APPLEBEES INTERNATIONAL INC
FORM OF APPLEBEE'S DEVELOPMENT AGREEMENT, EX 10.1
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>3
<FILENAME>devagrmt.txt
<DESCRIPTION>FORM OF APPLEBEE'S DEVELOPMENT AGREEMENT, EX 10.1
<TEXT>
                                                                    EXHIBIT 10.1










                                  STANDARD FORM

                       APPLEBEE'S NEIGHBORHOOD GRILL & BAR

                              DEVELOPMENT AGREEMENT





                            ------------------------
                               (Name of Developer)


                            ------------------------
                                     (Date)



                            -------------------------
                       (General Description of Territory)



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<PAGE>



                                TABLE OF CONTENTS
<TABLE>
<S>      <C>                                                                                               <C>
RECITALS.............................................................................................      E-3

    1.   GRANT OF DEVELOPMENT RIGHTS.................................................................      E-4
    2.   INITIAL DEVELOPMENT SCHEDULE................................................................      E-4
    3.   SUBSEQUENT DEVELOPMENT SCHEDULE;
         DEVELOPMENT OBLIGATIONS GENERALLY...........................................................      E-5
    4.   FRANCHISE FEE AND ROYALTY RATE..............................................................      E-13
    5.   SITE APPROVALS:  PLANS AND SPECIFICATIONS...................................................      E-14
    6.   FEES AND FRANCHISE AGREEMENTS...............................................................      E-15
    7.   DEVELOPER ORGANIZATION, AUTHORITY,
         FINANCIAL CONDITION AND SHAREHOLDERS........................................................      E-16
    8.   TRANSFER....................................................................................      E-18
    9.   TERMINATION.................................................................................      E-22
    10.  PREREQUISITES TO OBTAINING FRANCHISES
         FOR INDIVIDUAL RESTAURANT UNITS.............................................................      E-24
    11.  RESTRICTIONS................................................................................      E-25
    12.  DEVELOPMENT PROCEDURES......................................................................      E-27
    13.  NO WAIVER OF DEFAULT........................................................................      E-28
    14.  FORCE MAJEURE...............................................................................      E-28
    15.  CONSTRUCTION, SEVERABILITY, GOVERNING
         LAW AND JURISDICTION........................................................................      E-29
    16.  MISCELLANEOUS...............................................................................      E-30


APPENDIX A:             TERRITORY....................................................................      E-32

APPENDIX B:             FORM OF FRANCHISE AGREEMENT..................................................      E-33

APPENDIX C:             STATEMENT OF OWNERSHIP INTERESTS.............................................      E-34

APPENDIX D:             REVIEW AND CONSENT WITH RESPECT
                        TO TRANSFERS.................................................................      E-35

APPENDIX E:             CONFIDENTIALITY AGREEMENT AND
                        COVENANT NOT TO COMPETE......................................................      E-36

APPENDIX F:             CONFIDENTIALITY AGREEMENT....................................................      E-39
</TABLE>


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                       APPLEBEE'S NEIGHBORHOOD GRILL & BAR
                              DEVELOPMENT AGREEMENT


This Agreement is made this ________ day of ___________________, 20_____, 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.

     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

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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
___________,  20__, 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.

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  _____________,  20_____,  in  accordance  with the
following development schedule:

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          (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.

     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 ______________,  20_____,  and expiring
on _________________,  20____,  Developer shall develop and open for business in
the Territory,  in accordance with the parameters  established  under Subsection
3.2, that number of additional  Restaurants as is required to achieve at the end



(1) The 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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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,  will  equal  the  Minimum  Development  Potential  of the
Territory (as defined herein below).

     3.2 (a) Each  consecutive  two (2) year period,  commencing with the period
beginning on _______________,  20____, is hereafter referred to as a "Subsequent
Development Period."

