MEMORANDUM OF UNDERSTANDING

         This  MEMORANDUM OF  UNDERSTANDING  is made  effective as of October 5,
2002, by and between LOU KAUCIC ("Employee") and APPLEBEE'S INTERNATIONAL, INC.,
a Delaware Corporation ("Company") (collectively "the parties").

         WHEREAS,  the parties  desire to set forth their  understanding  of the
terms and  conditions of (1)  Employee's  continued  full-time  employment  with
Company as Company's Chief People Officer,  (2) Employee's  continued employment
with Company after conclusion of Employee's full-time employment with Company as
Chief People  Officer,  and (3) the general  terms and  conditions of Employee's
separation from Company.

         NOW,  THEREFORE,  in consideration of the premises and the mutual terms
and conditions hereof, Company and Employee hereby agree as follows:

         1. Employee's Full-Time  Employment With Company.  Regarding Employee's
continued full-time employment with Company as Company's Chief People Officer:

                  (a)  Employee  shall  remain  employed  full-time as Company's
         Chief  People  Officer  until such time as his  successor  as Company's
         Chief  People  Officer is selected  and in place,  and for a transition
         period thereafter, but for no longer than through May 1, 2004;

                  (b) During any  continued  employment of Employee as Company's
         Chief  People  Officer,  Employee  shall (1)  receive  the base  salary
         applicable to the Chief People  Officer  position,  including,  but not
         limited to, appropriate adjustments in base salary based on performance
         as  determined  by Company in its sole and  exclusive  discretion;  (2)
         receive bonuses  applicable to the Chief People Officer position at the
         normal bonus percentages and subject to the terms and conditions of the
         Company's bonus plan,  including a bonus for year 2004,  payable in the
         first  quarter of 2005 even though the Employee will not be employed on
         the payment date; (3) be eligible to receive  appropriate  stock option
         grants,  including for 2004 (any options granted in 2002, 2003 and 2004
         will provide  continued vesting after  retirement);  (4) be eligible to
         receive  payouts  for  earlier  granted  performance  share  awards  as
         described in each  Performance  Share Award Agreement but not new award
         grants under  Company's  performance  share payout program  (unless the
         Compensation Committee decides to include performance share awards in a
         retirement program generally applicable to executive officers);  (5) be
         eligible  for  the  benefits  attendant  to the  Chief  People  Officer
         position,  including,  but not limited to, applicable medical,  dental,
         drug,  and vision  coverage;  and (6) be eligible for any and all other
         benefits or  perquisites  of  employment  attendant to the Chief People
         Officer position; and

                  (c) Employee  understands  Employee's  continued employment as
         Company's  Chief  People  Officer is subject  to  Company's  employment
         practices and policies  applicable to the Chief People Officer position


                                       1
<PAGE>

         during such  continued  employment  and is at all times  at-will in all
         respects, which means, among other things, it is of not of any definite
         duration, can be terminated at any time for any lawful reason or for no
         reason,  and  remains  subject  to  Employee's  continued  satisfactory
         performance,  in Company's sole and exclusive discretion,  of the Chief
         People  Officer  duties and  responsibilities  and any other duties and
         responsibilities Employee is assigned from time to time.

         2.  Employee's  Post  Full-Time  Employment  With  Company.   Regarding
Employee's  continued  employment with Company from May 1, 2004 through November
1, 2004:

