10-Q

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended April 3, 2001
Commission File Number 0-20574

THE CHEESECAKE FACTORY INCORPORATED
(Exact Name of Registrant as Specified in its Charter)

Delaware
(State or other jurisdiction of
incorporation or organization)
26950 Agoura Road
Calabasas Hills, California
(Address of principal executive offices) 51-0340466
(IRS Employer Identification No.)

91301
(Zip Code)

Registrant’s telephone number, including area code: (818) 871-3000

     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 |_|

     As of April 23, 2001, 31,536,294 shares of the registrant’s Common Stock, $.01 par value, were outstanding.

THE CHEESECAKE FACTORY INCORPORATED AND SUBSIDIARIES

INDEX

			Page Number
PART I	FINANCIAL INFORMATION
	Item 1.	Financial Statements:
		Consolidated Balance Sheets - April 3, 2001 and January 2, 2001	2
		Consolidated Statements of Operations - Thirteen weeks ended    April 3, 2001 and March 28, 2000	3
		Consolidated Statements of Cash Flows - Thirteen weeks ended    April 3, 2001 and March 28, 2000	4
		Notes to Consolidated Financial Statements - April 3, 2001	5
	Item 2.	Management’s Discussion and Analysis of Financial Condition    and Results of Operations	7
	Item 3.	Quantitative and Qualitative Disclosures about Market Risk	11
PART II	OTHER INFORMATION
	Item 6.	Exhibits and Reports on Form 8-K	11
	Signatures		12

1

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

THE CHEESECAKE FACTORY INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share Data)

	April 3, 2001		January 2, 2001
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$   27,038		$   34,284
Investments and marketable securities	16,007		16,822
Accounts receivable	4,971		4,877
Other receivables	19,422		15,112
Inventories	10,771		9,328
Prepaid expenses	1,306		1,411
Deferred income taxes	708		773
Total current assets	80,223		82,607
Property and equipment, net	169,040		161,223
Other assets:
Marketable securities	35,197		34,208
Other receivables	7,304		5,276
Trademarks	1,919		1,905
Other	3,349		3,173
Total other assets	47,769		44,562
Total assets	$ 297,032		$ 288,392
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$   14,134		$   17,712
Income taxes payable	5,432		993
Other accrued expenses	23,672		24,422
Total current liabilities	43,238		43,127
Deferred income taxes	4,429		4,429
Stockholders’ equity:
Preferred stock, $.01 par value, 5,000,000 shares authorized; none issued	—		—
Junior participating cumulative preferred stock, $.01 par value, 150,000
shares authorized; none issued	—		—
Common Stock, $.01 par value, 150,000,000 shares authorized; 32,103,294
and 31,924,807 issued at April 3, 2001 and January 2, 2001, respectively	321		319
Additional paid-in capital	149,895		147,694
Retained earnings	107,952		99,581
Unrealized gain on available-for-sale securities	518		365
Treasury stock, 567,000 and 504,000 shares at cost at April 3, 2001
and January 2, 2001, respectively	(9,321	)	(7,123	)
Total stockholders’ equity	249,365		240,836
Total liabilities and stockholders’ equity	$ 297,032		$ 288,392

The accompanying notes are an integral part of these consolidated financial statements.

2

THE CHEESECAKE FACTORY INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Net Income Per Share)
(Unaudited)

	Thirteen Weeks Ended April 3, 2001	Thirteen Weeks Ended March 28, 2000
Revenues:
Restaurant sales	$112,359	$89,465
Bakery sales to other foodservice operators, retailers and distributors	8,162	6,646
Total revenues	120,521	96,111
Costs and expenses:
Restaurant cost of sales	28,766	22,560
Bakery cost of sales	3,927	2,787
Labor expenses	37,297	29,694
Other operating costs and expenses	27,635	21,444
General and administrative expenses	6,327	6,810
Depreciation and amortization expenses	3,881	3,103
Preopening costs	1,428	1,105
Total costs and expenses	109,261	87,503
Income from operations	11,260	8,608
Interest income, net	1,348	910
Other income, net	471	68
Income before income taxes	13,079	9,586
Income tax provision	4,708	3,619
Net income	$    8,371	$  5,967
Net income per share:
Basic	$      0.27	$    0.20
Diluted	$      0.25	$    0.19
Weighted average shares outstanding:
Basic	31,514	30,276
Diluted	33,160	32,220

The accompanying notes are an integral part of these consolidated financial statements.

3

THE CHEESECAKE FACTORY INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)

	Thirteen Weeks Ended April 3, 2001		Thirteen Weeks Ended March 28, 2000
Cash flows from operating activities:
Net income	$   8,371		$   5,967
Adjustments to reconcile net income to cash provided
by operating activities:
Depreciation and amortization	3,881		3,103
Gain on sale of available-for-sale securities	(407	)	—
Deferred income taxes	(23	)	(3	)
Changes in assets and liabilities:
Accounts receivable	(94	)	1,981
Other receivables	(6,338	)	2,889
Inventories	(1,443	)	(187	)
Prepaid expenses	105		1,413
Trademarks	(37	)	(70	)
Other	(202	)	(211	)
Accounts payable	(3,578	)	(1,144	)
Income taxes payable	4,439		2,991
Other accrued expenses	(750	)	(2,135	)
Cash provided by operating activities	3,924		14,594
Cash flows from investing activities:
Additions to property and equipment	(11,649	)	(9,076	)
Investments in available-for-sale securities	(33,327	)	(13,251	)
Sales of available-for-sale securities	33,801		6,020
Cash used in investing activities	(11,175	)	(16,307	)
Cash flows from financing activities:
Issuance of common stock	2		3
Proceeds from exercise of employee stock options	2,201		4,389
Purchase of treasury stock	(2,198	)	(922	)
Cash provided by financing activities	5		3,470
Net change in cash and cash equivalents	(7,246	)	1,757
Cash and cash equivalents at beginning of period	34,284		24,026
Cash and cash equivalents at end of period	$ 27,038		$ 25,783
Supplemental disclosures:
Interest paid	—		$          6
Income taxes paid	$      268		$      630

The accompanying notes are an integral part of these consolidated financial statements.