          (b) On or  before  the  commencement  of each  Subsequent  Development
     Period,  Franchisor  shall  provide to  Developer  in writing the number of
     Restaurants to be developed by Developer during such Subsequent Development
     Period  ("Subsequent  Development  Schedule"),  together  with  a  detailed
     summary of the Minimum Development Potential calculations used to determine
     the Subsequent  Development  Schedule.  The minimum  development  potential
     ("Minimum Development Potential") shall be determined as follows:

               (i) Each Area of Dominant Influence ("A.D.I."),  as determined by
          the  1988  Arbitron  Ratings,  comprising  all  or a  portion  of  the
          Territory shall be placed into one of four market categories  ("Market
          Categories"),  identified as either a "Small Market", defined as those
          A.D.I.'s  containing  less than  135,000  households  in  metropolitan
          counties  within the  Territory  with  incomes  greater  than  $25,000
          ("Income  Qualified Metro Household");  a "Medium Market",  defined as
          those A.D.I.'s  containing  135,000 to 399,999 Income  Qualified Metro
          Households;  a "Large  Market",  defined as those A.D.I.'s  containing
          400,000 to 1,399,999  Income  Qualified Metro  Households;  or a "Mega
          Market", defined as those A.D.I.'s containing 1,400,000 or more Income
          Qualified Metro Households (Small Market,  Medium Market, Large Market
          or Mega  Market  may also be  referred  to herein  individually  as an
          "A.D.I. Market" or collectively as "A.D.I.  Markets". The income level
          set forth above may,  but need not, be adjusted  upward or downward by
          Franchisor  once every  five (5) years in order to reflect  changes in
          household  income,  such  adjustments to be determined by reference to
          the United States Census Bureau's Median  Household Income Index or if
          such  index no longer  exists  at the time it is to be used,  then the
          index employed shall be such other  generally  known index used by NPD
          Crest or other such similar company then used by Franchisor.

               (ii) Each county within an A.D.I. Market shall be classified as a
          "Metropolitan  County", those counties with a total population greater
          than  50,000;  a "Small  Town  County",  those  counties  with a total
          population of 20,000 to 50,000;  or an "Other County",  those counties
          with a total population less than 20,000  (Metropolitan  County, Small
          Town  County and Other  County may be for  description  purposes  also
          referred to herein as a "County Type").

               (iii) Each A.D.I. Market shall at that time be assigned to one of
          four  development   groups  according  to  the  level  of  development
          penetration  which  Developer  has  achieved  in the A.D.I.  Market as
          compared  to the  level of  development  penetration  achieved  by all
          domestic  development in the System.  The four development groups will
          be determined by ranking each A.D.I.  in the System within each of the
          Market Categories from most developed to least developed. The A.D.I.'s

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          in ranking order from most developed to least  developed shall then be
          divided   into   four   substantially    equal   development   groups:
          "Opportunistic  Group", "Second Group", "Third Group" and "Lower Limit
          Group".  The average number of Restaurants per Income  Qualified Metro
          Household  developed by the top three territories in the System of the
          Second Group in each A.D.I.  Market  category shall be the development
          target for each such A.D.I. Market category ("Penetration Target").

               (iv) The total number of Restaurants to be developed by Developer
          in each Metropolitan  County of an A.D.I. Market shall be equal to the
          number of Income  Qualified  Metro  Households  in such A.D.I.  Market
          divided  by  the   Penetration   Target   ("Metropolitan   Development
          Potential").  The Metropolitan  Development Potential minus the number
          of Restaurants in each Metropolitan  County then open and operating in
          said  A.D.I.  Market  shall  be the  number  of  Restaurants  in  each
          Metropolitan  County  then  available  for  development  in the A.D.I.
          Market ("Metropolitan Development Balance").

               (v) The Minimum Development Potential shall be the maximum number
          of Restaurants  Franchisor  may include on the Subsequent  Development
          Schedule  and thus require  Developer to develop in the A.D.I.  Market
          during the next Subsequent  Development Period;  subject,  however, to
          the minimum and maximum development criteria outlined in paragraph (c)
          and (d) of this  Subsection 3.2. In the event,  however,  a particular
          A.D.I. Market is in the Opportunistic Group,  Developer and Franchisor
          shall  negotiate  in  good  faith  a  mutually  agreeable   Subsequent
          Development Schedule;  provided,  however, said Subsequent Development
          Schedule  shall  not  reflect a number  of  Restaurants  less than the
          remaining   undeveloped   portion  of  the  Metropolitan   Development
          Potential,  nor shall the Developer be required  (without its consent)
          to  develop  more  than  the  remaining  undeveloped  portion  of  the
          Metropolitan Development Potential.