                  (a) Employee shall be employed  part-time by Company for up to
         six  months,  during  which  part-time  employment  Employee  shall (1)
         perform special project work for up to twenty-five  (25) hours per week
         as reasonably  requested by Company's  Chief Executive  Officer,  Chief
         Operating  Officer,  and/or then Chief People Officer,  as the case may
         be; (2)  continue to receive the base salary  Employee  received on his
         last day of full-time  employment  as Company's  Chief People  Officer,
         less  applicable  deductions and  withholdings,  according to Company's
         then existing payroll  schedule;  (3) remain eligible to elect coverage
         under Company's  employee  medical,  dental,  drug, and vision plans as
         Employee  is  enrolled  in such  plans on his  final  day of  full-time
         employment as Company's Chief People  Officer,  with Company paying the
         employer  portion of premiums  for any such  elected  coverage;  (4) be
         eligible  to receive  payouts  for earlier  granted  performance  share
         awards as described in each  Performance  Share Award Agreement but not
         new award grants under Company's  performance share payout program; (5)
         be eligible to participate in the benefits and  perquisites  applicable
         to direct reports of Company's Chief Executive Officer,  including, but
         not limited to, executive physical,  retirement/tax/financial planning,
         and  long-term  disability  insurance;  and (6) be  eligible to receive
         appropriate  stock option grants (any options granted in 2002, 2003 and
         2004 will provide continued vesting after retirement); and

                  (b) Employee understands  Employee's part-time employment with
         Company is subject  to  Company's  employment  practices  and  policies
         applicable to such position during such part-time  employment and is at
         all times at-will in all respects,  which means, among other things, it
         is of not of any definite  duration,  can be terminated at any time for
         any lawful reason or for no reason,  and remains  subject to Employee's
         continued  satisfactory  performance,  in Company's  sole and exclusive
         discretion,  of duties and  responsibilities  Employee is assigned from
         time to time.

         3.  Employee's  Separation  From  Company.  Provided  Employee  remains
employed by Company as  contemplated by paragraphs 1 and 2 of this Memorandum of
Understanding,  Employee  agrees he will retire from Company on November 1, 2004
and thereby be entitled to any and all applicable retirement benefits.  Employee
further  agrees that, if requested,  upon any separation  from Company,  he will
fully release and forever discharge Company by executing a separation  agreement
containing a release similar to that set forth below:

                  Employee  (and  anyone  acting on  Employee's  behalf)  hereby
         RELEASES AND FOREVER  DISCHARGES  Company (including all of its current
         and/or former insurers, current and/or former directors, current and/or
         former  officers,  current  and/or former  fiduciaries,  current and/or


                                       2
<PAGE>

         former employees,  current and/or former agents,  current and/or former
         successors,  current  and/or  former  assigns,  current  and/or  former
         related corporations,  current and/or related entities, and any and all
         other entities currently and/or formerly  affiliated with or related to
         it (collectively  hereinafter  "Company  Affiliates")),  to the maximum
         extent permitted by law, from any and all claims,  demands,  and causes
         of  action  ("claims")  Employee  had or may have had  against  Company
         (including  any Company  Affiliates) up to the date Employee signs this
         Agreement,  which claims  include,  but are not limited to,  claims for
         attorney's  fees;  claims  under  any  local,   state,  and/or  federal
         statutory  or common law,  including,  but not  limited to,  claims for
         libel,  slander,  defamation,   breach  of  contract,  and/or  wrongful
         termination;  claims for discrimination  under any local, state, and/or
         federal statutory or common law, including, but not limited to, any and
         all claims under 42 U.S.C. ss.ss. 1981 and 1983, Title VII of the Civil
         Rights Act of 1964 (as  amended),  the Civil  Rights  Act of 1991,  the
         Americans With Disabilities  Act, the Age  Discrimination in Employment
         Act,  the  Employee  Retirement  Income  Security  Act,  the Family and
         Medical  Leave  Act,  the Kansas Act  Against  Discrimination,  and the
         Missouri Human Rights Act;  claims under the U.S.  Constitution  and/or
         any state constitution,  including the State of Kansas and the State of
         Missouri; claims under any other local, state, and/or federal statutory
         or common law not specifically referenced in this paragraph; and claims
         under any  other  agreement  with  Company  or under  any of  Company's
         policies and/or practices.

         4. Termination Without Cause.

                  (a) In the  event the  Company  terminates  Employee  prior to
         October 31, 2004 other than for Cause, then (i) the Company will pay to
         Employee,  beginning the month following the month of such termination,
         in 24 equal monthly installments,  an amount equal to two (2) times his
         then current  annual base  salary,  subject to all  applicable  payroll
         taxes and deductions,  and (ii) the 12 month  post-termination  periods
         under Sections 2(a) and 2(b) of the  Confidentiality,  Non-Solicitation
         and  Non-Competition   Agreement  dated  of  even  date  herewith  will
         automatically be extended to 24 months.

