<PAGE>
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as Permit-
ted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 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:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:<PAGE>
<TABLE>
(LOGO)
OUTBACK STEAKHOUSE, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON APRIL 15, 1998
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 15, 1998 at 10:00 A.M., Tampa time, for the following purposes:
1. To elect five directors, each to serve for a term of three
years and until his successor is duly elected and qualified;
and
2. To transact such other business as may properly come before
the meeting.
Only stockholders of record at the close of business on February 27,
1998 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 13, 1998 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-paid envelope.
<PAGE>
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 15, 1998 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, 1997 are first being
sent to stockholders on or about March 13, 1998.
The close of business on February 27, 1998 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
48,921,630 shares of Common Stock, $.01 par value ("Common Stock"), each of
which will be entitled to one vote. A plurality of the shares of Common
Stock present in person or represented by proxy at the meeting is required
for the election of directors. An affirmative vote of a majority of the
shares of Common Stock present in person or represented by proxy and
entitled to vote at the meeting is required for approval of all other items
being submitted to the stockholders for their consideration. All votes will
be tabulated by the Inspectors of Elections.
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 thirteen,
divided into two classes of four directors each and one class of five
directors. At the meeting, Common Stock represented by proxies, unless
otherwise specified, will be voted for the election of the five nominees
hereinafter named, each to serve for a term of three years and until his
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.
Nominees for Election at the Annual Meeting
Director Term
Name Age Since Expires
Paul E. Avery.................. 38 ---- 2001
John A. Brabson, Jr............ 57 1992 2001
Charles H. Bridges............. 67 1992 2001
J. Timothy Gannon.............. 49 1991 2001
Lee Roy Selmon................. 43 1994 2001
Paul E. Avery...........President of Outback Steakhouse of Florida, Inc.
("OSF"), the Company's predecessor and wholly owned
subsidiary since April 1997. From 1993 to 1997, Mr.
Avery served as Senior Vice President of OSF. From
1990 to 1993, Mr. Avery served as Director of
Operations of OSF.<PAGE>
John A. Brabson, Jr.....Chairman of the Board of Lykes Bros. Inc., a privately
owned holding company, since 1996. From 1989 to 1996,
Mr. Brabson served as Chairman, Chief Executive Officer
and President of Peoples Gas System, Inc.
Charles H. Bridges......Vice President, Treasurer and director, since 1993, of
Matilda Management Company, a former franchisee of the
Company which operated Outback Steakhouse(R)
restaurants in northern California. From 1981 to 1993
Mr. Bridges served as Chairman and Chief Executive
Officer of Francois L. Schwarz, Inc., an international
food brokerage company representing manufacturers to
U.S. military commissaries and exchanges.
J. Timothy Gannon.......Founder and Senior Vice President of the Company since
its formation in 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.
Directors Whose Terms Will Continue After the Annual Meeting
Director Term
Name Age Since Expires
Robert D. Basham............... 50 1991 1999
W. R. Carey, Jr................ 50 1992 1999
Debbi Fields-Rose.............. 41 1996 2000
Edward L. Flom................. 68 1991 2000
Robert S. Merritt.............. 46 1992 2000
Nancy Schneid.................. 39 1995 1999
Chris T. Sullivan.............. 50 1991 2000
Toby S. Wilt................... 53 1997 1999
Robert D. Basham........Founder, President and Chief Operating Officer
of the Company since its formation in 1991.
W. R. Carey, Jr.........President and Founder of Corporate Resource
Development, a sales and marketing consulting and
training firm since 1981. Mr. Carey also serves as
a director of Romac International since 1995 and
Didax, Inc., since 1997.
2<PAGE>
Debbi Fields-Rose.......Founder of Mrs. Fields, Inc., an international
franchisor and operator of retail dessert stores,
serving as President and Chief Executive Officer from
1979 to 1993, and Chairman of the Board from 1992 to
1996.
Edward L. Flom..........Retired; until 1993, 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., since 1980.