          (c) During each Subsequent  Development Period that Developer has less
     than ten (10)  Restaurants  open and operating in the Territory,  Developer
     shall be required to develop no more than one (1) Restaurant  each calendar
     year that the number of Restaurants in Developer's  Territory does not meet
     or exceed the Minimum Development  Potential of the Territory.  During each
     Subsequent   Development  Period  that  Developer  has  ten  (10)  or  more
     Restaurants  in the  Territory,  Developer  shall be required to develop no
     more  than two (2)  Restaurants  each  calendar  year  that the  number  of
     Restaurants   in  the  Territory  does  not  meet  or  exceed  the  Minimum
     Development Potential for the Territory.

          (d)  Notwithstanding  the  Minimum  Development  Potential  for  which
     Developer  might otherwise be obligated in order to satisfy the Penetration
     Target for the Territory,  Developer  shall not be required to develop more
     than ten (10) Restaurants in any one calendar year in the Territory. In the
     event Developer holds other  development  agreements with the System or the
     Principal   Shareholders   of  Developer   are  the   identical   Principal
     Shareholders  of other  entities  who hold other  development  agreement(s)
     within  the  System  (such  other  entities  being  defined   hereunder  as
     "Affiliates"),  Developer,  together  with such  Affiliates,  may limit its
     combined development under all such development  agreements to no more than
     ten (10)  Restaurants  in the  aggregate  in any calendar  year.  Provided,

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     however,  Developer and Principal Shareholder(s) hereby acknowledge that if
     Developer  exercises its option under this  provision to limit its combined
     development  with its  Affiliates  and after so  limited  its  development,
     Developer  (together  with its  Affiliate)  does not achieve such aggregate
     development, Developer shall be in default under that development agreement
     (or all such  development  agreements  as the  case  may be) but only  such
     development  agreement(s)  which  did not  meet the  individual  Subsequent
     Development   Schedule   calculated  and  agreed  to  for  that  individual
     development agreement.

          (e) If the Developer has timely developed and opened for operation the
     Restaurant  called for by the Initial  Development  Schedule and thereafter
     during a Subsequent  Development  Period objects to the  development of the
     last Restaurant  required during that Subsequent  Development  Period under
     Article 3 hereof, then Franchisor hereby grants Developer the right to make
     a written  demand for a study as to  whether  said last  Restaurant  may be
     located in the  Territory  or  whether  said  Restaurant  will at that time
     cannibalize  the sales  and  traffic  with  respect  to its other  existing
     Restaurants  in the  Territory.  In the event a written  request for such a
     study  is  received  by  Franchisor  prior  to the  end  of the  Subsequent
     Development  Period  in  question  and  prior  to  any  default  under  the
     Development  Agreement,  then in such an event,  Franchisor  and  Developer
     shall in good faith attempt to resolve the issue regarding whether the last
     Restaurant  should or should not be developed  and opened.  If an agreement
     cannot be reached  (which  process may include the Franchisor and Developer
     ordering a PIN study at Developer's  cost),  Franchisor and Developer shall
     submit the disagreement to the National Franchise Mediation Board ("NFMB"),
     as herein defined below,  for handling and  disposition.  The submission of
     said disagreement will be in accordance with subsection 3.2 (f)(i) hereof.