                  (b) The following shall constitute "Cause":

                  (i)  Employee is  convicted  of -- or pleads no contest / nolo
                  contendre  to -- any  felony  or any  other  serious  criminal
                  offense; or

                  (ii)  Employee   breaches  any  material   provision  of  this
                  Agreement or  habitually  neglects to perform his duties under
                  this  Agreement  (other than for  reasons  related to illness,
                  injury or temporary  disability) and such breach or neglect is
                  not  corrected  in the  Company's  good  faith  belief  within
                  fifteen (15)  business  days after  receipt of written  notice
                  from the Chief Executive Officer; or

                  (iii) Employee breaches any provision of the  confidentiality,
                  Non-Solicitation  and  Non-Competition  Agreement of even date


                                       3
<PAGE>

                  herewith,  and such breach is not  corrected in the  Company's
                  good faith belief  within five (5) business days after receipt
                  of written notice from the Chief Executive Officer; or

                  (iv) Employee is  determined  to have violated any  applicable
                  local,  state or federal  law  relating to  discrimination  or
                  harassment through egregious conduct; or

                  (v)  Employee  dies  or  becomes  permanently   disabled  from
                  continuing to provide the level of service required under this
                  Agreement.

         5. Restrictions on Employee's  Activities.  Employee agrees immediately
to execute the Confidentiality,  Non-Solicitation, and Non-Competition Agreement
attached hereto.



Dated: October 5, 2002                   By:/s/ Lou Kaucic
       ---------------                      -----------------------------------
                                            Lou Kaucic


Dated:  October 9, 2002                     Applebee's International, Inc.
        ---------------

                                         By:/s/ Lloyd Hill
                                            --------------------------------
                                            Title:




                                       4
<PAGE>





                      CONFIDENTIALITY, NON-SOLICITATION AND
                            NON-COMPETITION AGREEMENT

         This Confidentiality,  Non-Solicitation,  and Non-Competition Agreement
("Agreement") is made effective as of October, 5, 2002 by and between LOU KAUCIC
("Employee")  and  APPLEBEE'S   INTERNATIONAL,   INC.,  a  Delaware  Corporation
("Company") (collectively "the parties").

         This  Agreement  is not an  employment  contract,  and  the  employment
relationship between Company and Employee is and remains at all times at will in
all respects.

         In consideration of the employment/continued  employment of Employee by
Company  as  outlined  in  the  parties'  Memorandum  of  Understanding  and  in
consideration of the promises  contained in this Agreement,  the sufficiency and
adequacy  of which  consideration  Employee  hereby  acknowledges  and  accepts,
Employee and Company agree as follows.

1.       Non-Disclosure  and   Return  of   Confidential  Information.  Employee
acknowledges  his  position  with  Company  is  one  of the  highest  trust  and
confidence  both by reason of his  position  and by reason of his  access to and
contact  with the  trade  secrets  and  confidential  and  proprietary  business
information of Company. Both during Employee's employment with Company and after
the  termination of Employee's  employment with Company for any reason by either
Employee or Company, Employee agrees as follows:

                  a. He shall use his best efforts and exercise utmost diligence
         to  protect  and  safeguard  the trade  secrets  and  confidential  and
         proprietary  information  of Company,  including but not limited to the
         identity  of  its  customers  and  suppliers,   its  arrangements  with
         customers and suppliers, and its technical and financial data, records,
         compilations of information,  processes,  recipes,  and  specifications
         relating to its customers, suppliers, products, and services;

                  b. He  shall  not  disclose  any of  such  trade  secrets  and
         confidential and proprietary information,  except as may be required in
         the course of his employment with Company or by law; and

                  c. He  shall  not use,  directly  or  indirectly,  for his own
         benefit or for the  benefit of another,  any of such trade  secrets and
         confidential and proprietary information.

