SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted
by Rule 14-a6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Sec. 240.14a-11(c) or Sec. 240.14a-12
OUTBACK STEAKHOUSE, INC.
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement
if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
(1) Title of each class of securities to which transaction
applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how it
was determined.):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee previously paid with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(LOGO)
OUTBACK STEAKHOUSE, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON APRIL 23, 1997
Notice is hereby given that the Annual Meeting of Stockholders of
OUTBACK STEAKHOUSE, INC. (the "Company") will be held at the Tampa
Convention Center, 333 South Franklin Street, Tampa, Florida, on Wednesday,
April 23, 1997 at 10:00 A.M., Tampa time, for the following purposes:
1. To elect four directors, each to serve for a term of three years;
2. To vote on a proposal to amend the Company's Certificate of
Incorporation to increase the authorized number of shares of Common Stock,
par value $.01, from 100,000,000 shares to 200,000,000 shares;
3. To vote on a proposal to amend the Company's Amended and Restated
Stock Option Plan to increase the number of shares of Common Stock for
which options may be granted from 4,923,500 to 10,000,000, and adopt
certain other amendments regarding administration of the Plan; and
4. To transact such other business as may properly come before the
meeting.
Only stockholders of record at the close of business on March 7, 1997
are entitled to notice of and to vote at said meeting or any adjournment
or postponement thereof.
By Order of the Board of Directors
March 20, 1997 JOSEPH J. KADOW
Secretary
Stockholders who do not expect to attend the meeting in person are urged
to complete, date and sign the enclosed proxy and return it in the enclosed
postage-prepaid envelope.
OUTBACK STEAKHOUSE, INC.
PROXY STATEMENT
This statement is furnished in connection with the solicitation of
proxies for use at the Annual Meeting of Stockholders of OUTBACK
STEAKHOUSE, INC., a Delaware corporation (the "Company"), to be held on
Wednesday, April 23, 1997 at 10:00 A.M., Tampa time, at the Tampa
Convention Center, 333 South Franklin Street, Tampa, Florida, and at any
adjournment or postponement thereof. The Notice of Annual Meeting, this
statement and the accompanying proxy, together with the Company's Annual
Report to Stockholders for the year ended December 31, 1996 are first being
sent to stockholders on or about March 20, 1997.
The close of business on March 7, 1997 has been fixed as the record
date for the determination of stockholders entitled to notice of and to
vote at the meeting. At that date, the Company had outstanding ________
shares of Common Stock, $.01 par value ("Common Stock"), each of which will
be entitled to one vote.
ELECTION OF DIRECTORS
The number of directors of the Company has been fixed by the Board of
Directors (the "Board"), pursuant to the Company's Bylaws, at eleven,
divided into two classes of four directors each, and one class of three
directors. At the meeting, Common Stock represented by proxies, unless
otherwise specified, will be voted for the election of the four nominees
hereinafter named, each to serve for a term of three years and until his
or her successor is duly elected and qualified.
The following information is set forth with respect to the persons
nominated for election as a director and each director of the Company whose
term of office will continue after the meeting.
<TABLE>
<CAPTION>
Nominees for Election at the Annual Meeting
Director Term
Name Age Since Expires
<S> <C> <C> <C>
Debbi Fields 40 1996 2000
Edward L. Flom 67 1991 2000
Robert S. Merritt 45 1992 2000
Chris T. Sullivan 49 1991 2000
</TABLE>
Debbi Fields - Founder of Mrs. Fields, Inc., an international franchisor
and operator of specialty retail dessert stores specializing in chocolate
chip cookies, serving as President and Chief Executive Officer from 1979
to December 1993, and Chairman of the Board from 1992 to February 1996.
Mrs. Fields also serves as a director of Promus Hotel Corporation.
Edward L. Flom - Retired; former Chairman and Chief Executive Officer of
Florida Steel Corporation, a steel manufacturer and fabricator. Mr. Flom
also serves as a director of Teco Energy, Inc.
Robert S. Merritt - Senior Vice President Finance, Chief Financial Officer
and Treasurer of the Company since April 1991.
Chris T. Sullivan - Chairman and Chief Executive Officer of the Company
since its formation in April 1991. Mr. Sullivan also serves as a director
of Sports and Recreation, Inc.
<TABLE>
<CAPTION>
Directors Whose Terms Will Continue After the Annual Meeting
Director Term
Name Age Since Expires
<S> <C> <C> <C>
Robert D. Basham 49 1991 1999
John A. Brabson, Jr. 56 1992 1998
Charles H. Bridges 66 1992 1998
W. R. Carey, Jr. 49 1992 1999
J. Timothy Gannon 48 1991 1998
Nancy Schneid 38 1995 1999
Lee Roy Selmon 42 1994 1998
</TABLE>
Robert D. Basham - President of the Company since its formation in April
1991.
John A. Brabson, Jr. - Chairman of the Board, Lykes Bros. Inc., a privately
owned holding company, since September 1996; and Chairman, Chief Executive
Officer, and President of Peoples Gas System, Inc., since 1989.
Charles H. Bridges - Vice President, Treasurer and director of Matilda
Management Company since November 1993, a franchisee of the Company which
operates Outback Steakhouse(R) restaurants in northern California; former
Chairman and Chief Executive Officer of Francois L. Schwarz, Inc., an
international food brokerage company representing manufacturers to U.S.
military commissaries and exchanges.
W. R. Carey, Jr. - President and Founder of Corporate Resource Development,
a sales and marketing consulting and employment training firm, since its
formation in April 1981. Mr. Carey also serves as a director of Romac
International.
J. Timothy Gannon - Senior Vice President of the Company since its
formation in April 1991.
Nancy Schneid - Vice President Marketing of Outback Steakhouse of Florida,
Inc., the Company's predecessor and wholly-owned subsidiary, since 1991.
Lee Roy Selmon - Associate Athletic Director for External Affairs,
University of South Florida, since 1993. From 1986 to 1993, Mr. Selmon
served as Vice President Marketing of Barnett Bank of Tampa.
The Board held four meetings in 1996. Each of the directors attended
100% of the meetings of the Board and the committees thereof of which he
or she was a member. The Board has an Audit Committee and a Compensation
Committee, and until February 28, 1997, had a Stock Option Committee. The
Board does not have a Nominating Committee.
The members of the Audit Committee are Messrs. Brabson, Carey, and
Mrs. Fields. Mr. Carey serves as Chairman of the Audit Committee. The
Audit Committee held two meetings during 1996. The Audit Committee is
responsible for reviewing the audit plans of the Company's independent
auditors, evaluating the adequacy of and monitoring compliance with the
Company's accounting policies and reviewing the Company's annual financial
statements.
The members of the Compensation Committee are Messrs. Bridges, Flom,
and Selmon. Mr. Bridges serves as Chairman of the Compensation Committee.
The Compensation Committee held three meetings during 1996. The
Compensation Committee is responsible for establishing the compensation to
be provided to executive officers, other than benefits provided under the
Company's Amended and Restated Stock Option Plan.