          (f) The following  shall apply to the  submission to the NFMB pursuant
     to the preceding paragraph:

          (i) The  disagreement  shall be submitted by the Developer by way of a
          written demand for mediation tendered to Franchisor within thirty (30)
          days after  Franchisor  has  indicated to Developer  than an agreement
          cannot be reached.  Developer will deposit  $35,000 with Franchisor at
          the time of the filing of its  written  demand for  mediation.  If the
          demand  or the  deposit  or  either  or both of them are not so timely
          made,  then in such an event,  the  Developer  shall be deemed to have
          waived its right to request mediation and further,  shall be deemed to
          have elected to accept the full number of  Restaurants  Franchisor had
          determined for the Subsequent Development Period then in question. The
          NFMB will determine in its sole discretion the procedure,  time limits
          and  additional  filing and  responses  required  with  respect to the
          mediation.  However,  it is understood  and agreed by all parties that
          the mediation is intended to provide a more expeditious  resolution of
          the  matter  submitted  to the  NFMB.  The  mediation  decision  to be
          rendered  by  the  NFMB  will  be  binding  upon  all  parties  to the
          mediation.  The party for whom a favorable  decision is rendered shall
          receive from the other party reimbursement for all out-of-pocket costs
          and  expenses,  including  attorneys'  fees incurred and any PIN study
          conducted  with respect to the  mediation,  which are determined to be
          reasonable by the NFMB.

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          (ii) At the  conclusion  of the  mediation,  the NFMB shall  issue its
          decision  either  supporting  Developer and  indicating  that the last
          Restaurant  need  not  be  developed  as  a  part  of  the  Subsequent
          Development Period in question,  or conversely,  supporting Franchisor
          and  indicating  that  the  last  Restaurant  should  be a part of the
          development for that Subsequent Development Period. If the decision of
          the NFMB supports the Developer,  then in such an event, the Developer
          shall  maintain  its  exclusive  rights  to the  Territory,  and shall
          continue  to  maintain  its right to develop  therein  in the  future.
          Provided,  however,  Franchisor may request further development during
          future Subsequent  Development Periods. In addition,  Franchisor shall
          reimburse   Developer   the  $35,000   previously   deposited  at  the
          commencement of the mediation process.

          (iii) If the  decision of the NFMB  supports the  Franchisor,  then in
          such an event,  the Developer  shall be required to construct and open
          the last Restaurant,  pursuant to the development  schedule originally
          listed as a part of the Subsequent  Development Period so in question.
          In  addition,   the  funds  previously  deposited  by  Developer  with
          Franchisor  shall  be  applied  to the  Franchise  Fee  due  for  such
          Restaurant.  However,  in the event  Developer  fails to  develop  the
          Restaurant,  the  $35,000  shall be  forfeited  and shall  become  the
          exclusive   property  of   Franchisor   and  further,   the  exclusive
          development   rights  granted  by  the  Development   Agreement  shall
          terminate and be of no further force and effect.

          (iv) If,  after a new  developer  has been  appointed to open the last
          Restaurant,  and said Restaurant has opened for operation,  and within
          the  first  twelve  (12)  months  of  operation  of  said  Restaurant,
          Developer  believes  that said new  developer's  Restaurant  has had a
          significant  cannibalization  effect  upon one or more of  Developer's
          Restaurants,  then in such an event, the Developer may avail itself of
          the following post impact process  ("Post Impact  Process").  The Post
          Impact  Process will consist of the submission of the positions of the
          Developer,  new  developer  and  Franchisor  to the NFMB for study and
          mediation.  The Post Impact  Process is and shall be from time to time
          more fully  outlined in the Manuals.  The NFMB shall have the right to
          issue a non-binding determination as to whether or not the Developer's
          Restaurant  or  Restaurants  (as the  case  may  be)  were,  in  fact,
          significantly  cannibalized  as  contended  by  Developer  and  if  so
          determined,  a recommendation  on whether any and what type of royalty
          relief  or other  relief,  if any,  shall be  granted  Developer.  The
          parties agree to exhaust the foregoing remedies and seek the mediation
          provided by the NFMB prior to  submitting  the matter to any  judicial
          tribunal.

     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

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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.

     3.6 Notwithstanding  the foregoing  Subsection 3.2 and in addition thereto,
Franchisor shall further divide those counties identified as Small Town Counties
and Other Counties ("STC") and provide for the development of such counties.