4

THE CHEESECAKE FACTORY INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
April 3, 2001
(Unaudited)

NOTE A–BASIS OF PRESENTATION

     The accompanying consolidated financial statements include the accounts of The Cheesecake Factory Incorporated (referred to herein as the “Company” or in the first person notations “we”, “us” and “our”) and its wholly owned subsidiaries (The Cheesecake Factory Restaurants, Inc.; The Cheesecake Factory Bakery Incorporated; The Cheesecake Factory Assets Co. LLC; The Houston Cheesecake Factory Corporation; TCF Stonebriar Club Incorporated and Grand Lux Cafe LLC) for the thirteen weeks ended April 3, 2001 prepared in accordance with generally accepted accounting principles and with the instructions to Form 10-Q and Article 10 of Regulation S-X. The financial statements presented herein have not been audited by independent public accountants, but include all material adjustments (consisting of normal recurring adjustments) which are, in the opinion of management, necessary for a fair presentation of the financial condition, results of operations and cash flows for the period. However, these results are not necessarily indicative of results for any other interim period or for the full fiscal year. The consolidated balance sheet data presented herein for January 2, 2001 was derived from our audited consolidated financial statements for the fiscal year then ended, but does not include all disclosures required by generally accepted accounting principles. The preparation of financial statements in accordance with generally accepted accounting principles requires us to make certain estimates and assumptions for the reporting periods covered by the financial statements. These estimates and assumptions affect the reported amounts of assets, liabilities, revenues and expenses. Actual amounts could differ from these estimates.

     Certain information and footnote disclosures normally included in financial statements in accordance with generally accepted accounting principles have been omitted pursuant to requirements of the Securities and Exchange Commission. We believe the disclosures included in the accompanying interim financial statements and footnotes are adequate to make the information not misleading, but should be read in conjunction with the consolidated financial statements and notes thereto included in our Form 10-K for the fiscal year ended January 2, 2001.

NOTE B–INVESTMENTS AND MARKETABLE SECURITIES

     Investments and marketable securities, all classified as available-for-sale, consisted of the following as of April 3, 2001 (in thousands):

Classification	Cost	Fair Value	Unrealized Gain/(Loss)	Balance Sheet Amount	Maturity
Current assets:
Available-for-sale securities:
Corporate debt securities	$15,882	$16,007	$125	$16,007	July 2001 to April 2002
Other assets:
Available-for-sale securities:
Corporate debt securities	$34,524	$35,197	$673	$35,197	April 2002 to February 2004

5

THE CHEESECAKE FACTORY INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
April 3, 2001
(Unaudited)

NOTE C–NET INCOME PER SHARE

     In accordance with the provisions of SFAS No. 128, “Earnings Per Share”, basic net income per share is computed by dividing net income available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted net income per share includes the dilutive effect of potential stock option exercises, calculated using the treasury stock method.

NOTE D–STOCK TRANSACTIONS

     The Company’s Board of Directors has authorized the repurchase of up to 1,125,000 shares of our common stock for reissuance upon the exercise of stock options under the Company’s current stock option plans. As of April 3, 2001, we have repurchased 567,000 shares at a total cost of approximately $9.3 million under this authorization. Share repurchases occurred during fiscal 1999, 2000 and 2001.

NOTE E–RECENT 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.” This statement requires that all derivative instruments be recorded on the balance sheet at their fair value. Changes in the fair value of derivatives will be recorded each period in current earnings or other comprehensive income, depending on whether a derivative is designed as part of a hedge transaction and, if it is, the type of hedge transaction. We adopted SFAS No. 133 as of January 3, 2001. The adoption did not have any impact on our financial statements.

6

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

     Certain statements in this Form 10-Q which are not historical facts may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company and its subsidiaries to be materially different from any future results, performance or achievements expressed or implied by forward-looking statements. Such risks, uncertainties, and other factors include, but are not limited to: changes in general economic conditions which affect consumer spending for restaurant dining occasions; increasing competition in the upscale casual dining segment of the restaurant industry; adverse weather conditions which impact customer traffic at the Company’s restaurants in general and which cause the temporary underutilization of outdoor patio seating available at several of the Company’s restaurants; various factors which increase the cost to develop and/or delay the development and opening of the Company’s new, highly customized restaurants, including factors under the influence and control of the Company’s landlords; changes in the availability and/or cost of raw materials, management and hourly labor, energy or other resources necessary to successfully operate the Company’s restaurants and bakery production facility; the Company’s ability to raise prices sufficiently to offset cost increases; the success of strategic and operating initiatives, including new restaurant concepts and new bakery products; depth of management; adverse publicity about the Company, its restaurants or bakery products; the Company’s dependence on a single bakery production facility; the Company’s ability to obtain and retain customers for its bakery operations; changes in timing and/or scope of the purchasing plans of bakery customers which cause fluctuations in bakery sales and the Company’s consolidated operating results; the rate of growth of general and administrative expenses associated with building a strengthened corporate infrastructure to support the Company’s growing operations; relations between the Company and its employees; the availability, amount, type, and cost of capital for the Company and the deployment of such capital; changes in, or any failure to comply with, governmental regulations; the revaluation of any of the Company’s assets; the amount of, and any changes to, tax rates; and other factors referenced in this Form 10-Q and the Company’s Form 10-K filed with the Securities and Exchange Commission for the fiscal year ended January 2, 2001.

General

     As of April 23, 2001, The Cheesecake Factory Incorporated operated 42 upscale, high volume, casual dining restaurants under The Cheesecake Factory® mark. We also operated Grand Lux Cafe®, an upscale casual dining restaurant located in the Venetian Resort-Hotel-Casino in Las Vegas, Nevada; two self-service, limited menu “express” foodservice operations under The Cheesecake Factory® mark inside the DisneyQuest® family entertainment centers in Orlando, Florida and Chicago, Illinois; and a bakery production facility. We also licensed three limited menu bakery cafes under The Cheesecake Factory® mark to another foodservice operator.

     Our revenues consist of sales from our restaurant operations and sales from our bakery operations to other foodservice operators, retailers and distributors (“bakery sales”). Sales and cost of sales are reported separately for restaurant and bakery activities. All other operating cost and expense categories are reported on a combined basis for both restaurant and bakery activities. Comparable restaurant sales include the sales of restaurants open for the full period of each period being compared. New restaurants enter the comparable sales base in their thirteenth month of operations.

     We utilize a 52/53 week fiscal year ending on the Tuesday closest to December 31 for financial reporting purposes. Fiscal 2001 will consist of 52 weeks and will end on January 1, 2002.