The members of the Stock Option Committee were Messrs. Sullivan and
Basham. The Stock Option Committee held one meeting during 1996. The
Stock Option Committee was responsible for administering the Company's
Amended and Restated Stock Option Plan (the "Stock Option Plan"), including
selecting employees to whom options will be granted, and determining the
type and amount of options granted, the terms and conditions thereof, and
the terms and conditions of the agreement entered into with optionees. As
a result of changes to the Securities and Exchange Commission rules under
Section 16(b) of the Securities Exchange Act of 1934, the Board has
disbanded the Stock Option Committee and the Stock Option Plan is now
administered by the Compensation Committee.
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the
beneficial ownership of the Company's Common Stock as of March 7, 1997
(except as noted) by each person known to the Company to own beneficially
more than five percent of the Company's Common Stock, each director, each
nominee for election as a director, each executive officer, and all
executive officers and directors as a group.
<TABLE>
<CAPTION>
Amount Percent
Beneficially of
Name of Beneficial Owner Owned <F1> Class
<S> <C> <C>
Chris T. Sullivan<F2><F3> 8,646,401 ___%
Robert D. Basham<F2><F4> 8,502,511 ___%
J. Timothy Gannon<F2><F5> 8,458,761 ___%
Robert S. Merritt<F6> 504,894 ___%
Paul E. Avery<F7> 271,220 *
Joseph J. Kadow<F8> 75,000 *
John A. Brabson, Jr.<F9> 28,117 *
Charles H. Bridges<F10> 20,001 *
W. R. Carey, Jr.<F11> 30,000 *
Debbi Fields<F12> 30,000 *
Edward L. Flom<F13> 86,219 *
Nancy Schneid<F14> 127,351 *
Lee Roy Selmon<F15> 30,000 *
Multi-Venture Partners, Ltd.<F2> 8,373,761 ___%
T. Rowe Price Associates, Inc.<F16> 4,302,400 ___%
All directors and executive officers
as a group (13 persons) 10,064,953 ___%
_______________________
*Less than one percent.
FOOTNOTES:
<F1> The named stockholders have sole voting and dispositive power with
respect to all shares shown as being beneficially owned by them, except as
otherwise indicated.
<F2> Multi-Venture Partners, Ltd. ("MVP") is an investment partnership
formed by Chris T. Sullivan, Robert D. Basham and J. Timothy Gannon.
Messrs. Sullivan, Basham and Gannon are the only limited partners in MVP
and are the only members of MVP's general partner, SBG Investments, a
limited liability company. The management of MVP is controlled by its sole
general partner, SBG Investments, L.L.C. ("SBG"), which owns a .61343%
general partner's interest in MVP. Mr. Sullivan owns 27.16255% of the
limited partner interests in MVP, and 40% of the member interests in SBG;
Mr. Basham owns 49.76678% of the limited partner interests in MVP, and 40%
of member interests in SBG; and Mr. Gannon owns 22.45724% of the limited
partner interests in MVP, and 20% of the member interests in SBG.
<F3> Includes (i) 8,373,761 shares owned by MVP; (ii) 231,292 shares owned
by Sullivan Family Investments,Ltd. for which Mr. Sullivan serves as
general partner; and (iii) 1,712 shares owned by Mr. Sullivan's children
for whom Mr. Sullivan serves as custodian. Mr. Sullivan shares voting and
dispositive power with respect to Common Stock owned by MVP.
<F4> Includes (i) 8,373,761 shares owned by MVP. Mr. Basham shares voting
and dispositive power with respect to Common Stock owned by MVP.
<F5> Includes (i) 8,373,761 shares owned by MVP; and (ii) 85,000 shares
owned by The John Timothy Gannon Family Charitable Remainder Unitrust of
1993. Mr. Gannon has voting but not dispositive power with respect to
Common Stock owned by The John Timothy Gannon Family Charitable Remainder
Unitrust of 1993, and shares voting and dispositive power with respect to
Common Stock owned by MVP.
<F6> Includes 429,873 and 75,000 shares underlying stock options which Mr.
Merritt has the right to acquire at exercise prices of $0.28 and $26.38 per
share, respectively.
<F7> Includes 96,220, 75,000, and 100,000 shares underlying stock options
which Mr. Avery has the right to acquire at per share exercise prices of
$0.98, $21.50, and $26.50 per share, respectively.
<F8> Includes 75,000 shares underlying stock options which Mr. Kadow has
the right to acquire at an exercise price of $24.17 per share.
<F9> Includes 10,002 shares underlying stock options which Mr. Brabson has
the right to acquire at an exercise price of $10.00 per share; and (ii)
1,000 shares owned by The John A. Brabson, Jr. Money Purchase Pension Plan
f/b/o John A. Brabson, Jr.
<F10> Includes 20,001 shares underlying stock options which Mr. Bridges has
the right to acquire at an exercise price of $10.00 per share.
<F11> Includes 30,000 shares underlying stock options which Mr. Carey has
the right to acquire at an exercise price of $16.00 per share.
<F12> Includes 30,000 shares underlying stock options which Mrs. Fields has
the right to acquire at an exercise price of $31.50 per share.
<F13> Shares are held by the Edward Leonard Flom Revocable Trust of which
Mr. Flom is the grantor and sole trustee.
<F14> Includes 96,000 and 20,000 shares underlying stock options which
Ms. Schneid has the right to acquire at exercises prices of $1.12 and $26.21
per share, respectively.
<F15> Includes 30,000 shares underlying stock options which Mr. Selmon
has the right to acquire at an exercise price of $26.25 per share.
<F16> Based on a Schedule 13G filed by T. Rowe Price Associates, Inc. ("T.
Rowe Price") with the Securities and Exchange Commission on February 14,
1997, these securities are owned by various individual and institutional
investors for which T. Rowe Price serves as investment adviser with power
to direct investments and/or sole power to vote the securities. For
purposes of the reporting requirements of the Securities Exchange Act of
1934, T. Rowe Price is deemed to be a beneficial owner of such securities;
however, T. Rowe Price expressly disclaims that it is, in fact, the
beneficial owner of such securities.
</TABLE>
The address of each of Messrs. Sullivan, Basham and Gannon is 550
North Reo Street, Suite 200, Tampa, Florida 33609. The address of each of
MVP and SBG is 3111 South Valley View, Suite A-219, Las Vegas, Nevada
89102. The address of T. Rowe Price is 100 East Pratt Street, Baltimore,
Maryland 21202.