Robert S. Merritt.......Senior Vice President-Finance, Chief Financial Officer
and Treasurer of the Company since 1991.
Nancy Schneid...........Vice President-Marketing of OSF since 1991.
Chris T. Sullivan.......Founder, Chairman and Chief Executive Officer of the
Company since its formation in 1991.
Toby S. Wilt............Chairman of Christie Cookie Company since 1989, and
President of TSW Investment Company since 1987.
Mr. Wilt also serves as a director of First American
Corporation, a registered bank holding company since
1992.
The Board held five meetings in 1997. Mrs. Fields-Rose did not attend
three Board meetings. 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-Rose. Mr. Carey serves as Chairman of the Audit Committee. The
Audit Committee held two meetings during 1997. 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 two meetings during 1997. The Compensation
Committee is responsible for establishing the compensation to be provided
to executive officers, and effective February 28, 1997, benefits provided
under the Company's Amended and Restated Stock Option Plan. Prior to such
date, the Company's Amended and Restated Stock Option Plan was administered
by a Stock Option Committee consisting of Messrs. Sullivan and Basham.
3<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the
beneficial ownership of the Company's Common Stock as of February 27, 1998
(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.
<CAPTION>
Amount Percent
Beneficially of
Name of Beneficial Owner Owned <F1> Class
<S> <C> <C>
Chris T. Sullivan<F2><F3>..............8,505,490 17.39%
Robert D. Basham<F2><F4>...............8,360,875 17.09%
J. Timothy Gannon<F2><F5>..............8,373,761 17.12%
Robert S. Merritt<F6>....................475,894 *
Paul E. Avery<F7>........................371,220 *
Joseph J. Kadow<F8>.......................95,000 *
John A. Brabson, Jr.<F9>..................27,463 *
Charles H. Bridges<F10>...................20,347 *
W. R. Carey, Jr.<F11>.....................30,346 *
Debbi Fields-Rose<F12>....................30,266 *
Edward L. Flom<F13>.......................86,565 *
Nancy Schneid<F14>.......................124,851 *
Lee Roy Selmon<F15>.......................30,308 *
Toby S. Wilt<F16>.........................50,346 *
Multi-Venture Partners, Ltd.<F2>.......8,242,125 16.85%
T. Rowe Price Associates, Inc.<F17>....4,442,400 9.08%
All directors and executive officers
as a group (14 persons).............10,098,482 20.64%
________________________
*Less than one percent.
<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 sole general partner, SBG Investments, L.L.C.
("SBG"), a limited liability company. The management of MVP is controlled
by SBG, which owns a .623225% general partner's interest in MVP. Mr.
Sullivan owns 27.596366% of the limited partner interests in MVP, and 40%
of the member interests in SBG; Mr. Basham owns 50.561609% of the limited
partner interests in MVP, and 40% of the member interests in SBG; and Mr.
Gannon owns 21.218800% of the limited partner interests in MVP, and 20% of
the member interests in SBG.
<F3>Includes (i) 8,242,125 shares owned by MVP; (ii) 231,292 shares owned by
Sullivan Family Investments, Ltd., a family limited partnership of 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.
4<PAGE>
<F4>Includes 8,242,125 shares owned by MVP. Mr. Basham shares voting and
dispositive power with respect to Common Stock owned by MVP.
<F5>Includes 8,242,125 shares owned by MVP. Mr. Gannon shares voting and
dispositive power with respect to Common Stock owned by MVP.
<F6>Includes 400,873 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, 100,000, and 100,000 shares underlying stock
options which Mr. Avery has the right to acquire at exercise prices of
$0.98, $21.50, $26.50 and $22.50 per share, respectively.
<F8>Includes 65,000 and 30,000 shares underlying stock options which Mr. Kadow
has the right to acquire at exercise prices of $24.17 and $22.50 per share,
respectively.
<F9>Includes (i) 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-Rose has
the right to acquire at an exercise price of $31.50 per share.
<F13>Consists of shares are held by the Edward Leonard Flom Revocable Trust of
which Mr. Flom is the grantor and sole trustee.
