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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Year Ended: DECEMBER 31, 1998 Commission File Number: 0-19334
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OUTBACK STEAKHOUSE, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 59-3061413
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(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
550 NORTH REO STREET, SUITE 200, TAMPA, FLORIDA 33609
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(Address of principal executive offices) (Zip Code)
(813) 282-1225
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(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
NONE
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Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, $.01 PAR VALUE.
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(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in Definitive Proxy or Information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K.
As of March 24, 1999, the aggregate market value of the voting stock
held by nonaffiliates of the Registrant was $1,958,381,724.
As of March 24, 1999, the number of shares outstanding of the
Registrant's Common Stock, $.01 par value was 74,701,744.
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DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Annual Report to Shareholders for the year ended
December 31, 1998 are incorporated by reference in Part II of this report.
Portions of the Registrant's Proxy Statement of Outback Steakhouse, Inc. ("the
Proxy Statement") dated March 19, 1999 for the Annual Meeting of Shareholders
to be held on April 22, 1999 are incorporated by reference in Parts I and III
of this report.
PART I
This Annual Report on Form 10-K and the documents incorporated herein by
reference contain forward-looking statements that have been made pursuant to
the provisions of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements represent the Company's expectations or beliefs
concerning future events, including the following: any statements regarding
future sales and gross profit percentages, any statements regarding the
continuation of historical trends, and any statements regarding the sufficiency
of the Company's cash balances and cash generated from operating and financing
activities for the Company's future liquidity and capital resource needs.
Without limiting the foregoing, the words "believes," "anticipate," "plans,"
"expects," and similar expressions are intended to identify forward-looking
statements. The Company cautions that these statements are further qualified by
important economic and competitive factors that could cause actual results to
differ materially from those in the forward-looking statements, including,
without limitation, risks of the restaurant industry, including a highly
competitive industry with many well-established competitors with greater
financial and other resources than the Company, and the impact changes in
consumer tastes, local, regional and national economic conditions, demographic
trends, employee availability and cost increases. In addition, the Company's
ability to expand is dependent upon various factors, such as the availability
of attractive sites for new restaurants, the ability to negotiate suitable
lease terms, the ability to generate or borrow funds to develop new
restaurants, the ability to obtain various government permits and licenses, and
the recruitment and training of skilled management and restaurant employees.
Accordingly, such forward-looking statements do not purport to be predictions
of future events or circumstances and may not be realized.
ITEM 1. BUSINESS
GENERAL
The Company was incorporated in October 1987 as Multi-Venture Partners, Inc., a
Florida corporation, and in January 1990 the Company changed its name to
Outback Steakhouse, Inc. ("Outback Florida"). Outback Steakhouse, Inc., a
Delaware corporation ("Outback Delaware"), was formed in April 1991 as part of
a corporate reorganization completed in June 1991 in connection with the
Company's initial public offering, as a result of which Outback Delaware became
a holding company for Outback Florida. Carrabba's Italian Grill, Inc. ("CIGI"),
a Florida corporation, was formed in January 1995. Unless the context requires
otherwise, references to the "Company" mean Outback Delaware, its wholly owned
subsidiaries Outback Florida, CIGI and each of the limited partnerships and
joint ventures controlled by the Company.
In April 1993, the Company purchased a 50% interest in the cash flows of two
Carrabba's Italian Grill restaurants located in Houston, Texas (the "Original
Restaurants"), and entered into a 50-50 joint venture with the founders of
Carrabba's to develop additional Carrabba's Italian Grill restaurants
("Carrabba's"). In January 1995, the founders obtained sole ownership of the
Original Restaurants ("Carrabba's"), and the Company obtained sole ownership of
the Carrabba's concept and the four restaurants in Florida. The original 50-50
joint venture continues to develop restaurants in the State of Texas. The
Company has sole ownership of restaurants outside of Texas, and continues to
develop Carrabba's Italian Grills outside of Texas as Company owned
restaurants, and will pay royalties to the founders ranging from 1.0% to 1.5%
of sales of Carrabba's restaurants opened after 1994.
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In the fourth quarter of 1997, the Company recorded a pre-tax charge to
earnings of $26,001,000 which included approximately $23,113,000 for the write
down of certain impaired assets and $2,888,000 related to restaurant closings,
severance and other costs. The write down primarily related to Carrabba's
restaurant properties, nine of which were closed during the fourth quarter of
1997. The charge is presented in the Company's Consolidated Statements of
Income in the line item "Provision for impaired assets and restaurant
closings."
CONCEPTS AND STRATEGIES
As of December 31, 1998, the Company's restaurant system included 540
full-service restaurants operated under the name Outback Steakhouse, 95 of
which were franchised to unaffiliated domestic franchisees and 22 of which were
franchised to unaffiliated international franchisees and one international
restaurant in which it had a direct ownership interest. The system also
included 64 full-service restaurants operated under the name Carrabba's Italian
Grill, 52 of which were Company owned and twelve of which were operated as
development joint ventures. The majority of Outback restaurants serve dinner
only and feature a limited menu of high quality, uniquely seasoned steaks,
prime rib, chops, ribs, chicken, seafood and pasta. Outback also offers
specialty appetizers, including the signature "Bloomin' Onion," desserts and
full liquor service. The majority of Carrabba's restaurants serve dinner only
and feature a limited menu of high quality Italian cuisine including a variety
of pastas, chicken, seafood, veal and wood-fired pizza. Carrabba's also offers
specialty appetizers, desserts, coffees and full liquor service. The Company
believes that it differentiates its Outback Steakhouse and Carrabba's
restaurants by:
- - emphasizing consistently high quality ingredients and preparation of a
limited number of menu items that appeal to a broad array of tastes;
- - featuring generous portions at moderate prices;
- - attracting a diverse mix of customers through a casual dining atmosphere
emphasizing highly attentive service;
- - hiring and retaining experienced restaurant management by providing
general managers the opportunity to purchase a 10% interest in the
restaurants they manage; and
- - limiting service to dinner for the majority of its locations, (generally
from 4:30 p.m. to 11:00 p.m.), which reduces the hours of restaurant
management and employees.
OUTBACK STEAKHOUSE:
Menu. The Outback Steakhouse menu includes several cuts of freshly
prepared, uniquely seasoned and seared steaks, plus prime rib, barbecued ribs,
pork chops, chicken, seafood and pasta. The menu is designed to have a limited
number of selections to permit the greatest attention to quality while offering
sufficient breadth to appeal to all taste preferences. The Company tests new
menu items to replace slower-selling items and regularly upgrades ingredients
and cooking methods to improve quality and consistency of its food offerings.
The menu also includes several specialty appetizers and desserts, together with
full bar service featuring Australian beer and wine. Liquor service accounts
for approximately 13.7% of Outback Steakhouses' revenues. The price range of
appetizers is $1.99 to $6.99 and the price range of entrees is $5.99 to $25.99.
The average check per person was $17.10 during 1998. Outback Steakhouses also
offer a low-priced children's menu, and certain Outback Steakhouses also offer
a separate menu offering larger portions of prime beef with prices ranging from
$18.95 to $23.95.
Casual Atmosphere. Outback Steakhouses feature a casual dining
atmosphere with a decor suggestive of the rustic atmosphere of the Australian
outback. The decor includes blond woods, large booths and tables and Australian
memorabilia such as boomerangs, surfboards, maps and flags.
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Restaurant Management and Employees. The general manager of each
Outback is required to purchase a 10% interest in the restaurant he or she
manages for $25,000, and is required to enter into a five-year employment
agreement. By requiring this level of commitment and by providing the general
manager with a significant stake in the success of the restaurant, the Company
believes that it is able to attract and retain experienced and highly motivated
managers. In addition, since the Company's restaurants are generally open for
dinner only, the Company believes that it has an advantage in attracting and
retaining servers, food preparers and other employees who find the shorter
hours an attractive life-style alternative to restaurants serving both lunch
and dinner.
CARRABBA'S ITALIAN GRILL:
Menu. The Carrabba's Italian Grill menu includes several types of
uniquely prepared Italian dishes including pastas, chicken, seafood, and
wood-fired pizza. The menu is designed to have a limited number of selections
to permit the greatest attention to quality while offering sufficient breadth
to appeal to all taste preferences. The Company tests new menu items to replace
slower-selling items and regularly upgrades ingredients and cooking methods to
improve quality and consistency of its food offerings. The menu also includes
several specialty appetizers, desserts, and coffees, together with full bar
service featuring Italian wines and specialty drinks. Liquor service accounts
for approximately 16.0% of Carrabba's revenues. The price range of appetizers
is $5.99 to $8.99 and the price range of entrees is $7.99 to $15.99. The
average check per person was $17.47 during 1998.
Casual Atmosphere. Carrabba's Italian Grills feature a casual dining
atmosphere with a decor suggestive of a traditional Italian exhibition kitchen
where customers can watch their meals being prepared. The decor includes dark
woods, large booths and tables and Italian memorabilia featuring Carrabba's
family photos, authentic Italian pottery and cooking utensils.
Restaurant Management and Employees. The general manager of each
Carrabba's Italian Grill is required to purchase a 10% interest in the
restaurant he or she manages for $25,000 and is required to enter into a
five-year employment agreement. By requiring this level of commitment and by
providing the general manager with a significant stake in the success of the
restaurant, the Company believes that it is able to attract and retain
experienced and highly motivated managers. In addition, since the Company's
restaurants are generally open for dinner only, the Company believes that it
has an advantage in attracting and retaining servers, food preparers and other
employees who find the shorter hours an attractive life-style alternative to
restaurants serving both lunch and dinner.
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EXPANSION STRATEGY
During the year ended December 31, 1998, 81 Outback Steakhouses and 4
Carrabba's Italian Grills were added to the Company's restaurant system. In
1999 and 2000, the Company expects to develop six to ten Carrabba's
restaurants, the majority of which will be Company owned, in existing markets
where it has demonstrated success. The Company expects to open 80 to 95 Outback
Steakhouse restaurants in 1999 and 2000 of which 50 to 55 are expected to be
Company owned, 15 to 20 of which are expected to be operated by domestic
franchisees, and 10 to 15 of which are expected to be operated by international
franchisees, of which 3 to 5 will be development joint venture restaurants
primarily in Brazil and Hong Kong. During 1999, the Company expects to develop
new Outback Steakhouses and Carrabba's Italian Grills in its existing markets
and in select new domestic and international markets including locations in
Montana, South Dakota, Bahamas, Germany, Hong Kong, Mexico City and Panama.
The above statements regarding the Company's expansion plans
constitute forward looking statements. The Company notes that a variety of
factors could cause the actual results and experience to differ from the
anticipated results referred to above. The Company's development schedule for
new restaurant openings is subject to a number of risk factors that could cause
actual results to differ, including:
(i) Ability to obtain appropriate real estate sites at acceptable prices;
(ii) Ability to obtain all required governmental permits including zoning
approvals and liquor licenses on a timely basis;
(iii) Impact of government moratoriums or approval processes which could
result in significant delays;
(iv) Ability to obtain all necessary contractors and sub-contractors;
(v) Union activities such as picketing and hand billing which could delay
construction;
(vi) Weather and acts of God beyond the Company's control resulting in
construction delays.
The Company utilizes controlled partnerships, in which the Company
owns 51% to 90%, for the development of restaurants in order to attract
experienced restaurant operators and to provide them with the incentive to
actively supervise the development and operation of several restaurants in a
particular market.
The Company also utilizes development joint ventures, in which the
Company owns 50% and its joint venture partner owns 50%, for select Carrabba's
Italian Grills located in Florida and Texas.
Site Selection. The Company currently leases approximately 50% of its
restaurant sites. In the future, the Company expects to construct a significant
number of free standing restaurants on owned or leased sites. The Company's
leased sites are generally located in strip shopping centers. The Company
expects 80% to 90% of new restaurants to be free standing locations. The
Company considers the location of a restaurant to be critical to its long-term
success and devotes significant effort to the investigation and evaluation of
potential sites. The site selection process focuses on trade area demographics,
such as visibility, accessibility and traffic volume. The Company also reviews
potential competition and the profitability of national chain restaurants
operating in the area. Senior management inspects and approves each restaurant
site. It takes approximately 90 to 180 days to complete construction and open a
new restaurant.
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The Company designs the interior of its restaurants in-house and
utilizes outside architects when necessary. A typical Outback Steakhouse is
approximately 6,200 square feet and features a dining room and an island,
full-service liquor bar. The dining area of a typical Outback Steakhouse
consists of 35 to 38 tables and seats approximately 210 people. The bar area
consists of six to nine tables and has seating capacity for approximately 35
people. Appetizers and complete dinners are served in the bar area.
A typical Carrabba's Italian Grill is approximately 6,200 square feet
and features a dining room, pasta bar and an island, full service liquor bar.
The dining area of a typical Carrabba's Italian Grill consists of 34 to 36
tables and seats approximately 160 people. The liquor bar area includes eight
tables and seating capacity for approximately 52 people, and the pasta bar has
seating capacity for approximately 12 people. Appetizers and complete dinners
are served in both the pasta bar and liquor bar.
RESTAURANT LOCATIONS
The following table sets forth the location of each existing Outback
Steakhouse as of December 31, 1998:
<TABLE>
<CAPTION>
UNAFFILIATED UNAFFILIATED
COMPANY OWNED DOMESTIC FRANCHISED INTERNATIONAL
RESTAURANTS RESTAURANTS FRANCHISED RESTAURANTS
------------- ------------------- -----------------------
<S> <C> <C> <C>
Arizona (8) Nevada (7) Alabama (11) Aruba (1)
Arkansas (4) New Jersey (13) Alaska (1) Brazil
Colorado (11) New Mexico (2) California (39) Rio de Janeiro (1)
Delaware (1) New York (17) Connecticut(4) Sao Paulo (1)
Florida (56) North Carolina (23) Florida (1) Canada
Georgia (23) North Dakota (1) Idaho (3) Alberta (2)
Illinois (15) Ohio (23) Massachusetts (8) Ontario (7)
Indiana (14) Oklahoma (7) Mississippi (5) Guam (1)
Iowa (4) Pennsylvania (15) New Hampshire (1) Hawaii (2)
Kansas (4) South Carolina (14) Oregon (7) Korea
Kentucky (8) Tennessee(12) Rhode Island (1) Seoul (2)
Louisiana (12) Texas (42) Tennessee (3) Mexico
Maryland (12) Utah (4) Washington (11) Cancun (1)
Michigan (18) Virginia (24) Peru
Minnesota (7) West Virginia (6) Lima (1)
Missouri (9) Wisconsin (2) Philippines (1)
Nebraska (3) Wyoming (1) Puerto Rico (2)
AFFILIATED
INTERNATIONAL
RESTAURANTS
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Cayman Islands (1)
</TABLE>
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The following table sets forth the location of each existing
Carrabba's Italian Grill as of December 31, 1998:
<TABLE>
<CAPTION>
COMPANY OWNED DEVELOPMENT JOINT
RESTAURANTS VENTURE RESTAURANTS
- ------------- -------------------
<S> <C>
Arizona (3) Florida (3)
Colorado (6) Texas (9)
Georgia (5)
Florida (23)
Maryland (4)
New Jersey (3)
New Mexico (2)
North Carolina (4)
Pennsylvania (1)
Virginia (1)
</TABLE>
RESTAURANT OPERATIONS
Management and Employees. The management staff of a typical Outback
Steakhouse or Carrabba's Italian Grill consists of one general manager, one
assistant manager and one kitchen manager. Each restaurant also employs
approximately 50 to 70 hourly employees, many of whom work part-time. The
general manager of each restaurant has primary responsibility for the
day-to-day operation of his or her restaurant and is required to abide by
Company established operating standards.
Purchasing. The Company's management negotiates directly with
suppliers for most food and beverage products to ensure uniform quality and
adequate supplies and to obtain competitive prices. The Company and its
franchisees purchase substantially all food and beverage products from
authorized local or national suppliers and the Company will periodically make
advance purchases of various inventory items to ensure adequate supply or
obtain favorable pricing. The Company currently purchases substantially all of
its beef from three suppliers. The Company believes that beef of comparable
quality, as well as all other essential food and beverage products are
available, or upon short notice can be made available from alternative
qualified suppliers.
Supervision and Training. The Company requires its area operating
partners and restaurant general managers to have significant experience in the
full-service restaurant industry. In addition, the Company has developed a
comprehensive 12-week training course which all operating partners and general
managers are required to complete. The program emphasizes the Company's
operating strategy, procedures and standards. The Company's senior management
meets quarterly with the Company's operating partners to discuss
business-related issues and share ideas. In addition, members of senior
management regularly visit the restaurants to ensure that the Company's
concept, strategy and standards of quality are being adhered to in all aspects
of restaurant operations.
The restaurant general manager and area operating partners, together
with the Company's President, Regional Vice Presidents, Vice President of
Training and Director of Training, are responsible for selecting and training
the employees for each new restaurant. The training period for new employees
lasts approximately one week and is characterized by on-the-job supervision by
an experienced employee. Ongoing employee training remains the responsibility
of
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the restaurant manager. Written tests and observation in the work place are
used to evaluate each employee's performance. Special emphasis is placed on the
consistency and quality of food preparation and service which is monitored
through monthly meetings between kitchen managers and senior management.
Advertising and Marketing. The Company uses radio and television
advertising in selected markets where it is cost-effective. The Company's goal
is to develop a sufficient number of restaurants in each market it serves to
permit the cost-effective use of radio and television advertising. In addition,
the Company engages in a variety of promotional activities, such as
contributing goods, time and money to charitable, civic and cultural programs,
in order to increase public awareness of the Company's restaurants.
GENERAL MANAGER PROGRAM
The general manager of each Company owned restaurant is required, as a
condition of employment, to sign a five-year employment agreement and is
required to purchase a 10% interest in the restaurant he or she is employed to
manage. The Company requires each new unaffiliated franchisee to provide the
same opportunity to the general manager of each new restaurant opened by that
franchisee. To date, the purchase price for the 10% interest has been fixed at
$25,000. During the five-year employment term, each general manager is
prohibited from selling or otherwise transferring his 10% interest, and after
the five-year term of employment, any sale or transfer of that interest is
subject to certain rights of first refusal as defined in the employment
agreement. In addition, each general manager is required to sell his 10%
interest to his employer or its general partners upon termination of employment
on terms set forth in his employment agreement. The Company intends to continue
the general manager investment program.
OWNERSHIP STRUCTURES
The Company's ownership interests in Outback Steakhouse restaurants
and Carrabba's Italian Grills are divided into two basic categories: (i)
Company owned restaurants which are owned directly by the Company, by limited
partnerships or by controlled joint ventures, and (ii) development joint
ventures. The results of operations of Company owned restaurants are included
in the Company's Consolidated Statements of Income, and the results of
operations of restaurants owned by development joint ventures are accounted for
using the equity method of accounting.
COMPETITION
The restaurant industry is intensely competitive with respect to
price, service, location and food quality, and there are many well-established
competitors with substantially greater financial and other resources than the
Company. Some of the Company's competitors have been in existence for a
substantially longer period than the Company and may be better established in
the markets where the Company's restaurants are or may be located. The
restaurant business is often affected by changes in consumer tastes, national,
regional or local economic conditions, demographic trends, traffic patterns and
the type, number and location of competing restaurants. In addition, factors
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such as inflation, increased food, labor and benefits costs and the
availability of experienced management and hourly employees may adversely
affect the restaurant industry in general and the Company's restaurants in
particular.
UNAFFILIATED FRANCHISE PROGRAM
At December 31, 1998, there were 95 domestic franchised Outback
Steakhouses and 23 international franchised Outback Steakhouses. Each domestic
franchisee paid an initial franchise fee of $40,000 for each restaurant and
pays a continuing monthly royalty of 3% of gross restaurant sales and a monthly
marketing administration fee of 0.5% of gross restaurant sales. In addition,
until such time as the Company establishes a national advertising fund or a
regional advertising cooperative, all franchisees are required to expend, on a
monthly basis, a minimum of 3% of gross restaurant sales on local advertising.
Once the Company establishes a national advertising fund or a regional
advertising cooperative, covered domestic franchisees will be required to
contribute, on a monthly basis, 3.5% of gross restaurant sales to the fund or
cooperative in lieu of local advertising. Initial fees and royalties for
international franchisees vary by market. There were no agreements to franchise
Carrabba's Italian Grills at December 31, 1998.