All files, records, documents,  drawings,  specifications,  memoranda, notes, or
other  documents  relating  to the  business  of  Company,  whether  prepared by
Employee  or  otherwise  coming  into his  possession,  shall  be the  exclusive
property  of Company  and shall be  delivered  to Company  and not  retained  by
Employee upon termination of his employment for any reason  whatsoever or at any
other time upon request of Company.

                                       5
<PAGE>

2.       Non-Solicitation Agreement.

                  a. Non-Solicitation of Employees.  Employee agrees that during
         Employee's  employment  with  Company,  and for a period of twelve (12)
         months after termination of Employee's  employment with Company for any
         reason by either  Employee or Company,  Employee  will not  directly or
         indirectly  for  himself or for any third  party,  except as  otherwise
         agreed to in writing by Company's  Chief Executive  Officer,  employ or
         hire any other  person who is then  employed  by  Company,  or solicit,
         induce,  recruit,  or cause any other  person who is then  employed  by
         Company to  terminate  his/her  employment  for the purpose of joining,
         associating, or becoming employed with any business or activity that is
         engaged in the casual dining  restaurant  industry or any other segment
         of the restaurant  industry in which Company may become  involved after
         the date hereof and prior to the date of any  termination of Employee's
         employment with Company for any reason by either Employee or Company.

                  b. Non-Solicitation of Customers.  Employee agrees that during
         Employee's  employment  with  Company,  and for a period of twelve (12)
         months after termination of Employee's  employment with Company for any
         reason by either  Employee or Company,  Employee  will not  directly or
         indirectly  solicit,  divert,  or take away,  or  attempt  to  solicit,
         divert,  or take away, the business or patronage of any of the clients,
         customers, or accounts, or prospective clients, customers, or accounts,
         of Company.

3.       Non-Competition Agreement

                  a.  Restriction on Competition.  Employee agrees that,  during
         Employee's  employment  with  Company,  and  for two  (2)  years  after
         termination  of  Employee's  employment  with Company for any reason by
         either Employee or Company, Employee will not compete with the business
         of Company or its successors or assigns in any geographic area serviced
         by Company.  This agreement not to compete  means,  among other things,
         Employee  shall not,  without the prior  written  consent of  Company's
         Chief  Executive  Officer,  directly  or  indirectly,  as an  employee,
         employer, consultant, agent, principal, partner, shareholder, corporate
         officer,  director,  or through any other kind of ownership (other than
         ownership of securities of publicly held corporations of which Employee
         owns less than five percent 5% of any class of outstanding  securities)
         or in any other  representative  or individual  capacity,  engage in or
         render any  services to any  business in North  America  engaged in the
         casual  dining  restaurant  industry  or in any  other  segment  of the
         restaurant  industry in which Company or any  subsidiary of Company may
         become  involved  after  the  date  hereof  and  prior  to the  date of
         termination  of  Employee's  employment  with Company for any reason by
         either  Employee or Company.  For purposes of this  Agreement,  "casual
         dining  restaurant  industry"  consists  of "sit  down  table  service"
         restaurants serving alcoholic beverages, with a per guest average guest
         check within the United  States of under $20.00  (adjusted  upward each
         year to recognize Company menu price increases).



                                       6
<PAGE>

4.       General Provisions.


                  a. Judicial  Modification.  Company and Employee  specifically
         acknowledge  and agree that the  foregoing  covenants  of  Employee  in
         paragraphs  1-3 are  reasonable  in content  and scope and are given by
         Employee  for  adequate  consideration.  Company and  Employee  further
         acknowledge  and agree that, if any court of competent  jurisdiction or
         other appropriate  authority shall disagree with the parties' foregoing
         agreement  as to  reasonableness,  then such  court or other  authority
         shall reform or otherwise the foregoing covenants as reason dictates.