EXECUTIVE COMPENSATION
The following table sets forth information with respect to
compensation paid by the Company and its subsidiaries to the Chief
Executive Officer and the Company's four other most highly compensated
executive officers:
<TABLE>
<CAPTION>
Summary Compensation Table
Annual Compensation Long Term Compensation
Awards Payouts
Other
Annual Restricted All Other
Compen- Stock Options/ LTIP Compen-
Salary Bonus sation Award(s) SARs Payouts sation
Name and Principal Position Year ($) ($)<F1> ($) ($) (#) ($) ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Chris T. Sullivan 1996 $280,000 $120,000
Chairman and Chief 1995 $250,000 $198,809
Executive Officer 1994 $235,000 $299,178
Robert D. Basham 1996 $280,000 $120,000
President and Chief 1995 $250,000 $198,809
Operating Officer 1994 $235,000 $299,178
J. Timothy Gannon 1996 $220,000 $ 60,000
Senior Vice President 1995 $205,000 $163,024
1994 $190,000 $241,889
Robert S. Merritt 1996 $200,000 $ 50,000
Senior Vice President 1995 $185,000 $147,118 75,000
Finance, Chief 1994 $170,000 $216,427
Financial Officer, and
Treasurer
Paul E. Avery 1996 $200,000 $280,400
Senior Vice President 1995 $200,000 $120,500 100,000
1994 $180,000 $157,453
_______________
<F1> Both the fixed percentage and pro rata portion of each executive
officer's bonus is reflected in the bonus column of the Summary
Compensation Table above. The Company's executive officers' bonus plan
provides for a bonus to be paid to each executive officer computed as a
fixed percentage of the executive's base pay plus a pro rata portion of
each after-tax dollar earned by the Company in excess of the Company's
financial goals for that year. No bonus is paid to executive officers
unless and until the Company meets the preestablished financial goals for
the year.
</TABLE>
<TABLE>
<CAPTION>
Option/SAR Grants in Last Fiscal Year
Percent of
Total
Number of Options/SARs
Shares Underlying Granted to Exercise
Options/SARs Employees in or Base Price Expiration Grant Date
Name Granted Fiscal Year ($/Sh) Date Value ($)*
<S> <C> <C> <C> <C> <C>
None.
</TABLE>
<TABLE>
<CAPTION>
Aggregated Option/SAR Exercises in Last Fiscal Year
and FY-End Options/SAR Value Table
Number of Value of
Unexercised In-the-Money
Options/SARs Options/SARs at
Shares Acquired Value at FY-End (#) FY-End ($)*
Name on Exercise Realized ($) Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C> <C> <C>
Robert S. Merritt<F1> 25,000 $969,875 429,873 75,000 $11,271,271 $ 9,000
Paul E. Avery<F2> 10,000 $340,200 141,220 130,000 $ 2,680,534 $150,000
*Based on the average high and low sales prices of the Company's Common
Stock on December 31, 1996 as quoted on the NASDAQ National Market System.
<F1> Of the 504,873 stock options held by Mr. Merritt, 429,873 were granted
in January 1990, expire on January 1, 2000, and were exercisable in full
at December 31, 1996 at an exercise price of $0.28 per share. The
remaining 75,000 stock options were granted in April 1995, expire on April
25, 2005, and are exercisable as follows at an exercise price of $26.38 per
share: (a) 15,000 shares on or after January 1, 1998, (b) 15,000 shares
on or after January 1, 1999, and (c) 45,000 shares on or after January 1,
2000.
<F2> Of the 271,220 stock options held by Mr. Avery at December 31, 1996,
(i) 96,220 were granted in October 1990, expire on January 1, 2000, and
were exercisable in full at December 31, 1996 at an exercise price of $0.98
per share; (ii) 75,000 were granted in September 1993 and expire on
December 31, 2003, and are exercisable as follows at an exercise price of
$21.50 per share: (a) 45,000 shares on or after December 31, 1996, (b)
15,000 shares on or after September 1, 1997, (c) 15,000 shares on or after
September 1, 1998; and (iii) 100,000 were granted on January 24, 1995,
expire on January 25, 2005, and are exercisable as follows at an exercise
price of $26.50 per share: (a) 20,000 shares on or after January 25, 1998,
(b) 20,000 shares on or after January 25, 1999, and (c) 60,000 shares on
or after January 24, 2000.
</TABLE>
Joint Report by the Compensation Committee
and the Stock Option Committee on Executive Compensation
The Company's executive compensation program is administered by the
Compensation Committee of the Board, which has responsibility for all
aspects of the compensation program for the executive officers of the
Company. A component of overall compensation is the granting of stock
options, awards of which were made by the Stock Option Committee until
February 28, 1997. The Compensation Committee consists of three Directors
whose names are listed at the end of this report, none of whom is a current
or former employee of the Company.
The Compensation Committee's primary objective with respect to
executive compensation is to establish programs which attract and retain
key managers and align their compensation with the Company's overall
business strategies, values, and performance. To this end, the
Compensation Committee established and the Board endorsed an executive
compensation philosophy for 1996 which included the following
considerations:
* a "pay-for-performance" feature that differentiates compensation
results based upon the Company's annual financial performance;
* stock incentives, in certain cases, as a component of total
compensation in order to closely align the interests of the Company's
executives with the long-term interests of shareholders which facilitates
retention of talented executives and encourages Company stock ownership and
capital accumulation;
* emphasis on total compensation vs. cash compensation, under
which base salaries are generally set somewhat lower than competitive
levels but which motivates and rewards Company executives with total
compensation (including incentive programs) at or above competitive levels,
if the financial performance of the Company meets or exceeds goals
established for the year; and
For 1996, the Company's executive compensation program was comprised
of the following primary components: (a) base salaries; (b)cash incentive
opportunities; and (c) long-term incentive opportunities in the form of
stock options. Each primary component of pay is discussed below.
Base Salaries. The Committee generally attempts to set base salaries
of executive officers at levels which are below "market" rates, as
determined from information gathered by the Company from companies which
are similar in size and in the same industry group as the Company and which
were used by Dow Jones in compiling the Entertainment and Leisure-Restaurants
Index. Base salaries are subject to annual review and
adjustment on the basis of individual and Company performance, level of
responsibility, individual experience, and competitive, inflationary, and
internal equity considerations. The base salary of Chris T. Sullivan, the
Company's Chief Executive Officer was increased from 1995 to 1996 from
$250,000 to $280,000, based on such factors as the Company's profitability,
cash flow and capital spending for the prior fiscal year, the aggregate
number of new Outback Steakhouse(R) restaurants and new Carrabba's Italian
Grill(R) restaurants opened during the prior fiscal year, increases in
percentage of same store sales vs. budget forecasts, and subjective
considerations such as overall employee morale, succession planning,
general personnel problems, and competitive positions. The Committee
believes that the executive salaries established by the Committee,
including the salary paid to Mr. Sullivan, the Company's Chief Executive
Officer, are less than the range of salaries paid by the companies
surveyed.
Cash Incentives. In 1996, Company executives were eligible to receive
quarterly and annual cash bonus awards to focus attention on achieving key
goals pursuant to the following bonus plans which are designed to provide
competitive incentive pay only in the event such objectives are met or
exceeded.