7

Results of Operations

     The following table sets forth, for the periods indicated, our Consolidated Statements of Operations expressed as percentages of total revenues. The results of operations for the thirteen weeks ended April 3, 2001 are not necessarily indicative of the results to be expected for the full fiscal year.

	Thirteen Weeks Ended April 3, 2001	Thirteen Weeks Ended March 28, 2000
	%	%
Revenues:
Restaurant sales	93.2	93.1
Bakery sales to other foodservice operators,
retailers and distributors	6.8	6.9
Total revenues	100.0	100.0
Costs and expenses:
Restaurant cost of sales	23.9	23.5
Bakery cost of sales	3.3	2.9
Labor expenses	30.9	30.9
Other operating costs and expenses	22.9	22.3
General and administrative expenses	5.3	7.1
Depreciation and amortization expenses	3.2	3.2
Preopening costs	1.2	1.1
Total costs and expenses	90.7	91.0
Income from operations	9.3	9.0
Interest income, net	1.1	0.9
Other income, net	0.4	0.1
Income before income taxes	10.8	10.0
Income tax provision	3.9	3.8
Net income	6.9	6.2

Thirteen Weeks Ended April 3, 2001 Compared to Thirteen Weeks Ended March 28, 2000

Revenues

     For the thirteen weeks ended April 3, 2001, the Company’s total revenues increased 25.4% to $120.5 million compared to $96.1 million for the thirteen weeks ended March 28, 2000. Restaurant sales increased 25.6% to $112.4 million compared to $89.5 million for the same period of the prior year. The $22.9 million increase in restaurant sales consisted of a $2.1 million or 2.4% increase in comparable restaurant sales and a $20.8 million increase from the openings of new restaurants. Sales in comparable restaurants benefited, in part, from the impact of an effective menu price increase of approximately 1% which was taken during January 2001.

     Bakery sales increased 22.8% to $8.2 million for the thirteen weeks ended April 3, 2001 compared to $6.6 million for the same period of the prior year. The increase was principally attributable to higher sales volumes to foodservice operators and distributors. For the thirteen weeks ended April 3, 2001, sales to warehouse clubs comprised approximately 46% of total bakery sales compared to approximately 45% for the same period of the prior year.

8

Restaurant Cost of Sales

     During the thirteen weeks ended April 3, 2001, restaurant cost of sales increased 27.5% to $28.8 million compared to $22.6 million for the comparable period last year. The related increase of $6.2 million was primarily attributable to new restaurant openings. As a percentage of restaurant sales, these costs increased slightly to 25.6% versus 25.2% for the same period of the prior year, principally as a result of slightly higher produce and other commodity costs that were offset, in part, by menu price increases and volume purchase discounts.

     The menu at our restaurants is one of the most diversified in the industry and, accordingly, is not overly dependent on a single commodity. The principal commodity categories for our restaurants include produce, chicken, meat, fish and seafood, cheese, other dairy products, bread and general grocery items. While we have taken steps to qualify multiple suppliers and enter into longer-term supply agreements for some of the key commodities used in our restaurant operations, there can be no assurance that future supplies and costs for commodities used in our restaurant operations will not fluctuate due to weather and other market conditions outside of our control. For new restaurants, cost of sales will typically be higher than normal during the first 90-120 days of operations until our management team at each new restaurant becomes more accustomed to optimally predicting, managing and servicing the high sales volumes typically experienced by our restaurants.

Bakery Cost of Sales

     Bakery cost of sales, which include ingredient, packaging and production supply costs, were $3.9 million for the thirteen weeks ended April 3, 2001 compared to $2.8 million for the same period of the prior year. As a percentage of bakery sales, bakery costs for the thirteen weeks ended April 3, 2001 increased to 48.1% compared to 41.9% for the comparable period last year. This percentage increase was primarily attributable to a shift in the mix of sales to products with slightly lower contribution margins and a slight increase in the cost for certain dairy-related commodities. While we have taken steps to qualify multiple suppliers and enter into longer-term supply agreements for some of the key commodities used in our bakery operations, there can be no assurance that future supplies and costs for commodities used in our bakery operations will not fluctuate due to weather and other market conditions beyond our control.

Labor Expenses

     Labor expenses, which include restaurant-level labor costs and bakery direct production labor costs (including associated fringe benefits), increased 25.6% to $37.3 million for the thirteen weeks ended April 3, 2001 compared to $29.7 million for the same period of the prior year. This increase was principally due to the impact of new restaurant openings. As a percentage of total revenues, labor expenses were 30.9% for both periods as the California minimum wage increase effective January 2001 and other wage increases were effectively offset by the higher sales volumes leveraging the fixed cost component of our labor expenses. For new restaurants, labor expenses will typically be higher than normal during the first 90-120 days of operations until our management team at each new restaurant becomes more accustomed to optimally predicting, managing and servicing the high sales volumes typically experienced by our restaurants.

Other Operating Costs and Expenses

     Other operating costs and expenses consist of restaurant-level occupancy expenses (rent, insurance, licenses, taxes and utilities), other operating expenses (excluding food costs and labor expenses reported separately) and bakery production overhead, selling and distribution expenses. Other operating costs and expenses increased 28.9% to $27.6 million for the thirteen weeks ended April 3, 2001 compared to $21.4 million for the same period of the prior year. This increase was principally attributable to new restaurant openings. As a percentage of total revenues, other operating costs and expenses increased slightly to 22.9% for the thirteen weeks ended April 3, 2001 versus 22.3% for the same period of fiscal 2000. This slight percentage increase was primarily attributable to the impact of increased costs for electric and natural gas services to our restaurants which increased to 2.0% of total revenues for the thirteen weeks ended April 3, 2001 compared to 1.3% for the same period of the prior year.

     The cost for electric and natural gas services to our restaurants was 1.3% of restaurant sales for both fiscal 2000 and 1999. As of April 23, 2001, twelve of our 43 full-service restaurants and our bakery production facility were located in the state of California, where both the general availability and cost of energy have recently become more volatile. As a result, the impact of electric and natural gas services on our operations in California, and possibly in other states where we operate, will likely be less predictable during fiscal 2001 compared to prior fiscal years.

