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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K

     (Mark One)

        [X]    Annual Report Pursuant to Section 13 or 15(d) of the Securities
               Exchange Act of 1934

                 For the fiscal year ended December 31, 2000 or

        []     Transition Report Pursuant to Section 13 or 15(d) of the
               Securities Exchange Act of 1934

                         Commission File Number: 0-29410

                        IL FORNAIO (AMERICA) CORPORATION
             (Exact name of registrant as specified in its charter)

<TABLE>
<S>                                         <C>
              DELAWARE                                   94-2766571
  (State or other jurisdiction of           (I.R.S. Employer Identification No.)
   incorporation or organization)
</TABLE>


                         770 TAMALPAIS DRIVE, SUITE 400

                         CORTE MADERA, CALIFORNIA 94925

               (Address of principal executive offices) (Zip Code)

                                 (415) 945-0500

              (Registrant's telephone number, including area code)

           SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

                                      None

           SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
                     Common Stock, par value $.001 per share

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes[X] No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein and will not be contained, to the best
of the Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]

The aggregate market value of the voting stock held by non-affiliates of the
Registrant, based upon the closing price of the Registrant's Common Stock on
March 1, 2001, was $46,338,017.*

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.

As of March 1, 2001 there were 5,832,101 shares outstanding of the
Registrant's Common Stock.

* Excludes 2,415,473 shares outstanding at March 1, 2001, of the Registrant's
Common Stock held by directors, executive officers and holders of more than 10%
of the Company's Common Stock. Exclusion of shares held by any person should not
be construed to indicate that such person possesses the power, direct or
indirect, to direct or cause the direction of the management or policies of the
Registrant, or that such person is controlled by or under common control with
the Registrant.


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ITEM 1. BUSINESS

CAUTIONARY STATEMENT PURSUANT TO THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995

        Certain statements set forth in or incorporated by reference in this
Form 10-K constitute "forward-looking statements" within the meaning of the
Private Securities Litigation Act of 1995. These statements include, without
limitation, the timing of and plans for anticipated restaurant openings,
expansion strategy, the projected investment costs and sizes of future
restaurants, the adequacy of anticipated sources of cash, planned capital
expenditures, the effect of interest rate increases, and trends or expectations
regarding the Company's operations. In addition, words such as "believes,"
"anticipates," "expects," "intends," "estimates" and similar expressions are
intended to identify forward-looking statements, but are not the exclusive means
of identifying such statements. Such statements are based on currently available
operating, financial and competitive information and are subject to various
risks and uncertainties. Readers are cautioned that the forward-looking
statements reflect management's analysis only as of the date hereof, and the
Company assumes no obligation to update these statements. Actual future results,
events and trends may differ materially from those expressed in or implied by
such statements depending on a variety of factors, including, but not limited to
those set forth under "Risk Factors" and elsewhere in this Form 10-K. See
"Business -- Risk Factors."

GENERAL

        Il Fornaio owns and operates 25 full-service, white tablecloth Italian
restaurants serving creatively prepared, premium quality Italian cuisine based
on authentic regional recipes. The Company's restaurants offer an extensive
menu, featuring house-made pasta, poultry and game roasted over a wood-fired
rotisserie, meat and fresh fish from a charcoal grill, pizza from a wood-burning
oven, soups, salads and desserts. Il Fornaio's menu is distinguished by fresh,
hand-made breads, pastries and other baked goods that are produced in the
Company's restaurants and three wholesale bakeries. Il Fornaio's wholesale
bakeries also sell baked goods to quality grocery stores, specialty retailers,
hotels and other fine restaurants. In addition, the Company operates a retail
market in most of its restaurants, which sells baked goods, prepared foods and a
variety of Il Fornaio-brand products, allowing guests to recreate the Il Fornaio
experience at home.

        The Company's objectives are to offer guests the most authentic Italian
dining experience available outside of Italy and to establish a brand identity
that provides a competitive advantage in every market in which the Company
operates. The Company's strategy to achieve these objectives includes the
following key elements: (i) serve premium quality, authentic regional Italian
cuisine created by native-born Italian chefs and complemented by hand-made Il
Fornaio baked goods; (ii) build brand awareness through its bakeries and retail
markets, which reinforce the Company's image as a provider of premium quality,
authentic Italian food and enable guests to recreate the Il Fornaio dining
experience at home; (iii) create a distinctive authentic Italian atmosphere with
restaurant designs unique to each location; (iv) consistently execute Il
Fornaio's high standards of food quality, service and cleanliness through its
employee-designed Five Star Service Program; and (v) foster a strong corporate
culture which attracts and retains highly qualified management, chefs and hourly
employees.

        Il Fornaio intends to develop restaurants in both existing and new
geographic markets and to locate restaurants at sites in affluent urban and
suburban areas. The flexibility of the Il Fornaio concept enables the Company to
develop successful restaurants in a variety of locations, including residential
neighborhoods, shopping centers, office buildings and hotels. Since its initial
public offering in September 1997, the Company has opened twelve restaurants,
located in California, Colorado, Washington, Nevada, Georgia and Arizona. The
Company currently intends to open one new restaurant and one new wholesale
bakery in 2001.

        The Company was incorporated in California in June 1980 and was
reincorporated in Delaware in September 1997 prior to its initial public
offering. The Company's executive office is located at 770 Tamalpais Drive,
Suite 400, Corte Madera, California 94925. The Company's telephone number is
(415) 945-0500.

        Il Fornaio and the Il Fornaio logo are registered marks of the Company,
and Festa Regionale and Passaporto are marks used and owned by the Company.

RECENT DEVELOPMENTS

        The Company has entered an Agreement and Plan of Merger, dated as of
November 15, 2000, as amended as of January 9, 2001, with Manhattan Acquisition
Corp. ("Newco"), a wholly owned subsidiary of Bruckmann, Rosser, Sherrill & Co.
II, L.P. ("BRS"), a Delaware limited partnership engaged principally in the
business of investing in companies. Under the merger agreement, Newco will be
merged into Il Fornaio, with Il Fornaio as the surviving corporation (the
"Merger"). At the effective time of the Merger, each


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issued and outstanding share of Il Fornaio common stock will be converted into
the right to receive $14.00 in cash, without interest, except that certain
shares and options held by certain Il Fornaio directors, executive officers,
employees and stockholders will continue as, or be converted into, equity
interests of the surviving corporation. Following the Merger, Il Fornaio will
continue its operations as a privately held company with BRS as the controlling
stockholder. The Merger is contingent upon satisfaction of a number of
conditions, including approval of Il Fornaio's stockholders, regulatory and
other approvals and consents, the absence of any pending or threatened actions
that would reasonably be expected to have a material adverse effect on the
Company and receipt of financing for the transaction. There can be no assurance
that these or other conditions to the Merger will be satisfied or that the
Merger will be completed. If the Merger is not completed for any reason, it is
expected that the current management of Il Fornaio, under the direction of the
Board of Directors, will continue to manage Il Fornaio as an ongoing business.


RISK FACTORS

        In addition to the other information in this Annual Report on Form 10-K,
stockholders or prospective investors should carefully consider the following
risk factors:

UNCERTAINTIES ASSOCIATED WITH FUTURE GROWTH

        The Company has experienced growth in recent years, expanding from 11
restaurants at the end of 1995 to 25 restaurants at the end of 2000. In 2000,
the Company opened four new restaurants and currently expects to open one new
restaurant and one new wholesale bakery in 2001. The Company's ability to expand
successfully will depend on a number of factors, including the identification
and availability of suitable locations, the negotiation of favorable lease
arrangements, timely development and construction of any new shopping center,
hotel or other site in which the restaurant or bakery may be located, management
of the costs of construction and development of new restaurants and bakeries,
securing required governmental approvals and permits, recruitment of qualified
operating personnel (particularly managers and chefs), general economic
conditions and other factors, some of which are beyond the control of the
Company. Moreover, the opening of additional restaurants and bakeries in the
future will depend, in part, upon the Company's ability to generate sufficient
funds from existing operations or to obtain sufficient equity or debt financing
on favorable terms to support such expansion. There can be no assurance that the
Company will be successful in addressing these risks in each case, that the
Company will be able to open all of its planned new operations on a timely
basis, if at all, or, if opened, that those operations will be operated
profitably. Delays in opening, or failure to open, planned new restaurants could
have a material adverse effect on the Company's business, financial condition
and results of operations.

        The Company's growth strategy may place a strain on the Company's
management, financial and other resources. To manage its growth effectively, the
Company must maintain its high level of quality and service at its existing and
future restaurants, continue to enhance its operational, financial and
management systems, and locate, hire, train and retain experienced and dedicated
operating personnel, particularly managers and chefs. There can be no assurance
that the Company will be able to effectively manage this expansion in any one or
more of these areas, and any failure to do so could have a material adverse
effect on the Company's business, financial condition and results of operations.

RISKS ASSOCIATED WITH SMALL OPERATIONS BASE

        Because of the relatively small number of restaurants operated by the
Company, adverse results experienced by any one location could have a material
adverse effect on the Company's business, financial condition and results of
operations. The results achieved to date by the Company's relatively small
number of restaurants may not be indicative of those restaurants' long-term
performance or the potential market acceptance of restaurants in other
geographic locations.

GEOGRAPHIC CONCENTRATION

        Sixteen of the Company's 25 restaurants and all three of the Company's
wholesale bakeries are located in California. Because of this geographic
concentration, the Company is susceptible to local and regional risks, such as
energy shortages and related increased costs, increased government regulation,
adverse economic conditions, adverse weather conditions, earthquakes and other
natural disasters, any of which could have a material adverse effect on the
Company's business, financial condition and results of operations. In addition,
in light of the Company's current geographic concentration, adverse publicity
relating to the Company's restaurants could have a more pronounced adverse
effect on the Company's overall sales than might be the case if the Company's
restaurants were more broadly dispersed.



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        The Company has opened nine restaurants located outside of California.
Over the next several years, the Company expects that some of its expansion will
involve opening restaurants in additional states. Expansion into new geographic
regions involves a number of risks, in addition to those identified above,
including uncertainties related to local customs, demographics, legal
requirements, wages, costs and other economic conditions, the need to develop
relationships with local distributors and suppliers for fresh produce and other
ingredients, and potential difficulties related to management of operations
located in a number of broadly dispersed locations. There can be no assurance
that the Company will be successful in addressing these risks in each case, that
the Company will be able to open all of its planned new operations on a timely
basis, if at all, or, if opened, that those operations will be operated
profitably. Delays in opening, or failure to open, planned new restaurants could
have a material adverse effect on the Company's business, financial condition
and results of operations.

FLUCTUATIONS IN OPERATING RESULTS

        The Company's quarterly operating results may fluctuate significantly as
a result of a variety of factors, including general economic conditions,
consumer confidence in the economy, changes in consumer preferences, competitive
factors, weather conditions, the timing of new restaurant openings and related
expenses, net sales contributed by new restaurants, increases or decreases in
comparable restaurant revenues and fluctuations in inventory and general and
administrative expenses. For example, weather conditions have generally had the
most significant adverse impact in the first quarter of each year. In addition,
the Company is required to expense as incurred all start-up and preopening costs
that may not otherwise be capitalized as long-lived assets. In the past, this
has resulted in, and may in the future lead to, increased variability in
operating results, depending on the number and timing of restaurant openings.
See "Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations." Due to the foregoing factors, results for any one
quarter are not necessarily indicative of results to be expected for any other
quarter or for any year and, from time to time in the future, the Company's
results of operations may be below the expectations of public market analysts
and investors.

        A variety of factors also affect the Company's comparable restaurant
sales results, including general economic conditions, consumer confidence in the
economy, changes in consumer preferences, competitive factors, weather
conditions and the Company's ability to execute its business strategy. No
assurance can be given that comparable restaurant sales for any particular
future period will not decrease.

CHANGES IN FOOD, ENERGY AND LABOR COSTS

        The Company's profitability is dependent in part on its ability to
anticipate and react to changes in food, energy and labor costs. Various factors
beyond the Company's control, including adverse weather conditions and
governmental regulation, may affect the Company's food costs. There can be no
assurance that the Company will be able to anticipate and react to changing food
costs through its purchasing practices and menu price adjustments in the future,
and failure to do so could have a material adverse effect on the Company's
business, financial condition and results of operations.

        As a result of the recent energy crisis in California, the Company has
experienced a substantial increase in energy costs for its restaurants and
wholesale bakeries located within the state. There can be no assurance that the
Company will be able to react to further increases in energy costs through menu
price adjustments in the future, and inability to do so could have a material
adverse effect on the Company's business, financial condition and results of
operations.  In addition, if energy shortages become more acute, it is possible
that energy blackouts may interrupt operations at one or more of the Company's
locations, which could have a material adverse effect on the Company's business,
financial condition and results of operations.

        A substantial number of the Company's employees are subject to various
minimum wage requirements. Many of the Company's employees work in restaurants
located in California and receive salaries equal to the California minimum wage.
In January 1999, the minimum wage in Oregon increased to $6.50 an hour from
$6.00 an hour. On January 1, 2000, the minimum wage in Washington increased to
$6.50 an hour from $5.70 an hour. Effective January 1, 2000, California law
requires that overtime be paid to California hourly personnel who work longer
than eight hours per day. Prior to this change, the labor law in effect mandated
overtime pay to hourly personnel only to the extent they worked longer than an
average of 40 hours per calendar week. On January 1, 2001, the minimum wage in
California was increased to $6.25 an hour from $5.75 an hour. Beginning January
1, 2002, the minimum wage will increase to $6.75 an hour in California.

        There can be no assurance that similar increases will not be adopted in
other jurisdictions in which the Company operates or seeks to operate.
Additional federal minimum wage increases have recently been proposed. The
Company implemented a moderate menu price increase in 1999 and in January 2001
due, in part, to increases in labor costs and cost of goods. There can be no
assurance that


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the Company will be able to pass additional increases in labor costs through to
its guests in the form of menu price adjustments in the future and, accordingly,
such minimum wage increases could have a material adverse effect on the
Company's business, financial condition and results of operations. See "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations."

DEPENDENCE ON KEY PERSONNEL

        The success of the Company's business will continue to be highly
dependent on its key operating officers and employees, including Laurence B.
Mindel, the Company's Chairman of the Board, and Michael J. Hislop, the
Company's President and Chief Executive Officer. The Company currently maintains
a $5.0 million term life insurance policy covering Mr. Mindel and a $3.0 million
term life insurance policy covering Mr. Hislop. The Company's success in the
future will be dependent on its ability to attract, retain and motivate
qualified management and operating personnel, including restaurant managers and
chefs. Failure by the Company to attract and retain such key employees in the
future could have a material adverse effect on the Company's business, financial
condition and results of operations.

COMPETITION AND INDUSTRY CONDITIONS

        The restaurant and bakery industries are each intensely competitive with
respect to food quality, price-value relationships, ambiance, service and
location, and many restaurants and bakeries compete with the Company at each of
its locations. There are many well-established competitors with substantially
greater financial, marketing, personnel and other resources than the Company. In
addition, many of the Company's competitors are well established in the markets
where the Company's operations are, or in which they may be, located. While the
Company believes that its restaurants and wholesale bakeries are distinctive in
design and operating concept, other companies may develop restaurants and
wholesale bakeries that operate with similar concepts.

        The restaurant business is often affected by changes in consumer tastes,
national, regional or local economic conditions, demographic trends, consumer
confidence in the economy, discretionary spending priorities, weather
conditions, tourist travel, traffic patterns, and the type, number and location
of competing restaurants. Changes in these factors could have a material adverse
effect on the Company's business, financial condition and results of operations.
See "Business -- Competition."

LONG-TERM, NON-CANCELABLE LEASES; TERMINATION PROVISIONS

        The Company's current leases have annual base rents ranging from $35,000
to $411,000, are non-cancelable and typically have terms of 10 to 20 years.
Leases entered into by the Company in the future will likely also be long-term
and non-cancelable. If a decision is made to close any restaurant or bakery, the
Company may be committed to perform its obligations under the applicable lease,
which would include, among other things, payment of the base rent for the
balance of the lease term. In 1993 and 1995, the Company recorded provisions of
$2.3 million and $932,000, respectively, for liabilities associated with the
closure of facilities subject to non-cancelable, long-term leases. As of
December 31, 2000, the reserve for store closures was $257,000. The Company may
incur liabilities of this nature in the future if a decision is made to close
one or more restaurants or bakeries, and such liabilities, if incurred, could
have a material adverse effect on the Company's business, financial condition
and results of operations.

        In addition, one of the Las Vegas restaurant's lease contains provisions
that allow the hotel landlord to terminate the Company's lease without
compensation if, during any six-month period in which the hotel has achieved a
specified occupancy rate, the restaurant's monthly gross sales average less than
a specified minimum amount. There can be no assurance that restaurant sales will
continue to exceed the specified minimum. In addition, the lease contains
provisions allowing the landlord to relocate the Company's restaurant to another
site within the hotel possessing retail characteristics similar to the site
currently occupied by the Company. The landlord may not use the site vacated for
restaurant operations. Should the Company elect not to relocate the restaurant,
the lease may be terminated by the Company and, in that event, the landlord is
obligated to reimburse the Company for the unamortized cost of its improvements
to the site and any of the Company's furniture, fixtures and equipment not
removed by the Company. Such termination or relocation could have a material
adverse effect on the Company's business, financial condition and results of
operations. See "Item 2. Properties."

GOVERNMENTAL REGULATION

        The Company's operations are subject to regulation by federal agencies
and to licensing and regulation by state and local health, environmental, land
use, labor relations, sanitation, building, zoning, safety, fire and other
departments relating to the development and operation of restaurants and retail
establishments. The Company's activities are also subject to the federal
Americans With Disabilities Act and related regulations, which prohibit
discrimination on the basis of disability in public accommodations and


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employment. The Company is also subject to state "dram-shop" laws and
regulations, which generally provide that a person injured by an intoxicated
person may seek to recover damages from an establishment that wrongfully served
alcoholic beverages to such person. Changes in any or all of these laws or
regulations, such as government-imposed increases in minimum wages, paid leaves
of absence or mandated health benefits, or increased tax reporting and tax
payment requirements for employees who receive gratuities, could have a material
adverse effect on the Company's business, financial condition and results of
operations. In addition, the Company is required to comply with the alcohol
licensing requirements of the states and municipalities where its restaurants
are or may be located. Delays or failures in obtaining or maintaining the
required construction and operating licenses, permits or approvals could delay
or prevent the opening of new restaurants or could materially and adversely
affect the operation of existing restaurants. In addition, there can be no
assurance that the Company will be able to obtain necessary licenses, permits or
other approvals on a cost-effective and timely basis in order to construct and
develop restaurants and bakeries in the future. See "Business -- Governmental
Regulation."

UNINSURED LOSSES

        The Company has comprehensive insurance, including general liability,
fire, extended coverage and employee practices liability coverage. However,
there are certain types of losses that may be uninsurable or that the Company
believes are not economically insurable, such as earthquakes and other natural
disasters. In view of the location of many of the Company's existing and planned
restaurants in California, the Company's operations are particularly susceptible
to damage and disruption caused by earthquakes. In addition, the Company also
has a restaurant located in Seattle, Washington, an area which experienced a
significant earthquake in February 2001. The Company did not experience
significant damage. In the event of an earthquake or other natural disaster
affecting the Company's geographic area of operations, the Company could suffer
a loss of the capital invested in, as well as anticipated earnings from, the
damaged or destroyed properties. In addition, the Company does not currently
maintain any insurance coverage for the effects of adverse publicity, and such
litigation or adverse publicity could have a material adverse effect on the
Company's business, financial condition and results of operations.

CONTROL BY EXISTING STOCKHOLDERS AND MANAGEMENT

        At March 1, 2001, the Company's directors, officers and their affiliates
beneficially owned approximately 25.5% of the outstanding Common Stock (assuming
exercise of vested stock options). As a result of such Common Stock ownership,
the Company's directors, officers and their affiliates, if they voted together,
would be able to exercise significant influence over the election of members of
the Company's Board of Directors and other corporate actions requiring
stockholder approval. See "Item 12. Security Ownership of Certain Beneficial
Owners and Management."

POTENTIAL VOLATILITY OF STOCK PRICE

        The market price of the shares of Common Stock may be subject to
significant fluctuations in response to the Company's operating results and
other factors, including general economic and market conditions. In addition,
the stock market in recent years has experienced and continues to experience
extreme price and volume fluctuations, which have affected the market price of
the stock of many companies and which have often been unrelated or
disproportionate to the operating performance of these companies. These
fluctuations, as well as a shortfall in sales or earnings compared to securities
analysts' expectations, changes in analysts' recommendations or projections or
general economic and market conditions, may adversely affect the market price of
the Common Stock. In the past, securities class action litigation has often been
instituted following periods of volatility in the market price for a company's
securities. Such litigation could result in substantial costs and a diversion of
management attention and resources, which could have a material adverse effect
on the Company's business, financial condition and results of operations.

