% 84.9%
============== ============== ===============
General and administrative expenses................... 9.0% 10.2% 10.6%
Amortization of intangible assets..................... 0.9 0.6 0.6
Loss on disposition of restaurants and equipment...... 0.1 0.2 0.8
-------------- -------------- ---------------
Operating earnings.................................... 13.7 13.8 14.2
-------------- -------------- ---------------
Other income (expense):
Investment income................................ 0.2 0.4 0.7
Interest expense................................. (1.5) (0.3) (0.4)
Other income..................................... 0.1 0.1 0.1
-------------- -------------- ---------------
Total other income (expense).................. (1.3) 0.1 0.5
-------------- -------------- ---------------
Earnings before income taxes and extraordinary item... 12.4 13.9 14.7
Income taxes.......................................... 4.6 5.2 5.5
-------------- -------------- ---------------
Earnings before extraordinary item.................... 7.8 8.7 9.2
Extraordinary loss from early extinguishment
of debt, net of income taxes..................... (0.1) -- --
-------------- -------------- ---------------
Net earnings.......................................... 7.7% 8.7% 9.2%
============== ============== ===============
</TABLE>
22
<PAGE>
Fiscal Year Ended December 27, 1998 Compared With Fiscal Year Ended December 28,
1997
Company Restaurant Sales. Overall Company restaurant sales increased
$128,667,000 (28%) from $452,173,000 in 1997 to $580,840,000 in 1998. Sales for
Company Applebee's restaurants increased $117,137,000 (33%) from $354,443,000 in
1997 to $471,580,000 in 1998 due primarily to Company restaurant openings, sales
from the 33 Virginia restaurants acquired in March 1998, and incremental sales
from the 11 St. Louis restaurants acquired in April 1997. Sales for Company Rio
Bravo Cantina restaurants were $83,295,000 and $94,887,000 in 1997 and 1998,
respectively, and sales for the specialty restaurants were $14,435,000 and
$14,373,000 in 1997 and 1998, respectively. The increase in sales for the Rio
Bravo Cantina restaurants resulted from Company restaurant openings.
Comparable restaurant sales at Company Applebee's restaurants decreased by 0.4%
in 1998. Weighted average weekly sales at Company Applebee's restaurants
decreased 1.2% from $41,176 in 1997 to $40,664 in 1998. Comparable restaurant
sales and weighted average weekly sales at Company Applebee's restaurants in
1998 were positively affected by menu price increases implemented during the
fourth quarter of 1997 for certain menu items.
Comparable restaurant sales for Company Rio Bravo Cantina restaurants decreased
by 6.8% in 1998 due primarily to competition in the Atlanta and Florida markets.
Weighted average weekly sales (excluding one restaurant that is open for dinner
only) decreased from $60,946 in 1997 to $52,789 in 1998. Weighted average weekly
sales in 1998 were also impacted by new restaurant openings in new markets.
Franchise Income. Overall franchise income increased $3,075,000 (5%) from
$63,647,000 in 1997 to $66,722,000 in 1998 due primarily to the increased number
of franchise Applebee's and Rio Bravo Cantina restaurants operating during 1998
as compared to 1997. This increase was partially offset by a reduction in
franchise royalties as a result of the acquisition of the Virginia restaurants
in the second quarter of 1998 and the St. Louis restaurants in the second
quarter of 1997, as well as a reduction in franchise fees due to a decline in
franchise openings from 129 restaurants in 1997 to 88 restaurants in 1998. In
addition, comparable restaurant sales and weighted average weekly sales for
franchise Applebee's restaurants decreased by 0.1% and 1.1%, respectively, in
1998.
Cost of Company Restaurant Sales. Food and beverage costs decreased from 27.5%
in 1997 to 27.4% in 1998 due primarily to operational improvements, purchasing
efficiencies resulting from the Company's growth, and the menu price increase
implemented in the fourth quarter of 1997. Such decreases were partially offset
by an increase in dairy and poultry costs during the latter half of 1998 and
revisions to Rio Bravo Cantina menu items. Beverage sales, as a percentage of
Company restaurant sales, declined from 17.8% in 1997 to 16.6% in 1998 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 decreased from 32.1% in 1997 to 31.9% in 1998. The decrease was due
primarily to lower labor costs in the Virginia restaurants and a decrease in
group medical costs due to favorable claims experience. In addition, labor costs
in the latter part of 1997 were adversely impacted by the implementation of the
Company's food and menu enhancement initiative in its Applebee's restaurants.
These decreases were partially offset by continued pressure on both hourly labor
and management costs as a result of increases in the minimum wage, as well as
the highly competitive nature of the restaurant industry, and higher labor costs
experienced at the Rio Bravo Cantina restaurants due to the significant decline
in sales volumes in 1998.
23
<PAGE>
Direct and occupancy costs were 25.3% in both 1997 and 1998. Rent expense, as a
percentage of sales, declined in 1998 due to a higher proportion of owned
properties resulting from the Virginia Acquisition. In addition, plateware costs
decreased in 1998 as a result of the Company's 1997 food and menu enhancement
initiative in its Applebee's restaurants. Such decreases were offset by
increased levels of advertising expenditures and depreciation expense associated
with new restaurants as well as higher costs experienced at the Rio Bravo
Cantina restaurants due to the significant decline in sales volumes in 1998.
General and Administrative Expenses. General and administrative expenses
decreased from 10.2% in 1997 to 9.0% in 1998 due primarily to the absorption of
general and administrative expenses over a larger revenue base as well as the
additional leverage resulting from the Virginia and St. Louis acquisitions.
General and administrative expenses increased by $5,465,000 during 1998 compared
to 1997 due primarily to the costs of additional personnel associated with the
Company's development efforts and system-wide expansion.
Amortization of Intangible Assets. Amortization of intangible assets increased
in 1998 as a result of the amortization of goodwill related to the St. Louis and
Virginia acquisitions.
Investment Income. Investment income decreased in 1998 compared to 1997
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 1998 compared to 1997 primarily
as a result of interest associated with borrowings under the Company's
$225,000,000 credit facilities and capitalized leases related to the St. Louis
and Virginia acquisitions.
Income Taxes. The effective income tax rate, as a percentage of earnings before
income taxes, was 37.0% in 1998 compared to 37.2% in 1997. The decrease in the
Company's overall effective tax rate in 1998 was due primarily to an increase in
credits resulting from FICA taxes on tips.
Extraordinary Item. In connection with the early extinguishment of debt, the
Company paid a prepayment penalty of $930,000 on March 30, 1998. The prepayment
penalty plus the remaining unamortized portion of the related deferred financing
costs of $91,000 is reflected as an extraordinary loss of $641,000, net of
income taxes of $380,000, in the accompanying consolidated statement of earnings
for 1998.
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.
24
<PAGE>
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 implemented during the
fourth quarter of 1996 and the fourth quarter of 1997 for certain menu items. 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.
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.
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.
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. 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.
25
<PAGE>
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.
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 $90,480,000 in fiscal year 1997 (excluding $33,650,000
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) and $77,665,000 (excluding $101,749,000 related to the
Virginia Acquisition, including acquisition costs) in 1998. The Company
currently expects to open 28 Applebee's restaurants in 1999. Capital
expenditures are expected to be between $60,000,000 and $65,000,000 in fiscal
1999 primarily for the development of new restaurants, refurbishments of and
capital replacements for existing restaurants, and enhancements to information
systems. 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.
On March 30, 1998, the Company entered into a bank credit agreement that
provides for $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
working capital facility of $100,000,000. The Company also entered into a
five-year $5,000,000 letter of credit facility with another bank. Both the
senior term loan and the working capital facility are 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. In addition, both the
senior term loan and the working capital facility are subject to various
covenants and restrictions which, among other things, require the maintenance of
stipulated fixed charge, interest coverage and leverage ratios, as defined, and
limit additional indebtedness and capital expenditures in excess of specified
amounts. Cash dividends are limited to $5,000,000 through fiscal year 1999. The
credit agreement originally permitted up to $50,000,000 to be utilized for
repurchases of the Company's common stock. In February 1999, the credit
agreement was amended to permit additional repurchases of common stock of up to
$100,000,000 and to allow annual cash dividends of the greater of $5,000,000 or
50% of consolidated net income beginning in fiscal year 2000. The Company is
currently in compliance with the covenants contained in its credit agreement.
26
<PAGE>
During 1998, the Company's Board of Directors approved plans to repurchase up to
$50,000,000 of the Company's common stock, subject to market conditions. During
1998, the Company repurchased 2,431,000 shares of its common stock at an
aggregate cost of $49,332,000. In February 1999, the Company's Board of
Directors approved plans to repurchase up to an additional $100,000,000 of the
Company's common stock over a two-year period, subject to market conditions.
As of December 27, 1998, the Company held liquid assets totaling $6,646,000,
consisting of cash and cash equivalents of $1,767,000 and short-term investments
of $4,879,000. The working capital deficit increased from $18,534,000 at
December 28, 1997 to $31,042,000 at December 27, 1998 due primarily to the use
of cash and short-term investments for capital expenditures and stock
repurchases. As of December 27, 1998, $12,000,000 was outstanding under the
$100,000,000 working capital facility, and standby letters of credit totaling
$2,727,000 were outstanding under the $5,000,000 letter of credit facility.
The Company believes that its liquid assets and cash generated from operations,
combined with borrowings available under its $225,000,000 senior secured credit
facilities, will provide sufficient funds for its operating, capital and other
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.
New Accounting Pronouncement
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133
establishes accounting and reporting standards for derivative instruments and
hedging activities. It requires that an entity recognize all derivatives as
either assets or liabilities in the statement of financial position and measure
those instruments at fair value. This statement is effective for the Company for
periods beginning in fiscal year 2000. The Company believes that the adoption of
the provisions of SFAS No. 133 will not have a material effect on its financial
statements, based on current activities.
27
<PAGE>
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 established a team to assess risk, identify and correct
exposures when possible, and develop contingency plans for Year 2000 compliance
issues. This team has conducted a detailed assessment of its accounting,
finance, operational and other systems in order to identify and address
potential issues relating to the Year 2000. Systems that are not compliant will
be modified or replaced with systems that are Year 2000 compliant. The team is
also responsible for identifying and investigating the Year 2000 readiness of
critical suppliers, franchisees and other third parties, and for developing
contingency plans where necessary.
Key systems have been inventoried and assessed for compliance, and detailed
plans are in place for required system modifications or replacements.
Remediation and testing activities are well underway with approximately 70% of
the systems already compliant. The Company expects to be fully compliant by the
end of the third quarter of 1999. Inventories and assessments of non-information
technology ("non-IT") systems were completed during 1998. Remediation of
substantially all non-IT systems began in the fourth quarter of 1998 with a
mid-year 1999 target completion date. Progress toward remediation programs is
also monitored by senior management and periodically reported to the Company's
Board of Directors.
Questionnaires have been sent to substantially all of the Company's suppliers to
obtain reasonable assurance that plans are being developed to address the Year
2000 issue. Risk assessments and contingency plans, where necessary, will be
finalized in the first half of 1999. To the extent that vendors do not provide
the Company with satisfactory evidence of their readiness to handle Year 2000
issues, contingency plans will be developed to obtain qualified replacement
vendors. Information has also been provided to all franchisees regarding the
potential risks associated with Year 2000 compliance.
Contingency plans for Year 2000-related interruptions that are critical to the
ongoing operation of the business are being developed and will include, but not
be limited to, the development of emergency backup and recovery procedures,
remediation of existing systems parallel with installation of new systems,
replacement of electronic applications with manual processes, and identification
of alternate suppliers. All contingency plans are expected to be completed by
the end of the third quarter of 1999. However, no contingency plans are being
developed for the availability of key public services and utilities.
The Company's Year 2000 efforts are ongoing and its overall plan, as well as the
consideration of contingency plans, will continue to evolve as new information
becomes available. While the Company anticipates no major interruption of its
business activities, that will be dependent, in part, upon the ability of third
parties, particularly franchisees, to be Year 2000 compliant. Although the
Company has implemented the actions described above to address third party
issues, it has no direct ability to influence the compliance actions by such
outside parties. Accordingly, while the Company believes its actions in this
regard should have the effect of minimizing Year 2000 risks, it is unable to
eliminate them or to estimate the ultimate effect Year 2000 risks will have on
the Company's operating results.
28
<PAGE>
The Company believes that its significant systems are generally 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. This assumes
that the Company will not incur significant Year 2000-related costs on behalf of
its suppliers, franchisees or other third parties. The estimated total cost of
the Company's Year 2000 efforts is approximately $1,300,000. The total amount
expended through December 27, 1998 was approximately $200,000, and the estimated
costs to be incurred in fiscal year 1999 are approximately $1,100,000. These
amounts include the costs of external consultants, the purchase of software and
hardware, and the compensation of internal employees working on Year 2000
projects. All estimated costs have been budgeted and are expected to be funded
by cash flows from operations.
Forward-Looking Statements
The statements contained herein regarding restaurant development, capital
expenditures and the impact of the Year 2000 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 23, 1999.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
On March 30, 1998, the Company entered into a bank credit agreement that
provides for $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
working capital facility of $100,000,000. The senior term loan bears interest at
either the bank's prime rate plus 1.25% or LIBOR plus 2.25%, at the Company's
option. The working capital facility bears interest at either the bank's prime
rate plus 0.375% or LIBOR plus 1.375%, at the Company's option. The interest
rate on the working capital facility is subject to change based upon the
Company's leverage ratio.
In connection with the senior term loan, the Company has entered into interest
rate swap agreements to manage its exposure to interest rate fluctuations. The
agreements were effective beginning May 1, 1998, and have maturity dates ranging
from four to seven years for an aggregate notional amount of $100,000,000 for
three-month LIBOR rates ranging from 5.91% to 6.05%.
As of December 27, 1998, the total amount of debt subject to interest rate
fluctuations was $36,375,000 ($24,375,000 under the term loan and $12,000,000
under the revolving credit facility). A 1% change in interest rates would result
in an increase or decrease in interest expense of $364,000 per year.
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 13, 1999, 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 13, 1999, 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 13, 1999, 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 13,
1999, 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 November 23, 1998, announcing
the declaration of a dividend on its common stock to stockholders of
record as of December 16, 1998, payable on January 21, 1999.
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 25, 1999 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 25, 1999
------------------------------ --------------------------
Lloyd L. Hill
Director and Chief Executive Officer
(principal executive officer)
By:/s/ George D. Shadid Date: March 25, 1999
------------------------------ --------------------------
George D. Shadid
Director, Executive Vice President
and Chief Financial Officer
(principal financial officer)
By:/s/ Mark A. Peterson Date: March 25, 1999
------------------------------ --------------------------
Mark A. Peterson
Vice President and Controller
(principal accounting officer)
By:/s/ Abe J. Gustin, Jr. Date: March 25, 1999
------------------------------ --------------------------
Abe J. Gustin, Jr.
Director, Chairman of the Board
32
<PAGE>
By:/s/ Erline Belton Date: March 25, 1999
------------------------------ --------------------------
Erline Belton
Director
By:/s/ D. Patrick Curran Date: March 25, 1999
------------------------------ --------------------------
D. Patrick Curran
Director
By:/s/ Eric L. Hansen Date: March 25, 1999
------------------------------ --------------------------
Eric L. Hansen
Director
By:/s/ Mark S. Hansen Date: March 25, 1999
------------------------------ --------------------------
Mark S. Hansen
Director
By:/s/ Jack P. Helms Date: March 25, 1999
------------------------------ --------------------------
Jack P. Helms
Director
By:/s/ Kenneth D. Hill Date: March 25, 1999
------------------------------ --------------------------
Kenneth D. Hill
Director
By:/s/ Robert A. Martin Date: March 25, 1999
------------------------------ --------------------------
Robert A. Martin
Director
By:/s/ Burton M. Sack Date: March 25, 1999
------------------------------ --------------------------
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 27, 1998 and
December 28, 1997 .................................................................................. F-3
Consolidated Statements of Earnings for the fiscal years ended
December 27, 1998, December 28, 1997 and December 29, 1996........................................... F-4
Consolidated Statements of Stockholders' Equity for the fiscal Years
Ended December 27, 1998, December 28, 1997 and December 29, 1996..................................... F-5
Consolidated Statements of Cash Flows for the fiscal years ended
December 27, 1998, December 28, 1997 and December 29, 1996........................................... 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 27, 1998 and
December 28, 1997 and the related consolidated statements of earnings,
stockholders' equity and cash flows for each of the three fiscal years in the
period ended December 27, 1998. 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 27, 1998 and
December 28, 1997, and the consolidated results of their operations and cash
flows for each of the three fiscal years in the period ended December 27, 1998
in conformity with generally accepted accounting principles.
Deloitte & Touche LLP
Kansas City, Missouri
February 26, 1999
F-2
<PAGE>
APPLEBEE'S INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except share amounts)
<TABLE>
<CAPTION>
December 27, December 28,
1998 1997
-------------- --------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................................... $ 1,767 $ 8,908
Short-term investments, at market value..................................... 4,879 10,906
Receivables, net of allowance............................................... 17,159 16,390
Inventories................................................................. 6,709 4,788
Prepaid and other current assets............................................ 4,395 2,962
------------- -------------
Total current assets..................................................... 34,909 43,954
Property and equipment, net...................................................... 364,058 276,082
Goodwill, net.................................................................... 99,599 48,065
Franchise interest and rights, net............................................... 3,959 4,667
Other assets..................................................................... 8,379 4,706
------------- -------------
$ 510,904 $ 377,474
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt........................................... $ 1,666 $ 6,526
Accounts payable............................................................ 17,427 19,731
Accrued expenses and other current liabilities.............................. 44,114 28,547
Accrued dividends........................................................... 2,659 2,518
Accrued income taxes........................................................ 85 5,166
------------- -------------
Total current liabilities................................................ 65,951 62,488
------------- -------------
Non-current liabilities:
Long-term debt - less current portion....................................... 145,522 22,579
Franchise deposits.......................................................... 2,139 1,532
Deferred income taxes....................................................... 1,239 432
------------- -------------
Total non-current liabilities............................................ 148,900 24,543
------------- -------------
Total liabilities........................................................ 214,851 87,031
------------- -------------
Commitments and contingencies (Notes 6, 7 and 11) 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 - 32,150,360 shares in 1998 and 31,744,009 shares in 1997......... 321 317
Additional paid-in capital.................................................. 163,651 156,165
Retained earnings........................................................... 182,010 134,654
Unrealized gain on short-term investments, net of income taxes.............. 113 95
------------- -------------
346,095 291,231
Treasury stock-2,610,133 shares in 1998 and 261,629 shares in 1997,at cost.. (50,042) (788)
------------- -------------
Total stockholders' equity............................................... 296,053 290,443
------------- -------------
$ 510,904 $ 377,474
============= =============
</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 27, December 28, December 29,
1998 1997 1996
-------------- -------------- --------------
<S> <C> <C> <C>
Revenues:
Company restaurant sales................................ $ 580,840 $ 452,173 $ 358,990
Franchise income........................................ 66,722 63,647 54,141
-------------- -------------- --------------
Total operating revenues............................. 647,562 515,820 413,131
-------------- -------------- --------------
Cost of Company restaurant sales:
Food and beverage....................................... 159,420 124,469 100,534
Labor................................................... 185,260 145,165 112,969
Direct and occupancy.................................... 146,693 114,196 87,740
Pre-opening expense..................................... 3,093 3,661 3,557
-------------- -------------- --------------
Total cost of Company restaurant sales............... 494,466 387,491 304,800
-------------- -------------- --------------
General and administrative expenses.......................... 58,044 52,579 43,887
Amortization of intangible assets............................ 5,538 3,258 2,293
Loss on disposition of restaurants and equipment............. 952 1,209 3,318
-------------- -------------- --------------
Operating earnings........................................... 88,562 71,283 58,833
-------------- -------------- --------------
Other income (expense):
Investment income....................................... 1,131 1,834 2,863
Interest expense........................................ (9,922) (1,705) (1,571)
Other income............................................ 638 389 600
-------------- -------------- --------------
Total other income (expense)......................... (8,153) 518 1,892
-------------- -------------- --------------
Earnings before income taxes and extraordinary item.......... 80,409 71,801 60,725
Income taxes................................................. 29,753 26,710 22,711
-------------- -------------- --------------
Earnings before extraordinary item........................... 50,656 45,091 38,014
Extraordinary loss from early extinguishment
of debt, net of income taxes (Note 7)................... (641) -- --
-------------- -------------- --------------
Net earnings................................................. $ 50,015 $ 45,091 $ 38,014
============== ============== ==============
Basic earnings per common share:
Basic earnings before extraordinary item................ $ 1.67 $ 1.44 $ 1.22
Extraordinary item...................................... (0.02) -- --
-------------- -------------- --------------
Basic net earnings per common share.......................... $ 1.65 $ 1.44 $ 1.22
============== ============== ==============
Diluted earnings per common share:
Diluted earnings before extraordinary item.............. $ 1.67 $ 1.43 $ 1.21
Extraordinary item...................................... (0.02) -- --
-------------- -------------- --------------
Diluted net earnings per common share........................ $ 1.65 $ 1.43 $ 1.21
============== ============== ==============
Basic weighted average shares outstanding.................... 30,272 31,401 31,188
============== ============== ==============
Diluted weighted average shares outstanding.................. 30,385 31,640 31,533
============== ============== ==============
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE>
APPLEBEE'S INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(in thousands, except 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 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
Purchases of treasury stock..... -- -- -- -- -- (49,332) (49,332)
Dividends on common stock,
$0.09 per share............... -- -- -- (2,659) -- -- (2,659)
Stock options exercised......... 336,351 3 4,730 -- -- (184) 4,549
Shares sold under employee
stock purchase plan........... -- -- 681 -- -- 139 820
Income tax benefit upon exercise
of stock options.............. -- -- 1,011 -- -- -- 1,011
Shares issued under employee
stock ownership and 401(k)
plans......................... -- -- 784 -- -- 123 907
Restricted shares awarded under
equity incentive plan, net
of cancellations.............. 70,000 1 1,514 -- -- -- 1,515
Unearned compensation relating
to restricted shares.......... -- -- (1,234) -- -- -- (1,234)
Change in unrealized gain on
short-term investments, net of
income taxes.................. -- -- -- -- 18 -- 18
Net earnings.................... -- -- -- 50,015 -- -- 50,015
------------- ----------- ------------ ---------- ------------- ---------- --------------
Balance, December 27, 1998......... 32,150,360 $ 321 $ 163,651 $182,010 $ 113 $(50,042) $ 296,053
============= =========== ============ ========== ============= ========== ==============
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE>
APPLEBEE'S INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Fiscal Year Ended
---------------------------------------------
December 27, December 28, December 29,
1998 1997 1996
-------------- -------------- --------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings.................................................. $ 50,015 $ 45,091 $ 38,014
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization.............................. 29,135 20,877 15,652
Amortization of intangible assets.......................... 5,538 3,258 2,293
Amortization of deferred financing costs................... 477 50 50
(Gain) loss on sale of investments......................... (13) 20 27
Deferred income tax provision (benefit).................... (492) 1,001 128
Loss on disposition of restaurants and equipment........... 952 1,209 3,318
Changes in assets and liabilities (exclusive of effects of
acquisitions):
Receivables................................................ (1,305) 2,451 (2,702)
Inventories................................................ (1,432) (66) 5,479
Prepaid and other current assets........................... (84) 671 (898)
Accounts payable........................................... (2,304) 7,782 766
Accrued expenses and other current liabilities............. 16,317 2,400 2,806
Accrued income taxes....................................... (5,081) 4,248 (723)
Franchise deposits......................................... 607 (261) 625
Other...................................................... 178 (1,352) (189)
-------------- -------------- --------------
NET CASH PROVIDED BY OPERATING ACTIVITIES.................. 92,508 87,379 64,646
-------------- -------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of short-term investments........................... (30,799) (19,150) (49,487)
Maturities and sales of short-term investments................ 36,842 48,117 31,149
Purchases of property and equipment........................... (77,665) (90,480) (65,672)
Acquisitions of restaurants................................... (101,749) (33,650) --
Acquisition of minority interest in joint venture............. -- (1,525) --
Proceeds from sale of restaurants and equipment............... 10,216 988 4,314
-------------- -------------- --------------
NET CASH USED BY INVESTING ACTIVITIES...................... (163,155) (95,700) (79,696)
-------------- -------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Purchases of treasury stock................................... (49,332) -- --
Dividends paid................................................ (2,518) (2,191) (1,861)
Issuance of common stock upon exercise of stock options....... 4,549 2,194 3,801
Income tax benefit upon exercise of stock options............. 1,011 548 1,149
Shares sold under employee stock purchase plan................ 820 457 --
Proceeds from issuance of long-term debt...................... 175,825 -- --
Deferred financing costs relating to issuance of long-term debt (4,000) -- --
Payments on long-term debt.................................... (62,849) (1,194) (1,165)
Minority interest in net earnings of joint venture............ -- 69 284
-------------- -------------- --------------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES........... 63,506 (117) 2,208
-------------- -------------- --------------
NET DECREASE IN CASH AND CASH EQUIVALENTS.......................... (7,141) (8,438) (12,842)
CASH AND CASH EQUIVALENTS, beginning of period..................... 8,908 17,346 30,188
-------------- -------------- --------------
CASH AND CASH EQUIVALENTS, end of period........................... $ 1,767 $ 8,908 $ 17,346
============== ============== ==============
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE>
APPLEBEE'S INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS - (Continued)
(in thousands)
<TABLE>
<CAPTION>
Fiscal Year Ended
-----------------------------------------------------
December 27, December 28, December 29,
1998 1997 1996
---------------- ----------------- -----------------
<S> <C> <C> <C>
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Income taxes.................................... $ 33,935 $ 20,613 $ 22,437
================ ================= =================
Interest........................................ $ 8,809 $ 2,573 $ 1,061
================ ================= =================
</TABLE>
Supplemental disclosures of noncash investing and financing activities:
The Company received a $5,000,000 promissory note in connection with the sale of
six restaurants in October 1996 (see Note 9), 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 3).
