Ohio 31-0785108
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
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Title of each class Name of each exchange on which registered
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Common Shares, $.10 stated value New York, Boston, Chicago,
(114,664,000 shares outstanding Pacific and Philadelphia
at March 5, 2001) Stock Exchanges
$2.50 Term Convertible Securities, Series A New York Stock Exchange
Preferred Stock Purchase Rights New York Stock Exchange
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Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. YES _X_ NO ___.
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. _X_
The aggregate market value of the voting stock held by non-affiliates of the Registrant at March 5, 2001 was $2,327,470,000.
Documents incorporated by reference:
Portions of the Annual Report to Shareholders set forth in the Financial
Statements and Other Information furnished with the Definitive 2001 Proxy
Statement dated March 6, 2001 are incorporated by reference into Parts I
and II.
Portions of the Definitive 2001 Proxy Statement dated March 6, 2001 are
incorporated by reference into Part III.
Exhibit index on pages 15-17.
ITEM 1. BUSINESS
THE COMPANY
Wendy's International, Inc. was incorporated in 1969 under the laws of the State of Ohio. Wendy's International, Inc. and its subsidiaries are collectively referred to herein as the "Company."
The Company is primarily engaged in the business of operating, developing and franchising a system of distinctive quick-service restaurants. At December 31, 2000, there were 5,792 Wendy's restaurants (Wendy's) in operation in the United States and in 26 other countries and territories. Of these restaurants, 1,153 were operated by the Company and 4,639 by the Company's franchisees.
Additionally, at December 31, 2000, the Company and its franchisees operated 1,980 Tim Hortons (Hortons) restaurants in Canada and the United States. Of these restaurants open at December 31, 2000, only 105 were company operated.
OPERATIONS
Each Wendy's restaurant offers a relatively standard menu featuring hamburgers and filet of chicken breast sandwiches, which are prepared to order with the customer's choice of condiments. Wendy's menu also includes chicken nuggets, chili, baked and French fried potatoes, prepared salads, desserts, soft drinks and other non-alcoholic beverages and children's meals. In addition, the restaurants sell a variety of promotional products on a limited basis.
Each Hortons unit offers coffee, cappuccino, fresh baked goods such as donuts, muffins, pies, croissants, tarts, cookies, cakes, bagels and in some units sandwiches, soups and fresh-baked breads.
The Company strives to maintain quality and uniformity throughout all restaurants by publishing detailed specifications for food products, preparation and service, by continual in-service training of employees and by field visits from Company supervisors. In the case of franchisees, field visits are made by Company personnel who review operations and make recommendations to assist in compliance with Company specifications.
Generally, the Company does not sell food or supplies to its Wendy's franchisees. However, the Company has arranged for volume purchases of many of these products. Under the purchasing arrangements, independent distributors purchase certain products directly from approved suppliers and then store and sell them to local company and franchised restaurants. These programs help assure availability of products and provide quantity discounts, quality control and efficient distribution. These advantages are available both to the Company and to any franchisee who chooses to participate in the distribution program.
Under the Hortons Canada franchise arrangements, the franchisee is required to purchase certain products such as coffee, sugar, flour and shortening from a Hortons' subsidiary. These products are distributed from six warehouses located across Canada. Products are delivered to Hortons Canada restaurants primarily by Hortons' fleet of trucks and trailers. Both company and franchise stores of Hortons U.S. purchase products from a supplier that has been approved by the Company.
The New Bakery Co. of Ohio, Inc., (Bakery) a wholly-owned subsidiary of the Company, is a producer of buns for Wendy's restaurants. At December 31, 2000, the Bakery supplied 623 restaurants operated by the Company and 2,043 restaurants operated by franchisees. At the present time, the Bakery does not manufacture or sell any other products.
See Notes 6 and 13 on pages AA-17, AA-18, AA-21 and AA-22 of the Financial Statements and Other Information furnished with the Company's 2001 Proxy Statement, which Notes are incorporated herein by reference, for further information regarding revenues, income before income taxes and total assets attributable to the Company's segments.
RAW MATERIALS
The Company and its franchisees have not experienced any material shortages of food, equipment, fixtures or other products which are necessary to restaurant operations. The Company anticipates no such shortages of products and, in any event, alternate suppliers are available.
TRADEMARKS AND SERVICE MARKS OF THE COMPANY
The Company has registered certain trademarks and service marks in the United States Patent and Trademark office and in international jurisdictions, some of which include "Wendy's", "Wendy", "Old Fashioned Hamburgers", "Quality Is Our Recipe", "Tim Hortons", "TimBits" and "Your Friend Along the Way". The Company believes that these and other related marks are of material importance to the Company's business. Domestic trademarks and service marks expire at various times from 2001 to 2013, while international trademarks and service marks have various durations of five to 20 years. The Company generally intends to renew trademarks and service marks which expire.
The Company entered into an Assignment of Rights Agreement with R. David Thomas and his wife dated as of November 5, 2000 (the "Assignment"). The Company has used Mr. Thomas, Senior Chairman of the Board and Founder, as a spokesperson and focal point for its products and services for many years, and with the efforts and attributes of Mr. Thomas has, through its extensive investment in the advertising and promotional use of Mr. Thomas' name, likeness, image, voice, caricature, endorsement rights and photographs (the "Thomas Persona"), made the Thomas Persona well known in the U.S. and throughout North America and a valuable asset for both the Company and Mr. Thomas. The elements comprising the Thomas Persona, taken together, comprise property rights, transferrable at death and otherwise. Under the terms of the Assignment the Company acquired the entire right, title, interest and ownership in and to the Thomas Persona, including the sole and exclusive right to commercially use the Thomas Persona.
SEASONALITY
The Company's business is moderately seasonal. Average restaurant sales are normally higher during the summer months than during the winter months.
WORKING CAPITAL PRACTICES
Cash from operations, cash and investments on hand, and possible asset sales, should enable the Company to meet its financing requirements. In addition, the Company has available unused lines of credit.
COMPETITION
Each company and franchised restaurant is in competition with other food service operations within the same geographical area. The quick-service restaurant industry is highly competitive. The Company competes with other organizations primarily through the quality, variety and value perception of food products offered. The number and location of units, quality and speed of service, attractiveness of facilities, effectiveness of marketing and new product development by the Company and its competitors are also important factors. The price charged for each menu item may vary from market to market depending on competitive pricing and the local cost structure.
The Company's competitive position at its Wendy's restaurants is enhanced by its use of fresh ground beef, its unique and diverse menu, promotional products, its wide choice of condiments and the atmosphere and decor of its restaurants. Hortons is known for the freshness of its wide variety of baked goods and for its excellent coffee.
RESEARCH AND DEVELOPMENT
The Company engages in research and development on an ongoing basis, testing new products and procedures for possible introduction into the Company's systems. While research and development operations are considered to be of prime importance to the Company, amounts expended for these activities are not deemed material.
GOVERNMENT REGULATIONS
A number of states have enacted legislation which, together with rules promulgated by the Federal Trade Commission, affect companies involved in franchising. Much of the legislation and rules adopted have been aimed at requiring detailed disclosure to a prospective franchisee and periodic registration by the franchisor with state administrative agencies. Additionally, some states have enacted, and others have considered, legislation which governs the termination or non-renewal of a franchise agreement and other aspects of the franchise relationship. The United States Congress has also considered legislation of this nature. The Company has complied with requirements of this type in all applicable jurisdictions. The Company cannot predict the effect on its operations, particularly on its relationship with franchisees, of future enactment of additional legislation. Various other government initiatives such as minimum wage rates and taxes can all have a significant impact on the Company's performance.
ENVIRONMENT AND ENERGY
Various federal, state and local regulations have been adopted which affect the discharge of materials into the environment or which otherwise relate to the protection of the environment. The Company does not believe that such regulations will have a material effect on its capital expenditures, earnings or competitive position. The Company cannot predict the effect of future environmental legislation or regulations.
The Company's principal sources of energy for its operations are electricity and natural gas. To date, the supply of energy available to the Company has been sufficient to maintain normal operations.
ACQUISITIONS AND DISPOSITIONS
The Company has from time to time acquired the interests of and sold Wendy's restaurants to franchisees, and it is anticipated that the Company may have opportunities for such transactions in the future. The Company generally retains a right of first refusal in connection with any proposed sale of a franchisee's interest. The Company will continue to sell and acquire Wendy's restaurants in the future where prudent.
See Notes 8 and 9 on page AA-20 of the Financial Statements and Other Information furnished with the Company's 2001 Proxy Statement, which Notes are incorporated herein by reference, for further information regarding acquisitions and dispositions.
INTERNATIONAL OPERATIONS
Markets in Canada are currently being developed for both company owned and franchised restaurants. The Company has granted development rights for the countries and territories listed under Item 2 on page 7 of this Form 10-K.
FRANCHISED WENDY'S RESTAURANTS
As of December 31, 2000, the Company's franchisees operated 4,639 Wendy's restaurants in 50 states, the District of Columbia and 26 other countries and territories.
The rights and franchises under which most franchised restaurants in the United States are operated are set forth in one basic document, the Restaurant Franchise Agreement. This document gives the franchisee the right to construct, own and operate a Wendy's restaurant upon a site accepted by Wendy's and to use the Wendy's system in connection with the operation of the restaurant at that site. Since 1995, the Company has used a revised form of agreement, the Wendy's Unit Franchise Agreement, for new franchised restaurants operated in the United States.