POTENTIAL ANTI-TAKEOVER EFFECT OF CERTAIN CHARTER AND BY-LAW PROVISIONS

        The Company's Amended and Restated Certificate of Incorporation (the
"Restated Certificate") authorizes the Board of Directors to issue up to five
million shares of Preferred Stock and to determine the powers, preferences,
privileges, rights, including voting rights, qualifications, limitations and
restrictions of those shares without any further vote or action by the
stockholders. The rights of the holders of Common Stock will be subject to, and
may be adversely affected by, the rights of the holders of any Preferred Stock
that may be issued in the future. The Restated Certificate and By-laws, among
other things, provide for a classified Board of Directors, require that
stockholder actions occur at duly called meetings of the stockholders, limit who
may call special meetings of stockholders, do not permit cumulative voting in
the election of directors and require advance notice of stockholder proposals
and director nominations. These and other provisions could have the effect of
making it more difficult for a third party to acquire a majority of the
outstanding voting stock of the Company, discourage a hostile bid or delay,
prevent or deter a merger, acquisition or tender offer, in


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which the Company's stockholders could receive a premium for their shares, or a
proxy contest for control of the Company or other change in the Company's
management.


IL FORNAIO CONCEPT AND STRATEGY

        Offer Premium Quality, Authentic Regional Italian Cuisine. Il Fornaio
seeks to differentiate its restaurants from other restaurants in the Italian
food segment by offering creatively prepared, premium quality Italian cuisine
based on authentic regional recipes. The core menu served at both lunch and
dinner features a variety of dishes, including house-made pasta, poultry and
game roasted over a wood-fired rotisserie, meat and fresh fish from a charcoal
grill, pizza from a wood-burning oven, soups, salads and desserts. Native-born
Italian chefs develop all of the core menu items, which vary depending on the
seasonal availability of raw ingredients. The Company's chefs also develop
special menus each month based on the local cuisine and culinary style of one of
Italy's 20 geographic regions as part of the Company's Festa Regionale marketing
program. Hand-made, preservative-free baked goods, based on centuries- old
regional Italian recipes, are provided by Il Fornaio's wholesale bakeries for
use in a variety of menu items. Fresh breads and rolls are served with each
meal, providing an authentic and high quality complement to the menus. Il
Fornaio's restaurants have received numerous awards and commendations.

        Build Brand Awareness. The Company believes that its restaurants,
wholesale bakeries and retail markets work together to reinforce its image as a
provider of premium quality, authentic Italian food, enhance Il Fornaio's brand
image and reputation and attract guests over a wide variety of occasions for
dining out or dining in. The Company's wholesale bakeries supply the same fresh,
award-winning breads and other baked goods served at the Company's restaurants
to quality grocery stores, specialty retailers, hotels and other fine
restaurants as well as to retail markets within Il Fornaio restaurants. The
restaurants' retail markets offer prepared foods and Il Fornaio brand items,
including fresh baked goods, oakwood-roasted coffee, pasta, risotto, extra
virgin olive oil and balsamic vinegar imported from Modena, Italy, enabling
guests to recreate the Il Fornaio dining experience at home. The retail markets
also offer an Il Fornaio-brand Chianti Classico from a Tuscan vineyard that was
originally planted in the 11th century and is designated for Il Fornaio's
exclusive use. The Company has implemented a number of marketing initiatives
designed to build brand awareness, including monthly mailings of its Festa
Regionale menus, food and wine tastings, baking classes, Italian culture
seminars and the Passaporto program, which rewards frequent guests with
complimentary menu items and commemorative plates.

        Create a Distinctive Authentic Italian Atmosphere. The Company seeks to
create a distinctive authentic Italian atmosphere with restaurant designs that
are unique to each location. The restaurants' sophisticated, yet informal and
friendly atmosphere is intended to be suitable for a variety of meal occasions.
Exhibition kitchens with wood-fired rotisseries, charcoal grills and
wood-burning pizza ovens are in full display of the guests and create appealing
cooking aromas to reinforce the guests' perceptions of quality, freshness and
authenticity. Retail markets located at the entrance to each restaurant are
designed to provide an inviting initial impression as well as to enhance the
perception of an authentic Italian dining experience through the prominent
display of Il Fornaio's Italian food. Design elements, which may include
terracotta or European slate floors, marble bars, mahogany trim, outdoor
piazzas, hand-painted ceilings and fine art, are selected to evoke the charm and
elegance of a memorable dining experience in Italy. Il Fornaio's Sacramento
restaurant received the grand prize for best new restaurant design worldwide,
one of five grand prizes in hospitality design awarded in 1994 by a national
hospitality design magazine.

        Focus on Five Star Service. The Company believes that its emphasis on
service through the implementation of its Five Star Service Program has been an
important factor in its success. The Company's Five Star Service Program,
designed by the Company's employees, defines Il Fornaio's high standards for
food quality, service and cleanliness. The Company has invested significant
resources in the training of its service personnel and staffs each restaurant
with an experienced management team to ensure attentive guest service and
consistent food quality. Through employee and guest questionnaires, the Company
receives valuable feedback and implements measures designed to reinforce its
commitment to outstanding service and guest satisfaction. Results of the Five
Star Service Program are considered in the evaluation and advancement of
restaurant management.

        Foster a Strong Corporate Culture. The Company believes that qualified
employees are critical to its success. The Company believes that, by providing
extensive training, attractive compensation and significant opportunities for
employee feedback and advancement, it fosters a strong corporate culture that
helps attract and retain highly qualified employees. The Company has a
Partnership Program, which provides equity participation to chefs and restaurant
general managers. The Company also provides medical, dental and other benefits
to hourly employees and believes that the availability of these benefits
contributes to an employee turnover rate that is below the industry average.


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        Provide an Attractive Price-Value Relationship. The Company believes
that its restaurants provide guests with excellent value by offering high
quality authentic Italian food, a distinctive atmosphere and superior service,
all for an average check per guest in 2000 of $22.46 (including alcohol). As a
result, the Company's restaurants attract a broad variety of guests who desire a
more authentic Italian experience than may be available from other restaurants
in the Italian food segment, without a substantially higher cost.

UNIT ECONOMICS

        For 2000, the Company's 18 restaurants that were open for at least 18
months through fiscal year end 2000 had average revenues of approximately $5.5
million, average operating income of approximately $808,000, or 14.7% of average
restaurant sales, and average operating income before depreciation and
amortization of approximately $1.0 million, or 19.0% of restaurant sales. The
Company's restaurants range in size from 5,000 square feet to 14,000 square
feet. Since 1991, the Company's average total investment per restaurant, net of
landlord contributions, has averaged approximately $2.2 million, with additional
average pre-opening costs per restaurant of approximately $250,000. The Company
expects that its planned future restaurants will generally range in size from
7,000 to 10,000 square feet and that its total investment and pre-opening costs
per restaurant will be approximately $2.2 million and $250,000, respectively,
dependent upon inflation and the geographic locations of future restaurants.

LOCATIONS

        Il Fornaio owns and operates 25 full-service, white tablecloth Italian
restaurants and three wholesale bakeries. The wholesale bakeries provide fresh
breads, pastries and other baked goods to the restaurants, as well as to a
variety of quality grocery stores, specialty retailers, hotels and other fine
restaurants. All Il Fornaio restaurants and wholesale accounts in the San
Francisco Bay Area are supplied by the Company's 12,000-square foot bakery
located in Burlingame, California. The restaurants and wholesale accounts in
Southern California are supplied by the Company's 15,000-square foot bakery
located in Gardena, California. In addition, the Il Fornaio restaurant and
wholesale accounts located in the Sacramento area of California are supplied by
the Company's bakery located adjacent to the Company's Sacramento restaurant.
Restaurants that cannot be supplied by one of the Company's wholesale bakeries
are designed with an in-house bakery. Most of the restaurants feature a retail
market, which sells baked goods, prepared foods and a variety of Il
Fornaio-brand products, allowing guests to recreate the Il Fornaio experience at
home.

        The following table provides information about the Company's current and
planned operations.

CURRENT OPERATIONS
<TABLE>
<CAPTION>
                                                 YEAR             SIZE             NUMBER OF
LOCATION                                        OPENED          (SQ. FT.)           SEATS(1)
--------                                        ------          ---------          ---------
<S>                                             <C>             <C>                <C>
Restaurants
  Corte Madera, CA ................              1987             5,600               104
  San Francisco, CA ...............              1988             7,800               148
  Del Mar, CA .....................              1989             5,700               110
  Palo Alto, CA ...................              1989             7,300               136
  Irvine, CA ......................              1991             9,600               220
  Beverly Hills, CA ...............              1992             5,000                76
  San Jose, CA ....................              1992             8,000               171
  Pasadena, CA ....................              1993             8,000               152
  Sacramento, CA ..................              1993             7,900               158
  Burlingame, CA ..................              1995             9,200               185
  Carmel, CA ......................              1995             7,500               120
  Portland, OR ....................              1996             7,300               170
  Las Vegas, NV ...................              1997            10,900               218
  Santa Monica, CA ................              1997             7,500               150
  Denver, CO ......................              1997             9,200               175
  Seattle, WA .....................              1998            13,200               269
  Walnut Creek, CA ................              1998             8,700               210
  Las Vegas, NV (The Venetian) ....              1999            14,000               282
  Atlanta, GA .....................              1999             8,500               175
  Coronado Island, CA .............              1999             9,100               180
  Manhattan Beach, CA .............              1999             8,000               180
  Scottsdale, AZ ..................              2000             9,000               175
  Roseville, CA ...................              2000             7,500               202
  Denver, CO ......................              2000             9,000               228
  Broomfield, CO ..................              2000             7,500               204

Wholesale Bakeries
  Sacramento, CA ..................              1993             2,500                --
  Burlingame, CA ..................              1997            12,000                --
  Gardena, CA .....................              1999            15,000                --
</TABLE>


                                       8
<PAGE>   9


PLANNED RESTAURANTS AND WHOLESALE BAKERIES (2)

<TABLE>
<CAPTION>
                                                                SCHEDULED          SIZE
        OPERATION                  LOCATION                      OPENING         (SQ. FT.)
        ---------                  --------                  -------------      ----------
<S>                                <C>                       <C>                <C>
        Restaurant.........        Green Valley, NV...            2001            8,000
        Wholesale Bakery...        Denver, CO.........            2001           13,600
</TABLE>


(1)  Excludes patio seating.

(2)  Leases have been signed for each of the above planned restaurant and
     wholesale bakery locations.


EXPANSION STRATEGY AND SITE SELECTION

        The Company intends to continue to expand its operations by addressing
both existing and new geographic markets. The Company currently plans to open
one new restaurant and one new wholesale bakery in 2001.

        The Company believes that the location of each restaurant is critical to
its long-term success and devotes significant effort to finding appropriate
sites. The Company's site selection strategy is to locate restaurants in
affluent urban and suburban areas, often located near or on main traffic routes.
The Company takes into account a variety of local factors, including demand and
consumer preferences, competition, availability of suitable locations and
personnel, local demographics and household income levels, as well as specific
site characteristics, such as visibility, accessibility and traffic volume.
Senior management selects each restaurant site. The flexibility of the Il
Fornaio concept enables the Company to develop successful restaurants in a
variety of locations, including residential neighborhoods, shopping centers,
office buildings and hotels.

        The Company's success in implementing its expansion plans will depend,
in each case, on the Company's ability to effectively address a number of risks.
There can be no assurance that the Company will be able to open all of its new
operations on a timely basis, if at all, or, if opened, that those operations
will be operated profitably. See "Business -- Risk Factors."

MENU

        The Company's restaurants feature creatively prepared, premium quality
Italian food based on authentic regional recipes. All recipes are created by
native-born Italian chefs. As guests are seated, Il Fornaio breads and rolls are
placed on the table and served with Il Fornaio olive oil. Guests may then select
from a menu featuring a variety of dishes, including house-made pasta, poultry
and game roasted over a wood-fired rotisserie, meat and fresh fish from a
charcoal grill, pizza from a wood-burning oven, soups, salads and desserts. The
core menu includes several flavorful low-salt and low-fat selections oriented
toward health- or diet-conscious guests. The restaurants also offer Italian
appetizers, creative desserts prepared on site, full liquor service and an
award-winning, extensive wine list emphasizing Italian and California varietals.
The wine list includes an Il Fornaio-brand Chianti Classico from a Tuscan
vineyard that was originally planted in the 11th century and is designated for
Il Fornaio's exclusive use. The core menu is virtually identical at most of Il
Fornaio's restaurants. A daily insert, which varies by restaurant, lists
specials developed by chefs at each restaurant, featuring creative dishes
inspired by seasonal availability of fresh local produce, fish, meats and game.
Il Fornaio's restaurants have received numerous awards and commendations.

        In addition, for two weeks of every month, the restaurants feature the
Festa Regionale, innovative menus developed, on a rotating basis, by one of Il
Fornaio's Chef-Partners, based on authentic recipes of one of Italy's 20
geographic regions. Each menu is intended to capture both the unique flavors and
culinary style that characterize that region's local cuisine and includes menu
items based on produce, cheese, meat, poultry and seafood indigenous to the
region. Selected wines of the region are also offered to complement menu items.
The most popular menu items developed as part of Festa Regionale are frequently
added to the core menu.

        Il Fornaio's wholesale bakeries supply the restaurants with over 30
varieties of breads and rolls, based on centuries-old, regional Italian recipes.
Breads include ciabatta (a long, flat loaf with a porous interior and crunchy
crust), panmarino (a dome-shaped loaf infused with rosemary and sprinkled with
coarse sea salt), filone (a classic Italian white bread with a light crust and
soft interior),



                                       9
<PAGE>   10

pagnotta (a round, rustic loaf with a soft interior), pane all'uva (a rich,
moist bread filled with golden raisins), pane alle olive (a soft-textured bread
studded with green olives) and foccacia (a flat bread brushed with olive oil and
finished with a variety of fresh toppings). Pastries include cornetti
(croissants) and cannelle (cinnamon twists). The Company's authentic Italian
artisan breads have received numerous awards and commendations.

        The Company's average check per guest in 2000 at its restaurants,
including alcoholic beverages, was $22.46. Nine of the restaurants also offer
breakfast service which, during 2000, accounted for approximately 2% of
restaurant revenues. During the same period, wine sales represented
approximately 18% of restaurant revenues, while other alcoholic beverages
accounted for approximately 7% of restaurant revenues.

        Take-out prepared food and retail brand items accounted for
approximately 9% of restaurant revenues in 2000. The restaurants' retail markets
enable guests to recreate the Il Fornaio dining experience at home by offering
prepared foods, including assorted cold pasta and risotto salads, Il Fornaio
breads, green salads, whole roasted chickens, stuffed artichokes, individual
pizzette and assorted Italian sandwiches, as well as Il Fornaio-brand retail
items, including oakwood-roasted coffee, pasta, risotto, extra virgin olive oil,
balsamic vinegar imported from Modena, Italy, and Chianti Classico.

        In November of 1998, the Company opened Il Fornaio Risotteria, a full
service restaurant in Pacific Place, an entertainment and shopping center in
downtown Seattle. Risotteria features authentic Italian foods simply presented
at lower price points than a typical Il Fornaio restaurant. The casual setting
is designed for quicker, more informal service, with all menu items priced below
$10. While the Company has no current plans to expand the Risotteria concept to
other markets, it is possible that the Company may build other Risotterias in
the future in appropriate locations.

In June 1999, the Company opened Canaletto, a full service restaurant located in
the Venetian Resort Hotel and Casino in Las Vegas, Nevada. Canaletto's menu
focuses on the authentic foods of Venice and its surrounding regions of
Trentino-Alto Adige and Friuli-Venezia Giulia. The menu price points at
Canaletto are generally comparable to those at the Company's Il Fornaio
restaurants.

DECOR AND ATMOSPHERE

        The Company seeks to create a distinctive, authentic Italian atmosphere
with restaurant designs that are unique to each location. The restaurants'
sophisticated, yet informal and friendly atmosphere is intended to be suitable
for a variety of meal occasions. Exhibition kitchens with wood-fired
rotisseries, charcoal grills and wood-burning pizza ovens in full display of the
guests create appealing cooking aromas that reinforce the guests' perceptions of
quality, freshness and authenticity. Retail markets located at the entrance to
each restaurant are designed to provide an inviting initial impression as well
as to enhance the perception of an authentic Italian dining experience through
the prominent display of Il Fornaio's Italian food. Design elements, which may
include terracotta or European slate floors, marble bars, mahogany trim,
hand-painted ceilings and fine art, are selected to evoke the charm and elegance
of a memorable dining experience in Italy. The tables are a mix of booths and
free-standing tables with chairs. White tablecloths and Italian flatware dress
the tables. Service is intended to be professional and friendly but not
intrusive. In addition to table service, food is available at an indoor or
outdoor liquor/coffee bar, as well as at counter seats overlooking the large
pizza oven and open kitchen. The restaurants range in size from approximately
5,000 to 14,000 square feet with indoor seating ranging from 76 to 282 guests.
Outdoor piazzas provide additional seating during warmer weather. Il Fornaio's
Sacramento restaurant received the grand prize for best new restaurant design
worldwide, one of five grand prizes in hospitality design awarded in 1994 by a
national hospitality design magazine.

OPERATIONS

        The Company seeks to create a fine dining experience through the careful
selection, training and supervision of personnel. The staff of a typical
restaurant consists of a Managing Partner, two or three managers, a
Chef-Partner, two or three sous chefs and approximately 65 to 125 hourly
employees, many of whom work part-time. The Managing Partner of each restaurant
is responsible for the day-to-day operation of that restaurant, including
hiring, training and development of personnel, as well as operating results. The
Chef-Partner is responsible for product quality, food costs and kitchen labor
costs. The Company requires its Managing Partners and Chef-Partners to have
significant experience in the full-service restaurant industry.

        Comprehensive management manuals exist to ensure consistency in all
facets of restaurant operations, including food, service, safety and accounting.
Working in concert with Managing Partners and Chef-Partners, the Company's
senior management defines operations and performance objectives for each
restaurant and monitors implementation. The Company maintains quality and
consistency in its restaurants through its Five Star Service Program, which
establishes standards relating to food and beverage


                                       10
<PAGE>   11


preparation, maintenance of facilities and conduct of personnel. A restaurant
survey firm regularly visits the Company's restaurants and reports to senior
management on the effectiveness of the Five Star Service Program. In addition to
the Five Star Service Program, the Company's senior management regularly visit
each restaurant and bakery to ensure adherence to the Company's concept,
strategy and standards of quality in all aspects of restaurant operations.
Senior management also meets once a quarter with Managing Partners and
Chef-Partners to discuss operational, marketing and financial issues and to
review the Five Star Service Program.

        The Company has implemented a comprehensive compensation and benefits
package in order to attract and retain highly qualified personnel. The Company
has a Partnership Program, which provides equity participation for Managing
Partners and Chef-Partners in the form of stock options, to encourage commitment
to the long-term success of the restaurants and the Company. The Company
believes that this equity participation differentiates its compensation package
from that of many of its competitors. The Company's bonus program is designed to
reward the restaurant management team for achievement of superior operating
results, and all members of management at the restaurant level are eligible to
participate. The bonus may provide a large percentage of management's total
compensation.

        The Company has a comprehensive four-to-six week training program, which
all operating management personnel are required to complete. The program
emphasizes the Company's operating strategy, philosophy, procedures and
standards. The training encompasses all aspects of both restaurant and kitchen
management. As part of the training program, a series of written tests is
administered to evaluate the trainee's progress. The trainee must achieve a
certain score to progress to the next section of the program. This training
program is administered by the Company's Director of Training in conjunction
with the Vice President of Operations and Executive Chef. The Managing Partners
and Chef-Partners are responsible for selecting and training employees for each
restaurant. The training period for new hourly employees lasts approximately one
to two weeks and utilizes training manuals and seminars developed by the
Company's training department. To foster a strong corporate culture and
encourage employee commitment and enthusiasm, management regularly solicits
employee suggestions concerning Company operations through extensive employee
feedback surveys.

WHOLESALE BAKERIES

        The Company currently has three wholesale bakeries, which range in size
from 2,500 to 15,000 square feet. One of these bakeries is located adjacent to
one of the Company's restaurants. The Company's original heritage was based on
bakeries and bakery products, which remain an integral part of the Il Fornaio
restaurant concept. In addition to the Company's own restaurants, bakery
products are sold to quality grocery stores, specialty retailers, hotels and
other fine restaurants. The Company's wholesale bakeries accounted for
approximately 9% of gross revenues during 2000. For segment information, see
Part II, Item 8. Financial Statements and Supplementary Data - Note 10 of Notes
to Financial Statements, which is incorporated herein by reference.

        The Company operates a free-standing 12,000-square foot wholesale
bakery, located in Burlingame, California, to provide freshly baked goods to all
Il Fornaio restaurants and wholesale customers throughout the San Francisco Bay
Area and a 15,000-square foot wholesale bakery and training facility in Gardena,
California to serve its Southern California restaurants and wholesale customers.
The Company plans to open a new 13,600-square foot wholesale bakery, located in
Denver, Colorado in April, 2001 to serve its Colorado restaurants and wholesale
customers. These wholesale bakeries are designed to provide efficiencies in
production (both labor and ingredients) and distribution. These facilities
permit the Company to employ improved processes, which enhance quality and
consistency, while maintaining the Il Fornaio commitment to preservative-free,
hand-made authentic Italian breads.

        The Company's wholesale bakeries produce over 50 varieties of breads and
rolls based on regional Italian recipes, as well as a wide assortment of Italian
cookies, cakes and pastries. Recipes are standardized to ensure consistency. The
Company's bread doughs, based on centuries-old recipes, are mixed and then
fermented for up to 20 hours to increase flavor. Each loaf is hand-formed,
proofed and baked in European deck ovens that eject steam around the bread at
timed intervals. The Company believes that these processes contribute to a
characteristically irregular-shaped and crusty bread. Bakers create a wide
variety of breads by varying proportions of ingredients, length and number of
risings, temperature of the oven and size and shape of the loaves. Some recipes
include fresh aromatic herbs and spices, such as rosemary or fennel, or other
ingredients, such as parmesan cheese, raisins, nuts and sesame seeds. To
maintain the high quality of its bakery products, the Company maintains strict
criteria for ingredients.

