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 26, 1999
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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
----------------------- -----------------------
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
--------------------------------- ---------------------------------
(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 16, 2000 was $777,280,316 based upon the closing sale
price on March 16, 2000.
The number of shares of the registrant's common stock outstanding as of March
16, 2000 was 26,573,686.
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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<TABLE>
<CAPTION>
APPLEBEE'S INTERNATIONAL, INC.
FORM 10-K
FISCAL YEAR ENDED DECEMBER 26, 1999
INDEX
Page
<S> <C> <C>
PART I
Item 1. Business................................................................................ 3
Item 2. Properties.............................................................................. 14
Item 3. Legal Proceedings....................................................................... 16
Item 4. Submission of Matters to a Vote of Security Holders..................................... 16
PART II
Item 5. Market for Registrant's Common Equity and
Related Stockholder Matters....................................................... 17
Item 6. Selected Financial Data................................................................. 18
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations..................................... 19
Item 8. Financial Statements and Supplementary Data............................................. 26
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure............................................ 26
PART III
Item 10. Directors and Executive Officers of the Registrant...................................... 27
Item 11. Executive Compensation.................................................................. 27
Item 12. Security Ownership of Certain Beneficial Owners and Management.......................... 27
Item 13. Certain Relationships and Related Transactions.......................................... 27
PART IV
Item 14. Exhibits and Reports on Form 8-K........................................................ 28
Signatures.............................................................................................. 29
</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 under the name "Applebee's
Neighborhood Grill & Bar." With nearly 1,200 restaurants and $2.35 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 26, 1999, there were 1,168 Applebee's restaurants, of which 906
were operated by franchisees and 262 were operated by the Company. The
restaurants were located in 49 states and eight international countries. During
1999, 107 new restaurants were opened, including 80 franchise restaurants and 27
Company restaurants.
The Company acquired the Rio Bravo Cantina chain of Mexican casual dining
restaurants in March 1995. On April 12, 1999, the Company completed the sale of
the concept, which was comprised of 65 restaurants, including 40 Company
restaurants and 25 franchised restaurants. On April 26, 1999, the Company
completed the sale of its four specialty restaurants, which were also acquired
in 1995.
With the 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 26, December 27, December 28,
1999 1998 1997
----------------- ---------------- -----------------
<S> <C> <C> <C>
Number of restaurants:
Applebee's:
Company(1):
Beginning of year............................ 247 190 148
Restaurant openings.......................... 27 32 32
Restaurant closings.......................... -- (2) (1)
Restaurants acquired from (by) franchisees... (12) 27 11
----------------- ---------------- -----------------
End of year.................................. 262 247 190
----------------- ---------------- -----------------
Franchise:
Beginning of year............................ 817 770 671
Restaurant openings.......................... 80 84 113
Restaurant closings.......................... (3) (10) (3)
Restaurants acquired by (from) franchisees... 12 (27) (11)
----------------- ---------------- -----------------
End of year.................................. 906 817 770
----------------- ---------------- -----------------
Total Applebee's:
Beginning of year............................ 1,064 960 819
Restaurant openings.......................... 107 116 145
Restaurant closings.......................... (3) (12) (4)
----------------- ---------------- -----------------
End of year.................................. 1,168 1,064 960
================= ================ =================
Rio Bravo Cantinas:
Company:
Beginning of year............................ 40 31 21
Restaurant openings.......................... -- 9 10
Restaurants divested......................... (40) -- --
----------------- ---------------- -----------------
End of year.................................. -- 40 31
----------------- ---------------- -----------------
Franchise:
Beginning of year............................ 26 24 9
Restaurant openings.......................... -- 4 16
Restaurant closings.......................... (1) (2) (1)
Restaurants divested......................... (25) -- --
----------------- ---------------- -----------------
End of year.................................. -- 26 24
----------------- ---------------- -----------------
Total Rio Bravo Cantinas:
Beginning of year............................ 66 55 30
Restaurant openings.......................... -- 13 26
Restaurant closings.......................... (1) (2) (1)
Restaurants divested......................... (65) -- --
----------------- ---------------- -----------------
End of year.................................. -- 66 55
================= ================ =================
Specialty Restaurants................................. -- 4 4
================= ================ =================
Total number of restaurants:
Beginning of year............................ 1,134 1,019 853
Restaurant openings.......................... 107 129 171
Restaurant closings.......................... (4) (14) (5)
Restaurants divested......................... (69) -- --
----------------- ---------------- -----------------
End of year.................................. 1,168 1,134 1,019
================= ================ =================
</TABLE>
4
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<TABLE>
<CAPTION>
Fiscal Year Ended
-----------------------------------------------------
December 26, December 27, December 28,
1999 1998 1997
----------------- ---------------- -----------------
<S> <C> <C> <C>
Weighted average weekly sales per restaurant:
Applebee's:
Company(1).................................. $ 41,674 $ 40,664 $ 41,176
Franchise................................... $ 40,297 $ 39,077 $ 39,513
Total Applebee's............................ $ 40,619 $ 39,428 $ 39,826
Rio Bravo Cantinas:
Company(2).................................. -- $ 52,789 $ 60,946
Franchise................................... -- $ 41,675 $ 49,288
Total Rio Bravo Cantinas.................... -- $ 47,966 $ 56,206
Change in comparable restaurant sales:(3)
Applebee's:
Company(1).................................. 4.4% (0.4)% 0.1 %
Franchise................................... 2.9% (0.1)% 0.6 %
Total Applebee's............................ 3.2% (0.2)% 0.5 %
Rio Bravo Cantinas (Company).................... -- (6.8)% (1.6)%
Total system sales (in thousands):
Applebee's...................................... $2,347,388 $2,066,273 $1,818,503
Rio Bravo Cantinas.............................. 42,661 150,899 128,196
Specialty restaurants........................... 4,806 14,373 14,435
----------------- ---------------- -----------------
Total system sales.......................... $2,394,855 $2,231,545 $1,961,134
================= ================ =================
</TABLE>
- --------
(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. The Company has four free-standing restaurant prototypes. The
two larger prototypes are approximately 4,700 and 5,000 square feet and seat
approximately 165 and 200 patrons, respectively. There are also two "small-town"
prototypes which are approximately 3,800 and 4,300 square feet and seat
approximately 135 and 145 patrons, respectively.
During 1998, the Company introduced the new small-town restaurant prototype for
communities of less than 25,000 population. There were 19 test units of the new
small-town designs open as of December 26, 1999, nine by the Company and ten by
franchisees, 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 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 1999, alcoholic beverages accounted for 13.7% 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 typically lasts from six to ten 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 1999, approximately 4.0% of sales for Company Applebee's
restaurants was spent on advertising, including 1.5% contributed to the national
advertising pool which develops and funds the specific national promotions.
Beginning in 2000, the contribution to the national advertising pool will
increase from 1.5% to 2.1% of sales. 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 262 as of December 26, 1999 through the opening of 184 new
restaurants and the acquisition of 81 franchise restaurants over the last seven
years. In addition, as part of its portfolio management strategy, the Company
has sold 26 restaurants to franchisees during this period, including 12
restaurants in the Philadelphia market in December 1999.
The Company opened 27 new Applebee's restaurants in 1999 and anticipates opening
approximately 25 to 27 new Applebee's restaurants in 2000, 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 1999 are set forth in the
following table.
7
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<TABLE>
<CAPTION>
Company
Company Restaurants
Restaurants as of
Opened in December 26,
Area 1999 1999
------------------------------------------------------------- ----------------- ------------------
<S> <C> <C>
New England (includes Massachusetts, Vermont,
New Hampshire, Rhode Island and Maine).................... 6 41
Detroit/Southern Michigan................................... 6 40
Virginia.................................................... 2 37
Minneapolis/St. Paul, Minnesota............................. 3 35
North/Central Texas......................................... 3 27
Kansas City, Missouri/Kansas................................ 2 24
St. Louis, Missouri/Illinois................................ 3 24
Las Vegas/Reno, Nevada...................................... -- 12
Atlanta, Georgia............................................ 1 9
San Diego/Southern California............................... -- 7
Albuquerque, New Mexico..................................... -- 6
Philadelphia, Pennsylvania.................................. 1 --
----------------- ------------------
27 262
================= ==================
</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 26, 1999, the Company employed
nine Regional Vice Presidents of Operations/Directors of Operations and 43 Area
Directors, 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 68 franchise groups, including 13
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 42 states and eight international countries. Virtually all
territories in the contiguous 48 states have been granted to franchisees or
designated for Company development.
As of December 26, 1999, there were 906 franchise restaurants. Franchisees
opened 113 restaurants in 1997, 84 restaurants in 1998 and 80 restaurants in
1999. The Company anticipates between 90 to 100 franchise restaurant openings in
2000.
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.
8
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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. Through 1999, domestic franchisees were 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.
To fund the Company's brand-building strategy, the required contribution to the
national advertising fund will increase to 2.1% of gross sales in 2000, and may
increase from 2.1% to a maximum of 2.5% of gross sales in 2001. Beginning in
2002, the required contribution will be 2.5% of gross sales. 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. The Company also has franchise business
managers (12 at December 26, 1999) who are responsible for assisting each
franchisee with business planning, development, technology and human resources
efforts.
Quality Control. The Company continuously monitors franchisee operations and
inspects restaurants, principally through its full-time franchise territory
managers (14 at December 26, 1999). The Company makes both scheduled and
unannounced inspections of restaurants to ensure that only approved products are
in use and that Company prescribed practices and procedures are being followed.
A minimum of three planned visits are made each year, during which a
representative of the Company conducts an inspection and consultation at each
restaurant. The Company has the right to terminate a franchise if a franchisee
does not operate and maintain a restaurant in accordance with the Company's
requirements.
Franchise Business Council. The Company maintains a Franchise Business Council
which provides advice to the Company regarding operations, marketing, product
development and other aspects of restaurant operations for the purpose of
improving the franchise system. As of December 26, 1999, the Franchise Business
Council consisted of seven franchisee representatives, two 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 is 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.
9
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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, Central America
and the Middle East. In this regard, the Company currently has development
agreements with 13 international franchisees. The Company had 26 international
restaurants in operation as of December 26, 1999. 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.
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)"
service mark and certain variations thereof in the United States and 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.
10
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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 26, 1999, the Company employed approximately 16,700 full and
part-time employees, of whom approximately 380 were corporate personnel, 1,220
were restaurant managers or managers in training and 15,100 were employed in
non-management full and part-time restaurant positions. Of the 380 corporate
employees, 140 were in management positions and 240 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.
11
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Executive Officers of the Registrant
The executive officers of the Company as of December 26, 1999 are shown below.
<TABLE>
<CAPTION>
Name Age Position
<S> <C> <C>
Abe J. Gustin, Jr................ 65 Chairman of the Board of Directors
Lloyd L. Hill.................... 55 Chief Executive Officer, President and Member of the Board of
Directors
Steven K. Lumpkin................ 45 Executive Vice President of Strategic Development
George D. Shadid................. 45 Executive Vice President and Chief Financial Officer,
Treasurer and Member of the Board of Directors
Julia A. Stewart................. 44 President of Applebee's Division
Larry A. Cates................... 51 President of International Division
Karen B. Eadon................... 46 Senior Vice President of Marketing
Louis A. Kaucic.................. 48 Senior Vice President of Human Resources
John F. Koch..................... 40 Senior Vice President of Research and Development
Carin L. Stutz................... 43 Senior Vice President of Company Operations
</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.
12
<PAGE>
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.
Karen B. Eadon was employed by the Company in March 1999 as Senior Vice
President of Marketing. From April 1995 to March 1999, Ms. Eadon was Vice
President of Retail Marketing Programs with ARCO Products, a leading gasoline
retail and convenience store chain. From April 1993 to November 1994, she was
employed as Vice President of Marketing by Carl Karcher Enterprises, owner and
franchisor of Carl's Jr. restaurants. From 1985 to 1993, Ms. Eadon held several
key marketing positions with Taco Bell Corporation.
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.
John F. Koch was employed by the Company in February 1999 as Senior Vice
President of Research and Development. From January 1990 to February 1999, Mr.
Koch held various positions with The Olive Garden, most recently as the Senior
Vice President of Food and Beverage. Mr. Koch has over 20 years experience in
the restaurant industry.
Carin L. Stutz was employed by the Company in November 1999 as Senior Vice
President of Operations. From July 1994 to November 1999, Ms. Stutz was Division
Vice President with Wendy's International. From 1993 to 1994, she was Regional
Operations Vice President for Sodexho, USA. From 1990 to 1993, Ms. Stutz was
employed by Nutri/System, Inc. as a Vice President of Corporate Operations.
Prior to 1990, Ms. Stutz was employed for 12 years with Wendy's International.
13
<PAGE>
Item 2. Properties
At December 26, 1999, the Company owned or operated 262 restaurants, of which it
leased the land and building for 59 sites, owned the building and leased the
land for 80 sites, and owned the land and building for 123 sites. In addition,
as of December 26, 1999, the Company owned 8 sites for future development of
restaurants and had entered into 4 lease agreements for restaurant sites the
Company plans to open during 2000. 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 49 states and the eight international
countries in which Applebee's are located and the number of restaurants
operating in each state or country as of December 26, 1999:
14
<PAGE>
<TABLE>
<CAPTION>
Number of Restaurants
-----------------------------------------------------
State or Country Company Franchise Total System
---------------------------------- -------------- -------------- --------------
<S> <C> <C> <C>
Domestic:
--------
Alabama........................ -- 22 22
Alaska......................... -- 1 1
Arizona........................ -- 18 18
Arkansas....................... -- 6 6
California..................... 7 56 63
Colorado....................... -- 25 25
Connecticut.................... -- 4 4
Delaware....................... -- 4 4
Florida........................ -- 70 70
Georgia........................ 9 48 57
Idaho.......................... -- 6 6
Illinois....................... 6 40 46
Indiana........................ -- 44 44
Iowa........................... -- 19 19
Kansas......................... 10 13 23
Kentucky....................... -- 23 23
Louisiana...................... -- 17 17
Maine.......................... 4 -- 4
Maryland....................... -- 18 18
Massachusetts.................. 19 -- 19
Michigan....................... 40 8 48
Minnesota...................... 35 -- 35
Mississippi.................... -- 12 12
Missouri....................... 32 8 40
Montana........................ -- 6 6
Nebraska....................... -- 10 10
Nevada......................... 12 -- 12
New Hampshire.................. 11 -- 11
New Jersey..................... -- 20 20
New Mexico..................... 6 4 10
New York....................... -- 50 50
North Carolina................. 1 39 40
North Dakota................... -- 6 6
Ohio........................... -- 58 58
Oklahoma....................... -- 13 13
Oregon......................... -- 10 10
Pennsylvania................... -- 35 35
Rhode Island................... 5 -- 5
South Carolina................. -- 36 36
South Dakota................... -- 2 2
Tennessee...................... -- 40 40
Texas.......................... 27 23 50
Utah........................... -- 7 7
Vermont........................ 2 -- 2
Virginia....................... 36 9 45
Washington..................... -- 12 12
West Virginia.................. -- 11 11
Wisconsin...................... -- 24 24
Wyoming........................ -- 3 3
-------------- -------------- --------------
Total Domestic................. 262 880 1,142
-------------- -------------- --------------
</TABLE>
15
<PAGE>
<TABLE>
<CAPTION>
Number of Restaurants
-----------------------------------------------------
State or Country Company Franchise Total System
---------------------------------- -------------- -------------- --------------
<S> <C> <C> <C>
International:
-------------
Canada......................... -- 11 11
Germany........................ -- 2 2
Greece......................... -- 1 1
Honduras....................... -- 1 1
Kuwait......................... -- 1 1
Mexico......................... -- 3 3
Netherlands.................... -- 5 5
Sweden......................... -- 2 2
-------------- -------------- --------------
Total International............ -- 26 26
-------------- -------------- --------------
262 906 1,168
============== ============== ==============
</TABLE>
Item 3. Legal Proceedings
As of December 26, 1999, 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. In April 1999, a summary judgment of $3,833,000 was awarded to the
third party. The Company has filed an appeal and believes it has meritorious
defenses. As of December 26, 1999, the Company believes it has recorded adequate
reserves for this matter.
The Company has reached an agreement in principle to settle a dispute with the
Company's franchisee for Germany regarding disclosures allegedly made or omitted
by the Company.
In addition, the Company is involved in various legal actions arising in the
normal course of business. While the resolution of the matters described above
may have an impact on the financial results for the period in which they are
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.
16
<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 Stock Market(R)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>
1999 1998
------------------------------- -------------------------------
High Low High Low
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
First Quarter $ 28.69 $ 20.00 $ 23.75 $ 16.13
Second Quarter $ 32.75 $ 22.50 $ 26.00 $ 20.00
Third Quarter $ 34.94 $ 29.88 $ 24.63 $ 18.25
Fourth Quarter $ 35.00 $ 23.00 $ 22.13 $ 16.88
</TABLE>
2. Number of stockholders of record at December 26, 1999: 1,173
3. An annual dividend of $0.10 per common share was declared on December
16, 1999 for stockholders of record on December 27, 1999, and the
dividend was payable on January 28, 2000. 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.
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 2000 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.
17
<PAGE>
Item 6. Selected Financial Data
The following table sets forth for the periods and the dates indicated selected
financial data of the Company. 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 26, December 27, December 28, December 29, December 31,
1999 1998 1997 1996 1995
--------------- --------------- --------------- --------------- ----------------
(in thousands, except per share amounts)
STATEMENT OF
EARNINGS DATA:
<S> <C> <C> <C> <C> <C>
Company restaurant sales................. $ 596,754 $ 580,840 $ 452,173 $ 358,990 $ 299,824
Franchise income......................... 72,830 66,722 63,647 54,141 43,739
--------------- --------------- --------------- --------------- ----------------
Total operating revenues............ $ 669,584 $ 647,562 $ 515,820 $ 413,131 $ 343,563
=============== =============== =============== =============== ================
Operating earnings....................... $ 94,910 $ 88,562 $ 71,283 $ 58,833 $ 45,712
Earnings before extraordinary item....... $ 54,198 $ 50,656 $ 45,091 $ 38,014 $ 27,420
Basic earnings per share before
extraordinary item.................... $ 1.91 $ 1.67 $ 1.44 $ 1.22 $ 0.94
Diluted earnings per share before
extraordinary item.................... $ 1.89 $ 1.67 $ 1.43 $ 1.21 $ 0.92
Net earnings............................. $ 54,198 $ 50,015 $ 45,091 $ 38,014 $ 27,420
Basic net earnings per share............. $ 1.91 $ 1.65 $ 1.44 $ 1.22 $ 0.94
Diluted net earnings per share........... $ 1.89 $ 1.65 $ 1.43 $ 1.21 $ 0.92
Dividends per share...................... $ 0.10 $ 0.09 $ 0.08 $ 0.07 $ 0.06
Basic weighted average shares
outstanding........................... 28,403 30,272 31,401 31,188 29,319
Diluted weighted average shares
outstanding........................... 28,601 30,385 31,640 31,533 29,860
BALANCE SHEET DATA
(AT END OF FISCAL YEAR):
Total assets............................. $ 442,216 $ 510,904 $ 377,474 $ 314,111 $ 270,680
Long-term obligations, including
current portion........................ $ 108,100 $ 147,188 $ 29,105 $ 25,843 $ 27,427
Stockholders' equity..................... $ 253,873 $ 296,053 $ 290,443 $ 244,764 $ 203,993
</TABLE>
18
<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). 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 26, 1999, December 27, 1998
and December 28, 1997 contained 52 weeks and are referred to hereafter as 1999,
1998 and 1997, 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.
Divestitures
On April 12, 1999, the Company completed the sale of its Rio Bravo Cantina
concept, which was comprised of 65 restaurants, including 40 Company restaurants
and 25 franchised restaurants. The Company received $53 million in consideration
($47 million in cash at closing and a $6 million 8% subordinated note due in ten
years). On April 26, 1999, the Company also completed the sale of its four
specialty restaurants for $12 million in cash. The two sale transactions and
related expenses resulted in a loss on disposition of $9,000,000 before income
taxes ($5,670,000 net of income taxes), which was recorded in the first quarter
of 1999. Total Company restaurant sales, franchise income and cost of Company
restaurant sales for the 1999 period prior to divestiture were $33,444,000,
$26,000 and $30,331,000, respectively, for both the Rio Bravo Cantina and
specialty restaurants.
On December 13, 1999, the Company completed the sale of 12 Applebee's
restaurants in the Philadelphia market for $23,465,000. The operations of the
restaurants and future restaurant development in the market area were assumed by
an existing Applebee's franchisee. In connection with this transaction, the
Company recognized a gain in the fourth quarter of 1999 of $4,193,000
($2,650,000 net of income taxes). Total Company restaurant sales and cost of
Company restaurant sales for these restaurants for the 1999 period prior to
divestiture were $22,759,000 and $18,568,000, respectively.
19
<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 26, December 27, December 28,
1999 1998 1997
-------------- -------------- ----------------
<S> <C> <C> <C>
Revenues:
Company restaurant sales......................... 89.1% 89.7% 87.7%
Franchise income................................. 10.9 10.3 12.3
-------------- -------------- ----------------
Total operating revenues...................... 100.0% 100.0% 100.0%
============== ============== ================
Cost of sales (as a percentage of Company restaurant sales):
Food and beverage................................ 27.5% 27.4% 27.5%
Labor............................................ 31.6 31.9 32.1
Direct and occupancy............................. 24.4 25.3 25.3
Pre-opening expense.............................. 0.3 0.5 0.8
-------------- -------------- ----------------
Total cost of sales........................... 83.7% 85.1% 85.7%
============== ============== ================
General and administrative expenses................... 9.5% 9.0% 10.2%
Amortization of intangible assets..................... 0.9 0.9 0.6
Loss on disposition of restaurants and equipment...... 0.8 0.1 0.2
-------------- -------------- ----------------
Operating earnings.................................... 14.2 13.7 13.8
-------------- -------------- ----------------
Other income (expense):
Investment income................................ 0.2 0.2 0.4
Interest expense................................. (1.6) (1.5) (0.3)
Other income..................................... 0.1 0.1 0.1
-------------- -------------- ----------------
Total other income (expense).................. (1.4) (1.3) 0.1
-------------- -------------- ----------------
Earnings before income taxes and extraordinary item... 12.8 12.4 13.9
Income taxes.......................................... 4.7 4.6 5.2
-------------- -------------- ----------------
Earnings before extraordinary item.................... 8.1 7.8 8.7
Extraordinary loss from early extinguishment
of debt, net of income taxes..................... -- (0.1) --
-------------- -------------- ----------------
Net earnings.......................................... 8.1% 7.7% 8.7%
============== ============== ================
</TABLE>
20
<PAGE>
Fiscal Year Ended December 26, 1999 Compared With Fiscal Year Ended December 27,
1998
Company Restaurant Sales. Total Company restaurant sales increased $15,914,000
(3%) from $580,840,000 in 1998 to $596,754,000 in 1999. Sales for Company
Applebee's restaurants increased $91,730,000 (19%) from $471,580,000 in 1998 to
$563,310,000 in 1999 due primarily to Company restaurant openings, increases in
comparable restaurant sales and incremental sales from the 33 Virginia
restaurants acquired in March 1998. Sales for Company Rio Bravo Cantina
restaurants decreased from $94,887,000 in 1998 to $28,638,000 in 1999, and sales
for the specialty restaurants decreased from $14,373,000 in 1998 to $4,806,000
in 1999 as a result of their divestiture in April 1999.
Comparable restaurant sales at Company Applebee's restaurants increased by 4.4%
in 1999. Weighted average weekly sales at Company Applebee's restaurants
increased 2.5% from $40,664 in 1998 to $41,674 in 1999. These increases were due
to increased customer traffic as a result of the success of the Company's food
promotions, an increase in network television advertising in 1999 and increased
sales of appetizers, drinks and desserts.
Franchise Income. Overall franchise income increased $6,108,000 (9%) from
$66,722,000 in 1998 to $72,830,000 in 1999 due primarily to the increased number
of franchise Applebee's restaurants operating during 1999 as compared to 1998.
Successful system-wide food promotions also contributed to increases of 2.9% and
3.1%, respectively, in comparable restaurant sales and weighted average weekly
sales for franchise Applebee's restaurants in 1999. These increases were
partially offset by a reduction in franchise royalties as a result of the sale
of the Rio Bravo Cantina concept during the second quarter of 1999 and the
waiver of royalties related to these restaurants, as well as the acquisition of
the Virginia restaurants in the second quarter of 1998.
Cost of Company Restaurant Sales. Food and beverage costs increased from 27.4%
in 1998 to 27.5% in 1999. This increase resulted from the Company's strategy of
investing in higher cost food promotional items, which was partially offset by
the impact of the sale of the Rio Bravo restaurants. In addition, beverage
sales, as a percentage of total Company restaurant sales, declined from 16.6% in
1998 to 14.4% in 1999 which had a negative impact on overall food and beverage
costs, as a percentage of Company restaurant sales. This decrease was due, in
part, to the sale of the Rio Bravo restaurants, which had a higher proportion of
beverage sales. Management also believes that the reduction in beverage sales
was due, in part, to the continuation of the overall trend toward increased
awareness of responsible alcohol consumption as well as a higher rate of growth
in food sales resulting from successful food promotions.
Labor costs decreased from 31.9% in 1998 to 31.6% in 1999. The decrease was due
primarily to lower labor costs in the acquired Virginia restaurants and the
impact of the sale of the Rio Bravo restaurants. These decreases were partially
offset by continued pressure on both hourly labor and management costs due to
low unemployment as well as the highly competitive nature of the restaurant
industry.
Direct and occupancy costs decreased from 25.3% in 1998 to 24.4% in 1999. This
decrease was due primarily to the sale of the Rio Bravo restaurants, a decrease
in advertising costs, as a percentage of sales, and leverage resulting from the
sales increases at Applebee's restaurants in 1999.
General and Administrative Expenses. General and administrative expenses
increased from 9.0% in 1998 to 9.5% in 1999 due to the absorption of general and
administrative expenses over a lower revenue base as a result of the divestiture
of the Rio Bravo and specialty restaurants. General and administrative expenses
increased by $5,294,000 during 1999 compared to 1998 due primarily to increased
incentive compensation expense as a result of the Company's performance.
21
<PAGE>
Loss on Disposition of Restaurants and Equipment. Loss on disposition of
restaurants and equipment increased from $952,000 in 1998 to $5,607,000 in 1999
due primarily to the loss on the disposition of the Rio Bravo Cantina and
specialty restaurants of $9,000,000 which was partially offset by the gain on
the sale of the Philadelphia restaurants of $4,193,000.
Interest Expense. Interest expense increased in 1999 compared to 1998 primarily
as a result of interest associated with borrowings under the Company's credit
facilities for stock repurchases.
Income Taxes. The effective income tax rate, as a percentage of earnings before
income taxes, was 36.8% in 1999 compared to 37.0% in 1998. The decrease in the
Company's overall effective tax rate in 1999 was due primarily to an increase in
credits resulting from FICA taxes on tips and Work Opportunity Tax Credits.
Fiscal Year Ended December 27, 1998 Compared With Fiscal Year Ended December 28,
1997
Company Restaurant Sales. Total 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.
22
<PAGE>
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.
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 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.
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.
23
<PAGE>
Capital expenditures were $77,665,000 in fiscal year 1998 (excluding
$101,749,000 related to the Virginia Acquisition, including acquisition costs)
and $53,945,000 in 1999. The Company currently expects to open 25 to 27
Applebee's restaurants in 2000. Capital expenditures are expected to be between
$55,000,000 and $60,000,000 in fiscal 2000 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
provided 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 the third
quarter of 1999, the Company entered into a one-year renewable $10,000,000
unsecured line of credit facility, of which $5,000,000 may only be used for
letters of credit. In the fourth quarter of 1999, the Company's working capital
facility was reduced from $100,000,000 to $86,500,000 as a result of the sale of
the Philadelphia restaurants. 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 were 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.
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. In
December 1999, the Company's Board of Directors authorized an additional program
to repurchase up to $32,500,000 of its common stock through the year 2000,
subject to market conditions and pursuant to applicable restrictions under the
Company's credit agreement. During 1999, the Company repurchased 3,332,000
shares of its common stock at an aggregate cost of $102,959,000.
As of December 26, 1999, the Company held liquid assets totaling $3,982,000,
consisting of cash and cash equivalents of $1,427,000 and short-term investments
of $2,555,000. The working capital deficit increased from $34,576,000 at
December 27, 1998 to $43,451,000 at December 26, 1999. This increase was due
primarily to increased gift certificate sales in December 1999 and an increase
in accrued incentive compensation expense as a result of the Company's 1999
performance. As of December 26, 1999, $18,500,000 was outstanding under the
Company's working capital and line of credit facilities, and standby letters of
credit totaling $3,530,000 were outstanding under its letter of credit
facilities.
24
<PAGE>
The Company believes that its liquid assets and cash generated from operations,
combined with borrowings available under its 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 minimum wage has been recently proposed by the Federal
government and is 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, as
amended by SFAS No. 137, 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 beginning in the first quarter of fiscal year 2001.
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.
Impact of the Year 2000
As of the filing date of this report, the impact of the Year 2000 has not had a
material adverse impact on the Company's business or results of operations. The
total cost of the Company's Year 2000 efforts was approximately $1,300,000.
These amounts included the costs of external consultants, the purchase of
software and hardware, and the compensation of internal employees working on
Year 2000 projects. All costs were funded from cash flows from operations.
25
<PAGE>
Forward-Looking Statements
The statements contained herein regarding restaurant development and capital
expenditures are forward-looking and based on current expectations. There are
several risks and uncertainties that could cause actual results to differ
materially from those described. For a discussion of the principal factors that
could cause actual results to be materially different, refer to the Company's
current report on Form 8-K filed with the Securities and Exchange Commission on
February 9, 2000.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
On March 30, 1998, the Company entered into a bank credit agreement that
provided 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. In the fourth quarter of 1999, the
Company's working capital facility was reduced from $100,000,000 to $86,500,000
as a result of the sale of the Philadelphia restaurants. 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 0.125% or LIBOR plus 1.125%, 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 bank credit agreement, the Company 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 and were for an aggregate notional amount of
$100,000,000. The Company terminated $25,000,000 of the swap agreements in 1999.
The termination of the swap agreements did not have a material impact on the
Company's results of operations. The swap agreements effectively fix the
underlying three-month LIBOR interest rate on $75,000,000 of the senior credit
facilities to rates ranging from 5.91% to 6.05%.
As of December 26, 1999, the total amount of debt subject to interest rate
fluctuations was $28,161,000 ($9,661,000 under the term loan and $18,500,000
under revolving credit and unsecured line of credit facilities). A 1% change in
interest rates would result in an increase or decrease in interest expense of
$282,000 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.
26
<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 4, 2000, 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 4, 2000, 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 4, 2000, 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 4,
2000, is incorporated herein by reference.
27
<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 September 29, 1999,
announcing strong third quarter sales trends and increased network
television advertising in 2000.
28
<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 23, 2000 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 23, 2000
------------------------- -------------------------
Lloyd L. Hill
Director and Chief Executive Officer
(principal executive officer)
By: /s/ George D. Shadid Date: March 23, 2000
------------------------- -------------------------
George D. Shadid
Director, Executive Vice President
and Chief Financial Officer
(principal financial officer)
By: /s/ Mark A. Peterson Date: March 23, 2000
------------------------- -------------------------
Mark A. Peterson
Vice President and Controller
(principal accounting officer)
By: /s/ Abe J. Gustin, Jr. Date: March 23, 2000
------------------------- -------------------------
Abe J. Gustin, Jr.
Director, Chairman of the Board
29
<PAGE>
By: /s/ Erline Belton Date: March 23, 2000
------------------------- -------------------------
Erline Belton
Director
By: /s/ Douglas R. Conant Date: March 23, 2000
------------------------- -------------------------
Douglas R. Conant
Director
By: /s/ D. Patrick Curran Date: March 23, 2000
------------------------- -------------------------
D. Patrick Curran
Director
By: /s/ Eric L. Hansen Date: March 23, 2000
------------------------- -------------------------
Eric L. Hansen
Director
By: /s/ Mark S. Hansen Date: March 23, 2000
------------------------- -------------------------
Mark S. Hansen
Director
By: /s/ Jack P. Helms Date: March 23, 2000
------------------------- -------------------------
Jack P. Helms
Director
By: /s/ Burton M. Sack Date: March 23, 2000
------------------------- -------------------------
Burton M. Sack
Director
30
<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 26, 1999 and
December 27, 1998 .................................................................................. F-3
Consolidated Statements of Earnings for the fiscal years ended
December 26, 1999, December 27, 1998 and December 28, 1997........................................... F-4
Consolidated Statements of Stockholders' Equity for the fiscal Years
Ended December 26, 1999, December 27, 1998 and December 28, 1997..................................... F-5
Consolidated Statements of Cash Flows for the fiscal years ended
December 26, 1999, December 27, 1998 and December 28, 1997........................................... 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 26, 1999 and
December 27, 1998 and the related consolidated statements of earnings,
stockholders' equity and cash flows for each of the three fiscal years in the
period ended December 26, 1999. 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 auditing standards generally accepted
in the United States of America. 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 26, 1999 and
December 27, 1998, and the consolidated results of their operations and cash
flows for each of the three fiscal years in the period ended December 26, 1999
in conformity with accounting principles generally accepted in the United States
of America.