Capitalized leases of $5,052,000 were recorded in April 1998 when the Company
acquired the operations and assets of 33 franchise restaurants (see Note 3).
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
27, 1998, there were 1,064 Applebee's restaurants, of which 817 were operated by
franchisees and 247 were operated by the Company, and 66 Rio Bravo Cantina
restaurants, of which 26 were operated by franchisees and 40 were operated by
the Company. The Company also operated four other specialty restaurants. Such
restaurants were located in 48 states, Canada, Europe and Mexico.
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 27, 1998, December 28, 1997 and December
29, 1996 each contained 52 weeks, and are referred to hereafter as 1998, 1997
and 1996, 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 27, 1998, all short-term investments have
been classified as available-for-sale.
Financial instruments: The Company's financial instruments at December 27, 1998
and December 28, 1997 consist of cash equivalents, short-term investments,
long-term debt, excluding capitalized lease obligations, and interest rate swaps
(see Note 7). Except for interest rate swaps, which are not reflected in the
consolidated financial statements at fair value, the fair value of these
financial instruments approximates the carrying amounts reported in the
consolidated balance sheets. The carrying amount of 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 based on quotations made on similar issues.
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. The
treatment of such costs is in accordance with the provisions of AICPA Statement
of Position ("SOP") 98-5, "Reporting on the Costs of Start-up Activities," which
is effective for fiscal years beginning after December 15, 1998.
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
F-8
<PAGE>
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 $859,000, $755,000 and $618,000 were capitalized during
1998, 1997 and 1996, 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 27, 1998 and December 28, 1997 was $12,551,000 and $7,595,000,
respectively.
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. The Company analyzes potential impairments of assets on
a restaurant-by-restaurant basis.
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 27, 1998 and December
28, 1997 was $6,546,000 and $6,263,000, 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
$3,099,000, $4,263,000 and $4,615,000 for 1998, 1997 and 1996, 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 $29,097,000, $20,752,000 and $16,470,000 for 1998,
1997 and 1996, respectively.
Interest rate swap agreements: The Company has entered into interest rate swap
agreements to manage its exposure to interest rate fluctuations. The
differential to be paid or received is recognized over the term of the swap
agreements as a component of interest expense. Although the swap agreements
expose the Company to interest rate risk, fluctuations in the value of the swaps
are mitigated by expected offsetting fluctuations in the variable debt.
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 13.
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. 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):
F-9
<PAGE>
<TABLE>
<CAPTION>
1998 1997 1996
---------------- ---------------- ----------------
<S> <C> <C> <C>
Net earnings....................................... $ 50,015 $ 45,091 $ 38,014
================ ================ ================
Basic weighted average shares outstanding.......... 30,272 31,401 31,188
Dilutive effect of stock options................... 113 239 345
---------------- ---------------- ----------------
Diluted weighted average shares outstanding........ 30,385 31,640 31,533
================ ================ ================
Basic net earnings per common share................ $ 1.65 $ 1.44 $ 1.22
================ ================ ================
Diluted net earnings per common share.............. $ 1.65 $ 1.43 $ 1.21
================ ================ ================
</TABLE>
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 1,604,000, 1,625,000 and 1,368,000 for 1998, 1997 and 1996,
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 pronouncement: In June 1998, the Financial Accounting Standards
Board issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities." SFAS No. 133 establishes accounting and reporting standards for
derivative instruments and hedging activities. It requires that an entity
recognize all derivatives as either assets or liabilities in the statement of
financial position and measure those instruments at fair value. This statement
is effective for the Company for periods beginning in fiscal year 2000. The
Company believes that the adoption of the provisions of SFAS No. 133 will not
have a material effect on its financial statements, based on current activities.
3. Acquisitions
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, which were paid in 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
conjunction 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.
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 March 30, 1998, the Company acquired the operations and assets of 33
restaurants in the Virginia markets of Norfolk, Richmond, Roanoke and
Charlottesville, from Apple South, Inc. ("Apple South"), now Avado Brands, Inc.,
referred to herein as the "Virginia Acquisition." The total purchase price was
$94,749,000 and was paid in cash on March 30, 1998. See Note 11 for additional
commitments and contingencies relating to the agreement with Apple South. The
acquisition was accounted for as a purchase, and the results of operations of
such restaurants are reflected in the 1998 financial statements subsequent to
the date of acquisition.
F-10
<PAGE>
The Virginia Acquisition purchase price of $94,749,000 plus acquisition fees and
expenses of $7,000,000 has been allocated to the fair value of net assets
acquired based upon an independent appraisal and resulted in an allocation to
goodwill of $56,441,000 which is being amortized on a straight-line basis over
20 years. The total of $101,749,000 has been allocated in the financial
statements as follows (in thousands):
Property and equipment............................... $ 44,816
Inventories.......................................... 489
Goodwill............................................. 56,441
Cash................................................. 48
Prepaid and other current assets..................... 60
Accrued expenses..................................... (105)
-------------
Total........................................... $ 101,749
=============
The following summarized unaudited pro forma results of operations of the
Company (in thousands, except per share amounts) for 1998 and 1997 assume the
Virginia Acquisition and the Company's new financing arrangements (see Note 7)
occurred as of the beginning of the earliest period presented. The pro forma
results have been prepared for comparative purposes only and do not purport to
be indicative of the results of operations which actually would have resulted
had the Virginia Acquisition been effective as of the dates indicated, or which
may result in the future.
<TABLE>
<CAPTION>
Fiscal Year Ended
------------------------------------------------------
December 27, 1998 December 28, 1997
-------------------------- ---------------------------
Actual Pro Forma Actual Pro Forma
------------ ------------- ------------ --------------
<S> <C> <C> <C> <C>
Food and beverage sales.............................. $ 580,840 $ 597,507 $ 452,173 $ 513,456
Franchise income..................................... 66,722 65,995 63,647 61,106
------------ ------------- ------------ --------------
Total operating revenues............................. $ 647,562 $ 663,502 $ 515,820 $ 574,562
============ ============= ============ ==============
Earnings before extraordinary item................... $ 50,656 $ 50,381 $ 45,091 $ 44,432
Net earnings......................................... $ 50,015 $ 49,740 $ 45,091 $ 44,432
Basic net earnings per common share.................. $ 1.65 $ 1.64 $ 1.44 $ 1.41
Diluted net earnings per common share................ $ 1.65 $ 1.64 $ 1.43 $ 1.40
Basic weighted average shares outstanding............ 30,272 30,272 31,401 31,401
Diluted weighted average shares outstanding.......... 30,385 30,385 31,640 31,640
</TABLE>
F-11
<PAGE>
4. Short-Term Investments
The amortized cost, estimated market value and unrealized gains on short-term
investments are as follows (in thousands):
<TABLE>
<CAPTION>
December 27, 1998 December 28, 1997
----------------------------------------- -------------------------------------------
Amortized Unrealized Market Amortized Unrealized Market
Cost Gain Value Cost Gain Value
------------- -------------- ------------ ------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Certificates of deposit........ $ 22 $ -- $ 22 $ 19 $ -- $ 19
Preferred stocks............... 402 88 490 402 56 458
U.S. government and
agency securities........... -- -- -- 4,496 -- 4,496
State and local
municipal securities........ 4,275 92 4,367 5,837 96 5,933
------------- -------------- ------------ ------------- -------------- --------------
$ 4,699 $ 180 $ 4,879 $ 10,754 $ 152 $ 10,906
============= ============== ============ ============= ============== ==============
</TABLE>
The amortized cost and estimated market value of debt securities as of December
27, 1998, 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...................................... $ 2,221 $ 2,249
Due after one year through five years............................ 2,054 2,118
------------------ -----------------
$ 4,275 $ 4,367
================== =================
</TABLE>
5. Receivables
Receivables are comprised of the following (in thousands):
<TABLE>
<CAPTION>
December 27, December 28,
1998 1997
----------------- -----------------
<S> <C> <C>
Franchise royalty, advertising and trade receivables............. $ 11,507 $ 12,132
Notes receivable................................................. 3,534 1,593
Credit card receivables.......................................... 2,587 2,103
Franchise fee receivables........................................ 498 743
Interest and dividends receivable................................ 105 288
Other............................................................ 493 368
----------------- -----------------
18,724 17,227
Less allowance for bad debts..................................... 1,565 837
----------------- -----------------
$ 17,159 $ 16,390
================= =================
</TABLE>
The provision for bad debts totaled $1,000,000 for 1998 and $635,000 for 1997.
No provision for bad debts was recorded during 1996. Write-offs against the
allowance for bad debts totaled $272,000, $68,000 and $453,000 during 1998, 1997
and 1996, respectively.
F-12
<PAGE>
6. Property and Equipment
Property and equipment, net is comprised of the following (in thousands):
<TABLE>
<CAPTION>
December 27, December 28,
1998 1997
----------------- ------------------
<S> <C> <C>
Land............................................................. $ 77,121 $ 52,638
Buildings and leasehold improvements............................. 239,047 176,517
Furniture and equipment.......................................... 134,810 106,125
Construction in progress......................................... 6,351 10,238
----------------- ------------------
457,329 345,518
Less accumulated depreciation and capitalized
lease amortization............................................ 93,271 69,436
----------------- ------------------
$ 364,058 $ 276,082
================= ==================
</TABLE>
Property under capitalized leases in the amount of $9,592,000 and $4,540,000 at
December 27, 1998 and December 28, 1997, respectively, is included in buildings
and leasehold improvements. Accumulated amortization of such property amounted
to $711,000 and $235,000 at December 27, 1998 and December 28, 1997,
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 $29,135,000, $20,877,000 and $15,652,000 for 1998, 1997 and
1996, respectively. Of these amounts, $476,000, $210,000 and $145,000 related to
capitalized lease amortization during 1998, 1997 and 1996, 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>
1998 1997 1996
------------------ ------------------ -----------------
<S> <C> <C> <C>
Minimum rent................................. $ 12,432 $ 10,452 $ 8,138
Contingent rent.............................. 1,294 1,298 1,451
------------------ ------------------ -----------------
$ 13,726 $ 11,750 $ 9,589
================== ================== =================
</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 1999) as of December 27, 1998 are as follows (in
thousands):
<TABLE>
<CAPTION>
Capitalized Operating
Leases Leases
------------------ -----------------
<S> <C> <C>
1999............................................................. $ 1,023 $ 13,781
2000............................................................. 1,050 13,567
2001............................................................. 5,859 13,174
2002............................................................. 741 13,009
2003............................................................. 766 12,203
Thereafter....................................................... 10,542 105,750
------------------ ------------------
Total minimum lease payments..................................... 19,981 $ 171,484
==================
Less amounts representing interest............................... 10,295
------------------
Present value of minimum lease payments.......................... $ 9,686
==================
</TABLE>
F-13
<PAGE>
In February 1999, the Company purchased the buildings and related land and
equipment underlying three capital leases for a total of $4,725,000 from Apple
South. As a result, $5,052,000 of the capitalized lease obligations recorded as
of December 27, 1998 were retired.
7. Long-Term Debt
Long-term debt, including capitalized lease obligations, is comprised of the
following (in thousands):
<TABLE>
<CAPTION>
December 27, December 28,
1998 1997
------------------ ------------------
<S> <C> <C>
Unsecured senior term loan; interest at LIBOR plus 2.25% or base
rate plus 1.25%, with semi-annual principal payments; due
March 2006................................................... $ 124,375 $ --
Unsecured revolving credit facility; interest at LIBOR plus
1.375% or base rate plus 0.375%; due March 2003.............. 12,000 --
Unsecured notes payable; 7.70% interest per annum, with
principal payments beginning in 1998; due May 2004........... -- 20,000
Secured bank note; 6.69% interest per annum; due in quarterly
installments through October 1998............................ -- 600
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............................................... 802 1,187
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 1998........... -- 2,500
Capitalized lease obligations.................................... 9,686 4,579
Other............................................................ 325 239
------------------ ------------------
Total long-term debt............................................. 147,188 29,105
Less current portion of long-term debt........................... 1,666 6,526
------------------ ------------------
Long-term debt - less current portion............................ $ 145,522 $ 22,579
================== ==================
</TABLE>
On March 30, 1998, the Company entered into a bank credit agreement that
provides for $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
working capital facility of $100,000,000. The Company also entered into a
five-year $5,000,000 letter of credit facility with another bank.
In connection with the early extinguishment of debt, the Company paid a
prepayment penalty of $930,000 in 1998. The prepayment penalty plus the
remaining unamortized portion of the related deferred financing costs of $91,000
is reflected as an extraordinary loss of $641,000, net of income taxes of
$380,000, in the accompanying consolidated statement of earnings for 1998.
As of December 27, 1998, $12,000,000 was outstanding under the $100,000,000
working capital facility, and standby letters of credit totaling $2,727,000 were
outstanding under the $5,000,000 letter of credit facility.
The senior term loan bears interest at either the bank's prime rate plus 1.25%
or LIBOR plus 2.25%, at the Company's option, and requires 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 working capital
facility bears interest at either the bank's prime rate plus 0.375% or LIBOR
plus 1.375%, at the Company's option. A commitment fee of 0.30% is payable on
any unused portion of the working capital facility. The interest rate on the
working capital facility and the commitment fee are subject to change based upon
the Company's leverage ratio.
F-14
<PAGE>
In connection with the bank credit agreement, the Company has entered into
interest rate swap agreements to manage its exposure to interest rate
fluctuations. The agreements were effective beginning May 1, 1998, and have
maturity dates ranging from four to seven years for an aggregate notional amount
of $100,000,000 and effectively fix the underlying three-month LIBOR interest
rate on $100,000,000 of the senior credit facilities to rates ranging from 5.91%
to 6.05%. As of December 27, 1998, the fair value of these swaps was a net
payable of $3,069,000. The fair value represents the estimated amount that the
Company would receive or pay to terminate the agreements taking into account
current interest rates.
Both the senior term loan and the working capital facility are 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. In addition, both the
senior term loan and the working capital facility are subject to various
covenants and restrictions which, among other things, require the maintenance of
stipulated fixed charge, interest coverage and leverage ratios, as defined, and
limit additional indebtedness and capital expenditures in excess of specified
amounts. Cash dividends are limited to $5,000,000 through fiscal year 1999. The
credit agreement originally permitted up to $50,000,000 to be utilized for
repurchases of the Company's common stock. In February 1999, the credit
agreement was amended to permit additional repurchases of common stock of up to
$100,000,000 and to allow annual cash dividends of the greater of $5,000,000 or
50% of consolidated net income beginning in fiscal year 2000. The Company is
currently in compliance with the covenants contained in its credit agreement.
Maturities of long-term debt, including capitalized lease obligations, for each
of the five fiscal years subsequent to December 27, 1998, ending during the
years indicated, are as follows (in thousands):
1999............................. $ 1,666
2000............................. 1,704
2001............................. 6,347
2002............................. 1,304
2003............................. 13,639
F-15
<PAGE>
8. Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities are comprised of the following
(in thousands):
<TABLE>
<CAPTION>
December 27, December 28,
1998 1997
------------------ -----------------
<S> <C> <C>
Compensation and related taxes.................................... $ 12,551 $ 9,060
Gift certificates................................................. 7,803 4,129
Sales and use taxes............................................... 3,571 2,790
Insurance......................................................... 6,816 4,473
Rent.............................................................. 3,559 2,782
Other............................................................. 9,814 5,313
------------------ -----------------
$ 44,114 $ 28,547
================== =================
</TABLE>
9. 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.
In May 1998, the Company completed the sale of 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 have been assumed by an existing Applebee's franchisee. The sale of these
restaurants did not have a significant effect on the Company's net earnings and
financial position.
10. Income Taxes
The Company and its subsidiaries file a consolidated federal income tax return.
The income tax provision consists of the following (in thousands):
<TABLE>
<CAPTION>
1998 1997 1996
--------------- --------------- ----------------
<S> <C> <C> <C>
Current provision:
Federal............................................ $ 25,803 $ 22,016 $ 18,783
State.............................................. 4,442 3,693 3,800
Deferred provision (benefit)........................... (492) 1,001 128
--------------- --------------- ----------------
Income taxes........................................... $ 29,753 $ 26,710 $ 22,711
=============== =============== ================
</TABLE>
F-16
<PAGE>
The deferred income tax provision is comprised of the following (in thousands):
<TABLE>
<CAPTION>
1998 1997 1996
--------------- --------------- ----------------
<S> <C> <C> <C>
Depreciation........................................... $ 793 $ 2,270 $ 617
Franchise deposits..................................... 147 (534) 77
Allowance for bad debts................................ (420) (111) 345
Accrued expenses....................................... -- (758) 203
Property and equipment writedown....................... 112 671 (935)
Other.................................................. (1,124) (537) (179)
--------------- --------------- ----------------
Deferred income tax provision (benefit)................ (492) 1,001 128
Deferred income taxes related to change in
unrealized gain (loss) on investments.............. 10 57 (3)
--------------- --------------- ----------------
Net change in deferred income taxes.................... $ (482) $ 1,058 $ 125
=============== =============== ================
</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>
1998 1997 1996
--------------- --------------- ----------------
<S> <C> <C> <C>
Federal income tax at statutory rates.................. $ 28,143 $ 25,130 $ 21,254
Increase (decrease) to income tax expense:
State income taxes, net of federal benefit......... 2,951 2,625 2,470
Non-deductible goodwill amortization............... 320 280 276
Tax exempt investment income....................... (163) (310) (338)
Meals and entertainment disallowance............... 283 278 317
FICA tip tax credit................................ (2,124) (1,598) (1,136)
Other.............................................. 343 305 (132)
--------------- --------------- ----------------
Income taxes........................................... $ 29,753 $ 26,710 $ 22,711
=============== =============== ================
</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 27, December 28,
1998 1997
----------------- ------------------
<S> <C> <C>
Classified as current:
Allowance for bad debts..................................... $ 546 $ 126
Accrued expenses............................................ 1,003 1,003
Other, net.................................................. 245 (624)
----------------- ------------------
Net deferred income tax asset............................... $ 1,794 $ 505
================= ==================
Classified as non-current:
Depreciation................................................ $ (2,579) $ (1,786)
Franchise deposits.......................................... 753 900
Other, net.................................................. 587 454
----------------- ------------------
Net deferred income tax liability........................... $ (1,239) $ (432)
================= ==================
</TABLE>
F-17
<PAGE>
11. Commitments and Contingencies
Litigation, claims and disputes: As of December 27, 1998, the Company was using
assets owned by a former franchisee in the operation of one restaurant which
remains under a purchase rights agreement that 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 under
that agreement and as to whether the Company had agreed to guarantee the
franchisee's debt. Based upon a then-current independent appraisal, the Company
offered to settle the dispute and purchase the assets of the three then-existing
restaurants 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 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. The
lawsuit is set for trial in October 1999.