        The management staff of a typical bakery consists of a production
manager, an assistant production manager and a business manager. A bakery
employs 10 to 45 hourly employees, depending on the bakery's size. The
production manager carries responsibility for day-to-day results of the bakery.
Each production manager is required to have significant bread baking experience
in addition to other general baking and management skills. Both the production
manager and the assistant production manager are also trained in the Company's
systems, recipes and procedures. The business manager is responsible for all
accounting, including the preparation of sales


                                       11
<PAGE>   12

reports, which are electronically transmitted to the corporate office on a daily
basis. The business manager is also responsible for customer service and
distribution.

        The Company maintains a fleet of vehicles for distribution of its
products to wholesale customers and Company locations. A majority of the
products are packed and delivered in the early morning to ensure timely
delivery, and a second delivery is normally scheduled for Company locations to
provide fresh-baked products for late afternoon and evening sale and
consumption.

MARKETING

        The Company believes that providing an authentic Italian dining
experience by offering quality food and bakery products, distinctive decor, Five
Star Service and an attractive price-value relationship is the most effective
approach to attracting new and repeat guests. Accordingly, Il Fornaio has relied
primarily on reputation, local reviews and awards and word-of-mouth to promote
its restaurants and bakeries in each community in which it operates. The Company
has also implemented a program of marketing and public relations activities
designed to create awareness of the Il Fornaio name, to encourage guests to
associate that name with authentic, premium quality Italian food and to increase
the frequency of return visits to Il Fornaio.

        To encourage repeat patronage, the Company has developed the Festa
Regionale program. As part of this program, innovative menus are developed
monthly by Chef-Partners, on a rotating basis, based on authentic recipes from
one of Italy's 20 geographic regions. Menu items are accompanied by selected
wines from the region and a regional bread is provided by the Company's
bakeries. Mailers describing each month's Festa Regionale offerings are sent
monthly to over 300,000 households identified by the Company through customer
mailing lists or geographic proximity to an Il Fornaio restaurant. The
Passaporto program also encourages frequent dining at the Company's restaurants
by rewarding those who participate in each month of the six-month program with a
commemorative plate. In addition, guests receive a complimentary item such as an
appetizer or a dessert from the regional menu.

        The Company has developed a program that focuses marketing efforts on
each restaurant's immediate neighborhood. Under this program, each restaurant is
responsible for the execution of an annual Neighborhood Marketing Plan, which
includes initiatives to build awareness, sales and frequency from the immediate
trade area, typically defined as a one-mile radius around that location. These
initiatives include both on-site and off-site activities, such as large party,
special event and meeting planning, bread and baked goods classes, Italian
culture seminars, food and wine tastings, anniversary parties, community group
fund-raisers as well as programs designed to encourage concierges from local
hotels and office buildings to recommend Il Fornaio to their clients. Restaurant
management, in conjunction with the Director of Neighborhood Marketing, develops
a calendar of events based on quarterly and annual sales objectives. Each
location is provided with a comprehensive Neighborhood Marketing Resource Guide
and Neighborhood Marketing Calendar designed to assist management and staff with
event planning, sales building strategies and guest communication guidance.
These programs and initiatives are specifically tailored to the food service
needs of the current and potential guests that are employed or reside in the
immediate trade areas. Other public relations activities include special events,
such as chef demonstrations at local stores, charitable donations and
participation in community activities, such as fundraisers for schools,
hospitals and other non-profit organizations.

MANAGEMENT INFORMATION SYSTEMS

        The Company has developed an integrated management information system
that is utilized in all of its restaurants and wholesale bakeries. This system
currently includes a computerized point-of-sale system in its restaurant
operations and a proprietary accounts receivable system in its wholesale
bakeries. The restaurant point-of-sale system facilitates the movement of guest
food and beverage orders between the guest areas and kitchen and bar, controls
cash, handles credit card authorizations and provides management with revenue
data. The integrated system electronically transmits sales and guest counts to
Company headquarters on a daily basis. The Company has a computerized time
management system at each of its locations. The system calculates the time
worked by each employee, allows management to gather data and schedule labor
hours and produces payroll reports. Additionally, the Company has developed a
proprietary back-office system for processing daily and weekly paperwork (sales,
accounts payable, labor and inventory). This system generates a weekly operating
statement, which compares both weekly and month-to-date results versus budget.

        The Company's accounting system includes a scalable, relational
database. The Company's automated restaurant and bakery point-of-sale, time
management and unit accounting system provides data for posting directly to the
Company's centralized system. The centralized database provides flexibility in
generating various management reports against predetermined operating budgets.
Such reporting includes (i) weekly reports of revenues, cost of revenues and
selected controllable operating budgets, (ii) detailed monthly performance of
revenues and expenses and (iii) monthly reports of administrative expense
performance. The system allows management to review the mix of menu items in
order to better match guest preferences and improve profitability. Detailed
monthly


                                       12
<PAGE>   13

profit and loss statements are compiled at the corporate office and reviewed
with unit management every month by senior management.

PURCHASING

        The Company seeks to obtain ingredients of high quality at competitive
prices from reliable sources. To ensure freshness and quality, maintain low
inventory levels and facilitate the unique preparation of menu items, the
Company purchases most of its ingredients in an unprocessed state. In order to
maximize operating efficiencies and to provide the freshest ingredients for its
food products, the management team of each restaurant and wholesale bakery
determines the daily quantities of food items needed and orders accordingly. The
Company's purchasing department seeks to obtain the lowest possible prices
available to the Company by negotiating bulk purchasing contracts for a number
of the ingredients utilized by the restaurants and wholesale bakeries.
Ingredients and supplies are shipped directly to the restaurant or wholesale
bakery, as the Company does not maintain a central food product warehouse or
commissary.

COMPETITION

        The restaurant and wholesale bakery business is intensely competitive
with respect to food quality, price-value relationships, ambiance, service and
location, and many existing restaurants and bakeries compete with the Company at
each of its locations. There are many well-established competitors with
substantially greater financial, marketing, personnel and other resources than
the Company. In addition, many of the Company's competitors are well established
in the markets where the Company's operations are, or in which they may be,
located. While the Company believes that its restaurants and wholesale bakeries
are distinctive in design and operating concept, other companies may develop
restaurants and bakeries that operate with similar concepts.

        The restaurant business is often affected by changes in consumer tastes,
national, regional or local economic conditions, demographic trends, consumer
confidence in the economy, discretionary spending priorities, weather
conditions, tourist travel, traffic patterns, and the type, number and location
of competing restaurants. Changes in these factors could have a material adverse
effect on the Company's business, financial condition and results of operations.

EMPLOYEES

        At January 28, 2001, the Company employed approximately 3,039 persons,
44 of whom were executive office personnel, 194 of whom were unit management
personnel and the remainder of whom were hourly restaurant or wholesale bakery
personnel. None of the Company's employees is covered by a collective bargaining
agreement. The Company considers its employee relations to be good.

TRADEMARKS

        The Company has registered and applied for registration with the United
States Patent and Trademark Office for a number of trademarks and service marks
used in connection with its business. The Italian corporation that owned the
rights to the Il Fornaio marks in the United States has assigned to the Company
all of its United States rights and related goodwill. The Company regards its
trademarks and related rights as having substantial value and as being an
important factor in the marketing of its Il Fornaio restaurants and brand items.

GOVERNMENTAL REGULATION

        The Company's restaurants are subject to regulation by federal agencies
and to licensing and regulation by state and local health, sanitation, building,
zoning, safety, fire and other departments relating to the development and
operation of restaurants and retail establishments. These regulations include
matters relating to environmental, building construction, zoning requirements
and the preparation and sale of food and alcoholic beverages. The Company's
facilities are licensed and subject to regulation under state and local fire,
health and safety codes, and the operation of its trucks is subject to
Department of Transportation regulations. Delays or failures in obtaining or
maintaining the required construction and operating licenses, permits and
approvals could delay or prevent the opening of new restaurants or could
materially and adversely affect the operation of existing restaurants.

        The development and construction of additional restaurants and wholesale
bakeries will be subject to compliance with applicable zoning, land use,
environmental and licensing regulations. There can be no assurance that the
Company will be able to obtain necessary licenses or other approvals on a
cost-effective and timely basis in order to construct and develop restaurants
and wholesale


                                       13
<PAGE>   14

bakeries in the future. Various federal and state labor laws govern the
Company's operations and its relationship with its employees, including minimum
wage, overtime, working conditions, fringe benefit and citizenship requirements.

        During 2000, approximately 25% of restaurant revenues was attributable
to the sale of alcoholic beverages, primarily wine. The Company is required to
comply with the alcohol licensing requirements of the federal government, states
and municipalities where its restaurants are located. For each new location,
alcoholic beverage control regulations require applications to state authorities
and, in certain locations, county and municipal authorities for a license and
permit to sell alcoholic beverages. Typically, licenses must be renewed annually
and may be revoked or suspended for cause at any time. Alcoholic beverage
control regulations relate to numerous aspects of the daily operations of the
restaurants, including minimum age of guests and employees, hours of operation,
advertising, wholesale purchasing, inventory control and handling, storage and
dispensing of alcoholic beverages. Failure to comply with federal, state or
local regulations could cause the Company's licenses to be revoked or force it
to terminate the sale of alcoholic beverages at one or more of its restaurants.

        The Company is subject to state "dram-shop" laws and regulations, which
generally provide that a person injured by an intoxicated person may seek to
recover damages from an establishment that wrongfully served alcoholic beverages
to such person. While the Company carries liquor liability coverage as part of
its existing comprehensive general liability insurance, there can be no
assurance that it will not be subject to a judgment in excess of such insurance
coverage or that it will be able to obtain or continue to maintain such
insurance coverage at reasonable costs, or at all.

        The federal Americans With Disabilities Act prohibits discrimination on
the basis of disability in public accommodations and employment. The Company is
required to comply with the Act and regulations relating to accommodating the
needs of the disabled in connection with the construction of new facilities and
with significant renovations of existing facilities.

EXECUTIVE OFFICERS OF THE REGISTRANT

        Laurence B. Mindel, age 63, joined the Company as Chairman of the Board,
President and Chief Executive Officer in January 1987. Mr. Mindel currently
serves as Chairman of the Board, having resigned as President in 1995 and as
Chief Executive Officer in 1998. From 1964 to 1970, Mr. Mindel was President and
Chief Executive Officer of Caswell Coffee Company in San Francisco. In 1970, Mr.
Mindel co-founded Spectrum Foods, where he served as Chairman of the Board,
President and Chief Executive Officer. Under Mr. Mindel's direction, Spectrum
created 14 restaurants in Northern and Southern California, including Chianti,
MacArthur Park, Harry's Bar and American Grill, Prego and Guaymas. In 1984, Saga
Corporation acquired Spectrum Foods, and from that time until he joined the
Company, Mr. Mindel served as President of the Saga Restaurant Group, which
included Stuart Anderson's Black Angus, Velvet Turtle, Spoons, Hotel Food
Services and the newly acquired Spectrum Foods restaurants. In 1985, Mr. Mindel
became the first person of non-Italian descent and the first American to be
awarded the Caterina di Medici medal. Awarded by the Italian government, the
medal recognizes persons who have excelled in preserving the Italian heritage
outside of Italy. In 1998, Mr. Mindel became one of a select group of restaurant
industry leaders to receive the International Foodservice Manufacturers
Association's Foodservice Operator of the Year and Gold Plate Award. Mr. Mindel
is also a director of Peet's Coffee & Tea, Inc.

        Michael J. Hislop, age 46, joined the Company as President and Chief
Operating Officer in July 1995 and was promoted to Chief Executive Officer and
President in 1998. From April 1991 to May 1995, Mr. Hislop served as Chairman
and Chief Executive Officer of Chevy's Mexican Restaurants which, under his
direction, grew from 17 locations to 63 locations nationwide. From 1982 to 1991,
Mr. Hislop was employed by El Torito Mexican Restaurants, Inc., serving first as
Regional Operator, then as Executive Vice President of Operations and for the
last three years as Chief Operating Officer. From 1979 to 1982, Mr. Hislop was
employed by T.G.I. Fridays Restaurants, Inc. as a Regional Manager.

        Peter P. Hausback, age 41, was appointed Chief Financial Officer and
Secretary on December 1, 1999. Mr. Hausback is also Vice President of Finance
and has held that position since May 1999. From April 1998 to May 1999, Mr.
Hausback was the Vice President of Planning and Analysis and from February 1992
to April 1998 he was Controller. Prior to joining the Company, Mr. Hausback was
employed at Price Waterhouse.

        Michael J. Beatrice, age 47, joined the Company as Vice President,
Operations, in April 1996 and was promoted to Chief Operating Officer in 1998.
From 1994 to 1996, Mr. Beatrice was Vice President, Operations, for an area
developer of Boston Chicken, a restaurant company. From 1991 to 1994, he owned
and operated an upscale, full-service Italian restaurant north of Boston. From
1983 to 1991, he served a variety of positions with El Torito Mexican
Restaurant, Inc., most recently as Regional Vice President.

ITEM 2. PROPERTIES

        All of the Company's operations are located in leased facilities.
Current restaurant and wholesale bakery leases have expiration dates ranging
from 2002 to 2017, with the majority of the leases providing for five-year
options to renew for at least one additional


                                       14
<PAGE>   15


term. All of the Company's leases provide for a minimum annual rent, and most
leases require additional percentage rent based on sales volume in excess of
minimum levels at the particular location. Some of the leases require the
Company to pay the costs of insurance, taxes and a portion of the lessor's
operating costs. See Note 10 to Financial Statements for information regarding
aggregate minimum and percentage rentals paid by the Company for recent periods
and information regarding the Company's obligation to pay minimum rentals in
future periods. The Company's lease for one of its Las Vegas restaurants
contains certain termination and relocation provisions. See "Item 1. Business --
Risk Factors -- Long-Term, Non-Cancelable Leases; Termination Provisions."

        The Company does not anticipate any difficulties renewing existing
leases as they expire. However, there can be no assurance that the Company will
be able to renew any leases on favorable terms, if at all. Inability of the
Company to renew a particular lease or closure of a facility subject to a
long-term, non-cancelable lease could have a material adverse effect on the
Company's business, financial condition and results of operations.

        The Company's executive offices are located in approximately 8,110
square feet of leased space in Corte Madera, California.

ITEM 3. LEGAL PROCEEDINGS

        On or about November 16, 2000, four substantially identical civil
actions were commenced in the Court of Chancery of the State of Delaware in New
Castle County. The plaintiff in each action seeks to represent a putative class
consisting of the public stockholders of the Company. Named as defendants in
each of the complaints are the Company, members of the Company's board of
directors and Bruckmann, Rosser, Sherill & Co., L.L.C. (see Note 3 to
Financial Statements). The actions have since been consolidated into a single
action. The complaint alleges, among other things, that the proposed merger is
unfair and that the Company's directors breached their fiduciary duties by
failing to disclose material non-public information related to the value of the
Company and by engaging in self-dealing. The complaint seeks an injunction,
damages and other relief. The action is at a preliminary stage. No response has
been filed, and no trial date has been set. The defendants believe that the
claims alleged in this action are without merit and intend to contest them
vigorously. There can be no assurance, however, as to the outcome of this
lawsuit.

        The Company is a party to various other legal proceedings arising in the
ordinary course of its business. Although no assurance can be given, the Company
does not expect any of these other proceedings to have a material adverse effect
on the Company's business, financial condition or results of operations.


ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

    None.

                                     PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS

(a)  The Company's Common Stock (Nasdaq symbol "ILFO") is traded on the Nasdaq
     National Market. The following table presents quarterly information on the
     price range of the Company's Common Stock, indicating the high and low sale
     prices reported by the Nasdaq National Market. These prices do not include
     retail markups, markdowns or commissions.

<TABLE>
<CAPTION>
      FISCAL QUARTER ENDED:              HIGH            LOW
      ---------------------            -------        ------
<S>                                    <C>            <C>
      1999
      ----
      March 28, 1999...............    $  11.25       $   6.38
      June 27, 1999................    $  15.00       $   8.63
      September 26, 1999...........    $  15.13       $   9.38
      December 26, 1999............    $  10.00       $   5.50

      2000
      ----
      March 26, 2000...............    $  10.13       $   6.88
      June 25, 2000................    $   9.38       $   6.75
      September 24, 2000...........    $   9.94       $   6.25
      December 31, 2000............    $  13.38       $   8.25
</TABLE>

        At March 1, 2001, there were 479 holders of record of the Company's
Common Stock. The Company has never paid any cash dividends on its Common Stock.
The Board of Directors intends to retain earnings to support operations and to
finance expansion and does not intend to pay cash dividends on the Common Stock
for the foreseeable future.

RECENT SALES OF UNREGISTERED SECURITIES


                                       15
<PAGE>   16

Since December 26, 1999, the Registrant has sold and issued the following
unregistered securities:

        1.  During the period, the Company granted incentive and non-qualified
            stock options to key employees, officers and directors under its
            1997 Equity Incentive Plan (the "Plan") covering an aggregate of
            245,450 shares of the Company's Common Stock, at exercise prices
            ranging from $7.75 to $9.75 per share. These options vest over a
            period of time following their respective dates of grant. The
            Company claimed exemption from registration under the Securities Act
            of 1933 for these grants in that the Company believes such grants
            were not "sales" within the meaning of the Securities Act.

ITEM 6. SELECTED FINANCIAL DATA

     The following selected financial data have been derived from the financial
statements of the Company. The data set forth below should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the Company's financial statements and notes
thereto.

<TABLE>
<CAPTION>
                                                                                 FISCAL YEAR
                                                   ------------------------------------------------------------------------
                                                     2000           1999(1)         1998(1)        1997(1)         1996(1)
                                                   ---------       ---------       ---------      ---------       ---------
                                                                  (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S>                                                <C>             <C>             <C>            <C>             <C>
INCOME STATEMENT DATA:

Revenues:
  Restaurants                                      $ 113,872       $  92,266       $  75,523      $  65,525       $  50,599
  Wholesale bakeries                                  10,524           8,167           7,615          6,284           6,016
  Retail bakeries                                         --              --              --            311           4,137
                                                   ---------       ---------       ---------      ---------       ---------
     Total revenues                                  124,396         100,433          83,138         72,120          60,752
                                                   ---------       ---------       ---------      ---------       ---------
Costs and expenses:
  Costs of sales                                      29,777          23,806          19,594         16,993          14,792
  Operating expenses                                  72,441          58,011          47,589         41,800          35,152
  Depreciation and amortization                        6,117           4,946           3,948          3,298           3,284
                                                   ---------       ---------       ---------      ---------       ---------
    Total restaurant and bakery costs                108,335          86,763          71,131         62,091          53,228
                                                   ---------       ---------       ---------      ---------       ---------
Income from restaurant and bakery operations          16,061          13,670          12,007         10,029           7,524
  Preopening expenses(2)                                 969           1,077             534            432             426
  General and administrative expenses                  9,264           8,053           6,609          6,231           4,874
  Provision for store closures                            --              --              --           (470)             --
                                                   ---------       ---------       ---------      ---------       ---------
Operating income                                       5,828           4,540           4,864          3,836           2,224
Interest income, net                                     213             433             811            398             127
                                                   ---------       ---------       ---------      ---------       ---------
Income before income taxes and change
  in accounting principle                              6,041           4,973           5,675          4,234           2,351
Provision for income taxes                             2,267           1,914           2,224          1,651             898
                                                   ---------       ---------       ---------      ---------       ---------
Income before change in  accounting principle          3,774           3,059           3,451          2,583           1,453
Cumulative effect of change in accounting
  principle (net of taxes)(2)                             --              --             326             --              --
                                                   ---------       ---------       ---------      ---------       ---------
Net income                                         $   3,774       $   3,059       $   3,125      $   2,583       $   1,453
                                                   =========       =========       =========      =========       =========
Basic earnings per share before change in
  accounting principle                             $    0.66       $    0.54       $    0.59      $    0.53       $    0.32
Cumulative effect of change in accounting
  principle                                               --              --            0.06             --              --
                                                   ---------       ---------       ---------      ---------       ---------
Basic earnings per share                           $    0.66       $    0.54       $    0.53      $    0.53       $    0.32
                                                   =========       =========       =========      =========       =========
Basic weighted average shares outstanding              5,758           5,713           5,846          4,908           4,485
                                                   =========       =========       =========      =========       =========

Diluted earnings per share before change in
  accounting principle                             $    0.62       $    0.50       $    0.55      $    0.48       $    0.32
Cumulative effect of change in accounting
  principle                                               --              --            0.05             --              --
                                                   ---------       ---------       ---------      ---------       ---------
Diluted earnings per share                         $    0.62       $    0.50       $    0.50      $    0.48       $    0.32
                                                   =========       =========       =========      =========       =========
Diluted weighted average shares outstanding            6,090           6,097           6,298          5,433           4,570
                                                   =========       =========       =========      =========       =========

BALANCE SHEET DATA (AT YEAR END):

Working capital (deficit)                          $  (2,507)      $  (3,391)      $   6,748      $  11,094       $     158
Total assets                                          78,208          65,158          57,354         52,091          34,855
Stockholders' equity                                  47,259          42,578          39,509         37,126          22,936
</TABLE>

(1)  Certain fiscal 1999, 1998, 1997 and 1996 amounts have been reclassified to
     conform with fiscal 2000 presentations.