9

General and Administrative Expenses

     General and administrative (“G&A”) expenses consist of restaurant support expenses (field supervision, manager recruitment and training, relocation and other related expenses), bakery administrative expenses, and corporate support and governance expenses. G&A expenses decreased 7.1% to $6.3 million for the thirteen weeks ended April 3, 2001 compared to $6.8 million for the same period of fiscal 2000. As a percentage of total revenues, G&A expenses decreased to 5.3% for the thirteen weeks ended April 3, 2001 compared to 7.1% for the same period of the prior year. This decrease was principally attributable to the leveraging of the fixed component of these costs with our higher sales volumes. In addition, the prior year amount reflects increases in our reserves for our group medical plan liability and uncollectible bakery receivables. We intend to continue strengthening our operational support infrastructure during fiscal 2001, which will likely generate a higher absolute amount of general and administrative expenses for the fiscal year.

Depreciation and Amortization Expenses

     Depreciation and amortization expenses were $3.9 million for the thirteen weeks ended April 3, 2001 compared to $3.1 million for the thirteen weeks ended March 28, 2000. As a percentage of total revenues, depreciation and amortization expenses were 3.2% for both periods. The increase of $0.8 million for the thirteen weeks ended April 3, 2001 primarily consisted of higher restaurant depreciation expense which was principally due to the openings of new restaurants.

Preopening Costs

     Incurred preopening costs were $1.4 million for the thirteen weeks ended April 3, 2001 compared to $1.1 million for the same period of the prior year. We opened two Cheesecake Factory restaurants during the thirteen weeks ended April 3, 2001 compared to one opening for the same period of the prior year. In addition, preopening costs were incurred in both periods for restaurant openings in progress.

     Preopening costs include incremental, out-of-pocket costs which are not otherwise capitalizable that are directly incurred to open new restaurants. The principal components of preopening costs include the cost of recruiting and training the hourly staff for each new restaurant; the cost to relocate and pay the management staff assigned to each new restaurant approximately 45 days prior to opening; the cost to send training and support staff to each opening; and the cost of practice cooking and service activities. As a result of the highly customized and operationally complex nature of our upscale, casual dining restaurants, the restaurant preopening process is significantly more extensive and costly relative to that of other chain restaurant operations. Preopening costs will vary from location to location depending on a number of factors, including (but not limited to) the proximity of our other established restaurants; the size and physical layout of each location; the cost of travel and lodging in different metropolitan areas; and the relative difficulty of the restaurant staffing and training process. Additionally, new concepts such as Grand Lux Cafe are expected to incur initial preopening costs that could be significantly higher than preopening costs for our more established restaurant concepts. Preopening costs will fluctuate from period to period, based on the number and timing of restaurant openings and the specific preopening costs incurred for each restaurant, and the fluctuations could be significant. We expense preopening costs as they are incurred. Based on our current growth objectives for fiscal 2001 and 2002, preopening costs for each of those years will likely exceed the respective amount of preopening costs for the applicable prior year.

10

Liquidity and Capital Resources

     The following table sets forth a summary of the Company’s key liquidity measurements at April 3, 2001 and January 2, 2001.

	April 3, 2001	January 2, 2001
	(dollar amounts in millions)
Cash and marketable securities on hand	$78.2	$85.3
Net working capital	$37.0	$39.5
Current ratio	1.9:1	1.9:1
Long-term debt	—	—

     During the thirteen weeks ended April 3, 2001, our balance of cash and marketable securities on hand decreased by $7.1 million to $78.2 million from the January 2, 2001 balance. This decrease was primarily attributable to the timing of certain working capital requirements and capital expenditures associated with new restaurant openings and restaurant-level technology upgrades.

     As of April 23, 2001, there were no borrowings outstanding under the Company’s $25 million revolving credit and term loan facility (the “Credit Facility”). Borrowings under the Credit Facility will bear interest at variable rates based, at our option, on either the prime rate of interest, the lending institution’s cost of funds rate plus 0.75% or the applicable LIBOR rate plus 0.75%. The Credit Facility expires on May 31, 2002. On that date, a maximum of $25 million of any borrowings outstanding under the Credit Facility automatically convert into a four-year term loan, payable in equal quarterly installments at interest rates of 0.5% higher than the applicable revolving credit rates. The Credit Facility is not collateralized and requires us to maintain certain financial ratios and to observe certain restrictive covenants with respect to the conduct of its operations, with which we are currently in compliance.

     During fiscal 2000, our capital expenditures were approximately $39.2 million, most of which were related to our restaurant operations. For fiscal 2001, we currently estimate our capital expenditure requirement to range between $50-$55 million, net of agreed-upon landlord construction contributions and excluding $8-$9 million of expected noncapitalizable preopening costs for new restaurants. This estimate contemplates $40-$42 million for as many as 10 to 11 new restaurants to be opened during fiscal 2001, including an increase in estimated construction-in-progress disbursements for anticipated fiscal 2002 openings. Other estimated capital expenditures for fiscal 2001 include $4-$5 million for restaurant-level technology upgrades (new point-of-sale systems and automated front desk management systems); $3-$4 million for capacity additions to existing restaurants and the Company’s corporate center; and $3-$4 million for maintenance capital expenditures. We lease the land and building shells for substantially all of our restaurants for primary lease terms that usually range from 15 to 20 years for our new restaurants. We expend cash for leasehold improvements and furnishings, fixtures and equipment for our new restaurants.

     Based on our current expansion objectives and opportunities, we believe that our cash and short-term investments on hand, coupled with expected cash provided by operations, available borrowings under our Credit Facility and expected landlord construction contributions should be sufficient to finance our planned capital expenditures and other operating activities through fiscal 2002. We may seek additional funds to finance our growth in the future. However, there can be no assurance that such funds will be available when needed or be available on terms acceptable to us.

     The Board of Directors has authorized the repurchase of up to 1,125,000 shares of our common stock for reissuance upon the exercise of stock options under our current stock option plans. A source of funding for share repurchases will be the proceeds from the exercise of stock options. Shares may be repurchased in the open market or through privately negotiated transactions at times and prices considered appropriate by us. Under this authorization, we have repurchased 567,000 shares at a total cost of approximately $9.3 million as of April 3, 2001. Share repurchases occurred during fiscal 1999, 2000 and 2001.

Recent 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.” This statement requires that all derivative instruments be recorded on the balance sheet at their fair value. Changes in the fair value of derivatives will be recorded each period in current earnings or other comprehensive income, depending on whether a derivative is designed as part of a hedge transaction and, if it is, the type of hedge transaction. We adopted SFAS No. 133 as of January 3, 2001. The adoption did not have any impact on our financial statements.