Deloitte & Touche LLP
Kansas City, Missouri
February 18, 2000
F-2
<PAGE>
APPLEBEE'S INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
<TABLE>
<CAPTION>
December 26, December 27,
1999 1998
-------------- -------------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents.................................................... $ 1,427 $ 1,767
Short-term investments, at market value...................................... 2,555 4,879
Receivables, net of allowance................................................ 13,563 13,625
Inventories.................................................................. 11,247 6,709
Prepaid and other current assets............................................. 5,419 4,395
-------------- -------------
Total current assets...................................................... 34,211 31,375
Property and equipment, net....................................................... 300,140 364,058
Goodwill, net..................................................................... 88,667 99,599
Franchise interest and rights, net................................................ 3,449 3,959
Other assets...................................................................... 15,749 11,913
-------------- -------------
$ 442,216 $ 510,904
============== =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt............................................ $ 1,807 $ 1,666
Accounts payable............................................................. 16,966 17,427
Accrued expenses and other current liabilities............................... 54,962 44,114
Accrued dividends............................................................ 2,660 2,659
Accrued income taxes......................................................... 1,267 85
-------------- -------------
Total current liabilities................................................. 77,662 65,951
-------------- -------------
Non-current liabilities:
Long-term debt - less current portion........................................ 106,293 145,522
Franchise deposits........................................................... 1,765 2,139
Deferred income taxes........................................................ 2,623 1,239
-------------- -------------
Total non-current liabilities............................................. 110,681 148,900
-------------- -------------
Total liabilities......................................................... 188,343 214,851
-------------- -------------
Commitments and contingencies (Notes 7, 8 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 1999 and 32,150,360 shares in 1998.......... 321 321
Additional paid-in capital................................................... 168,584 163,651
Retained earnings............................................................ 233,548 182,010
Unrealized gain on short-term investments, net of income taxes............... 50 113
-------------- -------------
402,503 346,095
Treasury stock-5,553,213 shares in 1999 and 2,610,133 shares in 1998,at cost. (148,630) (50,042)
-------------- -------------
Total stockholders' equity................................................ 253,873 296,053
-------------- -------------
$ 442,216 $ 510,904
============== =============
</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 26, December 27, December 28,
1999 1998 1997
-------------- ------------- -------------
<S> <C> <C> <C>
Revenues:
Company restaurant sales................................ $ 596,754 $ 580,840 $ 452,173
Franchise income........................................ 72,830 66,722 63,647
-------------- ------------- -------------
Total operating revenues............................. 669,584 647,562 515,820
-------------- ------------- -------------
Cost of Company restaurant sales:
Food and beverage....................................... 163,865 159,420 124,469
Labor................................................... 188,538 185,260 145,165
Direct and occupancy.................................... 145,747 146,693 114,196
Pre-opening expense..................................... 1,582 3,093 3,661
-------------- ------------- -------------
Total cost of Company restaurant sales............... 499,732 494,466 387,491
-------------- ------------- -------------
General and administrative expenses.......................... 63,338 58,044 52,579
Amortization of intangible assets............................ 5,997 5,538 3,258
Loss on disposition of restaurants and equipment............. 5,607 952 1,209
-------------- ------------- -------------
Operating earnings........................................... 94,910 88,562 71,283
-------------- ------------- -------------
Other income (expense):
Investment income....................................... 1,195 1,131 1,834
Interest expense........................................ (10,814) (9,922) (1,705)
Other income............................................ 444 638 389
-------------- ------------- -------------
Total other income (expense)......................... (9,175) (8,153) 518
-------------- ------------- -------------
Earnings before income taxes and extraordinary item.......... 85,735 80,409 71,801
Income taxes................................................. 31,537 29,753 26,710
-------------- ------------- -------------
Earnings before extraordinary item........................... 54,198 50,656 45,091
Extraordinary loss from early extinguishment
of debt, net of income taxes (Note 8)................... -- (641) --
-------------- ------------- -------------
Net earnings................................................. $ 54,198 $ 50,015 $ 45,091
============== ============= =============
Basic earnings per common share:
Basic earnings before extraordinary item................ $ 1.91 $ 1.67 $ 1.44
Extraordinary item...................................... -- (0.02) --
-------------- ------------- -------------
Basic net earnings per common share.......................... $ 1.91 $ 1.65 $ 1.44
============== ============= =============
Diluted earnings per common share:
Diluted earnings before extraordinary item.............. $ 1.89 $ 1.67 $ 1.43
Extraordinary item...................................... -- (0.02) --
-------------- ------------- -------------
Diluted net earnings per common share........................ $ 1.89 $ 1.65 $ 1.43
============== ============= =============
Basic weighted average shares outstanding.................... 28,403 30,272 31,401
============== ============= =============
Diluted weighted average shares outstanding.................. 28,601 30,385 31,640
============== ============= =============
</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 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 and related
tax benefit.................... 163,054 1 2,741 -- -- -- 2,742
Shares sold under employee
stock purchase plan............ -- -- 396 -- -- 61 457
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 and related
tax benefit.................... 336,351 3 5,741 -- -- (184) 5,560
Shares issued under employee stock
purchase, stock ownership and
401(k) plans................... -- -- 1,465 -- -- 262 1,727
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
Purchases of treasury stock...... -- -- -- -- -- (102,959) (102,959)
Dividends on common stock,
$0.10 per share................ -- -- -- (2,660) -- -- (2,660)
Stock options exercised and related
tax benefit.................... -- -- 3,773 -- -- 3,252 7,025
Shares issued under employee stock
purchase, stock ownership and
401(k) plans................... -- -- 1,063 -- -- 1,113 2,176
Restricted shares awarded under
equity incentive plan, net of
cancellations.................. -- -- 121 -- -- 6 127
Unearned compensation relating
to restricted shares........... -- -- 431 -- -- -- 431
Notes receivable from officers for
stock sales.................... -- -- (455) -- -- -- (455)
Change in unrealized gain on
short-term investments, net of
income taxes................... -- -- -- -- (63) -- (63)
Net earnings..................... -- -- -- 54,198 -- -- 54,198
------------ ----------- ------------ ---------- ------------- ---------- ----------------
Balance, December 26, 1999.......... 32,150,360 $ 321 $ 168,584 $233,548 $ 50 $(148,630) $ 253,873
============ =========== ============ ========== ============= ========== ================
</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 26, December 27, December 28,
1999 1998 1997
-------------- -------------- --------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings.................................................. $ 54,198 $ 50,015 $ 45,091
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization.............................. 28,930 29,135 20,877
Amortization of intangible assets.......................... 5,997 5,538 3,258
Amortization of deferred financing costs................... 678 477 50
(Gain) loss on sale of investments......................... -- (13) 20
Deferred income tax provision (benefit).................... (244) (492) 1,001
Loss on disposition of restaurants and equipment........... 5,607 952 1,209
Changes in assets and liabilities (exclusive of effects of
acquisitions):
Receivables................................................ (108) 2,229 2,451
Inventories................................................ (5,781) (1,432) (66)
Prepaid and other current assets........................... 508 (84) 671
Accounts payable........................................... (461) (2,304) 7,782
Accrued expenses and other current liabilities............. 9,937 16,317 2,400
Accrued income taxes....................................... 1,182 (5,081) 4,248
Franchise deposits......................................... (374) 607 (261)
Other...................................................... 700 (3,356) (1,352)
-------------- -------------- --------------
NET CASH PROVIDED BY OPERATING ACTIVITIES.................. 100,769 92,508 87,379
-------------- -------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment........................... (53,945) (77,665) (90,480)
Proceeds from sale of restaurants and equipment............... 81,884 10,216 988
Purchases of short-term investments........................... -- (30,799) (19,150)
Maturities and sales of short-term investments................ 2,200 36,842 48,117
Acquisitions of restaurants................................... -- (101,749) (33,650)
Acquisition of minority interest in joint venture............. -- -- (1,525)
-------------- -------------- --------------
NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES........... 30,139 (163,155) (95,700)
-------------- -------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Purchases of treasury stock................................... (102,959) (49,332) --
Dividends paid................................................ (2,659) (2,518) (2,191)
Issuance of common stock upon exercise of stock options and
related tax benefit........................................ 7,025 5,560 2,742
Shares sold under employee stock purchase plan................ 944 820 457
Proceeds from issuance of long-term debt...................... 44,604 175,825 --
Deferred financing costs relating to issuance of long-term debt -- (4,000) --
Payments on long-term debt.................................... (78,203) (62,849) (1,194)
Minority interest in net earnings of joint venture............ -- -- 69
-------------- -------------- --------------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES........... (131,248) 63,506 (117)
-------------- -------------- --------------
NET DECREASE IN CASH AND CASH EQUIVALENTS.......................... (340) (7,141) (8,438)
CASH AND CASH EQUIVALENTS, beginning of period..................... 1,767 8,908 17,346
-------------- -------------- --------------
CASH AND CASH EQUIVALENTS, end of period........................... $ 1,427 $ 1,767 $ 8,908
============== ============== ==============
</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 26, December 27, December 28,
1999 1998 1997
----------------- ----------------- -----------------
<S> <C> <C> <C>
Supplemental disclosures of cash flow
information:
Cash paid during the year for:
Income taxes.................................... $ 29,629 $ 33,935 $ 20,613
================= ================= =================
Interest........................................ $ 10,651 $ 8,809 $ 2,573
================= ================= =================
</TABLE>
Supplemental disclosures of noncash investing and financing activities:
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).
The Company received a $6,000,000 subordinated note in connection with the sale
of the Rio Bravo Cantina restaurants in April 1999 (see Note 4), which is due in
April 2009.
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 under the name "Applebee's
Neighborhood Grill & Bar". As of December 26, 1999, there were 1,168 Applebee's
restaurants, of which 906 were operated by franchisees and 262 were operated by
the Company. Such restaurants were located in 49 states and eight international
countries.
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 26, 1999, December 27, 1998 and December
28, 1997 each contained 52 weeks, and are referred to hereafter as 1999, 1998
and 1997, respectively.
Short-term investments: Short-term investments are comprised of 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
26, 1999, all short-term investments have been classified as available-for-sale.
Financial instruments: The Company's financial instruments at December 26, 1999
and December 27, 1998 consist of cash equivalents, short-term investments,
long-term debt, excluding capitalized lease obligations, and interest rate swaps
(see Note 8). 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.
Property and equipment: Property and equipment are stated at cost. Depreciation
is provided primarily on a straight-line method over the estimated useful lives
of the assets. Leasehold improvements are amortized over the lesser of the lease
term, including renewal options, or the estimated useful life of the related
asset. The general ranges of original depreciable lives are as follows:
Years
Buildings........................................... 20
Leasehold improvements.............................. 15-20
Furniture and equipment............................. 3-7
Interest has been capitalized in connection with the development of new
restaurants and is amortized over the estimated useful life of the related
asset. Interest costs of $407,000, $859,000 and $755,000 were capitalized during
1999, 1998 and 1997, 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 26, 1999 and December 27, 1998 was $16,161,000 and $12,551,000,
respectively.
F-8
<PAGE>
Impairment of long-lived assets: Long-lived assets are reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount
may not be recoverable. 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 26, 1999 and December
27, 1998 was $7,057,000 and $6,546,000, 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
$2,897,000, $3,099,000 and $4,263,000 for 1999, 1998 and 1997, 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 $28,340,000, $29,097,000 and $20,752,000 for 1999,
1998 and 1997, 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 options or other contracts to issue
common stock were exercised or converted into common stock. Outstanding stock
options and accrued performance shares represent the only dilutive effect on
weighted average shares. A reconciliation between basic and diluted weighted
average shares outstanding and the related earnings per share calculation is
presented below (in thousands, except per share amounts):
<TABLE>
<CAPTION>
1999 1998 1997
--------------- ---------------- ----------------
<S> <C> <C> <C>
Net earnings....................................... $ 54,198 $ 50,015 $ 45,091
============ ============ ============
Basic weighted average shares outstanding.......... 28,403 30,272 31,401
Dilutive effect of stock options................... 198 113 239
------------ ------------ ------------
Diluted weighted average shares outstanding........ 28,601 30,385 31,640
============ ============ ============
Basic net earnings per common share................ $ 1.91 $ 1.65 $ 1.44
============ ============ ============
Diluted net earnings per common share.............. $ 1.89 $ 1.65 $ 1.43
============ ============ =============
</TABLE>
F-9
<PAGE>
Stock options with exercise prices greater than the average market price of the
Company's common stock for the applicable periods are excluded from the
computation of diluted weighted average shares outstanding. Such options totaled
approximately 8,000, 1,604,000 and 1,625,000 for 1999, 1998 and 1997,
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, as amended by SFAS No. 137, 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 beginning in the
first quarter of fiscal year 2001. 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.
Reclassifications: Certain prior year amounts have been reclassified to conform
with the 1999 presentation.
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. The acquisition was
accounted for as a purchase, and the results of operations of such restaurants
are reflected in the consolidated financial statements subsequent to the date of
acquisition.
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 financing arrangements (see Note 8)
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.
F-10
<PAGE>
<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>
4. Divestitures
On April 12, 1999, the Company completed the sale of its Rio Bravo Cantina
concept, which was comprised of 65 restaurants, including 40 Company restaurants
and 25 franchised restaurants. The Company received $53 million in consideration
($47 million in cash at closing and a $6 million 8% subordinated note due in ten
years). On April 26, 1999, the Company also completed the sale of its four
specialty restaurants for $12 million in cash. Total Company restaurant sales,
franchise income and cost of Company restaurant sales for the 1999 period prior
to divestiture were $33,444,000, $26,000 and $30,331,000, respectively, for both
the Rio Bravo Cantina and specialty restaurants.
In accordance with Statement of Financial Accounting Standards ("SFAS") No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of," the Company recorded a loss on disposition of $9,000,000
($5,670,000 net of income taxes) in the first quarter of 1999 to reflect the
difference between the carrying value of the net assets disposed and the
estimated proceeds from the sale transactions. Depreciation and amortization on
the long-lived assets to be disposed was discontinued in February 1999 in
anticipation of the sale of these restaurants.
On December 13, 1999, the Company completed the sale of 12 Applebee's
restaurants in the Philadelphia market for $23,465,000. The operations of the
restaurants and future restaurant development in the market area were assumed by
an existing Applebee's franchisee. The agreement also provides for additional
payments if the franchisee achieves certain future sales levels in the
Philadelphia market. Depreciation and amortization on the long-lived assets to
be disposed was discontinued in August 1999 in anticipation of the sale of these
restaurants. In connection with this transaction, the Company recognized a gain
in the fourth quarter of 1999 of $4,193,000 ($2,650,000 net of income taxes).
Total Company restaurant sales and cost of Company restaurant sales for these
restaurants for the 1999 period prior to divestiture were $22,759,000 and
$18,568,000, respectively.
F-11
<PAGE>
5. Receivables
Receivables are comprised of the following (in thousands):
<TABLE>
<CAPTION>
December 26, December 27,
1999 1998
----------------- -----------------
<S> <C> <C>
Franchise royalty, advertising and trade receivables............. $ 12,935 $ 11,507
Credit card receivables.......................................... 2,473 2,587
Franchise fee receivables........................................ 431 498
Interest and dividends receivable................................ 39 105
Other............................................................ 120 493
----------------- -----------------
15,998 15,190
Less allowance for bad debts..................................... 2,435 1,565
----------------- -----------------
$ 13,563 $ 13,625
================= =================
</TABLE>
The provision for bad debts totaled $981,000, $1,000,000 and $635,000 for 1999,
1998 and 1997, respectively. Write-offs against the allowance for bad debts
totaled $111,000, $272,000 and $68,000 during 1999, 1998 and 1997, respectively.
6. Other Assets
Other assets are comprised of the following (in thousands):
<TABLE>
<CAPTION>
December 26, December 27,
1999 1998
----------------- -----------------
<S> <C> <C>
Notes receivable................................................. $ 8,654 $ 3,534
Deferred financing costs, net.................................... 3,211 3,535
Liquor licenses.................................................. 2,800 3,824
Other............................................................ 1,084 1,020
----------------- -----------------
$ 15,749 $ 11,913
================= =================
</TABLE>
7. Property and Equipment
Property and equipment, net is comprised of the following (in thousands):
<TABLE>
<CAPTION>
December 26, December 27,
1999 1998
----------------- ------------------
<S> <C> <C>
Land............................................................. $ 63,922 $ 77,121
Buildings and leasehold improvements............................. 205,625 239,047
Furniture and equipment.......................................... 118,795 134,810
Construction in progress......................................... 4,786 6,351
----------------- ------------------
393,128 457,329
Less accumulated depreciation and capitalized
lease amortization............................................ 92,988 93,271
----------------- ------------------
$ 300,140 $ 364,058
================= ==================
</TABLE>
Property under capitalized leases in the amount of $4,055,000 and $9,592,000 at
December 26, 1999 and December 27, 1998, respectively, is included in buildings
and leasehold improvements. Accumulated amortization of such property amounted
to $647,000 and $711,000 at December 26, 1999 and December 27, 1998,
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 $28,930,000, $29,135,000 and $20,877,000 for 1999, 1998 and
1997, respectively. Of these amounts, $300,000, $476,000 and $210,000 related to
capitalized lease amortization during 1999, 1998 and 1997, respectively.
F-12
<PAGE>
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>
1999 1998 1997
------------------ ------------------ -----------------
<S> <C> <C> <C>
Minimum rent................................. $ 11,780 $ 12,432 $ 10,452
Contingent rent.............................. 1,070 1,294 1,298
------------------ ------------------ -----------------
$ 12,850 $ 13,726 $ 11,750
================== ================== =================
</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 2000) as of December 26, 1999 are as follows (in
thousands):
<TABLE>
<CAPTION>
Capitalized Operating
Leases Leases
------------------ -----------------
<S> <C> <C>
2000............................................................. $ 644 $ 10,962
2001............................................................. 667 10,912
2002............................................................. 691 10,829
2003............................................................. 716 10,409
2004............................................................. 741 9,520
Thereafter....................................................... 9,097 80,040
------------------ ------------------
Total minimum lease payments..................................... 12,556 $ 132,672
==================
Less amounts representing interest............................... 8,359
------------------
Present value of minimum lease payments.......................... $ 4,197
==================
</TABLE>
8. Long-Term Debt
Long-term debt, including capitalized lease obligations, is comprised of the
following (in thousands):
<TABLE>
<CAPTION>
December 26, December 27,
1999 1998
---------------- ----------------
<S> <C> <C>
Unsecured senior term loan; interest at LIBOR plus 2.25% or
prime rate plus 1.25%, with semi-annual principal payments;
due March 2006................................................. $ 84,661 $ 124,375
Unsecured revolving credit facility; interest at LIBOR plus
1.125% or prime rate plus 0.125%; due March 2003............... 18,000 12,000
Unsecured line of credit facility; interest at federal funds
rate; due September 17, 2000................................... 500 --
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.................................................. 417 802
Capitalized lease obligations...................................... 4,197 9,686
Other.............................................................. 325 325
---------------- ----------------
Total long-term debt............................................. 108,100 147,188
Less current portion of long-term debt........................... 1,807 1,666
---------------- ----------------
Long-term debt - less current portion............................ $ 106,293 $ 145,522
================ ================
</TABLE>
F-13
<PAGE>
On March 30, 1998, the Company entered into a bank credit agreement that
provided 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 the third
quarter of 1999, the Company entered into a one-year renewable $10,000,000
unsecured line of credit facility, of which $5,000,000 may only be used for
letters of credit.
In connection with the sale of the Rio Bravo Cantina and specialty restaurants,
the Company repaid $31,000,000 of the senior term loan during the second quarter
of 1999. In the fourth quarter of 1999, the Company also repaid $7,600,000 of
the senior term loan and $13,500,000 of borrowings under the working capital
facility in connection with the sale of the Philadelphia market. The Company's
working capital facility was reduced from $100,000,000 to $86,500,000 as a
result of this transaction.
In connection with the early extinguishment of debt in 1998, the Company paid a
prepayment penalty of $930,000. 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.
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 were retired
in 1999. In addition, as a result of the sale of the Philadelphia market in
December 1999, capitalized lease obligations decreased by $480,000.
As of December 26, 1999, $18,000,000 was outstanding under the $86,500,000
working capital facility, $500,000 was outstanding under the $10,000,000
unsecured line of credit facility, and standby letters of credit totaling
$3,530,000 were outstanding under the letter of credit facilities.
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 $860,000 per year for each year through March 31, 2005,
with the remaining $79,934,000 due in two equal amounts through March 31, 2006.
The working capital facility bears interest at either the bank's prime rate plus
0.125% or LIBOR plus 1.125%, at the Company's option. A commitment fee of 0.25%
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.
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 and were for an aggregate
notional amount of $100,000,000. The Company terminated $25,000,000 of the swap
agreements in 1999. The termination of the swap agreements did not have a
material impact on the Company's results of operations. The swap agreements
effectively fix the underlying three-month LIBOR interest rate on $75,000,000 of
the senior credit facilities to rates ranging from 5.91% to 6.05%. As of
December 26, 1999, the fair value of these swaps was a net receivable of
$2,076,000. 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 were 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.
F-14
<PAGE>
Maturities of long-term debt, including capitalized lease obligations, for each
of the five fiscal years subsequent to December 26, 1999, ending during the
years indicated, are as follows (in thousands):
2000.................................................... $ 1,807
2001.................................................... 893
2002.................................................... 902
2003.................................................... 19,237
2004.................................................... 929
9. Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities are comprised of the following
(in thousands):
<TABLE>
<CAPTION>
December 26, December 27,
1999 1998
------------------ -----------------
<S> <C> <C>
Compensation and related taxes.................................... $ 16,647 $ 12,551
Gift certificates................................................. 12,714 7,803
Sales and use taxes............................................... 3,109 3,571
Insurance......................................................... 7,675 6,816
Rent.............................................................. 3,019 3,559
Other............................................................. 11,798 9,814
------------------ -----------------
$ 54,962 $ 44,114
================== =================
</TABLE>
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>
1999 1998 1997
--------------- --------------- ----------------
<S> <C> <C> <C>
Current provision:
Federal............................................ $ 27,019 $ 25,803 $ 22,016
State.............................................. 4,762 4,442 3,693
Deferred provision (benefit)........................... (244) (492) 1,001
--------------- --------------- ----------------
Income taxes........................................... $ 31,537 $ 29,753 $ 26,710
=============== =============== ================
</TABLE>
The deferred income tax provision is comprised of the following (in thousands):
<TABLE>
<CAPTION>
1999 1998 1997
--------------- --------------- ----------------
<S> <C> <C> <C>
Depreciation........................................... $ 1,635 $ 793 $ 2,270
Other.................................................. (1,879) (1,285) (1,269)
--------------- --------------- ----------------
Deferred income tax provision (benefit)................ (244) (492) 1,001
Deferred income taxes related to change in
unrealized gain (loss) on investments.............. (38) 10 57
--------------- --------------- ----------------
Net change in deferred income taxes.................... $ (282) $ (482) $ 1,058
=============== =============== ================
</TABLE>
F-15
<PAGE>
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>
1999 1998 1997
--------------- --------------- ----------------
<S> <C> <C> <C>
Federal income tax at statutory rates.................. $ 30,007 $ 28,143 $ 25,130
Increase (decrease) to income tax expense:
State income taxes, net of federal benefit......... 3,043 2,951 2,625
FICA tip tax credit................................ (2,195) (2,124) (1,598)
Other.............................................. 682 783 553
--------------- --------------- ----------------
Income taxes........................................... $ 31,537 $ 29,753 $ 26,710
=============== =============== ================
</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 26, December 27,
1999 1998
----------------- ------------------
<S> <C> <C>
Classified as current:
Allowance for bad debts..................................... $ 896 $ 546
Accrued expenses............................................ 1,171 1,003
Other, net.................................................. 1,393 245
----------------- ------------------
Net deferred income tax asset............................... $ 3,460 $ 1,794
================= ==================
Classified as non-current:
Depreciation................................................ $ (4,214) $ (2,579)
Franchise deposits.......................................... 649 753
Other, net.................................................. 942 587
----------------- ------------------
Net deferred income tax liability........................... $ (2,623) $ (1,239)
================= ==================
</TABLE>
11. Commitments and Contingencies
Litigation, claims and disputes: As of December 26, 1999, 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. In April 1999, a summary judgment of
$3,833,000 was awarded to the third party. The Company has filed an appeal and
believes it has meritorious defenses. As of December 26, 1999, the Company
believes it has recorded adequate reserves for this matter.
The Company has reached an agreement in principle to settle a dispute with the
Company's franchisee for Germany regarding disclosures allegedly made or omitted
by the Company.
In addition, the Company is involved in various legal actions arising in the
normal course of business. While the resolution of the matters described above
may have an impact on the financial results for the period in which they are
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.
F-16
<PAGE>
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. Approximately $49,000,000 was funded
through this financing source, of which $12,000,000 was outstanding at December
26, 1999. 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 and
other parties, the Company has, in certain cases, remained contingently liable
for the remaining lease payments. As of December 26, 1999, the aggregate amount
of these lease payments totaled approximately $32,900,000. The Company has been
indemnified by the buyers from any losses related to such guaranties.
Philadelphia divestiture: In connection with the sale of the Philadelphia
restaurants, the Company has provided a guarantee to a franchise group totaling
$1,250,000.
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 26, 1999,
the Company would have been required to make payments aggregating approximately
$6,300,000. 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 $4,200,000 if such officers had been terminated as of December 26,
1999.
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. In
December 1999, the Company's Board of Directors authorized an additional program
to repurchase up to $32,500,000 of its common stock through the year 2000,
subject to market conditions and pursuant to applicable restrictions under the
Company's credit agreement. During 1999, the Company repurchased 3,332,000
shares of its common stock at an aggregate cost of $102,959,000.
13. Employee Benefit Plans
Employee stock option plans: 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.
F-17
<PAGE>
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 3,600,000. 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 years subsequent to 1995
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.
During 1999, the Company's Board of Directors approved the 1999 Employee
Incentive Plan (the "1999 Plan") which provides for the granting of nonqualified
stock options, stock appreciation rights, restricted stock, performance units
and performance shares to eligible participants. The number of shares authorized
to be issued pursuant to the 1999 Plan is 333,000. Options granted under the
1999 Plan have a term of ten years and are generally exercisable three years
from the date of grant. Under all three 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.
All three plans permit the granting of performance shares, representing rights
to receive the Company's common stock based upon certain performance criteria.
Performance shares were granted in 1999 which have a one-year and a three-year
performance period. Compensation expense of $2,048,000 related to these grants
was recorded in 1999 and was based on the market price of the Company's common
stock at the end of the fiscal year.
The Company accounts for all three 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):
<TABLE>
<CAPTION>
1999 1998 1997
--------------- --------------- --------------
<S> <C> <C> <C>
Net earnings, as reported................................ $ 54,198 $ 50,015 $ 45,091
Net earnings, pro forma.................................. $ 50,880 $ 48,205 $ 41,119
Basic net earnings per common share, as reported......... $ 1.91 $ 1.65 $ 1.44
Basic net earnings per common share, pro forma........... $ 1.79 $ 1.59 $ 1.31
Diluted net earnings per common share, as reported....... $ 1.89 $ 1.65 $ 1.43
Diluted net earnings per common share, pro forma......... $ 1.78 $ 1.59 $ 1.30
</TABLE>
The weighted average fair value at date of grant for options granted during
1999, 1998 and 1997 was $13.69, $10.68 and $12.76 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 1999, 1998 and
1997: dividend yield of 0.3% for all years; expected volatility of 48.4%, 51.7%
and 56.0%, respectively; risk-free interest rate of 6.4%, 4.7% and 5.7%,
respectively; and expected lives of 4.9, 5.5 and 4.6 years, respectively.
F-18
<PAGE>
<TABLE>
<CAPTION>
Transactions relative to all three plans are as follows:
1999 Plan 1995 Plan 1989 Plan
----------------------------- ----------------------------- ---------------------------
Weighted Weighted Weighted
Average Average Average
Number of Exercise Number of Exercise Number of Exercise
Options Price Options Price Options Price
-------------- -------------- -------------- -------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
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
Granted................... 83,000 $28.85 379,400 $ 28.24 -- --
Exercised................. -- -- (154,639) $ 26.14 (150,685) $13.15
Canceled.................. -- -- (31,142) $ 24.71 (227) $ 7.48
-------------- -------------- -------------
Options outstanding at
December 26, 1999............ 83,000 $28.85 2,018,217 $ 26.58 133,500 $15.20
============== ============== =============
Options exercisable at
December 26, 1999............ -- -- 937,435 $ 27.65 133,500 $15.20
============= ============== =============
Options available for grant at
December 26, 1999............ 250,000 1,379,355 --
</TABLE>
The following table summarizes information relating to fixed-priced stock
options outstanding for all three plans at December 26, 1999:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
------------------------------------------------ --------------------------------
Weighted
Average Weighted
Remaining Average Weighted
Range of Exercise Prices Number Contractual Exercise Number Average
Outstanding Life Price Exercisable Exercise Price
--------------------------- --------------- --------------- -------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
1989 Plan:
$ 3.02 to $ 3.03 2,500 1.6 years $ 3.02 2,500 $ 3.02
$ 13.82 to $ 14.38 98,000 4.3 years $ 13.88 98,000 $ 13.88
$ 19.25 to $ 21.88 33,000 1.8 years $ 20.05 33,000 $ 20.05
--------------- ---------------
$ 3.02 to $ 21.88 133,500 3.6 years $ 15.20 133,500 $ 15.20
=============== ===============
1995 Plan:
$ 18.81 to $ 22.75 324,000 8.5 years $ 20.62 5,000 $ 22.75
$ 24.00 to $ 26.69 298,360 5.8 years $ 25.12 165,450 $ 25.05
$ 28.00 to $ 33.00 1,395,857 6.9 years $ 28.27 766,985 $ 28.24
--------------- ---------------
$ 18.81 to $ 33.00 2,018,217 7.0 years $ 26.58 937,435 $ 27.65
=============== ===============
1999 Plan:
$ 28.50 to $ 33.00 83,000 9.4 years $ 28.85 -- --
=============== ===============
</TABLE>
F-19
<PAGE>
Restricted stock awards: During 1998 and 1999, 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 and
$388,000 in 1999.
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 subsequent years,
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 1999, 1998 and 1997 were $939,000, $945,000 and $702,000,
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 1999, 1998 and 1997, employees purchased
44,299, 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 1999 and
1998 and $500,000 for 1997.
14. Related Party Transactions
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 $158,000, $148,000 and $166,000 for 1999, 1998 and 1997,
respectively, and are included in direct and occupancy costs 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 4). In addition, the same entity became a
franchisee of the Company by purchasing seven existing Applebee's restaurants
from another franchisee.
F-20
<PAGE>
Pursuant to its policy to loan executives amounts used by the executive to
invest in the Company's stock, and in keeping with the Company's executive stock
ownership guidelines, the Company had loans of $455,000 outstanding to three
officers at December 26, 1999 at interest rates ranging from 4.7% to 6.2% which
are collateralized by the stock. These loans are reflected as a reduction to
additional paid-in capital in the Company's consolidated 1999 balance sheet.
15. Quarterly Results of Operations (Unaudited)
The following presents the unaudited consolidated quarterly results of
operations for 1999 and 1998 (in thousands, except per share amounts). During
the first quarter of 1999, the Company recognized a loss of $9,000,000 relating
to the sale of the Rio Bravo Cantina and specialty restaurants. During the
fourth quarter of 1999, the Company recognized a gain of $4,193,000 relating to
the sale of the Philadelphia restaurants.
<TABLE>
<CAPTION>
1999
---------------------------------------------------------------
Fiscal Quarter Ended
---------------------------------------------------------------
March 28, June 27, September 26, December 26,
1999 1999 1999 1999
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues:
Company restaurant sales....................... $161,760 $145,832 $145,434 $143,728
Franchise income............................... 17,540 18,151 18,259 18,880
------------- ------------- ------------- -------------
Total operating revenues.................... 179,300 163,983 163,693 162,608
------------- ------------- ------------- -------------
Cost of Company restaurant sales:
Food and beverage.............................. 44,765 39,776 39,633 39,691
Labor.......................................... 51,786 45,773 45,753 45,226
Direct and occupancy........................... 41,004 36,124 34,312 34,307
Pre-opening expense............................ 378 240 645 319
------------- ------------- ------------- -------------
Total cost of Company restaurant sales...... 137,933 121,913 120,343 119,543
------------- ------------- ------------- -------------
General and administrative expenses................. 16,133 14,484 15,568 17,153
Amortization of intangible assets................... 1,533 1,518 1,490 1,456
(Gain) loss on disposition of restaurants and
equipment........................................... 9,288 215 213 (4,109)
------------- ------------- ------------- -------------
Operating earnings.................................. 14,413 25,853 26,079 28,565
------------- ------------- ------------- -------------
Other income (expense):
Investment income.............................. 180 430 293 292
Interest expense............................... (3,055) (2,522) (2,444) (2,793)
Other income (expense)......................... 168 (164) 170 270
------------- ------------- ------------- -------------
Total other expense......................... (2,707) (2,256) (1,981) (2,231)
------------- ------------- ------------- -------------
Earnings before income taxes........................ 11,706 23,597 24,098 26,334
Income taxes........................................ 4,331 8,731 8,916 9,559
------------- ------------- ------------- -------------
Net earnings........................................ $ 7,375 $ 14,866 $ 15,182 $ 16,775
============= ============= ============= =============
Basic net earnings per common share................. $ 0.25 $ 0.51 $ 0.54 $ 0.62
============= ============= ============= =============
Diluted net earnings per common share............... $ 0.25 $ 0.51 $ 0.53 $ 0.62
============= ============= ============= =============
Basic weighted average shares outstanding........... 29,526 29,070 28,100 26,919
============= ============= ============= =============
Diluted weighted average shares outstanding......... 29,648 29,245 28,454 27,233
============= ============= ============= =============
</TABLE>
F-21
<PAGE>
<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 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-22
<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 Amendment dated May 13, 1999 to 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 Quarterly Report on Form 10-Q for the fiscal
quarter ended June 27, 1999).
4.3 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).
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.
10.5 Form of Applebee's Franchise Agreement.
10.6 Schedule of Applebee's Development and Franchise Agreements as
of December 26, 1999.
E-1
<PAGE>
Exhibit
Number Description of Exhibit
- --------------- ---------------------------------------------------------------
10.7 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).
10.8 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).
10.9 Asset Purchase Agreement dated February 10, 1999 by and among
Applebee's International, Inc., Rio Bravo International, Inc.,
Innovative Restaurant Concepts, Inc., IRC Kansas, Inc.,
Applebee's of Michigan, Inc., Rio Bravo Services, Inc., Chevys
Holdings, Inc., Chevys, Inc. and Rio Bravo Acquisitions, Inc.
(incorporated by reference to the Registrant's Quarterly Report
on Form 10-Q for the fiscal quarter ended March 28, 1999).
10.10 Asset Purchase Agreement dated February 8, 1999 by and among
Rio Bravo International, Inc., Innovative Restaurant Concepts,
Inc., Summit Restaurants, Inc. and Specialty Restaurant
Development, L.L.C. (incorporated by reference to the
Registrant's Quarterly Report on Form 10-Q dated March 28,
1999).
Management Contracts and Compensatory Plans or Arrangements
10.11 1995 Equity Incentive Plan, as amended.
10.12 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).
10.13 1999 Management and Executive Incentive Plan.
10.14 1999 Employee Incentive Plan.
10.15 Employment Agreement, dated January 27, 1994, with Lloyd L.
Hill (incorporated by reference to Exhibit 10.4 of the
Registrant's Quarterly Report on Form 10-Q for the fiscal
quarter ended March 27, 1994).
10.16 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).
10.17 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).
10.18 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).
10.19 Schedule of parties to Indemnification Agreement.
E-2
<PAGE>
Exhibit
Number Description of Exhibit
- --------------- ---------------------------------------------------------------
10.20 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.
10.21 New Form of Change in Control Agreement (incorporated by
reference to Exhibit 10.23 of the Registrant's Annual Report on
Form 10-K for the fiscal year ended December 27, 1998) 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 29 of the Form 10-K).
27 Financial Data Schedule.
E-3
STANDARD FORM
APPLEBEE'S NEIGHBORHOOD GRILL & BAR
DEVELOPMENT AGREEMENT
-----------------------------------
(Name of Developer)
-----------------------------------
(Date)
-----------------------------------
(General Description of Territory)
1
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
RECITALS .................................................................................... E-3
1. GRANT OF DEVELOPMENT RIGHTS.............................................................. E-4
2. INITIAL DEVELOPMENT SCHEDULE............................................................. E-5
3. SUBSEQUENT DEVELOPMENT SCHEDULE;
DEVELOPMENT OBLIGATIONS GENERALLY........................................................ E-6
4. FRANCHISE FEE AND ROYALTY RATE........................................................... E-7
5. SITE APPROVALS: PLANS AND SPECIFICATIONS................................................ E-9
6. FEES AND FRANCHISE AGREEMENTS............................................................ E-10
7. DEVELOPER ORGANIZATION, AUTHORITY,
FINANCIAL CONDITION AND SHAREHOLDERS..................................................... E-10
8. TRANSFER................................................................................. E-12
9. TERMINATION.............................................................................. E-16
10. PREREQUISITES TO OBTAINING FRANCHISES
FOR INDIVIDUAL RESTAURANT UNITS.......................................................... E-17
11. RESTRICTIONS............................................................................. E-19
12. DEVELOPMENT PROCEDURES................................................................... E-20
13. NO WAIVER OF DEFAULT..................................................................... E-22
14. FORCE MAJEURE............................................................................ E-22
15. CONSTRUCTION, SEVERABILITY, GOVERNING
LAW AND JURISDICTION..................................................................... E-22
16. MISCELLANEOUS............................................................................ E-24
APPENDIX A: TERRITORY.................................................................... E-27
APPENDIX B: FORM OF FRANCHISE AGREEMENT.................................................. E-28
APPENDIX C: STATEMENT OF OWNERSHIP INTERESTS............................................. E-29
APPENDIX D: REVIEW AND CONSENT WITH RESPECT
TO TRANSFERS................................................................. E-30
APPENDIX E: CONFIDENTIALITY AGREEMENT AND
COVENANT NOT TO COMPETE...................................................... E-31
APPENDIX F: CONFIDENTIALITY AGREEMENT.................................................... E-34
</TABLE>
2
<PAGE>
APPLEBEE'S NEIGHBORHOOD GRILL & BAR
DEVELOPMENT AGREEMENT
This Agreement is made this ________ day of _____________________, 19______, by
and between APPLEBEE'S INTERNATIONAL, INC., a Delaware corporation
("FRANCHISOR"), _____________________________________________, a
(_______________ corporation, sole proprietorship, _______________ partnership,
_______________ limited partnership [strike inappropriate language])
("DEVELOPER") and ______________________________________
______________________________ (collectively, the "PRINCIPAL SHAREHOLDERS" and,
individually, a "PRINCIPAL SHAREHOLDER" of Developer if a corporation or general
partner of Developer is a limited partnership having as its general partner a
corporation) and
- --------------------------------------------------------------------------------
("GENERAL PARTNER" of Developer if Developer is a limited partnership).*
* (If Developer is not a corporation or a sole proprietorship, or if
Developer is a limited liability company, the parties hereto hereby agree that
an Addendum shall be attached to this Agreement so as properly to reflect the
responsibilities of the partners of any general partnership, the general partner
of any limited partnership and the shareholders of any corporate general partner
of any partnership, or the members of any limited liability company.)
WITNESSETH:
RECITALS
A. Franchisor owns the rights to develop and operate a unique system of
restaurants which specialize in the sale of high quality, moderately priced food
and alcoholic beverages in an attractive, casual setting, which include
proprietary rights in certain valuable trade names, service marks and
trademarks, including the service mark Applebee's Neighborhood Grill & Bar and
variations of such mark, designs, decor and color schemes for restaurant
premises, signs, equipment, procedures and formulae for preparing food and
beverage products, specifications for certain food and beverage products,
inventory methods, operating methods, financial control concepts, training
facilities and teaching techniques (the "System").
B. Franchisor has established, through its own development and operation,
and through the granting of franchises, a chain of Applebee's Neighborhood Grill
& Bar restaurants which are distinctive; which are similar in appearance, design
and decor; and which are uniform in operation and product consistency.
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C. The value of Franchisor's trade names, service marks and trademarks is
based upon: (1) the maintenance of uniform high quality standards in connection
with the preparation and sale of Franchisor-approved food and beverage products,
(2) the uniform high standards of appearance of the individual restaurant units
in the System, (3) the use of distinctive trademarks, service marks, building
designs and advertising signs representing a uniformly high quality of product
and services, and (4) the assumption by Franchisor and its franchisees of the
obligation to maintain and enhance the goodwill and public acceptance of the
System (and of Franchisor's trade names, service marks and trademarks) by strict
adherence to the high standards required by Franchisor.
D. Developer desires to obtain the exclusive right to develop restaurant
units franchised by Franchisor within the geographic area specified in Appendix
A hereto ("Territory"), for the period specified in Subsection 1.1, pursuant to
the terms, conditions and provisions which are set forth in this Agreement.
NOW, THEREFORE, in consideration of Franchisor granting to Developer the
exclusive right to develop restaurant units franchised by Franchisor which
employ the System ("Restaurants") in the Territory for such period, and in
consideration of the mutual obligations which are provided for herein, it is
hereby agreed as follows:
1. GRANT OF DEVELOPMENT RIGHTS
1.1 Franchisor grants Developer the exclusive right to develop
Restaurants only in the Territory for a period commencing on the date hereof and
expiring on _____________________, ________, unless sooner terminated as
hereinafter provided. Developer has no rights under this Agreement to develop
Restaurants outside of the Territory or to develop restaurants which do not
employ the System, including the Applebee's Neighborhood Grill & Bar service
mark.