(2)  Reflects adoption of SOP 98-5, "Reporting on the Costs of Start-up
     Activities," in 1998. See Note 2 to Financial Statements.


                                       16
<PAGE>   17

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

OVERVIEW

        The Company's revenues consist of restaurant sales and wholesale bakery
sales. Comparable restaurant sales are calculated to include a new restaurant
only after its first full month following the eighteenth month of its operation.
Comparable restaurant sales may fluctuate significantly as a result of a variety
of factors. See "Factors Affecting Operating Results" below.

        Cost of sales is composed primarily of the cost of food and beverages.
Operating expenses include payroll and fringe benefit costs, occupancy costs,
marketing costs and other store-level costs. The majority of these costs are
variable and are expected to increase with sales volume. Occupancy costs include
both a fixed and percentage portion of rent.

        Preopening costs consist of direct costs related to hiring and training
the initial workforce, promotion and certain other direct costs related to
opening new restaurants. Preopening costs in 2000, 1999 and 1998 were expensed
as incurred. The expense-as-incurred standard has in the past resulted in, and
may in the future lead to, increased variability in the amount of preopening
costs recognized, depending on the number and timing of restaurant openings. As
a result, the Company's operating results may fluctuate to a greater extent than
under the previously applied principle.

        General and administrative expenses are composed of expenses associated
with all corporate and administrative functions that support existing operations
and provide an infrastructure to support future growth, including management and
staff salaries, employee benefits, travel, information systems and training and
market research. Certain expenses of recruiting and training unit management
personnel are also included as general and administrative expenses.

        The Company has entered an Agreement and Plan of Merger, dated as of
November 15, 2000, as amended as of January 9, 2001, with Manhattan Acquisition
Corp. ("Newco"), a wholly owned subsidiary of Bruckmann, Rosser, Sherrill & Co.
II, L.P. ("BRS"), a Delaware limited partnership engaged principally in the
business of investing in companies. Under the merger agreement, Newco will be
merged into Il Fornaio, with Il Fornaio as the surviving corporation (the
"Merger"). At the effective time of the Merger, each issued and outstanding
share of Il Fornaio common stock will be converted into the right to receive
$14.00 in cash, without interest, except that a specified number of shares and
options held by certain Il Fornaio directors, executive officers, employees and
stockholders will continue as, or be converted into, equity interests of the
surviving corporation. Following the Merger, Il Fornaio will continue its
operations as a privately held company with BRS as the controlling stockholder.
The Merger is contingent upon satisfaction of a number of conditions, including
approval of Il Fornaio's stockholders, regulatory and other approvals and
consents, the absence of any pending or threatened actions that would reasonably
be expected to have a material adverse effect on the Company and receipt of
financing for the transaction. There can be no assurance that these or other
conditions to the Merger will be satisfied or that the Merger will be completed.
If the Merger is not completed for any reason, it is expected that the current
management of Il Fornaio, under the direction of the Board of Directors, will
continue to manage Il Fornaio as an ongoing business.

        The Company and BRS estimate that the total amount of funds necessary to
consummate the Merger and related transactions, and to pay related fees and
expenses will be approximately $93.0 million. Of this amount, $40.0 million will
be funded from an equity investment in the Company by Newco, the continuing
stockholders and outside equity financing. An additional $50.0 million will be
funded through new credit facilities from a syndicate of banks and private
offerings of debt securities. BRS has received commitments, subject to various
conditions, from financial institutions and some of their affiliates in an
aggregate amount sufficient, taking into account the amounts to be contributed
as equity financing, to fund these requirements. Receipt of third-party
financing is a condition to completion of the Merger. Following completion of
the Merger, the Company and BRS expect to repay the third-party financing
through cash flow generated from operations in the ordinary course of business
and/or through refinancing.

        As a result, certain transaction costs incurred in anticipation of the
consummation of the Merger have been capitalized as deferred transaction costs.
Such costs will be accounted for as deferred financing costs as to a portion of
the costs and as a reduction in equity proceeds for the remainder upon
completion of the Merger, or expensed in the event the Merger is not completed.
At December 31, 2000, these costs amounted to $1.1 million and these costs are
expected to increase.


                                       17
<PAGE>   18

RESULTS OF OPERATIONS FOR FISCAL YEARS 2000, 1999 AND 1998

     The following table sets forth operating results as a percentage of total
revenues and the percentage change in amounts for the periods indicated.

<TABLE>
<CAPTION>
                                                        PERCENTAGE OF TOTAL REVENUES                PERCENTAGE INCREASE
                                                                 FISCAL YEAR                              (DECREASE)
                                                   -----------------------------------------     -----------------------------
                                                     2000           1999(1)         1998(1)      2000 VS. 1999   1999 VS. 1998
                                                   ---------       ---------       ---------     -------------   -------------
<S>                                               <C>              <C>             <C>           <C>             <C>
INCOME STATEMENT DATA:

Revenues:
  Restaurants                                           91.5%           91.9%           90.8%           23.4%           22.2%
  Wholesale bakeries                                     8.5%            8.1%            9.2%           28.9%            7.2%
                                                   ---------       ---------       ---------       ---------       ---------
     Total revenues                                    100.0%          100.0%          100.0%           23.9%           20.8%
                                                   ---------       ---------       ---------       ---------       ---------
Costs and expenses:
  Costs of revenues                                     24.0%           23.7%           23.6%           25.1%           21.5%
  Operating expenses                                    58.2%           57.8%           57.3%           24.9%           21.9%
  Depreciation and amortization                          4.9%            4.9%            4.7%           23.7%           25.3%
                                                   ---------       ---------       ---------       ---------       ---------
    Total restaurant and bakery costs                   87.1%           86.4%           85.6%           24.9%           22.0%
                                                   ---------       ---------       ---------       ---------       ---------
Income from restaurant and bakery operations            12.9%           13.6%           14.4%           17.5%           13.9%
  Preopening expenses(2)                                 0.8%            1.1%            0.6%          -10.0%          101.7%
  General and administrative expenses                    7.4%            8.0%            7.9%           15.0%           21.8%
                                                   ---------       ---------       ---------       ---------       ---------
Operating income                                         4.7%            4.5%            5.9%           28.4%           -6.7%
Interest income, net                                     0.2%            0.4%            1.0%          -50.8%          -46.6%
                                                   ---------       ---------       ---------       ---------       ---------
Income before income taxes and change
  In accounting principle                                4.9%            4.9%            6.9%           21.5%          -12.4%
Provision for income taxes                               1.9%            1.9%            2.7%           18.4%          -13.9%
                                                   ---------       ---------       ---------       ---------       ---------
Income before change in  accounting principle            3.0%            3.0%            4.2%           23.4%          -11.4%
Cumulative effect of change in accounting
  Principle (net of taxes)(2)                            0.0%            0.0%            0.4%            0.0%         -100.0%
                                                   ---------       ---------       ---------       ---------       ---------
Net income                                               3.0%            3.0%            3.8%           23.4%           -2.1%
                                                   =========       =========       =========       =========       =========
</TABLE>

(1)  Certain fiscal 1999 and 1998 amounts have been reclassified to conform with
     fiscal 2000 presentations.

(2)  Reflects adoption of SOP 98-5, "Reporting on the Costs of Start-up
     Activities," in 1998. See Note 2 to Financial Statements.

FISCAL 2000 COMPARED TO FISCAL 1999

REVENUES

        Total restaurant revenues increased by $21.6 million, or 23.4%, to
$113.9 million in 2000 from $92.3 million in 1999. The increase was primarily
attributable to (i) the opening of four new restaurants in 2000 as well as three
new restaurants opened during the second half of 1999 and (ii) a 4.4% increase
in comparable restaurant sales. Comparable restaurant sales are calculated to
include a new restaurant only after the first full month following the
eighteenth month of its operation. The increase in restaurant revenues also
reflects the benefit of an additional week of operations for the 53 weeks ended
December 31, 2000 compared to the 52 weeks ended December 26, 1999. Total
wholesale bakery revenues increased by $2.4 million, or 28.9%, to $10.5 million
in 2000 from $8.2 million in 1999. The increase was attributable primarily to
the continued addition of new wholesale accounts as well as increased sales to
existing accounts.

COST OF REVENUES

        Cost of revenues increased slightly as a percentage of revenues to 24.0%
for 2000 compared to 23.7% for 1999. The increase was primarily the result of
higher initial cost of revenues for the four new restaurants opened in 2000
along with a general shift in menu mix.

OPERATING EXPENSES

        Operating expenses include all restaurant and wholesale bakery operating
and occupancy costs, the major components of which are labor, rent, operating
supplies, repairs and maintenance, marketing and utilities. Operating expenses
as a percentage of revenues increased to 58.2% in 2000 from 57.8% in 1999. This
increase was primarily attributable to an increase in the minimum wage in
Washington and the corresponding indirect pressure on other wages, as well as
increased payment of overtime in California due to the labor law change that
took effect January 1, 2000. Additionally, there were general increases in
employee-related insurance programs and store operating supplies.


                                       18
<PAGE>   19

DEPRECIATION AND AMORTIZATION

        Depreciation and amortization expenses remained unchanged as a
percentage of revenues at 4.9% for 2000 and 1999. Depreciation and amortization
expenses increased to $6.1 million in 2000 from $4.9 million in 1999, primarily
reflecting increased depreciation related to new unit construction costs.


PREOPENING EXPENSES

        Prior to 1998, pre-opening expenses for each of the Company's new units
were capitalized and amortized over the 12-month period following the opening of
the unit. With the adoption of SOP 98-5, "Reporting On the Cost of Start-Up
Activities", pre-opening costs in 1998 were expensed as incurred. This change is
discussed in more detail in Note 2 to the Financial Statements. Total
pre-opening costs for 2000 were $969,000, or 0.8% as a percentage of revenue,
compared to $1.1 million, or 1.1% as a percentage of revenue, for 1999.
Pre-opening costs in 2000 were primarily incurred in connection with the opening
of the Scottsdale, Arizona restaurant on February 7, 2000, the Roseville,
California restaurant on August 25, 2000, the Broomfield, Colorado restaurant on
November 20, 2000 and the Denver, Colorado restaurant on December 11, 2000. The
pre-opening costs for 1999 were incurred primarily in connection with the
opening of the Company's Canaletto restaurant in Las Vegas, Nevada on June 28,
1999, the Coronado, California restaurant on September 3, 1999, the Manhattan
Beach, California restaurant on November 13, 1999 and the Atlanta, Georgia
restaurant on December 6, 1999.

GENERAL AND ADMINISTRATIVE EXPENSES

General and administrative expenses as a percentage of revenues decreased to
7.4% in 2000 compared to 8.0% in 1999. This decrease primarily reflects
non-recurring charges of approximately $400,000 incurred in the third quarter of
1999 that were associated with the Company's review of financial and strategic
alternatives to enhance stockholder value and included preliminary costs of
$84,000 with respect to the evaluation and negotiation of leases for two
potential sites, which the Company subsequently decided not to pursue. These
increases were offset, in part, by stable administrative staffing expense
levels.


INTEREST INCOME, NET

        Interest income decreased to $324,000 in 2000 from $464,000 in 1999,
reflecting interest earned on lower average cash balances as a result of the use
of cash to expand the Company's operations. Interest expense increased to
$111,000 in 2000 from $31,000 in 1999 as a result of the increased utilization
of the Company's line of credit in connection with the expansion of operations.

INCOME TAX PROVISION

        The Company's effective tax rate decreased for fiscal 2000 to 37.5% from
38.5% for fiscal 1999, due to the planned use of various deductible tax assets
and other tax credits available to the Company.

FISCAL 1999 COMPARED TO FISCAL 1998

REVENUES

        Total restaurant revenues increased by $16.7 million, or 22.2%, to $92.3
million in 1999 from $75.5 million in 1998. The increase was primarily
attributable to (i) the opening of four new restaurants in 1999 as well as two
new restaurants opened late in 1998 and (ii) a 3.1% increase in comparable
restaurant sales. Comparable restaurant sales are calculated to include a new
restaurant only after the first full month following the eighteenth month of its
operation. The increase in restaurant revenues also reflects the benefit of a
moderate menu price increase implemented in the second quarter of 1999. Total
wholesale bakery revenues increased by $552,000, or 7.2%, to $8.2 million in
1999 from $7.6 million in 1998. The increase was attributable to the continued
addition of new wholesale accounts as well as increased sales to existing
accounts.


                                       19
<PAGE>   20


COST OF REVENUES

        Cost of revenues as a percentage of revenues was 23.7% for 1999 and
23.6% for 1998. The slight increase was due to higher initial cost of revenues
for the four new restaurants opened in 1999.

OPERATING EXPENSES

        Operating expenses include all restaurant and wholesale bakery operating
and occupancy costs, the major components of which are labor, rent, operating
supplies, repairs and maintenance, marketing and utilities. Operating expenses
as a percentage of revenues increased to 57.8% from 57.3% in 1998. This increase
was primarily attributable to increases in minimum wage rates applicable at
certain restaurants (Portland and Seattle) and the corresponding indirect
pressure on other wages, as well as non-recurring charges related to the
disposition of equipment from two wholesale bakeries as a result of the
consolidation of certain bakery operations during 1999.

DEPRECIATION AND AMORTIZATION

        Depreciation and amortization expenses as a percentage of revenues
increased slightly to 4.9% in 1999 from 4.7% in 1998. Depreciation and
amortization expenses increased to $4.9 million in 1999 from $3.9 million in
1998, primarily reflecting increased depreciation related to new unit
construction costs.

PREOPENING EXPENSES

        Prior to 1998, pre-opening expenses for each of the Company's new units
were capitalized and amortized over the 12-month period following the opening of
the unit. With the adoption of SOP 98-5, pre-opening costs in 1998 were expensed
as incurred. This change is discussed in more detail in the "Overview" above.
Pre-opening expenses as a percentage of revenues were 1.1% for 1999 and 0.6% for
1998. This increase in pre-opening costs was due to the opening of four new
restaurants in 1999 versus two new restaurants in 1998.

GENERAL AND ADMINISTRATIVE EXPENSES

        General and administrative expenses as a percentage of revenues
increased to 8.0% in 1999 from 7.9% in 1998. This increase primarily reflects
non-recurring charges of approximately $400,000 incurred in the third quarter of
1999 that were associated with the Company's review of financial and strategic
alternatives to enhance stockholder value and included preliminary costs of
$84,000 were with respect to the evaluation and negotiation of leases for two
potential sites, which the Company subsequently decided not to pursue. These
increases were offset by stable administrative staffing expense levels.

INTEREST INCOME, NET

        Interest income decreased to $464,000 from $844,000 in 1998, reflecting
interest on lower average cash balances as a result of the use of cash to fund
the construction of new restaurants. Interest expense remained relatively
unchanged at $31,000 in 1999 and $33,000 in 1998.

INCOME TAX PROVISION

        The Company's effective tax rate decreased for fiscal 1999 to 38.5% from
39.2% for fiscal 1998, reflecting the planned use of various deductible tax
assets and FICA credits.

LIQUIDITY AND CAPITAL RESOURCES

        At December 31, 2000, the Company had $6.1 million in cash and cash
equivalents.

        For the periods presented, the Company has funded its capital expansion
primarily from the proceeds of the Company's initial public offering in
September 1997, as well as with cash flow generated from new and existing
restaurant operations. Cash flow from operations increased to $12.9 million for
fiscal 2000 from $10.9 million in fiscal 1999. At December 31, 2000, the Company
had a working capital deficit of $2.5 million compared to working capital
deficit of $3.4 million at December 26, 1999. The Company's


                                       20
<PAGE>   21

working capital deficit is primarily attributable to the timing of the payment
of the Company's current payables along with a decrease in cash as a result of
funding its capital expansion.

        Net cash provided by financing activities was $907,000 for 2000 as
compared to $10,000 in 1999. The Company received $583,000 in cash from the
issuance of common stock under the Company's employee stock purchase plan in
2000 compared to $712,000 in 1999 and $220,000 from the issuance of common stock
upon exercise of stock options in 2000 compared to $281,000 in 1999. The Company
did not repurchase any common stock in 2000 compared to $983,000 in 1999.

        In October 1998, the Board of Directors authorized the repurchase of up
to 500,000 shares of the Company's common stock. Repurchases were made in the
open market at prevailing prices or in negotiated off-market transactions. On
December 9, 1999, the Board of Directors authorized the repurchase of an
additional 250,000 shares of the Company's common stock. Through December 31,
2000, the Company had repurchased 499,400 shares of common stock in the open
market for an aggregate of approximately $3.0 million.

        The Company has a credit agreement, which provides for a $5.0 million
revolving line of credit and bears interest at the bank's reference rate. At
December 31, 2000, there were no amounts outstanding under the credit line. The
existing credit line is scheduled to expire May 31, 2001. In the event the
Merger is not completed, the Company intends to seek to renew the line of
credit.

        Capital expenditures, net of construction allowances received, were
$12.8 million for 2000 as compared to $18.1 million for 1999. These expenditures
reflected construction costs primarily for the Company's four new restaurants
opened in 2000 and 1999. The Company also anticipates incurring additional
expenditures to enhance some of its existing restaurants. To date, these
expenditures have been funded primarily by the proceeds from the Company's
initial public offering and cash flow generated from restaurant and bakery
operations. The Company expects that its planned future restaurants will
require, on average, a total investment by the Company per restaurant, net of
anticipated landlord contributions, of approximately $2.2 million, with
additional average pre-opening costs per restaurant of approximately $250,000.
The Company intends to finance these capital expenditures through a combination
of cash and cash equivalents on hand, cash provided by operations and landlord
construction contributions (when available).


                                       21
<PAGE>   22



        The Company's future capital requirements and the adequacy of its
available funds will depend on many factors, including the pace of expansion,
the size of restaurants developed and the nature of the arrangements negotiated
with landlords. Although no assurance can be given, the Company believes that
anticipated cash flow from operations, existing cash balances and borrowings
under the credit agreement will be sufficient to fund its capital requirements,
including planned expansion and ongoing maintenance and renovation of existing
restaurants, at least through 2001. In the event that additional capital is
required, the Company may seek to raise that capital through public or private
equity or debt financings. There can be no assurance that such capital will be
available on favorable terms, if at all.


FACTORS AFFECTING OPERATING RESULTS AND QUARTERLY RESULTS

        Certain statements set forth in this Managements' Discussion and
Analysis constitute "forward-looking statements" within the meaning of the
Private Securities Litigation Act of 1995. These statements include, without
limitation, the timing of and plans for anticipated restaurant and wholesale
bakery openings, expansion strategy, the projected investment costs, pre-opening
expenses and sizes of future restaurants, the adequacy of anticipated sources of
cash, planned capital expenditures, the Company's ability to complete the
proposed Merger and the outcome of the related litigation, the effect of
interest rate increases, and trends or expectations regarding the Company's
operations. In addition, words such as "believes," "anticipates," "expects,"
"intends," "will," "estimates" and similar expressions are intended to identify
forward-looking statements, but are not the exclusive means of identifying such
statements. Such statements are based on currently available operating,
financial and competitive information and are subject to various risks and
uncertainties. Readers are cautioned that the forward-looking statements reflect
management's analysis only as of the date hereof, and the Company assumes no
obligation to update these statements. Actual future results, events and trends
may differ materially from those expressed in or implied by such statements
depending on a variety of factors, including, but not limited to those set forth
under "Risk Factors" and elsewhere in this Form 10-K. See "Business -- Risk
Factors."

        The Company's business is subject to a number of challenges and risks
including, among other things, the risks associated with the Company's growth
strategy, risks related to the Company's relatively small operations base and
the geographic concentration of the Company's restaurants, uncertainties
associated with possible changes in food, energy and labor costs, potentially
adverse weather conditions, and the impact of potential governmental regulation,
risks related to the Company's dependence on its key personnel, uncertainties
related to the intensely competitive nature of the restaurant business, as well
as potential liabilities associated with long-term leases. The Company's plans
for new restaurant locations and timing of openings depend upon, among other
things, timely project development and restaurant construction, obtaining
appropriate regulatory approvals, management of costs and recruitment of
qualified operating personnel.

        The Company's quarterly operating results may fluctuate significantly as
a result of a variety of factors, including general economic conditions,
consumer confidence in the economy, changes in consumer preferences, competitive
factors, weather conditions, the timing of new restaurant openings and related
expenses, net sales contributed by new restaurants, the Company's ability to
execute its business strategy, fluctuations in inventory and general and
administrative expenses, and increases or decreases in comparable restaurant
revenues. Due to the foregoing factors, results for any one quarter are not
necessarily indicative of results to be expected for any other quarter or for
any year and, from time to time in the future, the Company's results of
operations may be below the expectations of public market analysts and
investors. Comparable restaurant sales may also vary from period to period as a
result of similar factors.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

        In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS 133 has been amended by SFAS Nos. 137
and 138, and is interpreted by the FASB and the Derivatives Implementation Group
through "Statement 133 Implementation Issues." SFAS No. 133, as amended, defines
derivatives, requires that derivatives be carried at fair value, and provides
for hedge accounting when certain conditions are met. The Company adopted the
provisions of SFAS No. 133 effective January 1, 2001. The adoption of this
statement did not have a significant impact on the financial statements.