Item 3. Quantitative and Qualitative Disclosure About Market Risk

     We are exposed to market risk from changes in interest rates on funded debt. This exposure relates to our $25 million revolving credit and term loan facility (the “Credit Facility”). There were no borrowings outstanding under the Credit Facility during the first quarter of 2001. Borrowings under the Credit Facility bear interest at variable rates based on either the prime rate of interest, the lending institution’s cost of funds plus 0.75% or LIBOR plus 0.75%. A hypothetical 1% interest rate change would not have any current impact on our results of operations.

     A change in market prices also exposes us to market risk related to our investments in marketable securities. As of April 3, 2001, we held $51.2 million in marketable securities. A hypothetical 10% decline in the market value of those securities would result in a $5.1 million unrealized loss and a corresponding decline in their fair value. This hypothetical decline would not affect cash flow from operations and would not have an impact on net income until the securities were disposed of.

PART II. OTHER INFORMATION

Item 6. Exhibits and Reports on form 8-K

(a) Exhibits.

10.11 David Overton Employment Agreement

(b) Reports on Form 8-K. None.

11

SIGNATURES

     Pursuant to the requirements 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.

	THE CHEESECAKE FACTORY INCORPORATED
Date: April 23, 2001
	By:	/s/ DAVID OVERTON ——————————    David Overton    Chairman of the Board, President and    Chief Executive Officer
	By:	/s/ GERALD W. DEITCHLE ————————————    Gerald W. Deitchle    Executive Vice President and    Chief Financial Officer

12

EX-10.11

EXHIBIT 10.11

EMPLOYMENT AGREEMENT

     This EMPLOYMENT AGREEMENT (the “Agreement”) is entered into this 6th day of March, 2001, between THE CHEESECAKE FACTORY INCORPORATED (the “Company”) and DAVID M. OVERTON (the “Employee”).

     WHEREAS, the Board of Directors of the Company (the “Board”) has approved and authorized the entry into this Agreement with the Employee; and

     WHEREAS, the parties desire to enter into this Agreement setting forth the terms and conditions for the employment relationship to the Employee with the Company.

     NOW, THEREFORE, in consideration of the promises and mutual covenants and agreements herein contained and intending to be legally bound hereby, the Company and the Employee hereby agree as follows:

     1. Employment. The Employee is employed as Chief Executive Officer and Chairman of the Board of the Company. In this capacity, the Employee shall have such duties and responsibilities as may be designated to him by the Board from time to time and as are not inconsistent with the Employee’s position with respect to any subsidiaries of the Company, as may be designated by the Board. Employee shall devote substantially all his time, attention and energies to the business and affairs of the Company and the subsidiaries. The Company acknowledges that the Employee is a member of the Board and that such membership constitutes an integral part of the Employee’s duties hereunder.

     2. Term. The “initial term” of this Agreement shall be for the period commencing on the date hereof and ending on the third anniversary of the date hereof; provided, however, that on the such anniversary, and on each subsequent anniversary date thereafter, the term of this Agreement shall automatically be extended for one additional year unless, not later than 90 days prior to such applicable anniversary date, the Company or the Employee shall give notice not to extend this Agreement. The “Term of this Agreement” or “Term” shall mean, for purposes of this Agreement, both the “initial term” and subsequent extensions, if any.

     3. Salary and Bonus. Subject to the further provisions of this Agreement, the Company shall pay the Employee during the Term of this Agreement a salary at an annual rate equal to: (a) $450,000 for the first 12 months from the date hereof, (b) $475,000 for the next 12 months thereafter, and (c) $500,000 for the next 12 months thereafter continuing through the Term of this Agreement. Such salary may be increased at such times, if any, and in such amounts as determined by the Board. Any increase in salary shall not serve to limit or reduce any other obligation of the Company hereunder and, after any increase, the Base Salary shall not be reduced. Such salary shall be payable by the Company to the Employee not less frequently than monthly. The Board may at any time grant a discretionary bonus to the Employee. Participation in deferred compensation, discretionary bonus, retirement, stock option and other employee benefit plans and in fringe benefits shall not reduce the Base Salary.

     4. Participation in Bonus, Retirement and Employee Benefit Plans. The Employee shall be entitled to participate equitably with other executive officers in any plan of the Company relating to bonuses, stock options, stock purchases, pension, thrift, profit sharing, life insurance, medical coverage, education, or other retirement or employee benefits that the Company has adopted or may adopt for the benefit of its executive officers.

     5. Fringe Benefits; Automobile; Health Insurance. The Employee shall be entitled to receive all other fringe benefits which are now or may be provided to the Company’s executive officers. In addition, the Company shall provide the Employee during the Term of this Agreement (a) with a non-accountable car allowance of $2,000 per month, and (b) reimbursement to Employee and his family members for any co-payment or deductible incurred under the Company’s health insurance policies.

     6. Vacations. The Employee shall be entitled to an annual paid vacation in accordance with the Company’s general administrative policy.

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     7. Business Expenses. During such time as the Employee is rendering services hereunder, the Employee shall be entitled to incur and be reimbursed for all reasonable business expenses. The Company agrees that it will reimburse the Employee for all such expenses upon the presentation by the Employee, from time to time, of an itemized account of such expenditures setting forth the date, the purposes for which incurred, and the amounts thereof, together with such receipts showing payments in conformity with the Company’s established policies. Reimbursement shall be made within a reasonable period after the Employee’s submission of an itemized account.

     8. Insurance.

     (a) The Employee shall be entitled to term insurance on the life of the Employee with such beneficiary as the Employee may designate in an amount equal to at least $2,000,000, with all premiums to be paid by the Company.

     (b) The Employee shall be entitled to an insurance policy for disability for his benefit, in an amount commercially available, with all premiums to be paid by the Company.

     9. Indemnity. The Company shall indemnify and hold the Employee harmless from any cost, expense or liability arising out of or relating to any acts or decisions made by the Employee on behalf of or in the course of performing services for the Company to the same extent the Company indemnifies and holds harmless other executive officers and directors of the Company and in accordance with the Company’s established policies. The Company agrees to seek to maintain Directors and Officers Liability Insurance.