                  b. Equitable  Relief. The restrictions contained in paragraphs
         1-3  are  necessary  for  the  protection  of the  legitimate  business
         interests,  goodwill,  trade secrets,  and confidential and proprietary
         information  of Company.  Employee  agrees any breach of paragraphs 1-3
         will cause Company substantial and irrevocable damage. Employee further
         agrees that, in addition to such other  remedies that may be available,
         including the recovery of damages from Employee, Company shall have the
         right to  injunctive  relief  to  restrain  or  enjoin  any  actual  or
         threatened  breach of the provisions of paragraphs 1-3, without posting
         bond. If Company  prevails in a legal  proceeding to remedy a breach or
         threatened breach of this Agreement,  then Company shall be entitled to
         receive   reasonable   attorney's   fees,   expert  witness  fees,  and
         out-of-pocket  costs incurred in connection  with such  proceeding,  in
         addition to any other relief it may be granted.

                  c.  Severability.  The terms and  provisions of this Agreement
         are severable in whole or in part, and if any term or provision of this
         Agreement is deemed invalid,  illegal,  or  unenforceable by a court of
         competent jurisdiction, the remaining terms and provisions shall remain
         in full force and effect.

                  d.  Assignment.  This Agreement is personal and not assignable
         by  Employee.  Company may assign this  Agreement  to any  successor in
         interest to the business, or part thereof, of Company.

                  e. Governing Law and Consent to  Jurisdiction.  This Agreement
         and all disputes  relating to Employee's  employment with Company shall
         be subject to,  governed by, and construed in accordance  with the laws
         of the State of  Kansas,  irrespective  of the fact that one or both of
         the  parties  now is or may become a  resident  of a  different  state.
         Employee  hereby  expressly  submits  and  consents  to  the  exclusive
         personal  jurisdiction  and  exclusive  venue of the  federal and state
         courts of competent jurisdiction in the State of Kansas.

                  f. No Conflicting  Agreements.  Employee represents to Company
         (1) there are no restrictions, agreements, or understandings whatsoever
         to which  employee is a party that would  prevent or make  unlawful his
         execution or performance of this Agreement or his employment  hereunder
         and (2)  Employee's  execution of this  Agreement and  employment  with
         Company does not  constitute a breach of any  contract,  agreement,  or
         understanding,  oral or  written,  to which  Employee  is a party or by
         which Employee is bound.

                                       7
<PAGE>

                  g. Disclosure of Agreement. In the event Company has reason to
         believe this  Agreement has or may be breached,  Employee  acknowledges
         and consents that this  Agreement may be disclosed by Company,  without
         risk of liability,  to a current or prospective employer of Employee or
         other business entity.

                  h.  Survival.  The  obligations  contained  in this  Agreement
         survive the termination,  for whatever reason, of Employee's employment
         with Company.

                  i. Entire  Agreement.  This Agreement  constitutes  the entire
         agreement  between the parties with  respect to its subject  matter and
         supersedes all prior agreements or understandings,  if any, between the
         parties with respect to the employment of Employee.  This Agreement may
         be modified or amended only by an  agreement in writing  signed by both
         parties.

                  j. No Waiver.  The  failure  of either  party to insist on the
         performance  of any of the terms or  conditions of this  Agreement,  or
         failure to enforce any of the provisions of this  Agreement,  shall not
         be construed as a waiver or a relinquishment of any such provision. Any
         waiver or failure to enforce on any one occasion is  effective  only in
         that instance,  and the obligations of either party with respect of any
         provision in this Agreement shall continue in full force and effect.

         THE PARTIES ARE  CAUTIONED  THAT,  BY  COMPLETING  AND  EXECUTING  THIS
AGREEMENT,  LEGAL  RIGHTS AND DUTIES ARE  CREATED.  THEY ARE  ADVISED TO CONSULT
INDEPENDENT LEGAL COUNSEL AS TO ALL MATTERS CONTAINED IN THIS DOCUMENT.


Date:  October 5, 2002             /s/ Lou Kaucic
       --------------------        -----------------
                                   Lou Kaucic




                                   Applebee's International, Inc.


Date:  October 9, 2002         By: /s/ Lloyd Hill
       --------------------        -----------------
                               Title:


                                       8