<F14>Includes 73,500, 20,000 and 20,000 shares underlying stock options which
Ms. Schneid has the right to acquire at exercise prices of $1.12, $26.21
and $22.50 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>Includes 30,000 shares underlying stock options which Mr. Wilt has the
right to acquire at an exercise price of $22.50 per share.
<F17>Based on a Schedule 13G filed by T. Rowe Price Associates, Inc.
("T. Rowe Price") with the Securities and Exchange Commission on February
10, 1998, these securities are owned by various individual and
institutional investors for which T. Rowe Price serves as investment
adviser with power to direct investments and/or sole power to vote the
securities. For purposes of the reporting requirements of the Securities
Exchange Act of 1934, T. Rowe Price is deemed to be a beneficial owner of
such securities; however, T. Rowe Price expressly disclaims that it is, in
fact, the beneficial owner of such securities.
5<PAGE>
The address of each of Messrs. Sullivan, Basham and Gannon is 550
North Reo Street, Suite 200, Tampa, Florida 33609. The address of each of
MVP and SBG is 3111 South Valley View, Suite A-219, Las Vegas, Nevada
89102. The address of T. Rowe Price is 100 East Pratt Street, Baltimore,
Maryland 21202.
EXECUTIVE COMPENSATION
The following table sets forth information with respect to compensation
paid by the Company and its subsidiaries to the Chief Executive Officer and
the Company's four other most highly compensated executive officers:
Summary Compensation Table
Annual Compensation Long-Term Compensation
Awards Payouts
Securities
Other Under-
Annual Restricted lying All Other
Compen- Stock Options/ LTIP Compen-
Salary Bonus sation Award(s) SARs Payouts sation
Name and Principal Position Year ($) ($)<F1> ($) ($) (#) ($) ($)
Chris T. Sullivan 1997 $400,000 $ 0
Chairman and Chief 1996 $280,000 $120,000
Executive Officer 1995 $250,000 $198,809
Robert D. Basham 1997 $400,000 $ 0
President and Chief 1996 $280,000 $120,000
Operating Officer 1995 $250,000 $198,809
J. Timothy Gannon 1997 $290,000 $ 0
Senior Vice President 1996 $220,000 $ 60,000
1995 $205,000 $163,024
Robert S. Merritt 1997 $270,000 $ 0
Senior Vice President 1996 $200,000 $ 50,000
-Finance, Chief 1995 $185,000 $147,118 75,000
Financial Officer, and
Treasurer
Paul E. Avery 1997 $200,000 $379,213 100,000
Senior Vice President 1996 $200,000 $280,400
1995 $200,000 $120,500 100,000
<F1> Bonus amounts paid in 1995 and 1996 to Messrs. Sullivan, Basham, Gannon
and Merritt represent amounts paid under a quarterly bonus plan. This
quarterly bonus plan was eliminated for 1997. Messrs. Sullivan, Basham,
Gannon, and Merritt are each entitled to receive an annual cash award
based upon the Company meeting or exceeding specific targets for earnings.
Bonus amounts paid in 1997 to Mr. Avery represent amounts paid under the
quarterly bonus plan established for him by the Compensation Committee and
the Company's Corporate Employee Bonus Plan. See "Executive
Compensation-Joint Report by the Compensation Committee and the Stock
Option Committee on Executive Compensation-Cash Incentives" for a
discussion of these plans.
6<PAGE>
Option/SAR Grants in Last Fiscal Year
<CAPTION>
Percent of
Total Potential Realizable Value at
Number of Options/SARs Assumed Annual Rates of
Shares Underlying Granted to Exercise Stock Price appreciation
Options/SARs Employees in or Base Price Expiration for Option Term
Name Granted Fiscal Year ($/Sh) Date 5% 10%
<S> <C> <C> <C> <C> <C> <C>
Paul E. Avery<F1> 100,000 6.85% $22.50 07/23/2007 $1,415,000 $3,586,000
Messrs. Sullivan, Basham, Gannon and Merritt did not receive option grants during 1997.