Wendy's has in the past franchised under different agreements on a multi-unit basis; however, now it is generally the intent of the Company to grant new franchises both in the United States and foreign countries on a unit-by-unit basis.
After having submitted to Wendy's the requested application and financial materials, if initially approved by Wendy's, an individual becomes an approved applicant upon the execution of a Preliminary Letter Agreement. This Preliminary Letter Agreement does not guarantee that the applicant will be accepted as a Wendy's franchisee but entitles the applicant to commence a training program, intended to allow both parties the opportunity to more carefully assess a long-term franchise relationship. For existing franchisees who in Wendy's opinion are not in need of additional training or part of a special program, the Preliminary Letter Agreement may not be necessary. Upon the execution of a Preliminary Letter Agreement, the applicant is required to pay a non-refundable fee of $5,000 to help defray some of the cost of initial orientation, the processing of the application and background investigation.
Both the Restaurant Franchise Agreement and the Wendy's Unit Franchise Agreement require that the franchisee pay a royalty of 4% of gross sales, as defined in the applicable agreement, from the operation of the restaurant. Both Agreements also typically require that the franchisee pay the Company a technical assistance fee. In the United States, the technical assistance fee required under newly executed Wendy's Unit Franchise Agreements is currently $25,000 for each restaurant.
The technical assistance fee is used to defray some of the cost to the Company in providing technical assistance in the development of the Wendy's restaurant, initial training of franchisees or their operator and in providing other assistance associated with the opening of the Wendy's restaurant. In certain limited instances (like the regranting of franchise rights or the relocation of an existing restaurant), Wendy's may charge a reduced technical assistance fee or may waive the technical assistance fee. The Company does not select or employ personnel on behalf of the franchisees.
Wendy's currently offers to qualified franchisees, pursuant to its Franchise Real Estate Development program, the option of having Wendy's locate and secure real estate for new store development. Wendy's obtains all licenses and permits necessary to construct and operate the restaurant, with the franchisee having the option of building the restaurant or having Wendy's construct it. The franchisee pays Wendy's a fee for this service and reimburses Wendy's for all out-of-pocket costs and expenses Wendy's incurs in locating, securing, and/or constructing the new store.
The rights and franchises currently offered for international development are contained in the Franchise Agreement and Services Agreement (the Agreements) which are issued upon approval of a restaurant site. The Agreements are for an initial term of 10 years or the term of the lease for the restaurant site, whichever is shorter. The Agreements license the franchisee to use the Company's trademarks and know-how in the operation of the restaurant. Upon execution of the Agreements, the franchisee is required to pay a technical assistance fee. Generally, the technical assistance fee is $30,000 for each restaurant. Currently, the franchisee is required to pay monthly fees, usually 4%, based on the monthly gross sales of the restaurant, as defined in the Agreements.
See Schedule II on page 14 of this Form 10-K, and Management's Review and Outlook on pages AA-1 through AA-7 and Note 10 on page AA-20 of the Financial Statements and Other Information furnished with the Company's 2001 Proxy Statement (Management's Review and Outlook and Note 10 are incorporated herein by reference) for further information regarding reserves, commitments and contingencies involving franchisees.
FRANCHISED HORTONS UNITS
Hortons franchisees operate under several types of license agreements. The typical term of a license agreement for a standard type of unit is 10 years plus aggregate renewal period(s) of approximately 10 years.
In Canada, for franchisees who lease land and/or buildings from Hortons, the license agreement generally requires between 3% and 4.5% of weekly gross sales of the restaurant, as defined in the license agreement, for royalties plus a monthly rental which is the greater of a base monthly rental payment or a percentage (usually 10%) rental payment based on monthly gross sales, as defined in the license agreement. Where the franchisee either owns the premises or leases it from a third party, the royalty required is increased by 1.5%. In the United States, for franchisees who lease land and/or buildings from Hortons, the license agreement generally requires 4.5% of weekly gross sales of the restaurant, as defined in the license agreement, for royalties plus a monthly rental which is the greater of a base monthly rental payment or a percentage (usually 8.5%) rental payment based on monthly gross sales, as defined in the license agreement.
Hortons generally retains the right to reacquire a franchisee's interest in a restaurant in the event the franchisee wants to sell its interest during the first five years of the term of the license agreement. After such period, Hortons generally retains a right of first refusal with regard to any proposed transfer of the franchisee's interest in the restaurant, together with the right to consent to any transfer to a new franchisee.
ADVERTISING AND PROMOTIONS
Products sold by Wendy's restaurants are advertised through television, radio, newspapers and a variety of promotional campaigns. The Company attempts to keep franchisees informed of current advertising techniques and effective promotions. The Company's advertising materials are also made available to the franchisees. Both the Restaurant Franchise Agreement and the Wendy's Unit Franchise Agreement provide that franchisees will spend 4% of their gross sales, as defined in the applicable agreement, for advertising and promotions. The Restaurant Franchise Agreement specifies 2% is to be spent on local and regional advertising (including in many cases cooperative advertising) and 2% is the required contribution to The Wendy's National Advertising Program, Inc. (WNAP). Under the Restaurant Franchise Agreement, the Company has the ability to increase the required local and regional expenditures to 3%, for a total of 5% for advertising and promotions, subject to certain conditions.
The Company has the ability under the Wendy's Unit Franchise Agreement to specify and to change the 4% advertising and promotions allocation subject to certain restrictions. Currently, the Company requires franchisees under the Wendy's Unit Franchise Agreement to allocate 2% to local and regional advertising and promotions and 2% to national advertising and promotions. In addition, under that agreement the Company may increase the total advertising and promotions contribution to 5% for franchisees operating restaurants pursuant to that agreement, if such increase is approved by an affirmative vote representing 75% or more of all domestic Wendy's restaurants.
Since 1993, a systemwide vote has been taken on a proposal to increase national advertising for the following calendar year(s). This voluntary program reallocates the 4% required minimum advertising expenditures such that 2.5% goes toward national advertising and 1.5% toward local and regional advertising. The 1999 systemwide vote approved reallocation through the end of fiscal year 2001. For the period from September 1, 1998 through February 28, 1999, the national advertising contribution rate was temporarily reduced to 1.75%. In 2001, a systemwide vote was taken to increase the national advertising contribution rate to 3% for fiscal years ended 2002 and 2003 and reduce the local and regional advertising rate to 1%. In 2004, these minimum requirements will revert back to 2% for national and 2% for local and regional advertising unless a new systemwide vote in 2003 approves reallocation for 2004.
In 2000, 1999 and 1998, approximately $152 million, $144 million and $126 million, respectively, was spent on advertising, promotions and related expenses by WNAP. WNAP is a not-for-profit corporation which was established to collect and administer the funds contributed by the Company and all domestic franchisees. WNAP's Trustees are comprised of representatives of both the Company and its franchisees.
Products sold by Wendy's Canada franchise and corporate restaurants are advertised through television, radio and a variety of promotional campaigns. Wendy's Canadian Advertising Program Inc. (WCAP) provides Wendy's Canada corporate and franchise restaurants (excluding Quebec, where all advertising is done locally) with in-store advertising and promotional materials. WCAP currently collects approximately 2.75% of monthly gross sales, as defined in the franchise agreement, from Wendy's Canada franchise and corporate restaurants (excluding Quebec) as contributions to this fund. During 2000, 1999 and 1998, approximately $8.8 million, $8.1 million and $7.4 million, respectively, was spent by WCAP.
Products sold by Wendy's international restaurants outside of Canada are advertised through various media including television, radio, newspaper and a variety of promotional campaigns. Most international franchisees are required by their franchise agreement to spend at least 4% of the gross sales of their restaurants, as defined in the franchise agreement, on advertising and marketing. The Company assists its international franchisees in preparing and executing marketing plans and endeavors to keep its international franchisees informed of current advertising techniques and effective promotions.
See Note 12 on page AA-21 of the Financial Statements and Other Information furnished with the Company's 2001 Proxy Statement, which Note is incorporated herein by reference, for further information regarding advertising.
PERSONNEL
As of December 31, 2000, the Company employed approximately 44,000 people, of whom approximately 41,000 were employed in company operated restaurants. The total number of full-time employees at that date was approximately 7,700. The Company believes that its employee relations are satisfactory.
ITEM 2. PROPERTIES
Wendy's uses outside contractors in the construction of its restaurants. The restaurants are built to Company specifications as to exterior style and interior decor. The majority are free-standing, one-story brick buildings, substantially uniform in design and appearance, constructed on sites of approximately 40,000 square feet, with parking for approximately 45 cars. Some restaurants, located in downtown areas or shopping malls, are of a store-front type and vary according to available locations but generally retain the standard sign and interior decor. The typical new free-standing restaurant contains about 2,910 square feet and has a food preparation area, a dining room capacity for 94 persons and a double pick-up window for drive-through service. The restaurants are generally located in urban or heavily populated suburban areas, and their success depends upon serving a large number of customers. Wendy's also operates restaurants in special site locations such as travel centers, gas station/convenience stores, military bases, arenas, malls, hospitals, airports and college campuses.
Hortons uses outside contractors in the construction of its restaurants. The restaurants are built to Company specifications as to exterior style and interior decor. The standard Hortons restaurant currently being built consists of a free-standing producing unit ranging from 2,500 to 3,030 square feet. Each of these includes a bakery capable of supplying fresh baked goods every 12 hours to several satellite Hortons within a defined area. In addition, Hortons has restaurants ranging from 550 to 2,250 square feet without bakery facilities, 550 to 800 square feet drive-through-only units, kiosks, full-service carts and mobile carts which are typically located in high traffic areas.