Quarterly Cash Incentives for Messrs. Sullivan, Basham, Gannon,
and Merritt. Messrs. Sullivan, Basham, Gannon, and Merritt were
eligible to receive a specified quarterly bonus based upon meeting
specific corporate and individual goals, including the Company's
profitability, cash flow and capital spending for the prior fiscal
quarter, the aggregate number of new Outback Steakhouse(R) restaurants
and new Carrabba's Italian Grill(R) restaurants opened during the prior
fiscal quarter, increases in percentage of same store sales vs. budget
forecasts, and subjective considerations such as overall employee
morale, succession planning, general personnel problems, and competitive
positions. The Committee reviews the specific corporate and individual
goals, both quantitative and qualitative, each quarter and determines
payment of the quarterly bonuses. For 1996, Messrs. Sullivan and Basham
were eligible to receive a quarterly bonus of $30,000 each, Mr. Gannon
was eligible to receive a quarterly bonus of $15,000, and Mr. Merritt
was eligible to receive a quarterly bonus of $12,500. In 1996, Messrs.
Sullivan, Basham, Gannon, and Merritt earned aggregate quarterly bonuses
of $120,000, $120,000, $60,000, and $50,000, respectively.
Quarterly Cash Incentives for Mr. Avery. The Committee believes
that the success of restaurant operations is essential in the Company's
success, and established a separate incentive program for Mr. Avery. In
1996, Mr. Avery was eligible to receive a quarterly bonus based upon the
Company meeting its operational plan. If the operational plan for a
specific quarter was met, Mr. Avery was entitled to earn a bonus of
$100,000 for that calendar quarter, subject to increase or decrease
according to the following schedule: (i) 0% (plan met), 0% adjustment;
(ii) 2% above/below plan, 8% adjustment; (iii) 4% above/below plan, 16%
adjustment; (iv) 8% above/below plan, 32% adjustment; and (v) 10%
above/below plan, 40% adjustment. In 1996, Mr. Avery earned quarterly
bonuses aggregating $280,400.
Annual Cash Incentives for Messrs. Sullivan, Basham, Gannon, and
Merritt. Messrs. Sullivan, Basham, Gannon, and Merritt were also eligible
to receive an additional annual cash bonus award based upon the Company
meeting or exceeding specific targets for earnings as reflected in the
Company's financial plan submitted by management and approved by the
Compensation Committee and the Board based on a variety of factors,
including viability of the target growth rate and amount of earnings
appropriate to satisfy shareholder expectations. In the event the Company
met or exceeded the after-tax earnings portion of the Company's financial
plan for the year, in 1996 Messrs. Sullivan, Basham, Gannon, and Merritt
would earn a bonus of 25% of each executive's base salary. Additionally,
the Compensation Committee would establish a bonus pool equal to 25% of the
difference between the after-tax earnings of the financial plan target,
less the aggregate annual bonus amounts previously paid to Messrs.
Sullivan, Basham, Gannon, and Merritt, and would award this sum to Messrs.
Sullivan, Basham, Gannon, and Merritt, pro rata, based on their respective
base salaries. No annual cash bonuses for 1996 were awarded to the named
executive officers, including Mr. Sullivan.
Long-Term Stock Incentives. Long-term stock incentives, which are a
component of compensation, have historically been awarded by the Stock
Option Committee of the Board under the Company's Amended and Restated
Stock Option Plan (the "Stock Option Plan"). Until February 28, 1997, the
Stock Option Committee consisted of two Directors whose names are listed
at the end of this report. Both members of the former Stock Option
Committee are executive officers of the Company.
The Stock Option Plan provides for the issuance of "incentive stock
options," within the meaning of Section 422 of the Internal Revenue Code,
and nonqualified stock options, for federal income tax purposes, to
officers and other employees of the Company. The Stock Option Plan was
originally adopted by the Board and shareholders in 1992. Grants to
executives under the Company's Stock Option Plan are designed to align a
portion of the executive compensation package with the long-term interests
of the Company's shareholders by providing an incentive that focuses
attention on managing the Company from the perspective of an owner with an
equity stake in the business.
Grants of stock options generally are limited to officers (other than
Messrs. Sullivan, Basham, and Gannon) and other key employees and managers,
of the Company or its subsidiaries who are in a position to contribute
substantially to the growth and success of the Company and its
subsidiaries. Incentive stock options and nonqualified stock options are
granted for terms up to ten years, and are designed to reward exceptional
performance with a long-term benefit, facilitate stock ownership, and deter
recruitment of key Company personnel by competitors and others. In
evaluating annual compensation of executive officers (other than Messrs.
Sullivan, Basham, and Gannon), the Compensation Committee takes into
consideration the stock options as a percentage of total compensation,
consistent with its philosophy that stock incentives more closely align the
interests of company managers with the long-term interests of shareholders.
In granting stock options to executive officers, the Stock Option Committee
has considered the number and size of stock options already held by an
executive officer when determining the size of stock option awards to be
made to the officer in a given fiscal year.
No executive officer of the Company was granted stock options in 1996.
At March 7, 1997, the executive officers appearing in the Summary
Compensation Table held stock or the right to acquire stock representing
______% of the Company's outstanding Common Stock, assuming all outstanding
options held by executive officers are exercised. Neither Mr. Sullivan,
Mr. Basham, nor Mr. Gannon, the Company's founders, have been granted
options to acquire shares of the Company's Common Stock.
Section 162(m). Section 162(m) to the Internal Revenue Code of 1986,
as amended (the "Code"), which prohibits a deduction to any publicly held
corporation for compensation paid to a "covered employee" in excess of $1
million per year (the "Dollar Limitation"). A covered employee is any
employee who appears in the Summary Compensation Table who is also employed
by the Company on the last day of the Company's calendar year. The
Compensation Committee does not expect the deductibility of any material
amount of compensation paid in 1996 to any executive officer to be affected
by Section 162(m). The Compensation Committee may consider alternatives
to its existing compensation programs in the future with respect to
qualifying executive compensation for deductibility.
The Company generally is entitled to a tax deduction upon an
employee's exercise of nonqualified options in an amount equal to the
excess of the value of the shares over the exercise price. Such deduction
is considered compensation for purposes of the Dollar Limitation with
respect to options having an exercise price less than fair market value at
the date of grant. Deductibility of compensation in future years to
Messrs. Merritt and Avery may be affected by the Dollar Limitation if they
remain covered employees and exercise certain of their options in amounts
which would result in compensation to Mr. Merritt or Mr. Avery exceeding
the Dollar Limitation in any year. Messrs. Merritt and Avery have each
agreed to cooperate with the Company in exercising their options so as to
minimize any loss of deductibility due to the Dollar Limitations.
Conclusion. As described above, the Company's executive compensation
program is designed to provide a link between total compensation and the
Company's performance and long-term stock price appreciation consistent
with the compensation philosophies set forth above. This program has been
established since the Company's inception, and has been a significant
factor in the Company's growth and profitability and the resulting gains
achieved by the Company's shareholders.
Compensation Committee Stock Option Committee
Charles H. Bridges, Chairman Chris T. Sullivan
Edward L. Flom Robert D. Basham
Lee Roy Selmon
Compensation Committee Interlocks and Insider Participation
The Compensation Committee consists of Charles H. Bridges, Lee Roy
Selmon, and Edward L. Flom. Mr. Bridges serves as Chairman of the
Committee. Until February 28, 1997, the Stock Option Committee of the
Board consisted of ChrisT. Sullivan, Chairman of the Board and Chief
Executive Officer of the Company, and Robert D. Basham, President of the
Company.