1.2 During the term of this Agreement, Franchisor shall not operate a
restaurant utilizing the System or license any other person to operate a
restaurant utilizing the System in the Territory. However, nothing in this
Agreement shall prohibit or infringe upon Franchisor's right to operate a
restaurant or license any other person to operate a restaurant in the Territory
which does not utilize the System or use the Applebee's Neighborhood Grill & Bar
service mark. In addition, Franchisor specifically reserves the right to operate
or license any other person to operate restaurants in any location within an
airport (serviced by one or more public or charter carrier), arena, stadium,
state or national park, or military fort, post or base which may be within the
boundaries of the Territory otherwise granted to Developer. Further, Developer
acknowledges and agrees that Franchisor or any one (1) or more of its subsidiary
or affiliated companies or divisions shall have the right to operate or license
any other person to operate such other restaurants which may or will compete
with the Restaurants, under a system and service mark other than Applebee's
Neighborhood Grill & Bar.
1.3 After this Agreement expires or is terminated, Franchisor shall have
the complete and unrestricted right to operate or license other persons to
operate a restaurant utilizing the System in the Territory.
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2. INITIAL DEVELOPMENT SCHEDULE
2.1 Developer shall develop a total of ___________ (____) Restaurants
franchised by Franchisor in the Territory during the period commencing on the
date hereof and expiring on ______________, ________, in accordance with the
following development schedule:
(a)1 During the first Initial Development Period under this
Agreement, Developer shall develop at least _________ (____) Restaurants
within the Territory, each of which shall be open for operation and doing
business on __________________, ________ (the end of the first Initial
Development Period under this Agreement).
(b) During the second Initial Development Period under this
Agreement, Developer shall develop the number of Restaurants within the
Territory necessary to result in the existence of ___________ (____) such
Restaurants developed by Developer which are open for operation and doing
business on _____________, ________ (the end of the second Initial
Development Period under this Agreement).
(c) During the third Initial Development Period under this
Agreement, Developer shall develop the number of Restaurants within the
Territory necessary to result in the existence of ___________ (____) such
Restaurants developed by Developer which are open for operation and doing
business on ______________, ________ (the end of the third Initial
Development Period under this Agreement).
Each of the periods specified in Subparagraphs (a) through (____) hereof is
sometimes referred to hereinafter as an "Initial Development Period."
2.2 During any Initial Development Period, subject to the provisions of
this Agreement, Developer is free to develop more than the total minimum number
of Restaurants which Developer is required to develop during that Initial
Development Period. Any such Restaurants developed, open for operation and doing
business during an Initial Development Period in excess of the minimum number
required to be developed during that Initial Development Period shall be applied
to satisfy Developer's development obligation during the next succeeding Initial
Development Period or next succeeding Subsequent Development Period (as defined
in Section 3 hereof), if any, as the case may be. Notwithstanding the above,
Developer shall not develop more than the total number Restaurants approved by
Franchisor for development under this Agreement.
1The periods specified in Subsection 2.1(a)-(c) may be revised, deleted or
added to in order to reflect the number of Restaurants Developer is obligated to
develop and the time in which the Developer is obligated to open such
Restaurants.
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2.3 Strict compliance with the development schedule specified in
Subsection 2.1 hereof is of the essence of this Agreement. If Developer fails to
fulfill its specified development obligation with respect to any of the Initial
Development Periods specified in Subsection 2.1 hereof, this Agreement shall
terminate sixty (60) days after the end of the Initial Development Period in
question, unless by the end of such sixty (60) day period Developer has
fulfilled the development obligation relating to such Initial Development
Period.
3. SUBSEQUENT DEVELOPMENT SCHEDULE; DEVELOPMENT
OBLIGATIONS GENERALLY
3.1 During the period commencing on _________________, ________ and
expiring on _________________, ________, Developer shall develop and open for
business in the Territory, from time to time in accordance with the development
schedule established under Subsection 3.2, that number of additional Restaurants
as is required to achieve at the end of such period a total number of
Restaurants open for business within the Territory which, after including the
Restaurants developed during the Initial Development Periods, would be equal to
(a) one (1) Restaurant for every twenty-five thousand (25,000) households within
the Territory having an income of twenty-five thousand dollars ($25,000) or
more, or (b) one (1) Restaurant for every seventy-five thousand (75,000)
individuals within the Territory who are between the ages of twenty (20) and
fifty-four (54) years old, whichever computation results in a lesser number of
Restaurants.
3.2 (a) Each consecutive twelve (12) month period, commencing with the
period beginning on _______________, ________, is hereafter referred to as a
"Subsequent Development Period." Each period consisting of two (2) consecutive
Subsequent Development Periods, commencing with the period beginning on
________________, ________, is hereinafter referred to as a "Calculation
Period."
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(b) Franchisor and Developer shall agree in writing on or before
the commencement of each Calculation Period on the number of Restaurants which
Developer must develop, each of which shall be open for operation and doing
business, during each of the two (2) Subsequent Development Periods included in
such Calculation Period; provided that such agreement is subject to the
following minimum and maximum development requirements: (i) Minimum development
requirements: Developer hereby agrees to develop during each Subsequent
Development Period at least that number of Restaurants, each of which shall be
open for operation and doing business, which will be equal to one-third (1/3) of
the total number of Restaurants (rounded to the nearest whole number) which were
required to be developed by Developer during all prior Initial Development and
Calculation Periods; and (ii) Maximum development requirements: Notwithstanding
the minimum development requirements, Developer shall not be required to develop
during any Subsequent Development Period more than that number of Restaurants
which, when added to the number of Restaurants which were required to be
developed by Developer during all prior Initial Development and Calculation
Periods, would exceed the number of Restaurants prescribed by the formula set
forth in Subsection 3.1, if such formula had been applied to determine the total
number of Restaurants required to service the Territory immediately prior to the
Calculation Period in question. No later than sixty (60) days prior to the
commencement of each Calculation Period, Franchisor shall provide Developer with
census data necessary for Developer to ascertain, for purposes of the maximum
development requirements, the number of Restaurants which would be required in
the Territory by application of the formula. Franchisor shall use census figures
provided by National Decision Systems, or such other generally recognized
demographic service as Developer and Franchisor shall reasonably designate.
3.3 Strict compliance with the development schedule established in
accordance with Subsection 3.2 hereof is of the essence of this Agreement. If
Developer shall fail to fulfill its specified development obligation with
respect to any Subsequent Development Period, this Agreement shall automatically
terminate sixty (60) days after the end of the Subsequent Development Period in
question, unless by the end of such sixty (60) day period Developer has
fulfilled the development obligation relating to such Subsequent Development
Period.
3.4 If, during the term of this Agreement, (a) Developer transfers or
disposes of any Restaurant developed hereunder in accordance with the provisions
hereof, or for any other reason ceases to operate any Restaurant developed
hereunder, and (b) after such transfer or other cessation of operation the
premises no longer are utilized for the operation of a Restaurant, Developer's
development obligation in the Initial or Subsequent Development Period in which
such transfer or other cessation of operations occurred shall increase, subject
to the general limitations on Developer's development obligations set forth in
Section 2 and Section 3, by the number of Restaurants which Developer so
transferred, disposed of or which otherwise ceased to operate.
3.5 Franchisor represents that it is the sole owner of the service mark
Applebee's Neighborhood Grill & Bar. If Franchisor determines that a third
person has rights under the law of any state with respect to such mark which
precludes Developer from fulfilling any portion of its development obligations
pursuant to this Agreement, Franchisor and Developer shall negotiate in good
faith for a revision of those development obligations, a redefinition of the
Territory, or such other modifications of this Agreement as may be reasonable in
the circumstances.
4. FRANCHISE FEE AND ROYALTY RATE
4.1 Developer shall pay Franchisor a franchise fee of $_____________ with
respect to each Restaurant which is developed pursuant to this Agreement during
the Initial Development Periods. Thereafter, Developer shall pay Franchisor a
franchise fee in an amount which is equal to the amount of the franchise fee
then in effect at the time of the issuance of the franchise agreement for each
additional restaurant to be opened during any Subsequent Development Period. The
amount of the franchise fee shall be set forth in the franchise offering
circular received by the Developer from Franchisor immediately preceding the
issuance of such franchise agreement. Simultaneously with the execution of this
Agreement, Developer shall pay to Franchisor, by certified check, the amount of
$______________ ("Franchise Fee Deposit"). Said Franchise Fee Deposit shall be
equal to the greater of (a) the franchise fee for one of the Restaurants to be
developed during the Initial Development Periods, or (b) ten percent (10%) of
the entire franchise fees covering the _______________ (____) Restaurants to be
developed during the first three2 (3) Initial Development Periods pursuant to
2In the event there are more or less than three (3) Initial Development
Periods, these fees are payable for each of the Restaurants provided for in the
applicable total number of Initial Development Periods.
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this Agreement (as reduced by a credit of $6,000 based on Developer's prior
payment, if so paid, of a non-refundable $6,000 application fee). The remaining
balance of the franchise fees for each of the Restaurants to be developed during
the three (3) Initial Development Periods shall be paid by certified check as
follows: one-half (1/2) of the balance shall be paid upon signing a franchise
agreement for that Restaurant and the remaining balance shall be paid fourteen
(14) days prior to the scheduled opening of the Restaurant. The Franchise Fee
Deposit shall be proportionately allocated to the franchise fee due with respect
to each Restaurant to which it applies. The franchise fee with respect to each
Restaurant to be developed during a Subsequent Development Period or with
respect to any additional Restaurants developed during the Initial Development
Periods shall be paid by certified check in the same manner.
4.2 Except as provided in this Subsection 4.2 and in Subsection 19.1 of
the form of franchise agreement which is attached hereto as Appendix B,
Developer shall have no right to recover from Franchisor, directly or
indirectly, any of the franchise fees which are prepaid pursuant to Subsection
4.1 hereof. If Developer's failure to develop the total number of Restaurants
specified in Subsection 2.1 of this Agreement is the result of the assertion of
rights by a third party as described in Subsection 3.5 hereof, those prepaid
franchise fees which relate to the Restaurants which cannot be so developed
shall be refunded to Developer in cash.
4.3 As partial consideration for the rights granted to Developer pursuant
to the franchise agreements covering the Restaurants which Developer develops
hereunder, Developer (as franchisee under each such franchise agreement) shall
pay Franchisor a monthly royalty fee as determined by Franchisor, not to exceed
five percent (5%) of each calendar month's gross sales (as that term is defined
in the form of franchise agreement which is attached hereto as Appendix B).
4.4 Pursuant to its obligations hereunder and under the applicable
franchise agreements, Franchisor will make various expenditures in connection
with the development of prospective Restaurant sites by Developer, including
expenditures for travel, lodging, meals, obtaining of information about
prospective sites, demographic information, traffic counts, and inquiries into
local laws and ordinances. Developer shall promptly notify Franchisor of a
decision to cease development of a prospective Restaurant site. In the event
that Developer fails to open a restaurant at any such site, in lieu of the
payment of the franchise fee therefor, Franchisor in its sole discretion may
require Developer to reimburse Franchisor for Franchisor's expenditures with
respect to that site. In such event, Franchisor shall provide Developer with an
itemized list of Franchisor's expenditures with respect to that site within
thirty (30) business days after Franchisor receives notice that Developer no
longer intends to develop a Restaurant at that site, and Developer shall
reimburse Franchisor for such costs within thirty (30) days after receiving such
list.
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5. SITE APPROVALS: PLANS AND SPECIFICATIONS
5.1 Developer assumes all cost, liability, expense and responsibility for
locating, obtaining, financing and developing sites for Restaurants, and for
constructing and equipping Restaurants at such sites. To assist Developer in the
site selection process, Franchisor will provide Developer with certain
demographic information regarding the site, will conduct an on-site inspection
and will review any lease or contract under negotiation for the prospective
site, such services to be provided to Developer at no additional cost. The
development of a Restaurant at any site must be approved by Franchisor in
accordance with its then-existing site approval procedure. In connection with a
request for approval of a proposed site for a Restaurant, Developer shall
provide a related contract of sale or lease agreement and such other information
and material as the Franchisor may reasonably require. Franchisor's approval of
a prospective Restaurant site shall not be unreasonably withheld. Franchisor
shall notify Developer whether it approves a proposed site and the related
contract of sale or lease agreement within thirty (30) business days of
receiving Developer's request for approval. Failure of Franchisor to so notify
Developer within such thirty (30) business day period shall be deemed to be an
approval of such site and the related contract of sale or lease agreement.
Developer acknowledges that Franchisor's approval of a prospective site for a
Restaurant does not constitute a representation, promise or guarantee by
Franchisor that a Restaurant operated at that site will be profitable or
otherwise successful. Developer shall not make any binding commitment to a
prospective vendor or lessor of real estate with respect to a site for a
Restaurant unless Franchisor has approved that site in accordance with
Franchisor's then-existing site approval procedure. After Franchisor has
approved a site for a Restaurant, Developer shall provide Franchisor with a copy
of the executed contract of sale or lease, as applicable, relating to the site
within a reasonable period of time.
5.2 For each Restaurant which Developer develops pursuant to this
Agreement, Franchisor will make available to Developer Franchisor's
specifications for a typical Restaurant. Developer will obtain architectural and
engineering services independently and at its own expense. Franchisor shall have
the right to review all such architectural and/or engineering plans which
Developer obtains and to prohibit the implementation of any plan, or part
thereof, which Franchisor, in its sole and absolute discretion, believes is not
consistent with the best interests of the System. In the event that Franchisor
desires to prohibit the implementation of any such plan, or part thereof,
Franchisor shall so notify Developer within thirty (30) business days of
receiving such architectural and/or engineering plans for review. Failure of
Franchisor to so notify Developer within such thirty (30) business day period
shall be deemed to be an approval of such plans. In the event Franchisor does
object to any such plan, Franchisor shall provide Developer with a reasonable
detailed list of changes necessary to make such plans acceptable to Franchisor.
Franchisor shall, upon resubmission of such plans, with such changes as
Developer has prepared, notify Developer within fifteen (15) business days of
receiving such plans whether they are acceptable. Failure to so notify Developer
within such fifteen (15) business day period shall be deemed to be an approval
of such amended plans.
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5.3 If Developer acquires a leasehold interest in a site, that leasehold
interest shall be for a term which is at least as long as the term of the form
of franchise agreement which is attached hereto as Appendix B, and the lease
shall provide that if the applicable franchise agreement is terminated prior to
the expiration of that term for whatever reason, Developer may assign the lease
to Franchisor without the lessor having any right to impose conditions on such
assignment or to obtain any payment in connection therewith.
6. FEES AND FRANCHISE AGREEMENTS
Not later than ninety (90) days prior to the scheduled opening of any
Restaurant which has been developed pursuant to this Agreement, Developer shall
deliver to Franchisor an executed franchise agreement substantially in the form
which is attached hereto as Appendix B, provided however, that the franchise
agreement which Developer executes shall require the payment of a franchise fee
in the amount described in Subsection 4.1, royalty fees as described in
Subsection 4.3, and advertising payments at the rates then established by
Franchisor with respect to new Restaurants, except that in no event shall such
rates exceed five percent (5%) of a Restaurant's gross sales (as defined in
Subsection 9.3 of the form of a franchise agreement which is attached hereto as
Appendix B).
7. DEVELOPER ORGANIZATION, AUTHORITY, FINANCIAL
CONDITION AND SHAREHOLDERS
7.1 Developer and each Principal Shareholder represent and warrant that:
(a) Developer is a corporation duly incorporated, validly existing and in good
standing under the laws of the state of its incorporation; (b) Developer is duly
qualified and is authorized to do business and is in good standing as a foreign
corporation in each jurisdiction in which its business activities or the nature
of the properties owned by it requires such qualification; (c) the execution and
delivery of this Agreement and the transactions contemplated hereby are within
Developer's corporate power; (d) the execution and delivery of this Agreement
have been duly authorized by the Developer; (e) the articles of incorporation
and by-laws of Developer delivered to Franchisor are true, complete and correct,
and there have been no changes therein since the date thereof; (f) the certified
copies of the minutes electing the officers of Developer and authorizing the
execution and delivery of this Agreement are true, correct and complete, and
there have been no changes therein since the date(s) thereof; (g) the specimen
stock certificate delivered to Franchisor is a true specimen of Developer's
stock certificate; (h) the financial statement of Developer and financial
statements of its Principal Shareholders, heretofore delivered to Franchisor,
are true, complete and correct, and fairly present the financial positions of
Developer and each Principal Shareholder, respectively, as of the date thereof;
(i) such financial statements have been prepared in accordance with generally
accepted accounting principles; and (j) there have been no materially adverse
changes in the condition, assets or liabilities of Developer or Principal
Shareholders since the date or dates thereof.
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7.2 Developer and each Principal Shareholder covenant that during the
term of this Agreement: (a) Developer shall do or cause to be done all things
necessary to preserve and keep in full force its corporate existence and shall
be in good standing as a foreign corporation in each jurisdiction in which its
business activities or the nature of the properties owned by it requires such
qualification; (b) Developer shall have the corporate authority to carry out the
terms of this Agreement; and (c) Developer shall print, in a conspicuous fashion
on all certificates representing shares of its stock when issued, a legend
referring to this Agreement and the restrictions on and obligations of Developer
and Principal Shareholders hereunder, including the restrictions on transfer of
Developer's shares.
7.3 Prior to development of the first Restaurant pursuant to this
Agreement, Developer shall maintain an average monthly balance of five hundred
thousand dollars ($500,000) in liquid assets. For purposes of this Agreement,
"liquid assets" shall consist of cash, cash available to Developer pursuant to
an irrevocable line of credit issued by a commercial bank in favor of Developer,
marketable securities, or any other similar asset which Franchisor's Chief
Financial Officer designates in writing as a liquid asset. After development of
the first Restaurant pursuant to this Agreement, and at any time thereafter in
which Developer is operating one (1) Restaurant in the Territory, Developer
shall maintain an average monthly balance of three hundred twenty-five thousand
dollars ($325,000) in liquid assets. After development of the second Restaurant
pursuant to this Agreement, and thereafter, so long as Developer is operating at
least two (2) Restaurants in the Territory, Developer shall maintain an average
monthly balance of one hundred fifty thousand dollars ($150,000) in liquid
assets. At all times Developer shall maintain the necessary financial resources
to satisfy its development obligations hereunder.
7.4 In addition to its obligations pursuant to Subsections 7.1 and 7.3
hereof, Developer and Principal Shareholders shall provide Franchisor with such
financial information as Franchisor may reasonably request from time to time,
including, on an annual basis, copies of the then-most current financial
statements of Developer and each Principal Shareholder, dated as of the end of
the last preceding fiscal year of the Developer or Principal Shareholder, said
statements to be delivered to Franchisor no later than April 15 of each year,
which financial statements shall conform to the standards set forth in
Subsection 7.1 hereof.
7.5 Developer and each Principal Shareholder represent, warrant and
covenant that all Interests (as defined in Subsection 8.4 hereto) in Developer
are owned as set forth on Appendix C hereto, that no Interest has been pledged
or hypothecated (except in accordance with Section 8 of this Agreement), and
that no change will be made in the ownership of any such Interest other than as
permitted by this Agreement, or otherwise consented to in writing by Franchisor.
Developer and Principal Shareholders agree to furnish Franchisor with such
evidence as Franchisor may request, from time to time, for the purpose of
assuring Franchisor that the Interests of Developer and Principal Shareholders
remain as represented herein.
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7.6 Each Principal Shareholder, jointly and severally, hereby personally
and unconditionally guarantees each of Developer's financial obligations to
Franchisor (including, but not limited to, all obligations relating to the
payment of fees by Developer to Franchisor). Each Principal Shareholder agrees
that Franchisor may resort to such Principal Shareholder (or any of them) for
payment of any such financial obligation, whether or not Franchisor shall have
proceeded against Developer, any other Principal Shareholder or any other
obligor primarily or secondarily obligated to Franchisor with respect to such
financial obligation. Each Principal Shareholder hereby expressly waives
presentment, demand, notice of dishonor, protest, and all other notices
whatsoever with respect to Franchisor's enforcement of this guaranty. In
addition, each Principal Shareholder agrees that if the performance or
observance by Developer of any term or provision hereof is waived or the time of
performance thereof extended by Franchisor, or payment of any such financial
obligation is accelerated in accordance with any agreement between Franchisor
and any party liable in respect thereto or extended or renewed, in whole or in
part, all as Franchisor may determine, whether or not notice to or consent by
any Principal Shareholder or any other party liable in respect to such financial
obligations is given or obtained, such actions shall not affect or alter the
guaranty of each Principal Shareholder described in this Subsection.
8. TRANSFER
8.1 There shall be no Transfer of any Interest of Developer, or of a
Principal Shareholder in Developer, in whole or in part (whether voluntarily or
by operation of law), directly, indirectly or contingently, except in accordance
with the provisions of this Section 8. "Transfer" and "Interest" are defined in
Subsections 8.2, 8.3 and 8.4.
8.2 Except as provided in Subsection 8.3, "Transfer" shall mean any
assignment, sale, pledge, hypothecation, gift or any other such event which
would change ownership of or create a new Interest, including, but not limited
to:
(a) any change in the ownership of or rights in or to any shares
of stock or other equity interest in Developer which would result from
the act of any shareholder of Developer ("Shareholder"), such as a sale,
exchange, pledge or hypothecation of shares, or any interest in or rights
to any of Developer's profits, revenues or assets, or any such change
which would result by operation of law; and
(b) any change in the percentage interest owned by any
Shareholder in the shares of stock of Developer, or interests in its
profits, revenues or assets which would result from any act of Developer
such as a sale, pledge or hypothecation of any Restaurant assets (other
than a pledge of assets to secure bona fide loans made or credit extended
in connection with acquisition of the assets pledged, provided that
immediately before and after such transaction Developer satisfies the
applicable liquid asset requirement described in Subsection 7.3 of this
Agreement); any sale or issuance of any shares of Developer's stock; the
retirement or redemption of any shares of Developer's stock; or any sale
or grant to any person of any right to participate in or otherwise to
share or become entitled to any part of Developer's profits, revenues,
assets or equity.
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8.3 "Transfer" shall not include (a) a change in the ownership of or
rights to any shares or other equity interest in Developer pursuant to a public
offering of Developer's securities registered under the Securities Act of 1933,
or (b) a change in the ownership of or rights to any securities or other equity
interest in Developer pursuant to a private offering of Developer's securities
exempted from registration under such Act, provided that Developer provides
Franchisor with a copy of its prospectus and/or offering memorandum ten (10)
days prior to its filing with the Securities and Exchange Commission or
circulation to third parties so that Franchisor may comment and, if necessary,
correct any information concerning Franchisor and/or the System, and further
provided that after giving effect to any such public or private offering, the
Principal Shareholders, or any of them, "control" Developer. For purposes of
this Section 8, "control" means either (1) owning legal and equitable title to
fifty-one percent (51%) or more of the outstanding voting securities of
Developer, which are not subject to a proxy granted to or contract with any
other person or party granting that party the right to vote part or all of such
securities, or (2) having and continually exercising the contractual power
presently to designate a majority of the directors of Developer.
8.4 "Interest" shall mean: when referring to interests or rights in
Developer, any shares of Developer's stock, and any other equitable or legal
right in or to any of Developer's stock, revenues, profits or assets; when
referring to rights or assets of Developer, Developer's rights under and
interest in this Agreement, any Restaurant and its revenues, profits and assets.
8.5 (a) The Interest of a Principal Shareholder may be transferred to
such Principal Shareholder's spouse or children or to a person designated in
such Principal Shareholder's will or trust (individually and collectively
referred to as "Successor"), upon such Principal Shareholder's death or
permanent incapacity, without Franchisor's approval, provided that such
Successor shall agree to be bound by the restrictions contained in this Section
8, and the other agreements and covenants of the Principal Shareholders
contained in this Agreement.
(b) The Interest of a Principal Shareholder may not be
transferred to another Principal Shareholder without Franchisor's approval,
which approval will not be unreasonably withheld.
(c) The Interest of a Successor may only be transferred in
accordance with Subsection 8.5(b) or 8.8, regardless of whether such Transfer is
for consideration or by gift or will or other device.
8.6 Until such date as Developer has developed and opened for operation
forty percent (40%) of the number of Restaurants required by Subsection 2.1
hereof and the number of Restaurants required by Subsection 3.1 hereof as said
total aggregate number is set forth on Appendix A, Developer shall have no right
to Transfer this Agreement or any rights or obligations under this Agreement,
and any franchise agreements to be issued pursuant hereto shall be issued solely
to the Developer, which as of the date of issuance of each such franchise
agreement shall be owned by the Principal Shareholders to the extent
hereinbefore provided. Any transfer or attempted transfer in contravention of
this provision shall be void and of no effect. If, after the date Developer has
developed and opened for continuous operation the number of Restaurants required
by this Subsection 8.6, the Principal Shareholders desire to dispose of all or
substantially all of the Interests of the Principal Shareholders in Developer,
or the Principal Shareholders (or Developer) desire to dispose of all or
substantially all of Developer's Interest in this Agreement or in the assets
which Developer has acquired pursuant to this Agreement, the Principal
Shareholders or Developer, as the case may be, shall notify Franchisor of that
desire, in writing, thirty (30) days before announcing that fact publicly or
engaging the services of a broker or sales agent.
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8.7 (a) If at any time any of the Principal Shareholders or Developer, as
the case may be, obtains from a third party or third parties a bona fide offer
(the "Offer") in writing for the purchase of all or substantially all of the
Interests of the Principal Shareholders in Developer or in the Restaurant assets
which Developer has acquired as a result of this Agreement, the Principal
Shareholders or Developer shall give notice (the "Selling Notice") to Franchisor
stating that the Principal Shareholders or Developer, as the case may be, have
received the Offer, identifying the prospective purchaser by name and address,
specifying the proposed purchase price and attaching a true and complete copy of
the Offer. Notwithstanding the foregoing, however, Developer and Principal
Shareholders understand and agree that, as provided in Subsection 8.6 hereof,
until such time as Developer has developed and opened for operation the number
of Restaurants required by said Subsection 8.6. hereof, any portion of any Offer
regarding the right to develop Restaurants or Developer's Interest in this
Agreement shall be invalid and of no force or effect, it being expressly
understood and agreed that such rights may not be transferred, and any franchise
agreements to be granted hereunder shall be issued solely to Developer, which
shall be owned by the Principal Shareholders as hereinbefore set forth. At such
time as Developer has developed and opened for operation the number of
Restaurants required by Subsection 8.6, any portion of such an Offer regarding
Developer's Interest in this Agreement shall be effective in accordance with its
terms.
(b) Franchisor shall have an option to purchase (the "Option"),
exercisable within a period of forty-five (45) days after receipt of the Selling
Notice (the "Option Period"), such Interests at the price and on the conditions
set forth in the Offer, except that Franchisor shall not be obligated to pay any
finder's or broker's fee, and if the Offer provides for payment of consideration
other than cash, or if the Offer involves certain intangible benefits,
Franchisor may elect to purchase such Interests by offering a reasonable dollar
value substitute including, at Franchisor's option, cash or the common stock or
other securities of the Franchisor or any combination thereof for the
non-cash/intangible benefits part of the Offer.
(c) The Option shall be exercisable by Franchisor delivering to
the Principal Shareholders or Developer, as the case may be, within the Option
Period, a notice (i) stating that the Option is being exercised, and (ii)
specifying the time, date and place at which such purchase and sale will take
place, which date shall be within forty-five (45) days after Franchisor delivers
such notice. Developer shall provide Franchisor access to and copies of such
information and documentation Franchisor shall request regarding the purchase.
The forty-five (45) day limitation described at the end of the preceding
sentence shall not apply if at the end of said forty-five (45) day period the
only issue which prevents completion of the purchase and sale is the need to
effect transfers of the applicable liquor licenses. In the event of such a
delay, the purchase and sale shall take place within seven (7) business days
after those liquor licenses have been transferred.
(d) If the Option is not exercised, the Principal Shareholders or
Developer, as the case may be, may sell the Interests in or of Developer to the
third party which made the Offer, on conditions no more favorable to the
third-party offerer than those set forth in the Offer, provided that Franchisor
approves the proposed transferee in accordance with the criteria set forth in
Appendix D and provided further that such sale takes place within ninety (90)
days after the expiration of the Option Period. The ninety (90) day limitation
described in the preceding sentence shall not apply if at the end of said ninety
(90) day period the issue which prevents completion of the purchase and sale is
either the need to effect transfers of the applicable liquor licenses or consent
or approval of the transaction by a state or federal regulatory agency. In the
event of such a delay, the purchase and sale shall take place within seven (7)
business days after those issues have been resolved or waived by Franchisor. In
the event of such a transfer, Franchisor may, in its discretion, require an
amendment to Subsection 2.1 of this Agreement in order to increase or decrease
the number of restaurants required thereby and the dates of the Initial
Development Periods referred to therein.
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(e) If the Option is not exercised, the Principal Shareholders or
Developer, as the case may be, shall immediately notify Franchisor in writing of
any change in the terms of an Offer. Any change in the terms of an Offer shall
cause it to be deemed a new Offer, conferring upon Franchisor a new Option
pursuant to this Subsection 8.7; the Option Period with respect to the new
Option shall be deemed to commence on the day on which Franchisor receives
written notice of a change in the terms of the original Offer. Provided however,
in such an instance, Franchisor shall provide Franchisee its response within
fifteen (15) days after Franchisor's receipt of all of the modified terms,
unless such changes are deemed material by Franchisor and in such an event,
Franchisor shall have a forty-five (45) day period within which to review said
changes.
8.8 (a) Developer understands and acknowledges that the rights and duties
set forth in this Agreement are personal to Developer and that Franchisor has
entered into this Agreement in reliance on the business skill and financial
capacity of Developer, and the business skill, financial capability and personal
character of each Principal Shareholder. Any transfer of Principal Shareholders'
Interest in Developer or in Developer's Interest in this Agreement in
contravention of this Section 8 shall cause the immediate termination of all
development rights granted herein with respect to Restaurants not otherwise open
for operation. Except as otherwise set forth in this Section 8, the Principal
Shareholders shall at all times retain control of Developer. Except as otherwise
provided in this Section 8, no Transfer of any part of Developer's Interest in
this Agreement, and no Transfer of any Interest of any Principal Shareholder
shall be completed except in accordance with this Subsection 8.8. In the event
of such a proposed Transfer of any part of Developer's Interest in this
Agreement, or of any Interest of any Principal Shareholder, the party or parties
desiring to effect such Transfer shall give Franchisor notice in writing of the
proposed Transfer, which notice shall set forth the name and address of the
proposed transferee, its financial condition, including a copy of its financial
statement dated not more than ninety (90) days prior to the date of said notice,
and all the terms and conditions of the proposed Transfer. Upon receiving such
notice, Franchisor may (i) approve the Transfer, or (ii) withhold its consent to
the Transfer. Franchisor shall, within forty-five (45) days of receiving such
notice and all the information required therein, advise the party or parties
desiring to effect the Transfer whether it (1) approves the Transfer, or (2)
withholds its consent to the Transfer, giving the reasons for such disapproval.
Failure of Franchisor to so advise said party or parties within that forty-five
(45) day period shall be deemed to be approval of the proposed Transfer.
Appendix D sets forth the criteria for obtaining Franchisor's consent to a
proposed Transfer.
(b) In the event that Franchisor approves the Transfer, and the
Transfer is not completed within ninety (90) days of the later of (i) expiration
of the forty-five (45) day notice period, or (ii) delivery of notice of
Franchisor's approval of the proposed Transfer, Franchisor's approval of the
proposed Transfer shall automatically be revoked. The ninety (90) day limitation
described in the preceding sentence shall not apply if at the end of said ninety
(90) day period the only issue which prevents completion of the Transfer is the
need to effect transfers of the applicable liquor licenses. In the event of such
a delay, the Transfer shall take place within seven (7) business days after
those liquor licenses have been transferred. Any subsequent proposal to complete
the proposed Transfer shall be subject to Franchisor's right of approval as
provided herein. The party which desires to effect the proposed Transfer shall
immediately notify Franchisor in writing of any change in the terms of a
Transfer. Any change in terms of a Transfer prior to closing shall cause it to
be deemed a new Transfer, revoking any approval previously given by Franchisor
and conferring upon Franchisor a new right to approve such Transfer, which shall
be deemed to commence on the day on which Franchisor receives written notice of
such change in terms.
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8.9 In connection with any request for Franchisor's approval of a
proposed Transfer to this Section 8, the parties to the proposed Transfer shall
pay Franchisor a nonaccountable fee to defray the actual cost of review and the
administrative and professional expenses related to the proposed Transfer and
the preparation and execution of documents and agreements, up to a maximum of
two thousand five hundred dollars ($2,500).
9. TERMINATION
9.1 This Agreement shall expire on _______________, _______, unless
sooner terminated pursuant to the terms hereof.
9.2 Franchisor shall have the right to terminate this Agreement
immediately upon written notice to Developer stating the reason for such
termination, and Developer shall no longer have any of the rights created by
this Agreement, in the event of:
(a) development by Developer of a Restaurant without first
obtaining approval from Franchisor of the Restaurant site or of
Developer's architectural and/or engineering plans in accordance with
Section 5 hereof;
(b) any breach or default of any of the provisions of Sections 8
and 11 of this Agreement and Subsection 14.1 of any franchise agreement
entered into pursuant to this Agreement;
(c) the filing by Developer of a petition in bankruptcy, an
arrangement for the benefit of creditors, or a petition for
reorganization; the filing against Developer of a petition in bankruptcy,
an arrangement for the benefit of creditors, or petition for
reorganization, not dismissed within ninety (90) days of the filing
thereof; the making of an assignment by Developer for the benefit of
creditors; or the appointment of a receiver or trustee for Developer,
which receiver or trustee shall not have been dismissed within ninety
(90) days of such appointment;
(d) the discovery by Franchisor that Developer made any material
misrepresentation or omitted any material fact in the information which
was furnished to Franchisor in connection with this Agreement;
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(e) failure by Developer to locate and employ a Director of
Operations who is approved by Franchisor in accordance with Subsection
12.2 within ninety (90) days of the date of this Agreement or, with
respect to a replacement Director of Operations, failure by Developer to
locate such a replacement who is approved by Franchisor in accordance
with Subsection 12.2 within one hundred eighty (180) days of the date on
which the last Director of Operations who was approved by Franchisor
ceased to be employed by Developer in that capacity;
(f) any part of this Agreement relating to the payment of fees to
Franchisor, or the preservation of any of Franchisor's trade names,
service marks, trademarks, trade secrets or secret formulae licensed or
disclosed hereunder or under any franchise agreement between Franchisor
and Developer, for any reason being declared invalid or unenforceable;
(g) Developer or any Principal Shareholder being convicted of or
pleading nolo contendere to a felony or any crime involving moral
turpitude; or
(h) the franchisee under any franchise agreement executed
pursuant to this Agreement committing a default subject to immediate
termination under the franchise agreement.
9.3 Except as provided above in Subsection 9.2, if Developer defaults in
the performance or observance of any of its other obligations hereunder or under
any franchise agreement between Developer and Franchisor, and any such default
continues for a period of thirty (30) days after written notice to Developer
specifying such default, Franchisor shall have the right to terminate this
Agreement upon written notice to Developer. If Developer defaults in the
performance or observance of the same obligation two (2) or more times within a
twelve (12) month period, Franchisor shall have the right to terminate this
Agreement immediately upon commission of the second act of default, upon written
notice to Developer stating the reason for such termination, without allowance
for any curative period.
9.4 This Agreement shall automatically terminate under the conditions and
at the times specified in Subsection 2.3 and 3.3.
10. PREREQUISITES TO OBTAINING FRANCHISES FOR INDIVIDUAL
RESTAURANT UNITS
10.1 Developer understands and agrees that this Agreement does not confer
upon Developer a right to obtain a franchise for any Restaurant, but is intended
by the parties to set forth the terms and conditions which, if fully satisfied,
shall entitle Developer to obtain such a franchise, located within the
Territory. Developer further understands that until the date Developer opens for
operation all those Restaurants required under Subsection 8.6 of this Agreement,
such aforesaid terms and conditions may only be satisfied by Developer (and not
an assignee or transferee thereof), who shall remain at all times owned and
controlled by the Principal Shareholders as herein set forth.
10.2 In the event that Developer shall have obtained Franchisor's
approval of a particular proposed site for a Restaurant, and if Franchisor, in
the exercise of its sole discretion, has granted Developer operational,
financial and legal approval, then Franchisor will grant Developer a franchise
for a Restaurant at the site in question. As used herein, Franchisor will give
Developer "operational", "financial" and "legal" approval under the following
circumstances:
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"Operational" approval will be granted if Franchisor has determined, in
the exercise of its sole discretion, that Developer is conducting the
operation of each of its Restaurants, and is capable of conducting the
operation of the proposed Restaurant, including physical aspects thereof,
(a) in accordance with the terms and conditions of this Agreement, (b) in
accordance with the provisions of the respective franchise agreements,
and (c) in accordance with the standards, specifications and procedures
set forth and described in the Franchise Operations Manual and in any
other materials or manuals provided or made available to Developer by
Franchisor (collectively, the "Manuals"), as such may be amended from
time to time. Developer understands that changes in said standards,
specifications and procedures may become necessary from time to time.
Developer agrees to accept said changes, and Developer further agrees
that it is within the sole discretion of Franchisor to make said changes.
"Financial" approval will be granted if (a) Developer is not in breach of
its obligations under Subsection 7.3 hereof and has been and is
faithfully performing all terms and conditions under each of its existing
franchise agreements with Franchisor, (b) Developer or its affiliates is
not in default of any money obligations owed to Franchisor, and (c)
Developer is not in default of any financial obligation to any of its
suppliers, unless any such obligation is being disputed in good faith by
the Developer. Developer acknowledges and agrees that it is vital to
Franchisor's interest that each of its franchisees be financially sound
to avoid failure of a franchised business (which would adversely affect
the reputation and good name of Franchisor and the System). Developer
acknowledges and agrees that it is vital to Franchisor's interest and to
the interests of the System that Developer (in its capacity as
franchisee) remain current in satisfying its financial obligations to it
suppliers.