(1) Exercisable as follows: (a) 20,000 shares on or after January 1, 1999;
(b) 20,000 shares on or after January 1, 2000; and (c) 60,000 shares
on or after January 1, 2001.
Aggregated Option/SAR Exercises in Last Fiscal Year
and FY-End Options/SAR Value Table
<CAPTION>
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARs Options/SARs at
Shares Acquired Value at FY-End (#) FY-End ($)*
Name on Exercise Realized ($) Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C> <C> <C>
Robert S. Merritt<F1> ------ $------- 429,873 75,000 $10,682,344 $ -------
Paul E. Avery<F2> ------ ------- 156,220 215,000 $ 2,541,513 $ 180,450
*Based on the average high and low sales prices of the Company's Common
Stock on December 31, 1997 as quoted on the NASDAQ National Market System.
<F1> Of the 504,873 stock options held by Mr. Merritt as of December 31, 1997,
429,873 were granted in January 1990, expire on January 1, 2000, and were
exercisable in full as of December 31, 1997 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 371,220 stock options held by Mr. Avery as of December 31, 1997,
(i) 96,220 were granted in October 1990, expire on January 1, 2000, and
were exercisable in full as of December 31, 1997 at an exercise price of
$0.98 per share; (ii) 75,000 were granted in September 1993, 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, and (c) 15,000 shares on
or after September 1, 1998; (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,
7<PAGE>
1998, (b) 20,000 shares on or after January 25, 1999, and (c) 60,000
shares on or after January 24, 2000; and (iv) 100,000 were granted on
July 23, 1997, expire on July 23, 2007, and are exercisable as follows at
an exercise price of $22.50 per share: (a) 20,000 shares on or after
January 1, 1999, (b) 20,000 shares on or after January 1, 2000, and
(c) 60,000 shares on or after January 1, 2001.
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, each of whom is a Non-Employee Director within the
meaning of Rule 16b-3 under the Securities Exchange Act of 1934.
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 1997 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 stockholders which facilitates retention of talented
executives and encourages Company stock ownership and capital accumulation; and
. emphasis on total compensation versus 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.
For 1997, 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 Compensation 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 1996 to 1997 from
$280,000 to $400,000, based on elimination of the quarterly bonus plan and
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)
8<PAGE>
restaurants and new Carrabba's Italian Grill(R) restaurants opened during the
prior fiscal year, increases in percentage of same store sales versus budget
forecasts, and subjective considerations such as overall employee
morale, succession planning, general personnel problems, and the Company's
competitive position. The Compensation Committee believes that the
executive salaries established by the Compensation 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 1997, Company executives were eligible to receive
quarterly and/or 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.
Annual Cash Incentives for Messrs. Sullivan, Basham, Gannon,
and Merritt. Messrs. Sullivan, Basham, Gannon, and Merritt were eligible to
receive annual cash bonus awards 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 stockholder expectations.
In the event the Company met or exceeded the after-tax earnings portion of the
Company's financial plan for the year, in 1997 Messrs. Sullivan, Basham,
Gannon, and Merritt would earn a bonus of 25% of each executive's base salary.
Also in such event, the Compensation Committee would establish a bonus pool
equal to 25% of the difference between the actual after-tax earnings and 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 1997 were awarded to the
named executive officers, including Mr. Sullivan.
Annual Cash Incentives for Mr. Avery. Mr. Avery participated in
the Company's Corporate Employee Bonus Plan, which bonus plan provides for a
bonus based upon the percentage that the after-tax earnings of the Company
meets or exceeds the after-tax earnings goal of the Company's annual financial
plan, determined by dividing the Company's after-tax earnings for the year by
the after tax earnings reflected in the financial plan (the "Percentage of
Plan Achieved"). For fiscal 1997, the Percentage of Plan Achieved equaled 96.3%
and eligible employees earned a bonus equal to 8.1% of their base salary.