There are also Wendy's and Hortons concepts combined in one free-standing unit which averages about 5,200 square feet. This unit shares a common dining room seating 104 persons. Each unit has separate food preparation and storage areas and most have separate pick-up windows for each concept.
The Company remodels its restaurants on a periodic basis to maintain a fresh image, providing convenience for its customers and increasing the overall efficiency of restaurant operations.
At December 31, 2000, the Company and its franchisees operated 5,792 Wendy's restaurants in the locations listed under Item 2 on page 7 of this Form 10-K. Of the 1,153 company operated Wendy's restaurants, the Company owned the land and building for 512 restaurants, owned the building and held long-term land leases for 387 restaurants and held leases covering land and building for 254 restaurants. The Company's land and building leases are written for terms of 10 to 25 years with one or more five-year renewal options. In certain lease agreements the Company has the option to purchase the real estate. Certain leases require the payment of additional rent equal to a percentage (ranging from 1% to 10%) of annual sales in excess of specified amounts. Some of the real estate owned by the Company is subject to mortgages which mature over various terms. The Company also owned land and buildings for, or leased, 497 Wendy's restaurant locations which were leased or subleased to franchisees. Surplus land and buildings are generally held for sale.
At December 31, 2000, there were 1,980 Hortons units, of which all but 105 were franchise operated. Of the 1,875 franchised units, 359 were owned by Hortons and leased to franchisees, 1,076 were leased by Hortons and in turn subleased to a franchisee, with the remainder either owned or leased directly by the franchisee.
DOMESTIC WENDY'S DOMESTIC TIM HORTONS
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STATE COMPANY FRANCHISE COMPANY FRANCHISE
Alabama - 97 - -
Alaska - 10 - -
Arizona 33 41 - -
Arkansas - 54 - -
California 14 193 - -
Colorado 35 69 - -
Connecticut 1 32 - -
Delaware - 18 - -
Florida 105 293 - -
Georgia 39 206 - -
Idaho - 21 - -
Illinois 87 106 - -
Indiana 3 163 - -
Iowa - 38 - -
Kansas 16 49 - -
Kentucky 2 116 1 -
Louisiana 54 51 - -
Maine 2 14 3 2
Maryland - 112 - -
Massachusetts 48 24 - -
Michigan 33 195 23 22
Minnesota 25 21 - -
Mississippi 1 72 - -
Missouri 18 62 - -
Montana - 15 - -
Nebraska - 32 - -
Nevada - 46 - -
New Hampshire 2 20 - -
New Jersey 15 104 - -
New Mexico - 32 - -
New York 59 146 - 22
North Carolina 30 175 - -
North Dakota - 8 - -
Ohio 113 304 30 15
Oklahoma - 41 - -
Oregon 15 40 - -
Pennsylvania 80 162 - -
Rhode Island 5 11 - -
South Carolina - 105 - -
South Dakota - 9 - -
Tennessee - 171 - -
Texas 72 256 - -
Utah 41 17 - -
Vermont - 3 - -
Virginia 41 139 - -
Washington 26 38 - -
West Virginia 19 48 1 1
Wisconsin - 63 - -
Wyoming - 13 - -
District of Columbia - 6 - -
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1,034 4,061 58 62
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INTERNATIONAL WENDY'S INTERNATIONAL TIM HORTONS
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COUNTRY/TERRITORY COMPANY FRANCHISE COMPANY FRANCHISE
Aruba - 3 - -
Bahamas - 5 - -
Canada 114 210 47 1,813
Cayman Islands - 1 - -
Colombia - 3 - -
Curacao - 2 - -
Dominican Republic - 6 - -
El Salvador - 7 - -
Greece - 9 - -
Guam 4 - - -
Guatemala - 7 - -
Hawaii 1 4 - -
Honduras - 16 - -
Hungary - 3 - -
Iceland - 1 - -
Indonesia - 27 - -
Jamaica - 2 - -
Japan - 100 - -
Mexico - 9 - -
New Zealand - 12 - -
Panama - 2 - -
Philippines - 49 - -
Puerto Rico - 35 - -
Saudi Arabia - 13 - -
United Kingdom - 3 - -
Venezuela - 47 - -
Virgin Islands - 2 - -
---- --- ---- -----
119 578 47 1,813
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ITEM 3. LEGAL PROCEEDINGS
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
This information is incorporated herein by reference from page AA-26 of the Financial Statements and Other Information furnished with the Company's 2001 Proxy Statement.
ITEM 6. SELECTED FINANCIAL DATA
This information is incorporated herein by reference from page AA-26 of the Financial Statements and Other Information furnished with the Company's 2001 Proxy Statement.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Management's Review and Outlook on pages AA-1 through AA-7 of the Financial Statements and Other Information furnished with the Company's 2001 Proxy Statement is incorporated herein by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
This information is incorporated herein by reference from page AA-5 of the Management's Review and Outlook in the Financial Statements and Other Information furnished with the Company's 2001 Proxy Statement.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Consolidated Financial Statements of the Company at December 31, 2000 and January 2, 2000, and for each of the three fiscal years in the periods ended December 31, 2000, January 2, 2000 and January 3, 1999, and the Report of Independent Accountants on these Consolidated Financial Statements are incorporated herein by reference from pages AA-8 through AA-24 of the Financial Statements and Other Information furnished with the Company's 2001 Proxy Statement.
The Report of Independent Accountants on the Company's Consolidated Financial Statement Schedule is included on page 13 of this report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
ITEMS 10, 11, 12, AND 13. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT; EXECUTIVE COMPENSATION; SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT; AND CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
EXECUTIVE OFFICERS OF THE REGISTRANT
NAME AGE POSITION WITH COMPANY OFFICER SINCE R. David Thomas 68 Senior Chairman of the Board and Founder, Director 1969 John T. Schuessler 50 Chief Executive Officer and President, Director 1983 Kerrii B. Anderson 43 Executive Vice President and Chief Financial Officer, Director 2000 Thomas J. Mueller 49 President and Chief Operating Officer - Wendy's North America 1998 Donald F. Calhoon 49 Executive Vice President 1984 Kathie T. Chesnut 49 Executive Vice President 1990 George Condos 47 Executive Vice President 1982 Kathleen A. McGinnis 49 Executive Vice President 1989 Ronald E. Musick 60 Executive Vice President, Director 1986 Edward L. Austin 43 Senior Vice President 1990 John F. Brownley 58 Senior Vice President and Treasurer 1981 Edward K. Choe 41 Senior Vice President 1998 Joyce L. Eufemi 54 Senior Vice President 1993 Stephen D. Farrar 50 Senior Vice President 1984 Brion G. Grube 49 Senior Vice President 1990 Lawrence A. Laudick 53 Senior Vice President, General Controller and Assistant Secretary 1976 Leon M. McCorkle, Jr. 60 Senior Vice President, General Counsel and Secretary 1998 Jack C. Whiting 51 Senior Vice President 1987 |
No arrangements or understandings exist pursuant to which any person has been, or is to be, selected as an officer, except in the event of a change in control of the Company, as provided in the Company's Key Executive Agreements. The executive officers of the Company are appointed by the Board of Directors.
Except as set forth below, each of the above individuals has held the same principal occupation with the Company for at least the last five years.
Mr. Schuessler joined the Company in 1974. He served in Company Operations as Regional Vice President from 1983 to 1984, Zone Vice President from 1984 to 1986, and Division Vice President from 1986 until 1987, when he was promoted to Senior Vice President of the Northeast Region. In 1995, Mr. Schuessler was promoted to Executive Vice President of U.S. Operations. He was named President and Chief Operating Officer, U.S. Operations in 1997, and Chief Executive Officer and President on March 16, 2000.
Mrs. Anderson joined the Company in 2000 as Executive Vice President and Chief Financial Officer. Prior to joining the Company, Mrs. Anderson had held the titles of Senior Vice President and Chief Financial Officer of M/I Schottenstein Homes, Inc. since 1987. She was also Secretary of M/I Schottenstein Homes, Inc. from 1987 to 1994 and Assistant Secretary from 1994 until she joined the Company.
Mr. Mueller joined the Company in 1998 as Senior Vice President, Special Projects, and in 1999 he was named Senior Vice President for the Northeast Region. In 2000, Mr. Mueller was named President and Chief Operating Officer - Wendy's North America. Prior to joining the Company, Mr. Mueller was with Burger King from 1973 to 1997, where his most recent position was Senior Vice President, North American Operations.
Mr. Calhoon joined the Company in 1978 and held various positions with the Company until being named Vice President, Field Marketing in 1984. In 1989 he was promoted to Vice President, Corporate Marketing and in 1995 was named Senior Vice President, Corporate Marketing. In 2000, Mr. Calhoon was named Executive Vice President, Corporate Marketing.
Mrs. Chesnut joined the Company in 1990 as Vice President, Special Projects. In 1991, Mrs. Chesnut was named Vice President, Research and Development and in 1994, she was promoted to Senior Vice President, Research and Development, Quality Assurance and Purchasing. In 2000, Mrs. Chesnut was promoted to Executive Vice President, Research and Development, Quality Assurance and Supply Chain Management. Prior to joining the Company, she was with Showbiz Pizza Time, Inc. as Director of Research and Development.