INFLATION

The primary inflationary factors affecting the Company's operations are food,
energy and labor costs. The Company from time to time has experienced
significant volatility in the cost of certain food-related commodities, such as
butter and manufacturing cream. As a result of the recent energy crisis in
California, the Company has experienced a substantial increase in energy costs
for its restaurants


                                       22
<PAGE>   23

and wholesale bakeries located within the state. Many of the Company's
restaurant personnel are paid at rates based on the applicable minimum wage, and
increases in the minimum wage directly affect the Company's labor costs. In
addition, increases in the minimum wage have resulted in indirect pressure on
other wage levels. To date, inflation (except for the impact of minimum wage
increases) has not had a material impact on the Company's operations. In January
1999, the minimum wage in Oregon increased to $6.50 an hour from $6.00 an hour.
On January 1, 2000, the minimum wage in Washington increased to $6.50 an hour
from $5.70 an hour. Effective January 1, 2000, California law requires that
overtime be paid to California hourly personnel who work longer than eight hours
per day. Prior to this change, the labor law in effect mandated overtime pay to
hourly personnel only to the extent they worked longer than an average of 40
hours per calendar week. On January 1, 2001, the minimum wage in California was
increased to $6.25 an hour from $5.75 an hour. Beginning January 1, 2002, the
minimum wage will increase to $6.75 an hour in California. Additional increases
in the federal minimum wage have also been proposed. There can be no assurance
that the Company will be able to pass the additional increases related to wages
and energy costs through to its guests in the form of menu price adjustments in
the future and, accordingly, such minimum wage and energy cost increases could
have a material adverse effect on the Company's business, financial condition
and results of operations.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

        The Company's cash and cash equivalents are subject to interest rate
risk. The Company invests primarily on a short-term basis. The financial
instrument holdings at year-end were analyzed to determine their sensitivity to
interest rate changes. The fair values of these instruments were determined by
net present values. In our sensitivity analysis, the same change in interest
rate was used for all maturities. All other factors were held constant. If
interest rates increased by 10%, the expected effect on net income related to
the Company's financial instruments would be immaterial.


                                       23
<PAGE>   24


ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                        IL FORNAIO (AMERICA) CORPORATION
                          INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                                                               PAGE
                                                                                               ----
<S>                                                                                            <C>
  Independent Auditors' Report ...........................................................      25

  Balance Sheets as of December 31, 2000 and December 26, 1999 ...........................      26

  Statements of Income for the years ended December 31, 2000, December 26, 1999,
  and December 27, 1998 ..................................................................      27

  Statements of  Stockholders' Equity for the years ended December 31, 2000,
  December 26, 1999, and December 27, 1998 ...............................................      28

  Statements of Cash Flows for the years ended December 31, 2000, December 26,
  1999, and December 27, 1998 ............................................................      29

  Notes to Financial Statements ..........................................................      30
</TABLE>


                                       24
<PAGE>   25

                          INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders of Il Fornaio (America) Corporation:

        We have audited the accompanying balance sheets of Il Fornaio (America)
Corporation (the "Company") as of December 31, 2000 and December 26, 1999, and
the related statements of income, stockholders' equity and cash flows for each
of the three years in the period ended December 31, 2000. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

        We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

        In our opinion, such financial statements present fairly, in all
material respects, the financial position of Il Fornaio (America) Corporation as
of December 31, 2000 and December 26, 1999, and the results of its operations
and its cash flows for each of the three years in the period ended December 31,
2000 in conformity with accounting principles generally accepted in the United
States of America.

/s/ DELOITTE & TOUCHE LLP
----------------------------------------------
DELOITTE & TOUCHE LLP

San Francisco, California
February 13, 2001


                                       25
<PAGE>   26

                        IL FORNAIO (AMERICA) CORPORATION

                                 BALANCE SHEETS
                        (in thousands, except share data)


<TABLE>
<CAPTION>
                                                                            DECEMBER 31,       DECEMBER 26,
                                                                                2000               1999
                                                                            ------------       ------------
<S>                                                                         <C>                <C>
                                     ASSETS

Current assets:
  Cash and cash equivalents ..........................................      $      6,091       $      5,118
  Restricted cash ....................................................               235                314
  Accounts receivable, net ...........................................             1,942              1,785
  Other receivables ..................................................             1,429                 --
  Inventories ........................................................             2,978              2,559
  Prepaid expenses and other assets ..................................             1,056              1,184
  Deferred transaction costs .........................................             1,112                 --
  Deferred tax assets, net ...........................................               361                218
                                                                            ------------       ------------
          Total current assets .......................................            15,204             11,178
                                                                            ------------       ------------

Property and equipment, net ..........................................            62,070             52,433
Deferred tax assets, net .............................................                --              1,000
Other assets .........................................................               934                547
                                                                            ------------       ------------
          Total assets ...............................................      $     78,208       $     65,158
                                                                            ============       ============

                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
  Accounts payable ...................................................      $      7,332       $      6,982
  Accrued expenses ...................................................            10,379              7,587
                                                                            ------------       ------------
          Total current liabilities ..................................            17,711             14,569

Reserve for restaurant closures ......................................               177                159
Deferred lease incentives ............................................            11,922              7,852
Deferred tax liabilities, net ........................................             1,139                 --
Commitments and contingencies (Notes 3 and 9)
Stockholders' equity:
  Preferred stock, $.001 par value; 5,000,000 shares
     authorized; no shares issued ....................................                --                 --
  Common stock, $.001 par value; 20,000,000 shares
     authorized; 6,326,971 shares issued and 5,827,571 shares
     outstanding at December 31, 2000, and 6,193,119 shares issued
     and 5,693,719 shares outstanding at December 26, 1999 ...........                 6                  6
  Additional paid-in-capital .........................................            39,658             38,751
  Retained earnings ..................................................            10,612              6,838
                                                                            ------------       ------------
                                                                                  50,276             45,595
  Treasury stock, 499,400 shares at cost .............................            (3,017)            (3,017)
                                                                            ------------       ------------
     Total stockholders' equity ......................................            47,259             42,578
                                                                            ------------       ------------
          Total liabilities and stockholders' equity .................      $     78,208       $     65,158
                                                                            ============       ============
</TABLE>

    The accompanying notes are an integral part of these financial statements


                                       26
<PAGE>   27


                        IL FORNAIO (AMERICA) CORPORATION

                              STATEMENTS OF INCOME
                    (in thousands, except per share amounts)

<TABLE>
<CAPTION>
                                                                                  YEAR ENDED
                                                                  ---------------------------------------------
                                                                  DECEMBER 31,     DECEMBER 26,    DECEMBER 27,
                                                                     2000             1999             1998
                                                                  ----------       ----------       ----------
<S>                                                               <C>              <C>              <C>
Revenues:
  Restaurants ..............................................      $  113,872       $   92,266       $   75,523
  Wholesale bakeries .......................................          10,524            8,167            7,615
                                                                  ----------       ----------       ----------
        Total revenues .....................................         124,396          100,433           83,138
                                                                  ----------       ----------       ----------
Costs and expenses:
  Cost of revenues .........................................          29,777           23,806           19,594
  Operating expenses .......................................          72,441           58,011           47,589
  Depreciation and amortization ............................           6,117            4,946            3,948
                                                                  ----------       ----------       ----------
        Total restaurant and bakery costs ..................         108,335           86,763           71,131
                                                                  ----------       ----------       ----------
Income from restaurant and bakery operations ...............          16,061           13,670           12,007
  Pre-opening expenses .....................................             969            1,077              534
  General and administrative expenses ......................           9,264            8,053            6,609
                                                                  ----------       ----------       ----------
Operating income ...........................................           5,828            4,540            4,864
Other income (expenses):
  Interest income ..........................................             324              464              844
  Interest expense .........................................            (111)             (31)             (33)
                                                                  ----------       ----------       ----------
        Total other income (expenses), net .................             213              433              811
                                                                  ----------       ----------       ----------
Income before income taxes and change in
  accounting principle .....................................           6,041            4,973            5,675
Provision for income taxes .................................           2,267            1,914            2,224
                                                                  ----------       ----------       ----------
Income before change in accounting principle ...............           3,774            3,059            3,451
Cumulative effect of change in accounting
  principle (net of taxes) .................................              --               --              326
                                                                  ----------       ----------       ----------
Net income .................................................      $    3,774       $    3,059       $    3,125
                                                                  ==========       ==========       ==========

BASIC EARNINGS PER SHARE
Basic earnings per share before change in
  accounting principle .....................................      $     0.66       $     0.54       $     0.59

Cumulative effect of change in accounting principle ........              --               --             0.06
                                                                  ----------       ----------       ----------
Basic earnings per share ...................................      $     0.66       $     0.54       $     0.53
                                                                  ==========       ==========       ==========
Basic weighted average shares outstanding ..................           5,758            5,713            5,846
                                                                  ==========       ==========       ==========

DILUTED EARNINGS PER SHARE
Diluted earnings per share before change in
  accounting principle .....................................      $     0.62       $     0.50       $     0.55

Cumulative effect of change in accounting principle ........              --               --             0.05
                                                                  ----------       ----------       ----------
Diluted earnings per share .................................      $     0.62       $     0.50       $     0.50
                                                                  ==========       ==========       ==========
Diluted weighted average shares outstanding ................           6,090            6,097            6,298
                                                                  ==========       ==========       ==========
</TABLE>

    The accompanying notes are an integral part of these financial statements


                                       27
<PAGE>   28


                        IL FORNAIO (AMERICA) CORPORATION

                       STATEMENTS OF STOCKHOLDERS' EQUITY
                        (in thousands, except share data)

<TABLE>
<CAPTION>
                                                                                     ADDITIONAL
                                                COMMON STOCK            PAID-IN       RETAINED      TREASURY
                                           SHARES           AMOUNT      CAPITAL       EARNINGS       STOCK          TOTAL
                                          ----------     ----------    ----------    ----------    ----------     ----------
<S>                                       <C>           <C>            <C>           <C>           <C>            <C>
BALANCE, DECEMBER 29, 1997 ...........     5,818,513     $        6    $   36,466    $      654    $       --     $   37,126
Issuance of common stock under the
  1997 Purchase Plan .................       119,836             --           959                                        959
Exercise of common stock options .....        82,612             --           333                                        333
Repurchase of treasury stock .........      (362,400)                                                  (2,034)        (2,034)
Net income ...........................                                                    3,125                        3,125
                                          ----------     ----------    ----------    ----------    ----------     ----------
BALANCE, DECEMBER 27, 1998 ...........     5,658,561              6        37,758         3,779        (2,034)        39,509
Issuance of common stock under the
  1997 Purchase Plan .................       104,576             --           712                                        712
Exercise of common stock options .....        67,582             --           281                                        281
Repurchase of treasury stock .........      (137,000)                                                    (983)          (983)
Net income ...........................                                                    3,059                        3,059
                                          ----------     ----------    ----------    ----------    ----------     ----------
BALANCE, DECEMBER 26, 1999 ...........     5,693,719              6        38,751         6,838        (3,017)        42,578
Issuance of common stock under the
  1997 Purchase Plan .................        85,492             --           583                                        583
Exercise of common stock options .....        48,360             --           220                                        220
Other ................................                                        104                                        104
Net income ...........................                                                    3,774                        3,774
                                          ----------     ----------    ----------    ----------    ----------     ----------
BALANCE, DECEMBER 31, 2000 ...........     5,827,571     $        6    $   39,658    $   10,612    $   (3,017)    $   47,259
                                          ==========     ==========    ==========    ==========    ==========     ==========
</TABLE>


    The accompanying notes are an integral part of these financial statements


                                       28
<PAGE>   29

                        IL FORNAIO (AMERICA) CORPORATION

                            STATEMENTS OF CASH FLOWS
                                 (in thousands)

<TABLE>
<CAPTION>
                                                                                       YEAR ENDED
                                                                       --------------------------------------------
                                                                       DECEMBER 31,    DECEMBER 26,     DECEMBER 27,
                                                                          2000             1999             1998
                                                                       ----------       ----------       ----------
<S>                                                                    <C>              <C>              <C>
Cash flows from operating activities:
  Net income ....................................................      $    3,774       $    3,059       $    3,125
  Adjustments to reconcile net income to
     net cash provided by operating activities:
     Depreciation and amortization ..............................           6,438            5,271            4,258
     Amortization of deferred lease incentives ..................            (589)            (439)            (447)
     Cumulative effect of change in accounting principle ........              --               --              326
     Provision for restaurant closures ..........................              18              (85)            (130)
     Loss on retirement of fixed assets .........................               1              206               --
     Deferred income taxes ......................................           1,996               50              736
  Changes in:
     Restricted cash ............................................              79               64              140
     Accounts receivable ........................................            (157)            (290)            (204)
     Other receivables ..........................................             (44)              --               --
     Inventories ................................................            (419)            (688)            (151)
     Prepaid expenses and other current assets ..................             128             (264)             174
     Other assets ...............................................            (387)             (60)               4
     Accounts payable ...........................................             350            3,072              825
     Accrued expenses ...........................................           1,680            1,021              279
                                                                       ----------       ----------       ----------
       Net cash provided by operating activities ................          12,868           10,917            8,935
                                                                       ----------       ----------       ----------

Cash flows from investing activities:
  Construction allowances received ..............................           3,274            1,166            2,353
  Capital expenditures ..........................................         (16,076)         (19,290)         (13,623)
  Collection of note receivable .................................              --               19              102
                                                                       ----------       ----------       ----------
       Net cash used in investing activities ....................         (12,802)         (18,105)         (11,168)
                                                                       ----------       ----------       ----------
Cash flows from financing activities:
  Net proceeds from the issuance of common stock ................             583              712              959
  Exercise of stock options .....................................             220              281              333
  Other .........................................................             104               --               --
  Repurchase of common stock ....................................              --             (983)          (2,034)
                                                                       ----------       ----------       ----------
       Net cash provided by (used in) financing activities ......             907               10             (742)
                                                                       ----------       ----------       ----------

Increase (decrease) in cash and equivalents .....................             973           (7,178)          (2,975)
Cash and equivalents, beginning of year .........................           5,118           12,296           15,271
                                                                       ----------       ----------       ----------
Cash and equivalents, end of year ...............................      $    6,091       $    5,118       $   12,296
                                                                       ==========       ==========       ==========

Interest paid ...................................................      $      111       $       38       $       28
                                                                       ==========       ==========       ==========
Income taxes paid ...............................................      $      354       $    1,747       $      685
                                                                       ==========       ==========       ==========
Noncash investing and financing activities:
      Construction allowance receivables ........................      $    1,385       $       --       $       --
      Accrual of deferred transaction costs .....................      $    1,112       $       --       $       --
</TABLE>


    The accompanying notes are an integral part of these financial statements


                                       29
<PAGE>   30

                        IL FORNAIO (AMERICA) CORPORATION

                          NOTES TO FINANCIAL STATEMENTS

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

        Organization and nature of operations - Il Fornaio (America) Corporation
(the "Company") is engaged in restaurant operations and the production and sale
of Italian bakery products for the wholesale and retail market. At December 31,
2000, the Company owned and operated 25 Italian white tablecloth restaurants and
three wholesale bakeries in California; Portland, Oregon; Las Vegas, Nevada;
Denver and Broomfield, Colorado; Seattle, Washington; Atlanta, Georgia and
Scottsdale, Arizona. The Company manages on the basis of two business segments
consisting of the restaurants and the wholesale bakeries. See Note 10.

        Fiscal year - The Company operates on a 52/53-week fiscal year ending on
the last Sunday in December. The fiscal year ended December 31, 2000 contained
53 weeks of operations. The fiscal years ended December 26, 1999 and December
27, 1998 each contained 52 weeks of operations.

        Cash and cash equivalents - Cash equivalents consist primarily of
investments with maturities of three months or less. Cash equivalents are
carried at cost which approximates market value.

        Restricted cash represents cash restricted for the Company's voluntary
disability insurance plan and contributions to the employee stock purchase plan.

        Fair value of financial instruments - The carrying amounts of cash and
cash equivalents, restricted cash, accounts receivable, accounts payable and
accrued liabilities are reasonable estimates of the fair values of these
financial instruments.

        Accounts receivable consist primarily of amounts due from wholesale
customers, which are net of allowances for doubtful accounts of $97,000 and
$85,000 as of December 31, 2000 and December 26, 1999, respectively.

        Other receivables consist primarily of lease incentives due from the
landlords of the Company's most recently opened restaurants in Denver and
Broomfield, Colorado.

        Inventories, consisting primarily of wine, liquor, grocery products and
operating supplies, are stated at the lower of first-in, first-out method (FIFO)
cost or market.

        Property and equipment are stated at cost and include interest on funds
borrowed to finance construction. Depreciation and amortization are computed
using the straight-line method over the following estimated useful lives:
leasehold improvements - lesser of lease term or life of improvements;
furniture, fixtures and equipment - 3 to 10 years. Leasehold improvements
reimbursed by the landlord through construction allowances are capitalized as
leasehold improvements with the construction allowances recorded as deferred
lease incentives. Such leasehold improvements and related deferred lease
incentives are amortized on a straight-line basis over the lease term.

        Impairments of long-lived assets - Long-lived assets are reviewed for
possible impairment when events or circumstances indicate that the carrying
value may not be recoverable. In such evaluation, the estimated future
undiscounted cash flows generated by the asset are compared with the amount
recorded for the asset to determine if a write-down may be required. If this
review determines that the recorded value will not be recovered, the amount
recorded for the asset is reduced to estimated fair value.

        Deferred rent - Certain leases contain fixed escalations of the minimum
annual lease payment during the original term of the lease. For these leases,
the Company recognizes rental expense on a straight-line basis and records the
difference between rent expense and the amount currently payable under the lease
as deferred rent. Deferred rent is included with deferred lease incentives.

        Preopening expenses are expensed as incurred. See further discussion in
Note 2.

        Advertising costs are expensed as incurred.

        Accounting estimates - The preparation of financial statements in
conformity with accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that affect the
reported amount of assets and


                                       30
<PAGE>   31

liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of expenses during the
reporting period. Actual amounts could differ from those estimates.

        Income taxes are accounted for using the liability method, under which
deferred taxes are provided for the temporary differences between the financial
reporting basis and the tax basis of the Company's assets and liabilities.

        Reserve for restaurant closures includes management's best estimates of
the net costs to be incurred on the sale or disposal of a closed restaurant. The
accrual consists of future payments on leases and other estimated costs directly
associated with the decision to close the restaurant, net of estimated sublease
income, if any.

        Stock-based compensation - The Company accounts for stock-based awards
to employees using the intrinsic value method in accordance with Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees."

        Revenue recognition - Revenue from restaurant sales is recognized when
food and beverage products are sold. Revenue from bakery sales is recognized
when the bakery products are shipped.

        Earnings per share - Basic EPS is computed as net income divided by the
weighted average number of common shares outstanding for the period. Diluted EPS
reflects the potential dilution that could occur from common shares issuable
through stock options, warrants and other convertible securities.

        Derivatives and hedging activities - In June 1998, the Financial
Accounting Standards Board issued Statement of Financial Accounting Standards
("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging
Activities." SFAS 133 has been amended by SFAS Nos. 137 and 138 and is
interpreted by the FASB and the Derivatives Implementation Group through
"Statement 133 Implementation Issues." SFAS No. 133, as amended, defines
derivatives, requires that derivatives be carried at fair value, and provides
for hedge accounting when certain conditions are met. The Company adopted the
provisions of SFAS No. 133 effective January 1, 2001. The adoption of this
statement did not have a significant impact on the financial statements.

        Reclassifications - Certain fiscal 1999 and 1998 amounts have been
reclassified to conform with fiscal 2000 presentations.

2. PRE-OPENING EXPENSES

        Pre-opening costs consist of location setup, employee training and
promotion associated with the opening of new locations. Preopening costs in
2000, 1999 and 1998 were expensed as incurred. The expense-as-incurred standard
has resulted in the past, and may in the future lead to, increased variability
in the amount of preopening costs recognized, depending on the number and timing
of restaurant openings.

        In April 1998, the Accounting Standards Executive Committee of the
American Institute of Certified Public Accountants issued Statement of Position
(SOP) 98-5 entitled "Reporting on the Costs of Start-Up Activities." The SOP
requires entities to expense as incurred all start-up and preopening costs that
may not otherwise be capitalized as long-lived assets. The Company elected early
adoption of SOP 98-5 in the fourth quarter of 1998, which resulted in a
one-time, after-tax charge for fiscal 1998 in the form of a cumulative effect of
a change in accounting principle of $326,000 (net of income taxes of $209,000)
for the unamortized balance of preopening costs as of December 28, 1997.


3. MERGER

        The Company has entered an Agreement and Plan of Merger, dated as of
November 15, 2000, as amended as of January 9, 2001, with Manhattan Acquisition
Corp. ("Newco"), a wholly owned subsidiary of Bruckmann, Rosser, Sherrill & Co.
II, L.P. ("BRS"), a Delaware limited partnership engaged principally in the
business of investing in companies. Under the merger agreement, Newco will be
merged into Il Fornaio, with Il Fornaio as the surviving corporation (the
"Merger"). At the effective time of the Merger, each issued and outstanding
share of Il Fornaio common stock will be converted into the right to receive
$14.00 in cash, without interest, except that certain shares and options held by
certain Il Fornaio directors, executive officers, employees and stockholders
will continue as, or be converted into, equity interests of the surviving
corporation. Following the Merger, Il Fornaio will continue its operations as a
privately held company with BRS as the controlling stockholder. The Merger is
contingent upon satisfaction of a number of conditions, including approval of Il
Fornaio's stockholders, regulatory and other approvals and consents, the absence
of any pending or threatened actions that would reasonably be expected to have a
material adverse effect on the Company and receipt of financing for


                                       31
<PAGE>   32

the transaction. There can be no assurance that these or other conditions to the
Merger will be satisfied or that the Merger will be completed. If the Merger is
not completed for any reason, it is expected that the current management of Il
Fornaio, under the direction of the Board of Directors, will continue to manage
Il Fornaio as an ongoing business.