In addition, the Company is involved in various legal actions arising in the
normal course of business. While the resolution of any 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 27, 1998, approximately
$48,000,000 had been funded through this financing source, of which $13,000,000
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.
Lease guaranties: In connection with the sale of restaurants to franchisees, the
Company has, in certain cases, remained contingently liable for the remaining
lease payments. As of December 27, 1998, the aggregate amount of these lease
payments totaled approximately $16,500,000. The Company has been indemnified by
the buyers from any losses related to such guaranties.
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 27, 1998,
the Company would have been required to make payments aggregating approximately
$5,900,000. 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 $4,400,000 if such officers had been terminated as of December 27,
1998.
Apple South divestiture plan: As part of the agreement with Apple South relating
to the Virginia Acquisition (see Note 3), 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. As of February 22, 1999,
Apple South had completed the sale of 243 of its restaurants (89% of its total),
and there are signed contracts on the two remaining territories. To the extent
any of the 31 remaining 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 of up to 10% of the borrowings of qualified franchise
groups, up to a maximum of $10,000,000 in the aggregate. To date, the Company
has provided a guarantee to one franchise group totaling $1,000,000. Two
principals of the franchise group are related to a director and officer of the
Company.
F-18
<PAGE>
12. Stockholders' Equity
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.
During 1998, the Company's Board of Directors approved plans to repurchase up to
$50,000,000 of the Company's common stock, subject to market conditions. During
1998, the Company repurchased 2,431,000 shares of its common stock at an
aggregate cost of $49,332,000. In February 1999, the Company's Board of
Directors approved plans to repurchase up to an additional $100,000,000 of the
Company's common stock over a two-year period, subject to market conditions.
13. 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, 1997 and 1998 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.
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):
F-19
<PAGE>
<TABLE>
<CAPTION>
1998 1997 1996
--------------- --------------- --------------
<S> <C> <C> <C>
Net earnings, as reported................................ $ 50,015 $ 45,091 $ 38,014
Net earnings, pro forma.................................. $ 48,205 $ 41,119 $ 32,863
Basic net earnings per common share, as reported......... $ 1.65 $ 1.44 $ 1.22
Basic net earnings per common share, pro forma........... $ 1.59 $ 1.31 $ 1.05
Diluted net earnings per common share, as reported....... $ 1.65 $ 1.43 $ 1.21
Diluted net earnings per common share, pro forma......... $ 1.59 $ 1.30 $ 1.04
</TABLE>
The weighted average fair value at date of grant for options granted during
1998, 1997 and 1996 was $10.68, $12.76 and $15.14 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 1998, 1997 and
1996: dividend yield of 0.3% for all years; expected volatility of 51.7%, 56.0%
and 58.1%, respectively; risk-free interest rate of 4.7%, 5.7% and 6.2%,
respectively; and expected lives of 5.5, 4.6 and 4.9 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 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
Granted................... 466,498 $ 21.38 -- --
Exercised................. -- -- (340,351) $ 13.94
Canceled.................. (382,999) $ 27.45 (15,249) $ 20.53
------------------ -----------------
Options outstanding at
December 27, 1998............ 1,824,598 $ 26.15 284,412 $ 14.11
================== =================
Options exercisable at
December 27, 1998............ 601,200 $ 27.64 284,412 $ 14.11
================== =================
Options available for grant at
December 27, 1998............ 398,235 --
================== =================
</TABLE>
F-20
<PAGE>
The following table summarizes information relating to fixed-priced stock
options outstanding for both plans at December 27, 1998:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
------------------------------------------------ --------------------------------
Weighted
Average Weighted
Remaining Average Weighted
Number Contractual Exercise Number Average
Range of Exercise Prices Outstanding Life Price Exercisable Exercise Price
--------------------------- --------------- --------------- -------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
1989 Plan:
$ 3.02 to $ 7.63 20,012 2.6 years $ 4.68 20,012 $ 4.68
$ 13.82 to $ 14.69 231,400 4.1 years $ 14.08 231,400 $ 14.08
$ 19.25 to $ 21.88 33,000 2.8 years $ 20.05 33,000 $ 20.05
--------------- ---------------
$ 3.02 to $ 21.88 284,412 3.8 years $ 14.11 284,412 $ 14.11
=============== ===============
1995 Plan:
$ 18.81 to $ 25.75 654,855 8.1 years $ 22.52 144,700 $ 25.04
$ 28.00 to $ 29.25 1,169,743 7.1 years $ 28.18 456,500 $ 28.46
--------------- ---------------
$ 22.75 to $ 29.25 1,824,598 7.5 years $ 26.15 601,200 $ 27.64
=============== ===============
</TABLE>
Restricted stock awards: During 1998, restricted stock awards were granted to
certain officers and key employees of the Company. These awards vest evenly over
a three-year period. Unearned compensation was recorded for the market value of
the stock at the date of grant and is shown as a reduction to stockholders'
equity in the accompanying consolidated balance sheet. Unearned compensation is
being amortized ratably to expense over the vesting period and accordingly, the
Company recognized compensation expense of $281,000 in 1998.
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 were 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 1998, 1997 and 1996 were $945,000, $702,000 and $570,000, 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 1998 and 1997, employees purchased
46,204 and 20,143 shares, respectively, 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 are made in shares of the Company's
common stock. The Company's contributions to the plan were $400,000 for 1998 and
$500,000 for 1997.
F-21
<PAGE>
14. 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 and 1996, the Company paid $264,000 and
$426,000, respectively, for equipment and services purchased from this company.
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 $148,000, $166,000 and $185,000 for 1998, 1997 and 1996,
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 $162,000,
$128,000 and $113,000 for 1998, 1997 and 1996, respectively, 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 expired in December 1998 and is renewable on a
month-to-month basis at the Company's option. Rents incurred under the lease
were $120,000, $120,000 and $104,000 for 1998, 1997 and 1996, respectively, and
are included in general and administrative expenses in the consolidated
statements of earnings.
In March 1998, the Company entered into an agreement to purchase a tract of land
for future restaurant development for $290,000 from an entity in which the
Chairman of the Company has a one-third ownership interest. The purchase price
was less than current appraised value.
In February 1999, the Company entered into an agreement to sell its four
specialty restaurants to an entity owned by the Company's Chairman and certain
members of his family (see Note 15). In addition, the same entity became a
franchisee of the Company by purchasing seven existing Applebee's restaurants
from another franchisee.
15. Subsequent Events
In February 1999, the Company entered into an agreement to sell its Rio Bravo
Cantina concept, which is comprised of 66 restaurants, including 40 Company
restaurants and 26 franchised restaurants. Under the terms of the agreement, the
buyer will become the franchisor of the Rio Bravo Cantina system and will
continue to operate the Company-owned restaurants. The buyer has agreed to
provide a number of future operating alternatives for existing franchisees,
including continued operation of franchise restaurants as Rio Bravo Cantinas or,
in certain cases, conversion to the buyer's restaurant concept. The Company will
receive $53 million in consideration ($47 million in cash at closing and a $6
million subordinated note). The buyer has also committed an additional $6
million available to partially fund the strategic alternatives offered to the
current Rio Bravo Cantina franchisees. The Company also entered into a separate
definitive agreement to sell its four specialty restaurants for $12 million in
cash (see Note 14).
F-22
<PAGE>
Both transactions are subject to customary third-party approvals. The two sale
transactions and related expenses are expected to result in a loss on
disposition of approximately $8,000,000 before income taxes (approximately
$5,000,000 net of income taxes), which will be recognized in the first quarter
of 1999. Total Company restaurant sales, franchise income and cost of Company
restaurant sales for the fiscal year ended December 27, 1998 were $109,260,000,
$2,054,000 and $99,395,000, respectively, for both the Rio Bravo Cantina and
specialty restaurants.
16. Quarterly Results of Operations (Unaudited)
The following presents the unaudited consolidated quarterly results of
operations for 1998 and 1997 (in thousands, except per share amounts).
<TABLE>
<CAPTION>
1998
---------------------------------------------------------------
Fiscal Quarter Ended
---------------------------------------------------------------
March 29, June 28, September 27, December 27,
1998 1998 1998 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues:
Company restaurant sales....................... $129,758 $149,829 $151,648 $149,605
Franchise income............................... 16,845 16,580 17,002 16,295
------------- ------------- ------------- -------------
Total operating revenues.................... 146,603 166,409 168,650 165,900
------------- ------------- ------------- -------------
Cost of Company restaurant sales:
Food and beverage.............................. 35,368 40,917 41,680 41,455
Labor.......................................... 42,323 47,291 47,589 48,057
Direct and occupancy........................... 33,219 37,191 38,301 37,982
Pre-opening expense............................ 481 527 912 1,173
------------- ------------- ------------- -------------
Total cost of Company restaurant sales...... 111,391 125,926 128,482 128,667
------------- ------------- ------------- -------------
General and administrative expenses................. 14,454 14,564 14,398 14,628
Amortization of intangible assets................... 875 1,546 1,546 1,571
Loss on disposition of restaurants and equipment.... 458 213 187 94
------------- ------------- ------------- -------------
Operating earnings.................................. 19,425 24,160 24,037 20,940
------------- ------------- ------------- -------------
Other income (expense):
Investment income.............................. 220 394 249 268
Interest expense............................... (751) (3,298) (2,853) (3,020)
Other income................................... 167 108 135 228
------------- ------------- ------------- -------------
Total other income (expense)................ (364) (2,796) (2,469) (2,524)
------------- ------------- ------------- -------------
Earnings before income taxes and
extraordinary item............................. 19,061 21,364 21,568 18,416
Income taxes........................................ 7,091 7,947 8,024 6,691
------------- ------------- ------------- -------------
Earnings before extraordinary item.................. 11,970 13,417 13,544 11,725
Extraordinary loss from early extinguishment
of debt, net of income taxes................... -- (641) -- --
------------- ------------- ------------- -------------
Net earnings........................................ $ 11,970 $ 12,776 $ 13,544 $ 11,725
============= ============= ============= =============
Basic net earnings per common share:
Basic earnings before extraordinary item....... $ 0.39 $ 0.44 $ 0.45 $ 0.39
Extraordinary item............................. -- (0.02) -- --
------------- ------------- ------------- -------------
Basic net earnings per common share................. $ 0.39 $ 0.42 $ 0.45 $ 0.39
============= ============= ============= =============
Diluted net earnings per common share:
Diluted earnings before extraordinary item..... $ 0.39 $ 0.44 $ 0.45 $ 0.39
Extraordinary item............................. -- (0.02) -- --
------------- ------------- ------------- -------------
Diluted net earnings per common share............... $ 0.39 $ 0.42 $ 0.45 $ 0.39
============= ============= ============= =============
Basic weighted average shares outstanding........... 30,611 30,381 30,184 29,911
============= ============= ============= =============
Diluted weighted average shares outstanding......... 30,734 30,522 30,278 29,976
============= ============= ============= =============
</TABLE>
F-23
<PAGE>
<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-24
-----------------------------
<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 27, 1998.
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 27, 1998.
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 Credit Agreement dated as of March 30, 1998 (incorporated by
reference to Exhibit 10.4 of the Registrant's Quarterly Report
on Form 10-Q for the fiscal quarter ended March 29, 1998).
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 (incorporated by reference to
Exhibit 10.14 of the Registrant's Annual Report on Form 10-K
for the fiscal year ended December 28, 1997).
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) and First Amendment to Employment
Agreement, dated December 31, 1997, 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 29, 1998).
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).
E-2
<PAGE>
Exhibit
Number Description of Exhibit
- --------------- ---------------------------------------------------------------
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).
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 Previous Form of Change in Control Agreement (incorporated by
reference to Exhibit 10.2 of the Registrant's Quarterly Report
on Form 10-Q for the fiscal quarter ended March 29, 1998) and
schedule of parties thereto.
10.23 New Form of Change in Control Agreement and schedule of parties
thereto.
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.
APPLEBEE'S INTERNATIONAL, INC.
DEVELOPMENT AND FRANCHISE AGREEMENT SCHEDULE
AS OF DECEMBER 27, 1998
<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 (DA.A) 09-24-93 CA, OR 5/09-20-96
804 E. Cypress Anna Wong Amended: 03-10-95
Suite B
Redding, CA 96002
(FA.A1) 09-20-94 1801 Hilltop Drive
Redding, CA
(FA.A2) 04-30-96 2030 Business Lane
Chico, CA
(FA.A3) 11-26-96 1388 Biddle Road
Medford, OR
(FA.A4) 09-28-98 2750 Campus Drive
Klamath Falls, OR
A.N.A., INC. Glenn D. Durham (DA.A) 10-10-91 AL, TN 13/04-30-99
601 Vestavia Parkway Fred W. Gustin Amended: 06-01-93
Suite 1000 06-06-95
Birmingham, AL 35216 05-01-97
(FA.A1) 02-14-89 601 Brookwood Village Mall
Homewood, AL
(FA.A2) 10-09-90 1240 Eastdale Mall
Montgomery, AL
(FA.A3) 02-26-92 3028 S. Memorial Parkway
Huntsville, AL
(FA.A4) 11-19-92 100 Century Plaza
7520 Crestwood Boulevard
Birmingham, AL
(FA.A5) 10-12-93 1700 Rainbow Drive
Gadsden, AL
(FA.A6) 05-03-94 62 McFarland Boulevard
Northport, AL
(FA.A7) 10-31-94 2041-A Beltline Road, S.W.
Decatur, AL
-1-
<PAGE>
(FA.A8) 01-24-95 302 Hughes Road
Madison, AL
(FA.A9) 02-28-95 3001 Carter Hill Road
Montgomery, AL
(FA.A10) 10-04-95 360 Cahaba Valley
Pelham, AL
(FA.A11) 05-27-98 1917 Cobbs Ford Rd.
Prattville, AL
(FA.A12) 09-29-98 3195 Taylor Road
Montgomery, AL
(FA.A13) 11-17-98 2271 Florence Blvd.
Florence, AL
APPLE AMERICAN Donald W. Strang, Jr. (DA.A) 04-10-96 DE 4/06-01-99
OF DELAWARE Allen S. Musikantow Amended: 03-01-97
8905 Lake Avenue 01-01-98
Cleveland, OH 44102
(FA.A1) 04-22-97 909 N. DuPont Highway
Dover, DE
APPLE AMERICAN Donald W. Strang, Jr. (DA.A) 06-25-89 IN 22/12-31-98
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
01-01-97
(FA.A1) 10-16-89 5046 W. Pike Plaza
Indianapolis, IN
(FA.A2) 06-18-90 4040 E. 82nd Street
Indianapolis, IN
(FA.A3) 12-18-90 1436 W. 86th Street
Indianapolis, IN
(FA.A4) 05-12-92 1050 Broad Ripple Avenue
Indianapolis, IN
(FA.A5) 08-08-92 2415 Sagamore Pkwy., South
Lafayette, IN
-2-
<PAGE>
(FA.A6) 11-10-92 1241 U.S. 31 North, #L-5
Greenwood, IN
(FA.A7) 12-14-93 1900 25th Street
Columbus, IN
(FA.A8) 06-08-94 14711 U.S. 31 North
Carmel, IN
(FA.A9) 11-03-94 1423 W. McGalliard Road
Muncie, IN
(FA.A10) 05-02-95 119 N. Baldwin
Marion, IN
(FA.A11) 05-09-95 1922 E. 53rd Street
Anderson, IN
(FA.A12) 05-31-95 3720 S. Reed Road
Kokomo, IN
(FA.A13) 06-12-95 2894 E. 3rd Street
Bloomington, IN
(FA.A14) 11-21-95 5664 Crawfordsville Road
Indianapolis, IN
(FA.A15) 02-13-96 700 N. Morton Street
Franklin, IN
(FA.A16) 02-27-96 8310 East 96th
Fishers, IN
(FA.A17) 08-13-96 109 S. Memorial Drive
New Castle, IN
(FA.A18) 10-15-96 2659 E. Main Street
Plainfield, IN
(FA.A19) 12-12-96 1516 S. Washington Street
Crawfordsville, IN
(FA.A20) 01-28-97 7345 E. Washington Street
Indianapolis, IN
(FA.A21) 12-16-97 3009 Northwestern Avenue
West Lafayette, IN
(FA.A22) 11-23-98 17801 Foundation Drive
Noblesville, IN
(FA.A23) 12-08-98 101 Lee Blvd.
Shelbyville, IN
-3-
<PAGE>
APPLE AMERICAN Donald W. Strang, Jr. (DA.A) 04-10-96 NJ 8/12-31-99
LIMITED Allen S. Musikantow Amended: 01-01-98
PARTNERSHIP OF
NEW JERSEY (FA.A1) 02-04-97 880 Berlin Road
8905 Lake Avenue Voorhees, NJ
Cleveland, OH 44102
(FA.A2) 03-02-98 700 Consumer Square
Mays Landing, NJ
(FA.A3) 09-21-98 3849 Delsea Drive
Vineland, NJ
APPLE AMERICAN Donald W. Strang, Jr. (DA.A) 11-11-92 OH 23/12-31-98
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 01-01-97
(FA.A1) 04-02-90 5658 Mayfield Road
Lyndhurst, OH
(FA.A2) 06-26-90 5010 Great Northern
Plaza South
North Olmstead, OH
(FA.A3) 11-20-91 3000 Westgate Mall
Fairview Park, OH
(FA.A4) 01-19-93 4981 Dressler Road
N. Canton, OH
(FA.A5) 08-31-93 508 Howe Avenue
Cuyahoga Falls, OH
(FA.A6) 09-24-93 6871 Pearl Road
Middlesburg Heights, OH
(FA.A7) 12-07-93 3989 Burbank Road
Wooster, OH
(FA.A8) 12-06-94 8174 Mentor Avenue
Mentor, OH
(FA.A9) 12-13-94 1023 N. Lexington-Springmill Rd.
Ontario, OH
(FA.A10) 12-15-94 6140 S.O.M. Center Road
Solon, OH
-4-
<PAGE>
(FA.A11) 01-24-95 7159 Macedonia Commons Blvd.
Macedonia, OH
(FA.A12) 05-23-95 4800 Ridge Road
Brooklyn, OH
(FA.A13) 06-06-95 5503 Milan Road
Sandusky, OH
(FA.A14) 10-31-95 1540 W. River Road
Elyria, OH
(FA.A15) 02-20-96 4115 Pearl Street
Medina, OH
(FA.A16) 03-05-96 411 Northfield Road
Bedford Heights, OH
(FA.A17) 08-07-96 233 Graff Road, S.E.
New Philadelphia, OH
(FA.A18) 09-04-96 17771 S. Park Center
Strongsville, OH
(FA.A19) 11-18-96 4296 Kent Road
Stow, OH
(FA.A20) 04-22-97 3938 W. Market Street
Copley Township, OH
(FA.A21) 11-11-97 1020 High Street
Wadsworth, OH
APPLE AMERICAN Donald W. Strang, Jr. (DA.A) 05-07-91 WA 14/12-31-99
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
(FA.A1) 12-03-92 1842 S. SeaTac Mall
Federal Way, WA
(FA.A2) 03-11-93 4626 196th Street, Southwest
Lynnwood, WA
(FA.A3) 06-08-94 806 S.E. Everett Mall Way
Everett, WA
(FA.A4) 11-30-94 3510 S. Meridian
Puyallup, WA
-5-
<PAGE>
(FA.A5) 07-18-95 17790 Southcenter Parkway
Tukwila, WA
(FA.A6) 01-02-96 1919 S. 72nd Street
Tacoma, WA
(FA.A7) 12-08-97 1300A N. Miller Street
Wenatchee, WA
(FA.A8) 03-30-98 3138 NW Randall Way
Silverdale, WA
APPLE Joe S. Thomson (DA.A) 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
(FA.A1) 06-15-93 5110 Summerhill Road
Texarkana, TX
(FA.A2) 10-19-93 9088 Mansfield Road
Shreveport, LA
(FA.A3) 03-08-94 6818 Rogers Avenue
Ft. Smith, AR
(FA.A4) 04-09-96 2126 Airline Drive
Bossier City, LA
(FA.A5) 05-29-96 4078 N. College
Fayetteville, AR
(FA.A6) 10-07-97 1517 Bert Kouns
Shreveport, LA
APPLE BY Ronald A. Caselli (DA.A) 08-01-98 CA 6/12-31-00
THE BAY, INC.*
c/o Grubb & Ellis Co.
1732 N. First Street (FA.1) 05-05-94 8200 Arroyo Circle
Suite 1000 Gilroy, CA
San Jose, CA 95112
(FA.2) 08-22-95 84 Ranch Drive
Milpitas, CA
(FA.3) 03-05-96 3900 Sisk Road
Modesto, CA
* Territory and restaurants previously held split with other Principal
Shareholder, Christian J. Knox, on 08/01/98.
-6-
<PAGE>
APPLE CENTRAL
INVESTMENTS, LTD. Donald Flynn (DA.A) 04-08-98 British Columbia, 9/12-15-03
c/o Mr. Athos Chrysanthou Canada
Chrysanthou & Chrisoforo
Th. Dernis & Florinis Street (FA.A1) 04-08-98 (To be determined)
Cy-1502 Nicosia CYPRUS
APPLE CORE Myron Thompson (DA.A) -98 MN, ND 5/10-31-98
ENTERPRISES, INC.*
1225 S. Broadway
Minot, ND 58701
(FA.A1) 11-13-90 2302 15th Street, S.W.