All unaffiliated franchisees are required to operate their Outback
Steakhouse restaurants in compliance with the Company's methods, standards and
specifications regarding such matters as menu items, ingredients, materials,
supplies, services, fixtures, furnishings, decor and signs although the
franchisee has full discretion to determine the prices to be charged to
customers. In addition, all franchisees are required to purchase all food,
ingredients, supplies and materials from suppliers approved by the Company.
EMPLOYEES
The Company employs approximately 36,500 persons, approximately 250 of
whom are corporate personnel employed by Outback Steakhouse, Carrabba's, and
Outback Steakhouses International franchising group. Approximately 1,600 are
restaurant management personnel and the remainder are hourly restaurant
personnel. Of the approximately 250 corporate employees, 35 are in management
and 215 are administrative or office employees. None of the Company's employees
is covered by a collective bargaining agreement.
TRADEMARKS
The Company regards its Outback Steakhouse service mark, its
Carrabba's Italian Grill service mark and its "Bloomin' Onion" trademark as
having significant value and as being important factors in the marketing of its
restaurants. The Company has also obtained a trademark for several other of its
Outback Steakhouse menu items, and the "No Rules. Just Right." and "Aussie
Mood. Awesome Food." advertising slogans. The Company is aware of names and
marks similar to the service mark of the Company used by other persons in
certain geographic areas in which the Company has restaurants. However, the
Company believes such uses will not adversely affect the Company. The Company's
policy is to pursue registration of its marks whenever possible and to oppose
vigorously any infringement of its marks.
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GOVERNMENT REGULATION
The Company is subject to various federal, state and local laws
affecting its business. Each of the Company's restaurants is subject to
licensing and regulation by a number of governmental authorities, which may
include alcoholic beverage control, health and safety and fire agencies in the
state or municipality in which the restaurant is located. Difficulties in
obtaining or failures to obtain the required licenses or approvals could delay
or prevent the development of a new restaurant in a particular area.
Approximately 14.0% of the Company's revenues is attributable to the
sale of alcoholic beverages. Alcoholic beverage control regulations require
each of the Company's restaurants to apply to a state authority and, in certain
locations, county or municipal authorities for a license or permit to sell
alcoholic beverages on the premises and to provide service for extended hours
and on Sundays. Typically, licenses must be renewed annually and may be revoked
or suspended for cause at any time. Alcoholic beverage control regulations
relate to numerous aspects of daily operations of the Company's restaurants,
including minimum age of patrons and employees, hours of operation,
advertising, wholesale purchasing, inventory control and handling, storage and
dispensing of alcoholic beverages. The failure of a restaurant to obtain or
retain liquor or food service licenses would adversely affect the restaurant's
operations.
The Company may be subject in certain states to "dram-shop" statutes,
which generally provide a person injured by an intoxicated person the right to
recover damages from an establishment which wrongfully served alcoholic
beverages to the intoxicated person. The Company carries liquor liability
coverage as part of its existing comprehensive general liability insurance.
The Company's restaurant operations are also subject to federal and
state minimum wage laws governing such matters as working conditions, overtime
and tip credits. Significant numbers of the Company's food service and
preparation personnel are paid at rates related to the federal minimum wage
and, accordingly, further increases in the minimum wage could increase the
Company's labor costs.
The Americans with Disabilities Act prohibits discrimination in
employment and public accommodations on the basis of disability. The Act became
effective in January 1992 with respect to public accommodation and July 1992
with respect to employment. Under the Act, the Company could be required to
expend funds to modify its restaurant to provide service to, or make reasonable
accommodations for the employment of, disabled persons.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to market risk from changes in interest rates on
debt and changes in commodity prices. The Company's exposure to interest rate
risk relates to its $125 million revolving line of credit with its bank.
Borrowings under the agreement bear interest at rates ranging from 50 to 75
basis points over the 30, 60, 90 or 180 London Interbank Offered Rate. At
December 31, 1998, there was $35,683,000 outstanding on the line of credit.
Many of the food products purchased by the Company and its franchisees are
affected by commodity pricing and are, therefore, subject to unpredictable price
volatility. Extreme changes in commodity prices and/or long-term changes could
affect the Company adversely. However, any changes in commodity prices would
also affect the Company's competitors at about the same time as the Company. We
expect that in most cases the Company could pass increased commodity prices
through to its consumers via increases in menu prices. From time to time,
competitive circumstances could limit menu price flexibility, and in those cases
margins would be negatively impacted by increased commodity prices.
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ITEM 2. PROPERTIES
Approximately 50% of the Company's restaurants are located in leased
space. In the future, the Company intends to continue to construct and own a
significant number of new restaurants on owned or leased land. Initial lease
expirations primarily range from five to ten years, with the majority of the
leases providing for an option to renew for at least one additional term. All
of the Company's leases provide for a minimum annual rent, and most leases call
for additional rent based on sales volume at the particular location over
specified minimum levels. Generally, the leases are net leases which require
the Company to pay the costs of insurance, taxes and a portion of lessors'
operating costs. See page 7 for listing of restaurant locations.
The Company's executive offices are located in approximately 25,800
square feet of leased space in Tampa, Florida, under a lease expiring in 1999.
The Company has signed a new lease for executive offices and corporate
administrative offices in Tampa, Florida, commencing in August 1999 and
expiring in February 2010 for approximately 66,680 square feet.
ITEM 3. LEGAL PROCEEDINGS
The Company is not a party to any litigation other than routine
matters which are incidental to the Company's business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SHAREHOLDERS
There were no matters submitted for vote of security holders during
the fourth quarter of 1998.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCK MATTERS
Filed herewith as Exhibit 13.03 and incorporated herein by reference.
DIVIDEND POLICY:
The Company has never paid a cash dividend on its Common Stock. The
Board of Directors intends to retain earnings of the Company to support
operations and to finance expansion and does not intend to pay cash dividends
on Common Stock for the foreseeable future. As a condition of the Company's
revolving line of credit, the Company is currently restricted from paying cash
dividends, other than in the form of partnership distributions, without the
consent of two-thirds of its lenders. The payment of cash dividends in the
future will depend upon such factors as earnings levels, capital requirements,
the Company's financial condition and other factors deemed relevant by the
Board of Directors.
The Board of Directors authorized a three-for-two stock-split of the
Company's Common Stock to be effected in the form of a stock dividend payable
on March 2, 1999 to the shareholders of record as of February 16, 1999.
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ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Years Ended December 31,
----------------------------------------------------------------------
1998 1997 1996 1995 1994
---------- ---------- -------- -------- --------
(Dollar amounts in thousands,
except per share data)
<S> <C> <C> <C> <C> <C>
Statements of Income Data:
Restaurant sales........................ $1,345,762 $1,142,588 $931,348 $730,204 $515,570
Other revenues.......................... 13,159 9,049 6,052 3,488 1,356
---------- ---------- -------- -------- --------
Revenues ............................... 1,358,921 1,151,637 $937,400 $733,692 $516,926
---------- ---------- -------- -------- --------
Cost of sales .......................... 526,254 440,172 363,285 286,762 202,250
Labor and other related expenses ....... 315,970 272,199 214,038 163,747 110,787
Other operating expenses ............... 290,539 251,959 195,229 150,409 108,952
General & administrative expenses ...... 53,556 43,763 33,829 26,175 18,996
Provision for impaired assets and
restaurant closings (1) .............. 26,001
Loss (income) from operations of
unconsolidated affiliates ............ (514) 467 102 (442) (1,269)
---------- ---------- -------- -------- --------
Total costs and expenses ............... 1,185,805 1,034,561 806,483 626,651 439,716
---------- ---------- -------- -------- --------
Income from operations ................. 173,116 117,076 130,917 107,041 77,210
Interest expense ....................... (1,157) (2,489) (1,096) (1,375) (302)
---------- ---------- -------- -------- --------
Income before elimination of
minority partners' interest
and provision for income taxes ....... 171,959 114,587 129,821 105,666 76,908
Elimination of minority
partners' interest ................... 21,238 19,411 17,925 15,181 11,930
---------- ---------- -------- -------- --------
Income before provision for income taxes 150,721 95,176 111,896 90,485 64,978
Provision for income taxes ............. 53,506 33,724 40,283 29,167 21,602
---------- ---------- -------- -------- --------
Income before cumulative effect of a
change in accounting principle........ 97,215 61,452 71,613 61,318 43,376
Cumulative effect of a change in
accounting principle (net of taxes)... (4,880)
---------- ---------- -------- -------- --------
Net income ............................. $ 92,335 $ 61,452 $ 71,613 $ 61,318 $ 43,376
========== ========== ======== ======== ========
Basic earnings per common share
Income before cumulative effect of
change in accounting principle....... $ 1.32 $ 0.86 $ 1.00 $ 0.87 $ 0.62
Cumulative effect of change in
accounting principle (net of taxes).. (0.06)
---------- ---------- -------- -------- --------
Net income $ 1.26 $ 0.86 $ 1.00 $ 0.87 $ 0.62
========== ========== ======== ======== ========
Diluted earnings per common share
Income before cumulative effect of
change in accounting principle....... $ 1.29 $ 0.84 $ 0.97 $ 0.84 $ 0.61
Cumulative effect of change in
accounting principle (net of taxes).. (0.06)
---------- ---------- -------- -------- --------
Net income $ 1.23 $ 0.84 $ 0.97 $ 0.84 $ 0.61
========== ========== ======== ======== ========
Diluted earnings per common share
Pro forma net income (2) ............... $ 57,911 $ 41,196
======== ========
Pro forma basic earnings per common
share (2) ............................ $ 0.82 $ 0.59
======== ========
Pro forma diluted earnings per
common share (2) ..................... $ 0.79 $ 0.57
======== ========
Basic weighted average number of
common shares outstanding ............ 73,446 71,751 71,720 70,518 69,533
Diluted weighted average number of
common shares outstanding ............. 75,228 72,758 73,934 73,316 71,511
Balance Sheet Data:
Working capital (deficiency) ........... $ 13,241 $ (5,220) $(31,745) $(10,883) $ 19,273
Total assets ........................... 705,211 592,780 469,843 372,271 259,118
Long-term debt ......................... 37,475 68,276 47,595 37,905 20,699
Interest of minority partners in
consolidated partnerships ............ 9,879 4,497 1,569 2,698 2,477
Stockholders' equity ................... 545,046 434,717 342,439 266,764 186,697
</TABLE>
(1) Amount includes approximately $23,113,000 for the write down of certain
impaired assets and $2,888,000 related to restaurant closings, severance
and other costs. The write down primarily related to Carrabba's restaurant
properties, nine of which were closed in the fourth quarter of 1997.
(2) In 1995 and 1996, the Company issued shares of its Common Stock to five of
its franchisees in exchange for all of their outstanding interests in
Outback Steakhouses located in Oklahoma, Nebraska, Arkansas, Kansas, Ohio,
Kentucky, Virginia, Illinois, Missouri and Tennessee. Pro forma amounts
include an adjustment to increase the provision for income taxes to
reflect the anticipated tax as if the merging Companies had not elected to
be taxed under Subchapter S of the Internal Revenue Code.
All applicable share and per share data have been restated to reflect the
retroactive effect of a three-for-two stock split effective on March 2, 1999.
12
<PAGE> 13
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Filed as Exhibit 13.01 and incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Independent Auditors' Report and Consolidated Financial Statements
of the Company are filed herewith as Exhibit 13.02 and are incorporated herein
by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
The Company filed a current report on Form 8-K, Item 4, regarding a
change in the Company's certifying accountants dated December 18, 1998.
13
<PAGE> 14
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this Item concerning the Company's
executive officers and directors is incorporated herein by reference to the
information set forth under the section entitled "Election of Directors" and
"Beneficial Owners and Management" in the Company's Definitive Proxy Statement
dated March 19, 1999.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item is incorporated herein by
reference to the information set forth under the section entitled "Executive
Compensation" in the Company's Definitive Proxy Statement dated March 19, 1999.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item is incorporated herein by
reference to the information set forth under the section entitled "Beneficial
Owners and Management" in the Company's Definitive Proxy Statement dated March
19, 1999.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item is incorporated herein by
reference to the information set forth under the section entitled "Compensation
Committee Interlocks and Insider Participation" in the Company's Definitive
Proxy Statement dated March 19, 1999.
14
<PAGE> 15
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K.
(a)(1) LISTING OF FINANCIAL STATEMENTS
Report of Independent Accountants
Page 7
The following consolidated financial statements of the Registrant and
subsidiaries, included in the Registrant's Annual Report to
Shareholders, are incorporated by reference in Item 8:
Consolidated Balance Sheets -
December 31, 1998 and 1997
Page 8
Consolidated Statements of Income -
Years ended December 31, 1998, 1997, and 1996
Page 9
Consolidated Statements of Stockholders' Equity -
Years ended December 31, 1998, 1997, and 1996
Page 10
Consolidated Statements of Cash Flows
Years ended December 31, 1998, 1997, and 1996
Page 11
Notes to Consolidated Financial Statements
Pages 12 - 19
(b) REPORTS ON FORM 8-K
The Company filed a report on Form 8-K with the Securities and
Exchange Commission dated December 18, 1998.
(c) FINANCIAL STATEMENT SCHEDULES
None.
15
<PAGE> 16
(d) EXHIBITS
The exhibits in response to this portion of Item 14 are listed below.
<TABLE>
<CAPTION>
Number Description
- ------ -----------
<S> <C>
3.01 Certificate of Incorporation of the Company (included as an exhibit to
Registrant's Registration Statement on Form S-1, No. 33-40255, and
incorporated herein by reference)
3.02 By-laws of the Company (included as an exhibit to Registrant's
Registration Statement on Form S-1, No. 33-40255, and incorporated
herein by reference)
4.01 Specimen Stock Certificate (included as an exhibit to Registrant's
Registration Statement on Form S-1, No. 33-40255, and incorporated
herein by reference)
4.02 Agreement and Plan of Reorganization dated December 18, 1991 among
Outback Delaware, Outback Florida, American Restaurants of South
Florida, Inc. ("ARSF") and the stockholders of ARSF (included as an
exhibit to Registrant's Registration Statement on Form S-1, No. 33-
44452, and incorporated herein by reference)
4.03 Agreement and Plan of Reorganization dated July 1, 1992 among Outback
Delaware, Outback Florida, Stone Danker, Inc. ("SDI") and the
stockholders of SDI (included as an exhibit to Registrant's
Registration Statement on Form S-1, No. 33-49586 and incorporated
herein by reference)
4.04 Agreement and Plan of Reorganization dated March 1, 1993 among Outback
Delaware, Outback Florida, Florida Summit Corporation ("Summit") and
the stockholders of Summit (included as an exhibit to Registrant's
Annual Report on Form 10-K for the year ended December 31,1992 and
incorporated herein by reference)
4.05 Agreement and Plan of Reorganization dated March 1, 1993 among Outback
Delaware, Outback Florida, Grantham Group, Inc. ("Grantham Group") and
the stockholders of Grantham Group (included as an exhibit to
Registrant's Annual Report on Form 10-K for the year ended December
31,1992 and incorporated herein by reference)
4.06 Agreement and Plan of Reorganization dated March 1, 1993 among Outback
Delaware, Outback Florida, F & B, Inc. ("F & B") FT & B
Enterprises/Ohio, Inc. ("FT & B"), Taste Buds, Inc. ("Taste Buds"),
Taste Buds of St. Matthews, Ltd., the stockholders of F & B, FT & B,
and Taste Buds, and the partners of Taste Buds of St. Matthews, Ltd
(included as an exhibit to Registrant's Annual Report on Form 10-K for
the year ended December 31,1992 and incorporated herein by reference)
4.07 Joint Venture Agreement dated March 31, 1993 between Outback/Carrabba,
Inc. and Mangia Beve, Inc. (included as an exhibit to Registrant's
Annual Report on Form 10-K for the year ended December 31,1993 and
incorporated herein by reference)
</TABLE>
16
<PAGE> 17
<TABLE>
<S> <C>
4.08 Agreement and Plan of Reorganization Among Outback Steakhouse, Inc.,
Outback Steakhouse of Florida, Inc., Aussie Enterprises, Inc.,
Attinger & Associates, Inc., Aussie of Louisiana, L.L.P., Aussie of
Baton Rouge No. 1901, L.L.C., Aussie of New Orleans No. 1911, L.L.C.,
Aussie of Lafayette No. 1921, L.L.C., Aussie of Shreveport No. 1931,
L.L.C., Aussie of Slidell No. 1912, L.L.C., Braxton I. Moody, IV and
Bruce Attinger (included as an exhibit to Registrant's Report on Form
10-Q for the quarter ended March 31, 1994 and incorporated herein by
reference)
4.09 Agreement and Plan of Reorganization dated May 18, 1994 Among Outback
Steakhouse, Inc., Outback Steakhouse of Florida, Inc., Hugh Connerty,
Carl Sahlsten, Ridge Sink, Michael Coble, and the Partnerships and
their respective General Partners (included as an exhibit to
Registrant's Report on Form 10-Q/A for the quarter ended March 31,
1994 and incorporated herein by reference)
4.10 Royalty Agreement dated April 1995 among Carrabba's Italian Grill,
Inc., Outback Steakhouse, Inc., Mangia Beve, Inc., Carrabba, Inc.,
Carrabba Woodway, Inc., John C. Carrabba, III, Damian C. Mandola, and
John C. Carrabba, Jr. (included as an exhibit to Registrant's Report
on Form 10-Q for the quarter ended March 31, 1995 and incorporated
herein by reference)
4.11 Reorganization Agreement dated January 1, 1995 among Carrabba/Outback
Joint Venture, Outback/Carrabba, Inc., Outback Steakhouse, Inc.,
Mangia Beve, Inc., Carrabba, Inc., Carrabba's of Woodway, Inc., John
C. Carrabba, III, Damian C. Mandola, and John C. Carrabba, Jr.
(included as an exhibit to Registrant's Report on Form 10-Q for the
quarter ended March 31, 1995 and incorporated herein by reference)
4.12 Agreement and Plan of Reorganization dated March 24, 1995 among
Outback Steakhouse, Inc., Outback Steakhouse of Florida, Inc.,
Fioretti-Theisen, Inc., and Charles E. Fioretti (included as an
exhibit to Registrant's Registration Statement on Form S-3, No.
33-95498, and incorporated herein by reference)
4.13 Agreement and Plan of Reorganization dated July 31, 1995 among Outback
Steakhouse, Inc., Outback Steakhouse of Florida, Inc., G'Day, Inc.,
Donald R. Everts, and Claire E. Everts (included as an exhibit to
Registrant's Registration Statement on Form S-3, No. 33-97166, and
incorporated herein by reference)
4.14 Agreement for Sale and Purchase of Partnership Interest among Outback
Steakhouse, Inc., Shlemon, Inc. and Steve Shlemon (included as an
exhibit to Registrant's Registration Statement on Form S-3,
No.333-00176, and incorporated herein by reference)
4.15 Agreement and Plan of Reorganization dated December 26, 1995 among
Outback Steakhouse, Inc., Outback Steakhouse of Florida, Inc., Hal W.
Smith, William E. Rosenthal, Geoff Alston, David M. Brauckmann, Don
Elliot, Joseph C. Penshorn, Waymon D. Williams, Williams J. Bishop,
Dan Trierweiler, OB-Little Rock, Inc., Lane Resources Trust (included
as an exhibit to Registrant's Report on Form 8-K dated December 31,
1995 and incorporated herein by reference)
4.16 Agreement and Plan of Reorganization dated December 26, 1995 among
Outback Steakhouse, Inc., Outback Steakhouse of Florida, Inc., Michael
Duty, Robert Krug, Henry Harris, Kent Little (included as an exhibit
to Registrant's Report on Form 8-K dated December 31, 1995 and
incorporated herein by reference)
</TABLE>
17
<PAGE> 18
<TABLE>
<S> <C>
4.17 Agreement and Plan of Reorganization dated December 26, 1995 among
Outback Steakhouse, Inc., Outback Steakhouse of Florida, Inc., Frank
Attinger, Kevin A. Rowell, F. Beaven Smith (included as an exhibit to
Registrant's Report on Form 8-K dated December 31, 1995 and
incorporated herein by reference)
4.18 Agreement and Plan of Reorganization dated February 2, 1996 among
Outback Steakhouse, Inc., Outback Steakhouse of Florida, Inc., Robert
Frey, Ronald Sock, David Ferry, Joseph Sumislawski, FMI Restaurants,
Inc., Fore Management West End, Inc., Fore Management, Inc. and Fore
Management Leasing , L.P. (included as an exhibit to Registrant's
Report on Form 8-K/A dated December 31, 1995 and incorporated herein
by reference)
4.19 Agreement and Plan of Reorganization dated February 2, 1996 among
Outback Steakhouse, Inc., Eric P. Bachelor, Brenica Restaurant Group,
Inc., First Four Group, Inc., and various partners (included as an
exhibit to Registrant's Registration Statement on Form S-3, No.