Mrs. McGinnis joined the Company in 1989 as Senior Vice President - Human Resources and Training. In 2000, Mrs. McGinnis was named Executive Vice President - Human Resources and Training.
Mr. Austin joined the Company in 1976. Before being named Senior Vice President of the Southeast Region in 1996, Mr. Austin had held the position of Division Vice President for the New Orleans Division since 1994 and for the Los Angeles Division since 1990.
Mr. Choe joined the Company in 1996 and was promoted to Division Vice President for the Northeast Region in 1998. In 2000 Mr. Choe was named Senior Vice President of the Northeast Region. Prior to joining the Company, Mr. Choe had 13 years of experience with one of the Company's franchisees, Wenco Food Systems, where his most recent position was Chief Operating Officer.
Mr. Grube joined the Company in 1990 as Division Vice President and was promoted to Senior Vice President - Canada in 1993. In January 2001, Mr. Grube was promoted to Senior Vice President - International Wendy's. Before joining the Company, Mr. Grube was with Imperial Savings Association from 1988 to 1990. Prior to that time, Mr. Grube spent 12 years with Pizza Hut, Inc.
Mr. Laudick joined the Company in 1976 as Assistant Controller. He was named Controller in 1977, General Controller in 1981, Vice President and General Controller in 1983 and Senior Vice President and General Controller in 1997. Mr. Laudick has also served as Assistant Secretary since 1976.
Mr. McCorkle joined the Company in 1998 as Senior Vice President and General Counsel. He was also named Secretary of the Company in 2000. Prior to joining the Company, he was a senior partner of Vorys, Sater, Seymour and Pease LLP.
The information required by these Items, other than the information set forth above, is omitted and incorporated herein by reference from the Company's 2001 Proxy Statement dated March 6, 2001. However, no information set forth in the 2001 Proxy Statement regarding the Audit Committee Report (pages 7-8), the Report of the Compensation Committee on Executive Compensation (pages 11-14) or the performance graph (page 15) shall be deemed incorporated by reference into this Form 10-K.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) (1) and (2) - The following Consolidated Financial Statements of Wendy's International, Inc. and Subsidiaries, included in the Financial Statements and Other Information furnished with the Company's 2001 Proxy Statement on pages AA-8 to AA-24 and incorporated by reference in Item 8, are filed as part of this Annual Report on Form 10-K.
Consolidated Statements of Income - Years ended December 31, 2000, January 2, 2000 and January 3, 1999.
Consolidated Balance Sheets - December 31, 2000 and January 2, 2000.
Consolidated Statements of Cash Flows - Years ended December 31, 2000, January 2, 2000 and January 3, 1999.
Consolidated Statements of Shareholders' Equity - Years ended December 31, 2000, January 2, 2000 and January 3, 1999.
Consolidated Statements of Comprehensive Income - Years ended December 31, 2000, January 2, 2000 and January 3, 1999.
(3) Listing of Exhibits - See Index to Exhibits.
The following management contracts or compensatory plans or arrangements are required to be filed as exhibits to this report:
Sample Restated Key Executive Agreement between the Company and Messrs. Brownley, Calhoon, Condos, Grube, Laudick, McCorkle, Mueller, Musick, Rath, Schuessler, Thomas, Mrs. Anderson, Mrs. Chesnut and Mrs. McGinnis.
Sample Key Executive Agreement between the Company, The TDL Group Ltd. and Mr. House.
Assignment of Rights Agreement between the Company and Mr. Thomas.
Employment Agreement between The TDL Group Ltd. (a subsidiary of the Company) and Mr. Joyce.
Amendment to Employment Agreement between The TDL Group Ltd. and Mr. Joyce.
Employment Agreement between The TDL Group Co. (a subsidiary of the Company), Mr. Joyce and the Company.
Amended and Restated Senior Executive Earnings Maximization Plan.
(b) No report on Form 8-K was filed during the quarter ended December 31, 2000.
(c) Exhibits filed with this report are listed in the Index to Exhibits.
(d) The following Consolidated Financial Statement Schedule of Wendy's International, Inc. and Subsidiaries is included in Item 14(d): II - Valuation and Qualifying Accounts.
All other schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission are not required under the related instructions, are inapplicable, or the information has been disclosed elsewhere.
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
By /s/ KERRII B. ANDERSON 3/26/01
---------------------------------------------
Kerrii B. Anderson
Executive Vice President
and Chief Financial Officer
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Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
/s/ R. DAVID THOMAS* 3/26/01 /s/ RONALD V. JOYCE* 3/26/01
-------------------------------------------- -----------------------------------------
R. David Thomas, Ronald V. Joyce, Director
Senior Chairman of the Board and
Founder, Director
/s/ JOHN T. SCHUESSLER* 3/26/01 /s/ KERRII B. ANDERSON 3/26/01
-------------------------------------------- -----------------------------------------
John T. Schuessler, Chief Executive Officer Kerrii B. Anderson, Executive Vice President
and President, Director and Chief Financial Officer, Director
/s/ RONALD E. MUSICK* 3/26/01 /s/ PAUL D. HOUSE* 3/26/01
-------------------------------------------- -----------------------------------------
Ronald E. Musick, Executive Vice Paul D. House, Director
President, Director
/s/ LAWRENCE A. LAUDICK* 3/26/01 /s/ ERNEST S. HAYECK* 3/26/01
-------------------------------------------- -----------------------------------------
Lawrence A. Laudick, Senior Vice Ernest S. Hayeck, Director
President, General Controller
and Assistant Secretary
/s/ JANET HILL* 3/26/01 /s/ THOMAS F. KELLER* 3/26/01
-------------------------------------------- -----------------------------------------
Janet Hill, Director Thomas F. Keller, Director
/s/ WILLIAM E. KIRWAN* 3/26/01 /s/ TRUE H. KNOWLES* 3/26/01
-------------------------------------------- -----------------------------------------
William E. Kirwan, Director True H. Knowles, Director
/s/ DAVID P. LAUER* 3/26/01 /s/ ANDREW G. McCAUGHEY* 3/26/01
-------------------------------------------- -----------------------------------------
David P. Lauer, Director Andrew G. McCaughey, Director
/s/ THEKLA R. SHACKELFORD* 3/26/01
-------------------------------------------- -----------------------------------------
James V. Pickett, Director Thekla R. Shackelford, Director
*By /s/ KERRII B. ANDERSON 3/26/01
-----------------------------------------
Kerrii B. Anderson,
Attorney-in-Fact
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TO THE BOARD OF DIRECTORS AND
SHAREHOLDERS OF WENDY'S INTERNATIONAL, INC.
Our audits of the consolidated financial statements referred to in our report dated February 9, 2001, appearing on page AA-24 of the Financial Statements and Other Information furnished with the 2001 Proxy Statement of Wendy's International, Inc. (which report and consolidated financial statements are incorporated by reference in this Annual Report on Form 10-K) also included an audit of the Financial Statement Schedule listed in Item 14(d) of this Form 10-K. In our opinion, this Financial Statement Schedule presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements.
Columbus, Ohio /s/ PricewaterhouseCoopers LLP February 9, 2001 |
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (File Nos. 2-67253, 2-98696, 33-18177, 2-82823, 33-36602, 33-36603, 333-9261, 333-32675, 33-57913, 333-60031, 333-60033, 333-83973 and 333-42478) of Wendy's International, Inc. of our reports dated February 9, 2001, on our audits of the consolidated financial statements and financial statement schedule of Wendy's International, Inc. and Subsidiaries as of December 31, 2000 and January 2, 2000 and for the years ended December 31, 2000, January 2, 2000 and January 3, 1999, which appear or are incorporated by reference in this Annual Report on Form 10-K.
Columbus, Ohio /s/ PricewaterhouseCoopers LLP
March 26, 2001
PricewaterhouseCoopers LLP
|
BALANCE AT CHARGED (CREDITED) BALANCE AT
BEGINNING TO COSTS & ADDITIONS END OF
CLASSIFICATION OF YEAR EXPENSES (DEDUCTIONS) (a) YEAR
Fiscal year ended December 31, 2000:
Reserve for royalty receivables $ 1,663 $ 380 $ (426) $ 1,617
Reserve for possible franchise-
related losses & contingencies 6,012 1,106 (438) 6,680
-------- -------- -------- --------
$ 7,675 $ 1,486 $ (864) $ 8,297
-------- -------- -------- --------
Fiscal year ended January 2, 2000:
Reserve for royalty receivables $ 2,998 $ (275) $ (1,060) $ 1,663
Reserve for possible franchise-
related losses & contingencies 17,282 2,371 (13,641)(b) 6,012
-------- -------- -------- --------
$ 20,280 $ 2,096 $(14,701) $ 7,675
-------- -------- -------- --------
Fiscal year ended January 3, 1999:
Reserve for royalty receivables $ 1,962 $ 1,237 $ (201) $ 2,998
Reserve for possible franchise-
related losses & contingencies 5,883 12,012 (613) 17,282
-------- -------- -------- --------
$ 7,845 $ 13,249 $ (814) $ 20,280
-------- -------- -------- --------
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(a) Primarily represents reserves written off or reversed due to the resolution of certain franchise situations.
(b) The decline in the reserves during 1999 substantially all relates to the franchisee settlement in Argentina (see Note 2 to the Consolidated Financial Statements).