Minot, ND
(FA.A2) 04-14-92 434 S. 3rd
Bismarck, ND
(FA.A3) 12-07-93 2351 S. Columbia Road
Grand Forks, ND **
(FA.A4) 11-08-94 2800 13th Avenue, Southwest
Fargo, ND **
(FA.A5) 12-19-95 289 15th Street, West
Dickinson, ND **
(DA.B) 10-26-98 AZ, CA 3/06-30-00
(FA.B1) 04-16-96 3101 S. Fourth Avenue
Yuma, AZ ***
(FA.B2) 08-12-97 32400 Date Palm Drive
Cathedral City, CA ***
* Name change from EJM Enterprises.
** Acquired from affiliated entity Grand Apple, L.L.C. on 10/26/98.
*** Acquired from Apple Desert, L.C. on 10/26/98.
-7-
<PAGE>
APPLE CORPS, L.P. * David K. Rolph (DA.A) 08-03-98 IL, WI, IA, MO 18/06-30-01
1877 North Rock Road Darrell L. Rolph
Wichita, KS 67206 (FA.A1) 08-03-98 6301 University Ave.
Cedar Falls, IA
(FA.A2) 08-03-98 105 Chestnut
Ames, IA
(FA.A3) 08-03-98 3838 Elmore Ave.
Davenport, IA
(FA.A4) 08-03-98 11410 Forest
Clive, IA
(FA.A5) 08-03-98 6301 S.E. 14th Street
West Des Moines, IA
(FA.A6) 08-03-98 303 Collins Road
Cedar Rapids, IA
(FA.A7) 08-03-98 3900 Merle Hay Rd.
Des Moines, IA
(FA.A8) 08-03-98 1001 E. First Street
Ankeny, IA
(FA.A9) 08-03-98 3805 41st Ave.
Moline, IL
(FA.A10) 08-03-98 3920 E. Lincoln Way
Sterling, IL
(FA.A11) 08-03-98 306 Cleveland
Muscatine, IA
(FA.A12) 08-03-98 3101 S. Center Street
Marshalltown, IA
(FA.A13) 08-03-98 2810 5th Avenue South
Fort Dodge, IA
(FA.A14) 08-03-98 2414 Lincoln Way
Clinton, IA
(FA.A15) 08-03-98 3006 Fourth Street S.W.
Mason City, IA
(FA.A16) 08-03-98 200 12th Avenue Center
Coralville, IA
* Acquired all Restaurants from Avado Brands, Inc. on 8/3/98.
-8-
<PAGE>
APPLE del NORESTE, Ricardo Garza (DA.A) 08-04-98 Nuevo Leon, Coahuila 4/12-31-01
S.A. de C.V. Jorge Garza Trevino and Tamaulipas, Mexico
Ave. Vasconcelos #210 Ote.
Residencial San Agustin
Garza Garcia, Nuevo Leon
C.P. 66260
Mexico (FA.A1) 08-04-98 Vasconcelos #158
Santa Engracia Ote.
Garza Garcia, Nuevo Leon 66260
Mexico
APPLE EAST, INC. Edwin F. Scheibel (DA.A) 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
(FA.A1) 10-21-97 57 Federal Road
Danbury, CT
APPLE FOOD SERVICE* Edward W. Doherty (DA.A) 05-04-98 NY 16/12-31-02
OF NEW YORK, LLC William A. Johnsen
7 Pearl Court
Allendale, NJ 07401 (FA.A1) 05-04-98 938 S. Broadway
Hicksville, NY
(FA.A2) 05-04-98 Veterans Hwy. &
Smithtown Ave.
Bohemia, NY
(FA.A3) 05-04-98 2660 Sunrise Highway
Bellmore, NY
(FA.A4) 05-04-98 1985 Jericho Turnpike
New Hyde Park, NY
(FA.A5) 05-04-98 2550 Sunrise Hwy.
East Islip, NY
(FA.A6) 05-04-98 1935 N. Ocean Avenue
Farmingville, NY
(FA.A7) 05-04-98 3145 Middle Country Rd.
Lake Grove, NY
(FA.A8) 11-24-98 360 Walt Whitman Rd.
Huntington Station, NY
* Acquired 7 restaurants from Applebee's International on 05/04/98.
-9-
<PAGE>
APPLE GOLD, INC. Michael D. Olander (DA.A) 07-01-94 NC, VA 29/01-31-98
170 Windchime Court Amended: 02-01-96
Raleigh, NC 27615
(FA.A1) 06-10-85 1389 Kildair Farm Road
Cary, NC
(FA.A2) 06-28-85 7471 Six Forks Road
Raleigh, NC
(FA.A3) 01-28-87 4004 Capital Boulevard
Raleigh, NC
(FA.A4) 01-28-87 1508 E. Franklin Road
Chapel Hill, NC
(FA.A5) 08-21-87 3400 Westgate Drive
Durham, NC
(FA.A6) 09-10-87 2001 N. Main
High Point, NC
(FA.A7) 06-13-88 476 Western Boulevard
Jacksonville, NC
(FA.A8) 02-01-89 1120 N. Wesleyan Boulevard
Rocky Mount, NC
(FA.A9) 01-22-90 3103 Garden Road
Burlington, NC
(FA.A10) 07-31-90 202 S.W. Greenville Blvd.
Greenville, NC
(FA.A11) 12-18-90 9616 E. Independence Blvd.
Matthews, NC
(FA.A12) 01-03-91 3625 Hillsborough Street
Raleigh, NC
(FA.A13) 07-01-91 10921 Carolina Place Pkwy.
Pineville, NC
(FA.A14) 03-24-92 4406 W. Wendover Avenue
Greensboro, NC
(FA.A15) 05-18-93 2180 Highway 70, Southeast
Hickory, NC
(FA.A16) 09-29-93 1115 Glenway Drive
Statesville, NC
(FA.A17) 07-19-94 901 N. Spence Avenue
Goldsboro, NC
(FA.A18) 10-18-94 8700 J.W. Clay
Charlotte, NC
(FA.A19) 01-10-95 3200 Battleground Avenue
Greensboro, NC
(FA.A20) 05-16-95 2239 W. Roosevelt Boulevard
Monroe, NC
(FA.A21) 09-19-95 5120 New Center Drive
Wilmington, NC
-10-
<PAGE>
(FA.A22) 11-07-95 1990 Griffin Road
Winston-Salem, NC
(FA.A23) 12-19-95 1403 N. Sand Hills Blvd.
Aberdeen, NC
(FA.A24) 03-05-96 1240 U.S. Highway 29 North
Concord, NC
(FA.A25) 04-29-96 3400 Clairndon Blvd.
New Bern, NC
(FA.A26) 11-12-96 2300 Forest Hills Road
Wilson, NC
(FA.A27) 02-11-97 501 E. Six Forks Road
Raleigh, NC
(FA.A28) 04-22-97 2702 Raeford Road
Fayetteville, NC
(FA.A29) 10-07-97 1165 Highway 70
Garner, NC
(FA.A30) 12-16-97 205 Faith Road
Salisbury, NC
(FA.A31) 02-03-98 5110 Piper Station Dr.
Charlotte, NC
(FA.A32) 06-02-98 1961 Skibo Road
Fayetteville, NC
(FA.A33) 11-03-98 3628 E. Franklin Blvd.
Gastonia, NC
APPLE J, L.P.* Pat Williamson (DA.A) 09-14-98 GA, NC, SC 32/12-31-02
31 Rushmore Dr. William A. Klepper
Greenville, SC 29615 Allan S. Huston
(FA.A1) 09-14-98 430 Congaree Rd.
Greenville, SC
(FA.A2) 09-14-98 2344 Broad River Rd. @I20
Columbia, SC
(FA.A3) 09-24-98 3441 Clemson Blvd.
Anderson, SC
(FA.A4) 09-14-98 9 Park Lane
Hilton Head, SC
-11-
<PAGE>
(FA.A5) 09-14-98 4505 Devine Street
Columbia, SC
(FA.A6) 09-14-98 7602 Greenville Hwy.
Spartanburg, SC
(FA.A7) 09-14-98 841 Broad Street
Sumter, SC
(FA.A8) 09-14-98 1635 Four Seasons Blvd.
Hendersonville, NC
(FA.A9) 09-14-98 1922 Augusta Street
Greenville, SC
(FA.A10) 09-14-98 1360 Whiskey Road
Aiken, SC
(FA.A11) 09-14-98 5055 Calhoun Memorial Blvd.
Easley, SC
(FA.A12) 09-14-98 115 Tunnel Road
Asheville, NC
(FA.A13) 09-14-98 245 O'Neil Court
Columbia, SC
(FA.A14) 09-14-98 704 Wade Hampton Blvd.
Greer, SC
(FA.A15) 09-14-98 696 Bypass 123
Seneca, SC
(FA.A16) 09-14-98 1617 Bypass 72 N.E.
Greenwood, SC
(FA.A17) 09-14-98 2227 Dave Lyle Blvd.
Rock Hill, SC
(FA.A18) 09-14-98 3944 Grandview Dr.
Simpsonville, SC
(FA.A19) 09-14-98 64 Beacon Drive
Greenville, SC
(FA.A20) 09-14-98 1512 W. Floyd Baker Ave.
Gaffney, SC
(FA.A21) 09-14-98 1268 Hwy. 9 Bypass
Lancaster, SC
-12-
<PAGE>
(FA.A22) 09-14-98 5185 Fernadina Rd.
Columbia, SC
(FA.A23) 09-14-98 605 Columbia Ave.
Lexington, SC
(FA.A24) 09-14-98 1655 Hendersonville Rd.
Asheville, NC
(FA.A25) 09-14-98 1065 S. Big A Road
Toccoa, GA
(FA.A26) 09-14-98 2360 Chestnut Street
Orangeburg, SC
(FA.A27) 09-14-98 2338 Boundary Street
Beaufort, SC
(FA.A28) 09-14-98 1221 Woodruff Rd.
Greenville, SC
(FA.A29) 09-14-98 1985 E. Main Street
Spartanburg, SC
* Restaurants acquired from Avado Brands, Inc. 09/14/98.
APPLE MIDDLE EAST Abdel Mohsen Al Homaizi (DA.A) 09-28-96 Bahrain, Egypt, Kuwait, 12/08-01-01
RESTAURANT Apple Middle East LLC Lebanon, United Arab
COMPANY, LLC Emirates
P.O. Box 209
Safat 13070 KUWAIT (FA.A1) 09-28-96 (to be determined)
APPLE NORTE, Eduardo Orozco (DA.A) 05-26-98 Chihauahua, Mexico 4/12-31-00
S.A. de C.V. Joaquin Martinez
Av. Technologico
1335 Altos
Fracc. Almos Technologico
Cd. Juarez, Chihuahua C.P.
32500 Mexico (FA.A1) 05-26-98 (to be determined)
APPLE NORTH, INC. Martin Hittinger No Development
99 New Unionville Rd. Eddie G. Hittinger Rights
Wallkill, NY 12589
(FA.A1) 03-11-92 Wappinger Plaza
1271 Route 9
Wappinger Falls, NY
-13-
<PAGE>
(FA.A2) 08-10-93 194 Colonie Center Mall
Albany, NY
(FA.A3) 11-21-95 18 Park Avenue
Clifton Park, NY
APPLE William F. Palmer (DA.A) 02-01-89 GA 17/12-31-98
RESTAURANTS, INC. Amended: 04-08-92
6620 McGinnis Ferry Rd. 07-31-92
Suite B, Building 12D 03-25-93
Duluth, GA 30097 04-05-94
(FA.A1) 02-01-89 655 Georgia Highway 120
Lawrenceville, GA
(FA.A2) 10-01-89 2445 Mall Boulevard
Kennesaw, GA
(FA.A3) 10-15-90 1152 Old Salem Road
Conyers, GA
(FA.A4) 03-11-91 Perimeter Mall, Suite 2054
4400 Ashford-Dunwoody Rd.
Atlanta, GA
(FA.A5) 11-25-91 826 Turner McCall Boulevard
Rome, GA
(FA.A6) 08-10-92 1705 Browns Bridge Road
Gainesville, GA
(FA.A7) 05-03-93 504 Lakeland Plaza
Cumming, GA
(FA.A8) 02-21-94 2728 Spring Road
Smyrna, GA
(FA.A9) 12-19-94 3676 Highway 138
Stockbridge, GA
(FA.A10) 03-21-95 226 W. Broad Street
Athens, GA
(FA.A11) 05-08-95 1925 Highway 124
Snellville, GA
(FA.A12) 02-05-96 185 Cherokee Place
Cartersville, GA
(FA.A13) 06-17-96 971 Bullsboro Drive
Newnan, GA
-14-
<PAGE>
(FA.A14) 02-24-97 1105 S. Park Street
Carrollton, GA
(FA.A15) 03-16-98 1421 Riverstone Pkwy.
Canton, GA
(FA.A16) 06-15-98 4210 Johns Creek Pkwy.
Suwanee, GA
(FA.A17) 08-10-98 125 Gwinco Blvd.
Suwanee, GA
APPLE RESTAURANTS Benoit Wesley (DA.A) 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
(FA.A1) 07-04-94 In De Cramer 169
6412 PM Heerlen
The Netherlands
(FA.A2) 05-17-96 Gevers Deynootplein 32
2586CK Scheveningen
HOLLAND
(FA.A3) 09-03-96 Wychenseweg 174
6538SX Nijmegen
HOLLAND
(FA.A4) 06-30-97 Pierre de Coubertinweg 1
6225 XT Maastricht
HOLLAND
(FA.A5) 08-17-98 Rijksweg Zuid #250
6161 BZ Geleen
HOLLAND
APPLE SAUCE, INC. W. Curtis Smith (DA.A) 02-11-92 IN, OH 19/03-01-99
741 Centre View Blvd. James Paul Borke Amended: 10-20-92
Suite 100 08-25-94
Crestview Hills, KY 41017 10-05-94
03-02-97
(FA.A1) 11-03-92 650 W. Lincoln Highway
Schererville, IN
(FA.A2) 08-24-93 5788 Coventry Lane
Ft. Wayne, IN
-15-
<PAGE>
(FA.A3) 12-21-93 4510 N. Clinton Street
Ft. Wayne, IN
(FA.A4) 11-15-94 4057 S. Franklin Street
Michigan City, IN
(FA.A5) 04-25-95 670 Morthland
Valparaiso, IN
(FA.A6) 07-04-95 6615 N. Main Street
Granger, IN
(FA.A7) 09-19-95 266 E. Alexis Road
Toledo, OH
(FA.A8) 11-07-95 3241 Interchange Drive
Elkhart, IN
(FA.A9) 12-05-95 531 Dussel Road
Maumee, OH
(FA.A10) 06-11-96 4702 Monroe Street
Toledo, OH
(FA.A11) 06-17-96 8425 Broadway
Merrillville, IN
(FA.A12) 07-30-96 3296 Elida Road
Lima, OH
(FA.A13) 09-10-97 6525 Lima Road
Ft. Wayne, IN
(FA.A14) 10-28-97 2531 Tiffan Avenue
Findlay, OH
(FA.A15) 11-25-97 1150 Ireland Road
South Bend, IN
(FA.A16) 12-09-97 330 Ridge Road
Munster, IN
(FA.A17) 07-14-98 2621 E. Center St.
Warsaw, IN
(FA.A18) 10-20-98 1807 Reith Blvd.
Goshen, IN
(DA.B) 09-09-92 FL 8/12-31-00
Amended: 09-30-93
10-05-94
03-28-95
-16-
<PAGE>
(FA.B1) 04-12-94 10135 Pines Boulevard
Pembroke Pines, FL
(FA.B2) 07-12-94 12719 W. Sunrise Boulevard
Sunrise, FL
(FA.B3) 02-15-95 1179 S. University Drive
Plantation, FL
(FA.B4) 09-12-95 2729 University Drive
Coral Springs, FL
(FA.B5) 10-10-96 9815 N.W. 41st Street
Miami, FL
APPLE SEED VENTURES Steven L. Millard (DA.A) 11-09-98 Alberta, Canada 10/12-31-03
160 Mount Laurel Crescent Tad A. Fugate
Winnipeg, Manitoba, (FA.A1) 11-09-98 13006 50th Street *
R2J 4C4 CANADA Edmonton, Alberta Canada
* Acquired from Can-Apple Investments, Ltd. 11/09/98.
APPLE-BAY EAST, INC. Richard L. Winders (DA.A) 12-18-92 CA 8/09-30-98
1811 Santa Rita Rd. Amended: 02-19-94
Suite 215 03-01-97
Pleasanton, CA 94566 02-05-98
(FA.A1) 06-14-94 2263 South Shore Center
Alameda, CA
(FA.A2) 09-27-94 4301 N. 1st Street
Livermore, CA
(FA.A3) 01-08-96 24041 Southland Drive
Hayward, CA
(FA.A4) 12-17-96 2819 Ygnacio Valley Road
Walnut Creek, CA
(FA.A5) 07-28-97 1369 Fitzgerald Drive
Pinole, CA
(FA.A6) 08-05-98 2737 Hillcrest Ave.
Antioch, CA
APPLE-METRO, INC. Roy Raeburn (DA.A) 03-23-94 NY 8/11-10-99
550 Mamaroneck Ave. Zane Tankel Amended: 04-01-95
Suite 301
Harrison, NY 10528
-17-
<PAGE>
(FA.A1) 10-25-94 Staten Island Mall
2655 Richmond Avenue
Staten Island, NY
(FA.A2) 06-06-95 640 E. Boston Post Road
Mamaroneck, NY
(FA.A3) 11-07-95 430 New Dorp Lane
Staten Island, NY
(FA.A4) 04-29-97 185 Bedford Road
Mt. Kisco, NY
(FA.A5) 11-18-97 1 Mall Walk West
Yonkers, NY
(FA.A6) 04-21-98 1451 Richmond Ave.
Staten Island, NY
(FA.A7) 11-17-98 3127 E. Main St.
Mohegan Lake, NY
APPLEBAY Leonard E. Rhode (DA.A) 03-18-93 CA 7/03-31-98
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
(FA.A1) 12-19-95 2250 Santa Rosa Avenue
Santa Rosa, CA
(FA.A2) 06-07-96 5301 Old Redwood Hwy.
Petaluma, CA
APPLEILLINOIS, L.L.C. J. Timothy Brugh (DA.A) 11-18-98 IL 36/12-31-03
741 Centre View Blvd. James P. Borke
Suite 100 Curtis J. Smith
Crestview Hills, KY 41017 (FA.A1) 11-18-98 354 W. Army Trail Rd.
Bloomingdale, IL
(FA.A2) 11-18-98 60 Waukegan Road
Deerfield, IL
(FA.A3) 11-18-98 999 Elmhurst Road
Mt. Prospect, IL
(FA.A4) 11-18-98 880 S. Barrington Rd.
Steamwood, IL
-18-
<PAGE>
(FA.A5) 11-18-98 9380 Joliet Road
Hodgkins, IL
(FA.A6) 11-18-98 5690 Northwest Hwy.
Crystal Lake, IL
(FA.A7) 11-18-98 4937 W. Cal-Sag Road
Crestwood, IL
(FA.A8) 11-18-98 1040 N. Kenzie
Bradley, IL
(FA.A9) 11-18-98 2411 Sycamore Road
DeKalb, IL
(FA.A10) 11-18-98 1296 W. Boughton Rd.
Bolingbrook, IL
(FA.A11) 11-18-98 125 S. Randall Road
Elgin, IL
(FA.A12) 11-18-98 2795 Plainfield Road
Joliet, IL
(FA.A13) 11-18-98 1690 S. Randall Road
Geneva, IL
(FA.A14) 11-18-98 6447 Grand Avenue
Gurnee, IL
(FA.A15) 11-18-98 1700 N. Richmond Rd.
McHenry, IL
(FA.A16) 11-18-98 251 N. Randall Rd.
Lake in the Hills, IL
(FA.A17) 11-18-98 16200 S. Harlem Ave.
Tinley Park, IL
(FA.A18) 11-18-98 17575 Halsted Avenue
Homewood, IL
(FA.A19) 11-18-98 741 E. Dundee
Palatine, IL
(FA.A20) 11-18-98 400 Town Center
Matteson, IL
(FA.A21) 11-18-98 449 S. Route 59
Aurora, IL
(FA.A22) 11-18-98 6656 W. Grand Ave.
Chicago, IL
-19-
<PAGE>
(FA.A23) 11-18-98 418 E. Rollins Rd.
Round Lake Beach, IL
APPLEJAM, INC. Frank DeAngelo (DA.A) 08-01-88 AL, FL, GA 8/10-01-98
P.O. Box 956308 Amended: 11-18-91
Duluth, GA 30096 08-20-93
03-10-94
10-12-94
10-01-96
11-20-97
(FA.A1) 12-01-88 1170 Appalachee Parkway
Tallahassee, FL
(FA.A2) 02-14-89 1400 Village Square Blvd.
Tallahassee, FL
(FA.A3) 04-17-90 637 Westover Boulevard
Albany, GA
(FA.A4) 06-25-91 678 W. 23rd Street
Panama City, FL
(FA.A5) 12-08-92 3050 Ross Clark Circle, S.W.
Dothan, AL
(FA.A6) 05-10-94 1301 S. Augustine Road
Valdosta, GA
(FA.A7) 08-23-94 1005 N.W. 13th Street
Gainesville, FL
(FA.A8) 05-21-96 1401 Capital Circle, N.W.
Tallahassee, FL
(FA.A9) 09-21-98 808 West 7th Street
Tifton, GA
(DA.B) 01-15-92 TX 6/12-31-98
Amended: 06-24-93
02-28-95
02-12-96
(FA.B1) 07-19-93 5809 Loop 410 Northwest
San Antonio, TX
(FA.B2) 04-12-94 97 Loop 410 Northeast
San Antonio, TX
(FA.B3) 09-19-95 995 I-35
New Braunfels, TX
-20-
<PAGE>
(FA.B4) 03-18-97 7880 Interstate Hwy. 35 N.