333-4674, and incorporated herein by reference)
4.20 Agreement and Plan of Reorganization, dated May 28, 1996, among
Outback Steakhouse, Inc., Outback Steakhouse of Florida, Inc., Nevada
Summit Corporation, and Anthony P. Grappo (included as Exhibit 2.2 to
Registration Statement on Form S-3, No. 333-14597, and incorporated
herein by reference)
4.21 Agreement and Plan of Reorganization among Outback Steakhouse, Inc.,
Outback Steakhouse of Florida, Inc. and Wibel & Associates (included
as Exhibit 2.1 to Registration Statement on Form S-3, No. 333-38985,
and incorporated herein by reference)
4.22 Agreement and Plan of Reorganization among Outback Steakhouse Inc.,
Outback Steakhouse of Florida, Inc. and Novello and Associates, Inc.
(included as an exhibit to Registrant's Annual Report on Form 10-K for
the year ended December 31,1997 and incorporated herein by reference)
4.23 Agreement and Plan of Reorganization among Outback Steakhouse Inc.,
Outback Steakhouse of Florida, Inc. and Songlines, Inc. (included as
an exhibit to Registrant's Annual Report on Form 10-K for the year
ended December 31,1997 and incorporated herein by reference)
4.24 Agreement and Plan of Reorganization among Outback Steakhouse Inc.,
Outback Steakhouse of Florida, Inc. and Stone, Inc. (included as an
exhibit to Registrant's Annual Report on Form 10-K for the year ended
December 31,1997 and incorporated herein by reference)
4.25 Agreement and Plan of Reorganization among Outback Steakhouse Inc.,
Outback Steakhouse of Florida, Inc. and Hood & Associates, Inc. and
Dennis L. Hood (included as an exhibit to Registrant's Annual Report
on Form 10-K for the year ended December 31,1997 and incorporated
herein by reference)
</TABLE>
18
<PAGE> 19
<TABLE>
<S> <C>
4.26 Agreement and Plan of Reorganization among Outback Steakhouse Inc.,
Outback Steakhouse of Florida, Inc. and Aaron Restaurant Group, Ltd.
(included as an exhibit to Registrant's Annual Report on Form 10-K for
the year ended December 31,1997 and incorporated herein by reference)
4.27 Agreement and Plan of Reorganization among Outback Steakhouse Inc.,
Outback Steakhouse of Florida, Inc., Samuel Tancredi and Tancredi,
Inc. (filed herewith)
10.01 Lease for the Company's executive offices (included as and exhibit to
Registrant's Registration Statement on Form S-1, No. 33-44452, and
incorporated herein by reference)
10.02 Service and Non-Competition Agreement dated January 2, 1990, between
Outback Florida and Chris T. Sullivan (included as and exhibit to
Registrant's Registration Statement on Form S-1, No. 33- 40255, and
incorporated herein by reference)
10.03 Service and Non-Competition Agreement dated January 2, 1990, between
Outback Florida and Robert D. Basham (included as and exhibit to
Registrant's Registration Statement on Form S-1, No. 33-40255, and
incorporated herein by reference)
10.04 Service and Non-Competition Agreement dated January 2, 1990, between
Outback Florida and John Timothy Gannon (included as and exhibit to
Registrant's Registration Statement on Form S-1, No. 33-40255, and
incorporated herein by reference)
10.05 Employment Agreement dated February 2, 1988, between Outback Florida
and John Timothy Gannon (included as and exhibit to Registrant's
Registration Statement on Form S-1, No. 33-40255, and incorporated
herein by reference)
10.06 Employment Agreement dated January 2, 1990, between Outback Florida
and Robert Merritt (included as and exhibit to Registrant's
Registration Statement on Form S-1, No. 33-40255, and incorporated
herein by reference)
10.07 Stock Option Agreement dated January 2, 1990, between Outback Florida
and Robert Merritt (included as and exhibit to Registrant's
Registration Statement on Form S-1, No. 33-40255, and incorporated
herein by reference)
10.08 Stock Option Plan (included as and exhibit to Registrant's
Registration Statement on Form S-1, No. 33-40255, and incorporated
herein by reference)
10.09 Loan Agreement dated September 14, 1994 between Outback Steakhouse,
Inc. and Barnett Bank of Tampa (included as an exhibit to Registrant's
Annual Report on Form 10-K for the year ended December 31, 1994 and
incorporated herein by reference)
10.10 Employment Agreement dated October, 1990 between Paul Avery and
Outback Florida (included as an exhibit to Registrant's Annual Report
on Form 10-K for the year ended December 31, 1994 and incorporated
herein by reference)
10.11 Stock Option Agreement dated November 30, 1990 between Outback Florida
and Paul Avery (included as an exhibit to Registrant's Annual Report
on Form 10-K for the year ended December 31, 1994 and incorporated
herein by reference)
</TABLE>
19
<PAGE> 20
<TABLE>
<S> <C>
10.12 Employment Agreement dated March, 1994 between Outback Florida and
Joseph J. Kadow (included as an exhibit to Registrant's Annual Report
on Form 10-K for the year ended December 31, 1994 and incorporated
herein by reference)
10.13 Stock Option Agreement dated April 1, 1994 between Outback Florida and
Joseph J. Kadow (included as an exhibit to Registrant's Annual Report
on Form 10-K for the year ended December 31, 1994 and incorporated
herein by reference)
10.14 Amendment to Lease for the Company's executive offices dates June 10,
1994 (included as an exhibit to Registrant's Annual Report on Form
10-K for the year ended December 31, 1994 and incorporated herein by
reference)
10.15 Amendment to Lease for the Company's executive office dated December
17, 1995 (included as an exhibit to Registrant's Annual Report on Form
10-K for the year ended December 31, 1995 and incorporated herein by
reference)
10.16 Stock Purchase Agreement dated July 18, 1995 among Outback Steakhouse,
Inc., Robert D. Basham, J. Timothy Gannon, and Bommerang Air, Inc.
(included as an exhibit to Registrant's Annual Report on Form 10-K for
the year ended December 31, 1995 and incorporated herein by reference)
10.17 First Amendment to Loan Agreement dated August 14, 1995 between
Outback Steakhouse, Inc. and Barnett Bank of Tampa (included as an
exhibit to Registrant's Annual Report on Form 10-K for the year ended
December 31, 1995 and incorporated herein by reference)
10.18 Amended and Restated Revolving Promissory Noted dated August 14, 1995
between Outback Steakhouse, Inc. and Barnett Bank of Tampa (included
as an exhibit to Registrant's Annual Report on Form 10- K for the year
ended December 31, 1995 and incorporated herein by reference)
10.19 Second Amendment to Loan Agreement dated May 30, 1996 between Outback
Steakhouse, Inc. and Barnett Bank of Tampa (included as an exhibit to
Registrant's Annual Report on Form 10-K for the year ended December
31, 1996 and incorporated herein by reference)
10.20 Amended and Restated Revolving Promissory Note dated May 30, 1996
between Outback Steakhouse, Inc. and Barnett Bank of Tampa (included
as an exhibit to Registrant's Annual Report on Form 10-K for the year
ended December 31, 1996 and incorporated herein by reference)
10.21 First Amendment to Second Amended and Restated Loan Agreement dated
May 30, 1996 between Outback Steakhouse, Inc. and Barnett Bank of
Tampa (included as an exhibit to Registrant's Annual Report on Form
10-K for the year ended December 31, 1996 and incorporated herein by
reference)
10.22 Amended and Restated Commercial Promissory Note dated May 30, 1996
between Outback Steakhouse, Inc. and Barnett Bank of Tampa (included
as an exhibit to Registrant's Annual Report on Form 10-K for the year
ended December 31, 1996 and incorporated herein by reference)
</TABLE>
20
<PAGE> 21
<TABLE>
<S> <C>
10.23 Credit Agreement dated as of August 22, 1997 among Outback Steakhouse,
Inc., as Borrower, Outback Steakhouse of Florida, Inc., and Carrabba's
Italian Grill, Inc., as Guarantors, The Lenders Identified Herein, as
Lenders and Barnett Bank, N.A., as Agent (included as an exhibit to
Registrant's Annual Report on Form 10-K for the year ended December
31, 1997 and incorporated herein by reference)
10.24 Lease for the Company's executive offices (filed herewith)
13.01 Management's Discussion and Analysis (filed herewith)
13.02 Independent Auditors' Report and Consolidated Financial Statements
(filed herewith)
13.03 Market for the Registrant's Common Stock and Related Stock Matters
(filed herewith)
13.04 Independent Auditors' Report
21.01 List of Subsidiaries (filed herewith)
23.01 Consent of PricewaterhouseCoopers LLP (filed herewith)
27.01 Financial Data Schedule (filed herewith)(for SEC use only)
</TABLE>
21
<PAGE> 22
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED
ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
OUTBACK STEAKHOUSE, INC.
By: /s/ Chris T. Sullivan
-----------------------------------
Chris T. Sullivan, Chairman
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934,
THIS REPORT HAS BEEN SIGNED BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<S> <C> <C>
/s/ Chris T. Sullivan Chairman, Chief Executive March 30, 1999
- ----------------------------- Officer and Director
Chris T. Sullivan (Principal Executive Officer)
/s/ Robert S. Merritt Senior Vice President, March 30, 1999
- ----------------------------- Chief Financial Officer,
Robert S. Merritt Treasurer and Director
(Principal Financial Officer and
Principal Accounting Officer)
/s/ Robert D. Basham President, Chief Operating March 30, 1999
- ----------------------------- Officer and Director
Robert D. Basham
/s/ J. Timothy Gannon Senior Vice President and March 30, 1999
- -------------------------- Director
J. Timothy Gannon
/s/ Paul E. Avery Director March 30, 1999
- -----------------------------
Paul E. Avery
/s/ John A. Brabson, Jr. Director March 30, 1999
- -----------------------------
John A. Brabson, Jr.
/s/ Charles H. Bridges Director March 30, 1999
- -----------------------------
Charles H. Bridges
/s/ W.R. Carey, Jr. Director March 30, 1999
- -----------------------------
W.R. Carey, Jr.
</TABLE>
22
<PAGE> 23
<TABLE>
<S> <C> <C>
/s/ Edward L. Flom Director March 30, 1999
- -----------------------------
Edward L. Flom
Director March , 1999
- -----------------------------
Debbi Fields Rose
/s/ Nancy Schneid Director March 30, 1999
- -----------------------------
Nancy Schneid
/s/ Lee Roy Selmon Director March 30, 1999
- -----------------------------
Lee Roy Selmon
/s/ Toby S. Wilt Director March 30, 1999
- -----------------------------
Toby S. Wilt
</TABLE>
23
<PAGE> 1
EXHIBIT 4.27
AGREEMENT AND PLAN OF REORGANIZATION
AMONG
OUTBACK STEAKHOUSE, INC.
OUTBACK STEAKHOUSE OF FLORIDA, INC.
SAMUEL TANCREDI
AND
TANCREDI, INC.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE 1 - PLAN OF ACQUISITION....................................................................1
1.1 The Merger................................................................................1
1.2 Adjustments...............................................................................2
1.3 Closing...................................................................................2
1.4 Execution and Delivery of Closing Documents...............................................2
1.5 Execution and Filing of Merger Documents..................................................2
1.6 Effectiveness of Merger...................................................................3
1.7 Further Assurances........................................................................3
1.8 Certificates..............................................................................3
1.9 Closing of Transfer Books.................................................................3
1.10 Fractional Shares.........................................................................3
1.11 Accounting Treatment......................................................................3
ARTICLE 2 - REPRESENTATIONS AND WARRANTIES OF TI AND
TANCREDI 3
2.1 Organization and Good Standing............................................................3
2.2 Power and Authority.......................................................................4
2.3 Foreign Corporation.......................................................................4
2.4 Authority and Validity....................................................................4
2.5 Binding Effect............................................................................4
2.6 Compliance with Other Instruments.........................................................4
2.7 Capitalization of TI......................................................................5
2.8 Absence of Certain Changes................................................................5
2.9 Tax Liabilities...........................................................................6
2.10 No Undisclosed Liabilities................................................................6
2.11 Title to Properties.......................................................................6
2.12 Contracts.................................................................................7
2.13 Litigation and Government Claims..........................................................7
2.14 No Violation of Any Instrument............................................................7
2.15 Necessary Approvals and Consents..........................................................7
2.16 Compliance With Laws......................................................................7
2.17 Accuracy of Information Furnished.........................................................7
ARTICLE 3 - REPRESENTATIONS AND WARRANTIES OF TANCREDI.............................................8
3.1 Authority and Validity....................................................................8
3.2 Binding Effect............................................................................8
3.3 Ownership.................................................................................8
3.4 Voting....................................................................................8
3.5 Residency.................................................................................8
3.6 Compliance with Other Instruments.........................................................8
ARTICLE 4 - REPRESENTATIONS AND WARRANTIES OF OSI AND
OUTBACK 9
4.1 Organization and Good Standing............................................................9
4.2 Foreign Qualification.....................................................................9
4.3 Power and Authority.......................................................................9
</TABLE>
i
<PAGE> 3
TABLE OF CONTENTS (continued)
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
4.4 Authority and Validity....................................................................9
4.5 Binding Effect............................................................................9
4.6 Compliance with Other Instruments.........................................................9
4.7 Capitalization of OSI.....................................................................9
4.8 SEC Reports...............................................................................10
4.9 Litigation and Government Claims..........................................................10
4.10 Necessary Approvals and Consents..........................................................10
4.11 Absence of Certain Changes or Events......................................................10
ARTICLE 5 - JOINT COVENANTS OF TI, TANCREDI, OSI AND OUTBACK......................................10
5.1 Notice of any Material Change.............................................................11
5.2 Cooperation...............................................................................11
5.3 Post-Closing Adjustment...................................................................11
5.4 Distribution and Allocation...............................................................12
5.5 Additional Agreements.....................................................................12
ARTICLE 6 - COVENANTS OF TI AND TANCREDI..........................................................12
6.1 Securities Law Compliance; Restrictions on Shares.........................................12
6.2 Payment of Liabilities....................................................................14
6.3 Pooling...................................................................................14
ARTICLE 7 - COVENANTS OF OSI AND OUTBACK..........................................................14
7.1 Employment Agreements.....................................................................14
7.2 Assumed Liabilities.......................................................................14
ARTICLE 8 - JOINT CONDITIONS PRECEDENT TO CLOSING OBLIGATIONS.....................................14
8.1 Consents to Transaction...................................................................14
8.2 Absence of Litigation.....................................................................15
8.3 Dissenter's Rights........................................................................15
ARTICLE 9 - CONDITIONS PRECEDENT TO OBLIGATIONS OF TI.............................................15
9.1 Compliance................................................................................15
9.2 Representations and Warranties............................................................15
9.3 Material Adverse Changes..................................................................15
ARTICLE 10 - CONDITIONS PRECEDENT TO OBLIGATIONS OF OSI AND
OUTBACK...................................................................................16
10.1 Compliance................................................................................16
10.2 Representations and Warranties............................................................16
10.3 Current Financial Status..................................................................16
10.4 Material Adverse Changes..................................................................16
10.5 Pooling...................................................................................16
ARTICLE 11 - INDEMNIFICATION.......................................................................16
11.1 Indemnification Based on Agreement........................................................16
11.2 Limitation................................................................................17
11.3 Cooperation...............................................................................17
</TABLE>
ii
<PAGE> 4
TABLE OF CONTENTS (continued)
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
11.4 Notice....................................................................................17
ARTICLE 12 - MISCELLANEOUS.........................................................................17
12.1 Termination...............................................................................17
12.2 Expenses..................................................................................18
12.3 Entire Agreement..........................................................................18
12.4 Survival of Representations and Warranties................................................18
12.5 Counterparts..............................................................................18
12.6 Notices...................................................................................19
12.7 Successors and Assigns....................................................................19
12.8 Governing Law.............................................................................19
12.9 Waiver and Other Action...................................................................19
12.10 Severability..............................................................................19
12.11 Headings..................................................................................19
12.12 Construction..............................................................................19
12.13 Jurisdiction and Venue....................................................................19
12.14 Enforcement...............................................................................20
12.15 Further Assurances........................................................................20
12.16 Equitable Remedies........................................................................20
EXHIBIT A
ARTICLES OF MERGER.................................................................................A-1
EXHIBIT B
DISCLOSURE SCHEDULES...............................................................................B-1
</TABLE>
iii
<PAGE> 5
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made
and entered effective as of the 1st day of April, 1998, by and among OUTBACK
STEAKHOUSE, INC., a Delaware corporation ("OSI"), OUTBACK STEAKHOUSE OF
FLORIDA, INC., a Florida corporation ("Outback"), TANCREDI, INC., a Kentucky
corporation ("TI") and SAMUEL TANCREDI, an individual residing in the State of
Indiana ("Tancredi").
W I T N E S S E T H:
WHEREAS, Outback is a wholly-owned subsidiary of OSI; and
WHEREAS, Tancredi is the sole owner of the issued and outstanding
common stock of TI, and Tancredi is the sole director, President and is
responsible for the day-to-day operations of TI; and
WHEREAS, Outback and TI have entered into that certain Florida limited
partnership known as Outback/Indianapolis-II, Limited Partnership
("Partnership");
WHEREAS, the Partnership operates Outback Steakhouse restaurants in
the states of Indiana and Kentucky; and
WHEREAS, the Board of Directors of TI has approved the merger of TI
into Outback (the "Merger") upon the terms and conditions set forth in this
Agreement; and
WHEREAS, for federal income tax purposes it is intended that the
Merger shall qualify as a reorganization within the meaning of Section 368(a)
of the Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, pursuant to the Merger, TI will be merged with and into
Outback and all of the outstanding shares of capital stock of TI will be
converted into shares of common stock, par value $.01, of OSI (the "OSI Common
Stock"); and
WHEREAS, the parties hereto desire by this Agreement to set forth the
terms and conditions upon which they are willing to consummate the Merger.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements contained herein, the parties hereto covenant and
agree as follows:
ARTICLE 1
PLAN OF ACQUISITION
1.1 The Merger. Subject to and upon the terms and conditions
contained herein, TI shall be merged with and into Outback, with Outback being
the surviving corporation, in accordance with the Articles of Merger
substantially in the form attached to this Agreement as EXHIBIT A (the "Merger
Agreement"), which will be executed and delivered by OSI, Outback, and TI prior
to the Merger. As a result of the Merger, each voting and nonvoting common
share of TI outstanding immediately before the
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<PAGE> 6
Effective Date (as herein defined) shall, by virtue of the Merger and without
any further action being required by the holders thereof, be converted into and
exchanged for 535 shares of OSI Common Stock.
1.2 Adjustments.
(a) Except as otherwise provided in this SECTION 1.2,
the total number of shares of OSI Common Stock to be issued pursuant
to the Merger shall be Fifty-Three Thousand Five Hundred (53,500.)
(b) If, between the date of this Agreement and the
Closing Date or the Effective Date, as the case may be, (i) the
outstanding shares of capital stock of TI shall have been changed into
a different number of shares or a different class by reason of any
reclassification, recapitalization, split-up, combination, exchange of
shares, or readjustment, with a record date within such period, or a
stock dividend thereon shall be declared with a record date within
such period or (ii) TI shall have issued additional shares of its
capital stock, the number of shares of OSI Common Stock received in
exchange for each share of TI's capital stock shall be adjusted so
that the aggregate number of shares of OSI Common Stock received in
exchange for all shares of TI's capital stock (assuming no Dissenting
Shares) remains at Fifty Three Thousand Five Hundred (53,500.)
(c) If, between the date of this Agreement and the
Closing Date or the Effective Date, as the case may be, the
outstanding shares of OSI Common Stock shall have been changed into a
different number of shares or a different class by reason of any
reclassification, recapitalization, split-up, combination, exchange of
shares, or readjustment, with a record date within such period, or a
stock dividend thereon shall be declared with a record date within
such period, the number of shares of OSI Common Stock received in
exchange for each share of capital stock of TI (as specified in
SECTION 1.1 hereof) shall be adjusted to accurately reflect such
change.