"Legal" approval will be granted if Franchisor has determined, in the
exercise of its sole discretion, that Developer has submitted to
Franchisor, in a timely manner as requested, all information and
documents requested by Franchisor prior to and as a basis for the
issuance of individual franchises or pursuant to any right granted to
Franchisor by this Agreement or by any franchise agreement between
Developer and Franchisor, and has taken such additional actions in
connection therewith as may be requested from time to time.
10.3 It is understood and agreed that the foregoing criteria apply to the
operational, financial and legal aspects of any Restaurant franchised by
Franchisor in which Developer or any Principal Shareholder has any legal or
equitable interest. It is further understood and agreed that Developer and
Principal Shareholders have an ongoing responsibility to operate each Restaurant
in which Developer or any Principal Shareholder has any legal or equitable
interest in a manner which satisfies the foregoing requirements for operational,
financial and legal approval.
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11. RESTRICTIONS
11.1 Developer and its Principal Shareholders acknowledge that over the
term of this Agreement they are to receive proprietary information which
Franchisor has developed over time at great expense, including, but not limited
to, methods of site selection, marketing methods, product analysis and
selection, and service methods and skills relating to the development and
operation of Restaurants. They further acknowledge that this information, which
includes, but is not necessarily limited to, that contained in the Manuals, is
not generally known in the industry and is beyond their own present skills and
experience, and that to develop it themselves would be expensive, time-consuming
and difficult. Developer and Principal Shareholders further acknowledge that the
Franchisor's information provides a competitive advantage and will be valuable
to them in the development of their business, and that gaining access to it is
therefore a primary reason why they are entering into this Agreement.
Accordingly, Developer and its Principal Shareholders agree that Franchisor's
information, as described above, which may or may not be "trade secrets" under
prevailing judicial interpretations or statutes, is private and valuable, and
constitutes trade secrets belonging to Franchisor; and in consideration of
Franchisor's confidential disclosure to them of these trade secrets, Developer
and Principal Shareholders agree as follows:
(a) During the term of this Agreement, neither Developer nor any
Principal Shareholder, for so long as such Principal Shareholder owns an
Interest in Developer, may, without the prior written consent of
Franchisor, directly or indirectly engage in, or acquire any financial or
beneficial interest (including any interest in corporations,
partnerships, trusts, unincorporated associations or joint ventures) in,
advise, help, guarantee loans or make loans to, any restaurant business
whose menu or method of operation is similar to that employed by
restaurant units within the System which is either (i) located in the
Territory, (ii) located in the Area of Dominant Influence (as defined and
established from time to time by Arbitron Ratings Company) of any
Restaurant developed pursuant to this Agreement, (iii) located within a
five (5) mile radius of any restaurant unit within the System, or (iv)
determined by Franchisor, exercising reasonable good faith judgment, to
be a direct competitor of the System.
(b) Neither Developer, for two (2) years following the
termination of this Agreement, nor any Principal Shareholder, for two (2)
years following the termination of all of his or her Interest in
Developer or the termination of this Agreement, whichever occurs first,
may directly or indirectly engage in, or acquire any financial or
beneficial interest (including any interest in corporations,
partnerships, trusts, unincorporated associations or joint ventures) in,
advise, help, guarantee loans or make loans to, any restaurant business
whose menu or method of operation is similar to that employed by
restaurant units within the System which is located either (i) in the
Territory, (ii) in the Area of Dominant Influence (as defined and
established from time to time by Arbitron Ratings Company) of any
Restaurant developed pursuant to this Agreement, (iii) within a five (5)
mile radius of any restaurant unit within the System, or (iv) within any
area for which an active, currently binding development agreement has
been granted by Franchisor to another franchisee as of the date of
termination.
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11.2 Neither Developer nor any Shareholder shall at any time (a)
appropriate or use the trade secrets incorporated in the System, or any portion
thereof, in any other restaurant business which is not within the System, (b)
disclose or reveal any portion of the System to any person other than to
Developer's employees as an incident of their training, (c) acquire any right to
use any name, mark or other intellectual property right which may be granted
pursuant to any agreement between Franchisor and Developer, except in connection
with the operation of a Restaurant, or (d) communicate, divulge or use for the
benefit of any other person or entity any confidential information, knowledge or
know-how concerning the methods of development or operation of a restaurant
utilizing the System, which may be communicated by Franchisor in connection with
the Restaurants to be developed hereunder.
11.3 Developer and Principal Shareholders agree that the provisions of
this Section 11 are and have been a primary inducement to Franchisor to enter
into this Agreement, and that in the event of breach thereof Franchisor would be
irreparably injured and would be without an adequate remedy at law. Therefore,
in the event of a breach, or a threatened or attempted breach, of any of such
provisions Franchisor shall be entitled, in addition to any other remedies which
it may have hereunder or in law or in equity (including the right to terminate
this Agreement), to a preliminary and/or permanent injunction and a decree for
specific performance of the terms hereof without the necessity of showing actual
or threatened damage, and without being required to furnish a bond or other
security.
11.4 The restrictions contained in Subsection 11.1 above shall not apply
to ownership of less than two percent (2%) of the shares of a company whose
shares are listed and traded on a national securities exchange if such shares
are owned for investment only, and are not owned by an officer, director,
employee or consultant of such publicly traded company.
11.5 If any court or other tribunal having jurisdiction to determine the
validity or enforceability of this Section 11 determines that it would be
invalid or unenforceable as written, then the provisions hereof shall be deemed
to be modified or limited to such extent or in such manner as necessary for such
provisions to be valid and enforceable to the greatest extent possible.
12. DEVELOPMENT PROCEDURES
12.1 Franchisor will use its reasonable efforts to furnish Developer with
advice in developing Restaurants and in selecting sites therefor.
12.2 Developer shall designate an individual employee who shall be
personally responsible for Developer's activities during the term of this
Agreement, and who shall devote his or her full-time, best efforts and constant
personal attention, on a day-to-day basis, to Developer's activities in the
Territory (the "Director of Operations"). Developer shall require that the
Director of Operations maintain his or her principal personal residence in the
Territory. Franchisor reserves the right to require that, as a condition of his
or her employment with Developer, the Director of Operations, as well as each
supervisory employee referred to in Subsection 12.3, must successfully complete
Franchisor's interview process and a psychological profile test in a manner
which satisfies a uniform standard established by Franchisor. The test shall be
administered by Franchisor, or by a testing agency designated by Franchisor, at
Developer's expense. Developer's designation of the first Director of
Operations, and any subsequent Director of Operations, shall be subject to the
written approval of Franchisor, which approval shall not be arbitrarily
withheld, and shall also be subject to the time limitations described in
Subsection 9.2(e) hereof. Franchisor shall notify Developer in writing within
fourteen (14) business days of receipt of Developer's request whether Franchisor
disapproves such person. Failure by Franchisor to so notify Developer within
that period shall be deemed to constitute Franchisor's approval of such person.
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12.3 In the event that Developer desires to designate an employee (in
addition to the Director of Operations) who will have supervisory authority over
the development of operation of more than one (1) Restaurant within the
Territory, Developer's designation of such a supervisory employee shall be
subject to the written approval of Franchisor, which approval shall not be
arbitrarily withheld. Franchisor shall notify Developer in writing within
fourteen (14) business days of receipt of Developer's request whether Franchisor
disapproves such person. Failure by Franchisor to so notify Developer within
that period shall be deemed to constitute Franchisor's approval of such person.
Developer shall require that any such supervisory employee maintain his or her
principal personal residence in the Territory.
12.4 Developer shall require the Director of Operations to execute a
confidentiality agreement and covenant not to compete in the form attached
hereto as Appendix E. In addition, at Franchisor's request, Developer shall
obtain from the Director of Operations an agreement verifying his or her
employment status. Developer shall require that each other employee of Developer
who will have supervisory authority over the development or operation of more
than one (1) Restaurant execute a confidentiality agreement in the form attached
hereto as Appendix F. Developer shall be responsible for compliance of its
employees with the agreements identified in this Subsection, including the
payment of any costs needed to enforce the obligations.
12.5 (a) Developer shall require its Director of Operations and any other
supervisory employee designated pursuant to Subsection 12.3 to attend and to
successfully complete to Franchisor's reasonable satisfaction an operations
training course provided by Franchisor. If the Director of Operations or any
such supervisory employee fails to successfully complete Franchisor's operations
training course, Franchisor may require designation of a new Director of
Operations or replacement supervisory employee, as the case may be, and
Developer shall designate a new Director of Operations or replacement
supervisory employee who shall be required to successfully complete such
training course.
(b) The Director of Operations and supervisory employees
designated pursuant to Subsection 12.3 shall, from time to time as reasonably
requested by Franchisor, attend and successfully complete to Franchisor's
reasonable satisfaction a Franchisor-provided refresher course in restaurant
operations.
12.6 With respect to each Restaurant within the Territory developed by
Developer, Developer's employees must satisfy the training requirements
described in Section 6 of Appendix B hereto. After Developer opens it first
Restaurant pursuant to this Agreement, Franchisor may at its option, and subject
to such conditions as Franchisor deems necessary, permit Developer (at
Developer's own expense) to conduct a portion of the required training at one of
Developer's existing Restaurants. In that event, Developer will be required to
provide qualified personnel to administer training tests and to maintain records
relating to the training and performance of employees.
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13. NO WAIVER OF DEFAULT
13.1 The waiver by any party to this Agreement of any breach or default,
or series of breaches or defaults, of any term, covenant or condition herein, or
of any same or similar term, covenant or condition contained in any other
agreement between Franchisor and any other person, shall not be deemed a waiver
of any subsequent or continuing breach or default of the same or any other term,
covenant or condition in this Agreement, or in any other agreement between
Franchisor and any other person.
13.2 All rights and remedies of Franchisor shall be cumulative and not
alternative, in addition to and not exclusive of any other rights or remedies
which are provided for herein or which may be available at law or in equity in
case of any breach, failure or default or threatened breach, failure or default
of any term, provision or condition of this Agreement. Franchisor's rights and
remedies shall be continuing and shall not be exhausted by any one (1) or more
uses thereof, and may be exercised at any time or from time to time as often as
may be expedient; and any option or election to enforce any such right or remedy
may be exercised or taken at any time and from time to time. The expiration or
earlier termination of this Agreement shall not discharge or release Developer
or any Principal Shareholder from any liability or obligation then accrued, or
any liability or obligation continuing beyond, or arising out of, the expiration
or earlier termination of this Agreement.
14. FORCE MAJEURE
14.1 As used in this Agreement, the term "Force Majeure" shall mean any
act of God, strike, lock-out or other industrial disturbance, war (declared or
undeclared), riot, epidemic, fire or other catastrophe, act of any government
and any other similar cause not within the control of the party affected
thereby.
14.2 If the performance of any obligation by any party under this
Agreement is prevented or delayed by reason of Force Majeure, which cannot be
overcome by use of normal commercial measures, the parties shall be relieved of
their respective obligations to the extent the parties are respectively
necessarily prevented or delayed in such performance during the period of such
Force Majeure. The party whose performance is affected by an event of Force
Majeure shall give prompt notice of such Force Majeure event to the other party
by facsimile, telephone or telegram (in each case to be confirmed in writing),
setting forth the nature thereof and an estimate as to its duration, and shall
be liable for failure to give such timely notice only to the extent of damage
actually caused.
15. CONSTRUCTION, SEVERABILITY, GOVERNING LAW AND
JURISDICTION
15.1 If any part of this Agreement shall for any reason be declared
invalid, unenforceable or impaired in any way, the validity of the remaining
portions shall remain in full force and effect as if this Agreement had been
executed with such invalid portion eliminated, and it is hereby declared the
intention of the parties that they would have executed the remaining portion of
this Agreement without including therein any such portions which might be
declared invalid; provided however, that in the event any part hereof relating
to the payment of fees to Franchisor, or the preservation of any of Franchisor's
trade names, service marks, trademarks, trade secrets or secret formulae
licensed or disclosed hereunder or pursuant to any franchise agreement between
Franchisor and Developer is for any reason declared invalid or unenforceable,
then Franchisor shall have the option of terminating this Agreement upon written
notice to Developer. If any clause or provision herein would be deemed invalid
or unenforceable as written, it shall be deemed to be modified or limited to
such extent or in such manner as may be necessary to render the clause or
provision valid and enforceable to the greatest extent possible in light of the
interest of the parties expressed in that clause or provision, subject to the
provisions of the preceding sentence.
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15.2 DEVELOPER AND PRINCIPAL SHAREHOLDERS ACKNOWLEDGE THAT FRANCHISOR MAY
ENTER INTO OTHER DEVELOPMENT AGREEMENTS THROUGHOUT THE UNITED STATES ON TERMS
AND CONDITIONS SIMILAR TO THOSE SET FORTH IN THIS AGREEMENT, AND THAT IT IS OF
MUTUAL BENEFIT TO DEVELOPER AND PRINCIPAL SHAREHOLDERS AND TO FRANCHISOR THAT
THESE TERMS AND CONDITIONS BE UNIFORMLY INTERPRETED. THEREFORE, THE PARTIES
AGREE THAT TO THE EXTENT THAT THE LAW OF THE STATE OF KANSAS DOES NOT CONFLICT
WITH LOCAL FRANCHISE STATUTES, RULES AND REGULATIONS, KANSAS LAW SHALL APPLY TO
THE CONSTRUCTION OF THIS AGREEMENT AND SHALL GOVERN ALL QUESTIONS WHICH ARISE
WITH REFERENCE HERETO; PROVIDED HOWEVER, THAT PROVISIONS OF KANSAS LAW REGARDING
CONFLICTS OF LAW SHALL NOT APPLY HERETO.
15.3 THE PARTIES AGREE THAT ANY CLAIM, CONTROVERSY OR DISPUTE ARISING OUT
OF OR RELATING TO THIS AGREEMENT OR THE PERFORMANCE THEREOF WHICH CANNOT BE
AMICABLY SETTLED, EXCEPT AS OTHERWISE PROVIDED HEREIN, MAY, AT THE OPTION OF THE
CLAIMANT, BE RESOLVED BY A PROCEEDING IN A COURT IN JOHNSON COUNTY, KANSAS, AND
DEVELOPER AND THE PRINCIPAL SHAREHOLDERS EACH IRREVOCABLY ACCEPT THE
JURISDICTION OF THE COURTS OF THE STATE OF KANSAS AND THE FEDERAL COURTS SERVING
JOHNSON COUNTY, KANSAS FOR SUCH CLAIMS, CONTROVERSIES OR DISPUTES.
The parties agree that service of process in any proceeding arising out
of or relating to this Agreement or the performance thereof may be made as to
Developer and any Principal Shareholder by serving a person of suitable age and
discretion (such as the person in charge of the office) at the address of
Developer specified in this Agreement and as to Franchisor by serving the
president or a vice-president of Franchisor at the address of Franchisor or by
serving Franchisor's registered agent.
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16. MISCELLANEOUS
16.1 All notices and other communications required or permitted to be
given hereunder shall be deemed given when delivered in person, by overnight
courier service, facsimile transmission or mailed by registered or certified
mail addressed to the recipient at the address set forth below, unless that
party shall have given written notice of change of address to the sending party,
in which event the new address so specified shall be used.
FRANCHISOR: Applebee's International, Inc.
4551 W. 107th Street, Suite 100
Overland Park, Kansas 66207
Attention: President
DEVELOPER:
PRINCIPAL SHAREHOLDERS:
16.2 All terms used in this Agreement, regardless of the number and
gender in which they are used, shall be deemed and construed to include any
other number, singular or plural, and any other gender, masculine, feminine or
neuter, as the context or sense of this Agreement may require, the same as if
such words had been written in this Agreement themselves. The headings inserted
in this Agreement are for reference purposes only and shall not affect the
construction of this Agreement or limit the generality of any of its provisions.
The term "business day" means any day other than Saturday, Sunday, or the
following national holidays: New Year's Day, Martin Luther King Day,
Washington's Birthday, Memorial Day, Independence Day, Labor Day, Columbus Day,
Veterans' Day, Thanksgiving and Christmas.
16.3 This Agreement, the Uniform Franchise Offering Circular currently in
effect and the documents referred to herein constitute the entire agreement
between parties, superseding and canceling any and all prior and contemporaneous
agreements, understandings, representations, inducements and statements, oral or
written, of the parties in connection with the subject matter hereof.
16.4 Except as expressly authorized herein, no amendment or modification
of this Agreement shall be binding unless executed in writing both by Franchisor
and by Developer and Principal Shareholders.
24
<PAGE>
16.5 In the event that any party to this Agreement initiates any legal
proceeding to construe or enforce any of the terms, conditions and/or provisions
of this Agreement, including, but not limited to, its termination provisions, or
to obtain damages or other relief to which any party may be entitled by virtue
of this Agreement, the prevailing party or parties shall be paid its reasonable
attorneys' fees and expenses by other party or parties.
IN WITNESS WHEREOF, the undersigned have entered into this Agreement as of the
date first above written.
25
<PAGE>
FRANCHISOR:
ATTEST: APPLEBEE'S INTERNATIONAL, INC.
By:
Name: Name:
-------------------------
Title: Title:
------------------------
DEVELOPER:
ATTEST:
By:
Name: Name:
-------------------------
Title: Title:
------------------------
PRINCIPAL SHAREHOLDER(S):
Witness Name:
Witness Name:
Witness Name:
Witness Name:
26
<PAGE>
APPENDIX A TO DEVELOPMENT AGREEMENT
TERRITORY
Franchisor specifically excludes from the Territory, and reserves the right to
operate or license any other person to operate restaurants in, any location
within an airport (serviced by one or more public or charter carrier), arena,
stadium, state or national park, or military fort, post or base which may be
within the boundaries of the Territory otherwise granted to Developer.
One hundred percent (100%) of the number of Restaurants required
by Subsections 2.1 and 3.1 is ---------- (-----).
27
<PAGE>
APPENDIX B TO DEVELOPMENT AGREEMENT
FORM FRANCHISE AGREEMENT
(See Exhibit F to this Offering Circular)
28
<PAGE>
APPENDIX C TO DEVELOPMENT AGREEMENT
STATEMENT OF OWNERSHIP INTERESTS
Percent of Issued
and Outstanding
Shareholder Shares of Developer
29
<PAGE>
APPENDIX D TO DEVELOPMENT AGREEMENT
REVIEW AND CONSENT WITH RESPECT TO TRANSFERS
In determining whether to grant or to withhold consent to a proposed
Transfer, Franchisor shall consider all of the facts and circumstances which it
views as relevant in the particular instance, including, but not limited to, any
of the following: (i) work experience and aptitude of Proposed New Owner and/or
proposed new management (a proposed transferee of a Principal Shareholder's
Interest and/or a proposed transferee of this Agreement is referred to as
"Proposed New Owner"); (ii) financial background and condition of Proposed New
Owner, and actual and pro forma financial condition of Developer; (iii)
character and reputation of Proposed New Owner; (iv) conflicting interests of
Proposed New Owner; (v) the terms and conditions of Proposed New Owner's rights,
if the proposed Transfer is a pledge or hypothecation; (vi) the adequacy of
Developer's operation (as Franchisee) of any Restaurant and compliance with the
System and this Agreement; and (vii) such other criteria and conditions as
Franchisor shall then consider relevant in the case of an application for a new
franchise to operate a restaurant unit within the System by an applicant that is
not then currently doing so. Franchisor's consent also may be conditioned upon
execution by Proposed New Owner of an agreement whereby Proposed New Owner
assumes full, unconditional, joint and several liability for, and agrees to
perform from the date of such Transfer, all obligations, covenants and
agreements contained herein to the same extent as if it had been an original
party to this Agreement and may also require Developer and Principal
Shareholders, including the proposed Transferor(s), to execute a general release
which releases Franchisor from any claims they may have had or then have against
Franchisor. In the event Proposed New Owner is a partnership (including, but not
limited to, a limited partnership), Proposed New Owner will also be required to
execute an addendum to the Agreement which amends the references to Developer
and its Principal Shareholders to include the partnership approved by Franchisor
and Proposed New Owner's general partner(s) and the principal shareholders of
the general partner(s), if the general partner(s) is a corporation. This
addendum will contain a provision including in the definition of "Transfer" the
withdrawal, removal or voluntary/involuntary dissolution (if applicable) of the
general partner(s) or the substitution or addition of a new general partner.
Developer or Principal Shareholders, as the case may be, shall provide
Franchisor with such information as it may require in connection with a request
for approval of a proposed Transfer.
30
<PAGE>
APPENDIX E TO DEVELOPMENT AGREEMENT
CONFIDENTIALITY AGREEMENT AND
COVENANT NOT TO COMPETE
THIS AGREEMENT is made this ________ day of ________________, 19______,
by and between _______________________________________, a _____________
corporation ("Developer"), and __________________________, an individual
employed by Developer ("Employee").
WITNESSETH:
WHEREAS, APPLEBEE'S INTERNATIONAL, INC. ("Applebee's") is the owner of
all rights in and to a unique system for the development and operation of
restaurants (the "System"), which includes proprietary rights in valuable trade
names, service marks and trademarks, including the service mark Applebee's
Neighborhood Grill & Bar and variations of such mark, designs and color schemes
for restaurant premises, signs, equipment, procedures and formulae for preparing
food and beverage products, specifications for certain food and beverage
products, inventory methods, operating methods, financial control concepts, a
training facility and teaching techniques;
WHEREAS, Developer is the owner of the exclusive right to develop
restaurants franchised by Applebee's which utilize the System ("Restaurants")
for the period and in the territory described in the Development Agreement
between Applebee's and Developer (the "Development Agreement");
WHEREAS, Developer and Employee acknowledge that Applebee's information
as described above was developed over time at great expense, is not generally
known in the industry and is beyond Developer's own present skills and
experience, and that to develop it itself would be expensive, time-consuming and
difficult, that it provides a competitive advantage and will be valuable to
Developer in the development of its business, and that gaining access to it was
therefore a primary reason why Developer entered into the Development Agreement;
and
WHEREAS, in consideration of Applebee's confidential disclosure to
Developer of these trade secrets, Developer has agreed to be obligated by the
terms of Development Agreement to execute, with its Director of Operations, a
written agreement protecting Applebee's trade secrets and confidential
information entrusted to Employee, and protecting against unfair competition;
NOW, THEREFORE, in consideration of the mutual covenants and
obligations contained herein, the parties agree as follows:
31
<PAGE>
(1) The parties acknowledge and agree that Employee is or will be
employed in a supervisory or managerial capacity and in such capacity will have
access to information and materials which constitute trade secrets and
confidential and proprietary information. The parties further acknowledge and
agree that any actual or potential direct or indirect competitor of Applebee's
or of any of its franchisees shall not have access to such trade secrets and
confidential information.
(2) The parties acknowledge and agree that the System includes trade
secrets and confidential information which Applebee's has revealed or will
reveal to Developer in confidence, and that protection of said trade secrets and
confidential information and protection of Applebee's against unfair competition
from others who enjoy or who have had access to said trade secrets and
confidential information are essential for the maintenance of goodwill and
special value of the System.
(3) Employee agrees that he or she shall not at any time (i)
appropriate or use the trade secrets incorporated in the System, or any portion
thereof, for use in any business which is not within the System; (ii) disclose
or reveal any portion of the System to any person other than to Developer's
employees as an incident of their training; (iii) acquire any right to use, or
to license or franchise the use of any name, mark or other intellectual property
right which is or may be granted by any franchise agreement between Applebee's
and Developer; or (iv) communicate, divulge or use for the benefit of any other
person or entity any confidential information, knowledge or know-how concerning
the methods of development or operation of a Restaurant which may be
communicated to Employee or of which Employee may be apprised by virtue of
Employee's employment by Developer. Employee shall divulge such confidential
information only to such of Developer's other employees as must have access to
that information in order to operate a Restaurant or to develop a prospective
site for a Restaurant. Any and all information, knowledge and know-how,
including, without limitation, drawings, materials, equipment, specifications,
techniques and other data, which Applebee's designates as confidential, shall be
deemed confidential for purposes of this Agreement.
(4) Employee agrees that for the duration of his or her employment by
Developer, and for two (2) years following termination thereof, Employee may
not, without the prior written consent of Applebee's, directly or indirectly,
for himself or through, on behalf of or in conjunction with any person,
partnership or corporation, engage in or acquire any financial or beneficial
interest (including any interest in corporations, partnerships, trusts,
unincorporated associations or joint ventures) in, advise, help, guarantee loans
or make loans to, any restaurant business whose menu or method of operation is
the same as or similar to that employed by restaurant units within the System
which is located either (a) in the Territory, as defined in the Development
Agreement, or (b) in the Area of Dominant Influence (as defined and established
from time to time by Arbitron Ratings Company) of any Restaurant developed
pursuant to the Development Agreement.
32
<PAGE>
(5) Employee further acknowledges and agrees that the Franchise
Operations Manual and any other materials and manuals provided or made available
to Developer by Applebee's (collectively, the "Manuals"), described in Section 5
of the form of franchise agreement which is attached as Appendix B to the
Development Agreement are loaned by Applebee's to Developer for limited purposes
only, remain the property of Applebee's, and may not be reproduced, in whole or
in part, without the written consent of Applebee's.
(6) Employee agrees to surrender to Developer or to Applebee's each and
every copy of the Manuals and any other information or material in his or her
possession or control upon request, upon termination of employment, or upon
completion of the use for which said Manuals or other information or material
may have been furnished to Employee.
(7) The parties agree that in the event of a breach of this Agreement,
Applebee's would be irreparably injured and would be without an adequate remedy
at law. Therefore, in the event of a breach or a threatened or attempted breach
of any of the provisions hereof, Applebee's shall be entitled to enforce the
provisions of this agreement as a third-party beneficiary hereof and shall be
entitled, in addition to any other remedies which it may have hereunder at law
or in equity (including the right to terminate the Development Agreement), to a
temporary and/or permanent injunction and a decree for specific performance of
the terms hereof without the necessity of showing actual or threatened damage,
and without being required to furnish a bond or other security.
(8) The restrictions in Subsection (4) hereof shall not apply to
ownership of less than two percent (2%) of the shares of a company whose shares
are traded on a national securities exchange if such shares are owned for
investment only, and are not owned by an officer, director, employee or
consultant of such publicly traded company.
(9) If any court or other tribunal having jurisdiction to determine the
validity or enforceability of this Agreement determines that it would be invalid
or unenforceable as written, the provisions hereof shall be deemed to be
modified or limited to such extent or in such manner necessary for such
provisions to be valid and enforceable to the greatest extent possible.
(10) In the event that any party to this Agreement or Applebee's
initiates any legal proceeding to construe or enforce any of the terms,
conditions and/or provisions of this Agreement, or to obtain damages or other
relief to which any party may be entitled by virtue of this Agreement, the
prevailing party or parties shall be paid its/their reasonable attorneys' fees
and expenses by other party or parties.
IN WITNESS WHEREOF, the undersigned have entered into this Agreement as
of the date first above written.
DEVELOPER: EMPLOYEE:
By: By:
--------------------------------------------------
Name: Name:
------------------------------------------------
Title:
33
<PAGE>
APPENDIX F TO DEVELOPMENT AGREEMENT
CONFIDENTIALITY AGREEMENT
THIS AGREEMENT is made this ________ day of ________________,
19_______, by and between ________________________________________, a
_____________ corporation ("Developer"), and __________________________, an
individual employed by Developer ("Employee").
WITNESSETH:
WHEREAS, APPLEBEE'S INTERNATIONAL, INC. ("Applebee's") is the owner of
all rights in and to a unique system for the development and operation of
restaurants (the "System"), which includes proprietary rights in valuable trade
names, service marks and trademarks, including the service mark Applebee's
Neighborhood Grill & Bar and variations of such mark, designs and color schemes
for restaurant premises, signs, equipment, procedures and formulae for preparing
food and beverage products, specifications for certain food and beverage
products, inventory methods, operating methods, financial control concepts, a
training facility and teaching techniques;
WHEREAS, Developer is the owner of the exclusive right to develop
restaurants franchised by Applebee's which utilize the System ("Restaurants")
for the period and in the territory described in the Development Agreement
between Applebee's and Developer (the "Development Agreement"); and
WHEREAS, Developer acknowledges that Applebee's information as
described above was developed over time at great expense, is not generally known
in the industry and is beyond Developer's own present skills and experience, and
that to develop it itself would be expensive, time-consuming and difficult, that
it provides a competitive advantage and will be valuable to Developer in the
development of its business, and that gaining access to it was therefore a
primary reason why Developer entered into the Development Agreement; and
WHEREAS, in consideration of Applebee's confidential disclosure to
Developer of these trade secrets, Developer has agreed to be obligated by the
terms of Development Agreement to execute, with each employee of Developer who
will have supervisory authority over the development or operation of more than
one Restaurant in the Territory described in the Development Agreement, a
written agreement protecting Applebee's trade secrets and confidential
information entrusted to Employee;
NOW, THEREFORE, in consideration of the mutual covenants and
obligations contained herein, the parties agree as follows:
34
<PAGE>
(1) The parties acknowledge and agree that Employee is or will be
employed in a supervisory or managerial capacity and in such capacity will have
access to information and materials which constitute trade secrets and
confidential and proprietary information. The parties further acknowledge and
agree that any actual or potential direct or indirect competitor of Applebee's,
or of any of its franchisees, shall not have access to such trade secrets and
confidential information.
(2) The parties acknowledge and agree that the System includes trade
secrets and confidential information which Applebee's has revealed to Developer
in confidence, and that protection of said trade secrets and confidential
information and protection of Applebee's against unfair competition from others
who enjoy or who have had access to said trade secrets and confidential
information are essential for the maintenance of goodwill and special value of
the System.
(3) Employee agrees that he or she shall not at any time (i)
appropriate or use the trade secrets incorporated in the System, or any portion
thereof, for use in any business which is not within the System; (ii) disclose
or reveal any portion of the System to any person other than to Developer's
employees as an incident of their training; (iii) acquire any right to use, or
to license or franchise the use of any name, mark or other intellectual property
right which is or may be granted by any franchise agreement between Applebee's
and Developer; or (iv) communicate, divulge or use for the benefit of any other
person or entity any confidential information, knowledge or know-how concerning
the methods of development or operation of a Restaurant which may be
communicated to Employee or of which Employee may be apprised by virtue of
Employee's employment by Developer. Employee shall divulge such confidential
information only to such of Developer's other employees as must have access to
that information in order to operate a Restaurant or to develop a prospective
site for a Restaurant. Any and information, knowledge and know-how, including,
without limitation, drawings, materials, equipment, specifications, techniques
and other data, which Applebee's designates as confidential, shall be deemed
confidential for purposes of this Agreement.
(4) Employee further acknowledges and agrees that the Franchise
Operations Manual and any other materials or manuals provided or made available
to Developer by Applebee's (collectively, the "Manuals"), described in Section 5
of the applicable franchise agreement between Applebee's and Developer, are
loaned by Applebee's to Developer for limited purposes only, remain the property
of Applebee's, and may not be reproduced, in whole or in part, without the
written consent of Applebee's.
(5) Employee agrees to surrender to Developer or to Applebee's each
and every copy of the Manuals and any other information or material in his or
her possession or control upon request, upon termination of employment or upon
completion of the use for which said Manuals or other information or material
may have been furnished to Employee.
35
<PAGE>
(6) The parties agree that in the event of a breach of this Agreement,
Applebee's would be irreparably injured and would be without an adequate remedy
at law. Therefore, in the event of a breach or a threatened or attempted breach
of any of the provisions hereof, Applebee's shall be entitled to enforce the
provisions of this Agreement as a third-party beneficiary hereof and shall be
entitled, in addition to any other remedies which it may have hereunder at law
or in equity (including the right to terminate the Development Agreement), to a
temporary and/or permanent injunction and a decree for specific performance of
the terms hereof without the necessity of showing actual or threatened damage,
and without being required to furnish a bond or other security.
(7) If any court or other tribunal having jurisdiction to determine
the validity or enforceability of this Agreement determines that it would be
invalid or unenforceable as written, the provisions hereof shall be deemed to be
modified or limited to such extent or in such manner necessary for such
provisions to be valid and enforceable to the greatest extent possible.
IN WITNESS WHEREOF, the undersigned have entered into this Agreement
as of the date first above written.
DEVELOPER EMPLOYEE
By: By:
--------------------------------------------------
Name: Name:
------------------------------------------------
Title:
36
STANDARD FORM
APPLEBEE'S NEIGHBORHOOD GRILL & BAR
FRANCHISE AGREEMENT
-----------------------------------
(Location Address)
-----------------------------------
(Franchisee Name)
-----------------------------------
(Date)
1
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
RECITALS ........................................................................................ F-3
1. FRANCHISE GRANT AND TERM................................................................ F-4
2. UNIFORM STANDARDS....................................................................... F-5
3. COMPLIANCE WITH THE SYSTEM.............................................................. F-6
4. GENERAL SERVICES OF FRANCHISOR.......................................................... F-6
5. RESTAURANT SYSTEM AND PROCEDURES........................................................ F-7
6. TRAINING................................................................................ F-9
7. RESTAURANT MAINTENANCE.................................................................. F-10
8. ADVERTISING............................................................................. F-11
9. FEES.................................................................................... F-13
10. RECORD KEEPING.......................................................................... F-14
11. FRANCHISEE ORGANIZATION, AUTHORITY,
FINANCIAL CONDITION AND SHAREHOLDERS.................................................... F-15
12. TRANSFER................................................................................ F-17
13. CONFIDENTIALITY; RESTRICTIONS........................................................... F-20
14. INSPECTIONS............................................................................. F-22
15. RELATIONSHIP OF PARTIES AND INDEMNIFICATION............................................. F-23
16. INSURANCE............................................................................... F-25
17. DEBTS AND TAXES......................................................................... F-26
18. TRADE NAMES, SERVICE MARKS AND TRADEMARKS............................................... F-26
19. EXPIRATION AND TERMINATION; OPTION TO
PURCHASE RESTAURANT; ATTORNEYS' FEES.................................................... F-28
20. NO WAIVER OF DEFAULT.................................................................... F-32
21. CONSTRUCTION, SEVERABILITY,
GOVERNING LAW AND JURISDICTION.......................................................... F-33
22. INTERFERENCE WITH EMPLOYMENT RELATIONS.................................................. F-34
23. LIQUOR LICENSE.......................................................................... F-34
24. FORCE MAJEURE........................................................................... F-34
25. MISCELLANEOUS........................................................................... F-35
26. ACKNOWLEDGMENTS......................................................................... F-37
EXHIBIT 1: ROYALTY FEE.................................................................. F-39
APPENDIX A: STATEMENT OF OWNERSHIP INTERESTS............................................. F-40
APPENDIX B: REVIEW AND CONSENT WITH
RESPECT TO TRANSFERS......................................................... F-41
APPENDIX C: CONFIDENTIALITY AGREEMENT.................................................... F-42
</TABLE>
2
<PAGE>
APPLEBEE'S NEIGHBORHOOD GRILL & BAR
FRANCHISE AGREEMENT
This Agreement is made this ________ day of _____________________, 19______, by
and between APPLEBEE'S INTERNATIONAL, INC., a Delaware corporation
("FRANCHISOR"), _____________________________________________, a
(_______________ corporation, sole proprietorship, _______________ partnership,
_______________ limited partnership [strike inappropriate language])
("FRANCHISEE") and ______________________________________
______________________________ (collectively, the "PRINCIPAL SHAREHOLDERS" and,
individually, a "PRINCIPAL SHAREHOLDER" of Franchisee if a corporation or
general partner if Franchisee is a limited partnership having as its general
partner a corporation) and
________________________________________________________________________________
("GENERAL PARTNER" of Franchisee if Franchisee is a limited partnership).*
* (If Franchisee is not a corporation or a sole proprietorship, or if
Franchisee is a limited liability company, the parties hereto hereby agree that
an Addendum shall be attached to this Agreement so as properly to reflect the
responsibilities of the partners of any general partnership, the general partner
of any limited partnership and the shareholders of any corporate general partner
of any partnership, or the members of any limited liability company.)
WITNESSETH:
RECITALS
A. Franchisor owns the rights to develop and operate a unique system of
restaurants which specialize in the sale of high quality, moderately priced food
and alcoholic beverages in an attractive, casual setting, which includes
proprietary rights in certain valuable trade names, service marks and
trademarks, including the service mark Applebee's Neighborhood Grill & Bar and
variations of such mark, designs, decor and color schemes for restaurant
premises, signs, equipment, procedures and formulae for preparing food and
beverage products, specifications for certain food and beverage products,
inventory methods, operating methods, financial control concepts, training
facilities and teaching techniques ("the System").
B. Franchisor established, through its own development and operation, and
through the granting of franchises, a chain of Applebee's Neighborhood Grill &
Bar restaurants which are distinctive; which are similar in appearance, design
and decor; and which are uniform in operation and product consistency.
C. The value of Franchisor's trade names, service marks and trademarks is
based upon: (1) the maintenance of uniform high quality standards in connection
with the preparation and sale of Franchisor-approved food and beverage products,
(2) the uniform high standards of appearance of the individual restaurant units
in the System, (3) the use of distinctive trademarks, service marks, building
designs and advertising signs representing a uniformly high quality of product
and services, and (4) the assumption by Franchisor and its franchisees of the
obligation to maintain and enhance the goodwill and public acceptance of the
System (and of Franchisor's trade names, service marks and trademarks) by strict
adherence to the high standards required by Franchisor.