        As a result, certain transaction costs incurred in anticipation of the
consummation of the Merger have been capitalized as deferred transaction costs.
Such costs will be accounted for as deferred financing costs as to a portion of
the costs and as a reduction in equity proceeds for the remainder upon
completion of the Merger, or expensed in the event the Merger is not completed.
At December 31, 2000, these costs amounted to $1.1 million.

        On or about November 16, 2000, four substantially identical civil
actions were commenced in the Court of Chancery of the State of Delaware in New
Castle County. The plaintiff in each action seeks to represent a putative class
consisting of the public stock holders of the Company. Named as defendants in
each of the complaints are the Company, members of the Company's board of
directors and Bruckmann, Rosser, Sherill & Co., L.L.C. The actions have
since been consolidated into a single action. The complaint alleges, among other
things, that the proposed merger is unfair and that the Company's directors
breached their fiduciary duties by failing to disclose material non-public
information related to the value of the Company and by engaging in self-dealing.
The complaint seeks an injunction, damages and other relief. The action is at a
preliminary stage. No response has been filed, and no trial date has been set.
The defendants believe that the claims alleged in this action are without merit
and intend to contest them vigorously. There can be no assurance, however, as to
the outcome of this lawsuit.

        In November 2000, the Company entered into a settlement agreement with
an investment firm that had previously provided services to the Company. The
settlement agreement provides for the payment to that firm of approximately
$611,627 in consideration of a release and discharge of claims against the
Company, its Chairman of the Board, Chief Executive Officer and President, BRS
and Newco. The settlement agreement requires the Company to make payment to the
investment firm only if there is a closing of the Merger, or a change in control
within twelve months of the settlement. In the event the Merger is completed,
the amount to be paid will be charged to expense.

4. PROPERTY AND EQUIPMENT

        Property and equipment consisted of the following (in thousands):

<TABLE>
<CAPTION>
                                                            DECEMBER 31,      DECEMBER 26,
                                                                2000             1999
                                                             ----------       ----------
<S>                                                         <C>              <C>
Leasehold improvements ................................      $   59,674       $   45,128
Machinery and equipment ...............................          20,992           17,911
Furniture and fixtures ................................          10,842            8,340
Construction in progress ..............................             681            5,003
                                                             ----------       ----------
          Total .......................................          92,189           76,382
Less -- accumulated depreciation and amortization .....         (30,119)         (23,949)
                                                             ----------       ----------
Property and equipment -- net .........................      $   62,070       $   52,433
                                                             ==========       ==========
</TABLE>

5. ACCRUED EXPENSES

     Accrued expenses consisted of the following (in thousands):


<TABLE>
<CAPTION>
                                                DECEMBER 31,     DECEMBER 26,
ACCRUED EXPENSES:                                    2000           1999
-----------------                                ----------      ----------
<S>                                              <C>             <C>
Accrued payroll and related benefits ......      $    3,999      $    2,024
Gift certificates .........................           1,318           1,041
Accrued rent ..............................             840             831
Accrued income taxes ......................             833           1,009
Accrued sales taxes .......................           1,311             979
Accrued construction costs ................             367             793
Accrued transaction costs .................           1,112              --
Other .....................................             599             910
                                                 ----------      ----------
Total accrued expenses ....................      $   10,379      $    7,587
                                                 ==========      ==========
</TABLE>

6.  LINE OF CREDIT

        The Company has a credit agreement, which provides for a $5.0 million
revolving line of credit and bears interest at the bank's reference rate. At
December 31, 2000, there were no amounts outstanding under the credit line. The
existing credit line is scheduled to expire May 31, 2001. In the event the
Merger is not completed, the Company intends to seek to renew the line of
credit.


                                       32
<PAGE>   33

7. STOCKHOLDERS' EQUITY

        Common Stock

        In October 1998, the Board of Directors authorized the repurchase of up
to 500,000 shares of the Company's common stock. Repurchases were authorized to
be made in the open market at prevailing prices or in negotiated off-market
transactions. On December 9, 1999, the Board of Directors authorized the
repurchase of up to 250,000 additional shares of the Company's common stock.
Through December 31, 2000, the Company had repurchased 499,400 shares of common
stock in the open market for an aggregate of approximately $3.0 million.

        Stock Plans

        The Company maintains several stock option plans under which the Company
may grant incentive stock options and nonqualified stock options to employees
and non-employee directors. Stock options have been granted at prices at or
above the fair market value on the date of the grant. Options vest and expire
according to terms established at the grant date.

        In March 1997, the Board of Directors adopted and, in April 1997, the
stockholders approved, an Equity Incentive Plan (the "1997 Incentive Plan")
authorizing the issuance of 1,300,000 shares of common stock, a Non-Employee
Directors' Stock Option Plan (the "1997 Directors Plan") authorizing the
issuance of 100,000 shares of common stock and an Employee Stock Purchase Plan
(the "1997 Purchase Plan," and collectively, the "1997 Plans") authorizing the
issuance of 300,000 shares of common stock. The 1997 Incentive Plan amends and
restates the 1992 Stock Option Plan and 1995 Stock Option Plan. In each of May
2000 and May 1999, the stockholders approved amendments to the 1997 Incentive
Plan to increase the number of shares authorized under the plan by 500,000
shares. As of December 31, 2000, there were 2,300,000 shares of common stock
authorized for issuance under the 1997 Incentive Plan. In May 2000, the
stockholders approved an amendment to the 1997 Purchase Plan to increase the
number of shares authorized for issuance thereunder by 200,000 shares.

        Employee Stock Purchase Plan

        During fiscal 1997, the Company implemented the 1997 Purchase Plan. The
Company's 1997 Purchase Plan provides that eligible employees may contribute up
to 15% of their base earnings toward semi-annual purchase of the Company's
common stock with a value up to $25,000 per employee, per year. The employee's
purchase price is 85% of the lesser of the fair market value of the stock on the
date of commencement of the offering or the date of purchase. No compensation
expense is recorded in connection with the plan. On April 30, 1998, the first
purchase date under the plan, an aggregate of 60,199 shares were issued under
the plan at $9.35 per share, and on October 30, 1998, an aggregate of 59,267
shares were issued under the plan at $6.70 per share. On April 30, 1999, an
aggregate of 52,308 shares were issued under the plan at $6.80 per share, and on
October 29, 1999, an aggregate of 52,268 shares were issued under the plan at
$6.81 per share. On May 1, 2000, an aggregate of 46,243 shares were issued under
the plan at $6.80 per share, and on October 31, 2000, an aggregate of 39,249
shares were issued under the plan at $6.96 per share. As of December 31, 2000,
no additional offerings had commenced under the Purchase Plan.

        Stock Option Plans

        The following table reflects the activity under the Company's stock
option plans:

<TABLE>
<CAPTION>
                                        NUMBER OF            WEIGHTED
                                         OPTIONS          AVERAGE PRICE
                                        ----------        -------------
<S>                                     <C>               <C>
Balance, December 28, 1997 ........         979,785       $     4.79
Granted ...........................         256,738            13.33
Exercised .........................         (82,612)            4.19
Cancelled .........................         (11,750)            7.80
                                        -----------
Balance, December 27, 1998 ........       1,142,161             6.72
Granted ...........................         461,924             8.70
Exercised .........................         (67,582)            4.17
Cancelled .........................         (48,172)            7.86
                                        -----------
Balance, December 26, 1999 ........       1,488,331             7.38
Granted ...........................         245,450             7.94
Exercised .........................         (48,360)            4.54
Cancelled .........................        (117,033)            9.90
                                        -----------
Balance, December 31, 2000 ........       1,568,388             7.39
                                        ===========
</TABLE>


                                       33
<PAGE>   34

     The weighted average fair values per share of options granted during 2000,
1999 and 1998 were $5.22, $5.56 and $7.76, respectively.

     Additional information regarding options outstanding as of December 31,
2000 was as follows:

<TABLE>
<CAPTION>
                                               OPTIONS OUTSTANDING
                           ---------------------------------------------------------
                                                  WEIGHTED AVG.
                                                    REMAINING                                      OPTIONS EXERCISABLE
     RANGE OF                 NUMBER               CONTRACTUAL         WEIGHTED AVG.           NUMBER            WEIGHTED AVG.
 EXERCISE PRICES           OUTSTANDING              LIFE (YRS)        EXERCISE PRICE         EXERCISABLE        EXERCISE PRICE
-----------------         -------------        --------------------   --------------        ------------        --------------
<S>       <C>             <C>                  <C>                    <C>                   <C>                 <C>
$ 4.00 -  4.00                 1,985                   3.3            $     4.00                 1,985            $     4.00
  4.50 -  4.50               465,784                   3.5                  4.50               465,784                  4.50
  4.95 -  6.00               244,464                   5.7                  5.45               183,743                  5.39
  6.60 -  7.00                85,677                   7.7                  6.89                43,146                  6.89
  7.38 -  7.38               160,000                   9.0                  7.38                40,000                  7.38
  7.75 -  7.75                13,500                   9.3                  7.75                    --                    --
  7.88 -  7.88               183,955                   9.3                  7.88                    --                    --
  8.67 -  9.75                25,524                   9.4                  8.78                    --                    --
 10.13 - 10.13               174,711                   8.4                 10.13                44,112                 10.13
 11.00 - 14.58               212,788                   7.5                 13.32               102,383                 13.33
                           ---------                                                        ----------
  4.00 - 14.58             1,568,388                   6.6                  7.39               881,153                  6.24
                           =========                                                        ==========
</TABLE>


        At December 26, 1999 and December 27, 1998, options to purchase 716,717
and 557,770 shares of common stock, respectively, were exercisable under the
plans.

        At December 31, 2000, the numbers of shares available for future grants
under the various plans were as follows:

<TABLE>
<CAPTION>
                                                     SHARES
                                                    AVAILABLE
                                                       FOR
                                                      GRANT
                                                   ----------
<S>                                                <C>
            1997 Directors Plan.............         61,000
            1997 Incentive Plan.............        681,863
            1997 Purchase  Plan.............             --
</TABLE>

        Additional Stock Plan Information

        As discussed in Note 1, the Company continues to account for its
stock-based awards using the intrinsic value method in accordance with
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees," and its related interpretations. No compensation expense has been
recognized in the financial statements for employee stock arrangements.

        SFAS No. 123, "Accounting for Stock-Based Compensation" (SFAS 123),
requires the disclosure of pro forma net income and earnings per share had the
Company adopted the fair value method as of the beginning of fiscal 1995. In
accordance with SFAS 123, the fair value of stock-based awards to employees is
calculated through the use of option pricing models, even though such models
were developed to estimate the fair value of freely tradeable, fully
transferable options without vesting restrictions, which significantly differ
from the Company's stock option awards. These models also require subjective
assumptions, including future stock price volatility and expected time to
exercise, which greatly affect the calculated values. The Company's calculations
were made using the Black-Scholes option pricing model with the following
weighted average assumptions: expected life, 3 years for 2000, 3 years for 1999
and 4 years for 1998, stock volatility, .73%, .71% and .62% in 2000, 1999 and
1998, risk-free interest rates, 5.06% in 2000, 6.27% in 1999 and 4.57% in 1998;
and no dividends during the expected term. The Company's calculations are based
on a multiple option valuation approach and forfeitures are recognized as they
occur. Under SFAS 123, the 1997 Purchase Plan would be compensatory due to the
look-back feature, and $207,000, $589,000 and $289,000 of compensation would
have been recognized in 2000, 1999 and 1998, respectively. If the computed fair
values of the 2000, 1999 and 1998 awards had been amortized to expense over the
vesting period of the awards, pro forma net income would have been as follows:


                                       34
<PAGE>   35


<TABLE>
<CAPTION>
                                              2000              1999              1998
                                           ----------        ----------        ----------
<S>                                        <C>               <C>               <C>
Net income (in thousands):
  As reported .....................        $    3,774        $    3,059        $    3,125
  Pro forma .......................             1,928             1,010             2,190
Basic earnings per share:
  As reported .....................        $     0.66        $     0.54        $     0.53
  Pro forma .......................              0.34              0.18              0.37
Diluted earnings per share:
  As reported .....................        $     0.62        $     0.50        $     0.50
  Pro forma .......................              0.32              0.17              0.35
</TABLE>

        However, the impact of outstanding unvested stock options granted prior
to 1995 has been excluded from the pro forma calculation; accordingly, the 1996
and subsequent pro forma adjustments are not indicative of future period pro
forma adjustments, when the calculation will apply to all applicable stock
options.

        The following is a summary of the calculation of the number of shares
used in calculating basic and diluted EPS:

<TABLE>
<CAPTION>
                                                    2000              1999              1998
                                                ----------        ----------        ----------
<S>                                              <C>               <C>               <C>
Shares used to compute basic EPS .......         5,757,678         5,712,818         5,846,215

Add: effect of dilutive securities .....           331,885           384,551           451,295
                                                ----------        ----------        ----------

Shares used to compute diluted EPS .....         6,089,563         6,097,369         6,297,510
                                                ==========        ==========        ==========
</TABLE>

8. INCOME TAXES

        The Company provides a deferred tax expense or benefit equal to the
change in the deferred tax liability during the year. Deferred income taxes
reflect the net tax effects of (a) temporary differences between the carrying
amounts of assets and liabilities for financial reporting purposes and the
amounts used for income tax purposes, and (b) tax credit carryforwards.
Significant components of the Company's net deferred tax balances as of December
31, 2000 and December 26, 1999 were as follows (in thousands):

<TABLE>
<CAPTION>
                                                      2000               1999
                                                   ----------         ----------
<S>                                                <C>                <C>
Deferred tax assets:
  Compensation related ....................        $      102         $       72
  Fixed assets ............................                --                  6
  Reserves for store closures .............               107                100
  Deferred rent liability .................               226                184
  Tax credit carryforwards ................               628                701
  Other ...................................               266                155
                                                   ----------         ----------
     Total deferred tax assets ............             1,329              1,218
                                                   ----------         ----------
Deferred tax liabilities:
  Fixed assets ............................            (2,107)                --
                                                   ----------         ----------
     Total deferred tax liabilities .......            (2,107)                --
                                                   ----------         ----------
Net deferred tax assets (liabilities) .....        $     (778)        $    1,218
                                                   ==========         ==========
</TABLE>

        The Company provided no valuation allowance against deferred tax assets
recorded as of December 31, 2000 and December 26, 1999, as the Company believes
it is "more-likely-than-not" that all deferred assets will be fully realized in
future periods.

        As of December 31, 2000, the Company has unused alternative minimum tax
credits of approximately $628,000. The minimum tax credits have an indefinite
carryforward period.

        The provision for income taxes consists of the following (in thousands):

<TABLE>
<CAPTION>
                                     2000              1999              1998
                                 ----------        ----------        ----------
<S>                              <C>               <C>               <C>
Current provision:
  Federal ...............        $      236        $    1,470        $    1,147
  State .................                35               394               340
                                 ----------        ----------        ----------
     Total current ......               271             1,864             1,487
Deferred taxes, net .....             1,996                50               737
                                 ----------        ----------        ----------
Income tax expense ......        $    2,267        $    1,914        $    2,224
                                 ==========        ==========        ==========
</TABLE>


                                       35
<PAGE>   36


        The reconciliation between the Company's effective tax rate on earnings
before income taxes and the statutory federal income tax rate of 34% was as
follows (in thousands):

<TABLE>
<CAPTION>
                                                              2000               1999               1998
                                                          ----------         ----------         ----------
<S>                                                       <C>                <C>                <C>
Federal income tax at 34% statutory rate .........        $    2,054         $    1,691         $    1,930
State income tax .................................               304                283                298
FICA tip credit and other business credits .......              (433)              (325)              (119)
Other accrual ....................................               144                229                 82
Permanent items and other ........................               198                 36                 33
                                                          ----------         ----------         ----------
Total ............................................        $    2,267         $    1,914         $    2,224
                                                          ==========         ==========         ==========
</TABLE>

9. COMMITMENTS AND CONTINGENCIES

        The Company leases all restaurant, wholesale bakery and office space
under operating leases, which terminate at various dates between 2002 and 2017.
Certain leases require increased rental payments, generally related to changes
in the Consumer Price Index and increases in property taxes and certain leases
also provide for additional rent based on a percentage of sales. Total rent
expense for all operating leases was as follows (in thousands):

<TABLE>
<CAPTION>
                                         2000              1999              1998
                                      ----------        ----------        ----------
<S>                                   <C>               <C>               <C>
Minimum rentals ..............        $    4,570        $    3,649        $    2,914
Contingent rentals ...........             1,967             1,396             1,178
                                      ----------        ----------        ----------
Total rental expense .........        $    6,537        $    5,045        $    4,092
                                      ==========        ==========        ==========
</TABLE>

        At December 31, 2000, future minimum lease payments under long-term
operating leases were as follows (in thousands):

<TABLE>
<CAPTION>
                           YEAR
                      ENDING DECEMBER
                --------------------------
<S>                                            <C>
                2001......................     $   5,648
                2002......................         5,485
                2003......................         5,295
                2004......................         5,109
                2005......................         4,728
                Thereafter................        24,437
                                               ---------
                Total.....................     $  50,702
                                               =========
</TABLE>

        At December 31, 2000, 16 of the Company's 25 restaurants and all three
of the Company's wholesale bakeries were located in California. Because of this
geographic concentration, the Company is susceptible to local and regional
risks, such as increased government regulation, adverse economic conditions,
energy shortages and related increased costs, adverse weather conditions,
earthquakes and other natural disasters, any of which could have a material
adverse effect on the Company's business, financial condition and results of
operations. In addition, in light of the Company's current geographic
concentration, adverse publicity relating to the Company's restaurants could
have a more pronounced effect on the Company's overall sales than might be the
case if the Company's restaurants were more broadly dispersed.

        In addition to the legal proceedings described in Note 3, the Company is
a party to various other legal proceedings arising in the ordinary course of its
business. Although no assurance can be given, the Company does not expect any of
these other proceedings to have a material adverse effect on the Company's
business, financial condition or results of operations.

10. SEGMENT INFORMATION

        The Company classifies its business interests into two reportable
segments: restaurants and wholesale bakeries. The accounting policies of the
segments are the same as those described in the summary of significant
accounting policies (Note 1). The Company evaluates performance and allocates
resources based on revenues and operating contribution (income before income
taxes), which excludes unallocated corporate general and administrative costs
and income tax expense or benefit. Unallocated assets include corporate cash and
equivalents, the net book value of corporate facilities and related information
systems, deferred tax amounts and other corporate long-lived assets.


                                       36
<PAGE>   37


     Financial information for the Company's business segments is as follows:

<TABLE>
<CAPTION>
                                                                        YEAR ENDED
                                                     ------------------------------------------------
                                                     DECEMBER 31,       DECEMBER 26,      DECEMBER 27,
                                                         2000               1999               1998
                                                     ----------         ----------         ----------
<S>                                                  <C>                <C>                <C>
Revenues:
Restaurants .................................        $  113,872         $   92,266         $   75,523
Wholesale bakeries ..........................            12,799             10,598              9,750
 Intersegment revenues ......................            (2,275)            (2,431)            (2,135)
                                                     ----------         ----------         ----------
Total revenues ..............................        $  124,396         $  100,433         $   83,138
                                                     ==========         ==========         ==========
Operating contribution:
Restaurants .................................        $   14,231         $   12,763         $   11,275
Wholesale bakeries ..........................             1,830                909                731
Unallocated .................................           (10,020)            (8,699)            (6,331)
                                                     ----------         ----------         ----------
Total operating contribution ................        $    6,041         $    4,973         $    5,675
                                                     ==========         ==========         ==========
Depreciation and amortization:
Restaurants .................................        $    5,569         $    4,443         $    3,457
Wholesale bakeries ..........................               548                503                491
Corporate ...................................               321                325                310
                                                     ----------         ----------         ----------
Total depreciation & amortization ...........        $    6,438         $    5,271         $    4,258
                                                     ==========         ==========         ==========
Capital expenditures:
Restaurants .................................        $   15,236         $   17,563         $   13,225
Wholesale bakeries ..........................               657              1,460                156
Corporate ...................................               183                267                242
                                                     ----------         ----------         ----------
Total capital expenditures ..................        $   16,076         $   19,290         $   13,623
                                                     ==========         ==========         ==========
Property and equipment, net:
Restaurants .................................        $   58,078         $   48,409         $   35,104
Wholesale bakeries ..........................             3,434              3,326              2,720
Corporate ...................................               558                698                796
                                                     ----------         ----------         ----------
Total property and equipment, net ...........        $   62,070         $   52,433         $   38,620
                                                     ==========         ==========         ==========
</TABLE>


11.  QUARTERLY FINANCIAL DATA (UNAUDITED):

     Summarized unaudited quarterly financial data (in thousands, except per
share data) for fiscal years 2000 and 1999 are as follows:

<TABLE>
<CAPTION>
                                                  FIRST             SECOND            THIRD             FOURTH
                                                ----------        ----------        ----------        ----------
<S>                                             <C>               <C>               <C>               <C>
2000 quarter:
  Total revenues .......................        $   29,649        $   30,138        $   29,813        $   34,796
  Income from operations ...............             1,343             1,722             1,156             1,607
  Net income ...........................               872             1,121               747             1,034
  Basic net income per share(1) ........        $     0.15        $     0.19        $     0.13        $     0.18
  Diluted net income per share(1) ......        $     0.15        $     0.19        $     0.12        $     0.17

1999 quarter:
  Total revenues .......................        $   23,533        $   23,705        $   25,419        $   27,776
  Income from operations ...............             1,380             1,469               579             1,112
  Net income ...........................               942               980               414               723
  Basic net income per share(1) ........        $     0.17        $     0.17        $     0.07        $     0.13
  Diluted net income per share(1) ......        $     0.16        $     0.16        $     0.07        $     0.12
</TABLE>

     (1)  Due to rounding, net income per share for the year may not equal the
          sum of the quarterly net income per share.