San Antonio, TX
(FA.B5) 11-24-97 8224 Fredericksburg
San Antonio, TX
APPLEROCKET Cees Toor (DA.A) 01-22-96 Kingdom of Sweden 04/04-01-99
FRANCHISING AB Gerard Toor
Hotel Restaurant Toor (FA.A1) 01-22-96 Infra City
Stationsplein 2 Uplands-Vasby
2405 Bk Alphen a/d Rijn SWEDEN
HOLLAND
(FA.A2) 03-18-98 Majorsvagen 2-4 1777 10
Jarfalla
Stockholm Quality Outlet
Barkaby, Sweden
AVADO BRANDS, INC.* Tom E. DuPree, Jr. (DA.A) 01-06-85 GA, NC, SC
Hancock @ Washington Amended: 03-04-91
Madison, GA 30650 01-10-92
05-14-93
01-26-94
06-22-94
02-24-95
06-29-98
Terminated: 09-14-98
(DA.B) 09-24-86 FL
Amended: 05-31-90
03-04-91
01-10-92
01-26-94
Terminated: 08-03-98
(DA.C) 06-06-88 AL, AR, MO, MS, TN
Amended: 03-04-91
01-10-92
01-01-94
01-26-94
06-29-98
Terminated: 10-26-98
(DA.D) 06-19-88 IN, KY, MD, NC, OH, PA,
Amended: 03-04-91 VA, WV, DC
01-10-92
01-26-94
-21-
<PAGE>
12-23-94
02-24-95
03-30-98
(FA.D1) 05-01-89 4535 Outer Loop
Louisville, KY
(FA.D2) 04-11-89 9201 Hurstbourne Lane
Louisville, KY
(FA.D3) 09-24-90 2225 Taylorsville Road
Louisville, KY
(FA.D4) 07-15-91 Greentree Mall
Hwy. 131 & Greentree Blvd.
Clarksville, IN
(FA.D5) 03-27-92 4717 Dixie Highway
Louisville, KY
(FA.D6) 01-29-93 12913 Shelbyville Road
Louisville, KY
(FA.D7) 09-07-93 14441 Brookfield Tower Dr.
Chantilly, VA
(FA.D8) 09-20-93 12970 Fair Lakes Shopping Center
Fairfax, VA
(FA.D9) 02-08-94 10600 Dixie Highway
Louisville, KY
(FA.D10) 06-13-94 9625 Lee Highway
Closed: 10-18-98 Fairfax, VA
(FA.D11) 06-26-94 6310 Richmond Highway
Alexandria, VA
(FA.D12) 07-11-94 7913 Sudley Road
Closed: 10-18-98 Manassas, VA
(FA.D13) 12-19-94 4100 N.W. Crain Highway
Bowie, MD
(FA.D14) 02-06-95 3610 Crain Highway
Waldorf, MD
(FA.D15) 05-29-95 5000 Shelbyville Road
Louisville, KY
(FA.D16) 07-31-95 755 Foxcroft Drive
Martinsburg, WV
-22-
<PAGE>
(FA.D17) 10-16-95 13850 Noblewood Plaza
Woodbridge, VA
(FA.D18) 10-26-95 45480 Miramar Way
California, MD
(FA.D19) 11-27-95 955 Edwards Ferry Road
Leesburg, VA
(FA.D20) 12-04-95 1050 Wayne Avenue
Chambersburg, PA
(FA.D21) 02-05-96 1481 Wesel Boulevard
Hagerstown, MD
(FA.D22) 06-17-96 5613 Spectrum Drive
Frederick, MD
(FA.D23) 06-17-96 7272 Baltimore Avenue
College Park, MD
(FA.D24) 06-17-96 19 Mall Road
Barboursville, WV
(FA.D25) 09-05-96 389 S. John Scott Avenue
Steubenville, OH
(FA.D26) 09-05-96 2851 Plank Road
Fredericksburg, VA
(FA.D27) 09-22-96 3 Dudley Farms Lane
Charleston, WV
(FA.D28) 10-07-96 1000 Largo Center Drive
Largo, MD
(FA.D29) 10-14-96 127 E. Broad Street
Falls Church, VA
(FA.D30) 10-14-96 50655 Valley Frontage Road
St. Clairsville, OH
(FA.D31) 10-21-96 21048 Frederick Road
Germantown, MD
(FA.D32) 11-18-96 802 Grand Central Avenue
Vienna, WV
(FA.D33) 12-09-96 45979 Denizen Plaza
Sterling, VA
(FA.D34) 05-20-97 100 Hylton Lane
Beckley, WV
-23-
<PAGE>
(FA.D35) 05-20-97 791 N. Dual Highway
Seaford, DE
(FA.D36) 06-23-97 60 Liberty Square
Hurricane, WV
(FA.D37) 07-28-97 105 West Lee Highway
Warrenton, VA
(FA.D38) 09-15-97 123 Meadowfield Lane
Princeton, WV
(FA.D39) 11-17-97 555 N. Solomons Island Road
Prince Frederick, MD
(FA.D40) 11-24-97 1135 Third Avenue
Huntington, WV
(FA.D41) 12-15-97 1270 Ocean Outlet
Rehoboth Beach, DE
(FA.D42) 01-26-98 531 Emily Drive
Clarksburg, WV
(FA.D43) 02-23-98 482 Pike Street
Marietta, OH
(FA.D44) 03-23-98 202 Kanawha Mall
Charleston, WV
(FA.D45) 06-22-98 505 Armco Road
Ashland, KY
(FA.D46) 07-06-98 3447 Donnell Drive
Forestville, MD
(DA.E) 04-24-91 KY, TN
Amended: 01-10-92
01-26-94
07-27-94
08-24-98
Terminated: 10-26-98
(DA.F) 05-12-92 FL, GA
Amended: 01-26-94
07-27-94
Terminated: 08-03-98
(DA.G) 11-28-89 GA, KY, NC, TN, VA
Amended: 08-23-91
-24-
<PAGE>
04-15-92
04-12-94
07-27-94
Terminated: 06-29-98
(DA.H) 04-25-95 IA, IL, MO, WI
Amended: 06-15-98
08-03-98
Terminated: 08-24-98
(DA.I) 07-11-90 MI, MN, WI
Amended: 04-08-93
08-03-94
08-24-98
Terminated: 12-07-98
(DA.J) 06-30-95 IL, WI
Amended: 08-24-98
Terminated: 11-18-98
* Formerly known as Apple South, Inc.
In process of divesting all restaurants, which is estimated to be completed
2nd Quarter 1999.
-25-
<PAGE>
B.T. WOODLIPP, INC. Larry Brown (DA.A) 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
(FA.A1) 06-11-90 The Bourse Shops
2101 Greentree Road
Pittsburgh, PA
(FA.A2) 05-28-91 North Hills Village Mall
4801 McKnight Road
Pittsburgh, PA
(FA.A3) 11-12-91 Edgewood Towne Centre
1601 S. Braddock Avenue
Pittsburgh, PA
(FA.A4) 08-09-93 2045 Lebanon Church Road
West Mifflin, PA
(FA.A5) 01-10-94 4039 Washington Road
McMurray, PA
(FA.A6) 10-21-96 425 Galleria Drive
Johnstown, PA
(FA.A7) 01-13-97 3440 William Penn Highway
Pittsburg, PA
(FA.A8) 12-08-97 1065 Van Voorhis Road
Morgantown, WV
(FA.A9) 01-12-98 110 Logan Valley Road
Altoona, PA
BROOKLYN- Nicholas Katos (DA.A) 12-07-94 NY 4/06-30-98
APPLE, LTD. Michael Katos
4240 Bell Blvd., #303 Stephen Katos
Bayside, NY 11361
BRUNSWICK, GMbH Warren Hardie (DA.A) 03-11-96 Berlin, Sachsen and 5/12-31-97
Brunswick Recreation Bart Burger Sachsen-Anhalt in
Centers Federal Republic of
1 North Field Court Germany
Lake Forest, IL 60045
(FA.A1) 03-11-96 lm US-Play im Elebe Park
Peschel Strasse 31
Dresden, GERMANY
(FA.A2) 08-26-96 AM Pfalberg 3
Magdeberg, GERMANY
(FA.A3) 09-02-96 Handelsstrasse 4
Closed: 12-31-97 Leipzig, GERMANY
CA ONE SERVICES, INC. Jack Onyett (FA.A1) 08-07-98 2500 Airport Drive No Development
6033 W. Century Blvd. Ontario, CA Rights
Suite 418
Los Angeles, CA 09945
CAFE VENTURES, INC. William F. Palmer 04-11-83 No Additional
6620 McGinnis Ferry Road (Employment Development
Suite B, Building 12D Agreement) Rights
Duluth, GA 30097
(FA.A1) 10-01-85 475 Franklin Road
Marietta, GA
(FA.A2) 05-12-86 2095 Pleasant Hill
Duluth, GA
-26-
<PAGE>
(FA.A3) 07-18-87 11070 Alpharetta
Roswell, GA
(FA.A4) 05-26-88 5200 Highway 78
Stone Mountain, GA
CALABEE'S, INC. John R. Bifone (DA.A) 08-27-92 CA 2/09-01-94
500 W. Bonita Ave., #3 Amended: 09-29-92
San Dimas, CA 91773 09-30-93
08-01-94
05-01-95
(FA.A1) 08-10-93 674 W. Arrow Highway
San Dimas, CA
(FA.A2) 10-31-94 300 S. California
West Covina, CA
(FA.A3) 09-17-96 502 W. Huntington Drive
Monrovia, CA
(FA.A4) 12-16-96 9241 Monte Vista Avenue
Montclair, CA
CAN-APPLE Joseph Mandolfo (DA.A) 05-19-93 Manitoba, Canada 5/12-31-96
INVESTMENTS INC. Nancy Mandolfo Amended: 03-24-94
P.O. Box 540790 10-24-94
14243 Hamilton Street 12-30-94
Omaha, NE 68154 02-28-95
(FA.A1) 06-24-94 2065 Pembina Highway
Winnipeg, Manitoba
CANADA
(FA.A2) 11-03-95 1150 Grant Avenue
Winnipeg, Manitoba
CANADA
(FA.A3) 12-09-97 1598 Regent Avenue
Winnipeg, Manitoba
CANADA
(FA.A4) 06-16-98 1204 18th Street
Brandon, Manitoba
CANADA
(DA.B) 03-01-95
Terminated: 11-09-98 Alberta, CANADA *
(FA.B1) 03-01-95 109th Street
Closed: 11-04-98 Edmonton, AB
CANADA
* One restaurant sold to Apple Seed Ventures 11/09/98.
-27-
<PAGE>
CASUAL RESTAURANT Franklin W. Carson (DA.A) 06-23-89 FL No Development
CONCEPTS, INC. Terminated: 08-23-91 Rights
Tampa Bay Marina Center
205 S. Hoover St., #305
Tampa, FL 33609
(FA.A1) 01-23-90 5110 East Bay Drive
Clearwater, FL
(FA.A2) 05-15-90 30180 U.S. Highway 19 N.
Clearwater, FL
(DA.B) 08-11-92 FL 12/06-30-99
Amended: 05-14-93
11-15-93
02-02-94
08-03-94
02-28-95
03-01-97
07-30-97
(FA.B1) 06-07-93 5779 E. Fowler Avenue
Temple Terrace, FL
(FA.B2) 02-02-94 4301 Cortez Road
Bradenton, FL
(FA.B3) 01-16-95 4700 4th Street, North
St. Petersburg, FL
(FA.B4) 07-03-95 10911 Starkey Road
Largo, FL
(FA.B5) 06-18-96 3255 University Pkwy.
Bradenton, FL
(FA.B6) 06-18-96 3702 W. McKay Avenue, S.
Tampa, FL
(FA.B7) 04-14-97 829 Providence Road
Brandon, FL
(FA.B8) 07-21-97 4835 S. Florida Avenue
Lakeland, FL
(FA.B9) 09-29-97 1465 McMullen Booth Road
Clearwater, FL
(FA.B10) 03-16-98 8537 Little Road
New Port Richey, FL
-28-
<PAGE>
(FA.B11) 07-20-98 4651 Commercial Way
Spring Hill, FL
(FA.B12) 10-19-98 15090 N. Dale Mabry Hwy.
Carrollwood, FL
CHRISTIAN J. KNOX * Christian J. Knox (DA.A) 08-01-98 CA 12/12-31-00
& ASSOCIATES, INC.
633 E. Victor Road
Suite E
Lodi, CA 95240 (FA.A1) 12-19-94 311 Lake Merced
Daly City, CA
(FA.A2) 03-15-94 1041 Admiral Callaghan Lane
Vallejo, CA
(FA.A3) 07-26-94 9105 E. Stockton Boulevard
Elk Grove, CA
(FA.A4) 11-08-94 2170 Golden Centre Lane
Gold River, CA
(FA.A5) 04-04-95 160 Nut Tree Parkway
Vacaville, CA
(FA.A6) 10-02-95 2442 N. Kettleman Lane
Lodi, CA
(FA.A7) 08-18-97 6700 Stanford Ranch Road
Roseville, CA
(FA.A8) 12-08-97 2659 W. March Lane
Stockton, CA
(FA.A9) 08-24-98 400 Iron Point Road
Folsom, CA
(FA.A10) 11-16-98 3601 Truxel
Sacramento, CA
* Territory and restaurants split from Apple By The Bay 08/01/98.
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CONCORD Lawrence S. Bird (DA.A) 07-01-91 KS, MO, NE 8/08-31-99
HOSPITALITY, INC. Amended: 07-05-91
1701 Windhoek Drive 11-27-94
P.O. Box 6212 01-31-95
Lincoln, NE 68516 09-01-95
09-01-97
(FA.A1) 04-07-92 100 Manhattan Town Center
3rd & Poyntz, Suite P-5
Manhattan, KS
(FA.A2) 06-03-92 5928 S.W. 17th Street
Topeka, KS
(FA.A3) 04-20-93 3730 Village Drive
Lincoln, NE
(FA.A4) 08-09-94 4004 Frederick Boulevard
St. Joseph, MO
(FA.A5) 08-15-95 102 Platte Oasis Parkway
North Platte, NE
(FA.A6) 07-30-96 6100 O Street
Lincoln, NE
(FA.A7) 09-22-98 2901 Eaglecrest Dr.
Emporia, KS
(DA.B) 09-07-93 OK, NM, TX 5/09-30-98
Amended: 09-01-94
11-27-94
11-29-95
09-30-96
10-01-96
(FA.B1) 04-22-94 2714 Soncy Road
Amarillo, TX
(FA.B2) 05-27-94 4025 S. Loop 289
Lubbock, TX
(FA.B3) 10-16-95 2911 Kemp Boulevard
Wichita Falls, TX
(FA.B4) 09-16-96 6211 N.W Cache Road
Lawton, OK
(FA.B5) 11-10-98 2680 W. Broadway
Ardmore, OK
(DA.C) 10-25-95 NE, WY 3/12-31-98
Amended: 07-01-97
(FA.C1) 08-03-94 2621 5th Avenue
Scottsbluff, NE
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(FA.C2) 10-22-96 3209 Grand Avenue
Laramie, WY
DELTA BLUFF, LLC Harold Jordan (DA.A) 10-26-98 MO, TN, AR, MS 15/12-31-01
35 Union Avenue Elmer Jordan
Suite 301 James L. Hudson
Memphis, TN 38103
(FA.A1) 10-26-98 2114 Union Ave.
Memphis, TN
(FA.A2) 10-26-98 6025 Winchester Rd.
Memphis, TN
(FA.A3) 10-26-98 4835 American Way
Memphis, TN
(FA.A4) 10-26-98 2890 Bartlett Road
Bartlett, TN
(FA.A5) 10-26-98 3448 Poplar Ave.
Memphis, TN
(FA.A6) 10-26-98 584 Carriage House Dr.
Jackson, TN
(FA.A7) 10-26-98 1106 Germantown Pkwy.
Cordova, TN
(FA.A8) 10-26-98 6482 Poplar Avenue
Memphis, TN
(FA.A9) 10-26-98 710 DeSoto Cove
Horn Lake, MS
(FA.A10) 10-26-98 929 Poplar
Collierville, TN
(FA.A11) 10-26-98 3954 Austin Peay Hwy.
Memphis, TN
(FA.A12) 10-26-98 2700 Lake Road
Dyersburg, TN
(FA.A13) 10-26-98 7515 Goodman Road
Olive Branch, MS
EHI REALTY, INC. Edward W. Doherty (DA.A) 08-30-91 NJ 11/06-30-99
7 Pearl Court William A. Johnson Amended: 12-10-92
Allendale, NJ 07401 07-31-93
08-03-94
07-01-97
-31-
<PAGE>
(FA.A1) 10-26-93 1282 Centennial Avenue
Piscataway, NJ
(FA.A2) 12-07-93 14 Park Road
Tinton Falls, NJ
(FA.A3) 11-09-94 Fashion Center Mall
17 North & Ridgewood East
Paramus, NJ
(FA.A4) 06-13-95 1599 Route 22, West
Watchung, NJ
(FA.A5) 11-21-95 52 Brick Plaza
Brick, NJ
(FA.A6) 04-16-96 Rt. 46 @ Riverview Drive
Totowa, NJ
(FA.A7) 11-12-96 251 Woodbridge Ctr. Drive
Woodbridge, NJ
(FA.A8) 08-19-97 112 Eisenhower Parkway
Livingston, NJ
(FA.A9) 08-09-96 1057 Route 46 East
Parsippany, NJ
(DA.B) 11-06-96 NJ 3/08-31-00
EL APPLE, INC. John M. Verlander (DA.A) 05-23-94 NM, TX 7/05-31-98
5835 Onix, Suite 300 James J. Gore Amended: 03-07-95
El Paso, TX 79912 07-31-97
(FA.A1) 05-27-94 5800 N. Mesa
El Paso, TX
(FA.A2) 03-13-95 1766 Airway Boulevard
El Paso, TX
(FA.A3) 11-01-95 7956 Gateway East
El Paso, TX
(FA.A4) 06-27-96 2501 E. Lohman
Las Cruces, NM
(FA.A5) 08-29-96 4700 Woodrow Bean
El Paso, TX
(FA.A6) 03-25-97 1985 George Dieter
El Paso, TX
-32-
<PAGE>
(FA.A7) 12-31-97 4333 Sherwood Way
San Angelo, TX
FLORIDA APPLE * Laura Georgas (DA.A) 08-03-98 FL 12/12-31-00
EAST, L.L.C. William Georgas
250 S. Australian Ave. Gregory Georgas
Suite 1110
West Palm Beach, FL 33401
(FA.A1) 08-03-98 10501 S. U.S. Highway 1
Port St. Lucie, FL
(FA.A2) 08-03-98 6775 W. Indiantown Road
Jupiter, FL
(FA.A3) 08-03-98 6706 Forrest Hill Boulevard
Green Acres, FL
(FA.A4) 08-03-98 4890 Okeechobee Road
Ft. Pierce, FL
(FA.A5) 08-03-98 1975 Military Trail
W. Palm Beach, FL
(FA.A6) 08-03-98 3373 S.E. Federal Highway
Stuart, FL
(FA.A7) 08-03-98 5335 20th Street
Vero Beach, FL
(FA.A8) 08-03-98 1720 S. Federal Highway
Delray Beach, FL
(FA.A9) 08-03-98 100 U.S. Highway 441
Royal Palm Beach, FL
(FA.A10) 08-03-98 3167 N. Lake Blvd.
Lake Park, FL
(FA.A11) 08-03-98 701 N. Congress Blvd.
Closed: 09-27-98 Boynton Beach, FL
* Acquired all Restaurants from Avado Brands, Inc. 08/03/98.
-33-
<PAGE>
FLORIDA APPLE * Laura Georgas (DA.A) 08-03-98 FL, GA 16/12-31-01
NORTH, L.L.C. William Georgas
250 S. Australian Ave. Gregory Georgas
Suite 1110
West Palm Beach, FL 33401
(FA.A1) 08-03-98 10502 San Jose Boulevard
Jacksonville, FL
(FA.A2) 08-03-98 492 Blanding Boulevard
Orange Park, FL
(FA.A3) 08-03-98 4194 S. 3rd Street
Jacksonville Beach, FL
(FA.A4) 08-03-98 9498 Atlantic Boulevard
Jacksonville, FL
(FA.A5) 08-03-98 9485 Bay Meadows Road
Jacksonville, FL
(FA.A6) 08-03-98 225 State Road 312
St. Augustine, FL
(FA.A7) 08-03-98 177 Altama Connector
Brunswick, GA
(FA.A8) 08-03-98 1901 Memorial Drive
Waycross, GA
(FA.A9) 08-03-98 574 Busch Drive
Jacksonville, FL
(FA.A10) 08-03-98 113 The Lake Boulevard
Kingsland, GA
(FA.A11) 08-03-98 Route 17, Box 2219
Lake City, FL
(FA.A12) 08-03-98 6251 103rd Street
Jacksonville, FL
(FA.A13) 08-03-98 13201 Atlantic Blvd.
Jacksonville, FL
(FA.A14) 08-03-98 5055 J. Turner Butler Blvd.
Jacksonville, FL
* Acquired all Restaurants from Avado Brands, Inc. 08/03/98.
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<PAGE>
FLORIDA APPLE * Laura Georgas (DA.A) 08-03-98 FL 12/12-31-01
WEST, L.L.C. William Georgas
250 S. Australian Ave. Gregory Georgas
Suite 1110
West Palm Beach, FL 33401
(FA.A1) 08-03-98 13550 S. Tamiami Trail
Ft. Myers, FL
(FA.A2) 08-03-98 3971 S. Tamiami Trail
Sarasota, FL
(FA.A3) 08-03-98 15151 N. Cleveland Avenue
N. Ft. Myers, FL
(FA.A4) 08-03-98 20 Electric Drive
Sarasota, FL
(FA.A5) 08-03-98 4329 S. Tamiami Trail
Venice, FL
(FA.A6) 08-03-98 5082 Airport Pulling Rd., N.