     10. Certain Terms Defined. For purposes of this Agreement:

     (a) Employee shall be deemed to be “Permanently Disabled” if a physical or mental condition occurs and persists which, in the written opinion of a licensed physician selected by the Board of Directors in good faith, has rendered Employee unable to perform Employee’s duties hereunder for a period of ninety (90) days or more and, in the written opinion of such physician, the condition will continue for an indefinite period of not less than an additional ninety (90) day period, rendering the Employee unable to return to Employee’s duties.

     (b) “Affiliate” means any corporation affiliated with any Person whose actions result in a Change of Control (or which, as a result of the completion of the transactions causing a Change of Control shall become affiliated) within the meaning of the Code.

     (c) “Base Salary” means, as of any date of termination of employment, the highest annual base salary of Employee in any of the last three fiscal years preceding such date of termination of employment.

     (d) “Beneficial Owner” shall have the meaning given to such term in the Exchange Act.

     (e) “Cause” means termination upon: (1) the willful failure by the Employee to substantially perform his duties with the Company (other than any such failure resulting from his incapacity due to physical or mental illness), after a written demand for substantial performance is delivered to him by the Board, which demand specifically identifies the manner in which the Board believes that he has not substantially performed his duties; (2) the Employee’s willful misconduct that is demonstrably and materially injurious to the Company, monetarily or otherwise; or (3) the Employee’s commission of such acts of dishonesty, fraud, misrepresentation or other acts of moral turpitude as would prevent the effective performance of his duties. No act, or failure to act, on the Employee’s part shall be deemed “willful” unless done, or omitted to be done, by him not in good faith and without the reasonable belief that his action or omission was in the best interest of the Company. Notwithstanding the foregoing, the Employee shall not be deemed to have been terminated for Cause unless and until there shall have been delivered to him a copy of a resolution duly adopted by the affirmative vote of a majority of the members of the Board at a meeting of such members (after reasonable notice to him and an opportunity for him, together with his counsel, to be heard before such members of the Board), finding that he has engaged in the conduct set forth above in this subsection (e) and specifying the particulars thereof in detail.

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     (f) A “Change of Control” occurs if:

     (i) any Person (other than Employee) or that Person’s Affiliate is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company representing 20% of more of the combined voting power of the Company’s then outstanding voting securities (“Voting Securities”); or

     (ii) the stockholders of the Company approve a merger or consolidation of the Company with any other corporation (or other entity), other than:

     I. a merger or consolidation which would result in the Voting Securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 80% of the combined voting power of the Voting Securities of the Company or such surviving entity outstanding immediately after such merger or consolidation;

     II. a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no Person acquires more than 20% of the combined voting power of the Company’s then outstanding Voting Securities; or

     III. a merger or consolidation which would result in the directors of the Company (who were directors immediately prior thereto) continuing to constitute at least 50% of all directors of the surviving entity after such merger or consolidation. In this paragraph (iv), “surviving entity“shall mean only an entity in which all the Company’s stockholders immediately before such merger or consolidation (determined without taking into account any stockholders properly exercising appraisal or similar rights) become stockholders by the terms of such merger or consolidation, and the phrase “directors of the Company (who were directors immediately prior thereto)“shall include only individuals who were directors of the Company at the beginning of the 24 consecutive month period preceding the date of such merger or consolidation.

     (iii) the stockholders of the Company approve a plan of complete liquidation or an agreement for the sale or disposition of all or substantially all of the Company’s assets; or

     (iv) during any period of 24 consecutive months, individuals, who at the beginning of such period constitute the Board of Directors of the Company, and any new director whose election by the Board of Directors, or whose nomination for election by the Company’s stockholders, was approved by a vote of at least one-half (½) of the directors then in office (other than in connection with a contested election), cease for any reason to constitute at least a majority of the Board of Directors;

     (g) “Code” means the Internal Revenue Code of 1986, as amended.

     (h) “Exchange Act” means the Securities Exchange Act of 1934, as amended.

     (i) “Person” is given the meaning as such term is used in Sections 13(d) and 14(d) of the Exchange Act; provided, however, that unless this Agreement provides to the contrary, the term shall not include the Company, any trustee or other fiduciary holding securities under an employee benefit plan of the Company, or any corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company.

     11. Termination.

     (a) Death or Disability. This Agreement shall terminate automatically upon the Employee’s death or Permanent Disability.

     (b) Cause. The Company may terminate Employee for Cause.

     (c) Change of Control. Employee may terminate this Agreement at any time within 18 months after a Change of Control.

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     (d) Notice of Termination. Any termination of the Employee’s employment by the Company for Cause or following a Change of Control shall be communicated by Notice of Termination to the other party hereto given in accordance with Section 16. Any termination by the Company due to Permanent Disability shall be communicated by giving written notice of its intention to terminate the Employee’s employment, and his employment shall terminate after receipt of such notice (“Disability Effective Date”). For purposes of this Agreement, a “Notice of Termination” means a written notice which (i) indicates the specific termination provision in this Agreement relied upon; (ii) except in the event of a termination following a Change of Control, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Employee’s employment under the provision so indicated; and (iii) specifies the Date of Termination (defined below).

     (e) Date of Termination. “Date of Termination” means the date of actual receipt of the Notice of Termination or any later date specified therein (but not more than fifteen (15) days after the giving of the Notice of Termination), as the case may be; provided that (i) if the Employee’s employment is terminated by the Company for any reason other than Cause or because the Employee becomes Permanently Disabled, the Date of Termination is the date on which the Company notifies the Employee of such termination; (ii) if the Employee’s employment is terminated due to Permanent Disability, the Date of Termination is the Disability Effective Date; and (iii) if the Employee’s employment is terminated due to the Employee’s death, the Date of Termination shall be the date of death.

     12. Certain Benefits Upon Termination.

     (a) If Employee’s employment by the Company is terminated for any reason (including by reason of death or Permanent Disability), except for a termination for Cause or a voluntary resignation by Employee, and Section 12(b) is inapplicable to such termination, then the Company shall pay Employee a lump sum severance payment (the “Severance Payment”) equal to three times Employee’s Base Salary.

