<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 22, 1999
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 Thursday, April 22, 1999
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 and
until his or her successor is duly elected and qualified;
2. 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 15,000,000 to 22,500,000, and to change the
maximum number of shares of Common Stock for which options may be granted
to any one individual from 900,000 over the term of the plan to 900,000
per year; and
3. To transact such other business as may properly come before the meeting.
Only stockholders of record at the close of business on February 26, 1999
are entitled to notice of and to vote at the meeting or any adjournment or
postponement of the meeting.
By Order of the Board of Directors
March 19, 1999 JOSEPH J. KADOW
Secretary
Stockholders who are unable to attend the meeting in person are urged to
complete, date and sign the enclosed proxy and return it in the enclosed
postage pre-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 Thursday, April 22, 1999
at 10:00 A.M., Tampa time, at the Tampa Convention Center, 333 South Franklin
Street, Tampa, Florida, and at any adjournment or postponement of the meeting.
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, 1998 are first being sent to stockholders on or about
March 19, 1999.
The close of business on February 26, 1999 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 74,314,968 shares
of Common Stock, $.01 par value ("Common Stock"), each of which will be
entitled to one vote. These share numbers and all share numbers throughout
this Proxy Statement reflect the Company's 3-for-2 stock split paid in the
form of a stock dividend on March 2, 1999 to holders of record on
February 16, 1999.
ELECTION OF DIRECTORS
The Board of Directors (the "Board") has fixed the number of directors of
the Company, pursuant to the Company's Bylaws, at thirteen. The thirteen
directors are divided into two classes of four directors each and one class
of five directors. At the meeting, the stockholders will vote on the election
of the four nominees named below, each to serve for a term of three years and
until his or her successor is duly elected and qualified. 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. Consequently, the four
nominees who receive the greatest number of votes will be elected as directors
of the Company. Common Stock represented by proxies, unless otherwise
specified, will be voted for the election of the four nominees named below.
The following information identifies 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
---- --- -------- -------
Robert D. Basham.. . . . . . . . . . . . . . . . 51 1991 2002
W. R. Carey, Jr. . . . . . . . . . . . . . . . . 51 1992 2002
Nancy Schneid. . . . . . . . . . . . . . . . . . 40 1995 2002
Toby S. Wilt . . . . . . . . . . . . . . . . . . 54 1997 2002
Robert D. Basham . . Founder, President and Chief Operating Officer
of the Company since its formation in 1991.
<PAGE>
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, Inc. and Didax, Inc.
Nancy Schneid. . . . Vice President-Marketing of Outback
Steakhouse of Florida, Inc. ("OSF"), the
Company's predecessor and wholly owned
subsidiary, since 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.
Directors Whose Terms Will Continue After the Annual Meeting
Director Term
Name Age Since Expires
---- --- -------- -------
Paul E. Avery. . . . . . . . . . . . . . . . . . 39 1998 2001
John A. Brabson, Jr. . . . . . . . . . . . . . . 58 1992 2001
Charles H. Bridges . . . . . . . . . . . . . . . 68 1992 2001
Debbi Fields-Rose. . . . . . . . . . . . . . . . 42 1996 2000
Edward L. Flom . . . . . . . . . . . . . . . . . 69 1991 2000
J. Timothy Gannon. . . . . . . . . . . . . . . . 50 1991 2001
Robert S. Merritt. . . . . . . . . . . . . . . . 47 1992 2000
Lee Roy Selmon . . . . . . . . . . . . . . . . . 44 1994 2001
Chris T. Sullivan. . . . . . . . . . . . . . . . 51 1991 2000
Paul E. Avery. . . . President of OSF since April 1997. From 1993
to 1997, Mr. Avery served as Senior Vice
President of OSF.
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., a gas service utility company.
Charles H. Bridges Vice President, Treasurer and director,
since 1993, of Matilda Management Company,
a private restaurant management company and
a former franchisee of the Company that
operated Outback Steakhouse(R) restaurants in
northern California.
Debbi Fields-Rose Founder of Mrs. Fields, Inc., an
international franchisor and operator of
retail dessert stores, serving as 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., a retail
electric service company.
2<PAGE>
J. Timothy Gannon Founder and Senior Vice President of
the Company since its formation in 1991.