Year-end balances are reflected in the Consolidated Balance Sheet as follows:
DECEMBER 31, JANUARY 2, JANUARY 3,
2000 2000 1999
---- ---- ----
Deducted from accounts receivable $ 5,544 $ 5,362 $ 7,816
Deducted from notes receivable - current 114 467 596
Deducted from notes receivable - long-term 2,639 1,846 11,350
Included in accrued expenses - other 518
------- ------- -------
$ 8,297 $ 7,675 $20,280
------- ------- -------
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EXHIBIT DESCRIPTION WHERE FOUND
2(a) Share Purchase Agreement, dated as of Incorporated herein by reference from
October 31, 1995, by and among Wendy's Exhibit 2 of Form 10-Q for the quarter
International, Inc., 1149658 Ontario Inc., ended October 1, 1995.
632687 Alberta Ltd. and Ronald V. Joyce
(b) Amendment to the Share Purchase Incorporated herein by reference to Exhibit 2.2
Agreement, dated as of December 28, to Ronald V. Joyce's Schedule 13D, dated
1995, by and among Wendy's International, January 5, 1996.
Inc., 1149658 Ontario Inc., 1052106
Ontario Limited and Ronald V. Joyce
(c) Agreement between Ronald V. Joyce, Incorporated herein by reference from Exhibit 2
WENTIM, LTD., Wendy's International, Inc. of Form 10-Q for the quarter ended October 4,
and the Irrevocable Trust for the Benefit of 1998.
Ronald V. Joyce, dated as of September 16, 1998
(d) Amendment to Share Purchase Agreement, Incorporated herein by reference from Exhibit
dated as of February 25, 1999, by and among 2(d) of Form 10-K for the year ended January 3,
Wendy's International, Inc., WENTIM, LTD. 1999.
and Ronald V. Joyce
(e) Share Exchange Agreement, dated as of Incorporated herein by reference to Exhibit 2.3
December 29, 1995, by and among to Ronald V. Joyce's Schedule 13D, dated
Wendy's International, Inc., 1149658 Ontario January 5, 1996.
Inc., and Ronald V. Joyce
(f) Amending Agreement No. 2 to the Share Incorporated herein by reference from Exhibit
Exchange Agreement, dated as of February 25, 2(f) of Form 10-K for the year ended January 3,
1999, by and among Wendy's International, 1999.
Inc., WENTIM, LTD. and Ronald V. Joyce
(g) Provisions attaching to Exchangeable Incorporated herein by reference to Exhibit 2.4
Shares to Ronald V. Joyce's Schedule 13D, dated
January 5, 1996.
(h) Support Agreement, dated as of Incorporated herein by reference to Exhibit 2.5
December 29, 1995, by and among Wendy's to Ronald V. Joyce's Schedule 13D, dated
International, Inc., 1149658 Ontario Inc., January 5, 1996.
and Ronald V. Joyce
(i) Irrevocable Trust Agreement for the Benefit Incorporated herein by reference to Exhibit 2.6
of Ronald V. Joyce, dated as of December 29, to Ronald V. Joyce's Schedule 13D, dated
1995, between Dana Klein and The January 5, 1996.
Huntington Trust Company, N.A.
(j) Subscription Agreement, dated as of Incorporated herein by reference to Exhibit 2.7
December 29, 1995, by and between to Ronald V. Joyce's Schedule 13D, dated
the Irrevocable Trust for the Benefit January 5, 1996.
of Ronald V. Joyce and Wendy's
International, Inc.
(k) Amending Agreement No. 2 to the Incorporated herein by reference from Exhibit
Subscription Agreement, dated as of 2(k) of Form 10-K for the year ended January 3,
February 25, 1999, by and between the 1999.
Irrevocable Trust for the Benefit of Ronald
V. Joyce and Wendy's International, Inc.
(l) Guaranty Agreement, dated as of Incorporated herein by reference to Exhibit 2.8
December 29, 1995, by and between the to Ronald V. Joyce's Schedule 13D, dated
Irrevocable Trust for the Benefit of Ronald January 5, 1996.
V. Joyce and Ronald V. Joyce
(m) Amending Agreement No. 2 to the Guaranty Incorporated herein by reference from Exhibit
Agreement, dated as of February 25, 1999, by 2(m) of Form 10-K for the year ended January 3,
and between the Irrevocable Trust for the 1999.
Benefit of Ronald V. Joyce and Ronald V. Joyce
|
(n) Registration Rights Agreement, dated as of Incorporated herein by reference to Exhibit 2.10
December 29, 1995, by and between Wendy's to Ronald V. Joyce's Schedule 13D, dated
International, Inc. and Ronald V. Joyce January 5, 1996.
(o) Amending Agreement No. 1 to the Registration Incorporated herein by reference from Exhibit
Rights Agreement, dated as of February 25, 2(o) of Form 10-K for the year ended January 3,
1999, by and between Wendy's International, 1999.
Inc. and Ronald V. Joyce
3(a) Articles of Incorporation, as amended to Incorporated herein by reference from Exhibit
date 3(a) of Form 10-K for the year ended January 3
1999.
(b) New Regulations, as amended Incorporated herein by reference from
Exhibit 3 of Form 10-Q for the quarter
ended July 2, 2000.
*4(a) Indenture between the Company and The Incorporated herein by reference from
Huntington National Bank pertaining to 7% Form S-3 Registration Statement, File No.
debentures and 6.35% notes due December 15, 33-57101.
2025 and December 15, 2005, respectively
(b) Indenture for subordinated debt securities Incorporated herein by reference from
between the Company and NBD Bank, Exhibit 4(a) of Form 10-Q for the quarter
as trustee ended September 29, 1996.
(c) First Supplemental Indenture between the Incorporated herein by reference from
Company and NBD Bank Exhibit 4(b) of Form 10-Q for the quarter
ended September 29, 1996.
(d) Amended and Restated Declaration of Trust Incorporated herein by reference from
of Wendy's Financing I Exhibit 4(c) of Form 10-Q for the quarter
ended September 29, 1996.
(e) Certificate P-1 Evidencing Trust Preferred Incorporated herein by reference from
Securities of Wendy's Financing I Exhibit 4(d) of Form 10-Q for the quarter
ended September 29, 1996.
(f) Certificate P-2 Evidencing Trust Preferred Incorporated herein by reference from
Securities of Wendy's Financing I Exhibit 4(e) of Form 10-Q for the quarter
ended September 29, 1996.
(g) Preferred Securities Guarantee Agreement Incorporated herein by reference from
for the benefit of the holders of Trust Exhibit 4(f) of Form 10-Q for the quarter
Preferred Securities of Wendy's Financing I ended September 29, 1996.
(h) 5% Convertible Subordinated Debenture Incorporated herein by reference from
of the Company Exhibit 4(g) of Form 10-Q for the quarter
ended September 29, 1996.
(i) Amended and Restated Rights Agreement Incorporated herein by reference from Exhibit 1
between the Company and American Stock of Amendment No. 2 to Form 8-A/A
Transfer and Trust Company Registration Statement, File No. 1-8116, filed
on December 8, 1997.
(j) Amendment No. 1 to the Amended and Restated Incorporated herein by reference from Exhibit 2
Rights Agreement between the Company and of Amendment No. 3 to Form 8-A/A
American Stock Transfer and Trust Company Registration Statement, File No. 1-8116, filed
on January 26, 2001.
10(a) Sample Restated Key Executive Agreement Incorporated herein by reference from Exhibit
between the Company and Messrs. Brownley, 10(a) of Form 10-K for the year ended January 3,
Calhoon, Condos, Grube, Laudick, McCorkle, 1999.
Mueller, Musick, Rath, Schuessler, Thomas,
Mrs. Anderson, Mrs. Chesnut and Mrs. McGinnis
* Neither the Company nor its subsidiaries are party to any other
instrument with respect to long-term debt for which securities
authorized thereunder exceed 10 percent of the total assets of the
Company and its subsidiaries on a consolidated basis. Copies of
instruments with respect to long-term debt of lesser amounts will be
furnished to the Commission upon request.
|
(b) Sample Key Executive Agreement between Incorporated herein by reference from Exhibit
the Company, The TDL Group Ltd. and 10 of Form 10-Q for the quarter ended July
Mr. House 4, 1999.
(c) Assignment of Rights Agreement between Attached hereto.
the Company and Mr. Thomas
(d) Employment Agreement between The Incorporated herein by reference from
TDL Group Ltd. (a subsidiary of the Exhibit 10(f) of Form 10-K for the year
Company) and Ronald V. Joyce ended December 31, 1995.
(e) Amendment to Employment Agreement Incorporated herein by reference from
between The TDL Group Ltd. (a subsidiary Exhibit 10 of Form 10-Q for the quarter
of the Company)and Ronald V. Joyce ended March 31, 1996.
(f) Employment Agreement between The TDL Incorporated herein by reference from
Group Co. (a subsidiary of the Company), Exhibit 10 of Form 10-Q for the quarter
Ronald V. Joyce and the Company ended October 4, 1998.
(g) Amended and Restated Senior Executive Incorporated herein by reference from the
Earnings Maximization Plan Annex to the Company's Definitive 1999
Proxy Statement, dated March 10, 1999.
(h) Description of Earnings Maximization Plan Incorporated herein by reference from Exhibit
10(g) of Form 10-K for the year ended January
3, 1999.
(i) Description of Management Incentive Plan Incorporated herein by reference from Exhibit
10(h) of Form 10-K for the year ended January
3, 1999.