          (a) Franchisor  shall request  Developer to commit to develop and open
     for operation pursuant to a pre-determined  development schedule the number
     of  Restaurants   utilizing  a  Small  Town   Restaurant   prototype  ("STC
     Restaurant") and in the specified counties set forth on the written request
     tendered to  Developer by  Franchisor  (the "STC  Notice").  The STC Notice
     provided Developer will further reflect the proposed  development  schedule
     for all such STC Restaurants. Within 30 days of Developer's receipt of such
     STC  Notice,  Developer  shall  indicate  in writing  whether it desires to
     develop  an STC  Restaurant  in all or a portion  of the  counties  listed.
     Thereafter,  the development  schedule  suggested in the STC Notice will be
     adjusted by the Franchisor, using the same pace of development as set forth
     in Subsection 3.2(c) and Subsection  3.2(d).  With respect to this process,
     the  Franchisor and Developer  will review the  development  feasibility of
     each county listed in the STC Notice,  giving appropriate  consideration to
     such  factors  as  liquor  license  availability,   proximity  to  existing
     Restaurants, the presence or absence of competitive concepts and other such
     matters as  Franchisor  deems  appropriate.  Any counties  removed from the
     purview of the STC Notice by such negotiations will be returned to the pool
     of unused  counties  for  possible  future  development.  At or before  the
     conclusion  of the 30-day  notice  period,  unless  otherwise  extended  in
     writing, Developer shall:

          (i) Signify its agreement to develop in accordance with the STC Notice
          in all of the listed  counties  and in  accordance  with the  proposed
          development  schedule  included  with the  revised STC Notice and as a
          result,  Developer's  exclusive  right to develop  Restaurants  in the
          Territory as previously granted remains unaffected;

          (ii) Signify its  agreement to develop an STC  Restaurant in a portion
          of the STC Notice  listed  counties,  and in such an event,  Developer
          shall no longer have the exclusive right to develop Restaurants in the
          counties in which it chose not to develop the STC  Restaurant and will
          be subject to the terms set forth in subparagraph (c) below; or

                                      E-10
<PAGE>


          (iii) Reject the  development  of an STC  Restaurant in all of the STC
          Notice  listed  counties,  and in such an  event,  Developer  shall no
          longer have the exclusive right to develop Restaurants in the counties
          listed in the final STC  Notice  and will be  subject  to the terms of
          subparagraph (c) below; or

          (iv) Seek mediation of the inclusion of one or more of the counties in
          the  STC  Notice  with  the  National  Franchise  Mediation  Board  in
          accordance with Subsection 3.6(b); or

          (v) Fail to respond in writing to the STC  Notice,  in which event the
          Developer  will  no  longer  have  the  exclusive   right  to  develop
          Restaurants  in the  counties  set forth in the STC Notice and will be
          subject to the terms of subparagraph (c) below.

     (b) In the event the  Developer  contests the STC Notice as  referenced  in
subsection  3.6(a)(iv) above, such disagreement shall be submitted for mediation
to the National  Franchise  Mediation Board, which shall be comprised of two (2)
individuals  appointed  by  Franchisor,  two (2)  individuals  appointed  by the
Franchise  Business Council and one (1) individual  chosen by the foregoing four
(4) individuals, in accordance with the following:

          (i) Developer  will deposit with  Franchisor at the time of the filing
          of its written  demand for  mediation an amount equal to $35,000 times
          the  number  of  counties   about  which   Developer   is   contesting
          development.  Notwithstanding  the  foregoing,  in no event shall less
          than  $35,000 be so  deposited.  If the deposit is not so timely made,
          then in such an event,  the  Developer  shall be deemed to have waived
          its right to request  mediation  and  further,  deemed to have elected
          alternative (v) as set forth in subparagraph 3.6(a).

          (ii) The NFMB will  determine in its sole  discretion  the  procedure,
          time limits and additional filing and responses  required with respect
          to the mediation.  However, it is understood and agreed by all parties
          that  the  mediation  is  intended  to  provide  a  more   expeditious
          resolution of the matter submitted to the NFMB.

          (iii)  The  mediation  decision  to be  rendered  by the NFMB  will be
          binding upon all parties to the mediation.