     (b) If within 18 months after a Change of Control of the Company, Employee gives notice of termination of employment for any reason, gives notice of nonrenewal, or Employee otherwise terminates employment (other than due to Employee’s death or Permanent Disability) or is terminated by the Company without Cause, (i) the Company shall pay Employee a Severance Payment in cash equal to $2 million, provided, however, that in the event of a Change of Control and Employee dies or becomes Permanently Disabled within 18 months after such Change of Control, then the Severance Payment shall be equal to three times Employee’s Base Salary and, (iii) for 36 months (the “Continuation Period”) the Company shall at its expense continue on behalf of the Employee and his dependents and beneficiaries, the life insurance, disability, medical, dental and hospitalization benefits provided (x) to the Employee at any time during the 90-day period prior to the date of termination or at any time thereafter or (y) to other similarly situated executives who continue in the employ of the Company during the continuation period. The coverage and benefits (including deductibles and costs) provided in this Section 12(b) during the Continuation Period shall be no less favorable to the Employee and his dependents and beneficiaries, than the most favorable of such coverages and benefits during any of the periods referred to in clauses (x) and (y) above. The Company’s obligation hereunder with respect to the foregoing benefits shall be limited to the extent that the Employee obtains any such benefits pursuant to a subsequent employer’s benefit plans, in which case the Company may reduce the coverage of any benefits it is required to provide the Employee hereunder so long as the aggregate coverages and benefits of the combined benefit plans is no less favorable to the Employee than the coverages and benefits required to be provided hereunder. This Section 12(b) shall not be interpreted so as to limit any benefits to which the Employee, his dependents or beneficiaries may be entitled under any of the Company’s employee benefit plans, programs or practices following the Employee’s termination of employment, including without limitation, retiree medical and life insurance benefits.

     (c) In the event either (a) or (b) above occurs, (i) in addition to the Severance Payment provided therein, the Company shall pay all accrued but unpaid salary and amounts due under the Company’s Performance Incentive Plan or any other bonus or incentive plan then in effect, and all accrued but unpaid or unused vacation, sick pay and expense reimbursement benefit, and (ii) all other benefits shall vest (unless a plan specifically provides vesting standards in which event the plan’s terms and conditions shall govern vesting).

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     (d) In the event that Employee’s employment terminates by reason of Employee’s death, all benefits provided in this Section 12 shall be paid to Employee’s estate or as Employee’s executor shall direct, but payment may be deferred until Employee’s executor or personal representative has been appointed and qualified pursuant to the laws in effect in Employee’s jurisdiction of residence at the time of Employee’s death.

     (e) Company shall make all cash payments to which Employee is entitled hereunder within thirty (30) days following the date of termination of Employee’s employment or earlier, if required by applicable law.

     (f) In the event Employee has provided notice to the Company of his intent to terminate or not renew this Agreement pursuant to Section 2 or Company has provided written notice to the Employee of its intent not to renew this Agreement pursuant to Section 2:

     (i) Salary and Benefits. The salary and other benefits to which Employee would have otherwise been entitled shall continue through the remainder of the period of notice specified by Section 2, provided that Employee is otherwise in compliance with the terms of this Agreement, unless (x) Employee subsequently terminates his employment or the Company terminates Employee’s employment for Cause, (y) Employee is entitled to the Severance Payment provided in Section 12(a) pursuant to the provisions of Section 12(f)(ii), or (z) Employee is entitled to the Severance Payment provided in Section 12(b).

     (ii) Section 12(a) Benefit. Employee shall be entitled to the extraordinary payment provided in Section 12(a) (unless Employee is otherwise entitled to the Severance Payment provided by Section 12(b)) in the event that, subsequent to such notice, (x) Employee is terminated without Cause by the Company, or (y) Employee’s employment terminates due to death or Permanent Disability.

     (iii) Section 11(b) Benefit. Employee shall have no rights under Section 12(b); provided, however, that if Company and a third party have executed a commitment letter or agreement under which a Change of Control is to occur and such agreement was entered into prior to the Company having provided notice to Employee of its intent not to renew pursuant to Section 2, then Employee shall be entitled to the extraordinary payment provided in Section 12(b), if that Change of Control in fact occurs.

     (g) In the event Employee is entitled hereunder to any payments or benefits set forth in Section 12(a) or (b), Employee shall have no obligation to notify Company of employment subsequent to Employee’s termination or to offset Company’s obligation by payments due to such employment and shall have no duty to mitigate.

     (h) The provisions for Severance Payments contained in this Section 12 may be triggered only once during the term of this Agreement, so that, for example, should Employee be terminated because of a Permanent Disability and should there thereafter be a Change of Control, then Employee would be entitled to be paid only under Section 12(a) and not under Section 12(b) as well. In addition, Employee shall not be entitled to receive severance benefits of any kind from any wholly owned subsidiary or other affiliated entity of the Company if in connection with the same event of series of events the Severance Payments provided for in this Section 12 have been triggered.

     (i) Excise Tax Payments:

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     (i) In the event that any payment or benefit (within the meaning of Section 280G(b)(2) of the Code, to the Employee or for his benefit paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise in connection with, or arising out of, his employment with the Company or a change in ownership or effective control of the Company or of a substantial portion of its assets (a “Payment“or “Payments”), would be subject to the excise tax imposed by Section 4999 of the Code or any interest or penalties are incurred by the Employee with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the “Excise Tax”), then the Employee will be entitled to receive an additional payment (a “Gross-Up Payment”) in an amount such that after payment by the Employee of all taxes (including any interest or penalties, other than interest and penalties imposed by reason of the Employee’s failure to file timely a tax return or pay taxes shown due on his return, imposed with respect to such taxes and the Excise Tax), including any Excise Tax imposed upon the Gross-Up Payment, the Employee retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments.

     (ii) An initial determination as to whether a Gross-Up Payment is required pursuant to this Agreement and the amount of such Gross-Up Payment shall be made at the Company’s expense by an accounting firm selected by the Company and reasonably acceptable to the Employee which is designated as one of the four largest accounting firms in the United States (the “Accounting Firm”). The Accounting Firm shall provide its determination (the “Determination”), together with detailed supporting calculations and documentation to the Company and the Employee within five days of the Termination Date if applicable, or such other time as requested by the Company or by the Employee (provided the Employee reasonably believes that any of the Payments may be subject to the Excise Tax) and if the Accounting Firm determines that no Excise Tax is payable by the Employee with respect to a Payment or Payments, it shall furnish the Employee with an opinion reasonably acceptable to the Employee that no Excise Tax will be imposed with respect to any such Payment or Payments. Within ten days of the delivery of the Determination to the Employee, the Employee shall have the rights to dispute the Determination (the “Dispute”). The Gross-Up Payment, if any, as determined pursuant to this Section 12(i)(ii) shall be paid by the Company to the Employee within five days of the receipt of the Accounting Firm’s determination. The existence of the Dispute shall not in any way affect the Employee’s right to receive the Gross-Up Payment in accordance with the Determination. Upon the final resolution of a Dispute, the Company shall promptly pay to the Employee any additional amount required by such resolution. If there is no Dispute, the Determination shall be binding, final and conclusive upon the Company and the Employee.