1.3 Closing. The closing of the transactions contemplated by this
Agreement, including the Merger (the "Closing"), shall take place at 10:00
a.m., Tampa time, at the offices of Outback on April 1, 1998, or on such date
and at such other time and place as is agreed upon by the parties hereto. The
day on which the Closing occurs is herein referred to as the "Closing Date." If
any of the conditions to the obligations of the parties to this Agreement have
not been satisfied or waived by the Closing Date, then the party to this
Agreement that is unable to meet such condition or conditions shall be entitled
to postpone the Closing by written notice to the other parties until such
condition shall have been satisfied (which such party shall seek to cause to
happen at the earliest practicable date) or waived, but the Closing shall occur
not later than May 15, 1998, unless further extended by written agreement of
the parties to this Agreement. The parties shall use their best efforts to
effectuate a timely closing as provided in this SECTION 1.3.
1.4 Execution and Delivery of Closing Documents. Before the
Closing, each party shall cause to be prepared and at the Closing the parties
shall execute and deliver each agreement and instrument required by this
Agreement or the Merger Agreement to be so executed and delivered and not
theretofore accomplished. At the Closing, each party also shall execute and
deliver such other appropriate and customary documents as the other parties
reasonably may request for the purpose of consummating the transactions
contemplated by this Agreement and the Merger Agreement. All actions taken at
the Closing shall be deemed to have been taken simultaneously at the time the
last of any such actions is taken or completed.
1.5 Execution and Filing of Merger Documents. At the time of
completion of the Closing, OSI, Outback, TI and Tancredi agree to take the
following actions:
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<PAGE> 7
(a) to execute and deliver all documents and
certificates relating to the Merger required to be executed by them
that have not already been so executed and that are required under
applicable federal, state and local laws to be filed in order validly
to effectuate the Merger; and
(b) to cause Articles of Merger to be filed with the
Secretary of State of the state of Florida and the Secretary of State
of the state of Kentucky and a Certificate of Merger to be issued by
each such officer.
1.6 Effectiveness of Merger. The Merger shall become effective
under the laws of Florida upon the later of (i) filing of these Articles of
Merger with the Secretary of State of the state of Florida and the Secretary of
State of the state of Kentucky; or (ii) April 1, 1998 (the "Effective Date").
Such Effective Date shall be indicated on Certificates of Merger issued by the
Secretary of State of the state of Florida and by the Secretary of State of the
state of Kentucky pursuant to the provisions of Sections 607.1101-607.1107 of
the Florida Business Corporation Act (the "Florida Act") and the laws of the
State of Kentucky ("Kentucky Law").
1.7 Further Assurances. After the Closing, the parties hereto
shall execute and deliver such additional documents and take such additional
actions as may reasonably be deemed necessary or advisable by any party in
order to consummate the transactions contemplated by this Agreement and by the
Merger Agreement, and to vest more fully in Outback the ownership of and the
rights to the business and assets of TI as existed immediately before the
Effective Date.
1.8 Certificates. As soon as practicable after the Effective
Date, OSI shall make available and each holder of capital stock of TI shall be
entitled to receive upon surrender of stock certificates of TI representing TI
capital stock for cancellation, certificates representing the number of shares
of OSI Common Stock into which such shares are converted in the Merger as
provided in SECTION 1.1 hereof. The OSI Common Stock into which such TI capital
stock is converted shall be deemed issued at the Effective Date.
1.9 Closing of Transfer Books. At the Closing Date, the stock
transfer books of TI shall be closed and no transfer of capital stock of TI,
shall thereafter be made.
1.10 Fractional Shares. No fractional shares of OSI Common Stock
and no certificates or scrip therefor shall be issued. Instead, one whole share
of OSI Common Stock shall be issued for each fractional share of .5 or more of
one whole share and each fractional share of less than .5 of one whole share
shall be disregarded.
1.11 Accounting Treatment. It is the intention of the parties
hereto that the Merger will be treated for financial reporting purposes as a
pooling of interests.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF TI AND TANCREDI
Each of TI and Tancredi, jointly and severally, represent and warrant
to OSI and Outback as follows:
2.1 Organization and Good Standing. TI is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Kentucky.
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<PAGE> 8
2.2 Power and Authority. TI has the requisite power and authority
and all material licenses and permits required by governmental authorities to
own, lease and operate its properties and assets and to carry on its businesses
as currently being conducted.
2.3 Foreign Corporation. TI is duly qualified or licensed to do
business and in good standing as a foreign corporation in Indiana and in every
other jurisdiction where the failure to so qualify could have a material
adverse effect on its respective business, operations, assets or financial
condition.
2.4 Authority and Validity.
(a) TI has the corporate power and authority to execute,
deliver and perform its obligations under this Agreement, the Merger
Agreement and the other documents executed or to be executed by TI in
connection with this Agreement; and the execution, delivery and
performance by TI of this Agreement, the Merger Agreement and the
other documents executed or to be executed by TI in connection with
this Agreement have been duly authorized by all necessary corporate
action. The execution, delivery and performance by TI of this
Agreement, the Merger Agreement and any other documents executed or to
be executed in connection with this Agreement and the consummation of
the transactions provided for herein have been duly authorized and
approved by the board of directors and shareholders of TI as required
under the laws of the State of Kentucky and TI's corporate governance
documents.
(b) Tancredi has the power and authority to execute,
deliver and perform his obligations under this Agreement and the other
documents executed or to be executed by Tancredi in connection with
this Agreement.
2.5 Binding Effect. This Agreement, the Merger Agreement and the
other documents executed or to be executed by TI and Tancredi in connection
with this Agreement have been or will have been duly executed and delivered by
TI and Tancredi, and are or will be, when executed and delivered, the legal,
valid and binding obligations of each of TI and Tancredi enforceable in
accordance with their terms except that:
(a) enforceability may be limited by bankruptcy,
insolvency or other similar laws affecting creditors' rights; and
(b) the availability of equitable remedies may be
limited by equitable principles of general applicability.
2.6 Compliance with Other Instruments. Neither the execution and
delivery by TI nor Tancredi of this Agreement and the Merger Agreement, nor the
consummation by them of the transactions contemplated hereby and thereby, will
violate, breach, be in conflict with, or constitute a default under, or permit
the termination or the acceleration of maturity of, or result in the imposition
of any lien, claim or encumbrance upon any material property or asset of TI or
Tancredi pursuant to, its certificate of incorporation, bylaws, partnership
agreement, operating agreement or other charter or governance document, or any
note, bond, indenture, mortgage, deed of trust, evidence of indebtedness, loan
or lease agreement, other agreement or instrument (including with customers),
judgment, order, injunction or decree by which TI or Tancredi is bound, to
which either of them is a party, or to which any assets of either of them are
subject; provided, however, this SECTION 2.6 shall not apply with respect to
any of the foregoing if TI is bound thereby, a party thereto, or its assets
subject, solely by reason of its status as a partner in the Partnership.
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<PAGE> 9
2.7 Capitalization of TI.
(a) The authorized capital stock of TI consists of one
thousand (1,000) common shares. There are one hundred (100) common
shares issued and outstanding, all of which are owned by Tancredi.
There are no other shareholders of TI and no other persons with rights
or options to acquire capital stock of TI. All of the issued and
outstanding shares of capital stock of TI have been duly authorized
and validly issued and are fully paid and nonassessable. There are no
shares of capital stock of TI held in its treasury.
(b) There are no voting trusts, shareholder agreements
or other voting arrangements to which the shareholder of TI is a
party.
(c) There is no outstanding subscription, contract,
convertible or exchangeable security, option, warrant, call or other
right obligating TI to issue, sell, exchange or otherwise dispose of,
or to purchase, redeem or otherwise acquire, shares of, or securities
convertible into or exchangeable for, capital stock of TI.
2.8 Absence of Certain Changes. From December 31, 1997 to the
Closing Date, (except solely as a result of TI's status as a partner in the
Partnership) TI has not:
(a) suffered any material adverse change in its
business, results of operations, working capital, assets, liabilities,
or condition (financial or otherwise) or the manner of conducting its
business;
(b) suffered any material damage or destruction to or
loss of its assets not covered by insurance, or any loss of suppliers
or employees;
(c) acquired or disposed of any asset, or incurred,
assumed, guaranteed, endorsed, paid or discharged any indebtedness,
liability or obligation, or subjected or permitted to be subjected any
material amount of assets to any lien, claim or encumbrance of any
kind, except in the ordinary course of business or pursuant to
agreements in force at the date of this Agreement and identified in
Item 2.8(c) of the Disclosure Schedules;
(d) forgiven, compromised, canceled, released, waived or
permitted to lapse any material rights or claims;
(e) entered into or terminated any lease, agreement,
commitment or transaction, or agreed to or made any changes in any
leases or agreements, other than transactions and commitments entered
into in the ordinary course of business;
(f) written up, written down or written off the book
value of any assets;
(g) declared, paid or set aside for payment any dividend
or distribution with respect to its capital stock;
(h) redeemed, purchased or otherwise acquired, or sold,
granted or otherwise disposed of, directly or indirectly, any of its
capital stock or securities or any rights to acquire such capital
stock or securities, or agreed to changes in the terms and conditions
of any such rights outstanding as of the date of this Agreement;
5
<PAGE> 10
(i) except in the ordinary course of business, increased
the compensation of any employee or paid any bonuses to any employee
or contributed to any employee benefit plan;
(j) entered into any employment, consulting,
compensation or collective bargaining agreement with any person or
group, except oral employment agreements which can be terminated at
will; or
(k) entered into, adopted or amended any employee
benefit plan or severance agreements.
2.9 Tax Liabilities. TI has filed all federal, state, county,
local and foreign tax returns and reports required to be filed by them by the
date hereof, including those with respect to income, payroll, property,
withholding, social security, unemployment, franchise, excise and sales taxes;
TI has either paid in full all taxes that have become due as reflected on any
return or report and any interest and penalties with respect thereto or have
fully accrued on their books or have established adequate reserves for all
taxes payable but not yet due; and have made cash deposits with appropriate
governmental authorities representing estimated payments of taxes, including
income taxes and employee withholding tax obligations. No extension or waiver
of any statute of limitations or time within which to file any return has been
granted to TI with respect to any tax. No unsatisfied deficiency, delinquency
or default for any tax, assessment or governmental charge has been claimed,
proposed or assessed against TI nor has TI received notice of any such
deficiency, delinquency or default. TI has no reason to believe that TI has or
may have any tax liabilities other than those reflected on the unaudited
balance sheet of TI as of December 31, 1997, with any notes thereto, and the
related unaudited statements of income for the twelve months ended December 31,
1997, together with supplemental information on TI, each prepared and attested
to by the chief financial officer of TI (the "Balance Sheets") and those
arising in the ordinary course of business since the date thereof. With regard
to the foregoing, TI has relied on the accuracy and completeness of the
Schedule K-1 provided by the Partnership.
Tancredi shall have sole responsibility for filing all required tax
returns for TI. OSI shall assist Tancredi in preparing income tax returns and
shall cooperate with Tancredi to the extent necessary therefor, and Tancredi
shall provide OSI with copies of all such returns at least fifteen (15) days
prior to filing.
2.10 No Undisclosed Liabilities. There are no liabilities or
obligations of TI (other than material liabilities arising solely by reason of
TI's status as a partner in the Partnership) of any nature, whether absolute,
accrued, contingent or otherwise, other than liabilities or obligations
indicated in Items 2.10(a) and 2.10(b) of the Disclosure Schedules.
2.11 Title to Properties. TI has good and marketable title to the
assets reflected in its books and records as being owned by it, (except as they
have since been affected by transactions in the ordinary course of business and
consistent with past practices) the real and personal properties reflected in
the Balance Sheets (except for assets subject to financing leases required to
be capitalized under generally accepted accounting principles, all of which are
so reflected in the Balance Sheet or notes thereto) and all assets purchased by
TI since the date of the Balance Sheet, in each case free and clear of any
lien, claim or encumbrance, except as reflected in the Balance Sheet or notes
thereto and in Item 2.11 of the Disclosure Schedule and except for liens for
taxes, assessments or other governmental charges not yet due and payable.
Except for those assets acquired since the date of the Balance Sheets,
all material properties and assets owned by TI are properly reflected on the
applicable Balance Sheets and notes thereto.
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<PAGE> 11
2.12 Contracts. Excluding (i) contracts and commitments between
Outback or OSI and TI or the Partnership, (ii) contracts and commitments
entered into by the Partnership to which Outback or OSI is a party, (iii)
contracts and commitments entered into by TI in the ordinary course of the
Partnership's business without violation of the provisions of the Partnership
Agreement, and (iv) contracts and commitments entered into with the written
consent of OSI or Outback, Item 2.12 of the Disclosure Schedule is a complete
and accurate list of all of the contracts and commitments (including summaries
of oral contracts) to which TI is a party or by which TI is bound.
2.13 Litigation and Government Claims. Except as indicated in Item
2.13 of the Disclosure Schedule, there is no pending suit, claim, action or
litigation or administrative, arbitration or other proceeding or governmental
investigation or inquiry against TI or the Partnership or to which any of their
business or assets is subject. Except as indicated in Item 2.13 of the
Disclosure Schedule, there are no such proceedings threatened or, to the best
knowledge of TI or Tancredi, contemplated or, to the best knowledge of TI or
Tancredi, any basis for any unasserted claims (whether or not the potential
claimant may be aware of the claim) of any nature that might be asserted
against TI or the Partnership.
2.14 No Violation of Any Instrument. Except as indicated in Item
2.14 of the Disclosure Schedule, TI is not in violation of or default under nor
has any event occurred that, with the lapse of time or the giving of notice or
both, would constitute a violation of or default under or permit the
termination or the acceleration of maturity of or result in the imposition of a
lien, claim or encumbrance upon any property or asset of TI pursuant to, the
articles or certificates of incorporation, bylaws or other chartering or
governance document of TI or (excluding any of the following entered into by
the Partnership and to which Outback or OSI is a signatory or to which Outback
or OSI consented in writing or which were entered into by TI in the ordinary
course of business without violation of the provisions of the Partnership
Agreement) any note, bond, indenture, mortgage, deed of trust, evidence of
indebtedness, loan or lease agreement, other material agreement or instrument
(including with customers), judgment, order, injunction or decree to which TI
is a party, by which TI is bound or to which any of the assets of TI are
subject.
2.15 Necessary Approvals and Consents. Other than (a) in
connection with or in compliance with the laws of the States of Florida and
Kentucky with respect to effectuating the Merger, (b) consents required to be
obtained from applicable liquor control authorities, (c) consents required to
be obtained from lessors, and (d) under the provisions of the Securities Act of
1933, as amended, the Securities Exchange Act of 1934, as amended, or state
securities or blue sky laws, no authorization, consent, permit or license or
approval of or declaration, registration or filing with, any person or
governmental or regulatory authority or agency is necessary for the execution
and delivery by each of TI and Tancredi of this Agreement, the Merger Agreement
and the other agreements executed or to be executed by them in connection with
this Agreement, and the consummation by TI and Tancredi of the transactions
contemplated by this Agreement and the Merger Agreement, and the ownership and
operation by Outback of the respective businesses and properties of TI after
the Effective Date in substantially the same manner as now operated.
2.16 Compliance With Laws. Tancredi has no actual knowledge that
TI or the Partnership are not in compliance with any such laws applicable to
their respective business, where failure to so comply would have a material
adverse effect on their business, operations, properties, assets or conditions.
2.17 Accuracy of Information Furnished. No representation or
warranty by TI or Tancredi in this Agreement nor any information in the
Financial Statements or in the Disclosure Schedule contains any untrue
statement of a material fact or omits to state any material fact that would
make the statements herein or therein, in light of the circumstances under
which they were made, false or misleading. Each of TI and
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<PAGE> 12
Tancredi have disclosed to OSI and Outback all facts known to them that are
material to TI's and the Partnership's respective businesses, operations,
financial condition or prospects.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF TANCREDI
In addition to the representations and warranties contained in ARTICLE
2, Tancredi represents and warrants to OSI and Outback as follows:
3.1 Authority and Validity. He has the capacity and authority to
execute, deliver and perform this Agreement and all other agreements and
documents he is executing or will execute in connection herewith or therewith.
3.2 Binding Effect. This Agreement and the other documents
executed or to be executed by Tancredi in connection with this Agreement have
been or will have been duly executed and delivered by him and are or will be,
when executed and delivered, his legal, valid and binding obligations
enforceable in accordance with their terms except that:
(a) enforceability may be limited by bankruptcy,
insolvency or other similar laws affecting creditors' rights; and
(b) the availability of equitable remedies may be
limited by equitable principles of general applicability.
3.3 Ownership. Tancredi is the sole record and beneficial
shareholder of TI and no other person has any rights (in any form) to acquire
any capital stock of TI.
3.4 Voting. He acknowledges that in his individual capacity as
shareholder and director of TI, he has voted in favor of the execution and
delivery of this Agreement and the Merger Agreement.
3.5 Residency. Tancredi is, and has been at all times during the
one year period ending on the date hereof, a resident of the State of Indiana.
3.6 Compliance with Other Instruments. Neither the execution and
delivery by Tancredi of this Agreement and the Merger Agreement, nor the
consummation by him of the transactions contemplated hereby and thereby will
violate, breach, be in conflict with or constitute a default under or permit
the termination or the acceleration of maturity of or result in the imposition
of any lien, claim or encumbrance upon any material property or asset of
Tancredi pursuant to any note, bond, indenture, mortgage, deed of trust,
evidence of indebtedness, loan or lease agreement, other agreement or
instrument (including with customers), judgment order, injunction or decree by
which Tancredi is bound, to which he is a party or to which he is subject.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF OSI AND OUTBACK
OSI and Outback jointly and severally represent and warrant to TI and
Tancredi as follows:
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4.1 Organization and Good Standing. OSI and Outback are
corporations duly organized, validly existing and in good standing under the
laws of the States of Delaware and Florida, respectively.
4.2 Foreign Qualification. Outback is duly qualified or licensed
to do business and in good standing as a foreign corporation in Delaware and in
every other jurisdiction where the failure to so qualify could have a material
adverse effect on its respective business, operations, assets or financial
condition.
4.3 Power and Authority. OSI and Outback each have the corporate
power and authority and all licenses and permits required by governmental
authorities to own, lease and operate their respective properties and assets
and to carry on their respective business as currently being conducted.
4.4 Authority and Validity. OSI and Outback each have the
corporate power and authority to execute, deliver and perform their respective
obligations under this Agreement, the Merger Agreement and the other documents
executed or to be executed by OSI and Outback in connection with this Agreement
and the execution, delivery and performance by OSI and Outback of this
Agreement, the Merger Agreement and the other documents executed or to be
executed by OSI and Outback in connection with this Agreement have been duly
authorized by all necessary corporate action.
4.5 Binding Effect. This Agreement, the Merger Agreement and the
other documents executed or to be executed by OSI and Outback in connection
with this Agreement have been or will have been duly executed and delivered by
OSI and Outback and are or will be, when executed and delivered, the legal,
valid and binding obligations of OSI and Outback, enforceable in accordance
with their terms except that:
(a) enforceability may be limited by bankruptcy,
insolvency or other similar laws affecting creditors' rights; and
(b) the availability of equitable remedies may be
limited by equitable principles of general applicability.
4.6 Compliance with Other Instruments. Neither the execution and
delivery by OSI and/or Outback of this Agreement, the Merger Agreement, nor the
consummation by it of the transactions contemplated hereby and thereby will
violate, breach, be in conflict with or constitute a default under or permit
the termination or the acceleration of maturity of or result in the imposition
of any lien, claim or encumbrance upon any property or asset of OSI or Outback
pursuant to, the certificate of incorporation or bylaws of OSI or Outback or
any note, bond, indenture, mortgage, deed of trust, evidence of indebtedness,
loan or lease agreement, other agreement or instrument, judgment order,
injunction or decree by which OSI or Outback is bound, to which it is a party
or to which its assets are subject.
4.7 Capitalization of OSI. The authorized capital stock of OSI
consists of Two Hundred Million (200,000,000) shares of Common Stock, $.01 par
value and Two Million (2,000,000) shares of Preferred Stock, $.01 par value, of
which approximately 48,559,385 shares of Common Stock and no shares of
Preferred Stock were issued and outstanding as of March 18, 1998. All of the
issued and outstanding shares of OSI Common Stock have been duly authorized and
validly issued and are fully paid and nonassessable. The shares of OSI Common
Stock to be issued in exchange for TI's capital stock at the Effective Date,
when issued and delivered, will be duly authorized, validly issued, fully paid
and nonassessable. As of the date hereof, except for (i) employee and director
stock options to acquire shares of OSI Common Stock and (ii) employee stock
ownership plans, there are no options, warrants or other rights, agreements or
commitments outstanding obligating Outback or OSI to issue shares of its
capital
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stock. All of the outstanding shares of capital stock of Outback are owned by
OSI, free and clear of any lien or encumbrance.