          (iv) The party for whom a favorable decision is rendered shall receive
          from the other party  reimbursement  for all  out-of-pocket  costs and
          expenses,  including  attorneys'  fees,  incurred  with respect to the
          mediation which are determined to be reasonable by the NFMB.

          (v) At the  conclusion  of the  mediation,  the NFMB  shall  issue its
          decision   either   supporting   Developer  and  indicating  that  the
          county(ies) to which the Developer  objected shall be removed from the
          STC  Notice  and  returned  to the  pool  of  unused  county(ies),  or
          conversely,  supporting Franchisor and indicating that the county(ies)

                                      E-11
<PAGE>

          about which an objection  was raised  should be so included in the STC
          Notice and therefore an STC Restaurant should be developed therein.

          (vi) If the decision of the NFMB supports the Developer,  then in such
          an event,  the Developer  shall  maintain its  exclusive  right to the
          county(ies)  in question,  and shall continue to maintain its right to
          develop therein in the future.  In addition,  the amount  deposited by
          Developer shall be refunded to Developer.

          (vii) If the  decision of the NFMB  supports the  Franchisor,  then in
          such an event,  the  Developer  shall be required to construct the STC
          Restaurant in the county(ies) in question, pursuant to the development
          schedule  originally  listed in the STC Notice.  The funds  previously
          deposited  by  Developer  with  Franchisor  shall  be  applied  to the
          Franchise  Fee due for each of said units at the rate of  $35,000  per
          each unit. In the event  Developer fails to develop some or all of the
          STC  Restaurants  in the  county(ies)  here in  question,  any  unused
          deposit  shall be forfeited  and further,  the  Developer's  exclusive
          rights to the  county(ies) in which no  development  occurred shall be
          terminated  and not  subject  to any first  right of  refusal  rights,
          notwithstanding anything herein to the contrary.

          (c) Except as otherwise provided in subparagraph 3.6(b) hereof, in the
     event that the Developer,  after receiving its STC Notice, falls within the
     purview of subsections  3.6(a)(ii),  (iii), or (v) above,  the counties for
     which the  Developer  rejected  the  right to  develop  an STC  Restaurant,
     Franchisor  may in its  discretion  seek another  franchisee to develop the
     rejected  counties or develop STC Restaurants in those counties on its own.
     Upon the  identification  of a bona fide  prospective  franchisee for those
     counties or upon the determination by Franchisor that it will develop those
     counties,  Franchisor shall provide Developer with a written first right of
     refusal  notice  ("FROR  Notice"),  which  FROR  Notice  will set forth the
     counties in question and the schedule of development.  Developer shall have
     30 days  within  which to  respond  to such FROR  Notice in  writing.  Such
     response shall be solely to accept or reject in whole its right of refusal.
     No partial acceptances will be honored by the Franchisor.  In the event the
     Developer  fails to respond or  responds  and  indicates  its desire not to
     develop the counties listed,  then  Developer's  exclusive right to develop
     such counties shall no longer be valid and  exclusivity  rights  previously
     granted in the  Development  Agreement as to those  counties shall be of no
     further effect, and in such an event the Franchisor may grant a third party
     prospective  franchisee  the  right to  develop  STC  Restaurants  in those
     counties  or  develop  STC  Restaurants  itself,   without  regard  to  the
     Developer.  Conversely,  if the  Developer  responds  to the FROR Notice in
     writing and  indicates  its desire to build the STC  Restaurants  listed in
     compliance  with the  schedule  set forth,  and at the same time  tenders a
     non-refundable deposit in the amount of $35,000 for each of the Restaurants
     to be developed in the counties  listed in the FROR Notice,  the  Developer
     shall  have the right to develop  said STC  Restaurants  and shall  further
     retain  the  exclusive  right to develop  Restaurants  in the  counties  so
     listed.