Directors Fees
Directors of the Company who are not executive officers receive fees
of $10,000 per year, $750 per Board meeting attended, and $500 per
committee meeting attended, plus the expenses of attending meetings.
During 1996, Messrs. Brabson, Bridges, Carey, Fields, Flom, and Selmon were
paid directors' fees of $14,000, $14,500, $14,000, $13,000, $14,500, and
$14,500, respectively.
Generally, upon election to the Board, each director who is not an
executive officer has been granted a one-time stock option to acquire
30,000 shares of Common Stock. The exercise price for such shares is equal
to the closing sale price of the Common Stock as reported on the NASDAQ
System on the date of grant. Options granted to Directors generally are
granted upon the same terms and conditions as options granted to executive
officers and key employees.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT
AND CHANGE-IN-CONTROL ARRANGEMENTS
In October 1995, the Company entered into an extension of the term of
the Employment Agreement with Mr. Avery, extending the term of his
employment for an additional five-year period. The employment agreement
restricts the ability of Mr. Avery to compete with the Company for a period
of two years following termination of his employment.
Effective February 29, 1996, the Company and each of Chris T.
Sullivan, Robert D. Basham, and J. Timothy Gannon, each of whom are
executive officers, directors, and founders of the Company (individually,
an "Executive"), entered into Stock Redemption Agreements (each an
"Agreement"). Under the terms of each Agreement, following the Executive's
death the Personal Representative of the Executive will have the right to
require the Company to purchase up to $30,000 million worth of Common Stock
beneficially owned by the Executive at the date of death, for a per share
price equal to the mean (rounded to the nearest one-tenth of one cent) of
the last sale price of the Company's Common Stock for 30 consecutive
trading days ending on the business day prior to the Executive's death as
quoted on the NASDAQ National Market System or the principal exchange on
which the Company's Common Stock is then traded. In the event, however,
that the Executive's death results (i) from an illness that was diagnosed
or an accident that occurred within one year of the Executive's death, and
(ii) the accident or illness was publicly disclosed, then the per share
purchase price will be equal to the mean (rounded to the nearest one-tenth
of one cent) of the last sale price of the Company's Common Stock for 30
consecutive trading days ending on the business day prior to the date of
public disclosure of the accident or illness as quoted on the NASDAQ
National Market System or the principal exchange on which the Company's
Common Stock is then traded. The maximum dollar amount of Common Stock
which the Company is obligated to purchase from the estate of the Executive
is $30,000,000. The Company's obligation to purchase Common Stock
beneficially owned by a deceased Executive is funded by an insurance policy
on the life of the Executive owned by the Company providing a death benefit
of $30,000,000.
As of March 7, 1997, Messrs. Sullivan, Basham, and Gannon beneficially
owned an aggregate of 8,862,151 shares of the Company's Common Stock with
a value of approximately $_________ based on the closing sale price of the
Company's Common Stock on that date as quoted on the NASDAQ National Market
System. The Agreements will remain in place for so long as the Board of
Directors deem appropriate.
PERFORMANCE GRAPH
The following line graph compares the Company's cumulative total
shareholder return with the cumulative total shareholder return of the Dow
Jones Equity Market Index and the Dow Jones Entertainment and Leisure-
Restaurants Index for the last five full fiscal years of the Company ending
December 31, 1996:
[TO BE INSERTED BY PRINTER]
PROPOSAL ONE
Proposed Amendment to the Certificate of Incorporation
to Increase the Number of Authorized Shares of Common Stock
There will be submitted to the stockholders at the meeting a proposal
to amend Article FOURTH of the Company's Restated Certificate of
Incorporation (the "Certificate") to increase the authorized number of
shares of Common Stock, $.01 par value, from 100,000,000 to 200,000,000.
The full text of Article FOURTH of the Certificate reflecting this
amendment is set forth as Exhibit A to this proxy statement.
The Company is presently authorized to issue 100,000,000 shares of
Common Stock, of which __________ were issued and outstanding at March 7,
1997, and _____________ were reserved for issuance under certain stock
option agreements and stock option plans. A balance of ____________
authorized shares of Common Stock remained available for issuance without
stockholder action. The 100,000,000 additional shares of Common Stock for
which authorization is sought would have the same rights and privileges as
the Common Stock presently outstanding. Holders of Common Stock have no
preemptive rights to subscribe for any additional Common Stock of the
Company.
The Board of Directors believes that it is desirable to have
additional authorized shares of Common Stock available for possible future
stock dividends, splits or other issuances, employee benefit programs,
acquisition transactions, and for other general corporate purposes. The
proposed amendment could discourage attempts to acquire control of the
Company. The issuance of Common Stock could be used to dilute the share
ownership of a party seeking to obtain control of the Company or the Common
Stock could be sold to persons who might support incumbent management.
However, the Board believes that the availability of additional shares to
assist in meeting corporate needs and goals makes their authorization
important without regard to any possible anti-takeover effects. The
Company does not have any present plans or commitments with respect to the
issuance of the additional shares of Common Stock for which authorization
is sought. If the amendment is approved, the additional shares would be
available for issuance without further action by the stockholders, unless
such action is required by applicable law or the rules of the NASDAQ
National Market System or any stock exchange or other quotation system on
which the Company's securities may be listed or quoted in the future.
Under Delaware law, the affirmative vote of a majority of the
outstanding Common Stock is required for approval of this proposal.
The Board of Directors recommends that the stockholders vote FOR this
proposal to amend the Certificate.
PROPOSAL TWO
Proposed Amendments to the Company's
Amended and Restated Stock Option Plan
The Board has approved amendments (the "Amendments") to the Company's
Amended and Restated Stock Option Plan (the "Stock Option Plan") (i) to
increase the number of shares for which options may be granted under the
Stock Option Plan by 5,076,500, or from 4,923,500 to 10,000,000; (ii) to
clarify that the exercise price of any option granted under the Stock
Option Plan cannot be reduced except to reflect the impact of stock splits,
stock dividends, mergers, recapitalization, changes in capital structure,
or other transactions having similar effect; and (iii) provide that the
Stock Option Plan shall be administered by a Committee of the Board (or,
at the Board's option, the full Board) that will be composed of such
members and operated in a manner to permit options granted under the Stock
Option Plan to be exempt from the short-swing profits provisions of Section
16(b) of the Securities Exchange Act of 1934.
The Amendments do not change the Stock Option Plan in any other
manner. A copy of the Stock Option Plan, as amended, is attached as
Exhibit B and the description of the Stock Option Plan is qualified in its
entirety by reference to Exhibit B.
Although stockholder approval of the Amendments are not required under
Delaware law, such approval is required under the terms of the Stock Option
Plan and is being sought in order to: (i) allow certain options granted
under the Stock Option Plan to qualify as incentive stock options under the
Internal Revenue Code of 1986, as amended; and (ii) cause options granted
under the Stock Option Plan to qualify as "performance based compensation"
for purposes of Section 162(m) of the Code.