Naples, FL
(FA.A7) 08-03-98 19010 Murdock Circle
Port Charlotte, FL
(FA.A8) 08-03-98 2228 Del Prado Blvd. South
Cape Coral, FL
(FA.A9) 08-03-98 26801 S. Tamiami Trail
Bonita Springs, FL
* Acquired all Restaurants from Avado Brands, Inc. 08/03/98.
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<PAGE>
GOLDEN WEST * Anand D. Gala (DA.A) 02-13-98 CA 10/02-15-01
RESTAURANTS, INC.
555 W. Redondo Beach Blvd.
Suite 211
Gardena, CA 90248
(FA.A1) 06-23-92 Fig Garden Village
5126 N. Palm Avenue
Fresno, CA
(FA.A2) 08-31-93 98 Shaw Avenue
Clovis, CA
(FA.A3) 12-12-94 1665 W. Lacey Boulevard
Hanford, CA
(FA.A4) 06-20-95 7007 N. Cedar
Fresno, CA
(FA.A5) 03-05-96 3604 West Shaw
Fresno, CA
(FA.A6) 06-10-97 5325 Avenida De Los Robles
Visalia, CA
(FA.A7) 08-12-97 9000 Ming Avenue, Suite M
Bakersfield, CA
* Acquired Restaurants from Marano Enterprises 02/13/98.
-36-
<PAGE>
GULF COAST Thomas G. Kellogg (DA.A) 04-30-96 LA, MS 7/03-31-99
RESTAURANTS, INC. Kathryn G. Kellogg Amended: 02-19-97
2386 Clower Street 04-01-97
Building G, Suite 202
Snellville, GA 30078
(FA.A1) 08-14-89 1000 W. Esplanada Avenue
Kenner, LA
(FA.A2) 06-18-90 3701 Veterans
Memorial Boulevard
Metarie, LA
(FA.A3) 04-07-92 850 I-10 Service Road
Slidell, LA
(FA.A4) 03-02-93 315 N. Highway 190
Covington, LA
(FA.A5) 12-21-93 5630 Johnston Street
Lafayette, LA
(FA.A6) 11-14-95 4005 General DeGaulle
New Orleans, LA
(FA.A7) 01-14-97 1220 Clearview Pkwy.
Harahan, LA
(FA.A8) 05-12-98 1039 W. Tunnel Blvd.
Houma, LA
(FA.A9) 07-13-98 3142 Highway 190
Hammond, LA
(DA.B) 01-30-96 LA, MS 6/12-31-98
Amended: 02-19-97
(FA.B1) 07-18-94 3006 College Drive
Baton Rouge, LA
(FA.B2) 05-09-95 4808 S. Sherwood Forest
Baton Rouge, LA
(FA.B3) 01-30-96 9702 Airline Highway
Baton Rouge, LA
(FA.B4) 06-04-96 1500 MacArthur Drive
Alexandria, LA
-37-
<PAGE>
(FA.B5) 07-29-97 3624 Ryan
Lake Charles, LA
J.S. VENTURES, INC. James H. Stevens (DA.A) 10-10-92 IA, KS, MO, NE 12/12-31-98
2400 N. Woodlawn Amended: 05-14-93
Suite 140 10-20-93
Wichita, KS 67220 02-28-95
01-01-97
(FA.A1) 08-07-89 6730 W. Central
Wichita, KS
(FA.A2) 01-15-91 2035 N. Rock Road, Ste. 101
Wichita, KS
(FA.A3) 09-22-92 3350 S. 143rd Place
Omaha, NE
(FA.A4) 12-14-93 2875 S. 9th
Salina, KS
(FA.A5) 07-05-94 4760 S. Broadway
Wichita, KS
(FA.A6) 11-08-94 7450 W. Dodge Street
Omaha, NE
(FA.A7) 02-28-95 1609 E. 17th Street
Hutchinson, KS
(FA.A8) 06-04-96 13208 W. Maple Road
Omaha, NE
(FA.A9) 01-21-97 4101 N. Vine
Hays, KS
(FA.A10) 08-11-97 1230 N. Washington
Omaha, NE
(FA.A11) 10-20-98 601 Manchester Lane
Newton, KS
KEYSTONE Stephen H. Davenport (DA.A) 05-14-93 PA 6/12-31-99
APPLE, INC. Amended: 03-28-95
1205 Manor Drive 02-01-96
Suite 201
P.O. Box 2055 (FA.A1) 05-04-94 4401 Jonestown Road
Mechanicsburg, PA 17055 Harrisburg, PA
-38-
<PAGE>
(FA.A2) 05-16-95 1181 Mae Street
Hummelstown, PA
(FA.A3) 06-17-97 2321 Lincoln Highway
Lancaster, PA
(FA.A4) 08-19-97 6055 Carlisle Pike
Mechanicsburg, PA
KS APPLE, INC. Nicholas Katos (DA.A) 12-07-94 NY 6/06-30-99
4240 Bell Blvd. Michael S. Shaevitz Amended: 03-07-95
Suite 303
Bayside, NY 11361 (FA.A1) 04-30-97 213-29 26th Avenue
Bayside, NY
MARANO Leon J. Marano (DA.A) 06-25-91
ENTERPRISES, INC. Amended: 03-01-93
96 Shaw Avenue 06-30-94
Suite 232 Terminated: 02-13-98
Clovis, CA 93612
* Restaurants acquired by Golden West Restaurants, Inc. 02/13/98.
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<PAGE>
MILLER APPLE William M. Wentworth (DA.A) 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
(FA.A1) 11-16-93 G3131 Miller Road
Flint, MI
(FA.A2) 12-15-94 2260 Tittabawassee
Saginaw, MI
(FA.A3) 11-28-95 4135 N. Court Street
Burton, MI
(FA.A4) 06-04-96 2384 U.S. 31 South
Traverse City, MI
(FA.A5) 07-01-97 3500 Wilder
Bay City, MI
(FA.A6) 10-28-97 8800 Main Street
Birch Run, MI
MILOMEL (DA.A) 10-27-96 Bulgaria, Serbia & 9/12-31-02
THESSALONIKI, LTD. Scopia, Romania
1050 Crown Pointe Pkwy. Nikos Koubatis Hellenic Rep. of Greece
Crown Pointe Tower 2000 Mihalis Papaloupulos Greece controlled Island
Suite 310 Alec Papadakis Island of Cyprus
Atlanta, GA 30338
(FA.A1) 10-27-96
11th Kilometer National Rd.
Thessaloniki National Airport
Thessaloniki, 57001
GREECE
40
<PAGE>
O.K. APPLE, INC. Michael D. Olander (DA.A) 03-01-96 KS, OK 10/12-31-98
170 Windchime Court Amended: 07-19-96
Raleigh, NC 27615
(FA.A1) 01-26-93 3900 S. Elm Place
Broken Arrow, OK
(FA.A2) 06-15-93 4733 S. Yale Avenue
Tulsa, OK
(FA.A3) 09-21-93 9409 E. 71st Street
Tulsa, OK
(FA.A4) 06-20-95 3521 S. Broadway
Edmond, OK
(FA.A5) 05-01-96 317 N. Perkins
Stillwater, OK
(FA.A6) 07-30-96 500 Ed Noble Pkwy.
Norman, OK
(FA.A7) 03-04-97 415 W. Shawnee
Muskogee, OK
(FA.A8) 05-13-97 3616 W. Garriot
Enid, OK
(FA.A9) 04-21-98 4825 Northwest Expressway
Oklahoma City, OK
(DA.B) 10-29-96 AR, MO 6/12-31-99
(FA.B1) 09-13-93 4333 Warden Road
Little Rock, AR
(FA.B2) 11-09-94 4426 Central Avenue
Hot Springs, AR
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<PAGE>
(FA.B3) 06-19-95 12110 Chenal Parkway
Little Rock, AR
PACIFIC APPLE Joseph J. Lal (DA.A) 01-01-96
CALIFORNIA, INC. Renu Lal Terminated: 10-31-98
7311 Greenhaven Drive
Suite 270
Sacramento, CA 95831
PACIFIC APPLE FOODS Joseph J. Lal (DA.A) 09-24-93
CORPORATION Renu Lal Amended: 10-11-93
7311 Greenhaven Drive 02-28-95
Suite 270 Terminated: 10-31-98
Sacramento, CA 95831
PACIFIC APPLE Joseph J. Lal (DA.A) 04-30-97
OREGON, INC. Renu Lal Terminated: 10-31-98
7311 Greenhaven Drive
Suite 270
Sacramento, CA 95831
PACIFIC GOLD, INC. Michael Olander (DA.A) 04-03-96 CA 10/06-30-01
170 Windchime Court
Raleigh, NC 27615
(FA.A1) 11-15-94 18279 Brookhurst Street
Fountain Valley, CA
(FA.A2) 04-03-96 1238 W. Imperial Highway
La Habra, CA
(DA.B) 10-14-96 CA 11/12-31-99
(FA.B1) 01-01-96 4070 E. Highland Avenue
Highland, CA
(FA.B2) 01-01-96 2046 Redlands Blvd.
Redlands, CA
(FA.B3) 01-01-96 3820 Mulberry
Riverside, CA
(FA.B4) 01-01-96 521 N. McKinley
* Restaurants acquired by West Coast Management, LLC on 10/31/98.
-42-
<PAGE>
Corona, CA
(FA.B5) 01-01-96 3956 Grand Avenue
Chino, CA
(FA.B6) 01-01-96 10709 Foothill Blvd.
Rancho Cucamonga, CA
(FA.B7) 10-07-97 26531 Aliso Creek Road
Aliso Viejo, CA
PORTER Todd G. Porter (DA.A) 10-09-92 IA, MN, MT, NE, SD, WY 5/09-30-99
APPLE COMPANY Amended: 03-28-94
4305 S. Louise Avenue 10-01-95
Suite 101-B 10-01-97
Sioux Falls, SD 57106
(FA.A1) 06-05-91 3800 S. Louise Avenue
Sioux Falls, SD
(FA.A2) 08-17-93 1700 Hamilton Boulevard
Sioux City, IA
(FA.A3) 08-09-94 4555 Southern Hills Dr., #106
Sioux City, IA
(FA.A4) 12-05-95 2160 Haines Avenue
Rapid City, SD
QUALITY RESTAURANT Fred Gustin (DA.A) 06-29-98 KY, TN, VA, AL, 19/12-31-00
CONCEPTS, L.L.C. * Glenn D. Durham GA, NC
601 Vestavia Pkwy. John Jones
Suite 1000
Birmingham, AL 35216 (FA.A1) 06-29-98 261 N. Peters Road
Knoxville, TN
(FA.A2) 06-29-98 6928 Kingston Pike
Knoxville, TN
(FA.A3) 06-29-98 1213 Oak Ridge Turnpike
Oak Ridge, TN
(FA.A4) 06-29-98 1661 E. Stone Drive
Kingsport, TN
(FA.A5) 06-29-98 1322 W. Walnut Avenue
Dalton, GA
(FA.A6) 06-29-98 2342 Shallowford Village Rd.
Chattanooga, TN
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<PAGE>
(FA.A7) 06-29-98 2100 North Roane St.
Johnson City, TN
(FA.A8) 06-29-98 358 Northgate Mall
Chattanooga, TN
(FA.A9) 06-29-98 2564 Alcoa Highway
Alcoa, TN
(FA.A10) 06-29-98 5316 Central Ave. Pike
Knoxville, TN
(FA.A11) 06-29-98 168 Paul Huff Pkwy.
Cleveland, TN
(FA.A12) 06-29-98 3216 East Towne Mall Circle
Knoxville, TN
(FA.A13) 06-29-98 5536 Decatur Pike
Athens, TN
(FA.A14) 06-29-98 2771 E. Andrew Johnson Hwy.
Greeneville, TN
(FA.A15) 06-29-98 437 Parkway
Gatlinburg, TN
(FA.A16) 06-29-98 2328 W. Andrew Jackson
Morristown, TN
(FA.A17) 06-29-98 425 Volunteer Pkwy.
Bristol, TN
(DA.B) 06-29-98 MS, AL 13/12-31-00
(DA.B1) 06-29-98 900 E. County Line Rd.
Ridgeland, MS
(DA.B2) 06-29-98 3703 Hardy Street
Hattiesburg, MS
(DA.B3) 06-29-98 885 Barnes Crossing Rd.
Tupelo, MS
(DA.B4) 06-29-98 2332 Highway 45 North
Columbus, MS
(DA.B5) 06-29-98 814 Highway 12 West
Starkville, MS
(DA.B6) 06-29-98 9319 Highway 49
Gulfport, MS
(DA.B7) 06-29-98 2389 Lakeland Dr.
Flowood, MS
(DA.B8) 06-29-98 106 Highway 11 & 80
Meridian, MS
(DA.B9) 06-29-98 2019 Highway 15 North
Laurel, MS
* Restaurants acquired from Avado Brands, Inc. on 06/29/98.
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RCI IDAHO, LLC Stephen A. Grove (DA.A) 08-29-96 ID, OR 4/06-30-99
400 Interstate N. Parkway
Suite 1200 (FA.A1) 06-02-97 635 N. Utah Avenue
Atlanta, GA 30339 Idaho Falls, ID
(FA.A2) 07-28-97 1587 Blue Lake Blvd.
Twin Falls, ID
(FA.A3) 04-20-98 1441 Bench Road
Pocatello, ID
(FA.A4) 07-20-98 7845 West Emerald
Boise, ID
RCI NEW Stephen A. Grove (DA.A) 08-10-96 NM 6/07-31-99
MEXICO, LLC
400 Interstate N. Parkway
Suite 1200
Atlanta, GA 30339
(FA.A1) 12-16-96 2212 North Main
Roswell, NM 88201
(FA.A2) 09-22-97 4246 Cerrillos Road
Santa Fe, NM
(FA.A3) 10-27-97 4601D E. Main St.
Farmington, NM
R.C.I. WEST, INC. Stephen A. Grove (DA.A) 12-21-88 CO 19/12-31-98
400 Interstate N. Pkwy. Amended: 03-18-91
Suite 1200 01-02-92
Atlanta, GA 30339 12-04-92
01-01-95
01-01-97
(FA.A1) 10-02-89 3301 Tamarac Drive
Denver, CO
-45-
<PAGE>
(FA.A2) 10-23-90 5250 S. Wadsworth Boulevard
Lakewood, CO
(FA.A3) 06-08-92 4306 S. College Avenue
Ft. Collins, CO
(FA.A4) 09-07-92 14091 E. Iliff Avenue
Aurora, CO
(FA.A5) 10-05-92 8292 S. University Boulevard
Littleton, CO
(FA.A6) 04-12-93 410 S. Colorado Boulevard
Glendale, CO
(FA.A7) 11-15-93 100 W. 104th Avenue
Northglenn, CO
(FA.A8) 01-24-94 9010 N. Wadsworth Parkway
Westminster, CO
(FA.A9) 03-21-94 6405 W. 120th Avenue
Broomfield, CO
(FA.A10) 05-30-94 1250 S. Hover Road
Building 10-A
Longmont, CO
(FA.A11) 08-29-94 1906 28th Street
Boulder, CO
(FA.A12) 10-31-94 10625 W. Colfax Avenue
Lakewood, CO
(FA.A13) 12-19-94 297 E. 120th Avenue
Thornton, CO
(FA.A14) 03-13-95 592 S. McCaslin Boulevard
Louisville, CO
(FA.A15) 06-26-95 10440 E. Arapahoe Road
Englewood, CO
(FA.A16) 10-23-95 5265 Wadsworth Boulevard
Arvada, CO
(FA.A17) 05-06-96 4100 West 10th Street
Greeley, CO
(FA.A18) 12-08-97 213 E. 29th
Loveland, CO
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<PAGE>
(FA.A19) 06-08-98 6482 S. Parker Rd.
Aurora, CO
(FA.A20) 11-02-98 16485 E. 40th Circle
Aurora, CO
(DA.B) 12-22-92 CO 6/06-02-98
Amended: 03-19-93
07-19-94
03-07-95
09-01-95
10-31-97
(FA.B1) 10-03-94 1360 Cragin Road
Colorado Springs, CO
(FA.B2) 04-03-95 3428 N. Elizabeth
Pueblo, CO
(FA.B3) 07-10-95 3708 E. Galley
Colorado Springs, CO
(FA.B4) 11-27-95 711 Horizon Drive
Grand Junction, CO
(FA.B5) 05-18-98 495 Garden of The Gods Rd.
Colorado Springs, CO
RENAISSANT Anthony R. Alvarez (DA.A) 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 78230 (FA.A1) 12-07-93 514 E. Expressway 83
McAllen, TX
(FA.A2) 08-25-94 4601 N. 10th Street
N. McAllen, TX
(FA.A3) 10-18-94 7601 San Dario
Laredo, TX
(FA.A4) 07-25-95 2960 Boca Chica Boulevard
Brownsville, TX
(FA.A5) 10-23-95 1519 W. Harrison
Harlingen, TX
(DA.B) 10-23-95 TX 2/10-31-97
-47-
<PAGE>
(FA.B1) 12-19-95 6490 N. Navarro
Victoria, TX
RESTAURANT Stephen A. Grove (DA.A) 11-02-90 AL, GA 14/06-30-98
CONCEPTS, INC. Amended: 10-10-93
400 Interstate N. Pkwy. 07-01-94
Suite 1200 06-30-96
Atlanta, GA 30339
(FA.A1) 06-17-85 2301 Airport Thruway, #F-1
Columbus, GA
(FA.A2) 06-17-85 3150 Wrightsboro Road
Augusta, GA
(FA.A3) 01-28-87 3117 Washington Road
Augusta, GA
(FA.A4) 08-21-87 480 Mall Boulevard
Savannah, GA
(FA.A5) 04-01-91 595 Bobby Jones Expressway
Augusta, GA
(FA.A6) 06-28-92 165 Tom Hill, Sr. Boulevard
Macon, GA
(FA.A7) 05-17-93 3229 Gentian Boulevard
Columbus, GA
(FA.A8) 07-26-93 1627-34 Opelika Road
Auburn, AL
(FA.A9) 10-25-93 11120 Abercorn
Savannah, GA
(FA.A10) 04-04-94 314 Russell Parkway
Warner Robbins, GA
(FA.A11) 09-05-94 4705 Highway 80
Savannah Island, GA
(FA.A12) 12-05-94 612 E. Hamric Avenue
Oxford, AL
(FA.A13) 06-05-95 2574 Riverside Drive
Macon, GA
(FA.A14) 10-30-95 3652 Eisenhower
Macon, GA
-48-
<PAGE>
(FA.A15) 05-11-98 2004 Veterans Blvd.
Dublin, GA
(FA.A16) 06-22-98 804 U.S. Highway 80 East
Statesboro, GA
(FA.A17) 07-27-98 5460 Augusta Road
Garden City, GA
(FA.A18) 08-17-98 100 Valley Drive
Perry, GA
ROSE CASUAL Harold T. Rose (DA.A) 08-04-93 MD 10/06-30-00
DINING, L.P. Amended: 09-09-94
826 Newton Yardley Rd. 02-28-95
Suite 200 02-15-96
Newtown, PA 18940 06-30-97
(FA.A1) 01-17-95 2141 Generals Highway
Annapolis, MD
(FA.A2) 10-31-95 2703 N. Salisbury Boulevard
Salisbury, MD
(FA.A3) 05-13-96 6505 Baltimore National Pike
Catonsville, MD
(FA.A4) 12-10-96 8610 LaSalle Road
Towson, MD
(FA.A5) 11-11-97 634 Baltimore Blvd.
Westminster, MD
(FA.A6) 12-31-98 7760 Eastpoint Mall
Route 6; Scranton-Carbondale Hwy.
Dickson City, PA
(DA.B) 02-01-96 PA 3/12-31-98
Amended: 03-01-97
(FA.B1) 06-02-97 939 New Berwick Highway
Bloomsburg, PA
(FA.B2) 07-07-98 2 Weis Lane
West Hazelton, PA
(FA.B3) 08-26-98 253 Wilkes-Barre Township Blvd.
Wilkes-Barre Township, PA
-49-
<PAGE>
(FA.B4) 12-08-98 1115 Susquehanna Valley Mall
Selinsgrove, PA
(DA.C) 02-01-96 NJ 3/08-31-99
Amended: 09-01-97
(FA.C1) 01-21-97 3330 Brunswick Pike
Lawrenceville, NJ
(FA.C2) 03-04-97 333 State Route 33
Trenton, NJ
(FA.C3) 06-02-98 1745 Easton Road
Doylestown, PA
RYAN RESTAURANT William O. Ryan (DA.A) 03-05-96 MT 7/12-31-99
CORPORATION Beverly R. Ryan Amended: 01-01-98
2038 Overland Avenue
Billings, MT 59102
(FA.A1) 11-23-93 740 24th Street, West
Billings, MT
(FA.A2) 03-05-96 1108 North 7th Avenue
Bozeman, MT
(FA.A3) 07-24-96 4041 Highway 93 South
Missoula, MT
(FA.A4) 12-10-96 1200 E. Idaho
Kalispell, MT
(FA.A5) 09-02-97 1212 Custer
Helena, MT
(FA.A6) 12-31-98 204 Main
Billings, MT
SCOTT'S APPLE, INC. Nicholas C. Scott (DA.A) 08-26-92 PA 2/10-31-94
4045 W. 12th Street Amended: 10-30-93
Erie, PA 16505
(FA.A1) 01-24-94 7790 Peach Street
Erie, PA
(FA.A2) 03-21-95 2911 W. 12th Street
Erie, PA
(FA.A3) 12-12-97 11227 Shaw Avenue
Meadville, PA
-50-
<PAGE>
SPECTRUM APPLE, L.P. John D. Gantes (DA.A) 08-11-94 CA 10/11-30-00
P.O. Box 80340 Linda B. Gantes Amended: 03-28-95
Rancho Santa
Margarita, CA 92688
(FA.A1) 09-05-95 23626 Valencia Boulevard
Santa Clarita, CA
(FA.A2) 04-16-96 39720 N. 10th Street West
Palmdale, CA
(FA.A3) 07-30-96 291 Ventura Blvd.
Camarillo, CA
(FA.A4) 08-26-97 3980 Thousand Oaks Blvd.