In 1997, Mr. Avery received a bonus of $16,200 under this plan.
Quarterly Cash Incentives for Mr. Avery. The Compensation
Committee believes that the success of restaurant operations is essential
to the Company's success, and established a separate quarterly incentive
program for Mr. Avery. In 1997, 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 a 1%
adjustment for each 1% above or below the operational plan. In 1997, Mr.
Avery earned quarterly bonuses aggregating $363,013.
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
9<PAGE>
Option Committee are executive officers of the Company. Effective February 28,
1997, the Amended and Restated Stock Option Plan is administered by the
Compensation Committee.
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 stockholders 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 stockholders 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), managing partners of Company
restaurants, 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. Stock options 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 stockholders.
In granting stock options to executive officers, the Compensation 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. The terms of stock options are established by
the Compensation Committee.
Mr. Avery is the sole named executive officer of the Company granted
stock options in 1997. As of February 27, 1998, the named executive officers
appearing in the Summary Compensation Table held stock or the right to acquire
stock representing 19.63% 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) of the Internal Revenue Code of 1986, as
amended (the "Code"), 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 1997 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
10<PAGE>
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 stockholders.
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, none of whom is an officer or employee of the
Company. Mr. Bridges serves as Chairman of the Compensation Committee.
Until February 28, 1997, the Stock Option Committee of the Board consisted
of Chris T. 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 employees of the Company receive
fees of $15,000 per year, $1,000 per Board meeting attended, and $500 per
committee meeting attended, plus the expenses of attending meetings. In
July, 1997, the Board adopted the Outback Steakhouse, Inc. Directors'
Deferred Compensation and Stock Plan ("Stock Plan"). Under the terms of the
Stock Plan, directors who are not employees of the Company are required to
receive 50% of their total fees in Common Stock of the Company and may
choose to receive the remaining 50% in cash and/or shares of Common Stock
in the Company. The receipt of any portion in shares of Common Stock of the
Company may be deferred for a period of time, as determined by each
director. In 1997, Messrs. Brabson, Bridges, Carey and Flom each received
$10,500 in cash and $9,500 in Common Stock; Mr. Selmon received $10,500 in
cash and $8,500 in Common Stock; and Mrs. Fields-Rose received $9,000 cash
and $7,500 in Common Stock. Mr. Wilt was elected to the Board in July,
1997, and his fees in the amount of $9,500 were paid in Common Stock.
Generally, upon election to the Board, each director who is not an
executive officer is 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.
11<PAGE>
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 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 as quoted on the NASDAQ
National Market System or the principal exchange on which the Company's
Common Stock is then traded for 30 consecutive trading days ending on the
business day prior to the Executive's death. 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 as quoted on the
NASDAQ National Market System or the principal exchange on which the
Company's Common Stock is then traded for 30 consecutive trading days
ending on the business day prior to the date of public disclosure of the
accident or illness. 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 February 27, 1998, Messrs. Sullivan, Basham, and Gannon
beneficially owned an aggregate of 8,755,876 shares of the Company's Common
Stock with a value of approximately $313,022,567 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 deems appropriate.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely upon review of the Forms 3, 4 and 5 furnished to the
Company, one Form 3 and one Form 4 as required by Section 16(a) of the
Securities Exchange Act of 1934 for Toby S. Wilt, in connection with his
election as a new director of the Company, and in connection with the
Company's grant of stock options to him, respectively, were not timely
filed.
12<PAGE>
PERFORMANCE GRAPH
The following line graph compares the Company's cumulative total
stockholder return with the cumulative total stockholder 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 ended
December 31, 1997:
[Note: A line graph appears here depicting the data in the following table.]
</TABLE>
<TABLE>
<CAPTION>
1992 1993 1994 1995 1996 1997
<C> <C> <C> <C> <C> <C>
Outback Steakhouse, Inc. $100 $132 $122 $186 $138 $149
Dow Jones Global US $100 $110 $111 $153 $188 $251
Dow Jones Entertainment & Leisure - Restaurant $100 $117 $111 $159 $162 $168
</TABLE>
SELECTION OF INDEPENDENT AUDITORS
At the meeting of the Board of the Company held on January 28, 1998,
the Board selected Deloitte & Touche to serve as the independent auditors
for the Company and its subsidiaries for the year ended December 31, 1997.