The Compensation Committee (the "Committee") of the Board administers
the Stock Option Plan. Incentive and nonqualified stock options may be
granted under the Stock Option Plan at any time until the expiration of the
Stock Option Plan on May 1, 2001. The maximum number of options that may
be granted pursuant to the Stock Option Plan, as amended is 10,000,000, and
the maximum number of options that may be granted to any one individual is
600,000, in each case subject to adjustment for stock dividends, stock
splits and certain other changes in the Company's capitalization.
Options have been in the past and the Company anticipates that in the
future options will be granted to certain officers, directors, and other
key employees of the Company or its subsidiaries who are in a position to
contribute substantially to the growth and success of the Company and its
subsidiaries. As of January 22, 1997, options to purchase approximately
__________ shares had been granted under the Stock Option Plan,
of which have been exercised and _________ of which were exercisable. As
of January 22, 1997, three executive officers, five nonexecutive officers,
six outside directors, and ____ employees were eligible to receive options.
Any shares not purchased under an option which has terminated or lapsed may
be used for the further grant of options under the Stock Option Plan.
Incentive stock options granted under the Stock Option Plan may not
be exercised more than ten (10) years after the date of grant (or five (5)
years in the case of an option granted to an individual who at the time of
the grant owns more than 10% of the total combined voting power of all
classes of stock of the optionee's employer corporation and its parent or
subsidiary corporations (a "10% Owner")). Nonqualified stock options
granted under the Stock Option Plan may be exercised within such time
period as the Committee determines at the time of grant. The aggregate
fair market value (determined at the time the option is granted) of the
stock with respect to which incentive stock options are exercisable for the
first time by any employee during any calendar year may not exceed
$100,000. The Stock Option Plan provides that the option price in the case
of incentive stock options shall be not less than 100% of the fair market
value of the Company's Common Stock at the time the option is granted or
110% of such fair market value in the case of an option granted to a 10%
Owner. In the case of nonqualified stock options the option price may be
less than the fair market value of the Company's Common Stock on the date
of grant. The purchase price must be paid in full by the optionee at the
time of exercise in either cash or Common Stock.
No cash consideration will be received by the Company for granting
options under the Stock Option Plan. Options will be granted in
consideration of the services rendered or to be rendered to the Company by
the employees receiving the options.
With respect to nonqualified stock options granted with an exercise
price not less than fair market value, in general, for federal income tax
purposes under present law:
(i) The grant of a nonqualified stock option, by itself, will not
result in income to the optionee.
(ii) Except as provided in (v) below, the exercise of a nonqualified
stock option (in whole or in part, according to its terms) will result in
ordinary income to the optionee at the time in an amount equal to the
excess (if any) of the fair market value of the stock on the date of
exercise over the option price.
(iii) The tax basis of the stock acquired upon exercise of a
nonqualified stock option, which will be used to determine the amount of
any capital gain or loss on a future taxable disposition of such stock,
will be the fair market value of the shares on the date of exercise.
(iv) No deduction will be allowable to the Company upon the grant of
a nonqualified stock option, but, subject to Section 162(m) of the Code,
upon exercise of a nonqualified stock option, a deduction will be allowable
to the Company at that time in an amount equal to the amount of ordinary
income realized by the optionee exercising such option if the Company
deducts and withholds appropriate federal withholding tax.
(v) With respect to the exercise of a nonqualified stock option and
the payment of the option price by the delivery of Common Stock, to the
extent that the number of shares received does not exceed the number of
shares surrendered, no taxable income will be realized by the optionee at
that time, the tax basis of the shares received will be the same as the tax
basis of the shares surrendered, and the holding period of the optionee in
the shares received will include his holding period in the shares
surrendered. To the extent that the number of shares received exceeds the
number of shares surrendered, ordinary income will be realized by the
optionee at that time in the amount of the fair market value of such excess
shares, the tax basis of such excess shares will be such fair market value,
and the holding period of the optionee in such shares will begin on the
date such shares are transferred to the optionee.
With respect to incentive stock options, in general, for federal
income tax purposes under present law:
(i) Neither the grant nor the exercise of an incentive stock option,
by itself, will result in income to the optionee; however, under Section
57 of the Code, the excess of the fair market value of the stock at the
time of exercise over the option price is an item of tax preference (unless
there is a disposition of the shares acquired upon exercise of an incentive
stock option in the taxable year of exercise) which may, under certain
circumstances, result in an alternative minimum tax liability to the
optionee under Section 55 of the Code.
(ii) Except as provided in (v) below, if the shares acquired upon
exercise of an incentive stock option are disposed of in a taxable
transaction after the later of two years from the date on which the option
is granted or one year from the date on which such shares are transferred
to the optionee, long-term capital gain or loss will be realized by the
optionee in an amount equal to the difference between the option price and
the amount realized by the optionee.
(iii) If the shares acquired upon exercise of an incentive stock
option are disposed of within the two-year period for the date of grant or
the one-year period after the transfer of the shares to the optionee:
(a) Ordinary income will be realized by the optionee at the time
of such disposition in the amount of the excess, if any, of the fair market
value of the shares at the time of such exercise over the option price, but
not in an amount exceeding the excess, if any, of the amount realized by
the optionee over the option price.
(b) Short-term or long-term capital gain will be realized by the
optionee at the time of any such taxable disposition in an amount equal to
the excess, if any, of the amount realized over the fair market value of
the shares at the time of such exercise.
(c) Short-term or long-term capital loss will be realized by the
optionee at the time of any such taxable disposition in an amount equal to
the excess, if any, of the option price over the amount realized.
(iv) No deduction will be allowed to the Company with respect to
incentive stock options granted or shares transferred upon exercise
thereof, except that if a disposition is made by the optionee within the
two-year period or the one-year period referred to above, the Company will
be entitled to a deduction, subject to Section 162(m) of the Code, in the
taxable year in which the disposition occurred in an amount equal to the
amount of ordinary income realized by the optionee making the disposition.
(v) With respect to the exercise of an incentive stock option and the
payment of the option price by the delivery of Common Stock, to the extent
that the number of shares received does not exceed the number of shares
surrendered, no taxable income will be realized by the optionee at the
time, the tax basis of the shares received will be the same as the tax
basis of the shares surrendered and the holding period (except for purposes
of the one-year period referred to above) of the optionee in shares
received will include his holding period in the shares surrendered. To the
extent that the number of shares received exceeds the number of shares
surrendered, no taxable income will be realized by the optionee at that
time, such excess shares will be considered incentive stock option stock
with a zero basis and the holding period of the optionee in such shares
will begin on the date such shares are transferred to the optionee. If the
shares surrendered were acquired as the result of the exercise of an
incentive stock option and the surrender takes place within two years from
the date the option relating to the surrendered shares was granted or
within one year from the date of such exercise, the surrender will result
in the realization of ordinary income by the optionee at that time in the
amount of the excess, if any, of the fair market value on the date of
exercise of the shares surrendered over the exercise price of such shares.
If any of the shares received are disposed of within one year after the
shares are transferred to the optionee, the optionee will be treated as
first disposing of the shares with a zero basis.