(j) Supplemental Executive Retirement Plan, Incorporated herein by reference from Exhibit
as amended 10(j) of Form 10-K for the year ended December
31, 1995.
(k) 1978 Non-Qualified Stock Option Plan, Incorporated herein by reference from Exhibit
as amended 10(k) of Form 10-K for the year ended January
2, 2000.
(l) 1982 Stock Option Plan, as amended Incorporated herein by reference from Exhibit
10(l) of Form 10-K for the year ended January
2, 2000.
(m) 1984 Stock Option Plan, as amended Incorporated herein by reference from Exhibit
10(m) of Form 10-K for the year ended January
2, 2000.
(n) 1987 Stock Option Plan, as amended Incorporated herein by reference from Exhibit
10(n) of Form 10-K for the year ended January
2, 2000.
(o) 1990 Stock Option Plan, as amended Incorporated herein by reference from
the Company's Definitive Proxy
Statement, dated March 7, 2000.
13 Portions of the Annual Report to Shareholders Incorporated herein by reference from the
set forth in the Financial Statements and Other Financial Statements and Other information
Information furnished with the Company's furnished with the Company's Definitive 2001
Definitive 2001 Proxy Statement, dated Proxy Statement, dated March 6, 2001.
March 6, 2001, as described in Parts I and II
of this Annual Report on Form 10-K.
21 Subsidiaries of the Registrant Attached hereto.
23 Consent of PricewaterhouseCoopers LLP Incorporated by reference to page 13
of this Form 10-K.
24 Powers of Attorney Attached hereto.
99 Safe harbor under the Private Securities Attached hereto.
Litigation Reform Act of 1995
|
ASSIGNMENT AGREEMENT, dated as of November 5, 2000 (the "Assignment Agreement"), by and among R. DAVID THOMAS A/K/A DAVE THOMAS a resident of Ft. Lauderdale, Florida ("THOMAS") and WENDY'S INTERNATIONAL, INC., an Ohio corporation ("WENDY'S).
WHEREAS, Wendy's is a corporation that engages in the Quick Service Restaurant business internationally and advertises and promotes it products and services through all of the major media;
WHEREAS, Thomas is the Founder and Senior Chairman of Wendy's, the international chain of restaurants that are dedicated to delivering food and service in a prompt manner ("Quick Service Restaurants" or "QSR"); and,
WHEREAS, Thomas also is the founder and currently a Trustee of the Dave Thomas Foundation for Adoption, Inc. ("Foundation"), which is dedicated to helping children find permanent homes and loving families; and,
WHEREAS, Wendy's has used Thomas as a spokesperson and focal point for Wendy's QSR products and services for many years and has, through its extensive investment in the advertising and promotional use of Thomas's name, likeness, image, voice, caricature, endorsement rights and photographs (the "Thomas Persona") made the Thomas Persona well known in the United States and throughout the world and a valuable asset for Thomas; and,
WHEREAS, Thomas has served as the chief spokesperson for Wendy's and has been featured in advertising campaigns (the "Dave Ads"); and,
WHEREAS, Thomas understands and acknowledges that the Thomas Persona asset has acquired increased value as a result of Wendy's use of Thomas as a spokesperson and focal point of the long running series of advertisements and, as a result of Wendy's promotion of the Thomas Persona, the Thomas Persona has become associated by the public as representative of Wendy's, its services and its products; and,
WHEREAS, both parties hereto desire to maintain the Wendy's - Thomas association in the public mind and to have Wendy's have the ability to use the Thomas Persona in advertising and as a spokesperson for Wendy's services and products; and,
WHEREAS, both parties recognize the importance of maintaining the status of the Thomas Persona throughout Thomas's life and after his death as a wholesome ideal free of any approbation by any segment of the public; and,
WHEREAS, the parties recognize that control of the use of the Thomas Persona must reside with one entity that has the longest range interest in maintaining the high ideal status of the Thomas Persona and because of the economic investment and risk of harm that would occur to Wendy's if the Thomas Persona were to become used in any manner adverse to said high ideals, the parties recognize that entity is Wendy's; and,
WHEREAS, pursuant to the terms and conditions of this Assignment Agreement, Thomas desires to assign to Wendy's, and Wendy's desires to assume from Thomas the entire right, title, interest and ownership in and to the Thomas Persona which ownership includes the sole and exclusive right to commercially use the Thomas Persona, including all Derivative Works of it (as defined herein).
NOW, THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants, agreements and conditions hereinafter set forth, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, and intending to be legally bound hereby, the parties hereto agree as follows:
For all purposes of this Assignment Agreement, except as otherwise expressly provided herein or unless the context otherwise requires, each of the following terms shall have the following respective meanings:
"AFFILIATE" and "ASSOCIATE" have the meanings prescribed by Rule 12b-2 of the regulations promulgated pursuant to the Securities Exchange Act of 1934, as amended and shall have the additional meaning of family members of the Thomas family and any and all heirs of R. David Thomas.
"DAMAGES" means lost profits, lost sales, diminution of the value of an asset, assessments, liabilities, costs and expenses, including, without limitation, interest, penalties and reasonable attorneys' fees, charges and disbursements and reasonable consultants' fees.
"WORK" means any use of the Thomas Persona or any of the Thomas Persona elements in any machine or human recognizable form now in existence or known or that are later developed, including without limitation to, print media, video, film, audio, three dimensional objects, books, music and other expressions of the intellect.
"DERIVATIVE WORKS" means all new work, in any and all media now in existence or known or that are later developed, which incorporate any elements of the Thomas Persona that have been or will be developed, created, and/or recorded, including, but not limited to, using present footage of Thomas in different settings than the original or with different audio tracks.
"GOVERNMENTAL AGENCY" means any federal, state, local, foreign or other governmental agency, instrumentality, commission, authority, board or body.
"PERSON" means any individual, corporation, partnership, limited liability company, association, joint-stock company, trust, unincorporated association, government and political subdivision thereof.
"PROPERTY RIGHTS" means the exclusive rights in and to the Thomas Persona and its individual elements including the registration rights in it and/or any Derivative Works as trademarks, copyrights, domain names or any other intellectual properties now or in the future recognized anywhere in the world and in perpetuity for any and all purposes, subject to the restrictions which Wendy's agrees to in Section 3.02(a) of this Assignment Agreement.
"SUBSIDIARY" means another Person (a) more than fifty percent (50%) of whose outstanding shares or securities (representing the right to vote for the election of directors or other managing authority) are owned or controlled, directly or indirectly, by a party hereto, or (b) that does not have outstanding shares of securities, as may be the case in a partnership, joint venture, limited liability company or unincorporated association, but more than fifty percent (50%) of the ownership interest representing the right to make the decisions for such corporation, company, or other entity is, now or hereafter, owned or controlled, directly or indirectly, by such party. Such corporation, company, or other entity shall be deemed to be a Subsidiary only so long as such ownership or control exists.
"TRADEMARK" or "MARK" means a name, brand, domain name, service mark and/or trademark registered or unregistered in any country or other political division anywhere in the world that is used to identify or is intended to identify the source of a service or product.
2.01. RIGHTS TRANSFERRED. Subject to the terms and conditions of this Assignment Agreement, Thomas irrevocably conveys, assigns, transfers and delivers to Wendy's all of his rights, title and interest in and to the Thomas Persona and all Property Rights associated therewith; provided, however, that Thomas, or his heirs, reserves the rights to receive all royalties and residuals for works he creates as an author or artist unrelated to and apart from the use of the Thomas Persona and for the use of the Thomas Persona as set forth in paragraph 7.04.
2.02. EXPRESS AGREEMENT. Except as and to the extent expressly provided in this Assignment Agreement, Wendy's has not agreed to assume, and will not have any liability or obligation with respect to, any liability or obligation, direct or indirect, absolute or contingent, of Thomas or any of Thomas's Associates or his Affiliates.
III. CONTROL OF AND USE OF THOMAS PERSONA
3.01. WENDY'S DISCRETION. Wendy's shall have full authority and discretion to use the Thomas Persona for any purpose it chooses, subject to covenants contained in Section 3.02.
3.02. COVENANTS REGARDING USE BY WENDY'S. Wendy's agrees to limit its use of the Thomas Persona solely to advertising, promotion, marketing, public relations, sales and related activities specifically pertaining to Wendy's as Wendy's is currently, or may in the future be, positioned provided that such use of the Thomas Persona does not lead to disparagement, ridicule or disrepute of Thomas during his lifetime or to the Thomas Persona after Thomas's death. Wendy's further agrees that it will at all times use the Thomas Persona in a manner, commensurate with Community Standards (as defined in Section 3.03(b)). Wendy's acknowledges that the Foundation, for so long as it maintains its present purpose and ideals, has an interest in the maintenance of the Thomas Persona as a wholesome family oriented image. In furtherance of Wendy's and the Foundation's obligations to maintain the quality image of the Thomas Persona in accordance with community standards, Wendy's shall license the Foundation to use the Thomas Persona as set forth in paragraph 3.04, such License to be executed concurrently with the execution of this Assignment. The License will provide for the Foundation to question Wendy's use of the Thomas Persona if, in the Foundation's reasonable belief, Wendy's use of the Thomas Persona does not meet the local community standards as described in paragraph 3.03 (b).