4.8 SEC Reports. OSI has delivered to TI and Tancredi true and
complete copies of its (i) Annual Report on Form 10-K for the year ended
December 31, 1997; (ii) Proxy Statement used in connection with its 1998 Annual
Meeting of Shareholders; (iii) 1998 Annual Report to Shareholders; (iv) all
periodic reports, if any, on Form 8-K filed with the Securities and Exchange
Commission since December 31, 1997 to the date hereof; and (v) all Forms 10-Q,
if any, filed with the Securities and Exchange Commission since December 31,
1997, to the date hereof. Such documents and reports did not on their dates or
the date of filing, contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. OSI has filed all material documents required to be filed by it
with the SEC and all such documents complied as to form with the applicable
requirements of law. Copies of all other reports filed by OSI with the SEC from
the date hereof to and including the Effective Date have been or will be
delivered to TI and Tancredi. All financial statements and schedules included
in the documents referred to in this SECTION 4.8 were prepared in accordance
with generally accepted accounting principles, applied on a consistent basis
except as noted therein and fairly present the information purported to be
shown therein.
4.9 Litigation and Government Claims. There is no pending suit,
claim, action or litigation or administrative, arbitration or other proceeding
or governmental investigation or inquiry against OSI or Outback which would,
severally or in the aggregate, have a material adverse effect on the business,
results of operations, assets or the condition, financial or otherwise, of OSI
and its subsidiaries, taken as a whole. There are no such proceedings
threatened or, to the knowledge of OSI or Outback, contemplated or any
unasserted claims (whether or not the potential claimant may be aware of the
claim), which might, severally or in the aggregate have a material adverse
effect on the business, results of operations, assets or the condition,
financial or otherwise, of OSI and its subsidiaries, taken as a whole.
4.10 Necessary Approvals and Consents. Other than (a) in
connection with or in compliance with the laws of the States of Florida and
Delaware with respect to effectuating the Merger, (b) consents required to be
obtained from applicable liquor control authorities and (c) consents required
to be obtained from lessors, no authorization, consent, permit or license or
approval of or declaration, registration or filing with, any person or
governmental or regulatory authority or agency is necessary for the execution
and delivery by OSI and Outback of this Agreement, the Merger Agreement and the
other agreements executed or to be executed by either of them in connection
with this Agreement and the consummation by OSI and Outback of the transactions
contemplated by this Agreement and the Merger Agreement.
4.11 Absence of Certain Changes or Events. Except as disclosed in
public filings by OSI with the Securities and Exchange Commission prior to the
date hereof and the Closing Date, since December 31, 1997, there has not been
any material adverse change in the financial condition, results of operations
or the business, properties, assets or liabilities of Outback or OSI.
ARTICLE 5
JOINT COVENANTS OF TI, TANCREDI, OSI AND OUTBACK
TI and Tancredi, jointly and severally, on the one hand, and OSI and
Outback, jointly and severally on the other hand, covenant with each other as
follows:
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5.1 Notice of any Material Change. Until the Effective Date, each
of TI, Tancredi, OSI and Outback shall, promptly after the first notice or
occurrence thereof but prior to the Effective Date, advise the others in
writing of any event or the existence of any state of facts that:
(a) would make any of its representations and warranties
in this Agreement untrue in any material respect; or
(b) would otherwise constitute a material adverse change
in the business, results of operation, working capital, assets,
liabilities or condition (financial or otherwise) of OSI, Outback or
TI and their respective subsidiaries, taken as a whole. No supplement
or amendment to any Disclosure Schedule shall have any effect for the
purpose of determining the satisfaction of or compliance with the
conditions to the obligations of the parties to consummate the Merger
set forth elsewhere in this Agreement.
5.2 Cooperation. Until the Effective Date, each of the parties
hereto shall and shall cause each of its affiliates to use its best efforts to:
(a) proceed promptly to make or give the necessary
applications, notices, requests and filings to obtain at the earliest
practicable date and, in any event, before the Closing Date, the
approvals, authorizations and consents necessary to consummate the
transactions contemplated by this Agreement;
(b) cooperate with and keep the other informed in
connection with this Agreement; and
(c) take such actions as the other parties may
reasonably request to consummate the transactions contemplated by this
Agreement and use its best efforts and diligently attempt to satisfy,
to the extent within its control, all conditions precedent to the
obligations to close this Agreement.
5.3 Post-Closing Adjustment. As soon as practicable after the
Effective Date, but in no event more than forty-five (45) days thereafter, OSI
shall determine and report in writing to all parties hereto:
(a) the amount of current assets of TI as of the
Effective Date;
(b) the amount of all liabilities of TI (other than
liabilities specified in Item 6.2 of the TI Disclosure Schedule to the
extent assumed by Outback) which were not paid in full prior to the
Effective Date; and
(c) the estimated amount of all federal and state taxes,
including, but not limited to, federal and state income taxes, payable
by TI for the short tax year ending on the Effective Date;
Upon receipt of such report, Tancredi (by notice to OSI as provided
herein) shall have a period of ten (10) days in which to object in writing to
any portion or item of such report. In the event no objection is timely made,
OSI's report shall be final and binding on all parties. If timely objection is
made, the chief financial officer of OSI and Tancredi (and at the expense of
Tancredi) shall meet and attempt to agree on the items to which objection was
made. If such persons cannot agree within thirty (30) days from the date of
written objection, the items on which agreement has not been reached shall be
submitted to the Tampa, Florida office of Price Waterhouse (or other agreed
upon independent "Big Six" accounting firm)
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for a resolution of such items and whose decision shall be final and binding on
all parties. The fees and expenses of Price Waterhouse (or other accounting
firm) shall be paid by the non-prevailing party.
If, as finally determined, the sum of Subsection (a) above exceeds the
sum of Subsections (b) and (c), OSI shall pay such excess to Tancredi within
ten (10) days of such final determination. If, as finally determined, the sum
of Subsections (b) and (c) exceeds the sum of Subsection (a), Tancredi shall
pay such excess to OSI within ten (10) days of the final determination.
5.4 Distribution and Allocations. The parties acknowledge and
agree that notwithstanding the effective date of the Merger, Outback shall be
entitled to TI's entire share of Partnership distributions of cash flow, and
shall be allocated TI's shares of profit and loss, from and after April 1,
1998.
5.5 Additional Agreements.
(a) Subject to the terms and conditions herein provided,
each of the parties hereto agrees to use all reasonable efforts to
take or cause to be taken, all actions and to do or cause to be done,
all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions
contemplated by this Agreement, including using all reasonable efforts
to obtain all necessary waivers, consents and approvals, to effect all
necessary registrations and filings and to lift any injunction or
other legal bar to the Merger (and, in such case, to proceed with the
Merger as expeditiously as possible), subject, however, to the
appropriate vote of the shareholders of TI.
(b) In case at any time after the Effective Date any
further action is necessary or desirable to carry out the purposes of
this Agreement, the proper officers and/or directors of OSI and
Outback and Tancredi shall take all such necessary action.
(c) Neither Outback, OSI, TI nor Tancredi shall take any
action which would jeopardize the characterization of the Merger as a
reorganization within the meaning of Section 368(a) of the Code or the
treatment of the Merger for financial reporting purposes as a pooling
of interests.
ARTICLE 6
COVENANTS OF TI AND TANCREDI
TI and Tancredi covenant and agree with OSI as follows:
6.1 Securities Law Compliance. Tancredi represents and warrants,
and covenants to Outback and OSI that:
(a) Tancredi has received all schedules and exhibits and
the documents furnished to TI pursuant to SECTION 4.8;
(b) Tancredi has had the opportunity to ask questions of
and receive answers from representatives of the management of OSI
concerning the terms and conditions of the transactions contemplated
hereby and to obtain all additional information that OSI possesses or
could acquire without unreasonable expense that is necessary to verify
the accuracy of information furnished to Tancredi.
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<PAGE> 17
(c) OSI and Outback have furnished him with all
information requested and full access to materials concerning OSI and
Outback which Tancredi and/or his advisors deemed necessary to
properly evaluate the Merger. Such information and access have been
made available and utilized to the extent Tancredi considers necessary
and advisable in making an informed investment decision, and Tancredi
has consulted his own tax advisor and understands the evaluation of
such materials may require the assistance of experts and Tancredi has
utilized such experts to the extent deemed necessary.
(d) Tancredi understands that the OSI Common Stock to be
received is an investment of a speculative nature and Tancredi must
bear the risks thereof for an indefinite period of time. Tancredi has
adequate means for providing for his needs, is able to bear the
economic risk of the investment and has no need for liquidity in the
OSI Common Stock to be received in the Merger.
(e) Tancredi and/or his representatives or advisors who
have acted with or on behalf of Tancredi and who have advised Tancredi
in this matter have such knowledge and experience in financial and
business matters that Tancredi is capable of evaluating the merits and
risks of the Merger for OSI Common Stock.
(f) Tancredi is participating in the Merger solely for
his account as a private investment, and Tancredi has no present
agreement, understanding, arrangement or intention to sell or transfer
all or any portion of the shares of OSI Common Stock to be issued in
the Merger to any other person or persons. Tancredi does not presently
intend to enter into any such agreement or undertaking and there are
no present circumstances which will compel Tancredi to sell any OSI
Common Stock so received. Tancredi will not sell or otherwise transfer
the shares (except for de minimis gifts of shares) unless they are
registered under the Securities Act and applicable state securities
laws or, in the opinion of OSI and its counsel, an exemption from
registration is available therefor.
(g) The investment by Tancredi in OSI Common Stock
pursuant to the Merger is a suitable investment for Tancredi given the
investment goals and objectives of Tancredi.
(h) Tancredi agrees to indemnify and hold OSI and
Outback and each of their respective officers, directors and advisors
harmless against all liability arising out of or in connection with
any purchase, resale or distribution by Tancredi of any OSI Common
Stock received hereby which is effected other than in strict
compliance with the terms hereof and applicable law.
(i) Tancredi understands that the shares of OSI Common
Stock to be issued in the Merger will not be registered under the
Securities Act, nor any state securities laws, and such OSI Common
Stock may not be sold or transferred except in compliance with such
laws. Neither OSI nor Outback will have any obligation to register any
OSI Common Stock hereof.
(j) Tancredi understands that OSI will place an
appropriate legend on the certificate representing OSI Common Stock to
be received restricting the transfer of the shares and stop-transfer
instructions will be given to the transfer agent for the OSI Common
Stock with respect to such certificates.
(k) Tancredi is a natural person (i) whose net worth
(the excess of total assets over total liabilities), individually or
jointly with his spouse, exceeds $1,000,000 (inclusive of the value of
home, home furnishings and automobiles); or (ii) who had an Individual
Annual Adjusted Gross
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Income in excess of $200,000 in each of the two most recent tax years
or joint income with Tancredi's spouse in excess of $300,000 in each
of those years and reasonably expects to reach the same income level
in the current tax year.
6.2 Payment of Liabilities. TI and Tancredi covenant and agree
that all debts and liabilities of TI relating to periods prior to the Closing
Date shall be paid or satisfied in full prior to the Effective Date, except
only current liabilities and those debts and liabilities of TI assumed by
Outback as specified in Item 6.2 of the Disclosure Schedules.
6.3 Pooling. Tancredi agrees that until such time as financial
results of OSI covering at least thirty (30) days of combined operations of OSI
and TI subsequent to the Effective Date have been published, he will not sell
or otherwise dispose of any shares of OSI Common Stock held by him as of the
Effective Date or any of such shares thereafter acquired by him at any time or
from time to time prior to the date of such publication. OSI shall give
instructions to its transfer agent and registrar, Bank of New York, Inc., with
respect to the shares of OSI Common Stock issued pursuant to the Merger, to the
effect that no transfer of such shares shall be effected until the date on
which the requisite financial results have been published and OSI and the
transfer agent may take any action, including placing an appropriate legend on
the certificates, they deem necessary to enforce this provision.
ARTICLE 7
COVENANTS OF OSI AND OUTBACK
OSI and Outback, jointly and severally, covenant and agree with TI and
Tancredi as follows:
7.1 Employment Agreements. Solely with respect to the Merger, and
any consequential termination of any partnership by operation of law, Outback
agrees not to elect to terminate the Employment Agreements between the
Partnership, as employer, and the general managers of the Partnership's Outback
Steakhouse(R) restaurants, as employees. Outback shall succeed to all rights
and obligations of the Partnership under such Employment Agreements. Nothing
contained herein shall be construed as in any way limiting Outback's right to
terminate any such Employment Agreement as a result of any circumstance or
event other than the Merger and consequential termination of the Partnership by
operation of law.
7.2 Assumed Liabilities. OSI and Outback agree to assume and pay
the liabilities specified in Item 6.2 (subject to the amount limits specified
in Item 6.2 of the Disclosure Schedules) and to indemnify and hold harmless
Tancredi from any loss or liability therefor.
ARTICLE 8
JOINT CONDITIONS PRECEDENT TO CLOSING OBLIGATIONS
Except as may be waived by OSI, the obligations of TI, Tancredi, OSI
and Outback to consummate the transactions contemplated by this Agreement shall
be subject to the satisfaction, on or before the Closing Date, of each of the
following conditions:
8.1 Consents to Transaction. TI, Outback and OSI shall have
received all consents or approvals and made all applications, requests, notices
and filings with, any person, governmental authority or governmental agency
required to be obtained or made in connection with the consummation of the
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transactions contemplated by this Agreement. There shall have been obtained
from all state and local governments and governmental agencies all approvals
and consents necessary to enable TI and/or the Partnership, as applicable, to
transfer their liquor licenses and permits to Outback, to enable Outback to
assume such licenses and permits or to enable Outback to operate restaurants
(of the kind and quality customarily operated by Outback) using such permits or
licenses. Copies of all consents and approvals received by any party pursuant
to this SECTION 8.1 shall be furnished to the other party.
8.2 Absence of Litigation. No governmental agency or authority
shall have instituted or threatened in writing to institute, any action or
proceeding seeking to delay, restrain, enjoin or prohibit the consummation of
the transactions contemplated by this Agreement and no order, judgment or
decree by any court or governmental agency or authority shall be in effect that
enjoins, restrains or prohibits the same or otherwise would materially
interfere with the operation of the assets and business of TI or the
Partnership or OSI and its subsidiaries, including the surviving corporation in
the Merger, after the Closing Date.
8.3 Dissenter's Rights. The number of shares of capital stock of
TI for which shareholders have exercised appraisal or dissenters' rights under
applicable law shall be a number which, in the sole and absolute discretion of
OSI, does not jeopardize the financial reporting and accounting treatment of
the Merger specified in SECTION 1.11 or is otherwise not contrary to the best
interests of Outback or OSI.
ARTICLE 9
CONDITIONS PRECEDENT TO OBLIGATIONS OF TI
The obligations of TI and Tancredi to consummate the transactions
contemplated by this Agreement shall be subject to the satisfaction on or
before the Closing Date of each of the following conditions:
9.1 Compliance. OSI and Outback shall have, or shall have caused
to be, satisfied or complied with and performed in all material respects all
terms, covenants and conditions of this Agreement to be complied with or
performed by OSI and Outback on or before the Closing Date.
9.2 Representations and Warranties. All of the representations
and warranties made by OSI and Outback in this Agreement, and in all
certificates and other documents delivered by OSI and Outback to TI and
Tancredi pursuant hereto or in connection with the transactions contemplated
hereby, shall have been true and correct in all material respects as of the
date hereof and shall be true and correct in all material respects at the
Closing Date with the same force and effect as if such representations and
warranties had been made at and as of the Closing Date, except for changes
permitted or contemplated by this Agreement.
9.3 Material Adverse Changes. Since the date hereof, there shall
have occurred no material adverse change in the business, properties, assets,
liabilities, results of operations or condition, financial or otherwise, of OSI
and Outback, taken as a whole.
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ARTICLE 10
CONDITIONS PRECEDENT TO OBLIGATIONS OF OSI AND OUTBACK
Except as may be waived by OSI and Outback, the obligations of OSI and
Outback to consummate the transactions contemplated by this Agreement shall be
subject to the satisfaction, on or before the Closing Date, of each of the
following conditions:
10.1 Compliance. TI and Tancredi shall have or shall have caused
to be satisfied or complied with and performed in all material respects all
terms, covenants and conditions of this Agreement to be complied with or
performed by any of them on or before the Closing Date.
10.2 Representations and Warranties. All of the representations
and warranties made by TI and/or Tancredi in this Agreement, the Disclosure
Schedule, and in all certificates and other documents delivered by TI or
Tancredi pursuant hereto or in connection with the transactions contemplated
hereby, shall have been true and correct in all material respects as of the
date hereof and shall be true and correct in all material respects at the
Closing Date with the same force and effect as if such representations and
warranties had been made at and as of the Closing Date, except for changes
permitted or contemplated by this Agreement.
10.3 Current Financial Status. OSI shall have received the
unaudited financial statements of TI as of March 31, 1998, for the month then
ended.
10.4 Material Adverse Changes. Since December 31, 1997, there
shall have occurred no material adverse change in the business, properties,
assets, liabilities, results of operations or condition, financial or
otherwise, of TI or the Partnership.
10.5 Pooling. OSI shall have received a letter from Deloitte &
Touche, in form and substance satisfactory to OSI and dated not more than five
days prior to the Closing Date, to the effect that the Merger shall qualify as
a pooling of interests for financial reporting purposes.
ARTICLE 11
INDEMNIFICATION
Tancredi, on the one hand, and OSI and Outback, jointly and severally,
on the other hand, agree as follows:
11.1 Indemnification Based on Agreement. Subject to the
limitations contained in SECTION 11.2 hereof, Tancredi shall indemnify and hold
harmless OSI, Outback and TI, and OSI, Outback and TI, jointly and severally,
shall indemnify and hold harmless Tancredi, against any losses, claims, damages
or liabilities to which such indemnified party may become subject, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any facts or circumstances that would constitute
a breach by the other of any representation, warranty or covenant contained
herein or in any agreement executed pursuant hereto and will reimburse any
legal or other expenses reasonably incurred by any indemnified party in
connection with investigating or defending any such loss, claim, damage,
liability or action.
In addition to the above, Tancredi shall indemnify OSI, Outback and
TI, as provided in the first paragraph of this SECTION 11.1, against any loss,
claim, damage or liability arising out of (i) any tax liability of TI for any
period prior to and including March 31, 1998 and (ii) any debt of TI (other
than the
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debts specified in Item 6.2 of the Disclosure Schedule to the extent assumed by
Outback), and (iii) all claims, obligations, causes of action and liabilities,
of whatever kind or character, of any of TI which arise out of or are based
upon events first occurring on or before the Effective Date, except only the
liabilities assumed by Outback as specified in Item 6.2 of the Disclosure
Schedule.
11.2 Limitation. Tancredi shall have no obligation under SECTION
11.1 to indemnify OSI, Outback or TI for any liability, loss, claim or damage
arising out of or based upon facts or actions first occurring after the
Effective Date. All obligations of indemnity (other than those relating to tax
obligations of TI under SECTION 11.1 above which shall continue for the period
specified in SECTION 12.4(B) hereof) shall terminate two (2) years from the
Closing Date; provided, however, the obligations of indemnity shall not
terminate with respect to any matter for which indemnification is claimed
within two (2) years from the Closing Date.
11.3 Cooperation. If any claim, demand, action, suit, proceeding
or investigation arising out of or pertaining to this Agreement or the
transactions contemplated hereby is begun or asserted, whether begun or
asserted before or after the Closing Date, the parties hereto will cooperate
and use their best efforts to defend against and respond thereto.