                                       37

<PAGE>   38

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURES

        None.

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

IDENTIFICATION OF DIRECTORS

LAURENCE B. MINDEL, 63, joined Il Fornaio as Chairman of the Board, President
and Chief Executive Officer in January 1987. Mr. Mindel currently serves as
Chairman of the Board, having resigned as President in 1995 and as Chief
Executive Officer in 1998. From 1964 to 1970, Mr. Mindel was President and Chief
Executive Officer of Caswell Coffee Company in San Francisco. In 1970, Mr.
Mindel co-founded Spectrum Foods, where he served as Chairman of the Board,
President and Chief Executive Officer. Under Mr. Mindel's direction, Spectrum
created 14 restaurants in Northern and Southern California, including Chianti,
MacArthur Park, Harry's Bar and American Grill, Prego and Guaymas. In 1984, Saga
Corporation acquired Spectrum Foods and, from that time until he joined Il
Fornaio, Mr. Mindel served as President of the Saga Restaurant Group, which
included Stuart Anderson's Black Angus, Velvet Turtle, Spoons, Hotel Food
Services and the newly acquired Spectrum Foods restaurants. In 1985, Mr. Mindel
became the first person of non-Italian descent and the first American to be
awarded the Caterina di Medici medal. Awarded by the Italian government, the
medal recognizes persons who have excelled in preserving the Italian heritage
outside of Italy. Mr. Mindel is also a director of Peet's Coffee & Tea, Inc.
Michael Mindel, the son of Laurence B. Mindel, is Vice President of Marketing of
Il Fornaio.

MICHAEL J. HISLOP, 46, joined Il Fornaio as President and Chief Operating
Officer in July 1995 and was promoted to Chief Executive Officer and President
in 1998. From April 1991 to May 1995, Mr. Hislop served as Chairman and Chief
Executive Officer of Chevy's Mexican Restaurants which, under his direction,
grew from 17 locations to 63 locations nationwide. From 1982 to 1991, Mr. Hislop
was employed by El Torito Mexican Restaurants, Inc., serving first as Regional
Operator, then as Executive Vice President of Operations and, for the last three
years, as Chief Operating Officer. From 1979 to 1982, Mr. Hislop was employed by
T.G.I. Fridays Restaurants, Inc. as a Regional Manager.

DEAN A. CORTOPASSI, 63, has been a director of Il Fornaio since April 1996. Mr.
Cortopassi founded and serves as Chief Executive Officer of San Tomo Group, a
holding company which owns and operates a number of food processing and
marketing companies, including Stanislaus Food Products, Gilroy Canning Company,
Sierra Quality Canners and MGI Holdings, Inc.

W. SCOTT HEDRICK, 55, has been a director of Il Fornaio since 1987. Mr. Hedrick
co-founded InterWest Partners, a venture capital management firm, in 1979 and
has been a general partner of that firm since that time. From 1974 to 1979, Mr.
Hedrick was a partner of American-Euro Interfund, a venture capital corporation.
From 1970 to 1974, he was an Assistant Vice President with Small Business
Enterprise Company, a venture capital subsidiary of Bank of America NT & SA. Mr.
Hedrick is also a director of Office Depot, Inc. and Golden State Vintners.

F. WARREN HELLMAN, 66, has been a director of Il Fornaio since 1983. From 1984
to 1997, Mr. Hellman was a general partner of Hellman & Friedman, an investment
firm, and, since January 1998, he has been Chairman of Hellman & Friedman LLC,
an investment firm. He has also been a partner of Matrix Partners, a venture
capital firm, since 1982 and a general partner of FWH Associates, a limited
partnership, since 1985. From 1962 to 1977, Mr. Hellman was a partner of Lehman
Brothers in New York, where he served at various times as head of Lehman's
Investment Banking Division, President and Director of Lehman Brothers, Inc.,
Chairman of Lehman Brothers, Inc. and Chairman of Lehman Corporation, a
closed-end investment company. From October 1981 to March 1984, Mr. Hellman also
served as a Managing Director of Lehman Brothers Kuhn Loeb. Mr. Hellman is also
a director of Levi Strauss & Co. and WPP Group, plc.

GEORGE B. JAMES, 63, has been a director of Il Fornaio since October 2000. Mr.
James was Senior Vice President and Chief Financial Officer of Levi Strauss &
Co., an apparel company, from 1985 until his retirement in 1998. Prior to his
employment at Levi Strauss, Mr. James was employed at Crown Zellerbach, where he
was Executive Vice President and Group President from 1984 to 1985 and Executive
Vice President and Chief Financial Officer from 1982 to 1983. Mr. James was
Senior Vice President and Chief Financial Officer of Arcata Corporation from
1972 to 1982. Mr. James is Chairman of the Board of Directors of Crown Vantage,
Inc. and Sharper Image, Inc.


                                       38
<PAGE>   39

LAWRENCE F. LEVY, 56, has been a director of Il Fornaio since December 1998.
Since 1978, Mr. Levy has served as the Chairman and Chief Executive Officer of
Levy Restaurants, a food service company, which he founded in 1978. The
Chicago-based company currently operates 50 food service locations throughout 18
North American markets. Prior to founding Levy Restaurants, Mr. Levy served as
President of Hawthorn Realty Group, a commercial real estate group. Mr. Levy is
also a director of Chicago Title Corporation and Burrell Communications.


IDENTIFICATION OF EXECUTIVE OFFICERS

        The information required by this Item concerning the Company's executive
officers is set forth in Part I of this Report.

COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

        Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's directors and executive officers, and
persons who own more than 10% of a registered class of the Company's equity
securities, to file with the Commission initial reports of ownership and reports
of changes in ownership of Common Stock and other equity securities of the
Company. Officers, directors and greater than 10% stockholders are required by
the Commission regulation to furnish the Company with copies of all Section
16(a) forms they file.

        To the Company's knowledge, based solely on a review of the copies of
such reports furnished to the Company and written representations that no other
reports were required, during the fiscal year ended December 31, 2000. Mr.
Mindel filed an amended Form 3, which corrected an omission of certain shares on
his initial Form 3; Mr Beatrice filed a late Form 4 regarding one transaction
and Eastbourne Capital Management, L.L.C. filed a Form 5 reflecting four late
filings for four aggregated transactions.

ITEM 11. EXECUTIVE COMPENSATION

COMPENSATION OF DIRECTORS

        Each non-employee director of the Company receives stock option grants
for his services as directors under the 1997 Non-Employee Directors' Stock
Option Plan (the "Directors' Plan"). There are currently 100,000 shares of
Common Stock authorized for issuance under the Directors' Plan and 61,000 shares
available for future grants. Options granted under the Directors' Plan are
intended by the Company not to qualify as incentive stock options under the
Internal Revenue Code of 1986, as amended (the "Code").

        Option grants under the Directors' Plan are non-discretionary. Each
person who was serving as a non-employee director on April 23, 1997, the date
the Directors' Plan was approved by the stockholders of the Company, was
automatically granted an option to purchase 4,500 shares of Common Stock of the
Company. Additionally, each person who is first elected or appointed to the
Board after April 23, 1997, will automatically be granted an option to purchase
4,500 shares of Common Stock of the Company, unless the Board determines
otherwise. Every 36 months after the initial grant of 4,500 shares, each
non-employee director will be granted an option to purchase an additional 4,500
shares of the Common Stock of the Company. No other options may be granted at
any time under the Directors' Plan. The exercise price of options granted under
the Directors' Plan is 100% of the fair market value of the Common Stock subject
to the option on the date of the option grant. Options granted under the
Directors' Plan vest in three equal annual installments commencing on the date
one year after the date of grant of the option, provided that the optionee has,
during the entire year prior to each such vesting date, provided continuous
service to the Company as a non-employee director or as an employee of the
Company or an affiliate of the Company. The term of options granted under the
Directors' Plan is 10 years. In the event of a merger of the Company with or
into another corporation or a consolidation, acquisition of assets or other
change-in-control transaction involving the Company, the vesting of each option
will accelerate and the option will terminate if not exercised prior to the
consummation of the transaction unless any surviving corporation assumes such
options or substitutes similar options for such options. For information
regarding treatment of options in the Merger, see "Item 13. Certain
Relationships and Related Transactions".

        During fiscal 2000, the Company granted options to three non-employee
directors of the Company under the Directors' Plan to purchase 4,500 shares each
at an exercise price of $7.75 per share. During fiscal 2000, options to purchase
16,000 shares of Common Stock were exercised under the Directors' Plan at a
weighted average exercise price of $4.15 per share.


                                       39
<PAGE>   40

        Mr. James and Mr. Levy serve on the Special Committee of the Board that,
in connection with the BRS offer, was established to evaluate, negotiate and
recommend a merger transaction. Each member of the Special Committee will
receive $75,000 for his services, even if the Merger is not completed.

        COMPENSATION OF EXECUTIVE OFFICERS

                             SUMMARY OF COMPENSATION

        The following table shows, for the fiscal years ended December 31, 2000,
December 26, 1999 and December 27, 1998, compensation awarded or paid to, or
earned by, the Company's Chief Executive Officer and its other executive
officers at December 31, 2000 (the "Named Executive Officers"):

                           SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
                                                                                                        LONG-TERM COMPENSATION
                                                                                                                AWARDS
                                                                       ANNUAL COMPENSATION(1)            NUMBER OF SECURITIES
     NAME AND PRINCIPAL POSITION                   YEAR            SALARY($)           BONUS($)(2)       UNDERLYING OPTIONS (#)
     ---------------------------                   ----            ---------           -----------      ----------------------
<S>                                                <C>             <C>                 <C>              <C>
Laurence B. Mindel(3)                              2000            $ 408,099            $ 176,100                  25,241
  Chairman of the Board                            1999            $ 408,099            $  12,900                  18,078
                                                   1998            $ 408,293            $  12,900                  15,218
Michael J. Hislop(3)                               2000            $ 405,000            $ 179,000                    ----
  President and Chief Executive Officer            1999            $ 393,846            $   9,000                 177,060
                                                   1998            $ 365,642            $   9,000                  14,296
Peter P. Hausback(4)                               2000            $ 132,692            $  37,000                  15,101
  Vice President, Finance, Chief Financial         1999            $  98,827            $  15,800                  12,643
  Officer and Secretary                            1998            $  84,835            $       0                  10,288
Michael J. Beatrice(5)                             2000            $ 179,115            $  53,250                  18,877
  Chief Operating Officer                          1999            $ 169,192            $  27,875                  29,939
                                                   1998            $ 153,201            $   6,000                  25,144
</TABLE>

------------

(1)     In accordance with the rules of the Commission, the compensation
        described in this table does not include medical, group life insurance
        or other benefits received by the Named Executive Officers that are
        available generally to all salaried employees of the Company, and
        certain perquisites and other personal benefits received by the Named
        Executive Officers that do not exceed the lesser of $50,000 or 10% of
        any such officer's salary and bonus disclosed in this table.

(2)     Includes bonuses paid in 2000 and 2001 for services rendered in 1999 and
        2000, respectively. No bonus amounts were paid for services rendered in
        1998. Includes car allowance.

(3)     Mr. Mindel resigned as Chief Executive Officer in May 1998, and Mr.
        Hislop was elected Chief Executive Officer in May 1998.

(4)     In December 1999, Mr. Hausback was elected Vice President, Finance,
        Chief Financial Officer and Secretary.

(5)     Mr. Beatrice was elected Chief Operating Officer in May 1998.


                                       40
<PAGE>   41


                        STOCK OPTION GRANTS AND EXERCISES

        The Company grants options to its executive officers under its 1997
Equity Incentive Plan. The following tables shows, for fiscal 2000, certain
information regarding options granted to the Named Executive Officers during
fiscal 2000 and options held by the Named Executive Officers at fiscal year end.

                     STOCK OPTION GRANTS DURING FISCAL 2000

<TABLE>
<CAPTION>
                                                                                                      POTENTIAL REALIZABLE VALUE
                                                                                                      AT ASSUMED ANNUAL RATES
                                                                                                    OF STOCK PRICE APPRECIATION
                                                    INDIVIDUAL GRANTS                                   FOR OPTION TERM(4)
                           -------------------------------------------------------------------      ----------------------------
                              NUMBER OF         % OF TOTAL
                             SECURITIES           OPTIONS         EXERCISE
                           UNDERLYING           GRANTED TO        PRICE
                              OPTIONS          EMPLOYEES IN      PER SHARE          EXPIRATION
       NAME                GRANTED (#)(1)     FISCAL YEAR(2)    ($/SHARE)(3)          DATE            5%($)             10%($)
     ---------               ----------        ----------       ----------          ----------      ----------        ----------
<S>                          <C>               <C>              <C>                 <C>             <C>               <C>
Laurence B. Mindel             23,024                 9%        $     8.67            5/2/10        $   55,151        $  121,869
                                2,217                 1%        $     7.88            5/2/10        $   10,987        $   27,843

Michael J. Hislop                  --                --                 --                --                --                --

Peter P. Hausback              15,101                 6%        $     7.88            5/2/10        $   74,836        $  189,649

Michael J. Beatrice            18,877                 8%        $     7.88            5/2/10        $   93,548        $  237,070
</TABLE>

--------------------

(1)     Options generally become exercisable on an annual basis at a rate of 25%
        per year over four years. Options generally expire 10 years from the
        date of grant or earlier upon termination of employment. Upon certain
        changes in control of the Company, if an outstanding option is not
        assumed or substituted by the surviving entity, the unvested portion of
        the option accelerates and the option terminates if not exercised prior
        to such change in control. For information regarding the treatment of
        options in the Merger, see "Item 13. Certain Relationships and Related
        Transactions".

(2)     Options to purchase 245,450 shares of Common Stock were granted to
        employees in fiscal 2000.

(3)     The exercise price per share of each option was equal to the fair market
        value of the Common Stock on the date of grant as determined by the
        Board of Directors except that, with respect to the incentive stock
        option granted to Mr. Mindel, the exercise price was equal to 110% of
        such fair market value.

(4)     The potential realizable value is calculated based on the term of the
        option at its date of grant (five years for Mr. Mindel's incentive stock
        option and 10 years for the nonstatutory stock option held by Mr. Mindel
        and for the options held by other officers). It is calculated based on
        the assumption that the stock price on the date of grant appreciates
        from the date of grant at the indicated annual rate compounded annually
        for the entire term of the option and that the option is exercised and
        sold on the last day of its term for the appreciated stock price. The 5%
        and 10% assumed rates of appreciation are derived from the rules of the
        Commission and do not represent the Company's estimate or projection of
        future Common Stock price.


                                       41
<PAGE>   42


AGGREGATED OPTION EXERCISES IN FISCAL 2000 AND FISCAL DECEMBER 31, 2000 OPTION
VALUES


<TABLE>
<CAPTION>
                                                                              NUMBER OF SECURITIES        VALUE OF UNEXERCISED
                                                                             UNDERLYING UNEXERCISED     IN-THE-MONEY OPTIONS AT
                                                                             OPTIONS AT DECEMBER 31,    DECEMBER 31, 2000 ($)
                                SHARES ACQUIRED ON           VALUE            2000 (#) EXERCISABLE/         EXERCISABLE/
      NAME                          EXERCISE (#)        REALIZED ($)(1)         UNEXERCISABLE(2)         UNEXERCISABLE(2)(3)
      ----                      ------------------      ---------------      ----------------------     ---------------------
<S>                             <C>                     <C>                  <C>                        <C>
Laurence B. Mindel              --                      --                      54,350 / 58,146          $323,638 / $225,608

Michael J. Hislop               --                      --                      534,073 / 149,983        $4,317,820 / $784,441

Peter P. Hausback               --                      --                      13,579 / 29,981          $51,371 / $120,167

Michael J. Beatrice             --                      --                      67,190 / 63,420          $398,107 / $270,365
</TABLE>


--------------------

(1)     Value realized is based on the fair market value of the Company's Common
        Stock on the date of exercise minus the exercise price, without taking
        into account any taxes that may be payable in connection with the
        transaction.

(2)     Reflects shares vested and unvested at December 31, 2000.

(3)     Fair market value of the Company's Common Stock based on the closing
        sales price of the Company's Common Stock reported by the Nasdaq
        National Market for December 29, 2000 ($13.00) minus the exercise price
        of the options.

                              EMPLOYMENT AGREEMENTS

        In April 1995, the Company entered into an at-will employment agreement
with Michael. J. Hislop as President and Chief Operating Officer. The agreement
provided for a base salary, option grant, annual bonus and a monthly car
allowance, subject to annual review. The agreement provides that in the event
Mr. Hislop's employment is involuntarily terminated by the Company for any
reason other than death, disability or cause (as defined in the agreement) or in
the event Mr. Hislop voluntarily terminates his employment within 30 days of a
change of control (as defined in the agreement), Mr. Hislop will receive, in
lieu of any severance benefits to which he may otherwise be entitled under any
Company severance plan or program, a cash severance payment in an aggregate
amount equal to 100% of Mr. Hislop's annual base salary at the time of such
termination.


                       COMPENSATION COMMITTEE INTERLOCKS
                           AND INSIDER PARTICIPATION

        Mr. Hedrick and Mr. Levy are members of the Compensation Committee of
the Board. For information regarding their interests in the Merger, see "Item
13. Certain Relationships and Related Transactions."



                                       42
<PAGE>   43


ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

        The following table sets forth certain information regarding the
beneficial ownership of Il Fornaio common stock as of March 1, 2001 by (1) all
those known by Il Fornaio to be beneficial owners of more than 5% of its Common
Stock, (2) each director, (3) each executive officer and (4) all executive
officers and directors of Il Fornaio as a group. Unless otherwise indicated, the
address for each of the stockholders listed below is c/o Il Fornaio (America)
Corporation, 770 Tamalpais Drive, Suite 400, Corte Madera, California 94925.

<TABLE>
<CAPTION>
                                                                                 BENEFICIAL           OWNERSHIP
                                                                                  NUMBER               PERCENT
BENEFICIAL OWNER                                                                 OF SHARES          OF TOTAL(1)(2)
----------------                                                                 ---------          --------------
<S>                                                                              <C>                <C>
Bruckmann, Rosser, Sherrill & Co. II, L.P.(3) ........................           1,715,514                26.3%
    c/o Bruckmann, Rosser, Sherrill & Co., L.L.C.
    126 East 56th Street, 29th Floor
    New York, N.Y. 10022
Eastbourne Capital Management, L.L.C.(4) .............................           1,463,100                25.1%
   1101 Fifth Avenue, Suite 1600
   San Rafael, CA 94901
Laurence B. Mindel(5) ................................................             741,525                12.6
Michael J. Hislop(6) .................................................             540,613                 8.5
Peter P. Hausback(6) .................................................              14,599                   *
Michael J. Beatrice(6) ...............................................              78,520                 1.3
Dean A. Cortopassi(7) ................................................             126,794                 2.2
W. Scott Hedrick(6) ..................................................              19,379                   *
F. Warren Hellman(8) .................................................             145,354                 2.5
George B. James ......................................................                   0                   0
Lawrence F. Levy(6) ..................................................               5,310                   *
All executive officers and directors as a group (9 persons)(9) .......           1,672,094                25.5%
</TABLE>

--------------------

*       Less than one percent.

(1)     This table is based on information supplied by officers, directors and
        principal stockholders of Il Fornaio and on any Schedules 13D or 13G
        filed with the Commission. On that basis, Il Fornaio believes that each
        of the stockholders named in this table has sole voting and investment
        power with respect to the shares indicated as beneficially owned except
        (a) for shares indicated as beneficially owned by any of the continuing
        stockholders, which are subject to a voting agreement with Newco
        pursuant to which Newco has been granted an irrevocable proxy to vote
        the shares in favor of the Merger and adoption of the merger agreement
        and (b) as otherwise indicated in the footnotes to this table and
        subject to community property laws where applicable.

(2)     Applicable percentages are based on 5,832,101 shares outstanding on
        March 1, 2001, adjusted as required by rules promulgated by the
        Commission.