3
<PAGE>
D. Franchisor, Franchisee and the Principal Shareholders have entered
into a Development Agreement dated __________________, 19______ ("Development
Agreement"), relating to the development by Franchisee of Applebee's
Neighborhood Grill & Bar restaurants.
E. Franchisee desires to use the System in connection with the operation
of an Applebee's Neighborhood Grill & Bar restaurant at the location which is
specified in Subsection 1.1 of this Agreement, pursuant to the terms, conditions
and provisions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual obligations contained herein, it
is hereby agreed as follows:
1. FRANCHISE GRANT AND TERM
1.1 Franchisor grants Franchisee, for the term stated below, the right,
license and privilege:
(a) to use the System incident to the operation of an Applebee's
Neighborhood Grill & Bar restaurant at
_____________________________________________________ (the "Restaurant");
(b) to use the trade names, service marks and trademarks which
Franchisor shall from time to time designate as part of the System, but
only in connection with the sale at the Restaurant of those products
which Franchisor has designated and approved; and
(c) to hold itself out to the public as a Franchisee of
Franchisor.
1.2 The term of the franchise shall commence as of the Commencement Date,
as hereinafter defined, and shall end twenty (20) years thereafter, unless this
Agreement is terminated prior to that date in accordance with its provisions.
"Commencement Date," as used herein, shall mean the date upon which the
Restaurant opens for business. The parties agree to affix to this Agreement an
addendum expressly setting forth the Commencement Date, which, when so affixed,
shall become a part of this Agreement.
1.3 At the expiration of the term hereof, Franchisee shall have an option
to operate the Restaurant for four (4) successive terms of five (5) years
(unless the franchise agreement with respect to that additional term is sooner
terminated in accordance with its provisions), provided that immediately prior
to each such five (5) year term (a) Franchisee satisfies the requirements which
Franchisor then-imposes on its new franchisees, (b) all other restaurant units
within the System which Franchisee then-operates substantially comply, in the
opinion of Franchisor, with Franchisor's then-current standards, specifications,
requirements and instructions, and (c) Franchisee executes the form of franchise
agreement which Franchisor is then using with respect to new restaurants within
the System, with the amount of royalty and advertising fees payable at the rates
then-prevailing under the franchise agreements which Franchisor is then using
for new restaurants within the System, and Franchisee pays to Franchisor for
each of said five (5) year periods a franchise fee equal to ten percent (10%) of
the prevailing franchise fee paid by new franchisees at that time. Any franchise
agreement which Franchisee executes for such additional term will also contain
options to obtain an assignment of Franchisee's lease with a third party and/or
4
<PAGE>
to purchase certain property or to purchase or lease the Restaurant premises
exercisable by Franchisor upon termination thereof and an option to purchase or
lease the Restaurant premises exercisable by Franchisor upon expiration of the
renewal term (subject to any then-existing renewal rights of Franchisee). Such
options will contain provisions substantially similar to the provisions of
Franchisor's options described in Subsection 19.4 hereof. Franchisee shall give
Franchisor written notice of its desire to exercise its option to operate the
Restaurant for an additional term no earlier than twelve (12) months, and no
later than seven (7) months, prior to expiration of the initial term. If
Franchisee gives that notice, Franchisor, in its sole discretion, reasonably
exercised, shall determine whether Franchisee has satisfied the foregoing
requirements. Within forty-five (45) days of receiving the notice described
above, Franchisor shall notify Franchisee in writing whether or not Franchisee
is eligible to exercise the option described in this Subsection.
1.4 During the period from the date of this Agreement to the expiration
or earlier termination of this Agreement, Franchisor shall not establish a
restaurant unit utilizing the System, or license another franchisee to establish
a restaurant unit utilizing the System, at any location within the lesser of a
three (3) mile radius of the Restaurant or a radius from the Restaurant which
includes either a daytime or residential population of forty thousand (40,000)
or more people. Notwithstanding the foregoing, Franchisor may establish a
restaurant unit or may license a restaurant unit to a third party within the
geographic area set forth in the preceding sentence, provided that (i) such
restaurant is located within an airport (serviced by one or more public or
charter carrier), arena, stadium, state or national park, or military fort, post
or base, or (ii) does not utilize the System or utilize the Applebee's
Neighborhood Grill & Bar service mark.
1.5 Franchisee, in consideration of the benefits and privileges provided
to it by this Agreement, agrees to operate the Restaurant and perform as
required hereunder for the full term of this Agreement.
1.6 This Agreement is entered into pursuant to and subject to the terms
and conditions which are set forth in the Development Agreement.
2. UNIFORM STANDARDS
2.1 The System is a comprehensive restaurant system for the retailing of
certain uniform and quality food and beverage products (including alcoholic
beverages), emphasizing a varied menu of high quality, moderately priced food
products (including appetizers, creative sandwiches, dinner entrees and
desserts), a selection of alcoholic and other beverages, and prompt and
courteous service in a clean, wholesome, casual atmosphere. The foundation of
the System is the establishment and maintenance of a reputation among the public
for the operation of high quality restaurant units. A fundamental requirement of
the System, this Franchise Agreement and franchises which Franchisor will grant
to others is adherence by all franchisees to Franchisor's standards and policies
providing for the uniform operation of all restaurant units within the System,
including, but not limited to, (a) selling only those products which Franchisor
has designated and approved, (b) using only Franchisor's prescribed building
layout and designs, equipment, signs, interior and exterior decor items,
fixtures and furnishings, (c) adhering strictly to Franchisor's standards and
specifications relating to the selection, purchase, storage, preparation,
packaging, service and sale of all food and beverage products being sold at the
Restaurant, and (d) satisfying all of Franchisor's prescribed standards of
quality, service and cleanliness. Compliance by all franchisees with the
foregoing standards and policies in conjunction with the use of Franchisor's
trade names, service marks and trademarks provides the basis for the wide public
acceptance of the System and its valuable goodwill. Accordingly, strict
adherence by all franchisees to all aspects of the System is required at all
times.
5
<PAGE>
2.2 The provisions of the Agreement shall be interpreted to give effect
to the intent of the parties stated in this Section 2 to assure that Franchisee
shall operate the Restaurant in conformity with the System, through strict
adherence to Franchisor's standards and policies as they now exist and as they
may be modified from time to time.
3. COMPLIANCE WITH THE SYSTEM
Franchisee acknowledges that every component of the System is important
to Franchisor, to all franchisees and to the operation of the Restaurant,
including the requirements (a) that only those products designated and approved
by the Franchisor are sold at the Restaurant, and (b) that there is uniformity
of food and beverage specifications, preparation methods, quality, appearance,
building and interior design, color and decor, landscaping, facilities and
service among all restaurant units in the System. Accordingly, Franchisee agrees
to and shall comply with all aspects of the System (as it now exists and as it
may be modified from time to time). Franchisee recognizes and agrees that
Franchisor may prohibit the use of the System and its trade names,
notwithstanding the granting of this Agreement, if Franchisee fails to design,
construct, equip or furnish its Restaurant in compliance with the specifications
designated by Franchisor, unless prior written approval has been received from
Franchisor.
4. GENERAL SERVICES OF FRANCHISOR
4.1 Franchisor shall advise and consult with Franchisee periodically in
connection with the operation of the Restaurant, and at other reasonable times
upon Franchisee's request. Franchisor will provide to Franchisee such of its
know-how, new developments, techniques and improvements in areas of restaurant
design, management, food and beverage preparation, sales promotion and service
concepts as may be pertinent to the construction and operation of the Restaurant
under the System. Franchisor may provide the foregoing information (a) by
sending representatives to visit the Restaurant, (b) by providing written or
other material, (c) at meetings or seminars, and (d) at training sessions at
Franchisor's training facility and/or such other locations as may be selected by
Franchisor from time to time. Franchisor also shall make available to Franchisee
all additional services, facilities, rights and privileges which Franchisor
makes available from time to time to its franchisees of the System generally.
4.2 For approximately eight (8) days prior to the opening of the
Restaurant and the first six (6) days that the Restaurant is open for business,
Franchisor shall provide Franchisee, at Franchisor's expense, with the services
of up to a maximum of six (6) of Franchisor's training personnel to facilitate
proper operation of the kitchen, bar and dining room areas during that period
and to assist in correcting any operational problems which may arise.
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4.3 From time to time during the term of this Agreement, Franchisor will
develop and test new menu items. The menu consists of approved national food and
beverage selections. Franchisee shall comply with all menu changes which
generally occur every six (6) months. The menu may be modified to reflect food
and beverage items peculiar to Franchisee's local area, subject to Franchisor's
testing and approval.
5. RESTAURANT SYSTEM AND PROCEDURES
5.1 Franchisor shall furnish Franchisee with advice and assistance in
managing and operating the Restaurant, and Franchisor's representatives will
visit the Restaurant periodically. Franchisor will assist Franchisee in
coordinating the Restaurant's pre-opening activities, and as noted more
particularly in Subsection 4.2 hereof, shall provide Franchisee with the
services of certain of Franchisor's personnel to facilitate proper operation of
the Restaurant when it opens for business.
5.2 Franchisee shall designate an employee who will supervise the
Restaurant, and devote his or her full time, best efforts and constant personal
attention to the day-to-day operation of the Restaurant (the "General Manager").
Franchisee also shall designate an employee who will supervise the Restaurant
kitchen, and devote his or her full time, best efforts and constant personal
attention to the day-to-day operation of the Restaurant kitchen (the "Kitchen
Manager").
5.3 Franchisee shall require that the General Manager, the Kitchen
Manager and each of Franchisee's employees who serve as Restaurant managers to
maintain his or her principal personal residence within a usual driving time of
not more than approximately one (1) hour from the Restaurant. Franchisor
reserves the right to require that, as a condition of his or her employment, the
General Manager must successfully complete Franchisor's interview process and a
psychological profile test in a manner which satisfies a uniform standard
established by Franchisor. The test shall be administered by Franchisor, or by a
testing agency designated by Franchisor, at Franchisee's expense.
5.4 Unless Franchisor shall have given its prior written approval,
Franchisee shall keep the Restaurant open for business only during the hours
which are specified by Franchisor in the Franchise Operations Manual or in such
other materials or manuals provided or made available by Franchisor to
Franchisee (collectively the "Manuals"), provided that such hours do not
conflict with state laws or local ordinances relating to the sale of alcoholic
beverages or governing the hours during which restaurant establishments may be
open for business. In addition, Franchisee expressly agrees to:
(a) operate the Restaurant in a clean, safe and orderly manner,
providing courteous, first-class service to the public;
(b) diligently promote and make every reasonable effort to
increase the business of the Restaurant;
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(c) advertise the business of the Restaurant by the use of the
Franchisor's trade names, service marks and trademarks and such other
insignia, slogans, emblems, symbols, designs and other identifying
characteristics as may be developed or established from time to time by
Franchisor and included in the Manuals, subject to the limitations of
Subsections 8.4 and 8.5 hereof;
(d) prohibit and, to the best of Franchisee's ability, prevent
the use of the Restaurant for any immoral or illegal purpose, or for any
other purpose, business activity, use of function which is not expressly
authorized hereunder or in the Manuals; and
(e) comply fully with all applicable laws and regulations,
including, but not limited to, those relating to building construction,
maintenance and safety, environmental, fire prevention, food safety,
public access and the sale of alcoholic beverages.
5.5 Franchisee hereby acknowledges receipt and loan of a copy of the
Manuals heretofore or hereinafter furnished to Franchisee, and agrees to
faithfully, completely and continuously perform, fulfill, observe and follow all
instructions, requirements, standards, specifications, systems and procedures
contained therein, including (a) those relating to the construction, design,
decor, building and equipping of the Restaurant, (b) those relating to the
selection, purchase, storage, preparation, packaging, service and sale of all
products being sold at the Restaurant, (c) those relating to the maintenance and
repair of Restaurant building, grounds, equipment, signs, interior and exterior
decor items, fixtures and furnishings, and (d) those relating to employee
uniforms and dress, accounting, bookkeeping, record retention, and other
business systems, procedures and operations. The Manuals are incorporated herein
by reference and hereby made part of this Agreement. Franchisee acknowledges and
agrees that the materials contained in the Manuals are integral, necessary and
material elements of the System.
5.6 Franchisee understands, acknowledges and agrees that strict
conformity with the System, including the standards, specifications, systems,
procedures, requirements and instructions contained in this Agreement and in the
Manuals, is vitally important, not only to the success of Franchisor, but to the
collective success of all of Franchisor's other franchisees, by reason of the
benefits which Franchisor and all of its franchisees will derive from uniformity
in products sold, identity, quality, appearance, facilities and service among
all restaurant units which are part of the System. Without limiting the
generality of the foregoing provisions, Franchisee agrees to adhere strictly to
the requirements in the Manuals relating (a) to the construction, design, decor,
building and equipping of the Restaurant, (b) to the maximum permissible ratio
of sales of alcoholic beverages to sales of food at the Restaurant, and (c) to
the limitations on the number of video games or similar devices which may be
placed on the Restaurant premises. Any failure to adhere to the standards,
specifications, systems, requirements or instructions contained in this
Agreement or in the Manuals shall constitute a material breach of this
Agreement.
5.7 Franchisor shall have the right, at any time and from time to time,
in the good faith exercise of its reasonable business judgment, consistent with
the overall best interests of the System generally, having due regard for the
financial burden which may be placed upon its franchisees, to revise, amend,
delete from and add to the System and the material contained in the Manuals.
Franchisee expressly agrees to comply with all such revisions, amendments,
deletions and additions.
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5.8 Franchisee shall offer for sale from the Restaurant, at all times
when the Restaurant is open for business, only the products which are expressly
designated in the Manuals, except, as noted more particularly in Subsection 4.3,
to the extent that Franchisee has obtained Franchisor's prior written consent to
a modification of that requirement. No product shall be offered or sold at or
from the Restaurant under, or in connection with, any trademark or service mark
other than Franchisor's designated trademarks and service marks without
Franchisor's prior written consent.
5.9 Franchisee shall obtain all food and beverage products, equipments,
signs, interior and exterior decor items, fixtures, furnishings, supplies, and
other products and materials required for the operation of or sold at the
Restaurant solely from suppliers (including manufacturers, distributors and
other sources) who demonstrate, to Franchisor's continuing reasonable
satisfaction, the ability to meet Franchisor's then-current standards and
specifications for such items; who possess adequate quality controls and
capacity to supply Franchisee's needs promptly and reliably; and who have been
approved in writing by Franchisor and not thereafter disapproved. The Manuals
contain a list of approved suppliers. If Franchisee desires to purchase any
items from an unapproved supplier, Franchisee shall submit to Franchisor a
written request for such approval, which approval shall not be unreasonably
withheld, or shall request the supplier itself to do so. Franchisor shall have
the right to inspect the supplier's facilities, and to require that samples from
the supplier be delivered, at Franchisor's option, either to Franchisor or to an
independent, certified laboratory designated by Franchisor for testing.
Franchisee or the supplier shall pay the costs of any such test. Franchisor
shall notify Franchisee in writing within forty-five (45) days of receiving any
such request whether it disapproves the supplier. Failure by Franchisor to so
notify Franchisee within that period shall be deemed to constitute Franchisor's
approval of such supplier. Franchisor reserves the right, at its option, to
reinspect the facilities and retest products of any such approved supplier at
any time and to revoke its approval upon the supplier's failure to continue to
meet any of Franchisor's criteria. Notwithstanding the foregoing, any supplier
of goods having any trademark, trade name, service mark, logo or symbol owned by
Franchisor shall not be approved to supply Franchisee such goods until such
supplier has entered a written agreement with Franchisor regarding the
production, use and sale of such goods.
5.10 No food or beverage product, interior or exterior decor item, sign,
item of equipment, fixtures, furnishings or supplies, or other product or
material required for the operation of the Restaurant, which bears any of
Franchisor's trade names, service marks or trademarks, shall be used or sold in
or upon the Restaurant premises unless the same shall have been first submitted
to and approved in writing by Franchisor.
5.11 The Manuals and all related material furnished to Franchisee
hereunder are and shall remain the property of Franchisor, and must be returned
to Franchisor, along with any copies made thereof, immediately upon request or
upon the expiration or earlier termination of this Agreement.
6. TRAINING
6.1 Franchisor shall make its operations training course available to the
General Manager, the Kitchen Manager, and Franchisee's Assistant Managers and
other Restaurant managers.
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6.2 Before the Restaurant opens for business, and thereafter as
replacement personnel are employed by Franchisee, the General Manager, the
Kitchen Manager and each Assistant Manager shall attend Franchisor's operations
training facility for such period of time as Franchisor shall deem reasonably
necessary, and shall successfully complete that course to Franchisor's
reasonable satisfaction. If the General Manager, Kitchen Manager or an Assistant
Manager fails to successfully complete Franchisor's operations training course,
Franchisor may require designation of a new General Manager, Kitchen Manager or
Assistant Manager, as the case may be, and Franchisee shall designate a new
General Manager, Kitchen Manager or Assistant Manager, who shall be required to
successfully complete such training course.
6.3 The General Manager, the Kitchen Manager and each Assistant Manager
shall, from time to time as reasonably required by Franchisor, attend and
successfully complete to Franchisor's reasonable satisfaction a
Franchisor-provided refresher course in restaurant operations.
6.4 Franchisee shall be responsible for the Restaurant's compliance with
the operating standards, methods, techniques and material taught at Franchisor's
operations training course, and shall cause the employees of the Restaurant to
be trained in such standards, methods and techniques as are relevant to the
performance of their respective duties.
6.5 Attendance of the General Manager, the Kitchen Manager and each
Assistant Manager at any of Franchisor's training courses shall be tuition-free.
Franchisee shall pay all other costs and expenses relating to the attendance of
Franchisee's personnel at any of Franchisor's training courses, including,
without limitation, the cost of travel, lodging, meals, and other related and
incidental expenses.
7. RESTAURANT MAINTENANCE
7.1 Franchisee shall, at Franchisee's sole cost and expense, maintain the
Restaurant in conformity with the standards, specifications and requirements of
the System, as the same may be designated by Franchisor from time to time.
Franchisee specifically agrees to repair or replace, at Franchisee's cost and
expense, equipment, signs, interior and exterior decor items, fixtures,
furnishings, supplies, and other products and materials required for the
operation of the Restaurant as necessary or desirable, and to obtain, at
Franchisee's cost and expense, any new or additional equipment, signs, interior
and exterior decor items, fixtures, furnishings, supplies, and other products
and materials which may be reasonably required by Franchisor for new products or
procedures. Except as may be expressly provided in the Manuals, no alterations
or improvements, or changes of any kind in design, equipment, signs, interior or
exterior decor items, fixtures or furnishings shall be made in or about the
Restaurant or Restaurant premises without the prior written approval of
Franchisor in each instance.
7.2 In order to assure the continued success of the Restaurant,
Franchisee shall, at any time from time to time after ________________,
_________, (i.e., six [6] years after the date of this Agreement) as reasonably
required by Franchisor (taking into consideration the cost and then-remaining
term of this Agreement), modernize the Restaurant premises, equipment, signs,
interior and exterior decor items, fixtures, furnishings, supplies, and other
products and materials required for the operation of the Restaurant, to
Franchisor's then-current standards and specifications, provided that at the
time Franchisor requires Franchisee to so modernize the Restaurant premises at
least twenty-five percent (25%) of Franchisor-owned and operated Restaurants
meet such standards and specifications. Franchisee's obligations under this
Subsection are in addition to, and shall not relieve Franchisee from, any of its
other obligations under this Agreement, including those contained in the
Manuals.
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7.3 If Franchisee is or becomes a lessee of the Restaurant premises,
Franchisee shall have included in the lease provisions expressly permitting both
Franchisee and Franchisor to take all actions and make all alterations referred
to under Subsections 7.1 and 7.2 hereof, requiring the lessor thereunder to give
Franchisor reasonable notice of any contemplated termination, and providing that
Franchisee has the unrestricted right to assign the lease to Franchisor without
the lessor having any right to impose conditions on such assignment or to obtain
any payment in connection therewith. Franchisee shall not, without the prior
written consent of Franchisor, execute any lease or other agreement which
imposes, or purports to impose, any limitations on the ability of Franchisee
and/or of Franchisor to operate additional restaurants at any particular
location beyond the geographic limitation set forth in Section 1.4 hereof, or
any lease the term of which is shorter than the term of this Agreement.
8. ADVERTISING
8.1 Franchisor shall develop and administer advertising, public relations
and sales promotion programs designed to promote and enhance the collective
success of all restaurant units in the System. It is expressly understood,
acknowledged and agreed that in all phases of such advertising and promotion,
including, without limitation, type, quantity, timing, placement and choice of
media and medium, market areas, advertising agencies and public relations firms,
Franchisor's decisions shall be final and binding. Franchisee shall have the
right to participate actively in all such advertising, public relations and
sales promotion programs, but only in full and complete accordance with such
terms and conditions as may be established by Franchisor for each such program.
8.2 Franchisee shall pay Franchisor, in the manner described in Section 9
hereof, a minimum dollar amount equal to one and one-half percent (1.5%) of
Franchisee's gross sales, as defined in Subsection 9.3 hereof. Such funds shall
become the sole and absolute property of Franchisor, to be allocated to a
separate "advertising account" established by Franchisor. Franchisor shall use
such funds for market studies, advertising and marketing studies or services,
production of commercials, advertising copy and layouts, traffic costs, agency
fees, marketing personnel, or any other costs associated with the development,
marketing and testing of advertising, and for the purchase of advertising time,
space or materials in national, regional or other advertising media, in a manner
determined by Franchisor in its sole discretion. Within six (6) months following
the end of Franchisor's fiscal year, Franchisor shall provide all franchisees
with an accounting of all amounts received from them and expended by Franchisor
for the matters set forth above. In addition, Franchisee shall expend a minimum
dollar amount equal to one and one-half percent (1.5%) of Franchisee's gross
sales, for local promotional activities, subject to the provisions of
Subsections 8.4 and 8.5 hereof. Franchisor shall have the right at all times to
review Franchisee's books and records, and to require Franchisee to produce
evidence of its gross sales and local promotional activities, to ensure
Franchisee's compliance with this Section. Any amount determined by said audit
to be due Franchisor as part of the advertising fee will be paid to Franchisor
by Franchisee within ten (10) days thereafter. At any time after execution of
this Agreement, Franchisor may in its sole discretion increase, to a maximum of
four percent (4%) of gross sales, the percentage of gross sales which Franchisee
shall be required to pay to Franchisor for allocation to a separate advertising
account pursuant to this Subsection 8.2. Franchisor shall use the funds paid
pursuant to that increased percentage requirement solely for the purchase of
advertising time, space or materials in national, regional or other advertising
media, in a manner determined by Franchisor in its sole discretion, provided
that in each calendar year (or other twelve [12] month period established by
Franchisor) in which Franchisor makes expenditures for advertising from such an
advertising account, so long as Franchisee is in compliance with its obligations
hereunder, Franchisor's expenditures for advertising in the Territory
encompassed by the Development Agreement (including expenditures for national or
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regional advertising in media which reach that Territory) shall be on a basis
which is roughly proportional to Franchisee's contribution to that advertising
account during that calendar year or other twelve (12) month period. Franchisor
also may increase the percentage of gross sales which Franchisee shall be
required to spend for local promotional activities, provided however, that in no
event shall Franchisee be required to make payments pursuant to this Subsection
8.2 in a dollar amount in excess of five percent (5%) of gross sales.
8.3 Franchisee shall submit to Franchisor, for Franchisor's approval, an
advertising campaign plan relating to the promotion of the opening of the
Restaurant which is sufficient to meet the needs of the market. The Manuals
contain a Press Release kit to assist Franchisee in this regard. Franchisee
shall conduct the approved advertising campaign and make all expenditures for
advertising to promote the opening of the Restaurant no later than sixty (60)
days after the Restaurant opens for business. Franchisor will reimburse fifty
percent (50%) of Franchisee's out-of-pocket opening advertising expenditures up
to a maximum of two thousand five hundred dollars ($2,500), if Franchisee meets
the following criteria:
(a) Franchisee's opening advertising expenditures are made within
sixty (60) days after the opening of the Restaurant;
(b) Franchisee submits to Franchisor within one hundred twenty
(120) days after the opening of the Restaurant documentation for the
opening advertising expenditures, such as paid invoices from suppliers of
goods or services evidencing expenditure on the opening advertising
promotion; and
(c) Franchisee's opening advertising expenditures are made
pursuant to the approved advertising campaign plan and in accordance with
the Grand Opening Reimbursement Program Policy Guidelines set forth in
the Manuals.
8.4 Nothing in the foregoing Subsections shall be deemed to prohibit
Franchisee from making additional expenditures for local promotional activities.
All of the Franchisee's local promotional activities shall utilize approved
advertising media. "Approved advertising media" are limited to the following:
(a) Newspapers, magazines and other such periodicals;
(b) Radio and television;
(c) Outdoor advertising by signs displayed on billboards or
buildings; and
(d) Handbills, flyers, door-hangers and direct mail.
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In the event Franchisee wants to use a form of advertising medium not set forth
above, Franchisee shall submit a description of such medium and advertising to
Franchisor. Franchisor shall notify Franchisee whether it approves the use of
such medium within thirty (30) days of Franchisee's request. Failure by
Franchisor to so notify Franchisee within that period shall be deemed to
constitute Franchisor's approval of such request. Guidelines for local
promotional activities are contained in the Manuals.
8.5 All advertising copy and other materials employed by Franchisee in
local promotional activities shall be in strict accordance and conformity with
the standards, formats and specimens contained in the Manuals and shall receive
the prior approval of Franchisor. In the event Franchisee wishes to deviate from
the materials contained in the Manuals, Franchisee shall submit, in each
instance, the proposed advertising copy and materials to Franchisor for approval
in advance of publication. Franchisor shall notify Franchisee in writing, within
fifteen (15) days of such submission, whether Franchisor disapproves such
advertising copy and materials. Failure by Franchisor to so notify Franchisee
within that period shall be deemed to constitute Franchisor's approval of such
advertising copy and materials. In no event shall Franchisee's advertising
contain any statement or material which may be considered (a) in bad taste or
offensive to the public or to any group of persons, (b) defamatory of any person
or an attack on any competitor, (c) to infringe upon the use, without
permission, of any other persons' trade name, trademark, service mark or
identification, or (d) inconsistent with the public image of Franchisor or of
the System.
9. FEES
9.1 As partial consideration for the rights granted hereunder, Franchisee
shall pay Franchisor:
(a) an initial franchise fee of _____________________ dollars
($__________), to be paid in the manner prescribed in Subsection 4.l of
the Development Agreement as payment for the grant of the franchise;
(b) a monthly royalty fee as determined by Franchisor, not to
exceed five percent (5%) of each calendar month's gross sales, as
provided in Subsection 4.3 of the Development Agreement, as payment for
Franchisee's continuing right to operate the Restaurant as part of the
System (see Exhibit 1); and
(c) a monthly advertising fee equal to such percentage of each
calendar month's gross sales as Franchisor may require pursuant to
Subsection 8.2 hereof.
Notwithstanding anything contained herein to the contrary, if the royalty
fee set forth in Subsection 9.1(b) is equal to five percent (5%) of monthly
gross sales, then in such an event, the advertising fee described in Subsection
9.1(c) shall not exceed four percent (4%) of monthly gross sales.
9.2 The fees referred to in Subsections 9.l(b) and (c) (the "Fees") shall
be paid by check mailed and postmarked on or before the twelfth day of the next
full month immediately following the month to which the Fees relate. Any Fees,
including the initial franchise fee, which are not paid when due shall bear
interest from and after the due dates thereof at the rate of eighteen percent
(18%) per annum or the highest rate permitted by applicable law, whichever is
less.
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9.3 (a) Except as provided in Subsection 9.3(b) hereof, the term "gross
sales," as used in this Agreement, shall mean all receipts (cash, cash
equivalents or credit) or revenues from sales from all business conducted upon
or from the Restaurant premises, whether evidenced by check, cash, credit,
charge account, exchange or otherwise, including, but not limited to, amounts
received from the sale of goods, wares and merchandise (including sales of food,
beverages and tangible property of every kind and nature, promotional or
otherwise), from all services performed from or at the Restaurant premises, and
from all orders taken or received at the Restaurant premises, regardless of
where such orders are filled. Gross sales shall not be reduced by any deductions
for cash shortages incurred in connection with the transaction of business with
customers, credit card company charges or theft which is reimbursed by insurance
or is not reported to the appropriate police authorities. Each charge or sale
upon installment or credit shall be treated as a sale for the full price in the
month during which such charge or sale shall be first made, irrespective of the
time when Franchisee shall receive payment (whether full or partial) therefor.
(b) Gross sales shall not include: (i) the sale of merchandise
for which cash has been refunded or, except as provided in the second sentence
of Subsection 9.3(a), not received, or allowances made for merchandise, if the
sales of any such returned or exchanged merchandise shall have been previously
included in gross sales, (ii) the amount of any sales tax imposed by any
federal, state, municipal or other governmental authority directly on sales and
intended to be collected from customers, provided that the amount thereof is
added to the selling price and actually paid by the Franchisee to such
governmental authority, (iii) the sale of merchandise for which a gift
certificate is redeemed, provided that the initial sale of said gift certificate
shall have been previously included in gross sales, (iv) the sale of waste
products of the Restaurant, (v) telephone, game and vending machine revenues,
(vi) the sale of non-food items or beverages at a discount in connection with a
promotional campaign, (vii) one-time sale of furniture, fixtures or equipment,
and (viii) theft which is not covered by insurance and is reported to the
appropriate police authorities. In addition, Franchisor may, from time to time,
in writing, permit or allow certain other items to be excluded from gross sales.
Any such permission or allowance may be revoked or withdrawn at Franchisor's
discretion.
10. RECORD KEEPING
10.1 Franchisee shall employ a point of sale system approved by
Franchisor, without modification, in connection with the business of the
Restaurant. Franchisee shall use such bookkeeping and record keeping forms as
shall be prescribed in the Manuals.
10.2 Franchisee shall complete and submit to Franchisor, on a regular,
continuous basis, each of the following reports, in the form specified in the
Manuals:
(a) monthly Restaurant reports, on or before the twelfth day of
each calendar month following the month to which the report relates;
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(b) annual Restaurant reports, on or before the fifteenth day of
April of each year; and
(c) weekly gross sales reports, on or before the Tuesday
following the calendar week to which the report relates.
10.3 The annual Restaurant reports referred to above shall include a
balance sheet dated as of the end of Franchisee's fiscal year or calendar year
and a profit and loss statement for such year, together with such additional
financial information as Franchisor may reasonably request. Such balance sheet
and profit and loss statement shall be prepared in accordance with generally
accepted accounting principles, certified as correct and complete by
Franchisee's chief executive officer, president, chief financial officer or
controller and reported on and reviewed by an independent state-licensed
certified public accountant. If Franchisee fails to provide Franchisor with such
balance sheet and profit and loss statement, Franchisor shall have the right to
have an independent audit made of Franchisee's books and records, and Franchisee
shall promptly reimburse Franchisor for the cost thereof.
10.4 Each of the reports referred to in this Section 10 shall be
completed by Franchisee or its accountant in the respective specimen forms, and
in accordance with the instructions, contained in the Manuals. Subsection 10.3
notwithstanding, time is of the essence with respect to the completion and
submission of each such report.
11. FRANCHISEE ORGANIZATION, AUTHORITY,
FINANCIAL CONDITION AND SHAREHOLDERS
11.1 Franchisee and each Principal Shareholder represent and warrant
that: (a) Franchisee is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of its incorporation; (b) Franchisee
is duly qualified and is authorized to do business and is in good standing as a
foreign corporation in each jurisdiction in which its business activities or the
nature of the properties owned by it requires such qualification; (c) the
execution and delivery of this Agreement and the transaction contemplated hereby
are within Franchisee's corporate power; (d) the execution and delivery of this
Agreement has been duly authorized by the Franchisee; (e) the articles of
incorporation and by-laws of Franchisee delivered to Franchisor are true,
complete and correct, and there have been no changes therein since the date
thereof; (f) the certified copies of the minutes electing the officers of
Franchisee and authorizing the execution and delivery of this Agreement are
true, correct and complete, and there have been no changes therein since the
date(s) thereof; (g) the specimen stock certificate delivered to Franchisor is a
true specimen of Franchisee's stock certificate; (h) the balance sheet of
Franchisee as of ____________________, ________ ("Balance Sheet") and the
balance sheets of its Principal Shareholders as of ____________________,
________, heretofore delivered to Franchisor, are true, complete and correct,
and fairly present the financial positions of Franchisee and each Principal
Shareholder, respectively, as of the dates thereof; (i) the Balance Sheet and
each such balance sheet have been prepared in accordance with generally accepted
accounting principles; and (j) there have been no materially adverse changes in
the condition, assets or liabilities of Franchisee or Principal Shareholders
since the date or dates thereof.
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11.2 Franchisee and each Principal Shareholder covenant that during the
term of this Agreement: (a) Franchisee shall do or cause to be done all things
necessary to preserve and keep in full force its corporate existence and shall
be in good standing as a foreign corporation in each jurisdiction in which its
business activities or the nature of the properties owned by it requires such
qualification; (b) Franchisee shall have the corporate authority to carry out
the terms of this Agreement; and (c) Franchisee shall print, in a conspicuous
fashion on all certificates representing shares of its stock when issued, a
legend referring to this Agreement and the restrictions on and obligations of
Franchisee and Principal Shareholders hereunder, including the restrictions on
transfer of Franchisee's shares.
11.3 In addition to the financial information which Franchisee is
required to provide to Franchisor under Subsections 10.2 and 11.1 hereof,
Franchisee and Principal Shareholders shall provide Franchisor with such other
financial information as Franchisor may reasonably request from time to time,
including, on an annual basis, copies of the then-most current financial
statements of Franchisee and each Principal Shareholder, dated as of the end of
the last preceding fiscal year of the Franchisee or Principal Shareholder, said
statements to be delivered to Franchisor no later than April 15 of each year,
which financial statements shall conform to the standards set forth in
Subsection 11.1 hereof.
11.4 Franchisee and each Principal Shareholder represent, warrant and
covenant that all Interests (as defined in Subsection 12.4 hereto) in Franchisee
are owned as set forth on Appendix A hereto, that no Interest has been pledged
or hypothecated (except in accordance with Section 12 of this Agreement), and
that no change will be made in the ownership of any such Interest other than as
permitted by this Agreement, or otherwise consented to in writing by Franchisor.
Franchisee and Principal Shareholders agree to furnish Franchisor with such
evidence as Franchisor may request, from time to time, for the purpose of
assuring Franchisor that the Interests of Franchisee and Principal Shareholders
remain as represented herein.
11.5 Each Principal Shareholder, jointly and severally, hereby personally
and unconditionally guarantees each of Franchisee's financial obligations to
Franchisor (including, but not limited to, all obligations relating to the
payment of fees by Franchisee to Franchisor). Each Principal Shareholder agrees
that Franchisor may resort to such Principal Shareholder (or any of them) for
payment of any such financial obligation, whether or not Franchisor shall have
proceeded against Franchisee, any other Principal Shareholder or any other
obligor primarily or secondarily obligated to Franchisor with respect to such
financial obligation. Each Principal Shareholder hereby expressly waives
presentment, demand, notice of dishonor, protest, and all other notices
whatsoever with respect to Franchisor's enforcement of this guaranty. In
addition, each Principal Shareholder agrees that if the performance or
observance by Franchisee of any term or provision hereof is waived or the time
of performance thereof extended by Franchisor, or payment of any such financial
obligation is accelerated in accordance with any agreement between Franchisor
and any party liable in respect thereto or extended or renewed, in whole or in
part, all as Franchisor may determine, whether or not notice to or consent by
any Principal Shareholder or any other party liable in respect to such financial
obligations is given or obtained, such actions shall not affect or alter the
guaranty of each Principal Shareholder described in this Subsection.
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12. TRANSFER
12.1 There shall be no Transfer of any Interest of Franchisee, or of a
Principal Shareholder in Franchisee, in whole or in part (whether voluntarily or
by operation of law), directly, indirectly or contingently, except in accordance
with the provisions of this Section 12. "Transfer" and "Interest" are defined in
Subsections 12.2, 12.3 and 12.4. Any proposed Transfer also shall be subject to
the provisions of the Development Agreement, which are incorporated herein by
reference.
12.2 Except as provided in Subsection 12.3, "Transfer" shall mean any
assignment, sale, pledge, hypothecation, gift or any other event which would
change ownership of or change or create a new Interest, including, but not
limited to:
(a) any change in the ownership of or rights in or to any shares
of stock or other equity interest in Franchisee which would result from
the act of any shareholder of Franchisee ("Shareholder"), such as a sale,
exchange, pledge or hypothecation of shares, or any interest in or rights
to any of Franchisee's profits, revenues or assets, or any such change
which would result by operation of law; and
(b) any change in the percentage interest owned by any
Shareholder in the shares of stock of Franchisee, or interests in its
profits, revenues or assets which would result from any act of Franchisee
such as a sale, pledge or hypothecation of any Restaurant assets (other
than a pledge of assets to secure bona fide loans made or credit extended
in connection with acquisition of the assets pledged, provided that
immediately before and after such transaction the net worth of Franchisee
shall not be less than the amount which is reflected on the Balance Sheet
referred to in Subsection 11.1 of this Agreement); any sale or issuance
of any shares of Franchisee's stock; the retirement or redemption of any
shares of Franchisee's stock; or any sale or grant to any person of any
right to participate in or otherwise to share or become entitled to any
part of Franchisee's profits, revenues, assets or equity.