Robert S. Merritt Senior Vice President-Finance, Chief
Financial Officer and Treasurer of the
Company since 1991.
Lee Roy Selmon . . . Associate Athletic Director for External
Affairs, University of South Florida since
1993.
Chris T. Sullivan Founder, Chairman and Chief Executive
Officer of the Company since its formation
in 1991. Mr. Sullivan also serves as a
director of Mannatech, Incorporated, which
develops and sells proprietary nutritional
supplements and topical products.
The Board held five meetings in 1998. Each director attended 75% or more of
the meetings of the Board and 100% of the committees of which he or she is a
member. The Board has an Audit Committee and a Compensation Committee. The
Board does not have a Nominating Committee.
The members of the Audit Committee are Messrs. Brabson, Carey, and Wilt and
Mrs. Fields-Rose. Mr. Carey serves as Chairman of the Audit Committee. The
Audit Committee held two meetings during 1998. 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. Selmon serves as Chairman of the Compensation Committee. The
Compensation Committee held two meetings during 1998. The Compensation
Committee is responsible for establishing the compensation of executive
officers, and benefits provided under the Company's Amended and Restated
Stock Option Plan.
3<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table describes the beneficial ownership of the Company's
Common Stock as of March 3, 1999 (except as noted) by each person known to the
Company to beneficially own 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. All share
numbers reflect the Company's 3-for-2 stock split paid in the form of a stock
dividend on March 2, 1999 to holders of record on February 16, 1999.
<CAPTION>
Amount Percent
Beneficially of
Name of Beneficial Owner Owned (F1) Class
------------------------ ------------- ---------
<S> <C> <C>
Chris T. Sullivan<F2><F3>. . . . . . . . . . . . 11,919,959 16.04%
Robert D. Basham<F2><F4> . . . . . . . . . . . . 11,753,090 15.81%
J. Timothy Gannon<F2><F5>. . . . . . . . . . . . 11,530,237 15.51%
Robert S. Merritt<F6>. . . . . . . . . . . . . . 239,090 *
Paul E. Avery<F7> . . . . . . . . . . . . . . . 271,830 *
Joseph J. Kadow<F8> . . . . . . . . . . . . . . 87,750 *
John A. Brabson, Jr.<F9> . . . . . . . . . . . . 40,675 *
Charles H. Bridges <F10> . . . . . . . . . . . . 0 *
W. R. Carey, Jr.<F11>. . . . . . . . . . . . . . 45,000 *
Debbi Fields-Rose<F12> . . . . . . . . . . . . . 45,000 *
Edward L. Flom<F13>. . . . . . . . . . . . . . . 129,328 *
Nancy Schneid<F14> . . . . . . . . . . . . . . . 127,276 *
Lee Roy Selmon<F15>. . . . . . . . . . . . . . . 45,000 *
Toby S. Wilt<F16>. . . . . . . . . . . . . . . . 45,000 *
Multi-Venture Partners, Ltd.<F2>.. . . . . . . . 11,530,237 15.51%
T. Rowe Price Associates, Inc.<F17>. . . . . . . 6,938,550 9.33%
FMR Corp. <F18>. . . . . . . . . . . . . . . . . 4,620,000 6.22%
All directors and executive officers as a group
(14 persons) . . . . . . . . . . . . . . . . . 13,218,761 17.58%
________________________
*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 .637% general partnership interest in MVP.
Mr. Sullivan owns a 27.883% limited partner interest in MVP and 40% of the
member interests in SBG; Mr. Basham owns a 50.367% limited partner
interest in MVP
4<PAGE>
and 40% of the member interests in SBG; and Mr. Gannon owns a 21.113%
limited partner interest in MVP and 20% of the member interests in SBG.
<F3> Consists of (i) 11,530,237 shares owned by MVP; (ii) 346,938 shares owned
by Sullivan Family Investments, Ltd., a family limited partnership of
which Mr. Sullivan serves as general partner; and (iii) 2,568 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 11,530,237 shares owned by MVP. Mr. Basham shares voting and
dispositive power with respect to Common Stock owned by MVP.
<F5> Consists of 11,530,237 shares owned by MVP. Mr. Gannon shares voting
and dispositive power with respect to Common Stock owned by MVP.