(3)     Pursuant to a voting agreement dated as of November 15, 2000, as amended
        as of January 9, 2001 among Newco and certain directors, officers and
        stockholders of the Company, BRS, BRS & Co., and BRSE LLC, and each of
        their respective members, and Newco may be deemed to beneficially own
        1,715,514 shares of Il Fornaio Common Stock, which includes options to
        purchase 685,692 shares exercisable within 60 days of March 1, 2001,
        representing approximately 26.3% of the outstanding Il Fornaio Common
        Stock, pursuant to the voting agreement. The business address of BRS,
        BRS & Co., and BRSE LLC and each of their respective members, and
        Newco is c/o Bruckmann, Rosser, Sherrill & Co., L.L.C., 126 East 56th
        Street, 29th Floor, New York, New York 10022.

(4)     Based on a Schedule 13D/A filed with the Commission on March 5, 2001.
        Includes 609,548 shares held by Black Bear Fund I, L.P. and 616,800
        shares held by Black Bear Offshore Fund Limited, both of which are
        advised by Eastbourne Capital Management, L.L.C. Richard Jon Barry is
        the Managing Member of Eastbourne Capital Management, L.L.C.

(5)     Includes 7,195 shares held by the Mindel Family Trust, 9,157 shares held
        by a Trust created for the benefit of Laurence B. Mindel and his family,
        and 663,184 shares held by The Mindel Living Trust, of which Mr. Mindel
        is a trustee. Also includes 61,989 shares issuable upon the exercise of
        stock options that are exercisable within 60 days of March 1, 2001.
        Excludes


                                       43
<PAGE>   44

        an aggregate of 195,944 shares held in trusts for five children of Mr.
        Mindel, as to which Mr. Mindel is not a trustee and disclaims beneficial
        ownership.

(6)     Includes shares subject to options exercisable within 60 days of March
        1, 2001 as follows: 540,613 for Mr. Hislop, 14,599 for Mr. Hausback,
        78,520 for Mr. Beatrice, 4,500 for Mr. Hedrick and 3,000 for Mr. Levy.

(7)     Includes 57,794 shares held of record by Stanislaus Food Products
        Company, a California corporation. Mr. Cortopassi is Chief Executive
        Officer and a principal stockholder of Stanislaus Food Products Company.
        Includes 60,000 shares held of record by Capecchio Foundation. Mr.
        Cortopassi is President and a member of the board of directors of
        Capecchio Foundation. Also includes 9,000 shares issuable upon the
        exercise of stock options that are exercisable within 60 days of
        March 1, 2001.

(8)     Includes 125,802 shares held of record by FWH Associates, a California
        limited partnership. Mr. Hellman is a general partner of FWH Associates.
        Also includes 2,052 shares held of record by Marco H. Hellman Trust "B."
        Mr. Hellman is a trustee of the Marco H. Hellman Trust "B." Also
        includes 7,500 shares issuable upon the exercise of stock options that
        are exercisable within 60 days of March 1, 2001,

(10)    Includes information contained in the notes above, as applicable.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

        The Company has entered into indemnity agreements with each of the
Company's directors and executive officers which provide that, subject to
certain limitations, the Company will indemnify, to the fullest extent permitted
by the Company's By-laws and Delaware law, against any and all expenses of the
director or executive officer who incurred such expenses because of his or her
status as a director or executive officer. In addition, the Company's By-laws
provide that the Company shall indemnify its directors and executive officers to
the fullest extent not prohibited by Delaware law, subject to certain
limitations, and may also secure insurance, to the fullest extent permitted by
Delaware law, on behalf of any director, officer, employee or agent against any
expense, liability or loss arising out of his or her actions in such capacity.

        The Company's Restated Certificate of Incorporation provides that a
director of the Company shall not be personally liable to the Company or its
stockholders for monetary damages for any breach of fiduciary duty as a
director, except for liability (i) for any breach of the director's duty of
loyalty to the corporation or its stockholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law, (iii) for unlawful payment of dividends or unlawful stock repurchases or
redemptions, or (iv) for any transaction from which the director derived an
improper personal benefit. If the Delaware law is amended to authorize corporate
action further eliminating or limiting the personal liability of a director,
then the liability of a Company director shall be eliminated or limited to the
fullest extent permitted by the Delaware law, as so amended. The provision in
the Restated Certificate does not eliminate the duty of care and, in appropriate
circumstances, equitable remedies such as injunctive or other forms of
non-monetary relief will remain available under Delaware law. The provision also
does not affect a director's responsibilities under any other law, such as the
federal securities laws or state or federal environmental laws.

        In November 2000, the Company entered into a settlement agreement with
an investment firm providing for the payment to that firm of approximately
$611,627 in consideration of a release and discharge of claims against Il
Fornaio, Messrs. Mindel and Hislop, BRS and Newco. At the same time, the Board
approved resolutions providing for the indemnification of Messrs. Mindel and
Hislop for all amounts they may become obligated to pay under the settlement
agreement. The settlement agreement requires the Company to make payment to the
investment firm only if there is a closing of the Merger, or a change in control
within twelve months of the settlement. In the event the Merger is completed,
the amount to be paid will be charged to expense.

        Laurence B. Mindel's son, Michael M. Mindel, is Vice President of
Marketing of the Company, and, as such, for 2000, received aggregate cash
compensation of $157,050 and options to acquire 15,995 shares of Common Stock at
a weighted average exercise price of $7.88. See also "Item 1. Business -- Recent
Developments."

        In connection with the proposed Merger, certain officers, directors,
employees and stockholders ("the participants") have entered, or are expected to
enter, into a Securities Purchase and Contribution Agreement, dated as of
November 15, 2000, as amended as of January 9, 2001, with BRS and Newco under
which the participants are to retain post-merger equity interests in Il Fornaio
as the surviving corporation. Among these participants are the following
executive officers and directors of the Company: Messrs. Beatrice, Cortopassi,
Hedrick, Hellman, Hislop and Mindel (the "continuing stockholders") Mr. Hausback
has elected not to participate as a continuing stockholder. The opportunity to
retain an equity interest in Il Fornaio as the surviving


                                       44
<PAGE>   45

corporation provides the continuing stockholders with interests in connection
with the Merger that are different from, or in addition to, the interests of Il
Fornaio stockholders generally. The approximate dollar amounts of the investment
in Il Fornaio equity by these continuing stockholders are expected to be as
follows:

<TABLE>
<CAPTION>
NAME                                       INVESTMENT AMOUNT
----                                       -----------------
<S>                                        <C>
Michael Beatrice.......................    $     396,398
Dean A. Cortopassi.....................        1,740,241
W. Scott Hedrick.......................          260,431
F. Warren Hellman......................        2,007,581
Michael J. Hislop......................        2,900,000
Laurence B. Mindel.....................        2,000,000
</TABLE>

        The continuing stockholders will retain equity interests in the
surviving corporation primarily by exchanging Il Fornaio capital stock (or
options to acquire Il Fornaio Common Stock) for securities of the surviving
corporation, as well as, to a lesser extent, through the payment of cash. Shares
of Il Fornaio capital stock contributed by the continuing stockholders will be
valued at $14.00 per share, and options to purchase shares of Il Fornaio Common
Stock will be valued at the difference between their exercise prices per share
and $14.00, multiplied by the number of shares subject to the option. As a
result of the structure of the transaction, the continuing stockholders are not
expected to recognize gain or loss for U.S. federal income tax purposes on their
retention of equity interests in the merger.

        Shares not contributed by the continuing stockholders will be converted
into the right to receive the merger consideration of $14.00 per share to be
paid to all of the Company's other stockholders. As consideration for shares of
Il Fornaio Common Stock he is not contributing, Mr. Mindel is expected to
receive (before taxes) approximately $8.1 million in the Merger. In addition,
Mr. Levy, a director who is not a continuing stockholder, is expected to receive
(before taxes) $32,340 upon conversion of his shares in the merger.

        In the Merger, some of the options held by Messrs. Beatrice and Hislop,
and all of the options held by Messrs. Hausback and Levy will be canceled, with
each option holder receiving a cash payment equal to the difference between
$14.00 and the exercise price of the applicable option, multiplied by the number
of shares subject to the option. The following table sets forth the cash
amounts, before taxes and any withholding, that they will receive in respect of
these stock options upon completion of the Merger:

<TABLE>
<CAPTION>
                                                PAYMENT UPON
                                                CANCELLATION
                                                 OF OPTIONS
           NAME                                 IN THE MERGER
           ----                                 -------------
<S>                                             <C>
           Michael Beatrice..............       $     396,398
           Peter P. Hausback.............             212,526
           Michael J. Hislop.............           2,882,744
           Lawrence F. Levy..............              31,500
</TABLE>


        In addition, following completion of the merger, a pool of approximately
39,683 shares of Il Fornaio Common Stock will be reserved pursuant to an
employee incentive program that provides for the issuance to employees of the
surviving corporation of employee stock options and/or restricted stock. The
exercise or purchase price for the initial grants is expected to be $14.00 per
share and shares subject to options granted or restricted shares are expected to
vest in accordance with prescribed time or performance criteria. Of the shares
reserved, approximately 15,080 shares are expected to be issued and sold to Mr.
Hislop for aggregate consideration of $211,120, and approximately 4,762 shares
are expected to be issued and sold to Mr. Beatrice for aggregate consideration
of $66,668.

        There are a number of conditions to the Merger, and there can be no
assurance that these conditions will be satisfied or that the Merger will be
completed.



                                       45
<PAGE>   46


ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a) 1.

        -   Index to Financial Statements

        -   Independent Auditors' Report

        -   Balance Sheets at December 31, 2000 and December 26, 1999

        -   Statements of Income for the years ended December 31, 2000, December
            26, 1999 and December 27, 1998

        -   Statements of Stockholders' Equity for the years ended December 31,
            2000, December 26, 1999 and December 27, 1998

        -   Statements of Cash Flows for the years ended December 31, 2000,
            December 26, 1999 and December 27, 1998

        -   Notes to Financial Statements

2.   All schedules are omitted because they are not required, are not applicable
     or the information is included in the financial statements or notes
     thereto.

3.   Exhibits

<TABLE>
<CAPTION>
       EXHIBIT
       NUMBER                            DESCRIPTION
       ------                            -----------
<S>                 <C>
        2.1         Agreement and Plan of Merger between the Company and
                    Manhattan Acquisition Corp., dated as of November 15, 2000,
                    as amended as of January 9, 2001.(7)

        3.1         Amended and Restated Certificate of Incorporation.(1)

        3.2         By-laws, as amended.(6)

        3.3         Reference is made to Exhibits 3.1 and 3.2.

        4.2         Speciman stock certificate.(4)

        10.1*       Form of Indemnity Agreement between the Company and each
                    executive officer and director.(3)

        10.2*       Summary of Bonus Plan for 2000.

        10.3*       1997 Equity Incentive Plan, as amended, and forms of related
                    agreements.(5)

        10.4*       1997 Employee Stock Purchase Plan, as amended, and form of
                    offering related thereto.(5)

        10.5*       1997 Non-Employee Directors' Plan and form of agreement
                    related thereto.

        10.6        Form of Series F Preferred Stock Purchase Agreement with
                    Schedule of additional Preferred Stock Purchase Agreements
                    attached.(3)

        10.7        Form of Warrant to purchase shares of Series F Preferred
                    Stock of the Registrant.(3)

        10.8        Revised License Agreement, dated December 11, 1986 and Stock
                    Purchase Agreement dated March 6, 1987, between the Company
                    and Vegetti S.r.1.(3)

        10.9        Assignment of Trademark Registrations Nunc Pro Tunc executed
                    by Vegetti S.r.1.(3)

        10.10+      Lease Agreement, dated December 22, 1988, and Amendment,
                    dated October 4, 1989, between the Company and Cowper Square
                    Partners, for the Palo Alto restaurant.(3)

        10.11+      Lease Agreement, dated November 21, 1991, between the
                    Company and Hotel Sainte Claire Partners, L.P., for Hotel
                    Sainte Claire, San Jose.(3)

        10.12+      Lease Agreement dated April 15, 1996, between the Company
                    and New York-New York Hotel, LLC, for the Las Vegas
                    Restaurant.(3)

        10.13       Food Service Operations Agreement dated November 21, 1991,
                    between the Company and Mobedshahi Hotel Group, Inc.(3)

        10.15*      Employment Agreement dated April 1995, between the Company
                    and Michael J. Hislop.(3)

        10.16*      1991 Incentive Stock Option Plan and form of related
                    agreement.(1)

        10.17*      1992 Non-Employee Directors' Stock Option Plan and form of
                    related agreement.(1)

        10.18*      1988 Stock Option Plan and form of related agreement.(1)
</TABLE>

                                       46
<PAGE>   47

<TABLE>
<CAPTION>
       EXHIBIT
       NUMBER                            DESCRIPTION
       ------                            -----------
<S>                 <C>
        10.19       Underwriting Agreement dated September 18, 1997 between the
                    Company and the Representatives of the Underwriters.(2)

        10.20       Revolving Line of Credit Note and Loan Agreement between the
                    Company and Wells Fargo Bank, N.A., dated October 12, 2000.

        23.1        Consent of Deloitte & Touche LLP.

        24.1        Power of Attorney, Reference is made to the signature page.
</TABLE>

------------

(1)  Filed as an exhibit to the Company's Form S-8 (File No. 333-46421), and
     incorporated herein by reference.

(2)  Filed as an exhibit to the Company's Quarterly Report on Form 10-Q for the
     quarter ended September 28, 1997 (0-29410), and incorporated herein by
     reference.

(3)  Filed as an exhibit to the Company's Registration Statement on Form S-1
     (File No. 333-23605), on March 19, 1997, and incorporated herein by
     reference.

(4)  Filed as an exhibit to Amendment No. 1 to the Form S-1 Registration
     Statement (File No. 333-23605), on July 1, 1997, and incorporated herein by
     reference.

(5)  Filed as an exhibit to the Company's Annual Report on Form 10-K for the
     fiscal year ended December 26, 1999, and incorporated herein by reference.

(6)  Filed as an exhibit to the Company's Annual Report on Form 10-K for the
     fiscal year ended December 27, 1998, and incorporated herein by reference.

(7)  Filed as Appendix A to the Company's Preliminary Proxy Statement on
     Schedule 14A filed with the Commission on February 26, 2001, and
     incorporated herein by reference.

*    Indicates management contracts or compensatory plans or arrangements filed
     pursuant to Item 601(b)(10) of Regulation S-K.

+    Certain confidential information has been deleted from this exhibit
     pursuant to a confidential treatment request order that was granted.


(b)  Reports on Form 8-K


        There were two Reports on Form 8-K filed for the quarter ended December
31, 2000.



1.   Report on Form 8-K filed with the Commission on November 16, 2000,
     reporting that the Company had entered into a merger agreement with Newco.

2.   Report on Form 8-K filed with the Commission on December 4, 2000, reporting
     the issuance of a press release regarding the litigation described under
     "Item 3. Legal Proceeedings".


                                       47
<PAGE>   48

                                   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.



Date: March 12, 2001            Il Fornaio (America) Corporation

                                By:           /s/  LAURENCE B. MINDEL
                                   ---------------------------------------------
                                                   Laurence B. Mindel
                                                 Chairman of the Board


                                By:           /s/ MICHAEL J. HISLOP
                                   ---------------------------------------------
                                                  Michael J. Hislop
                                        President and Chief Executive Officer
                                           (Principal Executive Officer)

POWER OF ATTORNEY

        KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Laurence B. Mindel and Peter P. Hausback
and each of them, as his true and lawful attorneys-in-fact and agents, with full
power of substitution, for him, and in his name, place and stead, in any and all
capacities, to sign any and all amendments to this report, and to file the same,
with exhibits thereto and other documents in connection therewith, with the
Securities Exchange Commission, granting unto said attorneys-in-fact and agents,
and each of them, full power and authority to do and perform each and every act
and thing requisite and necessary to be done therewith, as fully to all intents
and purposes as he might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents, and any of them, or his substitutes,
may lawfully do or cause to be done by virtue hereof.

        Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
               SIGNATURE                                           TITLE                                   DATE
               ---------                                           -----                                   ----
<S>                                         <C>                                                       <C>
       /s/ LAURENCE B. MINDEL                              Chairman of the Board                      March 19, 2001
--------------------------------------
         Laurence B. Mindel


        /s/ MICHAEL J. HISLOP                      President and Chief Executive Officer              March 19, 2001
--------------------------------------                 (Principal Executive Officer)
          Michael J. Hislop


        /s/ PETER P. HAUSBACK               Vice President, Finance and Chief Financial Officer       March 19, 2001
--------------------------------------          (Principal Financial and Accounting Officer)
          Peter P. Hausback


       /s/ DEAN A. CORTOPASSI                                     Director                            March 19, 2001
--------------------------------------
         Dean A. Cortopassi


        /s/ W. SCOTT HEDRICK                                      Director                            March 19, 2001
--------------------------------------
          W. Scott Hedrick


        /s/ F. WARREN HELLMAN                                     Director                            March 19, 2001
--------------------------------------
          F. Warren Hellman


        /s/ LAWRENCE F. LEVY                                      Director                            March 19, 2001
--------------------------------------
          Lawrence F. Levy


         /s/ GEORGE B. JAMES                                      Director                            March 19, 2001
--------------------------------------
           George B. James
</TABLE>


                                       48
<PAGE>   49
                                  EXHIBIT INDEX
<TABLE>
<CAPTION>
       EXHIBIT
       NUMBER                          DESCRIPTION
       -------                         -----------
<S>                 <C>
        2.1         Agreement and Plan of Merger between the Company and
                    Manhattan Acquisition Corporation, dated as of November 15,
                    2000, as amended as of January 9, 2001.(7)

        3.1         Amended and Restated Certificate of Incorporation.(1)

        3.2         By-laws, as amended.(6)

        3.3         Reference is made to Exhibits 3.1 and 3.2.

        4.2         Speciman stock certificate.(4)

        10.1*       Form of Indemnity Agreement between the Company and each
                    executive officer and director.(3)

        10.2*       Summary of Bonus Plan for 2000.

        10.3*       1997 Equity Incentive Plan, as amended, and forms of related
                    agreements.(5)

        10.4*       1997 Employee Stock Purchase Plan, as amended, and form of
                    offering related thereto.(5)

        10.5*       1997 Non-Employee Directors' Plan and form of agreement
                    related thereto.

        10.6        Form of Series F Preferred Stock Purchase Agreement with
                    Schedule of additional Preferred Stock Purchase Agreements
                    attached.(3)

        10.7        Form of Warrant to purchase shares of Series F Preferred
                    Stock of the Registrant.(3)

        10.8        Revised License Agreement, dated December 11, 1986 and Stock
                    Purchase Agreement dated March 6, 1987, between the Company
                    and Vegetti S.r.1.(3)

        10.9        Assignment of Trademark Registrations Nunc Pro Tunc executed
                    by Vegetti S.r.1.(3)

        10.10+      Lease Agreement, dated December 22, 1988, and Amendment,
                    dated October 4, 1989, between the Company and Cowper Square
                    Partners, for the Palo Alto restaurant.(3)

        10.11+      Lease Agreement, dated November 21, 1991, between the
                    Company and Hotel Sainte Claire Partners, L.P., for Hotel
                    Sainte Claire, San Jose.(3)

        10.12+      Lease Agreement dated April 15, 1996, between the Company
                    and New York-New York Hotel, LLC, for the Las Vegas
                    Restaurant.(3)

        10.13       Food Service Operations Agreement dated November 21, 1991,
                    between the Company and Mobedshahi Hotel Group, Inc.(3)

        10.15*      Employment Agreement dated April 1995, between the Company
                    and Michael J. Hislop.(3)

        10.16*      1991 Incentive Stock Option Plan and form of related
                    agreement.(1)

        10.17*      1992 Non-Employee Directors' Stock Option Plan and form of
                    related agreement.(1)

        10.18*      1988 Stock Option Plan and form of related agreement.(1)

        10.19       Underwriting Agreement dated September 18, 1997 between the
                    Company and the Representatives of the Underwriters.(2)

        10.20       Revolving Line of Credit Note and Loan Agreement between the
                    Company and Wells Fargo Bank, N.A., dated October 12, 2000.

        23.1        Consent of Deloitte & Touche LLP.

        24.1        Power of Attorney, Reference is made to the signature page.
</TABLE>
------------

(1)  Filed as an exhibit to the Company's Form S-8 (File No. 333-46421), and
     incorporated herein by reference.

(2)  Filed as an exhibit to the Company's Quarterly Report on Form 10-Q for the
     quarter ended September 28, 1997 (0-29410), and incorporated herein by
     reference.

(3)  Filed as an exhibit to the Company's Registration Statement on Form S-1
     (File No. 333-23605), on March 19, 1997, and incorporated herein by
     reference.

                                       49
<PAGE>   50



(4)  Filed as an exhibit to Amendment No. 1 to the Form S-1 Registration
     Statement (File No. 333-23605), on July 1, 1997, and incorporated herein by
     reference.

(5)  Filed as an exhibit to the Company's Annual report on Form 10-K for the
     fiscal year ended December 26, 1999, and incorporated herein by reference.

(6)  Filed as an exhibit to the Company's Annual Report on Form 10-K for the
     fiscal year ended December 27, 1998, and incorporated herein by reference.

(7)  Filed as Appendix A to the Company's Preliminary Proxy Statement on
     Schedule 14A filed with the Commission on February 26, 2001 and
     incorporated herein by reference.

*    Indicates management contracts or compensatory plans or arrangements filed
     pursuant to Item 601(b)(10) of Regulation S-K.

+    Certain confidential information has been deleted from this exhibit
     pursuant to a confidential treatment request order that was granted.


                                       50