11.4 Notice. An indemnified party shall give notice to the
indemnifying party or parties within ten (10) business days after actual
receipt of service or summons to appear in any action begun in respect of which
indemnity may be sought hereunder. Failure to so notify the indemnifying party
or parties shall cause the indemnified party to be liable for any damage caused
by failure to give timely notice. The indemnifying party or parties may
participate at their own expense and with their counsel in the defense of such
action. If the indemnifying party or parties so elect within a reasonable time
after receipt of such notice, they may assume the defense of such action with
counsel chosen by the indemnifying party or parties and approved by the
indemnified party in such action, unless the indemnified party reasonably
objects to such assumption on the ground that its counsel has advised it that
there may be legal defenses available to it that are different from or in
addition to those available to the indemnifying party or parties, in which case
the indemnified party shall have the right to employ counsel approved by the
indemnifying party or parties. If the indemnifying party or parties assume the
defense of such action, the indemnifying party or parties shall not be liable
for fees and expenses of counsel for the indemnified party incurred thereafter
in connection with such action. In no event shall the indemnifying party or
parties be liable for the fees and expenses of more than one counsel for the
indemnified parties in connection with any one action or separate but similar
or related actions in the same jurisdiction arising out of the same general
allegations or circumstances unless, in the reasonable opinion of such counsel,
there is, under applicable standards of professional conduct, a conflict on any
significant issue between the positions of any two or more indemnified parties.
ARTICLE 12
MISCELLANEOUS
12.1 Termination. This Agreement and the transactions contemplated
hereby may be terminated at any time on or before the Closing Date
(notwithstanding approval by the shareholders of TI):
(a) by mutual consent of TI and OSI;
(b) by OSI if there has been a material
misrepresentation or breach of warranty in the representations and
warranties of TI or Tancredi set forth herein or if there has been any
material failure on the part of TI or Tancredi to comply with their
obligations hereunder;
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(c) by TI if there has been a material misrepresentation
or breach of warranty in the representations and warranties of OSI or
Outback set forth herein or if there has been any material failure on
the part of OSI or Outback to comply with their obligations hereunder;
(d) by either OSI, TI or Tancredi, if the transactions
contemplated by this Agreement have not been consummated by May 30,
1998, unless such failure of consummation is due to the failure of the
terminating party to perform or observe the covenants, agreements and
conditions hereof to be performed or observed by it at or before the
Closing Date;
(e) by either OSI, or TI if the conditions precedent to
its obligations to close this Agreement have not been satisfied or
waived by it at or before the Closing Date; and
(f) by either TI or OSI if the transactions contemplated
hereby violate any nonappealable final order, decree or judgment of
any court or governmental body or agency having competent
jurisdiction.
12.2 Expenses. Each party hereto shall pay its own expenses
incurred in connection with this Agreement and the transactions contemplated
hereby.
12.3 Entire Agreement. This Agreement and the exhibits and
Disclosure Schedules hereto constitute and contain the complete agreement among
the parties with respect to the transactions contemplated hereby and supersede
all prior agreements and understandings among the parties with respect to such
transactions. The parties hereto have not made any representation or warranty
except as expressly set forth in this Agreement, the Merger Agreement or in any
certificate or schedule delivered pursuant hereto. The obligations of any party
under any agreement executed pursuant to this Agreement shall not be affected
by this SECTION 12.3.
12.4 Survival of Representations and Warranties.
(a) The representations, warranties and indemnification
obligations of OSI and Outback contained herein or in any exhibit,
certificate, document or instrument delivered pursuant to this
Agreement shall survive the Closing for a period of two years;
provided, however, that the obligations of OSI and Outback under
ARTICLE 7 and ARTICLE 11 hereof shall survive for the periods provided
therein.
(b) Except where otherwise specifically provided in this
Agreement, the representations, warranties and indemnification
obligations of Tancredi contained herein or in any exhibit, schedule,
certificate, document or instrument delivered pursuant to this
Agreement shall survive the Closing for a period of three years from
the Effective Date; provided, however, the representations and
warranties contained in SECTION 2.9 (Tax Liabilities) shall survive
the Closing for a period ending four years after the filing of TI's
federal income tax return for the period including the Effective Date.
12.5 Counterparts. This Agreement may be executed in any number of
identical counterparts, each of which when so executed and delivered shall be
deemed an original and such counterparts together shall constitute only one
original.
12.6 Notices. All notices, demands, requests or other
communications that may be or are required to be given, served or sent by any
party to any other party pursuant to this Agreement shall be
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in writing and shall be mailed by registered or certified mail, return receipt
requested, postage prepaid or transmitted by hand delivery, recognized national
overnight delivery service, telegram or telex, addressed as follows:
<TABLE>
<S> <C>
If to TI or Tancredi: TANCREDI, INC.
8935 N. Meredian Street Suite 109
Indianapolis, IN 46260
Attention: Samuel Tancredi
If to OSI or Outback: OUTBACK STEAKHOUSE, INC.
550 North Reo Street, Suite 200
Tampa, Florida 33609
Attention: Joseph J. Kadow, General Counsel
</TABLE>
Each party may designate by notice in writing a new address to which
any notice, demand, request or communication may thereafter be so given, served
or sent. Each notice, demand, request or communication that is mailed,
delivered or transmitted in the manner described above shall be deemed
sufficiently given, served, sent and received for all purposes at such time as
it is delivered to the addressee (with the return receipt, the delivery
receipt, the affidavit of messenger or (with respect to a telex) the answer
back being deemed conclusive evidence of such delivery) or at such time as
delivery is refused by the addressee upon presentation.
12.7 Successors and Assigns. This Agreement and the rights,
interests and obligations hereunder shall be binding upon and shall inure to
the benefit of the parties hereto and, except as otherwise specifically
provided for herein, their respective successors and assigns.
12.8 Governing Law. This Agreement shall be construed and enforced
in accordance with the laws of the State of Florida without giving effect to
principles of comity or conflicts of law thereof.
12.9 Waiver and Other Action. This Agreement may be amended,
modified or supplemented only by a written instrument executed by the parties
against which enforcement of the amendment, modification or supplement is
sought.
12.10 Severability. If any provision of this Agreement is held to
be illegal, invalid or unenforceable, such provision shall be fully severable
and this Agreement shall be construed and enforced as if such illegal, invalid
or unenforceable provision were never a part hereof; the remaining provisions
hereof shall remain in full force and effect and shall not be affected by the
illegal, invalid or unenforceable provision or by its severance; and in lieu of
such illegal, invalid or unenforceable provision, there shall be added
automatically as part of this Agreement, a provision as similar in its terms to
such illegal, invalid or unenforceable provision as may be possible and be
legal, valid and enforceable.
12.11 Headings. All headings and captions in this Agreement are
intended solely for the convenience of the parties and none shall be deemed to
affect the meaning or construction of any provision hereof.
12.12 Construction. All references herein to the masculine, neuter
or singular shall be construed to include the masculine, feminine, neuter or
plural, where applicable.
12.13 Jurisdiction and Venue. The parties agree that any action
brought by either party against the other in any court, whether federal or
state, shall be brought within the State of Florida in the judicial
19
<PAGE> 24
circuit in which OSI has its principal place of business. Each party hereby
agrees to submit to the personal jurisdiction of such courts and hereby waives
all questions of personal jurisdiction or venue for the purpose of carrying out
this provision, including, without limitation, the claim or defense therein
that such courts constitute an inconvenient forum.
12.14 Enforcement. In the event it is necessary for any party to
retain legal counsel or institute legal proceedings to enforce the terms of
this Agreement, including, without limitation, obligations upon expiration or
termination, the prevailing party shall be entitled to receive from the
non-prevailing party, in addition to all other remedies, all costs of such
enforcement including, without limitation, attorney's fees and court costs and
including appellate proceedings.
12.15 Further Assurances. Each party covenants and agrees to
execute and deliver, prior to or after the Merger, such further documents as
may reasonably be requested by another party to fully effectuate the
transactions provided for herein.
12.16 Equitable Remedies. The parties hereto acknowledge that a
refusal by a party to consummate the transactions contemplated hereby will
cause irreparable harm to the other parties, for which there may be no adequate
remedy at law. A party not in default at the time of such refusal shall be
entitled, in addition to other remedies at law or in equity, to specific
performance of this Agreement by the party that refused to consummate the
transactions contemplated hereby.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
"OSI"
Attest: OUTBACK STEAKHOUSE, INC.
a Delaware corporation
By: /s/ Joseph J. Kadow By: /s/ Robert D. Basham
------------------------------- ------------------------------------
JOSEPH J. KADOW, Secretary ROBERT D. BASHAM, President
"Outback"
Attest: OUTBACK STEAKHOUSE OF FLORIDA, INC.,
a Florida corporation
By: /s/ Joseph J. Kadow By: /s/ Robert D. Basham
------------------------------- ------------------------------------
JOSEPH J. KADOW, Secretary ROBERT D. BASHAM, Chief Operating
Officer
20
<PAGE> 25
"TI"
Attest: TANCREDI, INC.
a Kentucky corporation
By: /s/ Samuel Tancredi By: /s/ Samuel Tancredi
------------------------------- ------------------------------------
SAMUEL TANCREDI, Secretary SAMUEL TANCREDI, President
Witness: "TANCREDI"
/s/ /s/ Samuel Tancredi
- ---------------------------------- ---------------------------------------
SAMUEL TANCREDI
/s/
- ----------------------------------
21
<PAGE> 26
EXHIBIT A
ARTICLES OF MERGER
THIS AGREEMENT, PLAN AND ARTICLES OF MERGER ("Articles of Merger"),
dated as of April 1, 1998, is entered into by and among TANCREDI, INC., a
Kentucky corporation ("TI"); OUTBACK STEAKHOUSE, INC., a Delaware corporation
("OSI"); and OUTBACK STEAKHOUSE OF FLORIDA, INC., a Florida corporation
("Outback").
W I T N E S E T H:
WHEREAS, TI is a corporation duly organized and validly existing under
the laws of the State of Kentucky, and the authorized and outstanding capital
stock of TI is as follows:
<TABLE>
<CAPTION>
Authorized Shares Issued
Corporation Capital Stock And Outstanding
----------- ------------- ---------------
<S> <C> <C>
TANCREDI, Inc. 1,000 common shares 100 common shares
</TABLE>
WHEREAS, OSI is a corporation duly organized and validly existing
under the laws of the State of Delaware; and
WHEREAS, OSI is authorized to issue 2,000,000 shares of Preferred
Stock, par value $.01, none of which are outstanding and 200,000,000 shares of
Common Stock, $.01 par value (the "OSI Common Stock"), of which approximately
48,559,385 shares of OSI Common Stock are issued and outstanding as of March
18, 1998; and
WHEREAS, Outback is a wholly owned subsidiary of OSI; and
WHEREAS, the respective Boards of Directors of each of TI, Outback,
and OSI deem it advisable, for the benefit of their respective corporations and
shareholders, that TI be merged into Outback, with Outback as the surviving
corporation (in its capacity as surviving corporation, Outback is hereinafter
sometimes referred to as the "Surviving Corporation"), pursuant to the
provisions of Sections 607.1101-607.1107 of the Florida Business Corporation
Act (the "Florida Act") and the laws of the State of Kentucky ("Kentucky Law"),
and have approved these Articles of Merger; and
WHEREAS, the Board of Directors of TI has directed that these Articles
of Merger be submitted to its voting shareholder for approval and adoption and
the voting shareholder of TI has approved and adopted these Articles of Merger
in accordance with Kentucky Law and the corporate governance documents of TI by
unanimous written consent dated April 1, 1998; and
WHEREAS, OSI as the sole shareholder of Outback has approved and
adopted these Articles of Merger by written consent on April 1, 1998; and
WHEREAS, the Agreement and Plan of Reorganization (the "Reorganization
Agreement"), which Outback, OSI, and TI have entered, contemplates the
execution and delivery of these Articles of Merger.
A-1
<PAGE> 27
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants contained herein and for the purpose of prescribing the terms and
conditions of the merger and such other details and provisions as are deemed
necessary or desirable, the parties hereto agree as follows:
1. MERGER. The names of the corporations which propose to merge
are TANCREDI, INC., a Kentucky corporation ("TI"), and OUTBACK STEAKHOUSE OF
FLORIDA, INC. ("Outback"). In accordance with the provisions of the Florida Act
and Kentucky Law at the Effective Date (as hereinafter defined), TI shall be
merged into Outback, and Outback shall be the Surviving Corporation and as such
shall continue to be governed by the laws of the State of Florida. The plan of
merger set forth in these Articles of Merger was duly authorized by each of
Outback and TI, respectively, by all action required by the laws under which it
was incorporated or organized and by its constituent documents.
2. CONTINUATION OF CORPORATE EXISTENCE. The corporate existence
and identity of Outback, with all its purposes, powers, franchises, privileges,
rights and immunities, shall continue unaffected and unimpaired by the merger
and the corporate existence and identity of TI with all its purposes, powers,
franchises, privileges, rights and immunities at the Effective Date shall be
merged with and into that of Outback, and Outback as the Surviving Corporation
shall be vested fully therewith, and the separate corporate existence and
identity of TI shall thereafter cease except to the extent continued by
statute.
3. EFFECTIVE DATE. The merger shall become effective
(hereinbefore and hereinafter called the "Effective Date") upon the later of
(i) filing of these Articles of Merger with the Secretary of State of the state
of Florida and the Secretary of State of the state of Kentucky; or (ii) April
1, 1998. Such Effective Date shall be indicated on Certificates of Merger
issued by the Secretary of State of the state of Florida and by the Secretary
of State of the state of Kentucky pursuant to the Florida Act and Kentucky Law.
4. CORPORATE GOVERNMENT.
(a) The Certificate of Incorporation of Outback, as in
effect on the Effective Date, shall continue in full force and effect
and shall be the Certificate of Incorporation of the Surviving
Corporation.
(b) The Bylaws of Outback, as in effect as of the
Effective Date, shall continue in full force and effect and shall be
the Bylaws of the Surviving Corporation.
(c) The members of the Board of Directors and the
officers of the Surviving Corporation shall be the persons holding
such positions for Outback as of the Effective Date.
5. CONVERSION OF SHARES. The manner and basis of converting the
capital stock of TI into OSI Common Stock, subject to SECTION 5(C) below with
respect to fractional shares, shall be as follows:
(a) Each share of TI common stock which shall be
outstanding immediately prior to the Effective Date shall at the
Effective Date, by virtue of the merger and without any action on the
part of the holder thereof, be converted into and exchanged for 535
shares of OSI Common Stock.
(b) The Outback capital stock outstanding immediately
prior to the Effective Date shall be unaffected by the merger.
A-2
<PAGE> 28
(c) The stock transfer books of TI shall be closed as of
the close of business on the Effective Date and no transfer of record
of any of its capital stock shall take place thereafter.
(d) No fractional shares of OSI Common Stock and no
certificates or scrip therefor shall be issued. Instead one whole
share of OSI Common Stock shall be issued to each holder of shares of
common stock of the merging corporations whose fractional share
interest is .5 or more of one whole share; each fraction of less than
.5 of one whole share shall be disregarded.
(e) Notwithstanding the foregoing, the OSI shall not be
required to issue or distribute more than 53,500 shares of OSI Common
Stock pursuant to the merger, less any shares reserved for dissenters'
rights, as described in Article 1 of the Reorganization Agreement.
(f) All of the shares of OSI Common Stock, when
delivered pursuant to the provisions of these Articles of Merger,
shall be validly issued, fully paid and nonassessable.
(g) At the Effective Date, each holder of certificates
representing shares of the common stock of TI shall thereupon cease to
have any rights with respect to such shares and shall be deemed to be
a shareholder of OSI to the extent of the number of shares of OSI
Common Stock to which such shareholder shall be entitled in accordance
with these Articles of Merger; and shall surrender certificates
representing shares of the common stock of TI to the OSI, whereupon
such holder shall receive a certificate or certificates for the number
of shares of OSI Common Stock to which such holder is entitled
hereunder.
6. RIGHTS AND LIABILITIES OF THE SURVIVING CORPORATION. The
Surviving Corporation shall have the following rights and obligations:
(a) The Surviving Corporation shall have all the rights,
privileges, immunities and powers and shall be subject to all the
duties and liabilities of a corporation organized under the laws of
the State of Florida.
(b) The Surviving Corporation shall possess all of the
rights, privileges, immunities and franchises, of either a public or
private nature, of Outback, and TI and all property, real, personal
and mixed and all debts due on whatever account, including
subscription to shares and all other chooses in action and every other
interest of or belonging or due to TI shall be taken and deemed to be
transferred or invested in the Surviving Corporation without further
act or deed.
(c) At the Effective Date, the Surviving Corporation
shall thenceforth be responsible and liable for all liabilities and
obligations of TI and any claim existing or action or proceeding
pending by or against TI or Outback may be prosecuted as if the merger
had not occurred or the Surviving Corporation may be substituted in
its place. Neither the rights of creditors nor any liens upon the
property of TI or Outback shall be impaired by the merger.
7. CONSENT OF SHAREHOLDERS. These Articles of Merger have been
adopted by the shareholders of TI in accordance with Kentucky Law and its
corporate governance documents by unanimous written consent effective as of
April 1, 1998. These Articles of Merger have been adopted by the written
consent of the sole shareholder of Outback dated as of April 1, 1998, to the
Florida Act.
A-3
<PAGE> 29
8. DISSENTING SHAREHOLDERS. If any shareholder of TI files a
written objection to these Articles of Merger before a vote of the shareholders
is taken hereon and complies with the further provisions of the Florida Act or
Kentucky Law, as applicable, he may be paid the fair value of his shares. If
any shareholder of TI lawfully elects, pursuant to the Florida Act or Kentucky
Law, as applicable, to exercise or pursue his right to dissent from any of the
corporate actions referred to in these Articles of Merger with respect to the
shares of common stock of TI owned by such shareholder (the "Dissenting
Shares"), such shareholder shall be entitled to exercise only those rights
available to him as set forth in the Florida Act or Kentucky Law, as
applicable, and, in that event, only in the manner set forth therein. During
the period in which any such shareholder shall be exercising or pursuing any of
such shareholder's rights of dissent as specified in the Florida Act or
Kentucky Law, as applicable, such shareholder shall have no other rights
pursuant to or arising from these Articles of Merger.
9. REORGANIZATION AGREEMENT. These Articles of Merger are
intended to supplement the Reorganization Agreement and are not intended to
conflict with or supersede that agreement and, in the event of any conflict,
the provisions of the Reorganization Agreement shall control.
10. COPIES. A copy of these Articles of Merger shall be on file
at the principal place of business of the Surviving Corporation located at 550
North Reo Street, Suite 200, Tampa, Florida 33609. A copy of these Articles of
Merger will be furnished by the Surviving Corporation, on request and without
cost, to any shareholder of any corporation that is a party hereto.
IN WITNESS WHEREOF, the undersigned have executed these Articles of
Merger as of the day and year first above written.
"OSI"
Attest: OUTBACK STEAKHOUSE, INC.
a Delaware corporation
By: By:
----------------------------------- -------------------------------
JOSEPH J. KADOW, Secretary ROBERT D. BASHAM, President
A-4
<PAGE> 30
STATE OF FLORIDA )
) ss
COUNTY OF HILLSBOROUGH )
On this ______ day of ____________, 1998, before me, personally came
ROBERT D. BASHAM and JOSEPH J. KADOW, President and Secretary, respectively, of
OUTBACK STEAKHOUSE, INC., a Delaware corporation, who are personally known to
me, and each being first duly sworn, did depose and say that they executed the
foregoing on behalf of said corporation by order of the Board of Directors of
said corporation.
(NOTARY SEAL)
-------------------------------------------
(Notary Signature)
NOTARY PUBLIC
Commission No.
-----------------------------
"Outback"
Attest: OUTBACK STEAKHOUSE OF FLORIDA, INC.,
a Florida corporation
By: By:
----------------------------- ----------------------------------------
JOSEPH J. KADOW, Secretary ROBERT D. BASHAM, Chief Operating
Officer
STATE OF FLORIDA )
) ss
COUNTY OF HILLSBOROUGH )
On this ______ day of _______________, 1998, before me, personally
came ROBERT D. BASHAM and JOSEPH J. KADOW, Chief Operating Officer and
Secretary, respectively, of OUTBACK STEAKHOUSE OF FLORIDA, INC., a Florida
corporation, who are personally known to me, and each being first duly sworn,
did depose and say that they executed the foregoing on behalf of said
corporation by order of the Board of Directors of said corporation.
(NOTARY SEAL)
-------------------------------------------
(Notary Signature)
NOTARY PUBLIC
Commission No.
-----------------------------
A-5
<PAGE> 31
"TI"
Attest: TANCREDI, INC.
a Kentucky corporation
By: By:
---------------------------- ----------------------------------------
SAMUEL TANCREDI, Secretary SAMUEL TANCREDI, President
STATE OF PENNSYLVANIA )
) ss
COUNTY OF
------------- )
On this ______ day of _________________, 1998 before me, personally
came SAMUEL TANCREDI, President and Secretary, respectively, of TANCREDI, INC.,
a Kentucky corporation, who are personally known to me, and each being first
duly sworn, did depose and say that they executed the foregoing on behalf of
said corporation by order of the Board of Directors of said corporation.