Thousand Oaks, CA
SUNSHINE APPLE Lois J. Sedowicz (DA.A) 03-20-97 FL 18/12-31-00
(GEORGIA), LIMITED
PARTNERSHIP (FA.A1) 07-26-93 1545 Palm Bay Road
5555 Oakbrook Pkwy. Melbourne, FL
Suite 355
Norcross, GA 30093 (FA.A2) 11-22-93 100 Sykes Creek Pkwy. North
Merritt Island, FL
(FA.A3) 04-18-94 12103 Collegiate Way
Orlando, FL
(FA.A4) 06-26-95 2599 Enterprise Road
Orange City, FL
(FA.A5) 10-23-95 3001 W. Eau Gellie Blvd.
Melbourne, FL
(FA.A6) 02-12-96 150 Williamson Blvd.
Ormond Beach, FL
(FA.A7) 08-19-96 1390 Dunlawton Avenue
Port Orange, FL
TLC CENTRAL, LLC Matthew J. Fairbairn (DA.A) 08-31-98 NY, PA 11/12-31-00
201 ATP Tour Blvd. David Stein
Suite 120
Ponte Vedra Beach, FL 32082
(FA.A1) 01-10-96 877 Country Route 64
Elmira, NY
(FA.A2) 09-09-97 3701 Vestal Parkway East
Vestal, NY
-51-
<PAGE>
(FA.A3) 02-03-98 1205 Union Avenue
Newburg, NY
(FA.A4) 11-10-98 Woodbury Common
#488 Evergreen Court
Central Valley, NY
TLC WEST, LLC Matthew J. Fairbairn (DA.A) 08-31-98 NY, PA 18/06-30-99
201 ATP Tour Blvd. David Stein
Suite 120
Ponte Vedra Beach, FL 32082
(FA.A1) 03-12-91 3050 Winton Road South
Rochester, NY
(FA.A2) 09-30-91 5017 Transit Road
Williamsville, NY
(FA.A3) 06-23-92 4405 Milestrip Road
Blasdell, NY
(FA.A4) 07-21-92 585 Moseley Road
Fairport, NY
(FA.A5) 08-24-93 200 Paddy Creek Circle
Rochester, NY
(FA.A6) 09-28-93 3189 Erie Boulevard, East
De Witt, NY
(FA.A7) 07-06-94 628 S. Main Street
N. Syracuse, NY
(FA.A8) 08-23-94 1683 E. Ridge Road
Rochester, NY
(FA.A9) 10-04-94 1900 Military Road
Niagara Falls, NY
(FA.A10) 11-22-94 1641 Niagara Falls Boulevard
Amherst, NY
(FA.A11) 02-13-95 3975 Route 31
Liverpool, NY
(FA.A12) 06-20-95 1955 Empire Boulevard
Webster, NY
(FA.A13) 08-29-95 5822 S. Transit Road
Lockport, NY
-52-
<PAGE>
(FA.A14) 04-02-96 340 E. Fairmount Avenue
Lakewood, NY
(FA.A15) 07-30-96 2656 Delaware Avenue
Buffalo, NY
(FA.A16) 04-22-97 3637 Union Road
Checktowaga, NY
(FA.A17) 11-17-98 1283 Arsenal Street
Watertown, NY
T.S.S.O., INC. Lois J. Sedowicz (DA.A) 01-15-92 AL, FL, MS 7/06-30-99
5555 Oakbrook Parkway Amended: 08-30-93
Suite 355 03-28-95
Norcross, GA 30093 08-01-95
07-01-97
(FA.A1) 04-30-85 5760 Airport Boulevard
Mobile, AL
(FA.A2) 03-31-86 5091 Bayou Boulevard
Pensacola, FL
(FA.A3) 08-15-88 330 Mary Esther Cutoff
Mary Esther, FL
(FA.A4) 01-24-91 5701 Emerald Coast
Parkway - Sandestin
Destin, FL
(FA.A5) 12-06-93 4940 Government Boulevard
Mobile, AL
(FA.A6) 07-10-95 165 E. Nine Mile Road
Pensacola, FL
(DA.B) 11-20-91 IA, IL, MO 6/12-31-97
Amended: 04-07-93
08-16-93
06-15-98
(FA.B1) 11-02-92 3335 Veterans Parkway
Springfield, IL
(FA.B2) 08-16-93 1966 N. Henderson Street
Galesburg, IL
(FA.B3) 08-29-94 405 N. Main
E. Peoria, IL
-53-
<PAGE>
(FA.B4) 10-17-94 1275 S. Route 51
Forsyth, IL
(FA.B5) 11-07-94 502 N. Veterans Parkway
Bloomington, IL
(FA.B6) 08-28-95 116 S. Roosevelt
Burlington, IA
(FA.B7) 02-26-96 3827 Broadway
Quincy, IL
(FA.B8) 06-09-97 3540 Vermilion Street
Danville, IL
(FA.B9) 10-27-97 3540 Court Street
Pekin, IL
(FA.B10) 08-10-98 2121 N. Prospect
Champaign, IL
(FA.B11) 06-15-98 6844 N. War Memorial
Peoria, IL
THE BLOOMIN' APPLE, Mariann B. Allardice (DA.A) 08-24-98 IL, WI 5/12-31-00
L.L.C. Kevin P. Allardice
1470 Ben Sawyer Blvd. Ronald C. Williams
Suite 4 Andrew C. Robertson
Mt. Pleasant, SC 29464 (FA.A1) 08-24-98 6845 E. State St.
Rockford, IL
(FA.A2) 08-24-98 3024 Milton Ave.
Janesville, WI
(FA.A3) 08-24-98 1675 E. Riverside Rd.
Rockford, IL
(FA.A4) 08-24-98 1802 S. West St.
Freeport, IL
THE OZARK Gregory R. Walton (DA.A) 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
(FA.A1) 06-15-93 1855 E. Primrose
Springfield, MO
-54-
<PAGE>
(FA.A2) 01-03-94 2010 I-70 Drive, Southwest
Columbia, MO
(FA.A3) 06-01-94 1836 W. Highway 76
Branson, MO
(FA.A4) 06-27-95 2319 Missouri Boulevard
Jefferson City, MO
(DA.B) 01-29-96 AR, KS, MO, OK 3/12-31-97
(FA.B1) 07-19-94 2825 E. 32nd Street
Joplin, MO
(FA.B2) 06-19-96 528 N. 47th Street
Rogers, AR
THOMAS & KING, INC. Michael J. Scanlon (DA.A) 05-31-88 IN, KY, OH 35/05-30-99
249 E. Main St. Ronald T. Reynolds Amended: 05-31-91
Suite 101 Douglas M. Wilson 08-06-93
Lexington, KY 40507 06-07-95
07-30-96
05-30-97
(FA.A1) 08-01-88 2573 Richmond Road
Lexington, KY
(FA.A2) 11-14-88 7383 Turfway Road
Florence, KY
(FA.A3) 02-24-89 105 N. Springsboro Pike
W. Carrollton, OH
(FA.A4) 05-11-89 340 Glensprings Drive
Springdale, OH
(FA.A5) 10-09-89 4009 Nicholasville Road
Block B
Lexington, KY
(FA.A6) 04-11-89 10635 Techwood Circle
Blue Ash, OH
(FA.A7) 03-12-90 9660 Mason-Montgomery
Mason, OH
(FA.A8) 05-11-90 2755 Brice Road
Reynoldsburg, OH
-55-
<PAGE>
(FA.A9) 08-20-90 2555 Shiloh Springs Road
Trotwood, OH
(FA.A10) 12-11-90 6669 Dublin Center Drive
Dublin, OH
(FA.A11) 07-15-91 967 Hebron Road
Heath, OH
(FA.A12) 12-16-91 5050 Crookshank
Cincinnati, OH
(FA.A13) 08-17-92 4440 Glen Este-
Withamsville Road
Batavia, OH
(FA.A14) 11-09-92 4600 East Broad Street
White Hall, OH
(FA.A15) 03-01-93 1389 U.S. 127 South
Frankfort, KY
(FA.A16) 04-05-93 30 Crestview Hills Mall Road
Crestview Hills, KY
(FA.A17) 06-21-93 480 Ackerman Road
Columbus, OH
(FA.A18) 09-06-93 700 Washington Blvd., N.W.
Hamilton, OH
(FA.A19) 10-04-93 853 Eastern Bypass
Richmond, KY
(FA.A20) 01-17-94 Northgate Mall
9595 Colrain Avenue
Cincinnati, OH
(FA.A21) 04-11-94 910 Beaumont Center Pkwy.
Lexington, KY
(FA.A22) 06-13-94 3240 Towne Boulevard
Middletown, OH
(FA.A23) 10-03-94 8331 Old Troy Pike
Huber Heights, OH
(FA.A24) 12-02-94 1800 W. 1st Street
Springfield, OH
(FA.A.25) 05-29-95 4425 National Road East
Richmond, IN
-56-
<PAGE>
(FA.A26) 08-07-95 1615 Rivervalley Circle North
Lancaster, OH
(FA.A27) 01-29-96 1525 N. Lexington Avenue
Winchester, KY
(FA.A28) 01-30-96 1 Madison Avenue
Covington, KY
(FA.A29) 05-20-96 3894 Morse Road
Columbus, OH
(FA.A30) 07-25-96 1759 W. Main Street
Troy, OH
(FA.A31) 09-23-96 1514 Mt. Vernon Avenue
Marion, OH
(FA.A32) 03-24-98 5561 Westchester Woods Blvd.
Columbus, OH
(FA.A33) 06-30-98 1836 Alesheba Way
Lexington, KY
(FA.A34) 12-15-98 6242 Wilmington Pike
Dayton, OH
(DA.B) 02-24-94 OH, PA 3/12-31-98
Amended: 02-28-95
05-01-95
(FA.B1) 08-28-95 904 Great East Plaza
Niles, OH
(FA.B2) 02-25-97 201 S. Hermitage Road
Hermitage, PA
(FA.B3) 11-17-98 6691 South Avenue
Boardman, OH
(DA.C) 10-23-90 AZ 17/08-15-98
Amended: 10-21-94
06-01-95
09-16-96
01-08-98
(FA.C1) 03-31-93 2053 S. Alma School Road
Mesa, AZ
(FA.C2) 12-18-90 2720 W. Bell Road
Phoenix, AZ
-57-
<PAGE>
(FA.C3) 07-08-91 565 E. Wetmore
Tucson, AZ
(FA.C4) 12-08-92 6259 E. Southern Avenue
Mesa, AZ
(FA.C5) 05-17-93 Park Mall, Building E
5870 East Broadway
Tucson, AZ
(FA.C6) 06-14-93 2032 E. Baseline Road
Mesa, AZ
(FA.C7) 09-27-93 8001 W. Bell Road
Peoria, AZ
(FA.C8) 06-26-94 1655 W. Elliott
Tempe, AZ
(FA.C9) 05-22-95 2547 N. 44th Street
Phoenix, AZ
(FA.C10) 10-09-95 2 East Camelback
Phoenix, AZ
(FA.C11) 11-20-95 4924 E. Shea Boulevard
Phoenix, AZ
(FA.C12) 02-26-96 1881 West Highway 69
Prescott, AZ
(FA.C13) 08-19-96 5880 W. Peoria
Glendale, AZ
(FA.C14) 03-24-97 2230 W. Ina Road
Tucson, AZ
(FA.C15) 04-22-97 909 E. Broadway
Tempe, AZ
(FA.C16) 11-18-97 1245 W. Chandler Blvd.
Chandler, AZ
(FA.C17) 10-20-98 1143 N. Higley Rd.
Mesa, AZ
(DA.D) 11-14-94 IL, IN, KY, MO, TN 8/09-30-98
Amended: 10-01-95
03-25-96
09-30-97
-58-
<PAGE>
(FA.D1) 09-26-91 202 S. Broadview
Cape Girardeau, MO
(FA.D2) 10-27-92 3990 Hinkleville Roady
Paducah, KY
(FA.D3) 07-06-93 5120 Frederica
Owensboro, KY
(FA.D4) 12-13-94 2506 S. 3rd Street
Terre Haute, IN
(FA.D5) 04-04-95 1125 E. Main
Carbondale, IL
(FA.D6) 08-01-95 5100 E. Morgan
Evansville, IN
(FA.D7) 07-22-97 1475 Chelsa Drive
Madisonville, KY
(FA.D8) 06-30-98 2712 W. DeYoung St.
Marion, IL
THUNDER APPLE Robert A. Syroid (DA.A) 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
P7B 5Z6
CANADA
(FA.A1) 08-08-94 1155 Alloy Drive
Thunder Bay, Ontario
CANADA P7B 6M8
TRUE NORTH Ian A. Mackay (DA.A) 04-24-97 Ontario, Canada 1/12-01-97
RESTAURANTS, INC. Michael J. Lewis
46 Dawlish Avenue (FA.A1) 04-24-97 155 Kingston Road
Toronto, Ontario M4N 1H1 East Ajax, Ontario
Canada Canada L1S 7J4
WEST COAST Stephen A. Grove (DA.A) 10-31-98 WA, OR, ID, CA 29/12-31-02
MANAGEMENT, LLC
400 Interstate N. Parkway
Suite 1200 (FA.A1) 10-31-98 1220 N.W. 185th Avenue
Atlanta, GA 30339 Beaverton, OR
(FA.A2) 10-31-98 6325 S.W. Meadows Road
Lake Oswego, OR
-59-
<PAGE>
(FA.A3) 10-31-98 1415 S. Bradley
Santa Maria, CA
(FA.A4) 10-31-98 280 Hanley
Coeur D'Alene, ID
(FA.A5) 10-31-98 305 Madonna Road
San Luis Obispo, CA
(FA.A6) 10-31-98 12217 E. Mission Avenue
Spokane, WA
(FA.A7) 10-31-98 Lancaster Mall
747 Lancaster Drive, N.E.
Salem, OR
(FA.A8) 10-31-98 606 N. Columbia Ctr. Blvd.
Kennewick, WA
(FA.A9) 10-31-98 12717 S.E. 2nd Circle
Vancouver, MA
(FA.A10) 10-31-98 4007 29th Street
Spokane, WA
(FA.A11) 10-31-98 1439 N.E. Halsey
Portland, OR
(FA.A12) 10-31-98 1301 N. Davis Rd.
Salinas, CA
(FA.A13) 10-31-98 10004 NE Halsey
Portland, OR
(FA.A14) 10-31-98 10172 SE 82nd Street
Clakamas, OR
WHG REAL ESTATE Mark L. Dillon (DA.A) 12-07-98 MN, WI 5/12-31-00
NORTH, LLC James T. Query
2500 N. Mayfair Road David S. Israel
Suite G117
Wauwatosa, WI 43226 (FA.A1) 12-07-98 4745 Golf Road
Eau Clarie, WI
(FA.A2) 12-07-98 2221 W. Stewart Ave.
Wausau, WI
(FA.A3) 12-07-98 5609 Hwy. 10 East
Stevens Point, WI
-60-
<PAGE>
(FA.A4) 12-07-98 9364 Hwy. 16
Onalaska, WI
WHIT-MART, INC. * Gary P. Whitman (DA.A) 06-29-98 SC, NC 15/06-30-02
609 Pecan Lane
Whiteville, NC 28472 (FA.A1) 06-29-98 7818 Rivers Ave.
N. Charleston, SC
(FA.A2) 06-29-98 1859 Sam Rittenburg
Charleston, SC
(FA.A3) 06-29-98 811 S. Irby Street
Florence, SC
(FA.A4) 06-29-98 24 N. Market Street
Charleston, SC
(FA.A5) 06-29-98 88 Old Trolley Road
Summerville, SC
(FA.A6) 06-29-98 1486 Stuart Engles Blvd.
Mt. Pleasant, SC
(FA.A7) 06-29-98 7915 N. Kings Highway
Myrtle Beach, SC
(FA.A8) 06-29-98 1271 Folly Road
Charleston, SC
(FA.A9) 06-29-98 4910 Ashely Phosphate Rd.
North Charleston, SC
(FA.A10) 06-29-98 1647 Church Street
Conway, SC
(FA.A11) 06-29-98 203 S. Fifth Street
Hartsville, SC
(FA.A12) 06-29-98 3256 Highway 17 South
Murrells Inlet, SC
* Acquired restaurants from Avado Brands, Inc. 06/29/98.
-61-
<PAGE>
WILD WEST APPLE Calvin E. Keller
VENTURES, A Linda A. Keller
LIMITED LIABILITY
COMPANY
2220 Dell Range Blvd.
Suite 102
Cheyenne, WY 82009 (FA.A1) 07-07-92 1401 Dell Range Boulevard
Cheyenne, WY
WILLIAM TELL, INC. John B. Prince (DA.A) 05-14-93 ID, NV, UT 7/06-30-98
136 E. South Temple Amended: 03-01-95
Suite 1740 12-01-96
Salt Lake City, UT 84111
(FA.A1) 04-12-94 6123 S. State Street
Murray, UT
(FA.A2) 12-19-94 5678 S. Redwood Road
Taylorsville, UT
(FA.A3) 01-22-96 1622 N. 1000 West
Layton, UT
(FA.A4) 04-29-96 1125 W. Riverdale Road
Riverdale, UT
(FA.A5) 08-19-96 680 West 1300 South
Orem, UT
(FA.A6) 11-11-96 7047 S. 1300 East
Midvale, UT
WISCONSIN HOSPITALITY* David S. Israel (DA.A) 08-24-98 WI, MI 24/05-31-04
GROUP, LLC James T. Query
2500 N. Mayfair Rd. Mark L. Dillon
Suite G117 (FA.A1) 08-24-98 2500 N. Mayfair Road
Wauwatosa, WI 53226 Wauwatosa, WI
(FA.A2) 08-24-98 20101 W. Bluemound Road
Waukesha, WI
(FA.A3) 08-24-98 5100 S. 76th Street
Greendale, WI
(FA.A4) 08-24-98 5900 N. Port Washington Rd.
Glendale, WI
(FA.A5) 08-24-98 660 S. Whitney Way
Madison, WI
(FA.A6) 08-24-98 4710 E. Towne Boulevard
Madison, WI
(FA.A7) 08-24-98 3730 W. College Avenue
Appleton, WI
(FA.A8) 08-24-98 900 Hansen Road
Ashwaubenon, WI
-62-
<PAGE>
(FA.A9) 08-24-98 2521 S. Greenbay Road
Racine, WI
(FA.A10) 08-24-98 6950 75th Street
Kenosha, WI
(FA.A11) 08-24-98 1700 S. Koeller Road
Oshkosh, WI
(FA.A12) 08-24-98 2420 W. Mason Street
Greenbay, WI
(FA.A13) 08-24-98 4435 Calumet Avenue
Manitowoc, WI
(FA.A14) 08-24-98 841 W. Johnson Street
Fond Du Lac, WI
(FA.A15) 08-24-98 2510 W. Washington
West Bend, WI
(FA.A16) 08-24-98 3040 E. College Avenue
East Appleton, WI
(FA.A17) 08-24-98 526 S. Taylor Drive
Sheboygan, WI
(FA.A18) 08-24-98 W 180 N 9469 Premier Lane
Menomonee Falls, WI
(FA.A19) 08-24-98 1267 Capital Drive
Pewaukee, WI
* Acquired restaurants from Avado Brands, Inc. 08/24/98.
-63-
<PAGE>
WOODLAND GROUP, * Walter J. Horin, Sr. (DA.A) 08-24-98 KY, TN 17/12-31-01
INC. Sanford R. Penn, Jr.
105 Westwood Place Walter J. Horin, Jr.
Suite 125
Brentwood, TN 37027 (FA.A1) 08-24-98 335 Harding Place
Nashville, TN
(FA.A2) 08-24-98 718 Thompson Lane
Nashville, TN
(FA.A3) 08-24-98 7645 U.S. Hwy. 70 South
Nashville, TN
(FA.A4) 08-24-98 5270 Hickory Hollow Pkwy.
Antioch, TN
(FA.A5) 08-24-98 170 Old Fort Parkway
Murfreesboro, TN
(FA.A6) 08-24-98 5055 Old Hickory Blvd.
Hermitage, TN
(FA.A7) 08-24-98 1420 Interstate Drive
Cookeville, TN
(FA.A8) 08-24-98 2545 Scottsville Road
Bowling Green, KY
(FA.A9) 08-24-98 230 E. Main Street
Hendersonville, TN
(FA.A10) 08-24-98 1957 N. Jackson Street
Tullahoma, TN
(FA.A11) 08-24-98 3066 Wilma Rudolph Blvd.
Clarksville, TN
(FA.A12) 08-24-98 1557 N. Gallatin Pike
Madison, TN
(FA.A13) 08-24-98 705 S. James Campbell Blvd.
Columbia, TN
(FA.A14) 08-24-98 4089 Fort Campbell Blvd.
Hopkinsville, KY
(FA.A15) 08-24-98 609 N. Cumberland
Lebanon, TN
* Acquired Restaurants from Avado Brands, Inc. on 08/24/98.
-64-
</TABLE>
RIO BRAVO INTERNATIONAL, INC.
DEVELOPMENT AND FRANCHISE AGREEMENT SCHEDULE
AS OF DECEMBER 27, 1998
<TABLE>
<CAPTION>
(3) (5)
DATE OF DEVELOPMENT
DEVELOPMENT (4) SCHEDULE
(1) AGREEMENT (DA) TERRITORY (all or part (total
DEVELOPER NAME (2) OR FRANCHISE of the states/countries restaurants/
AND ADDRESS PRINCIPALS AGREEMENT (FA) listed) OR LOCATION deadline)
<S> <C> <C> <C> <C>
APPLE-METRO, INC. Roy Raeburn (DA.A) 03-26-97 NY 5/05-15-01
550 Mamaroneck Ave. Zane Tankel Amended: 01-01-98
Suite 301 11-01-98
Harrison, NY 10528
(FA.A1) 03-26-97 2690 Hylan Blvd.
Amended: 01-01-98 Staten Island, NY
11-01-98
(FA.A2) 08-26-97 2655 Richmond Ave.