<F6> Consists of 194,059 and 45,000 shares underlying stock options that Mr.
Merritt has the right to acquire at exercise prices of $0.19 and $17.59
per share, respectively. Does not include 817,500 shares underlying
stock options that are not exercisable within 60 days of March 3, 1999.
<F7> Consists of 69,330, 112,500, 60,000, and 30,000 shares underlying stock
options that Mr. Avery has the right to acquire at exercise prices of
$0.65, $14.33, $17.67 and $15.00 per share, respectively. Does not
include 210,000 shares underlying stock options that are not exercisable
within 60 days of March 3, 1999.
<F8> Consists of 78,750 and 9,000 shares underlying stock options that
Mr. Kadow has the right to acquire at exercise prices of $16.11 and
$15.00 per share, respectively. Does not include 186,000 shares underlying
stock options that are not exercisable within 60 days of March 3, 1999.
<F9> Consists of (i) 15,003 shares underlying stock options that Mr. Brabson
has the right to acquire at an exercise price of $6.67 per share; and
(ii) 1,500 shares owned by The John A. Brabson, Jr. Money Purchase
Pension Plan f/b/o John A. Brabson, Jr. Does not include shares deferred
under the Directors' Deferred Compensation and Stock Plan.
<F10>Does not include shares deferred under the Directors' Deferred
Compensation and Stock Plan.
<F11>Consists of 45,000 shares underlying stock options that Mr. Carey has
the right to acquire at an exercise price of $10.67 per share. Does not
include shares deferred under the Directors' Deferred Compensation and
Stock Plan.
<F12>Consists of 45,000 shares underlying stock options that Mrs. Fields-Rose
has the right to acquire at an exercise price of $21.00 per share. Does
not include shares deferred under the Directors' Deferred Compensation
and Stock Plan.
<F13>Consists of 129,328 shares held by the Edward Leonard Flom Revocable
Trust of which Mr. Flom is the grantor and sole trustee. Does not include
shares deferred under the Directors' Deferred Compensation and Stock Plan.
5<PAGE>
<F14>Consists of 92,250, 12,000 and 6,000 shares underlying stock options that
Ms. Schneid has the right to acquire at exercise prices of $.75, $17.47
and $15.00 per share, respectively. Does not include 117,000 shares
underlying stock options that are not exercisable within 60 days of
March 3, 1999.
<F15>Consists of 45,000 shares underlying stock options that Mr. Selmon has
the right to acquire at an exercise price of $17.50 per share. Does not
include shares deferred under the Directors' Deferred Compensation and
Stock Plan.
<F16>Includes 15,000 shares underlying stock options that Mr. Wilt has the
right to acquire at an exercise price of $15.00 per share. Does not
include 30,000 shares underlying stock options that are not exercisable
within 60 days of March 3, 1999. Does not include shares deferred under
the Directors' Deferred Compensation and Stock Plan.
<F17>Based on a Schedule 13G filed by T. Rowe Price Associates, Inc., a
Maryland corporation ("T. Rowe Price") with the Securities and Exchange
Commission ("SEC") on February 10, 1999, reflecting beneficial ownership
as of December 31, 1998. These shares are owned by various individual and
institutional investors for which T. Rowe Price serves as investment
adviser with power to direct investments. T. Rowe Price has sole power to
vote 794,568 of the shares. For purposes of the reporting requirements of
the Securities Exchange Act of 1934 ("Exchange Act"), T. Rowe Price is
deemed to be a beneficial owner of such shares; however, T. Rowe Price
expressly disclaims that it is, in fact, the beneficial owner of such
shares.