          (d) As to the other counties  unallocated  under the foregoing process
     set forth in  subsection  (c) above,  Franchisor  may issue future  notices
     regarding development of the same STC Restaurants for use in some or all of
     the  counties.   Further,  Franchisor  may  create  other  new  small  town

                                      E-12
<PAGE>

     prototypes using the System developed for the Restaurants, which extend the
     brand name but which would more  likely be  adaptable  to the  demographics
     shown for some or all of the other counties which have not been  identified
     for  development  under the preceding  sentence or under  subparagraph  (b)
     above.  As each such release  (which may be in one or more  increments)  is
     developed by the Franchisor, the same procedures set forth in subparagraphs
     (a) and (b) above shall apply.

          (e) The  development  and  opening  of an STC  Restaurant  in a listed
     county will not apply to or substitute for the  development  required under
     Section 2.1 hereof.  However,  in the event  Developer fails to develop and
     open the Restaurants called for under Section 3.6(a) hereof pursuant to the
     schedule established by Franchisor,  such default in development shall only
     affect the Developer's right to open and operate in the counties so listed.
     If Developer  fails to open one or more of the STC Restaurants in the total
     aggregate  time  period set forth in the  schedule,  then in such an event,
     Developer  shall  lose its  rights to develop  any STC  Restaurants  in the
     counties  listed in the STC Notice or the FROR  Notice (as the case may be)
     wherein no Restaurant is in operation and further, the exclusivity provided
     by this  Development  Agreement shall be of no further force or effect with
     respect  to those  counties  listed  in said  Notice  (but  only as to said
     affected  counties) and Franchisor may grant development  rights to a third
     party or develop said counties  itself.  It is  understood  that the 60-day
     period provided for in Section 2.3 of the Development Agreement shall apply
     to all of the Restaurants to be developed under this paragraph.

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 three(1) (3) Initial  Development Periods pursuant to
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


(1) In 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.


                                      E-13
<PAGE>

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.  Until January
1, 2020,  the monthly  royalty fee shall not exceed  four  percent  (4%) 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).  Thereafter,  the monthly
royalty fee shall be as determined by Franchisor.

     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.

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 for a fee, will conduct an on-site
inspection (if deemed  necessary),  and, at no additional  cost, will review any
lease or contract under negotiation for the prospective site. 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

                                      E-14
<PAGE>

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.

     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

                                      E-15
<PAGE>

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.

     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

                                      E-16
<PAGE>

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.

     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.

     7.7  Developer  and each  Principal  Shareholder  represent  and warrant to
Franchisor that:

          (a)  Neither  Developer  nor any  Principal  Shareholder  or any other
          person with a direct or indirect  ownership  interest in  Developer is
          identified,  either by name or an alias, pseudonym or nickname, on the
          list  of  "Specially   Designated   Nationals  and  Blocked   Persons"
          maintained by the U.S. Treasury  Department's Office of Foreign Assets
          Control (texts available at  www.treas.gov/offices/enforcement/ofac/).
          Further,  Developer  and  its  Principal  Shareholders  represent  and
          warrant  that neither has violated and agree that neither will violate
          any law (in effect now or which may become  effective  in the  future)

                                      E-17
<PAGE>

          prohibiting corrupt business practices, money laundering or the aid or
          support of persons or entities  who  conspire to commit acts of terror
          against any person or  government,  including  acts  prohibited by the
          U.S.        Patriot        Act        (text        available        at
          http://www.epic.org/privacy/terrorism/hr3162.html),   U.S.   Executive
          Order           13244           (text           available           at
          http://treas.gov/offices/enforcement/ofac/sanctions/terrorism.html),
          or similar law;

          (b) Developer has not made,  nor has any Principal  Shareholder  made,
          any  expenditures  other  than for  lawful  purposes  or  directly  or
          indirectly  offered,  gave, promised to give or authorized the payment
          or the gift of any  money,  or  anything  of value,  to any  person or
          entity,  while  knowing or having reason to know that all or a portion
          of such money or thing of value would be given or  promised,  directly
          or   indirectly,   to  any   government   official,   official  of  an
          international   organization,   officer  or   employee  of  a  foreign
          government  or anyone  acting in an  official  capacity  for a foreign
          government, for the purpose of (1) influencing any action, inaction or
          decision of such official in a manner  contrary to his or her position
          or creating an improper  advantage;  or (2) inducing  such official to
          influence  any  government  or  instrumentality  thereof  to effect or
          influence any act or decision of such government or instrumentality.