12.3 "Transfer" shall not include (a) a change in the ownership of or
rights to any shares or other equity interest in Franchisee pursuant to a public
offering of Franchisee's securities registered under the Securities Act of 1933,
or (b) a change in the ownership of or rights to any securities or other equity
interest in Franchisee pursuant to a private offering of Franchisee's securities
exempted from registration under such Act, provided that Franchisee provides
Franchisor with a copy of its prospectus and/or offering memorandum ten (10)
days prior to its filing with the Securities and Exchange Commission or
circulation to third parties so that Franchisor may comment and, if necessary,
correct any information concerning Franchisor and/or the System, and further
provided that after giving effect to such public or private offering, the
Principal Shareholders, or any of them, "control" Franchisee. For purposes of
this Section 12, "control" means either (1) owning legal and equitable title to
fifty-one percent (51%) or more of the outstanding voting securities of
Franchisee, which are not subject to a proxy granted to or contract with any
other person or party granting that party the right to vote part or all of such
securities, or (2) having and continually exercising the contractual power
presently to designate a majority of the directors of Franchisee.
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12.4 "Interest" shall mean: when referring to interests or rights in
Franchisee, any shares of Franchisee's stock and any other equitable or legal
right in or to any of Franchisee's stock, revenues, profits or assets; when
referring to rights or assets of Franchisee, Franchisee's rights under and
interest in this Agreement, the Restaurant and its revenues, profits and assets.
12.5 (a) The Interest of a Principal Shareholder may be transferred to
such Principal Shareholder's spouse or children or to a person designated in
such Principal Shareholder's will or trust (individually and collectively
referred to as a "Successor"), upon such Principal Shareholder's death or
permanent incapacity, without Franchisor's approval, provided that such
Successor shall agree to be bound by the restrictions contained in this Section
12, and the other agreements and covenants of the Principal Shareholders
contained in this Agreement.
(b) The Interest of a Principal Shareholder may not be
transferred to another Principal Shareholder without Franchisor's approval,
which approval shall not be unreasonably withheld.
(c) The Interest of a Successor may only be transferred in
accordance with Subsection 12.5(b), 12.6, 12.7 or 12.8, regardless of whether
such Transfer is for consideration or by gift or will or other device.
12.6 If at any time the Principal Shareholders desire to dispose of all
or substantially all of the Interests of the Principal Shareholders in
Franchisee, or the Principal Shareholders (or Franchisee) desire to dispose of
all or substantially all of Franchisee's Interest in this Agreement or in the
assets which Franchisee has acquired as a result of this Agreement, the
Principal Shareholders or Franchisee, as the case may be, shall notify
Franchisor of that desire, in writing, thirty (30) days before announcing that
fact publicly or engaging the services of a broker or sales agent.
12.7 (a) If at any time any of the Principal Shareholders or Franchisee,
as the case may be, obtains from a third party or third parties a bona fide
offer (the "Offer") in writing for the purchase of all or substantially all of
the Interests of the Principal Shareholders in Franchisee, or of Franchisee's
Interest in this Agreement or in the assets which Franchisee has acquired as a
result of this Agreement, the Principal Shareholders or Franchisee shall give
notice (the "Selling Notice") to Franchisor stating that the Principal
Shareholders or Franchisee, as the case may be, have received the Offer,
identifying the prospective purchaser by name and address, specifying the
proposed purchase price and attaching a true and complete copy of the Offer.
(b) Franchisor shall have an option to purchase (the "Option"),
exercisable within a period of forty-five (45) days after receipt of the Selling
Notice (the "Option Period"), such Interests at the price and on the conditions
set forth in the Offer, except that Franchisor shall not be obligated to pay any
finder's or broker's fee, and if the Offer provides for payment of consideration
other than cash, or if the Offer involves certain intangible benefits,
Franchisor may elect to purchase such Interests by offering a reasonable dollar
value substitute including, at Franchisor's option, cash or the common stock or
other securities of the Franchisor or any combination thereof for the
non-cash/intangible benefits part of the Offer.
(c) The Option shall be exercisable by Franchisor delivering to
the Principal Shareholders or Franchisee, as the case may be, within the Option
Period, a notice (i) stating that the Option is being exercised, and (ii)
specifying the time, date and place at which such purchase and sale will take
place, which date shall be within forty-five (45) days after Franchisor delivers
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such notice. Franchisee shall provide Franchisor access to and copies of such
information and documentation Franchisor shall request regarding the purchase.
The forty-five (45) day limitation described at the end of the preceding
sentence shall not apply if at the end of said forty-five (45) day period the
only issue which prevents completion of the purchase and sale is the need to
effect transfers of the applicable liquor licenses. In the event of such a
delay, the purchase and sale shall take place within seven (7) business days
after those liquor licenses have been transferred.
(d) If the Option is not exercised, the Principal Shareholders or
Franchisee, as the case may be, may sell the Interests in or of Franchisee to
the third party which made the Offer, on conditions no more favorable to the
third-party offerer than those set forth in the Offer, provided that Franchisor
approves the proposed transferee in accordance with the criteria set forth in
Appendix B and provided further that such sale takes place within ninety (90)
days after the expiration of the Option Period. The ninety (90) day limitation
described in the preceding sentence shall not apply if at the end of said ninety
(90) day period the issue which prevents completion of the purchase and sale is
either the need to effect transfers of the applicable liquor licenses or consent
or approval of the transaction by a state or federal regulatory agency. In the
event of such a delay, the purchase and sale shall take place within seven (7)
business days after those issues have been resolved or waived by Franchisor.
(e) If the Option is not exercised, the Principal Shareholders or
Franchisee, as the case may be, shall immediately notify Franchisor in writing
of any change in the terms of an Offer. Any change in the terms of an Offer
shall cause it to be deemed a new Offer, conferring upon Franchisor a new Option
pursuant to this Subsection 12.7; the Option Period with respect to the new
Option shall be deemed to commence on the day on which Franchisor receives
written notice of a change in the terms of the original Offer. Provided however,
in such an instance, Franchisor shall provide Franchisee its response within
fifteen (15) days after Franchisor's receipt of all of the modified terms,
unless such changes are deemed material by Franchisor and in such an event,
Franchisor shall have a forty-five (45) day period within which to review said
changes.
12.8 (a) Franchisee understands and acknowledges that the rights and
duties set forth in this Agreement are personal to Franchisee and that
Franchisor has entered into this Agreement in reliance on the business skill and
financial capability of Franchisee, and the business skill, financial capability
and personal character of each Principal Shareholder. Except as otherwise
provided in this Section 12, the Principal Shareholders shall at all times
retain control of Franchisee. Except as otherwise provided in this Section 12,
no Transfer of any part of Franchisee's Interest in this Agreement or in the
Restaurant, and no Transfer of any Interest of any Principal Shareholder, shall
be completed except in accordance with this Subsection 12.8. In the event of
such a proposed Transfer of any part of Franchisee's Interest in this Agreement
or in the Restaurant, or of any Interest of any Principal Shareholder, the party
or parties desiring to effect such Transfer shall give Franchisor notice in
writing of the proposed Transfer, which notice shall set forth the name and
address of the proposed transferee, its financial condition, including a copy of
its financial statement dated not more than ninety (90) days prior to the date
of said notice, and all the terms and conditions of the proposed Transfer. Upon
receiving such notice, Franchisor may (i) approve the Transfer, or (ii) withhold
its consent to the Transfer. Franchisor shall, within forty-five (45) days of
receiving such notice and all of the information required therein, advise the
party or parties desiring to effect the Transfer whether it (1) approves the
Transfer, or (2) withholds its consent to the Transfer, giving the reasons for
such disapproval. Failure of Franchisor to so advise said party or parties
within that forty-five (45) day period shall be deemed to be an approval of the
proposed Transfer. Appendix B sets forth the criteria for obtaining Franchisor's
consent to a proposed Transfer.
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(b) In the event that Franchisor approves the Transfer, and the
Transfer is not completed within ninety (90) days of the later of (i) expiration
of the forty-five (45) day notice period, or (ii) delivery of notice of
Franchisor's approval of the proposed Transfer, Franchisor's approval of the
proposed Transfer shall automatically be revoked. The ninety (90) day limitation
described in the preceding sentence shall not apply if at the end of said ninety
(90) day period the only issue which prevents completion of the Transfer is the
need to effect transfers of the applicable liquor licenses. In the event of such
a delay, the Transfer shall take place within seven (7) business days after
those liquor licenses have been transferred. Any subsequent proposal to complete
the proposed Transfer shall be subject to Franchisor's right of approval as
provided herein. The party which desires to effect the proposed Transfer shall
immediately notify Franchisor in writing of any change in the terms of a
Transfer. Any change in the terms of a Transfer prior to closing shall cause it
to be deemed a new Transfer, revoking any approval previously given by
Franchisor and conferring upon Franchisor a new right to approve such Transfer,
which shall be deemed to commence on the day on which Franchisor receives
written notice of such changes in terms.
12.9 In connection with any request for Franchisor's approval of a
proposed Transfer pursuant to this Section 12, the parties to the proposed
Transfer shall pay Franchisor a nonaccountable fee to defray the actual cost of
review and the administrative and professional expenses related to the proposed
Transfer and the preparation and execution of documents and agreements, up to a
maximum of two thousand five hundred dollars ($2,500).
13. CONFIDENTIALITY; RESTRICTIONS
13.1 Franchisee and its Principal Shareholders acknowledge that over the
term of this Agreement they are to receive proprietary information which
Franchisor has developed over time at great expense, including, but not limited
to, information regarding the System, methods of site selection, marketing and
public relations methods, product analysis and selection, and service methods
and skills relating to the development and operation of restaurants. They
further acknowledge that this information, which includes, but is not
necessarily limited to, that contained in the Manuals, is not generally known in
the industry and is beyond their own present skills and experience, and that to
develop it themselves would be expensive, time consuming and difficult.
Franchisee and its Principal Shareholders further acknowledge that the
Franchisor's information provides a competitive advantage and will be valuable
to them in the development of their business, and that gaining access to it is
therefore a primary reason why they are entering into this Agreement.
Accordingly, Franchisee and its Principal Shareholders agree that Franchisor's
information, as described above, which may or may not be "trade secrets" under
prevailing judicial interpretations or statutes, is private and valuable, and
constitutes trade secrets belonging to Franchisor. Accordingly, in consideration
of Franchisor's confidential disclosure to them of these trade secrets,
Franchisee and Principal Shareholders agree as follows (subject to the
provisions of the Development Agreement and any other franchise agreement
between Franchisor and Franchisee):
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(a) During the term of this Agreement, neither Franchisee nor any
Principal Shareholder, for so long as such Principal Shareholder owns an
Interest in Franchisee, may, without the prior written consent of
Franchisor, directly or indirectly engage in, or acquire any financial or
beneficial interest (including any interest in corporations,
partnerships, trusts, unincorporated associations or joint ventures) in,
advise, help, guarantee loans or make loans to, any restaurant business
whose menu or method of operation is similar to that employed by
restaurant units within the System which is either (i) located in the
Territory, as defined in the Development Agreement, (ii) located in the
Area of Dominant Influence (as defined and established from time to time
by Arbitron Ratings Company) of any restaurant developed pursuant to the
Development Agreement, (iii) located within a five (5) mile radius of any
restaurant unit within the System, or (iv) determined by Franchisor,
exercising reasonable good faith judgment, to be a direct competitor of
the System.
(b) Neither Franchisee, for two (2) years following the
termination of this Agreement, nor any Principal Shareholder, for two (2)
years following the termination of all of his or her Interest in
Franchisee or the termination of this Agreement, whichever occurs first,
may directly or indirectly engage in, or acquire any financial or
beneficial interest (including any interest in corporations,
partnerships, trusts, unincorporated associations or joint ventures) in,
advise, help, guarantee loans or make loans to, any restaurant business
whose menu or method of operation is similar to that employed by
restaurant units within the System which is located either (i) in the
Territory, as defined in the Development Agreement, (ii) in the Area of
Dominant Influence (as defined and established from time to time by
Arbitron Ratings Company) of any restaurant developed pursuant to the
Development Agreement, (iii) within a five (5) mile radius of any
restaurant unit within the System, or (iv) within any area for which an
active, currently binding development agreement has been granted by
Franchisor to another franchisee as of the date of the termination.
(c) Neither Franchisee nor any Shareholder shall at any time (i)
appropriate or use the trade secrets incorporated in the System, or any
portion thereof, in any restaurant business which is not within the
System, (ii) disclose or reveal any portion of the System to any person,
other than to Franchisee's Restaurant employees as an incident of their
training, (iii) acquire any right to use any name, mark or other
intellectual property right which is or may be granted by this Agreement,
except in connection with the operation of the Restaurant, or (iv)
communicate, divulge or use for the benefit of any other person or entity
any confidential information, knowledge or know-how concerning the
methods of development or operation of a restaurant utilizing the System,
which may be communicated by Franchisor in connection with the franchise
granted hereunder.
13.2 Franchisee and Principal Shareholders agree that the provisions of
this Section 13 are and have been a primary inducement to Franchisor to enter
into this Agreement, and that in the event of breach thereof Franchisor would be
irreparably injured and would be without adequate remedy at law. Therefore, in
the event of a breach, or a threatened or attempted breach, of any of such
provisions Franchisor shall be entitled, in addition to any other remedies which
it may have hereunder or at law or in equity (including the right to terminate
this Agreement), to a preliminary and/or permanent injunction and a decree for
specific performance of the terms hereof without the necessity of showing actual
or threatened damage, and without being required to furnish a bond or other
security.
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13.3 The restrictions contained in Subsection 13.1(a) and (b) above shall
not apply to ownership of less than two percent (2%) of the shares of a company
whose shares are listed and traded on a national securities exchange if such
shares are owned for investment only, and are not owned by an officer, director,
employee, or consultant of such publicly traded company.
13.4 If any court or other tribunal having jurisdiction to determine the
validity or enforceability of this Section 13 determines that it would be
invalid or unenforceable as written, then the provisions hereof shall be deemed
to be modified or limited to such extent or in such manner as necessary for such
provisions to be valid and enforceable to the greatest extent possible.
13.5 Franchisee shall require the General Manager, the Kitchen Manager
and each of its Restaurant managers to execute a confidentiality agreement in
the form attached hereto as Appendix C. Franchisee shall be responsible for
compliance of its employees with the agreements identified in this Subsection.
14. INSPECTIONS
14.1 Franchisor shall have the right at any time, and from time to time,
to have its representatives enter the Restaurant premises without notice for the
purpose of inspecting the condition thereof and the operation of the Restaurant
in order to determine whether Franchisee is in compliance with the standards,
specifications, requirements and instructions contained in this Agreement and in
the Manuals, and for any other reasonable purpose connected with the operation
of the Restaurant.
14.2 Without limiting the generality of Subsection 14.1, a representative
of Franchisor shall be present in the Restaurant to consult with Franchisee or
its General Manager once each calendar quarter and, at least semi-annually, a
representative shall conduct an inspection/ consultation at the Restaurant
(which may be conducted with or without notice). During such inspection,
Franchisor's representative will inspect the condition of the Restaurant and
observe procedures and operations at the Restaurant. Also during the
inspection/consultation, Franchisor's representative will meet with the General
Manager and such other Restaurant employees as Franchisor's representative may
designate, for the purpose of evaluating the condition and operation of the
Restaurant and seeking to maintain or achieve compliance with the standards,
specifications, requirements and instructions contained in this Agreement and in
the Manuals.
14.3 Without limiting the generality of Subsection 14.1, Franchisor's
representatives shall have the right at all times during normal business hours
to confer with Restaurant employees and customers, and to inspect Franchisee's
books, records and tax returns, or such portions thereof as pertain to the
operation of the Restaurant. All such books, records and tax returns shall be
kept and maintained at the principal executive offices of Franchisee or such
other place as may be agreed upon by the parties in writing. If any inspection
reveals that the gross sales reported in any report or statement are less than
the actual gross sales ascertained by such inspection, then the Franchisee shall
immediately pay Franchisor the additional amount of fees owing by reason of the
understatement of gross sales previously reported, together with interest as
provided in Subsection 9.2. In the event that any report or statement
understates gross sales by more than three percent (3%) of the actual gross
sales ascertained by Franchisor's inspection, Franchisee shall, in addition to
making the payment provided for in the immediately preceding sentence, pay and
reimburse Franchisor for any and all expenses incurred in connection with its
inspection, including, but not limited to, reasonable accounting and legal fees.
Such payments shall be without prejudice to any other rights or remedies which
Franchisor may have under this Agreement or otherwise. If any inspection reveals
that the gross sales reported in any report or statement are greater than the
actual gross sales ascertained by such inspection, and that Franchisee thereby
has made an overpayment of fees, the amount of the overpayment (without
interest) shall be offset against future fees owing by Franchisee to Franchisor.
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14.4 Franchisee shall maintain an accurate stock register. In the event
that the beneficial ownership of Franchisee's stock differs in any respect from
record ownership, Franchisee also shall maintain a list of the names, addresses
and interests of all beneficial owners of its stock. Franchisee shall produce
its stock register, and any list of beneficial owners certified by the
corporation's secretary to be correct, at its principal executive offices upon
ten (10) days prior written request by Franchisor. Franchisor's representatives
shall have the right to examine the stock register and any list of beneficial
owners, and to reproduce all or any part thereof. Further, upon ten (10) days
written notice, Franchisor may request a copy of the list of stockholders and
owners of beneficial interests to be forwarded to it at Franchisor's principal
office.
15. RELATIONSHIP OF PARTIES AND INDEMNIFICATION
15.1 Franchisee is not, and shall not represent or hold itself out as, an
agent, legal representative, joint venturer, partner, employee or servant of
Franchisor for any purpose whatsoever and, where permitted by law to do so,
shall file a business certificate to such effect with the proper recording
authorities. Franchisee is an independent contractor and is not authorized to
make any contract, agreement, warranty or representation on behalf of
Franchisor, or to create any obligation, express or implied, on behalf of
Franchisor. Franchisee agrees that Franchisor does not have any fiduciary
obligation to Franchisee. Franchisee shall not use the name Applebee's
Neighborhood Grill & Bar (other than in connection with the operation of the
Restaurant), or Applebee's International, Inc., or any similar words as part of
or in association with any trade name of any business entity which is, directly
or indirectly, associated with Franchisee.
15.2 Franchisee shall indemnify and hold harmless Franchisor and its
officers, directors, employees, agents, affiliates, successors and assigns from
and against (a) any and all claims based upon, arising out of, or in any way
related to the operation or condition of any part of the Restaurant or
Restaurant premises, the conduct of business thereat, the ownership or
possession of real or personal property, and any negligent act, misfeasance or
nonfeasance by Franchisee or any of its agents, contractors, servants, employees
or licensees (including, without limitation, the performance by Franchisee of
any act required by, or performed pursuant to, any provision of this Agreement),
and (b) any and all fees (including reasonable attorneys' fees), costs and other
expenses incurred by or on behalf of Franchisor in the investigation of or
defense against any and all such claims.
15.3 In addition to, and not in limitation of, any subsection hereof,
Franchisee specifically covenants, represents and warrants that Franchisee is in
compliance in all material respects with all federal, state, municipal and local
laws governing the generation, use or disposal of hazardous waste or hazardous
materials, and any and all other laws designed to protect the environment and
that:
(a) There have been no past, and there are no current or
anticipated, releases or substantial threats of a release of a hazardous
substance, pollutant or contaminant from or onto the Restaurant or real
property upon which the Restaurant is located and referred to in this
Agreement ("Premises") which is or may be subject to regulation under the
Comprehensive Environmental Response, Compensation and Liability Act (42
U.S.C. 9601, et seq.) or other laws designed to protect the environment;
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(b) The Premises have not previously been used, are not now being
used and are not contemplated to be used for the treatment, collection,
storage or disposal of any refuse or objectionable waste so as to require
a permit or approval from the Environmental Protection Agency pursuant to
the Hazardous and Solid Waste Amendments of 1984 (96 Stat. 3221) or any
other federal, state, county or municipal agency charged with the
responsibility of protecting the environment;
(c) The Premises have not previously been used, are not now being
used, and are not contemplated to be used, for the generation,
transportation, treatment, storage or disposal of any hazardous waste;
(d) No portion of the Premises are located on or over a "sanitary
landfill" or an "open dump" within the meaning of the Resource
Conservation and Recovery Act (42 U.S.C. 6941 et seq.), as amended by the
Hazardous and Solid Waste Amendments of 1984 (96 Stat. 3221);
(e) No asbestos fibers or materials or polychlorinated biphenyls
(PCB's) are on or in the Premises;
(f) There have not been, nor are there presently pending, any
federal or state enforcement actions against the Premises, nor is the
Franchisee or its Landlord, if any, subject to any outstanding
administrative orders which require ongoing compliance efforts in
connection with compliance with laws designed to protect the environment;
(g) The Franchisee has not entered into any consent decrees or
administrative consent orders with any agency charged with the
responsibility of protecting the environment;
(h) There have not been any notices of violation sent to the
Franchisee under the Citizens Suit Provisions of any statute;
(i) The Franchisee has not received any request for information,
notice or demand letters for administrative inquiries from any
governmental entity with regard to its environmental practices;
(j) The Franchisee has maintained all required records under each
and every applicable environmental statute and is in full compliance with
all environmental permits issued to it by any governmental or regulatory
agency;
(k) The Franchisee maintains all insurance policies as may be
required by any applicable law governing the environment;
(l) The Franchisee has no reason to believe that any operation of
equipment on or at the Premises may be the cause of a future spill or
release of a pollutant;
(m) The Franchisee has not in the past, nor is it presently,
generating, transporting or disposing of a hazardous substance as defined
by Section 9601(12) of CERCLA; and
(n) The Franchisor shall have the right, at Franchisee's expense,
to require an environmental audit of the Premises from a company or
companies satisfactory to Franchisor.
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16. INSURANCE
16.1 Franchisee shall procure before the commencement of Restaurant
operations, and shall maintain in full force and effect during the entire term
of this Agreement, at its sole cost and expense, an insurance policy or policies
protecting Franchisee and Franchisor and their respective officers, directors
and employees against any and all claims, loss, liability or expense whatsoever,
arising out of or in connection with the condition, operation, use or occupancy
of the Restaurant or Restaurant Premises. Franchisee shall procure workers'
compensation coverage for each of its employees no later than the first date of
such employee's employment. Franchisee shall also insure the Restaurant building
and other improvements, equipment, signs, interior and exterior decor items,
furnishings and fixtures, and any additions thereto, in accordance with standard
fire and extended coverage insurance policies then in effect for similar
businesses. Franchisor shall be named as an additional insured in all such
policies, workers' compensation excepted, and the certificate or certificates of
insurance shall state that the policy or policies shall not be subject to
cancellation or alteration without at least thirty (30) days prior written
notice to Franchisor. Such policy or policies shall be written by a responsible
insurance company or companies satisfactory to Franchisor, and shall be in such
form and contain such limits of liability as shall be satisfactory to Franchisor
from time to time. In any event, such policy or policies shall include at least
the following:
KIND OF INSURANCE MINIMUM LIMITS OF LIABILITY
Workers' Compensation Statutory
Employer's Liability $500,000 bodily injury by accident
$500,000 bodily injury by disease
General Public Liability, $1,000,000 each person,
including Product Liability, $1,000,000 each incident
Injury and Liquor Liability $2,000,000 aggregate
Fire and Extended Coverage Full replacement value
Umbrella Liability Insurance $10,000,000
Franchisee shall, upon request, exhibit certificates of such insurance to
Franchisor. The insurance afforded by the policy or policies respecting public
liability shall not be limited in any way by reason of any insurance which may
be maintained by Franchisor.
16.2 Within sixty (60) days after the execution of this Agreement, but in
no event later than the day before the Restaurant opens for business, Franchisee
shall submit to Franchisor for approval certificates of insurance showing
compliance with the requirements of Subsection 16.1. Notwithstanding the
foregoing, Franchisee shall submit to Franchisor for approval certificates of
insurance showing compliance with the worker's compensation requirements set
forth in Subsection 16.1 prior to the training of any Franchisee employee at a
Restaurant operated by Franchisor. Maintenance of such insurance and the
performance by Franchisee of its obligations under this Section 16 shall not
relieve Franchisee of liability under the indemnity provisions of this
Agreement, and shall not limit such liability.
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16.3 Should Franchisee, for any reason, fail to procure or maintain the
insurance coverage required by this Section, then Franchisor shall have the
right and authority to immediately procure such insurance coverage and to charge
the cost thereof to Franchisee, which amounts shall be paid immediately upon
notice and shall be subject to charges for late payments in the manner set forth
in Subsection 9.2.
16.4 No later than thirty (30) days following Franchisee's receipt of
same, Franchisee shall submit to Franchisor a copy of any written report
relating to the condition of the Restaurant premises, or any aspect thereof,
prepared by an insurer or prospective insurer or by a representative of a
federal, state or local government agency, provided that if any such report
contains comments or information which could materially and detrimentally affect
the Restaurant, such report shall be submitted to Franchisor within three (3)
days following Franchisee's receipt thereof.
17. DEBTS AND TAXES
Franchisee shall pay or cause to be paid promptly when due all
obligations incurred, directly or indirectly, in connection with the Restaurant
and its operation, including, without limitation, (a) all taxes and assessments
that may be assessed against the Restaurant land, building and other
improvements, equipment, fixtures, signs, furnishings, and other property; (b)
all liens and encumbrances of every kind and character created or placed upon or
against any of said property, and; (c) all accounts and other indebtedness of
every kind and character incurred by or on behalf of Franchisee in the conduct
of the Restaurant business. Notwithstanding the foregoing, Franchisee will not
be in default of this Agreement as a result of a non-payment or non-performance
of the foregoing so long as it disputes said debt or lien and is, in the sole
opinion of Franchisor, validly and in good faith pursuing a resolution of said
claim or lien and has reserved sufficient sums to pay the debt/claim as is
agreed to by Franchisor.
18. TRADE NAMES, SERVICE MARKS AND TRADEMARKS
18.1 Franchisee acknowledges the sole and exclusive right of Franchisor
(except for rights granted under existing and future franchise agreements) to
use Franchisor's trade names, service marks and trademarks in connection with
the products and services to which they are or may be applied by Franchisor, and
represents, warrants and agrees that Franchisee shall not, either during the
term of this Agreement, or after the expiration or other termination hereof,
directly or indirectly, contest or aid in contesting the validity, ownership or
use thereof by Franchisor, or take any action whatsoever in derogation of the
rights claimed herein by Franchisor.
18.2 The right granted to Franchisee under this Agreement to use
Franchisor's trade names, service marks and trademarks is nonexclusive, and
Franchisor, in its sole discretion, subject only to the limitations contained in
Subsection 1.4 of this Agreement, has the right to grant other rights in, to and
under those names and marks in addition to those rights already granted, and to
develop and grant rights in other names and marks on any such terms and
conditions as Franchisor deems appropriate. The rights granted under this
Agreement do not include any right or authority of any kind whatsoever to
pre-package or sell pre-packaged food products, under any of Franchisor's names
or marks, or any menu items approved for sale at the Restaurant, whether at the
Restaurant or at any other location.
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18.3 Franchisee understands and acknowledges and agrees that Franchisor
has the unrestricted right, subject only to the limitations contained in
Subsection 1.4 of this Agreement, to engage, directly and indirectly, through
its employees, representatives, licenses, assigns, agents, affiliates,
subsidiaries and others, at wholesale, retail, and otherwise, in (a) the
production, distribution and sale of products under the names and marks licensed
hereunder or other names or marks, (b) the use, in connection with such
production, distribution and sale, of any and all trademarks, trade names,
service marks, logos, insignia, slogans, emblems, symbols, designs and other
identifying characteristics as may be developed or used, from time to time, by
Franchisor with respect to the System or otherwise, and (c) the production,
distribution and sale of products through another restaurant or restaurants
which do not utilize the System or the Applebee's Neighborhood Grill & Bar
service mark and which otherwise compete or might compete with the Restaurant.
18.4 Nothing contained in this Agreement shall be construed to vest in
Franchisee any right, title or interest in or to any of Franchisor's names or
marks, the goodwill now or hereafter associated therewith, or any right in the
design of any restaurant building or premises, or the decor or trade-dress of
the Restaurant, other than the rights and license expressly granted herein for
the term hereof. Any and all goodwill associated with or identified by any of
Franchisor's names or marks shall inure directly and exclusively to the benefit
of Franchisor, including, without limitation, any goodwill resulting from
operation and promotion of the Restaurant, provided that this Subsection shall
not be construed to entitle Franchisor to receive any portion of the
consideration paid to Franchisee and/or any Principal Shareholder as a result of
a Transfer of an Interest pursuant to Section 12 hereof.
18.5 Franchisee shall adopt and use Franchisor's names and marks only in
a manner expressly approved by Franchisor, and shall not use any of Franchisor's
names or marks in connection with any statement or material which may, in the
judgment of Franchisor, be in bad taste or inconsistent with Franchisor's public
image, or tend to bring disparagement, ridicule or scorn upon Franchisor, any of
Franchisor's names or marks, or the goodwill associated therewith. Franchisee
shall not adopt, use or register as its corporate name (by filling a certificate
or articles of incorporation or otherwise) any trade or business name, style or
design which includes, or is similar to, any of Franchisor's trademarks, service
marks, trade names, logos, insignia, slogans, emblems, symbols, designs or other
identifying characteristics.
18.6 Franchisor shall have the right, at any time and from time to time,
upon notice to Franchisee, to make additions to, deletions from and changes in
any of Franchisor's names or marks, or all of them, all of which additions,
deletions and changes shall be made in good faith, on a reasonable basis and
with a view toward the overall best interests of the System. Franchisor will use
its best efforts to protect and preserve the integrity and validity of
Franchisor's names and marks, including the taking of actions deemed by
Franchisor to be appropriate in the event of any apparent infringement of any of
Franchisor's names or marks.
18.7 (a) Franchisor shall hold Franchisee harmless from any liability or
expense (but excluding consequential damages) resulting from infringement of a
third party's service mark, trade name or trademark by Franchisor's service
mark, Applebee's Neighborhood Grill & Bar, or by any other service mark,
trademark or trade name of Franchisor which Franchisor shall designate as part
of the System. This hold-harmless indemnity shall not apply to any unauthorized
use by Franchisee of any such service mark, trade name or trademark.
(b) Franchisee agrees to notify Franchisor promptly in writing of
any suit or claim for infringement which is within the scope of the
hold-harmless indemnity set forth in this Subsection 18.7. Subject to the terms
and conditions of this Subsection 18.7, Franchisor shall have the sole right to
defend or settle any such suit or claim of infringement at Franchisor's expense.
Franchisee, at Franchisee's expense, shall have the right to be represented by
counsel. Franchisor shall, however, retain control of any negotiations with
respect to such claim or of any litigation involving such suit. Franchisee
agrees to cooperate with Franchisor and to assist Franchisor whenever reasonably
requested by Franchisor, at Franchisor's expense, in the defense of any such
infringement suit or claim. Franchisee shall not enter into any settlement of
any such claim or suit or conduct any settlement negotiations relative thereto
without the prior approval of Franchisor in writing and, if Franchisee does so,
the hold-harmless indemnity set forth in this Subsection 18.7 shall be deemed to
have been waived and released in all respects.
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18.8 Franchisor represents that it is the sole owner of the service mark
Applebee's Neighborhood Grill & Bar. In the event that Franchisee is precluded
from operating the Restaurant because Franchisor determines that a third person
has acquired rights under the law of any state in such mark, which so precludes
Franchisee, Franchisor agrees (a) to repay to Franchisee the initial franchise
fee paid by Franchisee with respect to the Restaurant, and (b) to assist
Franchisee, at Franchisee's request, in locating an alternative site for the
Restaurant.
19. EXPIRATION AND TERMINATION;
OPTION TO PURCHASE RESTAURANT; ATTORNEYS' FEES
19.1 Franchisor shall have the right to terminate this Agreement
immediately upon written notice to Franchisee stating the reason for such
termination:
(a) in the event of any breach or default of any of the
provisions of Subsection 9.1, Sections 12 or 13, Subsection 14.1 or
Section 23;
(b) if a petition in bankruptcy, an arrangement for the benefit
of creditors, or a petition for reorganization is filed by Franchisee, or
is filed against Franchisee and not dismissed within ninety (90) days
from the filing thereof, or if Franchisee shall make any assignment for
the benefit of creditors, or if a receiver or trustee is appointed for
Franchisee and is not dismissed within ninety (90) days of such
appointment;
(c) if Franchisee ceases to operate the Restaurant without the
prior written consent of Franchisor or loses its right to possession of
the Restaurant premises; provided however, this provision will not apply
if Franchisee ceases to operate the Restaurant or loses its right to
possession of the Restaurant premises by reason of Force Majeure and
Franchisee complies with the requirements of Section 24 of this
Agreement;
(d) if Franchisor discovers that Franchisee has made any material
misrepresentation or omitted any material fact in the information which
was furnished to Franchisor in connection with this Agreement;
(e) if any part of this Agreement relating to the payment of fees
to Franchisor, or the preservation of any of Franchisor's trade names,
service marks, trademarks, trade secrets or secret formulae licensed or
disclosed hereunder is, for any reason, declared invalid or
unenforceable; or
(f) if Franchisee or any Principal Shareholder is convicted of or
pleads nolo contendere to a felony or any crime involving moral
turpitude.
If Franchisee defaults in the performance or observance of any of its
other obligations hereunder, and such default continues for a period of sixty
(60) days after written notice to Franchisee specifying such default, Franchisor
shall have the right to terminate this Agreement upon thirty (30) days written
notice to Franchisee. If Franchisee defaults in the performance or observance of
the same obligation two (2) or more times within a twelve (12) month period,
Franchisor shall have the right to terminate this Agreement immediately upon
commission of the second act of default, upon thirty (30) days written notice to
Franchisee stating the reason for such termination, without allowance for any
curative period.
The foregoing provisions of this Subsection 19.1 are subject to the
provisions of any local statutes or regulations which limit the grounds upon
which Franchisor may terminate this Agreement, or which require that Franchisor
give Franchisee additional prior written notice of termination and opportunity
to cure any default.
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In the event of termination by reason of Franchisee's failure after a
good faith effort to obtain the necessary state or local liquor licenses (as
required in Section 23), Franchisor shall refund to Franchisee, without
interest, the franchise fee payment referred to in Subsection 9.1(a), less any
expenses incurred and damages sustained by Franchisor in connection with its
performance hereunder prior to the date of such termination. Franchisor shall
also repay the initial franchise fee in the circumstances described in
Subsection 18.8 hereof. In the event of termination for any other reason,
Franchisor shall have no obligation to refund any amount previously paid by
Franchisee, and Franchisee shall be obligated to promptly pay all sums which are
then due Franchisor.
19.2 Upon the termination of this Agreement by Franchisor, Franchisee may
not remove any property from the Restaurant premises for thirty (30) days after
the termination. Upon the expiration or earlier termination of this Agreement
for any reason:
(a) Franchisee shall immediately discontinue its use of the
System and its use of Franchisor's trade names, service marks,
trademarks, logos, insignia, slogans, emblems, symbols, designs and other
identifying characteristics;
(b) if the Restaurant premises are owned by Franchisee or leased
from a third party, Franchisee shall, upon demand by Franchisor, remove
(at Franchisee's expense) Franchisor's trade names, service marks,
trademarks, logos, insignia, slogans, sign facia, emblems, symbols,
designs and other identifying characteristics from all premises, and
paint all premises and other improvements maintained pursuant to this
Agreement a design and color which is basically different from
Franchisor's authorized design and color. If Franchisee shall fail to
make or cause to be made any such removal or repainting within thirty
(30) days after written notice, then Franchisor shall have the right to
enter upon the Restaurant premises, without being deemed guilty of
trespass or any tort (or Franchisee shall cause Franchisor to be
permitted on the premises as necessary), and make or cause to be made
such removal, alterations and repainting at the reasonable expense of
Franchisee, which expense Franchisee shall pay to Franchisor immediately
upon demand; and
(c) Franchisee shall not thereafter use any trademark, trade
name, service mark, logo, insignia, slogan, emblem, symbol, design or
other identifying characteristic that is in any way associated with
Franchisor or similar to those associated with Franchisor, or use any
food or proprietary menu item, recipe or method of food preparation or
operate or do business under any name or in any manner that might tend to
give the public the impression that Franchisee is or was a licensee or
franchisee of, or otherwise associated with, Franchisor.
19.3 In the event that any party to this Agreement initiates any legal
proceeding to construe or enforce any of the terms, conditions and/or provisions
of this Agreement, including, but not limited to, its termination provisions and
its provisions requiring Franchisee to make certain payments to Franchisor
incident to the operation of the Restaurant, or to obtain damages or other
relief to which any such party may be entitled by virtue of this Agreement, the
prevailing party or parties shall be paid its reasonable attorneys' fees and
expenses by the other party or parties. If Franchisee fails to comply with a
written notice of termination sent by Franchisor and a court later upholds such
termination of this Agreement, Franchisee's operation of the Restaurant, from
and after the date of termination stated in such notice, shall constitute
willful trademark infringement and unfair competition by Franchisee, and
Franchisee shall be liable to Franchisor for damages resulting from such
infringement in addition to any fees paid or payable hereunder, including,
without limitation, any profits which Franchisee derived from such
post-termination operation of the Restaurant.
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19.4 (a) With respect to Restaurant premises owned by Franchisee, in the
event of termination of this Agreement, Franchisor shall have, for thirty (30)
days after the termination is effective, an option, exercisable upon written
notice to Franchisee within such thirty (30) day period, to elect to purchase
the Restaurant premises from Franchisee for the fair market value of the land
and buildings, furnishings and equipment located therein.