(a) CONTROL. To determine and enforce the community standards requirement, an independent Standards Committee will be created as set forth in Section 3.03 which Committee shall be convened at the request of Dave Thomas, during his life time and capacity to act independently; thereafter, in the event of Dave Thomas's death or incapacity, during the life of Dave Thomas's wife Lorraine's lifetime and capacity to act independently; and thereafter, in the event of Lorraine Thomas's death or incapacity, the lifetime and capacity of the adult lineal descendants of Dave Thomas (collectively the "Thomas Interests"), if in their view the use of the Thomas Persona by Wendy's is in a manner inconsistent with such standards.
Notwithstanding the establishment of a Community Standards Committee, Wendy's specifically agrees that it shall not, under any circumstances, use the Thomas Persona or any trademarks or other rights derived from the Thomas Persona which such rights identify Thomas, for any firearms, medical devices, pharmaceutical or over the counter drugs, including specifically, but without limitation to, alcohol, tobacco and/or birth control products and/or in support of services designed to promote birth control or the restriction of family size.
(a) COMPOSITION. The Standards Committee shall consist of a total of five (5) members reflecting the community at large, including one representative appointed from the Columbus Bar Association ("CBA"), one representative from the Columbus, Ohio Chamber of Commerce; one representative from the Columbus, Ohio chapter of the Council of Christians and Jews, and two members at-large, appointed by the Franklin County Probate Court from the Greater Columbus, Ohio community. The Court shall assure by its selection that Standards Committee shall at all times include at least one member that is a racial minority and shall contain members of different sexes. The Columbus Bar Association committee member shall be designated as the Chairman of the Standards Committee.
(b) PURPOSE AND GOVERNING STANDARD. The Standards Committee's purpose shall be to determine that the uses of the Thomas Persona by Wendy's comport with the community standards as represented by the Greater Columbus, Ohio community. The Committee shall be convened upon the request of the appropriate Thomas Interests on the one part or Wendy's on the other when either party disagrees on the appropriateness of a use of the Thomas Persona by Wendy's.
(c) PURPOSE OF ENDOWMENT. Wendy's shall initially endow the Standards Committee in an amount of not less than one hundred and fifty thousand dollars (US $150,000) which amount shall be placed in a trust account at a federally insured bank in Columbus, Ohio with a minimum of one hundred million dollars in assets (the "Endowment Fund") and the interest accrued thereon paid to Wendy's annually or, at Wendy's sole option, added to the principle in the trust account. Wendy's shall see that the trust amount is adjusted for inflation annually so that the trust amount remains at purchasing level equivalent to $150,000.00 in the year 2000. The Endowment Fund may be used as the Standards Committee deems reasonably appropriate including payment of an hourly rate to its members in the amount that they would charge clients or customers of their regular services, but in no instance more than an amount adjusted to equate to $250.00 per hour in the year 2000. The Endowment Fund may be used to pay for the services of a secretary as, if and when needed. Moreover, in the event a dispute arises between the Thomas Interests and Wendy's and the Procedure outlined in paragraph 3.03(d) hereof is instituted and the Standards Committee, in its sole discretion, determines that legal and/or expert advice is necessary for it to present its position, Endowment Fund money may be used for such purposes and shall be immediately replenished by Wendy's so that the initial amount is always available to the Standards Committee at any given time. It is contemplated by the parties hereto that the Standards Committee will only rarely need to convene.
(d) PROCEDURE. If, at any time, the Thomas Interests believes that any use of the Thomas Persona by Wendy's or its Affiliates or Associates is a disparaging use or use in a demeaning manner in violation of the Covenants of Section 3.02, the Thomas Interests may immediately notify Wendy's in writing, setting forth the reasons for the objection. Upon receipt of such notification, Wendy's shall have ten (10) days from the receipt thereof to respond to the objection with a written description of how it proposes to address the stated concerns. The Thomas Interests and Wendy's shall use their best efforts to resolve between themselves, all issues with respect to the disputed use.
(e) DISPUTE RESOLUTION. If the Thomas Interests and Wendy's are unable to reach a resolution with respect to the disputed use, they or either of them may ask that the Standards Committee be convened and may present the matter to the Standards Committee for determination upon procedures that are established by the Standards Committee which the parties hereto recommend should follow recognized arbitration proceeding procedures streamlined to the greatest extent possible to provide for as expedient and inexpensive resolution as possible. The decision of the Standards Committee shall be binding and final.
3.04. DAVE THOMAS FOUNDATION AND CHARITY WORK. The parties hereto agree and understand that Thomas is actively involved in the Foundation and that the Foundation has the name Dave Thomas in its corporate title. In order to protect the Property Rights acquired by Wendy's by this Agreement, to allow Thomas to continue his work in connection with the Foundation, to allow the Foundation to use "Dave Thomas" in its corporate title, to allow Thomas to use his Persona in the promotion of the Foundation during his lifetime and to allow the Foundation to use the Thomas Persona after Thomas's death for Foundation purposes as the Foundation is presently constituted, Wendy's shall contemporaneously with the signing of this Agreement execute a License Agreement with the Foundation in the form annexed hereto as Exhibit A (the "License Agreement"). The parties acknowledge and agree that the License Agreement shall and does require that the Foundation shall always make use of the Thomas Persona in a manner that is not adverse or inimical to the commercial interests of Wendy's and that Wendy's, as the owner of the Thomas Persona, shall have certain rights of quality control to assure that the Foundation's uses of the Thomas Persona are in accordance with the high standards the parties want to maintain for the use of the Thomas Persona.
3.05. OTHER PERMITTED ACTIVITIES OF THOMAS. During Thomas's lifetime Thomas shall be allowed to continue to use his name as his personal identification in connection with his activities on the Boards of, or in connection with, for profit and not-for-profit corporations, charities, clubs, fraternal and religious organizations and other worthwhile causes (collectively Thomas Associations) so long as such activities are not, in Wendy's reasonable opinion, inconsistent with Wendy's commercial interests. Wendy's agrees that Thomas's participation in the capacities and entities listed on Schedule A are not inconsistent with Wendy's commercial interests. It is specifically understood, acknowledged and agreed that Thomas may not allow his Persona, or any elements of it, to be used for any promotional, advertising, endorsement or other commercial or not-for-profit purposes the Thomas Associations with which he is associated without the prior written agreement by Wendy's who shall, in its sole discretion, determine whether to agree to such uses.
3.06. PROSCRIBED ACTIVITIES. The parties hereto, agree and understand that nothing herein is intended to prevent Thomas from associating with whomever he, in his sole discretion, pleases in his personal life; provided however, that Thomas understands that to the extent his personal life associations become matters of public interest, through news media or other public forums, and such associations cause embarrassment to Wendy's or cause it to lose goodwill with any segment of its market as Wendy's, in its sole discretion, shall decide or cause Wendy's to no longer be able to use the Thomas Persona for its products and services, Wendy's, in its sole discretion, can terminate this Agreement subject to the provisions of paragraph 6.02 below. Thomas therefore agrees to the following restrictions on his conduct and activities:
(a) POLITICAL ACTIVITIES. Thomas shall not seek or hold political office or seek to or hold an office in a political party or any other organization which, in Wendy's reasonable opinion, engages in causes or activities detrimental to Wendy's commercial interests. Nothing in the foregoing shall, however, restrict Thomas from belonging to (i) the Ft. Lauderdale Baptist Church, or (ii) any political party that qualifies for federal matching funds or (iii) personally associating with whomever he chooses at any time provided such associations do not bring disrepute or embarrassment to the Thomas Persona.
(b) NO DISREPUTABLE CONDUCT Thomas will, at all times, conduct himself with due regard to not bringing disrepute or embarrassment on the Thomas Persona or Wendy's or its products or otherwise impairing the ability of Wendy's to use the Thomas Persona as provided herein. Wendy's will, at all times, conduct itself with due regard to not bringing disrepute or embarrassment on Thomas or the Thomas Persona.
IV. PURCHASE PRICE
(a) The purchase price ("Purchase Price") paid to Thomas shall be an amount equal to that which would fund the purchase of an annuity at competitive market rates, with a company mutually agreed upon; such annuity being based upon Thomas' actuarial life to fund a $500,000 per annum payment for a period of fifteen (15) calendar years, with the first payment commencing on the fifth year anniversary date of the Effective Date of this Assignment Agreement, and otherwise upon terms and conditions and in form and substance satisfactory to the parties.(1) The Purchase Price shall be paid on a mutually agreeable date, but in no event shall such date be later than January 4, 2001.
(b) Wendy's agree to furnish or reimburse Thomas for the reasonable, prior approved costs of office facilities, secretarial services, security and transportation for Thomas personally to pursue and meet his obligations under this Assignment Agreement. This obligation of Wendy's is personal to Thomas and may not be assigned or devised.
(c) The Purchase Price for the Thomas Persona and all Property Rights associated therewith set forth herein shall be allocated in total to the acquisition of an intangible
(1)(NOTE: It is anticipated by the parties that this amount shall be approximately $4.7 - $4.8 million.) asset. Wendy's and Thomas agree to use the allocation for federal and state income tax purposes and to cooperate in the preparation and timely filing of IRS Form 8594 reflecting the allocation.
V. REPRESENTATIONS AND WARRANTIES
5.01. OF THOMAS. Thomas hereby represents and warrants to Wendy's as follows:
(a) AUTHORITY. Thomas has the power and authority to enter into this Assignment Agreement and the other agreements, documents and instruments to be executed and delivered by him pursuant hereto, and to carry out the transactions contemplated hereby and thereby.