The Board may at any time amend the Stock Option Plan or any part
thereof as it shall deem advisable. However, no amendment may be made in
any option then outstanding under the Stock Option Plan which would impair
the rights of the optionee without the consent of such optionee.
Under Delaware law, the affirmative vote of a majority of the
outstanding Common Stock is required for approval of this proposal.
The Board recommends that the stockholders vote FOR this proposal to
amend the Amended and Restated Stock Option Plan.
SELECTION OF INDEPENDENT AUDITORS
At the meeting of the Board of the Company held on January 22, 1997,
the Board selected Deloitte& Touche to serve as the independent auditors
for the Company and its subsidiaries for the year ending December 31, 1996.
Representatives of Deloitte& Touche are expected to be present at the
stockholders' meeting to respond to appropriate questions.
STOCKHOLDER PROPOSALS
Any stockholder who intends to present a proposal at the 1998 Annual
Meeting of Stockholders for inclusion in the proxy statement and form of
proxy relating to that meeting is advised that the proposal must be
received by the Company at its principal executive offices not later than
November 20, 1997. The Company will not be required to include in its
proxy statement or form of proxy a stockholder proposal which is received
after that date or which otherwise fails to meet requirements for
stockholder proposals established by regulations of the Securities and
Exchange Commission.
OTHER MATTERS
The solicitation of proxies is made by and on behalf of the Board.
The cost of the solicitation will be borne by the Company, including the
reasonable expenses of brokerage firms or other nominees for forwarding
proxy materials to beneficial owners. In addition to solicitation by mail,
proxies may be solicited by telephone, telegraph or personally. Proxies
may be solicited by directors, officers and employees of the Company
without additional compensation.
If the enclosed proxy is executed and returned, the shares represented
thereby will be voted in accordance with any specifications made by the
stockholder. In the absence of any such specification, they will be voted
to elect the directors as set forth under "Election of Directors" above,
and FOR Proposals ONE and TWO. Pursuant to the Company's Certificate and
applicable law, broker nonvotes and abstaining votes will not be counted
in favor of or against the election of any nominee for director or any of
the proposals to be presented at the meeting.
The presence of a stockholder at the meeting will not operate to
revoke his proxy. A proxy may be revoked at any time insofar as it has not
been exercised by giving written notice to the Company.
If any other matters shall come before the meeting, the persons named
in the proxy, or their substitutes, will vote thereon in accordance with
their judgment. The Board does not know of any other matters which will
be presented for action at the meeting.
By Order of the Board of Directors
March 20, 1997 JOSEPH J. KADOW
Secretary
EXHIBIT A
PROPOSED AMENDMENT TO ARTICLE FOURTH OF THE COMPANY'S
CERTIFICATE OF INCORPORATION
FOURTH: The total number of shares of all classes of stock which the
Corporation shall have authority to issue is Two Hundred and Two Million
(202,000,000), consisting of Two Hundred Million (200,000,000) shares of
Common Stock, $.01 par value (the "Common Stock"), and Two Million
(2,000,000) shares of Preferred Stock, $.01 par value (the "Preferred
Stock").
EXHIBIT B
OUTBACK STEAKHOUSE, INC.
AMENDED AND RESTATED STOCK OPTION PLAN
1. Purpose. The purpose of this Stock Option Plan ("Plan") is to
provide long-term incentives to key employees and members of the board of
directors ("Directors") of OUTBACK STEAKHOUSE, INC., a Delaware corporation
(the "Corporation"), its subsidiaries and affiliated partnerships; to
compensate existing key employees and Directors for their efforts on behalf
of the Corporation and its subsidiaries; to assist in retaining people of
ability and initiative in professional, management and other key positions;
and to induce such key employees to refrain from competing with the
Corporation and its subsidiaries. These purposes are intended to be
achieved, in part, through the grant of stock options ("Options"), some of
which are intended to qualify as "Incentive Stock Options" within the
meaning of Section 422 of the Internal Revenue Code of 1986, as amended
(the "Code"). In the event and to the extent that in connection with the
grant of Options intended to qualify as such "Incentive Stock Options" this
Plan shall not conform with a pertinent mandatory requirement under Section
422 or any related Treasury Regulation, then this Plan shall be deemed to
have incorporated such a mandatory provision and shall be construed
accordingly, notwithstanding any other provision contained in this Plan to
the contrary.
2. Administration of the Plan. The Plan shall be administered by a
committee of the board of directors of the Corporation (the "Board") or,
at the Board's election, by the full Board (such committee or the Board,
if it administers the Plan, the "Committee"). Any Committee designated by
the Board to administer the Plan shall consist of two or more members. The
Committee shall be composed of such members and shall be operated in a
manner that will permit Options granted under the Plan to be exempt from
the short-swing profit provisions of Section 16(b) of the Securities
Exchange Act of 1934 and the rules promulgated by the Securities and
Exchange Commission thereunder.
The Committee shall have full power to interpret and administer the
Plan and full authority to select the eligible individuals to whom Options
will be granted and to determine the type and amount of Options to be
granted to each participant, the terms and conditions of Options granted
under the Plan and the terms and conditions of the agreements which will
be entered into with participants.
The Committee shall have the authority to adopt, alter and repeal such
rules, guidelines and practices governing the Plan as it shall, from time
to time, deem advisable; to interpret the terms and provisions of the Plan
and any Option issued under the Plan (and any agreements relating thereto);
to direct employees of the Corporation or other advisors to prepare such
materials or perform such analysis as the Committee deems necessary or
appropriate; and otherwise to supervise the administration of the Plan.
Any interpretation or administration of the Plan by the Committee, and
all actions of the Committee, shall be final, binding and conclusive on the
Corporation, its stockholders, subsidiaries, and all participants in the
Plan, their respective legal representatives, successors and assigns, and
upon all persons claiming under it through any of them. No member of the
Board or of the Committee shall incur any liability for any action taken
or omitted, or any determination made, in good faith in connection with the
Plan.
3. Shares Subject to this Plan. The total number of shares which may
be issued and sold upon exercise of Options granted pursuant to this Plan
shall not exceed 10,000,000 shares of the Corporation's Common Stock, $.01
par value ("Common Stock"), except to the extent of adjustments authorized
by Paragraph 7 of this Plan. The maximum number of shares of Common Stock
as to which options may be granted to any one individual under the Plan
during its term is 600,000, except to the extent of adjustments authorized
by Paragraph 7 of this Plan. Such Common Stock may be treasury shares or
authorized but unissued shares or a combination of the foregoing. If an
Option granted under this Plan shall expire or terminate for any reason
other than its exercise, the shares subject to, but not delivered under,
such Option shall be available for the grant of other Options to the same
employee or other employees. The Committee will maintain records showing
the cumulative total of number of shares of Common Stock subject to Options
outstanding under the Plan.
4. Eligibility. The Committee may, from time to time and upon such
terms and conditions as it may determine, authorize the granting of Options
to Directors, officers and to other key salaried employees of the
Corporation or any of its subsidiaries or affiliated partnerships (each an
"Optionee") to purchase from the Corporation shares of Common Stock and may
fix the number of shares to be covered by such Option. Successive Options
may be granted to the same person whether or not the Option or Options
first granted to such person remain unexercised.