(b) In addition to the option described above, Franchisor shall
have an option, exercisable upon written notice to Franchisee, to elect to
purchase the Restaurant premises from Franchisee upon expiration of this
Agreement for the fair market value of the land and buildings, furnishings, and
equipment located therein subject to Franchisee's option to operate the
Restaurant for an additional term under Subsection 1.3 hereof. If Franchisee
does not notify Franchisor, pursuant to Subsection 1.3 hereof, of a desire to
operate the Restaurant for an additional term, then Franchisor shall provide the
written notice described in the preceding sentence within thirty (30) days after
the latest date by which Franchisee is required by Subsection 1.3 to advise
Franchisor of such a desire; if Franchisee does notify Franchisor of a desire to
operate the Restaurant for an additional term and Franchisor determines that
Franchisee is not eligible to do so, Franchisor shall provide the written notice
described in the preceding sentence within thirty (30) days of its written
notice to Franchisee that Franchisee is not eligible to operate the Restaurant
for such additional term. With respect to the option to purchase upon expiration
of this Agreement, this option shall not apply if prior to thirty (30) days
before said expiration, Franchisee enters into an agreement to sell such
Restaurant premises to a third party upon the expiration of the Franchise
Agreement, provided that Franchisee's agreement with the purchaser includes a
covenant by the purchaser, which is expressly enforceable by Franchisor as a
third-party beneficiary thereof, pursuant to which the purchaser agrees that,
for a period of twelve (12) months after the expiration of this Agreement, the
purchaser shall not use such premises for the operation of a restaurant business
whose menu or method of operation is similar to that employed by restaurant
units within the System.
(c) If Franchisee receives approval to operate the Restaurant
premises for an additional term in accordance with Subsection 1.3 hereof,
Franchisee will be required to execute the then-existing form of franchise
agreement, which shall contain an option to obtain assignment of Franchisee's
lease with a third party and/or to purchase certain property, exercisable by
Franchisor upon termination thereof, and an option to purchase the Restaurant
premises, exercisable by Franchisor upon expiration of the additional term
(subject to any then-existing rights to renew of Franchisee). Such options shall
be substantially similar to the provisions described in this Subsection 19.4.
(d) If the parties cannot agree on the purchase price or other
terms of purchase within thirty (30) days following Franchisor's exercise of its
option pursuant to Subsection 19.4(a) and (b), the price or disputed terms of
purchase shall be determined by three (3) appraisers, with each party selecting
one (1) appraiser and the two (2) appraisers, so chosen, selecting the third
appraiser. In the event of such an appraisal, each party shall bear its own
legal and other costs and shall split equally the appraisal fees. The
appraisers' determination of the price and other disputed terms of purchase
shall be final and binding.
(e) If Franchisor elects to exercise its option to purchase upon
termination of this Agreement, the purchase price shall be paid within thirty
(30) days of the determination of the purchase price and other terms of
purchase. If Franchisor elects to exercise its option to purchase upon
expiration of this Agreement, the purchase price shall be paid within thirty
(30) days of the later of (a) the determination of the purchase price and other
terms of purchase, or (b) expiration of this Agreement. If the Franchisor does
not elect to exercise its option to purchase the Restaurant premises, the
Franchisee may sell such premises to a third party, provided that Franchisee's
agreement with the purchaser includes a covenant by the purchaser, which is
expressly enforceable by Franchisor as a third-party beneficiary thereof,
pursuant to which the purchaser agrees that it shall not use such premises for
the operation of a restaurant business whose menu or method of operation is
similar to that employed by restaurant units within the System for a period of
twelve (12) months after the termination or expiration of this Agreement.
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(f) If the Restaurant premises are leased by Franchisee from a
third party, such lease must allow Franchisee to assign the lease to Franchisor.
Upon termination of this Agreement for any reason, Franchisor has the right,
exercisable upon written notice to Franchisee within thirty (30) days after
termination is effective, to require Franchisee to assign all Franchisee's
rights and obligations under the lease to Franchisor and to immediately
surrender possession of the premises, including all fixtures and leasehold
improvements, to Franchisor. The lessor may not impose any assignment fee or
other similar charge on Franchisor in connection with such assignment. If
Franchisor exercises that right, it has an additional right, to be exercised
within thirty (30) days after taking possession of the premises, to purchase all
of Franchisee's equipment, signs, decor items, furnishings, supplies and other
products and materials at their then-fair market value. If the parties cannot
agree on the price, the price will be determined in the manner set forth in
connection with Franchisee-owned Restaurant premises. If Franchisor elects not
to purchase the items mentioned above, Franchisee shall, at Franchisee's own
expense and under Franchisor's supervision remove those items from the premises
within ten (10) days after such final election, or ten (10) days after
expiration of the option period, whichever is earlier. If Franchisee fails to
remove all such property from the premises within such period, Franchisor shall
be entitled to do so, or to authorize a third party to do so, all at
Franchisee's expense.
19.5 In addition to the provisions contained in Subsection 19.4 hereof:
(a) With respect to Restaurant premises owned by Franchisee, in
the event of termination of this Agreement and Franchisor's exercise of
its option to purchase the Restaurant premises pursuant to Subsection
19.4(a) hereof, Franchisee shall have, for ten (10) days after its
receipt of written notice of Franchisor's election to purchase, an
option, exercisable upon written notice to Franchisor, to lease said
premises to Franchisor, pursuant to a lease which provides for rental at
a rate not in excess of six percent (6%) of gross sales and triple net
terms. Said lease shall provide for a lease term of at least ten (10)
years with two (2) five (5)-year options to renew, and for primary annual
rent of not in excess of the number derived from multiplying six percent
(6%) times the gross sales reported by Franchisee to Franchisor for which
Franchisee has paid a royalty fee for the next preceding calendar year
times eighty percent (80%).
(b) In addition to the option described above, Franchisee shall
have an option, exercisable upon written notice to Franchisor, to elect
to lease the Restaurant premises to Franchisor upon expiration of this
Agreement and Franchisor's exercise of its option to purchase the
Restaurant premises pursuant to Subsection 19.4(b) hereof, pursuant to
the same terms set forth in Subsection 19.5(a) above, subject to
Franchisee's option to operate the Restaurant for an additional term
under Subsection 1.3 hereof. If (i) Franchisee does not notify
Franchisor, pursuant to Subsection 1.3 hereof, of a desire to operate the
Restaurant for an additional term, or (ii) Franchisee does notify
Franchisor of a desire to operate the Restaurant for an additional term
and Franchisor determines that Franchisee is not eligible to do so, and
Franchisor exercises its option to purchase the Restaurant premises, then
Franchisee shall provide the written notice described in the preceding
sentence within ten (10) days after its receipt of written notice of
Franchisor's election to purchase. With respect to the option to lease
upon expiration of this Agreement, this option shall not apply if prior
to thirty (30) days before said expiration, Franchisee enters into an
agreement to sell such Restaurant premises to a third party upon the
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expiration of the Franchise Agreement, provided that Franchisee's
agreement with the purchaser includes a covenant by the purchaser, which
is expressly enforceable by Franchisor as a third-party beneficiary
thereof, pursuant to which the purchaser agrees, at Franchisor's option,
either to lease said premises to Franchisor upon the terms set forth in
Subsection 19.5(a), or that for a period of twelve (12) months after the
expiration of this Agreement, the purchaser shall not use such premises
for the operation of a restaurant business whose menu or method of
operation is similar to that employed by restaurant units within the
System.
(c) If Franchisee receives approval to operate the Restaurant
premises for an additional term in accordance with Subsection 1.3 hereof,
Franchisee will be required to execute the then-existing form of
franchise agreement which shall contain an option to obtain assignment of
Franchisee's lease with a third party and/or to lease certain property,
exercisable by Franchisor upon termination thereof, and an option to
lease the Restaurant premises, exercisable by Franchisor upon expiration
of the additional term (subject to any then-existing rights to renew of
Franchisee). Such options shall be substantially similar to the
provisions described in this Subsection 19.5.
20. NO WAIVER OF DEFAULT
20.1 The waiver by any party to this Agreement of any breach or default,
or series of breaches or defaults, of any term, covenant or condition herein, or
of any same or similar term, covenant or condition contained in any other
agreement between Franchisor and any franchisee, shall not be deemed a waiver of
any subsequent or continuing breach or default of the same or any other term,
covenant or condition contained in this Agreement, or in any other agreement
between Franchisor and any franchisee.
20.2 All rights and remedies of the parties hereto shall be cumulative
and not alternative, in addition to and not exclusive of any other rights or
remedies which are provided for herein or which may be available at law or in
equity in case of any breach, failure or default or threatened breach, failure
or default of any term, provision or condition of this Agreement. The rights and
remedies of the parties hereto shall be continuing and shall not be exhausted by
any one (1) or more uses thereof, and may be exercised at any time or from time
to time as often as may be expedient; and any option or election to enforce any
such right or remedy may be exercised or taken at any time and from time to
time. The expiration or earlier termination of this Agreement shall not
discharge or release Franchisee or any Principal Shareholder from any liability
or obligation then accrued, or any liability or obligation continuing beyond, or
arising out of, the expiration or earlier termination of the Agreement.
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21. CONSTRUCTION, SEVERABILITY,
GOVERNING LAW AND JURISDICTION
21.1 If any part of this Agreement shall for any reason be declared
invalid, unenforceable or impaired in any way, the validity of the remaining
portions shall remain in full force and effect as if the Agreement had been
executed with such invalid portion eliminated, and it is hereby declared the
intention of the parties that they would have executed the remaining portion of
this Agreement without including therein any such portions which might be
declared invalid; provided however, that in the event any part hereof relating
to the payment of fees to Franchisor, or the preservation of any of Franchisor's
trade names, service marks, trademarks, trade secrets or secret formulae
licensed or disclosed hereunder is for any reason declared invalid or
unenforceable, then Franchisor shall have the right to terminate this Agreement
upon written notice to Franchisee. If any clause or provision herein would be
deemed invalid or unenforceable as written, it shall be deemed modified or
limited to such extent or in such manner as may be necessary to render the
clause or provision valid and enforceable to the greatest extent possible in
light of the interest of the parties expressed in that clause or provision,
subject to the provisions of the preceding sentence.
21.2 FRANCHISEE AND PRINCIPAL SHAREHOLDERS ACKNOWLEDGE THAT FRANCHISOR
MAY GRANT NUMEROUS FRANCHISES THROUGHOUT THE UNITED STATES ON TERMS AND
CONDITIONS SIMILAR TO THOSE SET FORTH IN THIS AGREEMENT, AND THAT IT IS OF
MUTUAL BENEFIT TO FRANCHISEE AND PRINCIPAL SHAREHOLDERS AND TO FRANCHISOR THAT
THESE TERMS AND CONDITIONS BE UNIFORMLY INTERPRETED. THEREFORE, THE PARTIES
AGREE THAT TO THE EXTENT THAT THE LAW OF THE STATE OF KANSAS DOES NOT CONFLICT
WITH LOCAL FRANCHISE STATUTES, RULES AND REGULATIONS, KANSAS LAW SHALL APPLY TO
THE CONSTRUCTION OF THIS AGREEMENT AND SHALL GOVERN ALL QUESTIONS WHICH ARISE
WITH REFERENCE HERETO; PROVIDED HOWEVER, THAT PROVISIONS OF KANSAS LAW REGARDING
CONFLICTS OF LAW SHALL NOT APPLY HERETO.
21.3 THE PARTIES AGREE THAT ANY CLAIM, CONTROVERSY OR DISPUTE ARISING OUT
OF OR RELATING TO THIS AGREEMENT OR THE PERFORMANCE THEREOF WHICH CANNOT BE
AMICABLY SETTLED, EXCEPT AS OTHERWISE PROVIDED HEREIN, MAY, AT THE OPTION OF THE
CLAIMANT, BE RESOLVED BY A PROCEEDING IN A COURT IN JOHNSON COUNTY, KANSAS, AND
FRANCHISEE AND PRINCIPAL SHAREHOLDERS EACH IRREVOCABLY ACCEPT THE JURISDICTION
OF THE COURTS OF THE STATE OF KANSAS AND THE FEDERAL COURTS SERVING JOHNSON
COUNTY, KANSAS FOR SUCH CLAIMS, CONTROVERSIES OR DISPUTES.
The parties agree that service of process in any proceeding arising out
of or relating to this Agreement or the performance thereof may be made as to
Franchisee and any Principal Shareholder by serving a person of suitable age and
discretion (such as the person in charge of the office) at the address of
Franchisee specified in this Agreement and as to Franchisor by serving the
president or a vice-president of Franchisor at the address of Franchisor or by
serving Franchisor's registered agent.
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22. INTERFERENCE WITH EMPLOYMENT RELATIONS
During the term of this Agreement, neither Franchisor nor Franchisee
shall employ or seek to employ in a managerial position (i.e., in a position at
a pay grade at or above that of Assistant Restaurant Manager or Kitchen
Manager), directly or indirectly, any person who is at the time or was at any
time during the prior six (6) months employed by the other party or any of its
subsidiaries or affiliates, or by any franchisee in the System. This section
shall not be violated if, at the time Franchisor or Franchisee employs or seeks
to employ such person, such former employer has given its written consent.
Notwithstanding any other provision of this Agreement, the parties hereto
acknowledge that if this Section is violated, such former employer shall be
entitled to liquidated damages equal to three (3) times the annual salary of the
employee involved, plus reimbursement of all costs and attorneys' fees incurred.
In addition to the rights granted to the parties hereto, the parties acknowledge
and agree that any franchisee from which an employee was hired by either party
to this Agreement in violation of the terms of this Section shall be deemed to
be a third-party beneficiary of this provision and may sue and recover against
the offending party the liquidated damages herein set forth; provided however,
the failure by Franchisee to enforce this Section shall not be deemed to be a
violation of this Section.
23. LIQUOR LICENSE
The grant of the rights which are the subject of this Agreement is
expressly conditioned upon the ability of the Franchisee to obtain and maintain
any and all required state and/or local licenses permitting the sale of liquor
by the drink on the Restaurant premises, and Franchisee agrees to use its best
efforts to obtain such licenses. In the event Franchisee fails, after a good
faith effort, to obtain any and all such required liquor licenses prior to the
date on which the Restaurant is otherwise ready to open for business, then, at
the option of the Franchisor, this Agreement may be terminated forthwith by
Franchisor upon written notice to Franchisee, in which event, Franchisor shall
refund to Franchisee, without interest, the initial franchise fee payment
referred to in Subsection 9.1, less any expenses incurred and damages sustained
by Franchisor in connection with its performance hereunder prior to the date of
such termination. After obtaining the necessary state or local liquor licenses,
Franchisee shall thereafter comply with all applicable laws and regulations
relating to the sale of liquor on the Restaurant premises. If, during any twelve
(12) month period during the term of this Agreement, Franchisee is prohibited
for any reason from selling liquor on the Restaurant premises for more than
thirty (30) days because of a violation or violations of state or local liquor
laws, then at the option of Franchisor this Agreement may be terminated
forthwith by Franchisor upon written notice to Franchisee.
24. FORCE MAJEURE
24.1 As used in this Agreement, the term "Force Majeure" shall mean any
act of God, strike, lock-out or other industrial disturbance, war (declared or
undeclared), riot, epidemic, fire or other catastrophe, act of any government
and any other similar cause not within the control of the party affected
thereby.
34
<PAGE>
24.2 If the performance of any obligation by any party under this
Agreement is prevented or delayed by reason of Force Majeure, which cannot be
overcome by use of normal commercial measures, the parties shall be relieved of
their respective obligations to the extent the parties are respectively
necessarily prevented or delayed in such performance during the period of such
Force Majeure. The party whose performance is affected by an event of Force
Majeure shall give prompt notice of such Force Majeure event to the other party
by facsimile, telephone or telegram (in each case to be confirmed in writing),
setting forth the nature thereof and an estimate as to its duration, and shall
be liable for failure to give such timely notice only to the extent of damage
actually caused.
24.3 Notwithstanding the provisions of this Section 24, if, as a result
of an event of Force Majeure (including condemnation proceedings), the
Franchisee ceases to operate the Restaurant or loses the right to possession of
the Restaurant premises, Franchisee shall apply within thirty (30) days after
the event of Force Majeure for Franchisor's approval to relocate and/or
reconstruct the Restaurant. If relocation is necessary, Franchisor agrees to use
its reasonable efforts to assist Franchisee in locating an alternative site in
the same general area where Franchisee can operate a Restaurant within the
System for the balance of the term of the Franchise Agreement. If Franchisor so
assists Franchisee, Franchisee shall reimburse Franchisor for its reasonable
out-of-pocket expenses incurred as a result thereof. (This provision shall not
be construed to prevent Franchisee from receiving the full amount of any
condemnation award of damages relating to the closing of the Restaurant;
provided however, that if Franchisor or an affiliate is the lessor of the
Restaurant premises, Franchisee specifically waives and releases any claim it
may have for the value of any building, fixtures and other improvements on the
premises, whether or not installed or paid for by the Franchisee, and Franchisee
agrees to subordinate any claim it may have to Franchisor's claim for such
improvements.) Selection of an alternative location will be subject to the site
approval procedures set forth in Section 5 of the Development Agreement. Once
Franchisee has obtained Franchisor's approval to relocate and/or reconstruct the
Restaurant, Franchisee must diligently pursue relocation and/or reconstruction
until the Restaurant is reopened for business.
25. MISCELLANEOUS
25.1 All notices and other communications required or permitted to be
given hereunder shall be deemed given when delivered in person, by overnight
courier service, facsimile transmission or mailed by registered or certified
mail addressed to the recipient at the address set forth below, unless that
party shall have given written notice of change of address to the sending party,
in which event the new address so specified shall be used.
FRANCHISOR: Applebee's International, Inc.
4551 W. 107th Street, Suite 100
Overland Park, Kansas 66207
Attention: President
FRANCHISEE:
35
<PAGE>
PRINCIPAL SHAREHOLDERS:
25.2 All terms used in this Agreement, regardless of the number and
gender in which they are used, shall be deemed and construed to include any
other number, singular or plural, and any other gender, masculine, feminine or
neuter, as the context or sense of this Agreement may require, the same as if
such words had been written in this Agreement themselves. The headings inserted
in this Agreement are for reference purposes only and shall not affect the
construction of this Agreement or limit the generality of any of its provisions.
The term "business day" means any day other than Saturday, Sunday, or the
following national holidays: New Year's Day, Martin Luther King Day,
Washington's Birthday, Memorial Day, Independence Day, Labor Day, Columbus Day,
Veterans' Day, Thanksgiving and Christmas.
25.3 Franchisee shall, at its own cost and expense, promptly comply with
all laws, ordinances, orders, rules, regulations and requirements of all
federal, state and municipal governments and appropriate departments,
commissions, boards and offices thereof. Without limiting the generality of the
foregoing, Franchisee shall abide by all applicable rules and regulations of any
public health department.
25.4 In the event that Franchisor has leased the Restaurant premises to
Franchisee pursuant to a written lease agreement (the "Lease"), the Lease is
hereby incorporated in this Agreement by reference, and any failure on the part
of Franchisee (Lessee therein) to perform, fulfill or observe any of the
covenants, conditions or agreements contained in the Lease shall constitute a
material breach of this Agreement. It is expressly understood, acknowledged and
agreed by Franchisee that any termination of the Lease shall result in automatic
and immediate termination of this Agreement without additional notice to
Franchisee.
25.5 This Agreement and the documents referred to herein constitute the
entire agreement between the parties, superseding and canceling any and all
prior and contemporaneous agreements, understandings, representations,
inducements and statements, oral or written, of the parties in connection with
the subject matter hereof. FRANCHISEE EXPRESSLY ACKNOWLEDGES THAT IT HAS ENTERED
INTO THIS FRANCHISE AGREEMENT AS A RESULT OF ITS OWN INDEPENDENT INVESTIGATION
AND AFTER CONSULTATION WITH ITS OWN ATTORNEY, AND NOT AS A RESULT OF ANY
REPRESENTATIONS OF FRANCHISOR, ITS AGENTS, OFFICERS OR EMPLOYEES, EXCEPT AS
CONTAINED HEREIN AND IN FRANCHISOR'S FRANCHISE OFFERING CIRCULAR, HERETOFORE
MADE AVAILABLE TO FRANCHISEE.
25.6 Except as expressly authorized herein, no amendment or modification
of this Agreement shall be binding unless executed in writing both by Franchisor
and by Franchisee and Principal Shareholders.
36
<PAGE>
26. ACKNOWLEDGMENTS
Franchisee and Principal Shareholders acknowledge that:
(a) Franchisee has received a copy of this Agreement and has had
an opportunity to consult with its attorney with respect thereto at least
five (5) business days prior to execution of this Agreement;
(b) No representation has been made by Franchisor as to the
future profitability of the Restaurant;
(c) Prior to the execution of this Agreement, Franchisee has had
ample opportunity to contact Franchisor's existing franchisees, if any,
and to investigate all statements made by Franchisor relating to the
System;
(d) This Agreement establishes the right to construct and operate
a Restaurant only at the location specified in Subsection 1.1 hereof; and
(e) Franchisor is the sole owner of the service marks identified
in this Agreement, and of the goodwill associated therewith, and
Franchisee acquires no right, title or interest in those names and marks
other than the right to use them only in the manner and to the extent
prescribed and approved by Franchisor.
IN WITNESS WHEREOF, the undersigned have entered into this Agreement as of the
date first above written.
FRANCHISOR:
ATTEST: APPLEBEE'S INTERNATIONAL, INC.
By:
- -------------------------------------------
Name: Name:
-------------------------------------
Title: Title:
------------------------------------
FRANCHISEE:
ATTEST:
By:
- -------------------------------------------
Name: Name:
-------------------------------------
Title: Title:
------------------------------------
37
<PAGE>
PRINCIPAL SHAREHOLDER(S):
Witness Name:
Witness Name:
Witness Name:
38
<PAGE>
EXHIBIT 1 TO FRANCHISE AGREEMENT
ROYALTY FEE
The monthly royalty fee to be paid by Franchisee shall be four percent
(4%) of each calendar month's gross sales; provided however, on and after
January 1, 2003, Franchisor may, in its sole discretion, increase the monthly
royalty fee to five percent (5%) of each calendar month's gross sales.
39
<PAGE>
APPENDIX A TO FRANCHISE AGREEMENT
STATEMENT OF OWNERSHIP INTERESTS
Percent of Issued
and Outstanding
Shareholder Shares of Franchisee
40
<PAGE>
APPENDIX B TO FRANCHISE AGREEMENT
REVIEW AND CONSENT WITH RESPECT TO TRANSFERS
In determining whether to grant or to withhold consent to a proposed
Transfer, Franchisor shall consider all of the facts and circumstances which it
views as relevant in the particular instance, including, but not limited to, any
of the following: (i) work experience and aptitude of Proposed New Owner and/or
proposed new management (a proposed transferee of a Principal Shareholder's
Interest and/or a proposed transferee of this Agreement is referred to as
"Proposed New Owner"); (ii) financial background and condition of Proposed New
Owner, and actual and pro forma financial condition of Franchisee; (iii)
character and reputation of Proposed New Owner; (iv) conflicting interests of
Proposed New Owner; (v) the terms and conditions of Proposed New Owner's rights,
if the proposed Transfer is a pledge or hypothecation; (vi) the adequacy of
Franchisee's operation of any Restaurant and compliance with the System and this
Agreement; and (vii) such other criteria and conditions as Franchisor shall then
consider relevant in the case of an application for a new franchise to operate a
restaurant unit within the System by an applicant that is not then currently
doing so. Franchisor's consent also may be conditioned upon execution by
Proposed New Owner of an agreement whereby Proposed New Owner assumes full,
unconditional, joint and several liability for, and agrees to perform from the
date of such Transfer, all obligations, covenants and agreements contained
herein to the same extent as if it had been an original party to this Agreement
and may also require Franchisee and Principal Shareholders, including the
proposed Transferor(s), to execute a general release which releases Franchisor
from any claims they may have had or then have against Franchisor. In the event
Proposed New Owner is a partnership (including, but not limited to, a limited
partnership), Proposed New Owner will also be required to execute an addendum to
the Agreement which amends the references to Franchisee and its Principal
Shareholders to include the partnership approved by Franchisor and Proposed New
Owner's general partner(s) and the principal shareholders of the general
partner(s), if the general partner(s) is a corporation. This addendum will
contain a provision including in the definition of "Transfer" the withdrawal,
removal or voluntary/involuntary dissolution (if applicable) of the general
partner(s) or the substitution or addition of a new general partner. Franchisee
or Principal Shareholders, as the case may be, shall provide Franchisor with
such information as it may require in connection with a request for approval of
a proposed Transfer.
41
<PAGE>
APPENDIX C TO FRANCHISE AGREEMENT
CONFIDENTIALITY AGREEMENT
THIS AGREEMENT is made this ________ day of ________________,
19_______, by and between _______________________________________, a
_____________ corporation ("Developer"), and __________________________, an
individual employed by Developer ("Employee").
WITNESSETH:
WHEREAS, APPLEBEE'S INTERNATIONAL, INC. ("Applebee's") is the owner of
all rights in and to a unique system for the development and operation of
restaurants (the "System"), which includes proprietary rights in valuable trade
names, service marks and trademarks, including the service mark Applebee's
Neighborhood Grill & Bar and variations of such mark, designs and color schemes
for restaurant premises, signs, equipment, procedures and formulae for preparing
food and beverage products, specifications for certain food and beverage
products, inventory methods, operating methods, financial control concepts, a
training facility and teaching techniques;
WHEREAS, Developer is the owner of the exclusive right to develop
restaurants franchised by Applebee's which utilize the System ("Restaurants")
for the period and in the territory described in the Development Agreement
between Applebee's and Developer (the "Development Agreement"); and
WHEREAS, Developer acknowledges that Applebee's information as
described above was developed over time at great expense, is not generally known
in the industry and is beyond Developer's own present skills and experience, and
that to develop it itself would be expensive, time-consuming and difficult, that
it provides a competitive advantage and will be valuable to Developer in the
development of its business, and that gaining access to it was therefore a
primary reason why Developer entered into the Development Agreement; and
WHEREAS, in consideration of Applebee's confidential disclosure to
Developer of these trade secrets, Developer has agreed to be obligated by the
terms of Development Agreement to execute, with each employee of Developer who
will have supervisory authority over the development or operation of more than
one Restaurant in the Territory described in the Development Agreement, a
written agreement protecting Applebee's trade secrets and confidential
information entrusted to Employee;
NOW, THEREFORE, in consideration of the mutual covenants and
obligations contained herein, the parties agree as follows:
(1) The parties acknowledge and agree that Employee is or will be
employed in a supervisory or managerial capacity and in such capacity will have
access to information and materials which constitute trade secrets and
confidential and proprietary information. The parties further acknowledge and
agree that any actual or potential direct or indirect competitor of Applebee's,
or of any of its franchisees, shall not have access to such trade secrets and
confidential information.
42
<PAGE>
(2) The parties acknowledge and agree that the System includes trade
secrets and confidential information which Applebee's has revealed to Developer
in confidence, and that protection of said trade secrets and confidential
information and protection of Applebee's against unfair competition from others
who enjoy or who have had access to said trade secrets and confidential
information are essential for the maintenance of goodwill and special value of
the System.
(3) Employee agrees that he or she shall not at any time (i)
appropriate or use the trade secrets incorporated in the System, or any portion
thereof, for use in any business which is not within the System; (ii) disclose
or reveal any portion of the System to any person, other than to Developer's
employees as an incident of their training; (iii) acquire any right to use, or
to license or franchise the use of any name, mark or other intellectual property
right which is or may be granted by any franchise agreement between Applebee's
and Developer; or (iv) communicate, divulge or use for the benefit of any other
person or entity any confidential information, knowledge or know-how concerning
the methods of development or operation of a Restaurant which may be
communicated to Employee or of which Employee may be apprised by virtue of
Employee's employment by Developer. Employee shall divulge such confidential
information only to such of Developer's other employees as must have access to
that information in order to operate a Restaurant or to develop a prospective
site for a Restaurant. Any and information, knowledge and know-how, including,
without limitation, drawings, materials, equipment, specifications, techniques
and other data, which Applebee's designates as confidential, shall be deemed
confidential for purposes of this Agreement.
(4) Employee further acknowledges and agrees that the Franchise
Operations Manual and any other materials or manuals provided or made available
to Developer by Applebee's (collectively, the "Manuals"), described in Section 5
of the applicable franchise agreement between Applebee's and Developer, are
loaned by Applebee's to Developer for limited purposes only, remain the property
of Applebee's, and may not be reproduced, in whole or in part, without the
written consent of Applebee's.
(5) Employee agrees to surrender to Developer or to Applebee's each and
every copy of the Manuals and any other information or material in his or her
possession or control upon request, upon termination of employment or upon
completion of the use for which said Manuals or other information or material
may have been furnished to Employee.
(6) The parties agree that in the event of a breach of this Agreement,
Applebee's would be irreparably injured and would be without an adequate remedy
at law. Therefore, in the event of a breach or a threatened or attempted breach
of any of the provisions hereof, Applebee's shall be entitled to enforce the
provisions of this Agreement as a third-party beneficiary hereof and shall be
entitled, in addition to any other remedies which it may have hereunder at law
or in equity (including the right to terminate the Development Agreement), to a
temporary and/or permanent injunction and a decree for specific performance of
the terms hereof without the necessity of showing actual or threatened damage,
and without being required to furnish a bond or other security.
43
<PAGE>
(7) If any court or other tribunal having jurisdiction to determine the
validity or enforceability of this Agreement determines that it would be invalid
or unenforceable as written, the provisions hereof shall be deemed to be
modified or limited to such extent or in such manner necessary for such
provisions to be valid and enforceable to the greatest extent possible.
IN WITNESS WHEREOF, the undersigned have entered into this Agreement as
of the date first above written.
DEVELOPER EMPLOYEE
By: By:
--------------------------------------------------
Name: Name:
------------------------------------------------
Title:
44
APPLEBEE'S INTERNATIONAL, INC.
DEVELOPMENT AND FRANCHISE AGREEMENT SCHEDULE
AS OF DECEMBER 26, 1999
<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>
AB ENTERPRISES Joseph K. Wong CA, OR
804 E. Cypress Anna Wong
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
(FA.A5) 02-09-99 3197C Highway 97
Bend, 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 East Dale 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>
(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)
- --------------------------- ------------------------ ---------------------- ------------------------------ ---------------
(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
(FA.A14) 05-31-99 550 Academy Drive
Bessemer, AL
(FA.A15) 06-28-99 4711 Norell Drive
Trussville, AL
APPLE ALASKA, LLC William P. Pargeter (DA.A) 02-9-99 Anchorage, AL 3/12/31/01
P.O. Box 190337 Barbara L. Pargeter
Anchorage, AK 99519 James E. Larson (FA.A1) 10-25-99 4331 Credit Union Drive
Robin A. Figueroa Anchorage, AK
Dale S. Martens
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
(FA.A2) 05-17-99 900 Churchman Road
Christiana, 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
2
<PAGE>
(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
(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
3
<PAGE>
(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
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
(FA.A4) 06-07-99 1850 Deptford Center Drive
Deptford, NJ 08096
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
4
<PAGE>
(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
(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
(FA.A22) 08-24-99 2033 Crocker Road
Westlake, OH 44145
5
<PAGE>
APPLE Joe S. Thomson AR, LA, OK, TX
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
(FA.A7) 02-23-99 2305 East End Boulevard South
Marshall, TX 75670
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.A1) 05-05-94 8200 Arroyo Circle
Suite 1000 Gilroy, CA
San Jose, CA 95112
(FA.A2) 08-22-95 84 Ranch Drive
Milpitas, CA
(FA.A3) 03-05-96 3900 Sisk Road
Modesto, CA
(FA.A4) 09-21-99 2501 Fulkerth Road
Turlock, CA 95380
APPLE CAPITOL Bruce Frazey (DA.A) 05-03-99 Washington, DC; Hagerstown, MD; 12/12-31-03
GROUP, LLC Jason Kirschner Portion of Salisbury, MD
490 Sawgrass Corp. Pkwy. Andreas Typaldos
Suite 330 Vince Wiley (FA.A1) 05-03-99 14441 Brookfield Tower Dr.
Sunrise, FL 33325 Chantilly, VA
(FA.A2) 05-03-99 12970 Fair Lakes Shopping Ctr.
Fairfax, VA
6
<PAGE>
(FA.A3) 05-03-99 6310 Richmond Highway
Alexandria, VA
(FA.A4) 05-03-99 4100 N.W. Crain Highway
Bowie, MD
(FA.A5) 05-03-99 3610 Crain Highway
Waldorf, MD
(FA.A6) 05-03-99 755 Foxcroft Drive
Martinsburg, WV
(FA.A7) 05-03-99 13850 Noblewood Plaza
Woodbridge, VA
(FA.A8) 05-03-99 45480 Miramar Way
California, MD
(FA.A9) 05-03-99 933 Edwards Ferry Road
Leesburg, VA
(FA.A10) 05-03-99 1050 Wayne Avenue
Chambersburg, PA
(FA.A11) 05-03-99 1481 Wesel Boulevard
Hagerstown, MD
(FA.A12) 05-03-99 5613 Spectrum Drive
Frederick, MD
(FA.A13) 05-03-99 7272 Baltimore Avenue
College Park, MD
(FA.A14) 05-03-99 2851 Plank Road
Fredericksburg, VA
(FA.A15) 05-03-99 1000 Largo Center Drive
Largo, MD
(FA.A16) 05-03-99 127 E. Broad Street
Falls Church, VA
(FA.A17) 05-03-99 21048 Frederick Road
Germantown, MD
(FA.A18) 05-03-99 45979 Denizen Plaza
Sterling, VA
(FA.A19) 05-03-99 791 N. Dual Highway
Seaford, DE
(FA.A20) 05-03-99 105 West Lee Highway
Warrenton, VA
7
<PAGE>
(FA.A21) 05-03-99 555 N. Solomons Island Road
Prince Frederick, MD
(FA.A22) 05-03-99 1270 Ocean Outlet
Rehoboth Beach, DE
(FA.A23) 05-03-99 3447 Donnell Drive
Forestville, MD
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 2325 Ottawa Street
Cy-1502 Nicosia CYPRUS Port Coquitlam, British Columbia
APPLE CORE Myron Thompson (DA.A) 08-20-98 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
(FA.A6) 12-26-99 6 26th Street West
Williston, 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.
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
8
<PAGE>
(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
(FA.A17) 08-23-99 1355 Associates Drive
Dubuque, IA
9
<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
(FA.A2) 10-11-99 Ave. Eugenio Garza Sada #3680-A/
Col. Contry
Monterrey, Nuevo Leon
Mexico
APPLE EAST, INC. Edwin F. Scheibel CT
89 Taunton Hill Road Cynthia H. Scheibel
Newtown, CT 06470
(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
10
<PAGE>
(FA.A9) 03-02-99 200 Airport Plaza
Farmingdale, NY
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
11
<PAGE>
(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
(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
12
<PAGE>
(FA.A34) 02-02-99 4690 N. Patterson Avenue
Winston-Salem, NC
(FA.A35) 07-20-99 5184 Highway 70 West
Morehead, NC
(FA.A36) 11-09-99 1260 N. Brightleaf Blvd.
Smithfield, 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
Closed: 11-14-99 Hilton Head, SC
(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
13
<PAGE>
(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
(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
14
<PAGE>
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 Gulf Street
Kuwait City, Kuwait
APPLE NORTE, Eduardo Orozco (DA.A) 05-26-98 Chihuahua, 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 Avenida Tecnologico 1585
Colonia Partido Doblado
Cd. Juarez, Chihuahua
Mexico
APPLE NORTH, INC. Martin Hittinger
99 New Unionville Rd. Eddie G. Hittinger
Wallkill, NY 12589
(FA.A1) 03-11-92 Wappinger Plaza
1271 Route 9
Wappinger Falls, NY
(FA.A2) 08-10-93 194 Colonie Center Mall
Albany, NY
(FA.A3) 11-21-95 18 Park Avenue
Clifton Park, NY
APPLE NORTHWEST Don Flynn (DA.A) 03-03-99 WA 15/12-31-03
LLC * 219 9th Avenue N.
Suite 200
Seattle, WA 98109 (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
(FA.A5) 07-18-95 17790 Southcenter Parkway
Tukwila, WA
15
<PAGE>
(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
* Acquired 8 restaurants from Apple American Limited Partnership of Washington
03/03/99.
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
Closed: 03-31-99 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
16
<PAGE>
(FA.A12) 02-05-96 185 Cherokee Place
Cartersville, GA
(FA.A13) 06-17-96 971 Bullsboro Drive
Newnan, GA
(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
(FA.A18) 02-08-99 1647 North Expressway
Griffin, GA
(FA.A19) 07-05-99 815 Industrial Boulevard
McDonough, GA
APPLE RESTAURANTS Benoit Wesley The Netherlands, Belgium,
EUROPE, B.V. Roger L. Cohen Luxembourg
One Main Plaza
Suite 1000
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
17
<PAGE>
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
(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
18
<PAGE>
(FA.A17) 07-14-98 2621 E. Center St.
Warsaw, IN
(FA.A18) 10-20-98 1807 Reith Blvd.