(b) VALID AND BINDING AGREEMENT. This Assignment Agreement and each of the other agreements, documents and instruments executed and delivered by Thomas pursuant hereto constitutes a valid and binding agreement of Thomas, enforceable against him in accordance with its terms to the extent permissible by applicable law or regulation.
(c) NO VIOLATION. Neither the execution and delivery of this Assignment Agreement or any other agreements, documents and instruments to be executed and delivered by Thomas pursuant hereto nor the consummation by Thomas of the transactions contemplated hereby or thereby will, to Thomas' knowledge (i) violate or conflict with any statute, law, ordinance, rule, regulation, order, judgment or decree affecting Thomas, or (ii) result in the creation of any Lien against Thomas or any of the Property Rights; or (iii) violate or conflict with or constitute a default (or an event which, with notice or lapse of time, or both, would constitute a default) under, or result in the termination of, or accelerate the performance required by any contract, commitment, understanding, arrangement, agreement or restriction of any kind or character to which Thomas is a party or by which Thomas may be bound or affected, or to which Thomas or the Property Rights are subject, or (iv) cause, or give any Person grounds to cause (with or without notice, the passage of time, or both), the acceleration of the maturity of any debt, liability or obligation of Thomas , or increase any such liability or obligation or have any other adverse effect. Except as herein provided, no consent, approval, authorization, order, permit, action by, registration, declaration or filing with any Governmental Agency or other third party is required in connection with the execution and delivery by Thomas of this Assignment Agreement, any other agreements, documents and instruments to be executed and delivered by Thomas pursuant hereto or by the consummation by Thomas of the transactions contemplated hereby or thereby.
(d) RIGHTS. To the best of Thomas's actual knowledge, the Property Rights herein conveyed do not conflict with or infringe any similar rights of any other Person. Thomas has not and to his actual knowledge no one on his behalf has previously assigned any of the Property Rights and no one has claim to the Property Rights. To Thomas's knowledge, no claims have been asserted by any Person or entity with respect to the ownership, validity, license or use of the Property Rights and there is no basis for any such claims. Thomas, in conjunction with Wendy's has taken reasonable measures to enforce, maintain and protect his interests in and, to the Property Rights. Thomas has, and upon consummation of the transfer of the Property Rights contemplated hereby will deliver to Wendy's, the sole and exclusive ownership of the Property Rights.
(e) ADVICE OF COUNSEL. Thomas has entered into this Assignment Agreement with the advice of counsel of his own choosing and understands his rights and obligations under this Assignment Agreement.
(f) DISCLOSURE. No representation or warranty to Wendy's contained in this Assignment Agreement, and no statement contained in any certificate, document or instrument delivered by Thomas pursuant hereto contains, to Thomas's knowledge, any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained herein or therein not misleading.
5.02. OF WENDY'S. Wendy's hereby represents and warrants to Thomas as follows:
(a) AUTHORITY. Wendy's is a corporation duly organized, validly existing and in good standing under the laws of the State of Ohio. Wendy's has the power and authority to enter into this Assignment Agreement and the other agreements, documents and instruments to be executed and delivered by it pursuant hereto, and to carry out the transactions contemplated hereby and thereby.
(b) VALID AND BINDING AGREEMENT. This Assignment Agreement constitutes, and when executed and delivered each of the other agreements, documents and instruments to be executed and delivered by Wendy's pursuant hereto will constitute a valid and binding agreement enforceable against Wendy's each in accordance with its terms.
(c) NO VIOLATION. Neither the execution and delivery of this Assignment Agreement or the other agreements, documents and instruments to be executed and delivered by Wendy's pursuant hereto nor the consummation by Wendy's of the transactions contemplated hereby or thereby will, to Wendy's knowledge (i) conflict with any provision of the Certificate of Incorporation or By-Laws of Wendy's, or (ii) violate or conflict with or constitute a default (or an event which, with notice or lapse of time, or both, would constitute a default) under, or will result in the termination of, or accelerate the performance required by, or result in the creation of any Lien upon Wendy's or any of the Property Rights or have any other adverse effect under, any term or provision of the Certificate of Incorporation or By-Laws of Wendy's or of any contract, commitment, understanding, arrangement, agreement or restriction of any kind or character to which Wendy's is a party or by which Wendy's may be bound or affected, or to which Wendy's or the Property Rights are or will be subject, or (iii) cause, or give any Person grounds to cause (with or without notice, the passage of time, or both), the maturity or acceleration of the maturity of any debt, liability or obligation of Wendy's, or will increase any such liability or obligation or have any other adverse effect. Except as herein provided, no consent, approval, authorization, order, permit, action by, registration, declaration or filing with any Governmental Agency or other third party is required in connection with the execution and delivery by Wendy's of this Assignment Agreement, the other agreements, documents and instruments to be executed and delivered by Wendy' pursuant hereto or the consummation by Wendy's of the transactions contemplated hereby or thereby.
(d) ADVICE OF COUNSEL. Wendy's has entered into this Assignment Agreement with the advice of counsel of its own choosing and understands its rights and obligations under this Assignment Agreement.
(e) DISCLOSURE. No representation or warranty to Thomas contained in this Assignment Agreement, and no statement contained in any certificate, document or instrument delivered by Wendy's pursuant hereto contains, to Wendy's knowledge, any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained herein or therein not misleading.
VI. SURVIVAL OF REPRESENTATIONS AND REMEDIES
6.01. SURVIVAL OF REPRESENTATIONS. All representations, warranties and agreements made by any party in this Assignment Agreement or pursuant hereto shall survive expiration or termination of this Assignment Agreement.
(a) ADDITIONAL REMEDIES OF WENDY'S. Notwithstanding the provisions of paragraph 6.02 hereof, Wendy's shall have the right to seek legal and equitable remedies through the courts to protect its goodwill and prevent the continuation of the complained of acts, to obtain damages caused by the acts and/or for the loss of goodwill in the Property Rights. Further, in the event that the decision of the Standards Committee favors Wendy's it may seek the enforcement of the Standards Committee's decision in a court of competent jurisdiction.
(b) ADDITIONAL REMEDIES OF THOMAS. In the event of a material breach of this Agreement by Wendy's, Thomas may seek legal remedies from the courts or equitable remedies requiring specific performance by Wendy's. The parties agree that under no circumstances may Thomas or his heirs or assigns seek the return of the rights in and to the Thomas Persona, the Property Rights or any of them. The parties agree that the assignment herein made is final.
VII. MISCELLANEOUS
7.01. WAIVER OF COMPLIANCE. Any failure of any party to comply with any obligation, covenant, agreement or condition herein may be expressly waived in writing by the other parties hereto, but such waiver or failure to insist upon strict compliance with such obligation, covenant, agreement or condition shall not operate as a waiver of, or estoppel with respect to, any subsequent or other failure.
7.02. FURTHER ASSURANCES. From time to time, at the request of Wendy's and without further consideration, Thomas agrees that he will execute and deliver to Wendy's such documents and take such other action (but without incurring any material financial obligation) as Wendy's may reasonably request in order to consummate more effectively the transactions contemplated hereby, including, without limitation, consent to trademark applications in the United States Patent and Trademark Office or elsewhere throughout the world for the registration of Trademarks of the Thomas Persona or elements of it and other documents needed to vest in Wendy's good, valid and marketable title in and to the Thomas Persona and the Property Rights and any of them being transferred hereunder. Thomas also agrees to reasonably assist Wendy's in the enforcement of any rights in the Property Rights.
7.03. ASSIGNMENT. This Assignment Agreement may be assigned by Wendy's to any of its Subsidiaries, Affiliates and/or Associates as it deems in its sole opinion to be best for the operations of its business, provided such assignment does not permit the use of the Thomas Persona apart from the business of Wendy's. Wendy's shall not sell or assign rights to the Thomas Persona or any Trademarks encompassing the Thomas Persona or any elements of it ("Thomas Trademarks") in gross, i.e., apart from the ongoing business with which the Thomas Persona or the Thomas Trademarks are then currently publicly associated and shall not sell or assign such rights apart from the company named Wendy's other than as herein provided. Any assignment permitted hereunder shall be made only in the event that the assignee agrees in writing to be bound by the terms and conditions of this Assignment Agreement, including without limitation the covenants contained in Section III. Any attempted assignment in violation of this Section 7.03 shall be null and void.
7.04. ENTIRE AGREEMENT. This Assignment Agreement, the License Agreement and the other agreements, instruments and writings referred to herein or delivered pursuant hereto contain the entire understanding of the parties with respect to its subject matter; provided that nothing herein is intended to affect nor shall be interpreted as affecting the terms and conditions of the Screen Actors Guild and/or other union agreements to which Thomas and Wendy's are or may become parties as such agreements relate to the performance of Thomas in Wendy's commercials and including his entitlement to payment for such performances as provided by such agreements. Except as here specifically provided, this Assignment Agreement supersedes all prior agreements and understandings among the parties with respect to its subject matter and cannot be modified except by a written instrument signed by the parties hereto.
7.05. SEVERABILITY. In the event that one or more of the provisions or parts of a provision contained in this Assignment Agreement shall for any reason be held to be invalid, illegal or unenforceable in any respect in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision or part of a provision of this Assignment Agreement in that jurisdiction or affect that provision in any other jurisdiction, but this Assignment Agreement shall be reformed and construed in any such jurisdiction as if such invalid or illegal or unenforceable provision or part of a provision had never been contained herein and such provision or part shall be reformed so that it would be valid, legal and enforceable to the maximum extent permitted in such jurisdiction.
7.