<F18>Based on a Schedule 13G filed by FMR Corp., a Massachusetts corporation,
with the SEC on February 12, 1999, reflecting beneficial ownership as of
December 31, 1998. Includes (i) 4,136,700 shares beneficially owned by
Fidelity Management & Research Company ("Fidelity"), and (ii) 483,300
shares owned by Fidelity Management Trust Company ("FMTC"). Fidelity and
FMTC are wholly-owned subsidiaries of FMR Corp. Fidelity is the beneficial
owner of shares as a result of acting as investment adviser to several
investment companies registered under Section 8 of the Investment Company
Act of 1940 ("Fidelity Funds"). Edward C. Johnson, III, Chairman of FMR
Corp., and FMR Corp., through their control of Fidelity and the Fidelity
Funds each has sole power to dispose of the 4,136,700 shares owned by the
Fidelity Funds. Neither FMR Corp. nor Edward C. Johnson, III has the sole
power to vote or direct the voting of the shares owned directly by the
Fidelity Funds, which power resides with the Fidelity Funds' Boards of
Trustees. Edward C. Johnson, III, and FMR Corp., through their control of
FMTC, have sole dispositive power over 322,200 shares and sole power to
vote or direct the voting of 483,300 shares. Edward C. Johnson, III owns
12.0% and Abigail Johnson owns 24.5% of the outstanding voting common
stock of FMR Corp.
The mailing address of the Company and of Messrs. Sullivan, Basham and
Gannon is 550 North Reo Street, Suite 200, Tampa, Florida 33609. The address
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. The address of FMR Corp. is 82 Devonshire Street, Boston,
Massachusetts 02109.
6<PAGE>
EXECUTIVE COMPENSATION
The following table describes the 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 ($) ($)<F1> ($) ($) (#) ($) ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Chris T. Sullivan 1998 $410,000 $ 0
Chairman and Chief 1997 $400,000 $ 0
Executive Officer 1996 $280,000 $120,000
Robert D. Basham 1998 $410,000 $ 0
President and Chief 1997 $400,000 $ 0
Operating Officer 1996 $280,000 $120,000
J. Timothy Gannon 1998 $305,000 $ 0
Senior Vice President 1997 $290,000 $ 0
1996 $220,000 $ 60,000
Paul E. Avery 1998 $400,000 $651,273
President of OSF 1997 $200,000 $379,213 150,000(2)
1996 $200,000 $280,400
Nancy Schneid 1998 $198,957 $ 98,608
Vice President-Marketing 1997 $168,000 $ 12,000 30,000(2)
of OSF 1996 $160,000 $ 18,900
<F1>Bonus amounts paid in 1996 to Messrs. Sullivan, Basham and
Gannon represent amounts paid under a quarterly bonus plan.
This quarterly bonus plan was eliminated in 1997. Messrs.
Sullivan, Basham, and Gannon are each entitled to receive an
annual cash award based upon the Company meeting or exceeding
specific targets for earnings. Bonus amounts paid in 1998 to
Ms. Schneid represent amounts paid under the Company's
Corporate Employee Bonus Plan and a discretionary bonus. Bonus
amounts paid in 1998 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-Report by the
Compensation Committee on Executive Compensation-Cash
Incentives" for a discussion of these plans.
<F2>Securities underlying options/SARs reflect the Company's 3-for-2
stock split paid in the form of a stock dividend on March 2,
1999 to holders of record on February 16, 1999.
7<PAGE>
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>
Nancy Schneid<F2> 22,500 $501,924 114,750 48,000 $4,285,396 $1,148,052
Paul E. Avery<F3> 30,000 $735,400 256,830 270,000 $8,011,556 $6,387,880
_______________________
*Based on the average high and low sales prices of the Company's Common Stock on December 31, 1998 as
quoted on the Nasdaq National Market System.
<F1> All share numbers in this table reflect the Company's 3-for-2 stock split paid in the form
of a stock dividend on March 2, 1999 to the holders of record on February 16, 1999.
<F2> Of the 162,750 stock options held by Ms. Schneid as of December 31, 1998, (i) 102,750 were
granted in May 1991, expire on May 3, 2001, and were exercisable in full as of
December 31, 1998 at an exercise price of $0.75 per share, (ii) 30,000 were granted on
July 1, 1994, expire on July 1, 2004, and are exercisable as follows at an exercise price
of $17.47 per share: (a) 6,000 shares on or after July 1, 1997, (b) 6,000 shares on or after
July 1, 1998, and (c) 18,000 shares on or after July 1, 1999, and (iii) 30,000 were granted
on July 23, 1997, expire on July 23, 2007, and are exercisable as follows at an exercise
price of $15.00 per share: (a) 6,000 shares on or after January 1, 1999, (b) 6,000 shares
on or after January 1, 2000, and (c) 18,000 shares on or after January 1, 2001.