Representatives of Deloitte & Touche are expected to be present at the
stockholders' meeting with the opportunity to make a statement, if they
desire to do so, and to respond to appropriate questions from stockholders.
13<PAGE>
STOCKHOLDER PROPOSALS
Any stockholder who intends to present a proposal at the 1999 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 16, 1998. 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 the Board on behalf of the
Company. 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. Pursuant to the Company's Certificate of Incorporation
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 proposal 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 13, 1998 JOSEPH J. KADOW
Secretary
14
<PAGE> FRONT SIDE OF PROXY CARD
OUTBACK STEAKHOUSE, INC.
550 North Reo Street, Suite 200
Tampa, Florida 33609
COMMON STOCK PROXY
ANNUAL MEETING OF SHAREHOLDERS
To be held on April 15, 1998
This Proxy is solicited on behalf of the Board of Directors
The undersigned hereby appoints Robert D. Basham, Chris T. Sullivan,
and Joseph J. Kadow, and each of them, as Proxy holders and attorneys, with
full power of substitution, to appear and vote all the Common Stock of Outback
Steakhouse, Inc. (the "Company"), which the undersigned shall be entitled to
vote at the Annual Meeting of Stockholders of the Company, to be held at the
Tampa Convention Center, 333 South Franklin Street, Tampa, Florida, on
Wednesday, April 15, 1998, at 10:00 a.m., Tampa time, and at any adjournments
or postponements thereof, hereby revoking any and all proxies heretofore given,
and authorizes and directs said Proxy holders to vote all the Common Stock of
the Company represented by this Proxy as follows, with the understanding that
if no directions are given below, said changes will be voted FOR the election
of the five Directors nominated by the Board of Directors and FOR the proposals
set forth below.
(Continued, and to be executed and dated on the other side.)
OUTBACK STEAKHOUSE, INC.
P.O. BOX 11016
NEW YORK, N.Y. 10203-0016
<PAGE>
BACK PAGE OF PROXY CARD
(Note: Entire pack page of proxy card printed in red.)
1. ELECTION OF DIRECTORS
FOR ALL NOMINEES LISTED BELOW [ ]
WITHHOLD AUTHORITY TO VOTE FOR ALL NOMINEES LISTED BELOW. [ ]
*EXCEPTIONS [ ]
NOMINEES: PAUL E. AVERY, JOHN A. BRABSON, JR., CHARLES H. BRIDGES,
J. TIMOTHY GANNON, LEE ROY SELMON
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE,
MARK THE "EXCEPTIONS" BOX AND WRITE THAT NOMINEE'S NAME IN THE SPACE
PROVIDED BELOW.)
*EXCEPTIONS:___________________________________________________________
2. IN THEIR DISCRETION TO ACT ON ANY OTHER BUSINESS AS MAY PROPERLY COME
BEFORE THE ANNUAL MEETING OR ANY ADJOURNMENT OR POSTPONEMENT THEREOF.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
CHANGE OF ADDRESS AND OR COMMENTS MARK HERE [ ]
YOUR SIGNATURE ON THIS PROXY FORM SHOULD BE EXACTLY AS THE NAME APPEARING
HEREON. PERSONS SIGNING AS EXECUTORS, ADMINISTRATORS, TRUSTEES AND SIMILAR
CAPACITIES SHOULD SO INDICATE. FOR JOINT ACCOUNTS IN THE NAME OF EACH JOINT
OWNER SHOULD BE SIGNED.
DATED _____________________, 1998
_________________________________
SIGNATURE
_________________________________
SIGNATURE, IF HELD JOINTLY
SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
VOTES MUST BE INDICATES (X) IN BLACK OR BLUE INK. [ ]