Options granted under the Plan may be (i) options which are intended
to qualify as incentive stock options under Section 422 of the Code
("Incentive Stock Options"); (ii) options which are not intended to qualify
under Section 422 of the Code; or (iii) both of the foregoing if granted
separately, not in tandem. No option granted under the Plan shall be an
Incentive Stock Option unless the stock option agreement evidencing such
option specifically states that the option is intended to be an Incentive
Stock Option.
5. Term of Option and Transferability. The term of each Option
granted under the Plan shall be established by the Committee, but the term
of Incentive Stock Options shall not exceed ten years from the date of
grant; provided, however, that in the case of an Optionee who owns stock
possessing more than 10% of the total combined voting power of all classes
of stock of the Corporation or of its parent or subsidiary corporations at
the time an Option which is intended to qualify as an Inventive Stock
Option is granted, the term of such Option shall not exceed five years from
the date of grant. No Option shall be transferable by the Optionee
otherwise than by will or the laws of descent and distribution. Options
shall be exercisable during the Optionee's lifetime only by the Optionee
or by his or her legal guardian or legal representative.
6. Option Price and Payment. The Option price (which may be less
than fair market value) shall be established by the Committee, provided
that in the case of an Option intended to qualify as an Incentive Stock
Option the Option price shall be not less than the fair market value of the
shares covered by the Option at the time the Option is granted (110% of
such fair market value in the case of an Option intended to qualify as an
Incentive Stock Option granted to an individual who, at the time the Option
is granted, owns shares possessing more than 10% of the total combined
voting power of all classes of shares of the Corporation, its parent or any
of its subsidiaries). If Common Stock of the same class as the stock
subject to Incentive Stock Options granted or to be granted hereunder are
at any time traded on a national securities exchange, the term "fair market
value" shall mean (i) the mean between the highest and lowest selling
prices reported by the consolidated stock exchange network for such stock
on the date as of which the determination is to be made; or (ii) if there
are no sales of such Common Stock reported by the consolidated stock
exchange network on such date, the mean between the highest and lowest
reported selling prices on the consolidated stock exchange network on the
nearest trading date before such date and on which there were such sales.
If such shares of Common Stock are at any time traded only otherwise than
on a national securities exchange, the term "fair market value" shall mean
the mean between the bid and asked prices of the stock as reported by such
sources as shall be, in the judgment of the Committee, appropriate evidence
of such prices or, if quoted on NASDAQ, the mean between NASDAQ high and
low selling prices, as of the close of business on the date for which a
determination is being made. If there shall be no trading in such Common
Stock at any time, then the term "fair market value" means the value per
share of stock as determined by the Committee upon consideration of such
financial and market data as the Committee may deem necessary and
appropriate. The Option price shall be payable (i) in cash, (ii) by check
acceptable to the Corporation, (iii) by delivery of Common Stock of the
sale class of stock subject to the Option, or (iv) a combination of the
above so that the sum of the fair market value of any such cash, check or
Common Stock equals the Option price.
7. Adjustments. The Committee shall make or provide for such
adjustments in the Option price and in the number or kind of shares of
Common Stock or other securities covered by outstanding Options as the
Committee in its sole discretion, exercised in good faith, may determine
are equitably required to prevent dilution or enlargement of the rights of
Optionees that would otherwise result from (i) any share dividend, share
split, combination of shares, issuance of rights or warrants to purchase
shares, recapitalization or other change in the capital structure of the
Corporation; (ii) any merger, consolidation, separation, reorganization or
partial or complete liquidation; or (iii) any other corporate transaction
or event having an effect similar to any of the foregoing. The Committee
shall not have the power to reduce the Option price for outstanding Options
except in the case of transactions described in the preceding sentence.
The Committee shall also make or provide for such adjustments in the number
or kind of shares of Common Stock which may be sold under this Plan as the
Committee in its sole discretion, exercised in good faith, may determine
are appropriate to reflect any transaction or event described in this
Section.
8. Other Terms. Each grant of Options hereunder shall be evidenced
by a stock option agreement. Each stock option agreement shall contain
provisions established by the Committee setting forth the manner of
exercise of such Option, whether the Option granted is intended to qualify
or not to qualify as an Incentive Stock Option and such other terms and
conditions not inconsistent herewith as shall be approved by the Committee.
9. Cancellation. The Committee may, with the concurrence of the
affected Optionee, cancel any Option granted under this Plan. In the event
of any such cancellation, the Committee may authorize the granting of new
Options (which may or may not cover the same number of shares which had
been subject to any prior Option) in such manner, at such Option price and
subject to the same terms and conditions as would have been applicable had
the cancelled Options not been granted.
10. Amendment. This Plan may be amended from time to time by the
Board but, without further approval by the stockholders of the Corporation,
no such amendment shall (i) increase the aggregate number of shares of
Common Stock that may be issued and sold under this Plan (except to the
extent authorized by Paragraph 7), (ii) change the designation in Paragraph
4 of the class of employees eligible to receive Options, or (iii)
materially increase the benefits accruing to Optionees.
11. Time of Granting Options. The date of grant of an Option under
this Plan shall, for all purposes, be the date on which the Committee makes
the determination to grant such Option. Notice of the determination shall
be given to each employee to whom an Option is so granted within a
reasonable time after the date of such grant.
12. Termination of Plan. This Plan shall be terminated and no
further Options shall be granted hereunder as of the tenth anniversary of
the earlier of (i) the date the Plan is adopted by the Board or (ii) the
date this Plan is approved by the Corporation's stockholders.
13. General Provisions. Neither the adoption of this Plan nor its
operation, nor any document describing or referring to this Plan or any
part thereof, shall confer upon any Optionee any right to continue in the
employ of the Corporation or an parent or subsidiary corporation, or shall
in any way affect the right and power of the Corporation or any parent or
subsidiary corporation to terminate the employment of any Optionee under
the Plan at any time with or without assigning a reason therefor, to the
same extent as the Corporation might have done if the Plan had not been
adopted.
14. Compliance with Law and Approval of Regulatory Body. No Option
shall be exercisable and no stock will be delivered under this Plan except
in compliance with all applicable federal and state laws and regulations,
including, without limitation, compliance with applicable withholding tax
requirements, if any, and the rules of all domestic stock exchanges on
which the Corporation may be listed. Any stock certificates issued to
evidence stock as to which an Option is exercised may bear such legends and
statements as the Committee shall deem advisable to assure compliance with
federal and state laws and regulations. No Option shall be exercisable,
and no stock will be delivered under this Plan, until the Corporation has
obtained such consent or approval from the regulatory body, federal or
state, having jurisdiction over such matters as the Committee may deem
advisable.
In the case of the exercise of an Option by a person or estate
acquiring the right to exercise such Option by bequest or inheritance, the
Committee may require reasonable evidence as to the ownership of such
Option and may require such consents and releases of taxing authorities as
the Committee may deem advisable.