<F3> Of the 526,830 stock options held by Mr. Avery as of December 31, 1998, (i) 114,330 were
granted in October 1990, expire on January 1, 2000, and were exercisable in full as of
December 31, 1998 at an exercise price of $0.65 per share; (ii) 112,500 were granted
in September 1993, expire on December 31, 2003, and were exercisable in full as of
December 31, 1998 at an exercise price of $14.33 per share; (iii) 150,000 were granted on
January 24, 1995, expire on January 25, 2005, and are exercisable as follows at an exercise
price of $17.67 per share: (a) 30,000 shares on or after January 25, 1998, (b) 30,000 shares
on or after January 25, 1999, and (c) 90,000 shares on or after January 24, 2000; and
(iv) 150,000 were granted on July 23, 1997, expire on July 23, 2007, and are exercisable as
follows at an exercise price of $15.00 per share: (a) 30,000 shares on or after
January 1, 1999, (b) 30,000 shares on or after January 1, 2000, and (c) 90,000 shares on
or after January 1, 2001.
8<PAGE>
Report by the Compensation 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. 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 Exchange Act.
The Compensation Committee's primary objective with respect to executive
compensation is to establish programs that 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 1998 that
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 to closely align the interests of the Company's executives with
the long-term interests of stockholders that 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
that 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 1998, 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 that are below "market" rates, as
determined from information gathered by the Company from companies that are
similar in size and in the same industry group as the Company and that 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 1997 to 1998 from $400,000 to $410,000, 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 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.
9<PAGE>
Cash Incentives. In 1998, 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 that are designed to provide
competitive incentive pay only in the event such objectives are met or exceeded.
Annual Cash Incentives for Messrs. Sullivan, Basham, and Gannon. Messrs.
Sullivan, Basham and Gannon 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 1998 Messrs. Sullivan, Basham and Gannon 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 1998 were awarded to the named executive officers, including
Mr. Sullivan.
Annual Cash Incentives for Mr. Avery and Ms. Schneid. All executive
officers other than Messrs. Sullivan, Basham and Gannon participate 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 1998, the Percentage of Plan Achieved equaled 103.5% and
eligible executive employees earned a bonus equal to 17.5% of their base salary.
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 1998, 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 $150,000
for that calendar quarter, subject to a 1% adjustment for each 1% above or
below the operational plan. In 1998, Mr. Avery earned quarterly bonuses
aggregating $581,273 under this plan.
Discretionary Bonus for Ms. Schnied. The Compensation Committee granted
Ms. Schneid a special discretionary bonus in the amount of $63,791 to reward
her exceptional individual performance in 1998 and during her long tenure with
the Company.
Long-Term Stock Incentives. The Company's Amended and Restated Stock Option
Plan (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.
10<PAGE>
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 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.
No executive officer of the Company was granted stock options in 1998. As
of March 3, 1999, the named executive officers appearing in the Summary
Compensation Table held stock or the right to acquire stock representing
16.79% of the Company's outstanding Common Stock, assuming all outstanding
options exercisable within 60 days of March 3, 1999 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 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.
As of January 1, 1998, Mr. Avery had 144,330 stock options that expire
on January 1, 2000. Mr. Avery exceeded the Dollar Limitation for the year
1998 as a result of bonuses from the Company meeting its operational plan and
Percentage of Plan Achieved, as described above, and his exercise of 30,000
stock options. Deductibility of compensation in future years to Mr. Avery and
Ms. Schneid may be affected by the Dollar Limitation if they remain covered
employees and they exercise certain of their options in amounts that would
result in compensation to them exceeding the Dollar Limitation in any year.