     (j) Company agrees to take reasonable steps to ensure that in the event Company has an obligation to perform under Section 12(b), Company shall have the financial ability to do so.

     13. Fees and Expenses. The Company shall pay all legal fees and related expenses (including the costs of experts, evidence and counsel) incurred by the Employee as they become due as a result of (a) the Employee’s termination of employment (including all such fees and expenses, if any, incurred in contesting or disputing any such termination or employment), or (b) the Employee seeking to obtain or enforce any right or benefit provided by this Agreement or by any other plan or arrangement maintained by the Company under which the Employee is or may be entitled to receive benefits.

     14. No Set Off, Interest. Except as provided herein, the Company’s obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any circumstances, including without limitation any set-off, counterclaim, recoupment, defense or other right which the Company may have against the Employee or others. All amounts provided herein shall include, in each case, interest, compounded quarterly, on the total unpaid amount determined to be payable under this Agreement, such interest to be calculated on the basis of the prime commercial lending rate announced by Bank of America National Trust and Savings Association in effect from time to time during the period of such nonpayment.

     15. Assignment.

     (a) This Agreement is personal to each of the parties hereto. No party may assign or delegate any rights or obligations hereunder without first obtaining the written consent of the other party hereto, except that this Agreement shall be binding upon and inure to the benefit of any successor corporation to the Company.

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     (b) The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, “Company” shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes this Agreement by operation of law, or otherwise.

     (c) This Agreement shall inure to the benefit of and be enforceable by the Employee and his personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.

16.       (a) Confidential Information. During the Term of this Agreement and thereafter, the Employee shall not, except as may be required to perform his duties hereunder or as required by applicable law, disclose to others for use, whether directly or indirectly, any Confidential Information regarding the Company. “Confidential Information”shall mean information about the Company, its subsidiaries and affiliates, and their respective clients and customers that is not available to the general public and that was learned by the Employee in the course of his employment by the Company, including (without limitation) any data, formulae, information, proprietary knowledge, trade secrets and client and customer lists and all papers, resumes, records and the documents containing such Confidential Information. The Employee acknowledges that such Confidential Information is specialized, unique in nature and of great value to the Company, and that such information gives the Company a competitive advantage. Upon the termination of his employment, the Employee will promptly deliver to the Company all documents (and all copies thereof) containing any Confidential Information.

     (b) Noncompetition. The Employee agrees that during the Term of this Agreement, he will not, directly or indirectly, without the prior written consent of the Company, provide consultative service with or without pay, own, manage, operate, join, control, participate in, or be connected as a stockholder, partner, or otherwise with any business, individual, partner, firm, corporation, or other entity which is then in competition with the Company or any present affiliate of the Company; provided, however, that the “beneficial ownership” by the Employee, either individually or as a member of a “group,” as such terms are used in Rule 13d of the Exchange Act, of not more than 1% of the voting stock of any publicly held corporation shall not be a violation of this Agreement. It is further expressly agreed that the Company will or would suffer irreparable injury if the Employee were to compete with the Company or any subsidiary or affiliate of the Company in violation of this Agreement and that the Company would by reason of such competition be entitled to injunctive relief in a court of appropriate jurisdiction, and the Employee further consents and stipulates to the entry of such injunctive relief in such a court prohibiting the Employee from competing with the Company or any subsidiary or affiliate of the Company in violation of this Agreement.

     (c) Right to Company Materials. The Employee agrees that all styles, designs, recipes, lists, materials, books, files, reports, correspondence, records, and other documents (“Company Material”) used, prepared, or made available to the Employee, shall be and shall remain the property of the Company. Upon the termination of his employment or the expiration of this Agreement, all Company Materials shall be returned immediately to the Company, and Employee shall not make or retain any copies thereof.

     (d) Antisolicitation. The Employee promises and agrees that during the Term of this Agreement, and for a period of one year thereafter, he will not influence or attempt to influence customers, franchisees, landlords, or suppliers of the Company or any of its present or future subsidiaries or affiliates, either directly or indirectly, to divert their business to any individual, partnership, firm, corporation or other entity then in competition with the business of the Company, or any subsidiary or affiliate of the Company.

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     17. Notice.For the purpose of this Agreement, notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States certified or registered mail, return receipt requested, postage prepaid, addressed to the respective addresses set forth below, or to such other addresses as either party may have furnished to the other in writing in accordance herewith, except that notice of a change of address shall be effective only upon actual receipt:

Company:



with a copy to:

Employee: The Cheesecake Factory Incorporated
26950 Agoura Road
Calabasas Hills, California 91301

the Secretary of the Company;

David M. Overton
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     18. Amendments or Additions. No amendment or additions to this Agreement shall be binding unless in writing and signed by both parties hereto.

     19. Section Headings. The section headings used in this Agreement are included solely for convenience and shall not affect, or be used in connection with, the interpretation of this Agreement.

     20. Severability. The provisions of this Agreement shall be deemed severable and the invalidity or unenforceability of any provision shall not affect the validity or enforceability of the other provisions hereof.

     21. Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed to be an original, but both of which together will constitute one and the same instrument.

     22. Arbitration. Any dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration, conducted before a panel of three arbitrators in Los Angeles, California, in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered on the arbitrator’s award in any court having jurisdiction.

     23. Miscellaneous.No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by the Employee and such officer as may be specifically designated by the Board. No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not expressly set forth in this Agreement. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of California without regard to its conflicts of law principles. All references to sections of the Exchange Act or the Code shall be deemed also to refer to any successor provisions to such sections.

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     Any payments provided for hereunder shall be paid net of any applicable withholding required under federal, state or local law. Sections 13, 15 and 21 shall survive the expiration of the Term of this Agreement.

     IN WITNESS WHEREOF, each of the parties hereto has executed this Agreement on the date first indicated above.

COMPANY:
CHEESECAKE FACTORY INCORPORATED
By:	/s/ LINDA J. CANDIOTY ————————————————————— Executive Vice President and Secretary
EMPLOYEE:
/s/ DAVID OVERTON ——————————————————————— DAVID OVERTON

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