          (c)  Developer nor any  Principal  Shareholder  or any other person or
          entity who has any direct or  indirect  ownership  interest is or will
          become  directly or indirectly  owned or  controlled  by  governmental
          authorities of any country that is subject to a United States embargo;
          and

     Developer  understands and its Principal  Shareholders  understand and have
been advised by legal counsel on the  requirements  of the United States Foreign
Corrupt         Practices        Act        (currently         located        at
www.usdoj.gov/criminal/fraud/fcpa.html, any local foreign corrupt practices laws
and       the        Patriot       Act        (currently        located       at
www.epic.org/privacy/terrorism/hr3162.html,   acknowledge   the   importance  to
Franchisor and the Restaurants and the parties' relationship of their respective
compliance  with  the  requirements  of these  laws,  including  any  applicable
auditing  requirements  and any  requirement  to  report  or  provide  access to
information to Franchisor or any government, that is made part of any applicable
law,  and agree to take all steps  required  by their  consultants,  agents  and
employees  to comply  with such laws prior to  engaging  or  employing  any such
individuals or entities.

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:

                                      E-18
<PAGE>

          (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.

     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.

                                      E-19
<PAGE>

         (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, any of the Principal  Shareholders desires to dispose of
all or  substantially  all of the Interests of the Principal  Shareholder(s)  in
Developer,  or any of the  Principal  Shareholders  (or  Developer)  desires  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  Shareholder(s)  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.

     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, including all relevant materials required for approval by Franchisor.
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

                                      E-20
<PAGE>

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
prior to the start of the Option  Period.  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.

     (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'

                                      E-21
<PAGE>

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.

     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 _______________,  20____,  unless sooner
terminated pursuant to the terms hereof.

                                      E-22
<PAGE>

     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;

          (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

                                      E-23
<PAGE>

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:

          "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

                                      E-24
<PAGE>

          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.

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

                                      E-25
<PAGE>

     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.

     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

                                      E-26
<PAGE>

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.

     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

                                      E-27
<PAGE>

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.

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

                                      E-28
<PAGE>

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.

     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.

                                      E-29
<PAGE>

     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.

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.

                                      E-30
<PAGE>

     16.4 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.

     16.5 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.

     16.6 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.

                                   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: ____________________________

                                      E-31
<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.


     For purposes of Section 8.6 only, one hundred  percent (100%) of the number
of Restaurants required by Subsections 2.1 and 3.1 is __________ (_____).

                                      E-32
<PAGE>


                       APPENDIX B TO DEVELOPMENT AGREEMENT


                            FORM FRANCHISE AGREEMENT

                    (See Exhibit F to this Offering Circular)



                                      E-33

<PAGE>


                       APPENDIX C TO DEVELOPMENT AGREEMENT

                        STATEMENT OF OWNERSHIP INTERESTS





                                                 Percent of Issued and
     Shareholder                           Outstanding Shares of Developer







                                      E-34



<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.

                                      E-35
<PAGE>


                       APPENDIX E TO DEVELOPMENT AGREEMENT

                          CONFIDENTIALITY AGREEMENT AND
                             COVENANT NOT TO COMPETE


     THIS AGREEMENT is made this ________ day of ________________,  20______, 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:

     (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

                                      E-36
<PAGE>

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.

     (5) Employee further acknowledges and agrees that any 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

                                      E-37
<PAGE>

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: ____________________

                                      E-38
<PAGE>


                      APPENDIX F TO DEVELOPMENT AGREEMENT

                            CONFIDENTIALITY AGREEMENT

     THIS AGREEMENT is made this ________ day of ________________, 20_______, 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

                                      E-39
<PAGE>

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 any 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.

                                      E-40
<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


DEVELOPER:                         EMPLOYEE:


By:________________________        By: ______________________________
Name: _____________________        Name: ____________________________
Title: ____________________


                                      E-41


</TEXT>
</DOCUMENT>