Deductibility of compensation in future years to Mr. Merritt may be affected
by the Dollar Limitation if he becomes a covered employee, and he exercises
certain of his options in amounts that would result in compensation to him
exceeding the Dollar Limitation in any year. As of December 31, 1998,
Mr. Merritt held options to acquire 451,309 shares of the Company's Common
Stock with a value of $15,940,212. Mr. Merritt's options expire as follows:
338,809 on January 1, 2000 and 112,500 on April 5, 2005. Mr. Avery held
options to acquire 526,830 shares of the Company's Common Stock with a value
of $14,399,436. Mr. Avery's options expire as follows: 114,330 on
January 1, 2000; 112,500 on December 31, 2003; 150,000 on January 24, 2005;
and 150,000 on July 23, 2007. Ms. Schneid held options to acquire 114,750
shares of the Company's Common Stock with a value of $4,572,099. Ms. Schneid's
options expire as follows: 102,750 on May 3, 2001; 30,000 on
11<PAGE>
July 1, 2004; and 30,000 on July 23, 2007. 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 Limitation.
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
Charles H. Bridges
Edward L. Flom
Lee Roy Selmon, Chairman
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 or was an officer or
employee of the Company or any of its subsidiaries. Mr. Selmon serves as
Chairman of the Compensation Committee.
Directors' Compensation
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 1998, Messrs. Bridges,
Carey and Selmon each received $10,000 in cash and $10,000 in Common Stock;
Mr. Wilt received $9,000 in cash and $9,000 in Common Stock; and Mr. Brabson
and Mrs. Fields-Rose each received $9,500 cash and $9,500 in Common Stock.
Mr. Flom elected to receive his fees, in the amount of $20,000, all in Common
Stock. All of the fees taken in the form of Common Stock have been deferred.
Generally, upon election to the Board, each director who is not an
executive officer is granted a one-time stock option to acquire 45,000 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 National Market
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.
12<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, all 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 before 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 before the date of public disclosure
of the accident or illness. The maximum dollar amount of Common Stock that
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. The Agreements will remain in place for so long as the Board of
Directors deems appropriate.
As of March 3, 1999, Messrs. Sullivan, Basham, and Gannon beneficially
owned an aggregate of 12,142,912 shares of the Company's Common Stock with a
value of approximately $393,123,539 based on the closing sale price of the
Company's Common Stock on that date as quoted on the Nasdaq National Market
System. These share numbers reflect the Company's 3-for-2 stock split paid
in the form of a stock dividend on March 2, 1999 to the holders of record on
February 16, 1999.
13<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, the Dow Jones Entertainment and Leisure Index,
and the Dow Jones Restaurants Index for the last five full fiscal years of
the Company ended December 31, 1998:
[Note: A line graph appears here depicting the data in the following table.]
1993 1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C> <C>
OUTBACK STEAKHOUSE INC. 100 92 140 105 112 156
DOW JONES EQUITY MARKET 100 101 139 172 229 294
DOW JONES ENTERTAINMENT & LEISURE 100 91 121 132 162 214
DOW JONES RESTAURANTS 100 95 136 139 143 217
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Robert D. Basham, a Director, President and Chief Operating Officer of
the Company, together with J. Timothy Gannon, a Director and Senior Vice
President of the Company, own all of the outstanding common stock of
Walkabout Air, Inc., a Florida corporation ("Walkabout"), and serve as its
only directors and officers. Walkabout provides jet charter services to the
Company. For the year ended December 31, 1998, the Company paid Walkabout an
aggregate of $90,018 for charter services. The Company believes that the
services provided by Walkabout are comparable to services provided by other
jet charter services, and that the payments made to Walkabout represent less
than the Company would have paid for comparable services from other jet
charter services.
14<PAGE>
On December 23, 1998, Boomerang Air, Inc., a wholly owned subsidiary of
OSF, purchased a 1976 Sabreliner 80 aircraft (the "Aircraft") from Walkabout
Air, Inc. Messrs. Basham and Gannon owned all of the outstanding common stock
of Walkabout Air, Inc. at the time of the transfer and served as its only
directors and officers. The purchase price paid by Boomerang for the Aircraft
was $1,350,000. The value of the Aircraft was established by the Board after
obtaining two appraisals estimating the value at $1,300,000 and $1,410,000,
respectively. Boomerang initially purchased the Aircraft on December 8, 1997
for $1,125,000.
In 1998, OSF paid to Tampa Bay Devil Rays, Ltd., the owners of the Tampa
Bay Devil Rays National League Baseball Franchise, the aggregate amount of
$350,000 to lease four signs for advertising pursuant to a contract entered
into on September 9, 1996 that extends through 2002. The amounts to be
paid to Tampa Bay Devil Rays, Ltd., under the contract for future years is:
$360,500 for 1999, $371,315 for 2000, $382,454 for 2001, and $393,928 for 2002.