(NOTARY SEAL)
----------------------------------------------------
(Notary Signature)
NOTARY PUBLIC
Commission No.
--------------------------------------
A-6
<PAGE> 32
EXHIBIT B
DISCLOSURE SCHEDULES
Item 2.8(c) Any asset acquired or disposed of, or indebtedness incurred,
assumed, guaranteed, endorsed, paid or discharged; any
material amount of assets subjected or permitted to be
subjected to any liability or obligation or to any lien,
claim or encumbrance of any kind, except in the ordinary
course of business or pursuant to agreements in force at the
date of this Agreement and identified below:
None.
Item 2.10(a) Material liabilities or obligations, contingent or otherwise
of the Partnership of any nature:
None.
Item 2.10(b) Liabilities or obligations of TI (other than material
liabilities arising solely by reason of TI's status as a
partner in the Partnership) of any nature, whether absolute,
accrued, contingent or otherwise:
None.
Item 2.11 Liens and encumbrances on real and personal property
purchased by TI or the Partnership since the date of the
Balance Sheet, except for liens for taxes, assessments or
other governmental charges not yet due and payable.
None.
Item 2.12 Contracts and commitments not in the ordinary course of the
Partnership's business.
None.
Item 2.13 Pending suits, claims, actions or litigation or
administrative, arbitration or other proceedings or
governmental investigations or inquiries against TI or the
Partnership to which any of their business or assets is
subject.
None.
Item 2.14 Violations and defaults of TI and the Partnership.
None.
Item 6.2 Current liabilities and those debts and liabilities of TI
agreed to be assumed by Outback:
None.
B-1
<PAGE> 1
EXHIBIT 10.24
CRESCENT CENTER AT INTERNATIONAL PLAZA OFFICE BUILDING
LEASE AGREEMENT
LEASE DATE: _____________________, 19___.
LANDLORD: Crescent Resources, Inc., a South Carolina corporation.
NOTICE Post Office Box 1003 [zip code 28201-1003] (If delivered by mail)
ADDRESS OF 400 South Tryon Street, Suite 1300 [zip code 28202] (If personally
LANDLORD:delivery or overnight service or telegram)
Charlotte, North Carolina
Attention: Robert J. Holmes, Jr. Telephone: (704) 382-8009
Facsimile: (704) 382-6385
TENANT: Outback Steakhouse, Inc., a Florida
corporation
NOTICE
-------------------
ADDRESS OF
-------------------
TENANT: Prior to occupancy:
550 North Reo Street, Suite 204
Tampa, Florida 33609
Attention: Bob Merritt Telephone: (813) 282-1225
Facsimile: (813) 286-2247
After occupancy:
Notices shall be sent to Premises address
Attention: Bob Merritt
TENANT'S
CONTACT
PERSON: Bob Merritt Telephone: (813) 282-1225
Facsimile: (813) 286-2247
BUILDING: Six (6) story office building known as Crescent Center At
International Plaza located on the Land at the Northwest corner of the
intersection of North Westshore and Spruce Boulevard, Tampa, Florida
<PAGE> 2
LAND: That certain tract or parcel of land located in Tampa, Florida,
and described on Exhibit A attached hereto and incorporated
herein by reference.
PREMISES: Suite 500 in the Building, as more particularly described on
Exhibit B-1 attached hereto and incorporated herein by reference.
PREMISES NET
RENTABLE
AREA: Approximately 66,860 square feet located on the fifth (5th) floor
of the Building.
BUILDING NET
RENTABLE
AREA: 389,000 square feet.
LEASE TERM: Ten (10) years and six (6) months, beginning on the Commencement
Date. Provided, however, if the Commencement Date is any day
other than the first day of a calendar month, the Lease Term
shall be extended automatically until midnight on the last day
of the calendar month in which the Lease Term otherwise would
expire.
COMMENCEMENT
DATE: August 27, 1999
<TABLE>
<CAPTION>
BASE RENTAL: Annual Rate
Per Square Foot
Of Premises
Lease Term Net Rentable Area
-------------------------------------------------------
<S> <C>
Months 1-6 $0.00
Months 7-30 $22.00
Months 31-42 $22.50
Months 43-54 $23.00
Months 55-66 $23.50
Months 67-78 $24.00
Months 79-90 $24.50
Months 91-102 $25.00
Months 103-114 $25.50
Months 115-126 $26.00
</TABLE>
ADJUSTMENT
DATE: [Intentionally deleted]
BASIC COSTS
EXPENSE STOP: The Basic Costs (excluding ad valorem real estate taxes) paid or
incurred by Landlord during the calendar year 2000, grossed up to
reflect occupancy of 95% of the
<PAGE> 3
Building Net Rentable Area or Four and 75/100 Dollars ($4.75)
multiplied by the Building Net Rentable Area; whichever is greater.
PREMISES ELECTRICAL
EXPENSE STOP: Seventy cents ($.70) multiplied by the Building Net Rentable Area.
REAL ESTATE TAX
EXPENSE STOP: Two and 25/100 Dollars ($2.25) multiplied by the Building Net
Rentable Area.
ADVANCE
BASE RENTAL
PAYMENT: One Hundred Thirty-Thousand Eight Hundred Fifty and 59/100 Dollars
($130,850.59), which includes sales tax, for the seventh month of the
Lease Term.
SECURITY
DEPOSIT: [Intentionally Deleted].
TENANT
IMPROVEMENTS
ALLOWANCE: Twenty-Three and 50/100 Dollars ($23.50) per square foot of
Premises Net Rentable Area.
BROKER: CLW Realty Group, Inc.
The foregoing summary (the "Lease Summary") is hereby incorporated into and made
a part of the Lease Agreement. In the event, however, of a conflict between the
terms of the Lease Summary and the terms of the Lease Agreement, the latter
shall control.
Initial: (For Landlord)
------------
Initial: (For Tenant)
-----------
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PARAGRAPH DESCRIPTION
- --------- -----------
<S> <C>
. Definitions
. Lease Grant
. Lease Term
. Use
. Base Rental
. Adjustments to Base Rental
. Adjustments for Increase in Basic Costs
. Services to Be Furnished by Landlord
. Construction of Improvements
. Maintenance and Repair by Landlord
. Maintenance and Repair by Tenant
. Alterations by Tenant
. Use of Electrical Services by Tenant
. Graphics and Signage
. Parking
. Compliance with Laws
. Building Rules
. Entry by Landlord
. Assignment and Subletting
. Liens
</TABLE>
<PAGE> 5
<TABLE>
<S> <C>
. Property Insurance
. Liability Insurance
. Indemnities
. Waiver and Waiver of Subrogation Rights
. Casualty Damage
. Condemnation
. Damages from Certain Causes
. Events of Default/Remedies
. Security Deposit
. Peaceful Enjoyment
. Holding Over
. Subordination to Mortgage
. Estoppel Certificate
. Attorneys' Fees
. No Implied Waiver
. Personal Liability
. Notices
. Severability
. Recordation
. Governing Law
. Force Majeure
. Time of Performance
. Transfers by Landlord
. Commissions
</TABLE>
<PAGE> 6
<TABLE>
<S> <C>
. Effect of Delivery of this Lease
. Real Estate Investment Trust
. Hazardous Materials
. Landlord's Right of Relocation
. Evidence of Authority
. Survival of Obligations
. Confidentiality
. Contractual Landlord's Lien
. Rent a Separate Covenant
. Radon
. Miscellaneous Provisions
. Special Stipulations
. Waiver of Jury Trial
</TABLE>
<TABLE>
<CAPTION>
EXHIBITS
- --------
<S> <C>
A Description of Land
B Designation of Premises
C Construction of Improvements
D Cleaning and Janitorial Services
E Rules and Regulations
F Special Stipulations
G Commencement Date Stipulation
HReo Street Hold Over Provision
</TABLE>
<PAGE> 7
LEASE AGREEMENT
THIS LEASE AGREEMENT (this "Lease") is made and entered into on the
date and between the Landlord and Tenant identified in the Lease Summary.
WITNESSETH:
. Definitions.
Capitalized terms appearing in this Lease, unless defined elsewhere in this
Lease or in the Lease Summary, shall have these definitions:
() "Additional Rent" shall mean all sums of money in addition to Base
Rental which shall become due from Tenant under this Lease, including, without
limitation, Tenant's Proportionate Share of Basic Costs in excess of the Basic
Costs Expense Stop, as set forth in Paragraph 7 herein.
() "Adjustment Date" shall have the meaning set forth in the Lease
Summary.
() "Advance Base Rental Payment" shall have the meaning set forth in
the Lease Summary.
() "Base Rental" during the Lease Term shall be the amount so
designated in the Lease Summary, as same may be adjusted pursuant to the terms
of this Lease, together with all taxes (excise, sales, use or other) levied or
assessed by any governmental entity on Basic Rent, Additional Rent or any other
sums payable by Tenant under this Lease.
() "Basic Costs" shall mean and include: all expenses relating to the
Building and the Building Exterior Common Areas, including all costs of
operation, maintenance and management thereof and assessments for public
betterments or improvements or charged by any owner's association, ad valorem
real estate taxes and any other tax on real estate as such, ad valorem taxes on
furniture, fixtures, equipment or other property used in connection with the
operation, maintenance or management of the Building and the Building Exterior
Common Areas and the costs, including, without limitation, of legal and
consulting fees of contesting or attempting to reduce any of the aforesaid
taxes, reasonable amortization of capital improvements which are required by
applicable law that come into effect after the Commencement Date or which will
improve the efficiency of operating, managing or maintaining the Building or
which will reduce Landlord's operating expenses or the rate of increase thereof,
the cost of labor, materials, repairs, insurance, utilities and services and
such other expenses with respect to the operation, maintenance and management of
the Building and the Building Exterior Common Areas, all of which expenses
<PAGE> 8
shall be incurred or paid by or on behalf of Landlord or are properly chargeable
to Landlord's operating expenses in accordance with generally accepted
accounting principles as applied to the operation, maintenance and management of
a first class office building.
Notwithstanding the foregoing, it is agreed that the Basic Costs shall
not include: any leasing or marketing or brokerage costs, fees, or commissions;
any cost of upfitting space for occupancy by tenants; any amortization of
principal or interest on account of any indebtedness; any legal expenses arising
out of any misconduct or negligence of Landlord or any person for which Landlord
is responsible or arising out of dealings between any principals constituting
Landlord or arising out of any leasing, sale or financing of the Building or the
Land or any part of either of them; or, except as expressly permitted above, any
amortization or depreciation.
() "Basic Costs Expense Stop" shall be the amount so designated in the
Lease Summary.
() "Broker" shall be the party or parties so designated in the Lease
Summary.
() "Building" shall have the meaning set forth in the Lease Summary.
() "Building Exterior Common Areas" shall mean the exterior of the
Building and all of the improvements and real property on the Land, including,
without limitation, all parking areas, enclosed or otherwise, and all streets,
sidewalks, signs, drainage and detention ponds and landscaped areas located on
or within the Land.
() "Building Net Rentable Area" shall have the meaning set forth in the
Lease Summary.
() "Building Shell Improvements" shall mean the Building improvements
constructed or to be constructed by Landlord, at Landlord's sole cost and
expense and without applying any of the Tenant Improvements Allowance. The
Building Shell Improvements are more particularly described in Exhibit C
attached hereto and incorporated herein by reference.
() "Commencement Date" shall mean that date set forth in the Lease
Summary, as same may be adjusted pursuant to the provisions of Paragraph 3
herein.
() "Common Areas" shall mean those areas within the Building devoted to
corridors, elevator foyers, restrooms, mechanical rooms, janitorial closets,
electrical and telephone closets, vending areas and other similar facilities
provided for the common use or benefit of tenants generally and/or the public,
including any columns and/or projections located within said areas.
() "Force Majeure Matters" is defined in Paragraph 41 herein.
() "Land" shall mean the real property upon which the Building is
situated as more particularly described on Exhibit A hereto.
<PAGE> 9
() "Lease Term" shall mean the term of this Lease as set forth in the
Lease Summary.
() "Premises" shall have the meaning set forth in the Lease Summary.
() "Premises Electrical Expense Stop" shall have the meaning set forth
in the Lease Summary. The Premises Electrical Expense Stop is the component of
the Basic Cost Expense Stop which covers the cost of electricity to be supplied
to premises in the Building to be occupied by tenants (including the Premises)
(i) to operate lights and light fixtures; therein, (ii) to operate equipment and
fixtures that are connected to electrical outlets therein and (iii) to operate
any HVAC system or unit that exclusively serves such tenant premises (or any
portion thereof) [the base Building HVAC for a single tenant floor shall not be
deemed exclusively serving tenant premises].
() "Premises Net Rentable Area" shall have the meaning set forth in the
Lease Summary. The Premises Net Rentable Area is determined using a common area
load factor of 1.09% for a single tenant floor and 1.13% for a multi-tenant
floor.
() "Real Estate Tax Expense Stop" shall have the meaning set forth in
the Lease Summary.
() "Tenant Delay Factors" shall mean delays caused by Tenant or
Tenant's agents, employees, contractors, subcontractors or licensees, including,
without limitation, change orders to the Tenant Improvements Plans and
Specifications.
() "Tenant Improvements" shall mean the improvements to be constructed
and installed in the Premises (beyond the Building Shell Improvements) in
accordance with the Tenant Improvements Plans and Specifications, the terms of
Paragraph 9 herein and Exhibit C attached hereto.
() "Tenant Improvements Allowance" shall mean the allowance to be
provided by Landlord to Tenant for the design, space planning and construction
of the Tenant Improvements. The amount of the Tenant Improvements Allowance is
set forth in the Lease Summary.
() "Tenant Improvements Plans and Specifications" shall mean the plans
and Specifications" for the construction of the Tenant Improvements, which plans
and specifications shall be prepared pursuant to Exhibit C attached hereto.
() "Tenant's Proportionate Share" means that fraction, the numerator of
which is the Premises Net Rentable Area and the denominator of which is the
Building Net Rentable Area.
. Lease Grant.
Landlord hereby leases to Tenant, and Tenant hereby leases from
Landlord, upon and subject to the covenants, agreements, provisions and
conditions of this Lease, the Premises located in the Building.
<PAGE> 10
. Lease Term.
This Lease shall continue in force during a period beginning on the
Commencement Date and continuing until the expiration of the Lease Term, unless
this Lease is sooner terminated or extended to a later date under any other term
or provision herein. Subject to delays resulting from Construction Force Majeure
Matters (as hereinafter defined) or delays caused by Tenant or Tenant's agents,
employees, contractors, subcontractors or licensees, including, without
limitation, change orders to the Tenant Improvements Plans and Specifications
("Tenant Delay Factors"), Landlord will do its best efforts to deliver the
Premises to Tenant not later than the Commencement Date set forth in the Lease
Summary (the "Target Commencement Date"), with the Tenant Improvements
substantially completed in accordance with the Tenant Improvements Plans and
Specifications, as evidenced, if requested by Tenant, by a certificate of
substantial completion issued by Landlord's architect or other designated
architectural representative. If Landlord for any reason whatsoever cannot
deliver possession of the Premises to Tenant (with the Tenant Improvements
substantially completed in accordance with the Tenant Improvements Plans and
Specifications) not later than the Target Commencement Date, this Lease shall
not be void or voidable nor shall Landlord be liable to Tenant for any loss or
damage resulting therefrom; but in that event, Landlord shall act diligently and
in good faith to complete the work that is necessary to allow Landlord to
deliver the Premises to Tenant as specified above.
In such case, (a) if Landlord's failure to deliver possession of the
Premises to Tenant (with the Tenant Improvements substantially completed in
accordance with the Tenant Improvements Plans and Specifications) by the Target
Commencement Date is not the result, in whole or in part, of one or more Tenant
Delay Factors, the Commencement Date shall be adjusted to be the date when
Landlord does in fact deliver possession of the Premises to Tenant as described
above and (b) if Landlord's failure to deliver possession of the Premises to
Tenant (with the Tenant Improvements substantially completed in accordance with
the Tenant Improvements Plans and Specifications) by the Target Commencement
Date is the result, in whole or in part, of one or more Tenant Delay Factors,
the Commencement Date shall be the later of (i) the Target Commencement Date or
(ii) the date that the Building Exterior Common Areas and the Building Shell
Improvements have been substantially completed. Notwithstanding any term or
provision herein to the contrary, if, for any reason other than Construction
Force Majeure Matters or Tenant Delay Factors, Landlord cannot deliver
possession of the Premises (with the Tenant Improvements substantially completed
in accordance with the Tenant Improvements Plans and Specifications) to Tenant
by November 30, 1999, Tenant shall be entitled to terminate this Lease by so
notifying Landlord in writing not later than December 10, 1999. Time is of the
essence relative to Tenant's right to terminate this Lease pursuant to this
Paragraph 3 and in the event that Tenant fails to deliver the notice of
termination by December 10, 1999, Tenant shall have no further right to
terminate this Lease.
If, for any reason other than Construction Force Majeure Matters or
Tenant Delay Factors, Landlord cannot deliver possession of the Premises (with
the Tenant Improvements substantially completed in accordance with the Tenant
Improvements Plans and Specifications) to Tenant by the Commencement Date,
Landlord shall be obligated to pay Tenant a penalty equal to One Hundred Fifty
Thousand and No/100 Dollars ($150,000.00). Additionally, subject to
<PAGE> 11
delays caused by Construction Force Majeure Matters and Tenant Delay Factors,
Landlord shall pay a per day penalty of Four Thousand Five Hundred and No/100
Dollars ($4,500.00) for each day after September 3, 1999 that the Landlord
cannot deliver possession of the Premises (with the Tenant Improvements
substantially competed in accordance with the Tenant Improvements Plans and
Specifications). Also, subject to delays caused by Construction Force Majeure
Matters and Tenant Delay Factors, Landlord shall pay to Tenant the per day
amount of the "Liquidated Damage Amount" (as hereinafter defined) that may be
charged by Tenant's current landlord under Tenant's current lease of space at
550 Reo Street, Tampa, Florida (the "Reo Street Lease") for September 1, 1999
and for each day thereafter that Landlord cannot deliver possession of the
Premises (with the Tenant Improvements substantially completed in accordance
with the Tenant Improvements Plans and Specifications) and, in the event that
Tenant's current landlord elects not to assess a claim for the Liquidated Damage
Amount and elects to pursue a damage claim as a result of such holding over, the
Landlord agrees to indemnify and hold Tenant harmless against a damage award
that Tenant's landlord may obtain in connection with any litigation against
Tenant as a result of such holding over. Tenant agrees to assign its interest in
such litigation to Landlord and agrees that Landlord may retain counsel and
defend such action as Landlord may direct. In the event a Construction Force
Majeure Matter or Tenant Delay Factor affects Landlord's construction and
delivery obligation(s) relative to the Premises under this Lease, the
Commencement Date and each date that Landlord is obligated to pay any penalties
or damages as provided for in this paragraph shall be extended by the same
number of days as the number of days of delay caused by such Construction Force
Majeure Matter or Tenant Delay Factor on the critical path of completing such
construction and delivery obligation(s). Tenant hereby acknowledges that the
term of the Reo Street Lease expires on August 31, 1999 and that the Tenant's
current landlord may charge Tenant the market rate rental for such space during
any period of hold-over plus the "Liquidated Damage Amount". The "Liquidated
Damage Amount" is fifty percent (50%) of the per day market rate rental due
under the Reo Street Lease during any hold over period. The hold over provision
in the Reo Street Lease is attached hereto as Exhibit H.
Within five (5) days following Tenant's occupancy of the Premises,
Tenant shall execute and deliver to Landlord duplicate originals of a
stipulation in the form attached to this Lease as Exhibit G (with the blanks
properly completed). Subject to Landlord's approval of the information inserted
by Tenant in the blanks, Landlord shall execute the duplicate originals of the
stipulation and shall promptly return one (1) fully executed original to Tenant.