Amended: 01-01-98 Staten Island, NY
11-01-98
APPLE SAUCE, INC. W. Curtis Smith (DA.A) 08-15-96 IN, OH 5/01-31-01
741 Centre View Blvd. James P. Borke Amended: 01-01-98
Suite 100 11-01-98
Crestview Hills, KY 41017
(FA.A1) 08-15-96 500 E. 81st Avenue
Amended: 01-01-98 Merrillville, IN
11-01-98
APPLE SAUCE, INC. W. Curtis Smith (DA.B) 08-15-96 FL 5/01-31-01
741 Centre View Blvd. James P. Borke Amended: 01-01-98
Suite 100 11-01-98
Crestview Hills, KY 41017
(FA.B1) 08-15-96 (to be determined)
BRAVO AMERICAN Donald W. Strang, Jr. (DA.A) 04-22-97 IL 5/07-15-01
CHICAGO LIMITED Allen S. Musikantow Amended: 01-01-98
LIABILITY COMPANY 11-01-98
8905 Lake Avenue
Cleveland, OH 44102
(FA.A1) 04-22-97 3080 Warrenville Road
Amended: 01-01-98 Lisle, IL
11-01-98
BRAVO AMERICAN Donald W. Strang, Jr. (DA.A) 11-11-96 IN 5/01-31-01
INDIANA LIMITED Allen S. Musikantow Amended: 01-01-98
LIABILITY COMPANY 11-01-98
8905 Lake Avenue
Cleveland, OH 44102 (FA.A1) 11-11-96 2525 Sagamore Pkwy. S.
Amended: 01-01-98 Lafayette, IN
11-01-98
-1-
<PAGE>
BRAVO AMERICAN Donald W. Strang, Jr. (DA.A) 02-07-96 OH 5/06-30-00
OHIO LIMITED Allen S. Musikantow Amended: 01-01-98
LIABILITY COMPANY 11-01-98
8905 Lake Avenue
Cleveland, OH 44102 (FA.A1) 02-07-96 1541 Golden Gate Plaza
Amended: 01-01-98 Mayfield Heights, OH
11-01-98
(FA.A2) 03-25-97 17227 SouthPark Center
Amended: 01-01-98 Strongsville, OH
11-01-98
BRAVO HOSPITALITY, Edward W. Doherty (DA.A) 08-06-97 NJ 4/03-31-01
LLC William A. Johnsen Amended: 01-01-98
7 Pearl Court 11-01-98
Allendale, NJ 07401
(FA.A1) 08-06-97 (to be determined)
DAKOTA RIO, INC. Todd G. Porter (DA.A) 06-25-97 SD, MT, WY, NE, MN, IA 2/08-01-99
101B Empire Office Ctr. Amended: 01-01-98
4305 S. Louise Avenue 12-23-98
Sioux Falls, SD 57106 11-01-98
(FA.A1) 06-25-97 2801 S. Louise Ave.
Amended: 01-01-98 Sioux Falls, SD
11-01-98
HEARTLAND RIO, INC. James H. Stevens (DA.A) 01-16-96 KS, IA, MO, NE 3/10-31-98
2400 N. Woodlawn Amended: 01-01-98
Suite 140 11-01-98
Wichita, KS 67220
(FA.A1) 01-16-96 8310 E. 21st Street
Amended: 01-01-98 Wichita, KS
11-01-98
(FA.A2) 12-09-97 8406 W. Central Avenue
Amended: 01-01-98 Wichita, KS
11-01-98
MANZANA GRANDE, Myron Thompson (DA.A) 01-15-97 ND, SD, MN 3/08-15-99
INC. Engen Eckmann Amended: 01-01-98
1225 S. Broadway 11-01-98
Minot, ND 58701
(FA.A1) 01-15-97 3000 32nd Ave. South
Amended: 01-01-98 Grand Forks, ND
11-01-98
-2-
<PAGE>
MISS-ALA-RIO, INC. Glenn D. Durham (DA.A) 01-24-96 AL, GA, TN, FL, MS 5/06-30-00
601 Vestavia Pkwy. Fred Gustin Amended: 01-01-98
Suite 1000 11-01-98
Birmingham, AL 35216
(FA.A1) 01-24-96 2070 Eastern Blvd.
Amended: 01-01-98 Montgomery, AL
11-01-98
OZARK RIO, INC. Gregory R. Walton (DA.A) 02-29-96 MO, AR, OK, KS 4/08-31-99
3252 Roanoke Amended: 01-01-98
Kansas City, MO 64111 11-01-98
(FA.A1) 02-29-96 2040 E. Independence Ave.
Amended: 01-01-98 Springfield, MO
11-01-98
(FA.A2) 08-26-97 Hwy. 71 Bypass & College
Amended: 01-01-98 Fayetteville, AR
11-01-98
RCI CANTINA, LLC Stephen A. Grove (DA.A) 02-01-96 AL, GA, SC 4/08-31-99
400 Interstate N. Pkwy. Amended: 01-01-98
Suite 1200 11-01-98
Atlanta, GA 30339
(FA.A1) 02-01-96 2128 Washington Road
Amended: 01-01-98 Augusta, GA
11-01-98
(FA.A2) 12-03-96 169 Tom Hill Senior
Amended: 01-01-98 Macon, GA
11-01-98
(FA.A3) 06-25-97 3327 Gentian Blvd.
Amended: 01-01-98 Columbus, GA
11-01-98
RCI CANTINA II, LLC Stephen A. Grove (DA.A) 01-22-98 TN, GA, AL, NC, KY, 5/08-01-02
400 Interstate N. Pkwy. Amended: 01-22-98 MO, AR
Suite 1200 11-01-98
Atlanta, GA 30339
(FA.A1) 01-22-98 7020 Shallowford Road
Amended: 11-01-98 Chattanooga, TN
-3-
<PAGE>
RCI CANTINA III, LLC Stephen A. Grove (DA.A) 01-22-98 CO 5/08-01-02
400 Interstate N. Pkwy. Amended: 01-22-98
Suite 1200 11-01-98
Atlanta, GA 30339
(FA.A1) 01-22-98 6676 S. Parker Rd.
Amended: 11-01-98 Aurora, CO
RIO ROSE, L.P. Harry T. Rose (DA.A) 09-16-97 NJ, PA 5/04-14-02
826 Newton Yardley Rd. Amended: 01-01-98
Suite 200 11-01-98
Newtown, PA 18940
(FA.A1) 09-16-97 (to be determined)
RIORO, INC. Michael Olander (DA.A) 02-29-96 NC, SC 5/06-30-00
170 Windchime Court Amended: 01-01-98
Raleigh, NC 27615 11-01-98
(FA.A1) 02-29-96 9813 South Blvd.
Amended: 01-01-98 Pineville, NC
11-01-98
RIORO, INC. Michael Olander (DA.B) 02-29-96 WV, NC 5/06-30-00
170 Windchime Court Amended: 08-29-96
Raleigh, NC 27615 01-01-98
11-01-98
(FA.B1) 02-29-96 (to be determined)
SOUTH COAST William F. Palmer (DA.A) 02-22-96 FL 5/06-30-00
CANTINAS, INC. Amended: 03-13-97
6620 McGinnis Ferry Road 01-01-98
Suite B 11-01-98
Duluth, GA 30155
(FA.A1) 02-29-96 (to be determined)
SOUTH COAST William F. Palmer (DA.B) 02-22-96 NC, SC, GA 5/06-30-00
CANTINAS, INC. Amended: 03-13-97
6620 McGinnis Ferry Road 01-01-98
Suite B 11-01-98
Duluth, GA 30155
(FA.B1) 02-22-96 34 Tunnel Road
Amended: 01-01-98 Asheville, NC
11-01-98
(FA.B2) 06-30-97 21 Roper Mountain Road
Amended: 01-01-98 Greenville, SC
11-01-98
-4-
<PAGE>
(FA.B3) 09-09-97 838 Turner McCall Blvd.
Amended: 01-01-98 Rome, GA
11-01-98
(FA.B4) 02-16-98 1701 Browns Bridge Road
Amended: 11-01-98 Gainesville, GA
T & K PARTNERS, LTD. Michael J. Scanlon (DA.A) 02-29-96 KY, OH, IN 5/06-30-00
249 E. Main Street Amended: 08-15-96
Suite 101 01-01-98
Lexington, KY 40507 11-01-98
(FA.A1) 02-29-96 2349 Richmond Road
Amended: 01-01-98 Lexington, KY
Closed: 09-14-98
(FA.A2) 08-15-96 7980 Hosbrook Road
Amended: 01-01-98 Madeira, OH
Closed: 09-14-98
T & K PARTNERS, LTD. Michael J. Scanlon (DA.A) 02-29-96 OH, IN, PA 5/06-30-00
249 E. Main Street Amended: 08-14-96
Suite 101 01-01-98
Lexington, KY 40507 11-01-98
(FA.A) 02-29-96 40 Hutchinson Avenue
Closed: 11-24-97 Worthington, OH
THE RIO TRIO Frank DeAngelo (DA.A) 01-17-96 FL, GA 4/08-31-99
CORPORATION Amended: 11-20-97
3305 Breckenridge Blvd. 01-01-98
Suite 126 11-01-98
Duluth, GA 30096
(FA.A1) 01-17-96 1926 Capital Circle, N.E.
Amended: 01-01-98 Tallahassee, FL
11-01-98
THE RIO TRIO Frank DeAngelo (DA.B) 08-10-96 VA, WV, NC 5/01-31-01
CORPORATION Amended: 11-20-97
3305 Breckenridge Blvd. 01-01-98
Suite 126 11-01-98
Duluth, GA 30096
(FA.B1) 08-10-96 4105 Chesapeake Square Blvd.
Amended: 01-01-98 Chesapeake, VA
11-01-98
-5-
<PAGE>
TLC-EAST, INC. Matthew J. Fairbairn (DA.A) 02-06-97 NY, PA 5/04-15-01
201 ATP Tour Blvd. David Stein Amended: 01-01-98
Suite 120 11-01-98
Ponte Vedra Beach, FL
32082 (FA.A1) 02-06-97 (to be determined)
(fka DSMF, INC.)
6
</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.
7
<PAGE>
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.
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.
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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
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
<PAGE>
AMENDMENT NO. 4
1995 EQUITY INCENTIVE PLAN
THE FOLLOWING AMENDMENT to the 1995 Equity Incentive Plan (the "Plan")
was adopted by the Executive Compensation Committee on December 16, 1998 and by
the Board of Directors on December 17, 1998 at their regular meetings held on
those dates, to be effective as to all grants made pursuant to the Plan on or
after said December 17, 1998:
"The Amendment to Section 2 of the Plan adopted by the Board of
Directors as of March 14, 1996 be, and the same hereby is, deleted and
canceled, so that the definition of the term "Retirement" shall be as
set forth in the Plan as originally adopted."
IN WITNESS WHEREOF, the Plan has been amended as of this 17th day of
December, 1998.
APPLEBEE'S INTERNATIONAL, INC.
By: /s/ Lloyd L. Hill
Lloyd L. Hill, President/CEO
SCHEDULE OF PARTIES RECEIVING INDEMNIFICATION AGREEMENTS
W. Matthew Carpenter
Larry A. Cates
D. Patrick Curran
Edward J. Gleich
Abe J. Gustin, Jr.
Eric L. Hansen
Jack P. Helms
Kenneth D. Hill
Lloyd L. Hill
Robert A. Hoffmeister
James W. Kirkpatrick
John F. Koch
Steven K. Lumpkin
Robert A. Martin
Mark A. Peterson
Burton M. Sack
George D. Shadid
Robert T. Steinkamp
Harry B. Stroup
John A. Weber
PARTIES TO PREVIOUS FORM OF CHANGE IN CONTROL AGREEMENT
Steven K. Lumpkin
Robert A. Martin
Robert T. Steinkamp
Harry B. Stroup
John A. Weber
CHANGE OF CONTROL AGREEMENT
This Agreement is made as of , 19 , by and between APPLEBEE'S
INTERNATIONAL, INC., a Delaware corporation (the "Company") and
_________________________ (the "Executive").
WHEREAS, the Company believes it to be in its best interest to provide
for continuity of management and to protect its management personnel against
financial hardship in the event of a change in control of the Company.
NOW, THEREFORE, in consideration of premises and the mutual terms and
conditions hereof, the company and the Executive hereby agree as follows:
1. Termination After Change in Control. In the event of a Change in
Control, as defined below, any termination of Executive's employment with the
Company within the 12 month period following such Change in Control, whether by
Executive or by the Company and whether with or without cause, the following
shall occur:
a. On the tenth business day following the effective date of
such termination, the Executive shall receive a lump sum payment in
cash equal to (i) his current fiscal year annualized salary times a
multiple ("Multiple") and (ii) the greater of (a) the Multiple times
the product of an amount equal to his/her prior year's bonus divided by
12 or (b) the Multiple times the product of all accrued but unpaid
bonus amounts calculated under the Executive Bonus Plan for each prior
fiscal quarter in the fiscal year in which the termination becomes
effective, including the fiscal quarter in which the termination
becomes effective (so long as the termination becomes effective after
the ninth week of such fiscal quarter)divided by 12. Multiple is
defined as a fraction, the denominator of which is twelve (12) and the
numerator of which is a number equal to twenty (20). The term "Company"
shall include Applebee's International and all of its subsidiaries and
affiliated companies; and
b. The Executive shall be entitled to continuation of coverage
for twelve (12) months (beginning with the month subsequent to the
effective date of such termination) under all Company paid or partially
paid health, disability, or group life insurance plans or any
retirement, pension, or profit sharing plans, or any stock, restrictive
stock, phantom stock or other such option or incentive plan, in each
case at such level as had been available to the Executive immediately
prior to the Change in Control; and
1
<PAGE>
c. Any unvested portion of all stock options held by the
Executive as of the day immediately preceding the effective date of
such termination shall immediately vest and become exercisable and, for
purposes of such options, such termination shall be deemed to be a
termination by the Company not for cause. Further, any restricted stock
held by the Executive shall be deemed unrestricted as of the day
immediately preceding the effective date of such termination.
2. Definitions Related to Change of Control.
a. "Change of Control" means any one of the following: (i)
continuing directors no longer constitute at least 2/3 of the Board of
Directors; (ii) any person or group of persons (as defined in Rule
13d-5 under the Securities Exchange Act of 1934), together with its
affiliates, become the beneficial owner, directly or indirectly, or 30%
or more of the Company's then outstanding Common Stock or 30% or more
of the voting power of the company's then outstanding securities
entitled generally to vote for the election of the Company's Directors;
(iii) the approval by the Company's stockholders of the merger or
consolidation of the Company with any other corporation, the sale of
substantially all of the assets of the company or the liquidation or
dissolution of the company, unless, in the case of a merger or
consolidation, then Continuing Directors in office immediately prior to
such merger or consolidation will constitute at least 2/3 of the board
of Directors of the surviving corporation of such merger or
consolidation and any parent (as such term is defined in Rule 12b-2
under the Securities Exchange Act of 1934) of such corporation; or (iv)
at least 2/3 of the then Continuing Directors in office immediately
prior to any other action proposed to be taken by the Company's
Stockholders or by the Company's Board of Directors determine that such
proposed action, if taken, would constitute a change of control of the
Company and such action is taken.
b. "Continuing Director" means any individual who either (i)
was a member of the Company's Board of Directors ont he date hereof, or
(ii) was designated (before initial election as a Director) as a
continuing Director by a majority of the then Continuing Directors.
3. Arbitration of Disputes. Any dispute or claim arising out of or
relating to this Agreement shall be settled by arbitration in Johnson County,
Kansas in accordance with the then current rules of the American Arbitration
Association, and judgment upon any award rendered therein may be entered in any
court having proper jurisdiction. The Company shall bear the full cost of any
arbitration, including the expenses and attorneys' fees incurred by the
Executive related thereto and including any actions taken by either party to
appeal or enforce the judgment rendered therein, regardless of the outcome of
such arbitration, and the Company shall not be entitled to use any lawyer who is
a Company employee to represent it in any dispute or arbitration related hereto.
Notwithstanding the foregoing, if the Company refuses to arbitrate such a
dispute and the same is submitted to a court for resolution, the Company shall
pay all attorneys fees and expenses as incurred by Executive in enforcing this
Agreement, in addition to any such fees and expenses incurred by the Company.
Conversely, if the Executive refuses to arbitrate such a dispute and the same is
submitted to a court for resolution, the Company shall not be obligated to pay
Executive's attorneys fees or expenses.
2
<PAGE>
4. Mitigation. The Executive shall have no duty to attempt to mitigate
the level of benefits payable by the Company to him hereunder and the Company
shall not be entitled to set off against the amounts payable hereunder any
amounts received by the Executive from any other source, including any
subsequent employer.
5. General Provisions.
a. Law governing. This Agreement shall be governed by and
construed in accordance with the laws of the State of Kansas.
b. Termination. This Agreement shall remain in effect for a
period of three (3) years from and after the date hereof and shall be
automatically extended each year thereafter for additional terms of one
(1) year each, unless either party has provided the other party written
notice of the termination hereof sixty (60) days prior to the end of
the then applicable term. Notwithstanding the foregoing, if a Change of
Control occurs, this Agreement shall not terminate or be terminable by
either party until twelve (12) months after the effective date of the
change of control.
c. Invalid Provisions. If any provision of this Agreement is
held to be illegal, invalid, or unenforceable, such provision shall be
fully severable and this Agreement shall be construed and enforced as
if such illegal, invalid, or unenforceable provision had never
comprised a part hereof; and the remaining provisions hereof shall
remain in full force and effect and shall not be affected by the
illegal, invalid, or unenforceable provision or by its severance
herefrom. Furthermore, in lieu of such illegal, invalid, or
unenforceable provision there shall be added automatically as a part of
this Agreement a provision as similar in terms to such illegal,
invalid, or unenforceable provision as may be possible and still be
legal, valid or enforceable.
d. Entire Agreement. This Agreement sets forth the entire
understanding of the parties and supersedes all prior agreements or
understandings, whether written or oral, with respect to termination or
severance benefits payable by the Company tot he Executive. No terms,
conditions, warranties, other than those contained herein, and no
amendments or modifications hereto shall be binding unless made in
writing and signed by the parties hereto.
3
<PAGE>
e. Binding Effect. This Agreement shall extend to and be
binding upon and inure to the benefit to the parties hereto, their
respective heirs, representatives, successors and assigns. This
Agreement may not be assigned by the Executive.
f. Waiver. The waiver by either party hereto of a breach of
any term or provision of this Agreement shall not operate or be
construed as a waiver of a subsequent breach of the same provision by
any party or of the breach of any other term or provision of this
Agreement.
g. Titles. Titles of the paragraphs herein are used solely for
convenience and shall not be used for interpretation or construing any
work, clause, paragraph, or provision of this Agreement.
h. Counterparts. this Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the Company and the Executive have executed this
Agreement as of the date and year first above written above.
EXECUTIVE: APPLEBEE'S INTERNATIONAL, INC.
By:
4
<PAGE>
PARTIES TO CHANGE IN CONTROL AGREEMENT
Larry A. Cates
W. Matthew Carpenter
Robert A. Hoffmeister
Mark A. Peterson
Edward J. Gleich
James W. Kirkpatrick
John F. Koch
Julia A. Stewart
Lawrence M. Folk
5
APPLEBEE'S INTERNATIONAL, INC. SUBSIDIARY CORPORATIONS
(100% owned unless indicated)
A.I.I. Euro Services (Holland) B.V.
AII Services - Europe, Limited
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 a
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 26, 1999, appearing in and incorporated by reference in the Annual
Report on Form 10-K of Applebee's International, Inc. for the year ended
December 27, 1998, 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 26, 1999, appearing in and incorporated by reference in the Annual
Report on Form 10-K of Applebee's International, Inc. for the year ended
December 27, 1998, 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 26, 1999, appearing in and incorporated by reference in the Annual
Report on Form 10-K of Applebee's International, Inc. for the year ended
December 27, 1998, 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.
333-01969 of Applebee's International, Inc. on Form S-8 of our report dated
February 26, 1999, appearing in and incorporated by reference in the Annual
Report on Form 10-K of Applebee's International, Inc. for the year ended
December 27, 1998, 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.
333-17823 of Applebee's International, Inc. on Form S-8 of our report dated
February 26, 1999, appearing in and incorporated by reference in the Annual
Report on Form 10-K of Applebee's International, Inc. for the year ended
December 27, 1998, 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 26, 1999, appearing in and incorporated by reference in the Annual
Report on Form 10-K of Applebee's International, Inc. for the year ended
December 27, 1998, and to the reference to us under the heading "Experts" in
such Registration Statement.
Kansas City, Missouri
March 26, 1999
<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>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS
<FISCAL-YEAR-END> DEC-27-1998 DEC-28-1997
<PERIOD-END> DEC-27-1998 DEC-28-1997
<CASH> 1,767 8,908
<SECURITIES> 4,879 10,906
<RECEIVABLES> 18,724 17,227
<ALLOWANCES> 1,565 837
<INVENTORY> 6,709 4,788
<CURRENT-ASSETS> 34,909 43,954
<PP&E> 457,329 345,518
<DEPRECIATION> 93,271 69,436
<TOTAL-ASSETS> 510,904 377,474
<CURRENT-LIABILITIES> 65,951 62,488
<BONDS> 145,522 22,579
0 0
0 0
<COMMON> 321 317
<OTHER-SE> 295,732 290,126
<TOTAL-LIABILITY-AND-EQUITY> 510,904 377,474
<SALES> 580,840 452,173
<TOTAL-REVENUES> 647,562 515,820
<CGS> 494,466 387,491
<TOTAL-COSTS> 552,510 440,070
<OTHER-EXPENSES> 6,490 4,467
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 9,922 1,705
<INCOME-PRETAX> 80,409 71,801
<INCOME-TAX> 29,753 26,710
<INCOME-CONTINUING> 50,656 45,091
<DISCONTINUED> 0 0
<EXTRAORDINARY> (641) 0
<CHANGES> 0 0
<NET-INCOME> 50,015 45,091
<EPS-PRIMARY> 1.65 1.44
<EPS-DILUTED> 1.65 1.43
</TABLE>