On February 20, 1995, OSF entered into a Private Suite License Agreement
with Tampa Bay Devil Rays, Ltd., for a private suite at Tropicana Field
located in St. Petersburg, Florida, commencing on March 31, 1998, and ending
on December 31, 2007. The license fee is $100,000 per year.
Mr. Sullivan, through his corporation Out of the Park, Inc., and Mr. Basham,
through his corporation Touch 'Em All, Inc., each own a percentage of Tampa
Bay Devil Rays, Ltd., as general partners. Messrs. Sullivan and Basham own all
of the outstanding common stock of their respective corporations and serve as
their only directors and officers.
PROPOSAL ONE
Proposed Amendments to the Company's
Amended and Restated Stock Option Plan
The Board has approved an amendment (the "Amendment") to the Company's
Amended and Restated Stock Option Plan (the "Stock Option Plan") to increase
the number of shares for which options may be granted under the Stock Option
Plan by 7,500,000, or from 15,000,000 to 22,500,000 and to change the maximum
number of shares of Common Stock for which options may be granted to any
one individual from 900,000 over the term of the plan to 900,000 per year.
All share numbers reflect the Company's 3-for-2 stock split paid in the form
of a stock dividend on March 2, 1999 to holders of record on February 16, 1999.
The Amendment does not change the Stock Option Plan in any other manner. A
copy of the Stock Option Plan, as amended, is attached as Exhibit A and the
description of the Stock Option Plan is qualified in its entirety by reference
to Exhibit A.
The Board believes the increase in the number of shares for which options
may be granted under the Stock Option Plan is necessary to have sufficient
options available (i) for regular one-time grants of options to managing
partners of Company restaurants at the start of their five-year term of
employment; (ii) for grants of options to managing partners of Company
restaurants who complete their five-year term of employment and who extend
their employment for an additional five-year term; and (iii) for grants of
options to officers and other key employees as determined by the
Compensation Committee.
15<PAGE>
In order for options granted under the Stock Option Plan to qualify as
"performance-based compensation" under Section 162(m) of the Code, the Stock
Option Plan is required to have a limit on the number of shares for which
options may be granted to any one individual. The Stock Option Plan currently
provides that the maximum number of shares of Common Stock for which options
may be granted to any one individual during the term of the Stock Option Plan
is 900,000. The Board believes that this limitation is too restrictive and
has approved an amendment to the Stock Option Plan that provides that the
maximum number of shares for which options may be granted to any one
individual is 900,000 per year.
Although stockholder approval of the Amendment is not required under
Delaware law, such approval is required: under the terms of the Stock Option
Plan; by the rules and regulations of Nasdaq National Market System; and
under the Internal Revenue Code of 1986, as amended, to 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 permit 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 22,500,000, and the maximum
number of options that may be granted to any one individual is 900,000 per
year, 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 December 31, 1998, options to purchase approximately
13,073,205 shares had been granted under the Stock Option Plan, 3,843,120
of which have been exercised and 1,996,342 of which were currently
exercisable. These share numbers reflect the Company's 3-for-2 stock split
paid in the form of a stock dividend on March 2, 1999 to holders of record
on February 16, 1999. As of December 31, 1998, three executive officers,
12 non-executive officers, seven outside directors, and 578 current and
former employees have been granted options under the Stock Option Plan. Any
shares not purchased under an option that 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 years after the date of grant (or five 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
16<PAGE>
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 satisfies
appropriate federal withholding or reporting requirements.
(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) that may, under certain circumstances,
result in an alternative minimum tax liability to the optionee under
Section 55 of the Code.
17<PAGE>
(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 of stock options,
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 provided the Company
satisfies appropriate withholding or reporting requirements.
(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.
18<PAGE>
The Board may at any time amend the Stock Option Plan or any part of the
Stock Option Plan as it shall deem advisable. However, no amendment may be
made in any option then outstanding under the Stock Option Plan that would
impair the rights of the optionee without the consent of such optionee.