Goshen, IN
(FA.A19) 08-03-99 346 Hauenstein Road
Huntington, IN
(FA.A20) 10-26-99 3703 Portage Road
South Bend, IN
(FA.A21) 12-07-99 2225 N. Oak Road
Plymouth, IN
(FA.A22) 12-14-99 6211 US Hwy. 6
Portage, IN
(DA.B) 09-09-92 FL 8/12-31-00
Amended: 09-30-93
10-05-94
03-28-95
(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
(FA.A2) 09-11-99 50-D 5250 22nd Street
Red Deer, Alberta Canada
APPLE SEED II Steven L. Millard Manitoba, Canada
INVESTMENTS LTD. Tad A. Fugate
160 Mount Laurel Cres.
Winnipeg, MB R2J 4C4
CANADA
19
<PAGE>
(FA.A1) 08-23-99 2065 Pembina Highway
Winnipeg, Manitoba
CANADA
(FA.A2) 08-23-99 1150 Grant Avenue
Winnipeg, Manitoba
CANADA
(FA.A3) 08-23-99 1598 Regent Avenue
Winnipeg, Manitoba
CANADA
(FA.A4) 08-23-99 1204 18th Street
Brandon, Manitoba
CANADA
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
(FA.A7) 01-06-99 17900 San Ramon Valley Road
San Ramon, CA
(FA.A8) 03-01-99 39139 Farwell Drive
Fremont, 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 (FA.A1) 10-25-94 Staten Island Mall
2655 Richmond Avenue
Staten Island, NY
20
<PAGE>
(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
(FA.A8) 04-13-99 221 Route 59
Airmont, NY
(FA.A9) 07-27-99 35 Lecount Place
New Rochelle, NY
(FA.A10) 12-07-99 2276 Bartow Avenue
Bronx, 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
21
<PAGE>
(FA.A4) 11-18-98 880 S. Barrington Rd.
Steamwood, IL
(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
22
<PAGE>
(FA.A22) 11-18-98 6656 W. Grand Ave.
Chicago, IL
(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
(FA.A10) 02-09-99 600 N. Tyndall Parkway
Callaway, FL
(FA.A11) 03-07-99 10071 Middle Beach Road
Panama City Beach, FL
(FA.A12) 12-14-99 421 East By-Pass NE
Moultrie, GA
(DA.B) 01-15-92 TX 6/12-31-98
Amended: 06-24-93
23
<PAGE>
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
(FA.B4) 03-18-97 7880 Interstate Hwy. 35 N.
San Antonio, TX
(FA.B5) 11-24-97 8224 Fredericksburg
San Antonio, TX
(FA.B6) 08-26-99 1511 S.W. Military Drive
San Antonio, TX
APPLEROCKET Cees Toor Kingdom of Sweden
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
B.T. WOODLIPP, INC. Larry Brown PA, WV
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 Scott Towne Center
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
24
<PAGE>
(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
BRUNSWICK, GMbH Warren Hardie Berlin, Sachsen and
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
25
<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
CASUAL RESTAURANT Franklin W. Carson FL
CONCEPTS, INC.
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
26
<PAGE>
(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.
Closed: 08-23-99 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
(FA.B11) 07-20-98 4651 Commercial Way
Spring Hill, FL
(FA.B12) 10-19-98 15090 N. Dale Mabry Hwy.
Carrollwood, FL
(FA.B13) 02-15-99 201 Cypress Garden Boulevard
Winter Haven, FL
(FA.B14) 04-19-99 10606 Sheldon Road
Tampa, FL
(FA.B15) 12-13-99 4000 Park Boulevard
Pinellas Park, 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
Closed: 11-04-98 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
27
<PAGE>
(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
(FA.A11) 11-09-99 2024 Arden Way
Sacramento, CA
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
(FA.A8) 08-02-99 3951 North 27th
Lincoln, NE
28
<PAGE>
(FA.A9) 12-14-99 721 Diers Avenue
Grand Island, NE
(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
(FA.C2) 10-22-96 3209 Grand Avenue
Laramie, WY
(FA.C3) 08-16-99 359 Miracle
Evansville, WY
Delaware Valley Rose, L.P. Harry T. Rose (DA.A) 12-13-99 Philadelphia, PA 14/8-31-04
826 Newton Yardley Road
Suite 200 (FA.A1) 12-13-99 Catasaqua Road & Route 22
Newtown, PA 18940 Bethlehem, PA
(FA.A2) 12-13-99 470 West Lincoln Highway
Exton, PA
(FA.A3) 12-13-99 9142 Roosevelt Blvd.
Philadelphia, PA
(FA.A4) 12-13-99 1905 Ridgewood
Wyomissing, PA
29
<PAGE>
(FA.A5) 12-13-99 1063 East Street Road
Upper Southampton, PA
(FA.A6) 12-13-99 555 S. Trooper Road
Norristown, PA
(FA.A7) 12-13-99 323 Old York Road
Jenkintown, PA
(FA.A8) 12-13-99 2700 DeKalb Pike
East Norriton, PA
(FA.A9) 12-13-99 145 Northwest End Boulevard
Quakertown, PA
(FA.A10) 12-13-99 7650 City Line
Philadelphia, PA
(FA.A11) 12-13-99 2333 W. Main Street
Lansdale, PA
(FA.A12) 12-13-99 833 N. State Street
Pottstown, PA
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 Anton Van Vincent
Bridget Chisholm
(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
30
<PAGE>
(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
(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
(FA.A10) 02-16-99 Ocean County Mall
1201 Hooper Avenue
Tom's River, NJ
31
<PAGE>
(FA.A11) 04-14-99 375 Route 3 East
Clifton, NJ
(FA.A12) 06-29-99 Manalapan Epicentre
Route 9 & Symmes Road
Manalapan, NJ
(FA.A13) 08-27-99 640 Promenade Blvd.
Bridgewater, NJ
(FA.A14) 11-16-99 1045 Rt. 1 South
Edison, 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
(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
32
<PAGE>
(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
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
33
<PAGE>
(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
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
34
<PAGE>
(FA.A10) 08-03-98 1991 Main Street
Sarasota, FL
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
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
35
<PAGE>
(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
LA, MS
(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
(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
36
<PAGE>
(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 1202 N. Washington
Omaha, NE
(FA.A11) 10-20-98 601 Manchester Lane
Newton, KS
(FA.A12) 01-19-99 3000 Dial Drive
Council Bluffs, IA
(FA.A13) 04-20-99 436 S. Andover Road
Andover, KS
(FA.A14) 10-12-99 3209 10th Street
Great Bend, 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
(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 NY
4240 Bell Blvd. Michael S. Shaevitz
Suite 303
Bayside, NY 11361 (FA.A1) 04-30-97 213-29 26th Avenue
Bayside, NY
(FA.A2) 03-09-99 61-48 188th Street
Fresh Meadows, NY
37
<PAGE>
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.
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
(FA.A7) 07-19-99 1400 East Hill
Grand Blanc, MI
(FA.A8) 12-20-99 5940 State Street
Saginaw, 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
38
<PAGE>
NEIGHBORHOOD Theresa Johnson (DA.A) 02-19-99 WV; Portion of PA 3/12-31-01
HOSPITALITY, LLC L. Martin Johnson
625 Memorial Drive
Suite 301
Hazard, KY 41701 (FA.A1) 02-19-99 19 Mall Road
Barboursville, WV
(FA.A2) 02-19-99 389 S. John Scott Avenue
Steubenville, OH
(FA.A3) 02-19-99 3 Dudley Farms Lane
Charleston, WV
(FA.A4) 02-19-99 50655 Valley Frontage Road
St. Clairsville, OH
(FA.A5) 02-19-99 802 Grand Central Avenue
Vienna, WV
(FA.A6) 02-19-99 100 Hylton Lane
Beckley, WV
(FA.A7) 02-19-99 60 Liberty Square
Hurricane, WV
(FA.A8) 02-19-99 123 Meadowfield Lane
Princeton, WV
(FA.A9) 02-19-99 1135 Third Avenue
Huntington, WV
(FA.A10) 02-19-99 531 Emily Drive
Clarksburg, WV
(FA.A11) 02-19-99 482 Pike Street
Marietta, OH
(FA.A12) 02-19-99 202 Kanawha Mall
Charleston, WV
(FA.A13) 02-19-99 505 Armco Road
Ashland, KY
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
39
<PAGE>
(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
(FA.A10) 05-18-99 608 N. Air Depot
Midwest City, OK
(FA.A11) 11-23-99 6020 SW 3rd Street
Oklahoma City, OK
(DA.B) 10-29-96 AR, MO 6/12-31-99
(FA.B1) 09-13-93 4333 Warden Road
North Little Rock, AR
(FA.B2) 11-09-94 4426 Central Avenue
Hot Springs, AR
(FA.B3) 06-19-95 12110 Chenal Parkway
Little Rock, AR
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
40
<PAGE>
(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
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
41
<PAGE>
(FA.A5) 06-29-98 1322 W. Walnut Avenue
Dalton, GA
(FA.A6) 06-29-98 2342 Shallowford Village Rd.
Chattanooga, TN
(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
(FA.B1) 06-29-98 900 E. County Line Rd.
Ridgeland, MS
(FA.B2) 06-29-98 3703 Hardy Street
Hattiesburg, MS
(FA.B3) 06-29-98 885 Barnes Crossing Rd.
Tupelo, MS
(FA.B4) 06-29-98 2332 Highway 45 North
Columbus, MS
42
<PAGE>
(FA.B5) 06-29-98 814 Highway 12 West
Starkville, MS
(FA.B6) 06-29-98 9319 Highway 49
Gulfport, MS
(FA.B7) 06-29-98 2389 Lakeland Dr.
Flowood, MS
(FA.B8) 06-29-98 106 Highway 11 & 80
Meridian, MS
(FA.B9) 06-29-98 2019 Highway 15 North
Laurel, MS
(FA.B10) 12-20-99 111 Clinton Center Drive
Clinton, MS
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
43
<PAGE>
(FA.A1) 10-02-89 3301 Tamarac Drive
Denver, CO
(FA.A2) 10-23-90 5250 S. Wadsworth Boulevard
Littleton, 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
44
<PAGE>
(FA.A18) 12-08-97 213 E. 29th
Loveland, CO
(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 7625 Goddard Street
Colorado Springs, CO
(FA.B2) 04-03-95 3428 N. Elizabeth
Pueblo, CO
(FA.B3) 07-10-95 3708 East 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 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 Sandrio
Laredo, TX
(FA.A4) 07-25-95 2960 Boca Chica Boulevard
Brownsville, TX
(FA.A5) 10-23-95 1519 W. Harrison
Harlingen, TX
45
<PAGE>
TX
(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
46
<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
(FA.A19) 02-08-99 106 Roberson Mill Road
Milledgeville, GA
(FA.A20) 05-31-99 2090 Highway 280/431
Phenix City, AL
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) 11-17-98 7760 Eastpoint Mall
Essex, MD
(FA.A7) 12-07-99 2450 Broad Avenue
Timonium, MD
(FA.A8) 12-20-99 8335 Benson Drive
Columbia, MD
(DA.B) 02-01-96 PA 3/12-31-98
Amended: 03-01-97
47
<PAGE>
(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
(FA.B4) 10-27-98 74 Viewmont Mall
Route 6; Scranton-Carbondale Hwy.
Dickson City, PA
(FA.B5) 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) 05-20-98 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
48
<PAGE>
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
SPECIALTY Abe Gustin (DA.A) 02-10-99 FL 9/12-31-02
RESTAURANT Gregory Gustin
DEVELOPMENT, L.L.C. Guy Taylor (FA.A1) 02-11-99 1545 Palm Bay Road
1001 North Lake Destiny Rd. Melbourne, FL
Suite 100
Maitland, FL 32751
(FA.A2) 02-11-99 100 Sykes Creek Parkway N.
Merritt Island, FL
(FA.A3) 02-11-99 12103 Collegiate Way
Orlando, FL
(FA.A4) 02-11-99 2599 Enterprise Road
Orange City, FL
(FA.A5) 02-11-99 3001 W. Eaugallie Blvd.
Melbourne, FL
(FA.A6) 02-11-99 150 Williamson Blvd.
Ormond Beach, FL
(FA.A7) 02-11-99 1390 Dunlawton Avenue
Port Orange, FL
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
49
<PAGE>
(FA.A4) 08-26-97 3980 Thousand Oaks Blvd.
Thousand Oaks, CA
(FA.A5) 12-17-99 109 Cochran Street
Simi Valley, CA
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
(FA.A3) 02-03-98 1205 Union Avenue
Newburg, NY
(FA.A4) 11-10-98 Woodbury Common
#488 Evergreen Court
Central Valley, NY
(FA.A5) 01-12-99 255 Quaker Road
Queensbury, NY
(FA.A6) 03-30-99 600 Troy Road
Rensselaer, 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
50
<PAGE>
(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
Buffalo, 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
(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
(FA.A18) 02-08-99 3908 Vineyard Drive
Dunkirk, NY
(FA.A19) 11-16-99 217 Grant Street
Auburn, NY
TLC EAST, INC. Matthew J. Fairbairn (DA.A) 02-24-98 CT 5/12-31-00
220 Ponte Vedra Park Dr. David A. Stein Amended: 01-15-99
Suite 100
Ponte Vedra Beach, FL 32082 (FA.A1) 09-15-99 2400 Dixwell Avenue
Hamden, CT
(FA.A2) 11-09-99 270 New Britian Avenue
Plainville, CT
(FA.A3) 12-20-99 350 Long Hill Road
Groton, CT
51
<PAGE>
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 8670 Hwy. 98 West
Destin, FL
(FA.A5) 12-06-93 4940 Government Boulevard
Mobile, AL
(FA.A6) 07-10-95 165 E. Nine Mile Road
Pensacola, FL
(FA.A7) 11-15-99 2409 S. McKenzie Street
Farley, AL 36535
(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
(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
52
<PAGE>
(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
(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
(FA.A5) 01-12-99 2430 N. Glenstone
Springfield, MO
(DA.B) 01-29-96 AR, KS, MO, OK 3/12-31-97
53
<PAGE>
(FA.B1) 07-19-94 2825 E. 32nd Street
Joplin, MO
(FA.B2) 06-19-96 528 N. 47th Street
Rogers, AR
(FA.B3) 12-20-99 2802 N. Broadway
Pittsburg, KS
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 Road
Mason, OH
(FA.A8) 05-11-90 2755 Brice Road
Reynoldsburg, OH
(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
54
<PAGE>
(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
(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
55
<PAGE>
(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
(FA.A35) 01-26-99 5980 Meijer Drive
Milford, OH
(FA.A36) 11-16-99 8565 Winton Road
Cincinnati, OH
(FA.A37) 12-20-99 1161 Polaris Parkway
Columbus, 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
56
<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) 12-12-94 10460 N. 90th Street
Scottsdale, AZ
(FA.C10) 05-22-95 2547 N. 44th Street
Phoenix, AZ
(FA.C11) 10-09-95 2 East Camelback
Phoenix, AZ
(FA.C12) 11-20-95 4924 E. Shea Boulevard
Closed: 11-17-97 Phoenix, AZ
(FA.C13) 02-26-96 1881 West Highway 69
Prescott, AZ
(FA.C14) 08-19-96 5880 W. Peoria
Glendale, AZ
(FA.C15) 03-24-97 2230 W. Ina Road
Tucson, AZ
(FA.C16) 04-22-97 909 E. Broadway
Tempe, AZ
(FA.C17) 11-18-97 1245 W. Chandler Blvd.
Chandler, AZ
(FA.C18) 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
57
<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) 09-16-99 Ontario, Canada 14/12-31-03
RESTAURANTS, INC. Michael J. Lewis
46 Dawlish Avenue (FA.A1) 04-14-98 155 Kingston Road
Toronto, Ontario M4N 1H1 East Ajax, Ontario
Canada Canada L1S 7J4
(FA.A2) 03-16-99 355 Hespeler Road
Cambridge, Ontario
Canada N1R6B3
(FA.A3) 09-16-99 5700 Mavis Road
Mississauga, Ontario
Canada L5V2N6
58
<PAGE>
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
(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
(FA.A15) 08-23-99 105 WarBonnet Drive
Moscow, ID
(FA.A16) 10-11-99 2625 Liberty Street N.E.
Salem, OR
59
<PAGE>
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
(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
60
<PAGE>
(FA.A12) 06-29-98 3256 Highway 17 South
Murrells Inlet, SC
(DA.B) 03-29-99 KY 3/12-31-02
(FA.B1) 03-29-99 4535 Outer Loop
Louisville, KY
(FA.B2) 03-29-99 9201 Hurstbourne Lane
Louisville, KY
(FA.B3) 03-29-99 2225 Taylorsville Road
Louisville, KY
(FA.B4) 03-29-99 Hwy. 131 & Greentree Blvd.
Greenville Mall
Clarksville, IN 47130
(FA.B5) 03-29-99 4717 Dixie Highway
Louisville, KY
(FA.B6) 03-29-99 12913 Shelbyville Road
Louisville, KY
(FA.B7) 03-29-99 10600 Dixie Highway
Louisville, KY
(FA.B8) 03-29-99 5000 Shelbyville Road
Louisville, KY
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
61
<PAGE>
(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
(FA.A7) 04-13-98 2715 West City Center Court
West Valley, 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
(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
62
<PAGE>
(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
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
63
<PAGE>
(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
</TABLE>
64
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
<PAGE>
Amendments to
1995 Equity Incentive Plan
Section 4.1 of the Plan shall be amended so that the number of shares
authorized under the Plan is increased to 3,600,000 shares.
Note: The following amendments will be effective for options granted in
1999, so that the first Measurement Year will be 1998 and the first base year
will be 1997.
Section 9 of the Plan shall be amended as follows:
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 would automatically increase if Earnings
Per Share for the Fiscal Year immediately preceding the year in which
the director option is granted (the "Measurement Year") exceeded the
Earnings Per Share for the Fiscal Year immediately preceding the
Measurement Year by more than 15%. The Board of Directors will
determine the formula by which the base grant would increase each year.
In no event shall the number of Director Options granted to each
Nonemployee Director 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.
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9.2.2 Exercise Price. The Exercise Price for the Shares
subject to each Option granted pursuant to this Section 9 shall be 100%
of the Fair Market Value of such Shares on the Grant Date.
9.2.3 Exercisability. Each Option granted pursuant to Section
9.1.1 shall become immediately exercisable on the first anniversary of
the Grant Date. Notwithstanding the preceding, once an optionee ceases
to be a Director, his or her Options which are not exercisable shall
not become exercisable thereafter.
9.2.4 Expiration of Options. Each Option shall terminate upon
the first to occur of the following events:
(a) The expiration of 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.
* * * * *
The definition of "Earnings Per Share" under the Plan shall be amended
to read as follows:
"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 the weighted
average number of Shares outstanding for such Fiscal Year (basic Earnings Per
Share as opposed to diluted Earnings Per Share), rounded to the nearest cent
($0.01). The weighted average number of shares outstanding for any Fiscal Year
will be determined by disregarding any stock repurchases by the Company and the
Net Income or Pro Forma Net Income will be adjusted to reflect the net impact of
any debt service attributable to funds borrowed to effect any stock repurchases.
For these purposes, all funds used to effect stock repurchases will be deemed to
have been borrowed, and at an interest rate equal to the lowest cost of the
Company's then existing borrowed funds."
APPLEBEE'S INTERNATIONAL, INC.
1999 MANAGEMENT AND EXECUTIVE INCENTIVE PLAN
PREAMBLE
This Applebee's International, Inc. Management and Executive Incentive
Plan (the "Plan") is an unfunded bonus and deferred compensation arrangement for
a select group of management or highly compensated personnel, effective as of
January 1, 1999.
ARTICLE I
DEFINITIONS
"Base Salary" means the weighted average base salary for the
Participant for the year in question as approved by the Committee.
"Beneficiary" means the person or entity designated by a Participant
on the most recently dated Beneficiary Designation Form signed by such
Participant and delivered to the Committee.
"Beneficiary Designation Form" means the form designated by the
Committee from time to time as the document to be used by Participants to select
a person or entity to receive any payments due such Participant in the event of
such Participant's death prior to the date of such payment.
"Board" means the Board of Directors of the Company.
"Bonus" means each Participant's individual bonus for any specified
period of time calculated pursuant to Section 2.02.
"Bonus Percentage" means the percentage of Base Salary of a
Participant used to determine a Bonus payment.
"Change in Control" means an event constituting a Change in Control
under the Equity Incentive Plan.
"Committee" means the Committee that administers the Equity Incentive
Plan.
"Company" means Applebee's International, Inc., a Delaware corporation
and its corporate successors.
"Disability" means mental or physical disability (i) of at least six
months which in the determination of a physician selected by the Company,
prevents a Participant from engaging in the principal duties of his employment
or (ii) has qualified the individual for coverage under the Company's long-term
disability insurance.
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"Employee in Good Standing" means a full-time employee of the Company
or a Subsidiary who:
(i) has not been on probation, received a written warning of
performance or disciplinary deficiencies, or been suspended, at any
time during the preceding 12 months; or
(ii) has not failed to perform adequately any duty or
responsibility during the period in question.
"Equity Incentive Plan" means the Applebee's International, Inc. 1995
Equity Incentive Plan, as amended from time to time.
"Fiscal year" or "year" (unless otherwise specified) means the Fiscal
year of the Company as now constituted or as it may be changed hereafter from
time to time.
"GAAP" means generally accepted accounting principles used in the
United States.
"Participant" means an employee of the Company, or of a Subsidiary,
designated by the Committee for participation in the benefits of the Plan.
"Plan" means this 1999 Management and Executive Incentive Plan as it
may be amended from time to time.
"Retirement" means retirement at or after attaining age 65.
"Satisfactory Separation" means the termination of employment with the
Company and its Subsidiaries in instances where:
(i) the termination results from the death, Disability or
Retirement of the Participant; or
(ii) as otherwise determined by the Committee in its sole
discretion.
"Subsidiary" 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.
"Target" means the measurement of financial performance of the Company
selected by the Committee to be used to determine the applicable Bonus
Percentage.
"Threshold Level" is the level of achievement of the Target at which
Bonus Percentages begin and below which no Bonus is paid.
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ARTICLE II
DESIGNATION OF PARTICIPANTS AND CALCULATION OF BONUS AMOUNTS
Section 2.01 Committee Designations. The Committee shall determine for each
Fiscal year:
(a) The name, employee level, and Bonus Percentages of each
Participant for such Fiscal year;
(b) The Target and Threshold Level for such Fiscal year; and
(c) The percentage of the Bonus, if any, that will be payable at
the discretion of the Chief Executive Officer based upon the
achievement of departmental or individual goals or objectives
and the individuals or employee levels to which such
discretionary bonus percentage shall be applicable.
Section 2.02 Calculation of Bonus. Bonuses shall be calculated by multiplying
the Participant's Base Salary times the applicable Bonus Percentage determined
by reference to the achievement of the Target, all as determined with respect to
the period in question.
Section 2.03 Payment of Bonus.
(a) At the end of each Fiscal year, the Target and Bonus
calculations shall be made on a full Fiscal year basis. Each
Participant will then receive the amount of such Participant's
Bonus calculated on a full Fiscal year basis and reflecting
the application of the discretion of the Chief Executive
Officer assigned by the Committee under Section 2.01(c),
above, if any.
(b) Bonuses will be paid as soon as practicable after the end of
the year.
(c) Upon a Participant's election in accordance with policies and
procedures established by the Committee from time to time, up
to fifty percent (50%) of the amount of such Participant's
Bonus may be paid pursuant to the Equity Incentive Plan in
Shares (as defined in the Equity Incentive Plan), as an Award
of Restricted Stock under Section 7 of the Equity Incentive
Plan in lieu of the payment of such percentage of such Bonus
pursuant to this Plan. The restrictions are determined in the
discretion of the Committee. The number of Shares payable to
the Participant shall be subject to the maximum aggregate
number of Shares permitted under Section 7 of the Equity
Incentive Plan and shall be determined, in the discretion of
the Committee as announced to Participants from time to time,
by dividing the cash value of that part of the Bonus to be
paid in Shares by a percentage (whether equal to, lesser or
greater than 100 percent (100%)) of Fair Market Value (as
defined in the Equity Incentive Plan) on the date such Bonus
is payable to the Participant or pursuant to a formula based
on the closing price, or a percentage of the closing price, of
Shares on one or more days preceding such date.
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ARTICLE III
QUALIFICATION; EMPLOYMENT STATUS
Section 3.01 Qualification. In order for a Participant to be qualified to
receive a Bonus payment hereunder, the Participant must meet the following
qualifications:
(a) Be an Employee in Good Standing on the date the Bonus payment
is to be paid; or
(b) Have been an Employee in Good Standing as of the end of the
fiscal year in question but have terminated employment with
the Company through a Satisfactory Separation between the end
of such fiscal year and the date the Bonus payment is to be
paid for such fiscal year.
(c) A Participant having terminated employment with the Company
through a Satisfactory Separation shall be entitled only to
receive the Bonus calculated through the end of the fiscal
year at which the Participant was an Employee in Good
Standing.
Section 3.02 Employment Status Changes. Unless specifically determined otherwise
by the Committee:
(a) In the event that a person first becomes an employee of the
Company at an employment level eligible for participation in
the Plan at any time other than the first day of a year, such
person's bonus shall be prorated based on the weeks worked
during the year; and
(b) In the event a Participant changes from one employment level
within the Plan to another employment level within or outside
of the Plan, such change shall be deemed effective as of the
first day of the first week beginning after the effective date
of such change, and any Bonus for an employment level shall be
prorated according to the number of weeks the Participant was
employed in such employment level.
ARTICLE IV
ADMINISTRATION; MISCELLANEOUS
Section 4.01 Books and Records: Expenses. The books and records to be maintained
for the purpose of the Plan shall be maintained by the officers and employees of
the Company at its expense and subject to the supervision and control of the
Committee. All calculations and financial accounting matters relevant to this
Plan shall, except as otherwise directed by the Committee, be determined in
accordance with GAAP. All expenses of administering the Plan shall be paid by
the Company from the general funds of the Company and shall not be charged
against any Participant account.
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Section 4.02 Attachment. To the extent permitted by law, the right of any
Participant or any Beneficiary in any benefit or to any payment hereunder shall
not be subject in any manner to attachment or other legal process for the debts
of such Participant or Beneficiary; and any such benefit or payment shall not be
subject to anticipation, alienation, sale, transfer, assignment or encumbrance.
Section 4.03 No Liability. No member of the Board or of the Committee and no
officer or employee of the Company shall be liable to any person for any action
taken or omitted in connection with the administration of this Plan unless
attributable to his own fraud or willful misconduct; nor shall the Company be
liable to any person for any such action unless attributable to fraud or willful
misconduct on the part of a director, officer or employee of the Company.
Section 4.04 No Fiduciary Relationship. Nothing contained herein shall be deemed
to create a trust of any kind or create any fiduciary relationship. To the
extent that any person acquires a right to receive payments from the Company
under this Plan, such right shall be no greater than the right of any unsecured
general creditor of the Company.
Section 4.05 Beneficiaries. Each Participant shall have the right to designate
Beneficiaries who are to succeed to his/her contingent right to receive payments
hereunder in the event of his/her death. In case of a failure of designation or
the death of a designated Beneficiary without a designated successor, payments
shall be made to the Participant's estate. Beneficiaries may be changed without
the consent of any prior Beneficiaries.
Section 4.06 Amendment. The Plan may be amended in whole or in part from time to
time by the Board of Directors of the Company.
Section 4.07 Notice. Notice of every such amendment shall be given in writing to
each Participant and Beneficiary.
Section 4.08 No Guarantee of Employment. Nothing contained in this Plan shall be
deemed to give any Participant the right to be retained in the service of the
Company or to interfere with the right of the Company to discharge any
Participant, for or without cause, at any time, regardless of the effect which
such discharge shall have upon such individual as a Participant in the Plan.
Section 4.09 Governing Law. This Plan shall be construed in accordance with the
laws of the State of Kansas.
Section 4.10 Interpretation of Plan. The Committee shall have sole and absolute
discretion and authority to interpret all provisions of this Plan and to resolve
all questions arising under this Plan; including, but not limited to,
determining whether any person is eligible under this Plan, whether any person
shall receive any payments pursuant to this Plan, and the amount of any payments
to be made pursuant to this Plan. Any interpretation, resolution or
determination of the Committee shall be final and binding upon all concerned and
shall not be subject to review.
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Section 4.11 Rights Non-transferable. Any right to receive payments in the
future pursuant to this Plan shall not be transferable by the Participant other
than pursuant to a Beneficiary Designation Form.
Section 4.12 Change in Control. In the event there is a Change in Control,
Bonuses shall be determined and paid hereunder for the Fiscal year in which such
Change in Control occurs by calculating as nearly as practical the achievement
of the Target as if the Change in Control had not occurred.
Section 4.13 Withholding. Prior to the delivery of any Shares or cash pursuant
to this Plan, 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 delivery.
6
APPLEBEE'S INTERNATIONAL, INC.
1999 EMPLOYEE INCENTIVE PLAN
SECTION 1
PURPOSE AND DURATION
1.1 Effective Date. This Plan shall become effective on May 13, 1999.
1.2 Purpose of this Plan. This Plan permits the grant of Nonqualified
Stock Options, SARs, Restricted Stock, Performance Units and Performance Shares.
This Plan is intended to attract, motivate, and retain employees of the Company
and its Affiliates. 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.
"Award" means, individually or collectively, a grant under this Plan of
Nonqualified 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 12.2.
"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.
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"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.
"Director" means any individual who is a member of the Board of
Directors of the Company.
"Disability" means a permanent and total disability, provided that 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.
"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, provided, however, that no
employee of the Company or of an Affiliate with the title of Vice-President or
higher shall be considered an employee for purposes of this Plan.
"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.
"Nonqualified Stock Option" means an Option to purchase Shares which is
not an incentive stock option under Section 422 of the Code.
"Option" means a Nonqualified Stock Option.
"Participant" means an Employee who has an outstanding 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.
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"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. 1999 Employee Incentive
Plan, as set forth in this instrument and as hereafter amended from time to
time.
"Restricted Stock" means an Award granted to a Participant pursuant to
Section 7.
"Retirement" means a Termination of Service by reason of the Employee's
retirement if (a) the Employee has been a full time Employee of the Company or
of any Affiliate for at least five (5) consecutive years immediately prior to
the date of such retirement, and (b) the age of the Employee on the date of such
retirement when added to the total number of years for which the Employee was a
full time Employee of the Company or of any Affiliate equals 60. For these
purposes, employment by a company or business acquired by the Company or an
Affiliate prior to such acquisition shall be counted as full time employment by
the Company or an Affiliate.
"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 6.
"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 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.
SECTION 3
ADMINISTRATION
3.1 The Committee. This Plan shall be administered by the Committee
that administers the Applebee's International, Inc., 1995 Equity Incentive Plan.
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 shall be granted Awards, (b) prescribe the terms and
conditions of the Awards, (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.
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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.
3.4 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
333,000. 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 canceled,
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
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.
4.4 Adjustments upon Merger or Asset Sale. In the event of a merger of
the Company with or into another corporation, or the sale of substantially all
of the assets of the Company, the Board of Directors, in its discretion, may
require the successor corporation to either (i) assume each outstanding Award or
(ii) substitute an equivalent award by the successor corporation or a Parent or
Subsidiary of the successor corporation. If an Award is not assumed or
substituted in the event of a merger or sale of assets, the Award shall become
immediately exercisable and the Committee shall notify the Participant that the
Award shall be fully exercisable for a period of fifteen (15) days from the date
of such notice, and the Award shall terminate upon the expiration of such period
unless exercised. For the purposes of this paragraph, the Award shall be
considered assumed if, following the merger or sale of assets, the Award confers
the right to purchase or receive, for each Share subject to the Award
immediately prior to the merger or sale of assets, equal consideration (whether
stock, cash, or other securities or property) as received in the merger or sale
of assets by holders of each Share of common stock held on the effective date of
the transaction (and if holders of Shares were offered a choice of
consideration, the type of consideration chosen by the holders of a majority of
the outstanding Shares); provided, however, that if such consideration received
in the merger or sale of assets was not solely common stock of the successor
corporation or its Parent, the Committee may, with the consent of the successor
corporation, provide for the consideration to be received upon the exercise of
the Award, for each Share subject to the award, to be solely common stock of the
successor corporation or its Parent equal in fair market value to the per share
consideration received by holders of common stock in the merger or sale of
assets.
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SECTION 5
STOCK OPTIONS
5.1 Grant of Options. Subject to the terms and provisions of this Plan,
Options may be granted to Employees 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 50,000 Shares.
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.
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. 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 Substitute Options. Notwithstanding the provisions of
Sections 5.3.1, in the event that the Company or an Affiliate
consummates a transaction in which persons may become Employees on
account of such transaction, such persons 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, 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
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(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; or
(d) The expiration of three (3) years from the
date of the Optionee's Termination of
Service by reason of Disability or death; or
(e) The expiration of three (3) years from the
date of the Optionee's Retirement.
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.
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.
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.
6
<PAGE>
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 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 50,000 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.
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.
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.
7
<PAGE>
At the sole discretion of the Committee, the payment upon an 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 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
50,000 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.
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 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.
1999 EMPLOYEE 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."
8
<PAGE>
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 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. After the end of the applicable Period of Restriction,
the Participant shall be entitled to have any legend or legends under Section
7.4.2 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 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 50,000 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.
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." 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. 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.
9
<PAGE>
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.
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,
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 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 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
MISCELLANEOUS
9.1 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.
9.2 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
<PAGE>
9.3 Participation. No Employee 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.
9.4 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.
9.5 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.
9.6 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.
9.7 Nontransferability of Awards. No Award granted under this Plan may
be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated,
other than by will, by the laws of descent and distribution, or to the limited
extent provided in Section 9.6. All rights with respect to an Award granted to a
Participant shall be available during his or her lifetime only to the
Participant.
9.8 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).
11
<PAGE>
SECTION 10
AMENDMENT, TERMINATION, AND DURATION
10.1 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. 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.
10.2 Duration of this Plan. This Plan shall become effective on the
date specified herein and, subject to Section 10.1 (regarding the Board's right
to amend or terminate this Plan), shall remain in effect thereafter.
SECTION 11
TAX WITHHOLDING
11.1 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).
11.2 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 12
CHANGE IN CONTROL
12.1 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.
12
<PAGE>
12.2 Definition. For purposes of Section 12.1 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 12.1 shall not
apply thereto:
12.2.1 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;
12.2.2 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 Section 12.2.1, 12.2.2 or 12.2.3) 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
12.2.3 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 12.2.1) 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).
13
<PAGE>
SECTION 13
LEGAL CONSTRUCTION
13.1 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.
13.2 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.
13.3 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.
13.4 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).
13.5 Captions. Captions are provided herein for convenience of
reference only, and shall not serve as a basis for interpretation or
construction of this Plan.
14
SCHEDULE OF PARTIES RECEIVING INDEMNIFICATION AGREEMENTS
Erline Belton
W. Matthew Carpenter
Larry A. Cates
D. Patrick Curran
R.J. Dourney
Karen B. Eadon
Edward J. Gleich
Abe J. Gustin, Jr.
Eric L. Hansen
Mark S. Hansen
Jack P. Helms
Lloyd L. Hill
James W. Kirkpatrick
John F. Koch
Steven K. Lumpkin
Mark A. Peterson
Burton M. Sack
George D. Shadid
Robert T. Steinkamp
Julia A. Stewart
Harry B. Stroup
Carin L. Stutz
Douglas D. Waltman
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
PARTIES TO CHANGE IN CONTROL AGREEMENT
Larry A. Cates
W. Matthew Carpenter
R.J. Dourney
Mark A. Peterson
Edward J. Gleich
James W. Kirkpatrick
John F. Koch
Julia A. Stewart
Carin L. Stutz
Douglas D. Waltman
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 18, 2000, appearing in and incorporated by reference in the Annual
Report on Form 10-K of Applebee's International, Inc. for the year ended
December 26, 1999, 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 18, 2000, appearing in and incorporated by reference in the Annual
Report on Form 10-K of Applebee's International, Inc. for the year ended
December 26, 1999, 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 18, 2000, appearing in and incorporated by reference in the Annual
Report on Form 10-K of Applebee's International, Inc. for the year ended
December 26, 1999, 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 18, 2000, appearing in and incorporated by reference in the Annual
Report on Form 10-K of Applebee's International, Inc. for the year ended
December 26, 1999, 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 18, 2000, appearing in and incorporated by reference in the Annual
Report on Form 10-K of Applebee's International, Inc. for the year ended
December 26, 1999, 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 18, 2000, appearing in and incorporated by reference in the Annual
Report on Form 10-K of Applebee's International, Inc. for the year ended
December 26, 1999, 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.
333-95705 of Applebee's International, Inc. on Form S-8 of our report dated
February 18, 2000, appearing in and incorporated by reference in the Annual
Report on Form 10-K of Applebee's International, Inc. for the year ended
December 26, 1999, and to the reference to us under the heading "Experts" in
such Registration Statement.
Kansas City, Missouri
March 24, 2000
<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-26-1999 DEC-27-1998
<PERIOD-END> DEC-26-1999 DEC-27-1998
<CASH> 1,427 1,767
<SECURITIES> 2,555 4,879
<RECEIVABLES> 15,998 15,190
<ALLOWANCES> 2,435 1,565
<INVENTORY> 11,247 6,709
<CURRENT-ASSETS> 34,211 31,375
<PP&E> 393,128 457,329
<DEPRECIATION> 92,988 93,271
<TOTAL-ASSETS> 442,216 510,904
<CURRENT-LIABILITIES> 77,662 65,951
<BONDS> 106,293 145,522
0 0
0 0
<COMMON> 321 321
<OTHER-SE> 253,552 295,732
<TOTAL-LIABILITY-AND-EQUITY> 442,216 510,904
<SALES> 596,754 580,840
<TOTAL-REVENUES> 669,584 647,562
<CGS> 499,732 494,466
<TOTAL-COSTS> 563,070 552,510
<OTHER-EXPENSES> 11,604 6,490
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 10,814 9,922
<INCOME-PRETAX> 85,735 80,409
<INCOME-TAX> 31,537 29,753
<INCOME-CONTINUING> 54,198 50,656
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 (641)
<CHANGES> 0 0
<NET-INCOME> 54,198 50,015
<EPS-BASIC> 1.91 1.65
<EPS-DILUTED> 1.89 1.65
</TABLE>