The affirmative vote of a majority of the Common Stock voting on this
proposal is required for approval. Abstentions and broker non-votes are not
counted as voting.
The Board recommends that the stockholders vote FOR this proposal to amend
the Amended and Restated Stock Option Plan.
SELECTION OF INDEPENDENT AUDITORS
On December 18, 1998, the Company informed representatives of
Deloitte & Touche LLP, the Company's previous independent accountants, that
their firm would no longer be engaged as the principal accountant to audit
the Company's financial statements for the fiscal year ending December 31, 1998
and terminated the relationship effective December 18, 1998. Deloitte & Touche's
reports on the financial statements for the past two fiscal years did not
contain any adverse opinions or disclaimers of opinion and were not qualified
or modified as to uncertainty, audit scope or accounting principles. The
decision to change accountants was recommended and approved by the
Company's Audit Committee of the Board of Directors. In connection with
its audits for the fiscal years ended December 31, 1996 and 1997 and
during the subsequent interim periods, there have been no disagreements
with Deloitte & Touche on any matters of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure. During the
Company's two most recent fiscal years and during the subsequent interim
periods, no "reportable events" (as described in item 304(a)(1)(v) of
Regulation S-K) have occurred.
The Company engaged PricewaterhouseCoopers as its new independent
accountants effective December 18, 1998. During the most recent fiscal year
and through December 18, 1998, the Company has not consulted with
PricewaterhouseCoopers concerning its financial statements, including the
following items: an audit of the Company's financial statements as the
principal accountant, an audit of a significant subsidiary as an independent
accountant, the application of accounting principles to a specified
transaction or the type of audit opinion that might be rendered on the
Company's financial statements or any matter that concerned a disagreement
or "reportable event" with the previous independent accountants.
At the meeting of the Board of the Company held on January 27, 1999,
the Board selected PricewaterhouseCoopers LLP to serve as the independent
auditors for the Company and its subsidiaries for the year ended
December 31, 1998. Representatives of PricewaterhouseCoopers LLP 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. Representatives of Deloitte & Touche LLP will not be
present at the meeting.
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 26, 1999. The
Company will not be
19<PAGE>
required to include in its proxy statement or form of proxy a stockholder
proposal that is received after that date or that otherwise fails to meet
requirements for stockholder proposals established by regulations of the SEC.
OTHER MATTERS
The solicitation of proxies is made by the Board on behalf of the Company.
The Company has also engaged Corporate Investor Communications, Inc., to
solicit proxies on behalf of the Company for a fee of $6,000. 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 internet, 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 by
the proxy 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 four directors as set forth under "Election of Directors" above and
FOR Proposal ONE. Pursuant to 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.
Your presence at the meeting will not operate to revoke your proxy. You may
revoke your proxy at any time if 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 that will be presented
for action at the meeting.
By Order of the Board of Directors
March 19, 1999 JOSEPH J. KADOW
Secretary
20
<PAGE>
EXHIBIT A
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 22,500,000 shares of the
Corporation's Common Stock,
<PAGE>
$.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 for which options may be granted
to any one individual under the Plan during its term is 900,000
per year, 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
A-2<PAGE>
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.
A-3<PAGE>
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 any 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.
A-4
</TABLE>
<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 22, 1999
This Proxy is solicited on behalf of the Board of Directors
The undersigned hereby appoints Robert S. Merritt, 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
Thursday, April 22, 1999, 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 four Directors nominated by the Board of Directors and FOR the proposal
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: ROBERT D. BASHAM, W. R. CAREY, JR., NANCY SCHNEID, TOBY S. WILT
(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. AMEND THE COMPANY'S AMENDED AND RESTATED STOCK OPTION PLAN TO INCREASE
THE NUMBER OF OF SHARES OF COMMON STOCK FOR WHICH OPTIONS MAY BE GRANTED
FROM 15,000,000 TO 22,500,000 AND TO CHANGE THE MAXIMUM NUMBER OF SHARES
OF COMMON STOCK AS TO WHICH OPTIONS MAY BE GRANTED TO ANY ONE INDIVIDUAL
FROM 900,000 OVER THE TERM OF THE PLAN TO 900,000 PER YEAR.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. 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 _____________________, 1999
_________________________________
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. [ ]