At any time prior to January 1, 1999, Landlord shall be entitled, at
Landlord's sole option and by written notice to Tenant, to relocate the Premises
to the sixth (6th) floor of the Building, containing approximately 66,135 square
feet of Premises Net Rentable Areas., as more particularly described on Exhibit
B-2 attached hereto and incorporated herein by reference. Other than a change in
the Premises from the fifth (5th) to the sixth (6th) floor, all other terms and
conditions of this Lease shall remain the same. If Landlord does not designate
the sixth (6th) floor as the Premises, Landlord agrees that either the
contiguous fourth (4th) or sixth (6th) floor will be leased by Landlord on a
multi-tenant basis and if Landlord designates the sixth (6th) floor as the
Premises, the contiguous fifth (5th) floor will be leased by Landlord on a
multi-tenant basis. The multi-tenant floor as designated by Landlord as provided
above is hereinafter referred to as the "Contiguous Multi-Tenant Floor".
<PAGE> 12
At any time between January 1, 1999 and January 15, 1999 (the "Notice
Period"), Tenant shall be entitled to request an expansion of the Premises by no
more than five percent (5%) of the Premises Net Rentable Area on the same terms
and conditions as contained in this Lease. The area of expansion shall be on the
Contiguous Multi-Tenant Floor of the Building. In the event of such expansion,
the Base Rental and Tenant Improvements Allowance shall be adjusted accordingly.
Tenant hereby agrees to execute an amendment to this Lease reflecting the above
modifications. In the event that Tenant fails to request such expansion prior to
the expiration of the Notice Period, Tenant shall have no further right to
expand or reduce the size of the Premises.
. Use.
The Premises shall be used for office purposes and for no other
purposes. Tenant agrees not to use or permit the use of the Premises for any
purpose that is illegal or is in violation of any applicable legal,
governmental, quasi-governmental or owner association requirement, ordinance or
rule, or that, in Landlord's opinion, creates a nuisance, disturbs any other
tenant of the Building or injures the reputation of the Building.
. Base Rental.
() Tenant agrees to pay during the Lease Term to Landlord, without any
setoff or deduction, except as provided herein, the Base Rental, and all such
other sums of money as shall become due hereunder as Additional Rent, all of
which are sometimes herein collectively called "rent" or "Rent." Base Rental for
each calendar year or portion thereof during the Lease Term, together with any
applicable adjustment thereto pursuant to Paragraph 6 herein, shall be due and
payable in advance, in twelve (12) equal installments on the first day of each
calendar month during the Lease Term; provided, however, (i) Base Rental from
the Commencement Date through the sixth (6th) full calendar month of the Lease
Term shall be abated by Landlord and (ii) as set forth in the Lease Summary and
Paragraph 5(b) herein, Base Rental for the seventh (7th) full calendar month
during the Lease Term (i.e., the Advance Base Rental Payment) shall be due and
payable upon the full execution of this Lease. Tenant hereby agrees to pay such
Base Rental and any adjustments thereto to Landlord at Landlord's address
provided herein (or such other address as may be designated by Landlord in
writing from time to time) monthly, in advance, and without demand. If the Lease
Term commences on a day other than the first day of a month or terminates on a
day other than the last day of a month, then the installments of Base Rental and
any adjustments thereto for such month or months shall be prorated, based on the
number of days in such month or months.
() Upon the execution of this Lease, Tenant has paid to Landlord the
Advance Base Rental Payment as additional security for Tenant's performance of
its obligations under this Lease. If Tenant is not then in default under this
Lease, Landlord shall apply the Advance Base Rental Payment to the payment of
the monthly installment of Base Rental due relative to the seventh (7th) full
calendar month during the Lease Term. If Tenant is then in default under this
Lease, Landlord may, at its option, apply all or any part of the Advance Base
Rental Payment to cure the default. With regard to the first full calendar month
during the Lease Term and with
<PAGE> 13
regard to any partial calendar month (if any) preceding the first full calendar
month during the Lease Term, Tenant shall pay its monthly installment of Base
Rental (or the prorate portion thereof) in a timely manner pursuant to Paragraph
5(a) herein.
. Adjustments to Base Rental. [Intentionally deleted].
. Adjustments for Increases in Basic Costs.
With respect to each calendar year or portion thereof during the Lease
Term (and any renewal or extension thereof), Tenant shall pay Landlord as
Additional Rent, in the manner hereafter provided, Tenant's Proportionate Share
of the amount by which Basic Costs (excluding ad valorem real estate taxes) paid
or incurred by Landlord during such period (grossed up, if necessary, to reflect
occupancy of ninety-five percent (95%) of the Building Net Rentable Area)
exceeded the Basic Costs Expense Stop and Tenant's Proportionate Share of the ad
valorem real estate taxes that exceeds the Real Estate Tax Expense Stop
(collectively, the "Excess Basic Costs"). References in this Paragraph 7 to
"Basic Costs" shall be deemed and construed to refer to Basic Costs as grossed
up pursuant to the immediately preceding sentence. If Tenant shall be obligated
to make payments as aforesaid with regard to any partial calendar year during
the Lease Term, the Excess Basic Costs shall be prorated on the basis of the
number of days during such calendar year for which Tenant is obligated to make
such payments.
It is acknowledged and agreed that it will not be possible to determine
the actual amount of the Excess Basic Costs (if any) for a given calendar year
until after the end of such calendar year. Therefore, until Tenant's liability
for Tenant's Excess Basic Costs shall have been finally determined for a
particular calendar year, Tenant shall make payment on account of Excess Basic
Costs as follows:
() Commencing as of the Commencement Date and continuing throughout the
Lease Term (and any renewal or extension thereof), and subject to the limitation
expressed above, Landlord shall make a good faith estimate of Basic Costs for
such calendar year and Tenant's Proportionate Share thereof (hereinafter
"Estimated Basic Costs" and "Tenant's Estimated Excess Basic Costs"), and Tenant
shall pay to Landlord, as Additional Rent with each monthly installment of Base
Rental, an amount equal to one-twelfth (1/12) of Tenant's Estimated Excess Basic
Costs. Such payments for any partial month shall be paid in advance at the daily
rate equal to the monthly payment divided by the number of days in the month for
which the same is due. On or about January 1 of each calendar year in respect of
which Tenant shall be obligated to make payments on account of Excess Basic
Costs during the Lease Term (and any renewal or extension thereof), Landlord
shall furnish to Tenant a statement for such calendar year of Tenant's Estimated
Excess Basic Costs and thereupon, subject to the limitations expressed above, as
of such January 1, Tenant shall make payments under this Paragraph 7(a) in
accordance with such statement.
() On or before April 1 in the year following the year in which the
Commencement Date occurs and each April 1 thereafter during the Lease Term (and
any renewal or extension thereof), Landlord shall furnish Tenant with a
statement setting forth the total amount of Excess Basic Costs for the preceding
calendar year. If any such statement shall show an overpayment or
<PAGE> 14
underpayment of the Excess Basic Costs for the preceding calendar year, any
overpayment shall be refunded to Tenant or credited against payments due from
Tenant under this Lease, and the full amount of any underpayment shall be paid
to Landlord by Tenant not later than the first day of the first calendar month
after such statement shall have been delivered to Tenant.
() In the event Tenant is required to pay Excess Basic Costs pursuant
to this Paragraph 7, Tenant shall have the right, at Tenant's expense and no
more frequently than once per calendar year, to inspect Landlord's books and
records showing Basic Costs of the Building for the calendar year in question;
provided, however, Tenant shall not have the right to withhold any payments of
Excess Basic Costs due and payable hereunder the amount of which may be in
dispute, and Tenant must pay the entire amount due and payable hereunder prior
to reviewing Landlord's books and records. In the event Tenant's inspection of
Landlord's books and records reveals a verifiable error in Landlord's
computation of Excess Basic Costs resulting in an overpayment by Tenant of
Excess Basic Costs (after allowing for any adjustment pursuant to Paragraph 7(b)
herein), Landlord shall promptly reimburse the amount of such overpayment to
Tenant, together with interest thereon from the date of overpayment until the
date of reimbursement at a rate per annum equal to one percent (1%) plus the
Prime Rate (as defined herein) in effect as of the date of overpayment. As used
in this Lease, the "Prime Rate" shall be deemed to be that rate of interest
announced by NationsBank, N.A., or any successor thereto, from time to time as
its "prime rate," and Landlord and Tenant acknowledge and understand that
NationsBank, N.A., lends at rates of interest both above and below the Prime
Rate. Landlord's statement setting forth the total amount of Excess Basic Costs
furnished to Tenant in accordance with the provisions of this Paragraph 7 shall
be deemed to have been approved by Tenant unless protested by Tenant in writing
within ninety (90) days after delivery of such statement to Tenant at the
Premises.
Notwithstanding the foregoing provisions of this Paragraph 7, the
Excess Costs (excluding taxes, insurance premiums and utilities) for the
calendar year 2001 shall not exceed four percent (4%) of the Basic Costs Expense
Stop (excluding taxes, insurance premiums and utilities). For each calendar year
thereafter, the Excess Costs payable by Tenant (excluding taxes, insurance
premiums and utilities) shall not exceed one hundred four percent (104%) of the
Excess Costs paid by Tenant (excluding taxes, insurance premiums and utilities)
for the previous calendar year.
. Services to Be Furnished by Landlord.
Landlord agrees to furnish Tenant the following services:
() Hot and cold water at those points of supply provided for general
use of other tenants in the Building.
() Except with regard to any HVAC system or unit that exclusively
serves the Premises (or any portion thereof) [the base Building HVAC for a
single tenant floor shall not be deemed exclusively serving tenant premises],
which shall be Tenant's responsibility pursuant to Paragraph 11(b) herein,
Landlord shall furnish central heat and air conditioning sufficient for the
comfortable occupancy of the Premises. Provided, however, central heating and
air conditioning
<PAGE> 15
service at times other than for "Normal Business Hours" for the Building (which
are 8:00 a.m. to 6:00 p.m. on Mondays through Fridays and 8:00 a.m. to 1:00 p.m.
on Saturdays, exclusive of normal business holidays), shall be furnished only on
the written request of Tenant delivered to Landlord on the following schedule:
() For evenings Monday through Friday - prior to 3:00 p.m. on the day
when such service is required;
() For Saturday afternoon, Saturday evening and Sunday - prior to 3:00
p.m. on Friday; and
() For normal business holidays - prior to the times set forth above
for the last day prior to such holiday.
Tenant shall bear the entire cost (as Additional Rent) of such additional
heating and air conditioning used by Tenant at times other than Normal Business
Hours, and Tenant shall pay such costs within ten (10) days following demand by
Landlord. Any such costs paid by Tenant or any other tenant shall not be
included in Basic Costs. The cost to be charged by Landlord to Tenant hereunder
for heating and air conditioning service used by Tenant during times other than
Normal Business Hours shall be $30.00 per hour, per floor, subject to reasonable
increases in such hourly rate from time to time during the Lease Term to
reimburse Landlord for increases in the cost to Landlord of electricity consumed
in providing the heating and air conditioning service.
If heat-generating machines or equipment shall be used in the Premises
by Tenant which affect the temperature otherwise maintained by the Building HVAC
system verified by a certified mechanical contractor in writing and upon thirty
(30) days prior written notice to Tenant to allow for time by Tenant to mitigate
the affect of such heat-generating machines, Landlord shall have the right (at
Landlord's option) to install (or to require Tenant to install) one or more HVAC
systems or units that exclusively serve the Premises (or the portion thereof
where such heat-generating machines or equipment are located). As set forth in
Paragraph 11(b) herein, the cost of any such separate HVAC systems or units that
exclusively serve the Premises, including the cost of installation and the cost
of operation and maintenance thereof, shall be borne by Tenant.
() Electrical service to serve the Common Areas and the Premises,
subject to the terms of Paragraph 13 herein.
() Routine maintenance and electric lighting service for all Common
Areas of the Building in the manner and to the extent deemed by Landlord to be
standard.
() Janitorial service, in accordance with the schedule attached hereto
as Exhibit D, Mondays through Fridays, exclusive of normal business holidays;
provided, however, if Tenant's floor covering or other improvements require
special treatment, Tenant shall pay the additional cleaning cost attributable
thereto as Additional Rent upon presentation of a statement therefor by
Landlord.
<PAGE> 16
() All Building standard fluorescent and incandescent light bulb
replacement in the Common Areas and all light bulb replacement in the Premises.
Provided, however, Tenant shall promptly pay to Landlord, as Additional Rent,
costs incurred by Landlord in replacing light bulbs in the Premises (including
the cost of purchasing such light bulbs) if and to the extent such replacement
cost exceeds the replacement cost for Building standard light bulbs. As used
herein, "Building standard light bulbs" shall be deemed to refer to 2' x 4', 3
lamp F40/CW with energy saving ballasts.
() Tenant, its employees, and its invitees who have been registered
with Landlord shall have access to the Premises (including elevator service) by
a code or card access system seven (7) days a week, twenty-four (24) hours a
day. Tenant shall receive an allotment of codes or cards for all of its
employees and for its invitees who are registered with Landlord. Landlord shall
bear the cost of each such code or card initially issued, provided Tenant shall
pay to Landlord (as Additional Rent, within thirty (30) days after Tenant
receives an invoice therefor) the actual costs incurred by Landlord in obtaining
and issuing replacement codes or cards for codes or cards previously issued.
Landlord, however, shall have no liability to Tenant, its employees, agents,
invitees or licensees for losses due to theft or burglary or for damages done by
unauthorized persons on the Premises, and Landlord shall not be required to
insure against any such losses. Tenant shall cooperate fully with Landlord's
efforts to maintain security in the Building during times other than Normal
Business Hours and shall follow all regulations promulgated by Landlord with
respect thereto.
The failure by Landlord to any extent to furnish, or the interruption
or termination of these defined services in whole or in part, resulting from any
Force Majeure Matters or from any other causes shall not (i) render Landlord
liable in any respect, (ii) be construed as an eviction of Tenant, (iii) work an
abatement of rent, or (iv) relieve Tenant from the obligation to fulfill any
covenant or agreement in this Lease. Should any of the equipment or machinery
used in the provision of such services for any cause cease to function properly,
Tenant shall have no claim for offset or abatement of rent or damages on account
of an interruption in service resulting therefrom. Amounts payable pursuant to
this Paragraph 8 shall be deemed to be Additional Rent due from Tenant to
Landlord, and any default in the payment thereof shall entitle Landlord to all
remedies provided for herein at law or in equity on account of Tenant's failure
to pay Base Rental.
Notwithstanding the foregoing, in the event that there is a failure of
services for which Landlord is responsible to perform which is not the result of
Force Majeure Matters and which renders the Premises untenantable for five (5)
consecutive days, Tenant shall be entitled to give Landlord written notice of
such event. In the event that Landlord fails to cure such failure within five
(5) days from receipt of such written notice, Tenant shall be entitled to cure
such failure and bill Landlord for the reasonable out-of-pocket costs of Tenant
in effecting such cure.
<PAGE> 17
. Construction of Improvements.
() Subject to Construction Force Majeure Matters and consistent with
the terms of Paragraph 3 herein and Exhibit C hereto, Landlord shall pursue
diligently and in good faith the completion of the Building Shell Improvements
and the Tenant Improvements.
() The Tenant Improvements Allowance shall be applied by Landlord
against the costs of designing, planning and constructing the Tenant
Improvements. In the event the costs incurred in connection with the design,
planning and construction of the Tenant Improvements exceed the Tenant
Improvements Allowance, Tenant shall be responsible for bearing and paying such
excess costs (the "Excess Costs") as soon as the final accounting is prepared
and submitted by Landlord to Tenant.
The failure to make any such payment of Excess Costs (if any) when due shall
constitute a default of Tenant under Paragraph 28(a)(i) herein. In the event the
cost to complete the Tenant Improvements is less than the Tenant Improvements
Allowance, Landlord will contribute such savings toward the payment of Tenant's
actual reasonable moving expenses, including but not limited to actual costs for
moving, cabling, telephone switches, furniture and security system.
() Except as otherwise provided above in this Paragraph 9, all
installations and improvements now or hereafter placed on or in the Premises
shall be for Tenant's account and at Tenant's cost. Tenant shall also pay ad
valorem taxes and increased insurance on or attributable to the Tenant
Improvements (to the extent of the cost of the Tenant Improvements is in excess
of the Tenant Improvements Allowance), which cost shall be payable by Tenant to
Landlord as Additional Rent.
() At the beginning of the sixth (6th) calendar year of the Lease Term,
Landlord will provide Tenant with a refurbishment allowance of Three and No/100
Dollars ($3.00) multiplied by the Premises Net Rentable Area to be used solely
by Tenant to paint, recarpet and otherwise improve the Premises with comparable
materials as provided in the initial Tenant Improvements. Landlord shall be
entitled to request reasonable documentation from Tenant to confirm that the
refurbishment allowance is being used for the above purposes prior to disbursing
all or a portion of the refurbishment allowance to Tenant.
. Maintenance and Repair by Landlord.
Except to the extent any such repairs or replacements are the
responsibility of Tenant pursuant to the terms of Paragraph 11 or Paragraph 12
herein or any other provision in this Lease, Landlord shall be responsible for
maintaining, repairing and replacing:
() the roof, foundations, exterior walls, and all structural parts of
the Building;
() all portions of the Premises affected by structural conditions whose
source lies outside the Premises;
() all Common Areas and Building Exterior Common Areas;
<PAGE> 18
() all utility, sprinkler service, electrical and plumbing lines and
HVAC systems outside the Premises but which serve the Premises on a
non-exclusive basis; and
() all utility, sprinkler service, electrical and plumbing lines and
HVAC systems within the Premises but which serve other space within the
Building.
Except as expressly provided herein, Landlord shall not be required to
make any repairs to the Premises or the Building.
. Maintenance and Repair by Tenant.
In addition to any other provisions in this Lease which obligate Tenant
to perform maintenance, repair and replacement duties relative to the Premises
and/or the Building, Tenant shall be responsible for the following maintenance,
repair and replacement responsibilities:
() Tenant shall, at its expense, keep and maintain the Premises in good
order and repair and not commit or allow any waste to be committed on any
portion of the Premises; and at the termination of this Lease, Tenant agrees to
deliver up the Premises to Landlord in as good of a condition as existed on the
Commencement Date, excepting only ordinary wear and tear, acts of God and
repairs required to be made by Landlord pursuant to the terms of this Lease.
() Tenant shall, at its expense, keep and maintain all HVAC systems and
units, appliances and equipment that exclusively serve the Premises (or any
portion thereof) [the base Building HVAC for a single tenant floor shall not be
deemed exclusively serving tenant premises]. In the event the Premises (or any
portion thereof) is exclusively served by an HVAC system or unit, Tenant shall
contract with a qualified heating and air conditioning service company approved
by Landlord for the monthly maintenance and the repair and replacement, as
necessary, of such HVAC system or unit. Tenant shall provide Landlord with a
copy of any contract required under this Paragraph 11(b) within ten (10) days
after the Commencement Date and a copy of any subsequent contracts (or any
renewal contracts) within ten (10) days after their execution. The cost of all
contracts which Tenant is required to maintain under this Paragraph 11(b) shall
be borne by Tenant.
() Tenant shall, at Tenant's own cost and expense, repair or replace
any damage done to the Common Areas, the Building Exterior Common Areas, the
Building, or any part thereof (including the Premises), caused by Tenant or
Tenant's agents, or employees, and such repairs shall restore the damaged area
to as good of a condition as existed prior to such damage and shall be effected
in compliance with all applicable laws; provided, however, if, within a
reasonable period following written notice from Landlord of the need for such
repairs or replacements, Tenant fails to make such repairs or replacements
promptly, Landlord may, at its option, make the repairs or replacements, and
Tenant shall pay the cost thereof to Landlord on demand as Additional Rent.
<PAGE> 19
. Alterations by Tenant.
Tenant shall not make or allow to be made any alterations to the
Premises or install any vending machines in the Premises, without first
obtaining the written consent of Landlord in each such instance. Tenant shall
not be obligated to obtain Landlord consent to non-structural alterations that
do not exceed a cost of $10,000.00. Any and all alterations to the Premises
shall become the property of Landlord upon the termination of this Lease (except
for movable equipment or furniture owned by Tenant). Landlord may, by written
notice to Tenant not later than sixty (60) days prior to termination, require
Tenant, upon the expiration or earlier termination of this Lease, to remove any
and all fixtures, equipment and other improvements installed in the Premises by
Tenant for which Landlord advised Tenant upon installation thereof that they
must be removed upon Lease termination. In the event that Landlord so elects and
Tenant fails to remove such improvements, Landlord may remove such improvements
at Tenant's cost, and Tenant shall pay Landlord on demand the cost of restoring
any damage to the Premises resulting from such removal, excepting only ordinary
wear and tear and acts of God.
. Use of Electrical Services by Tenant.
Landlord will install, at Landlord's sole cost and expense, an
electrical check meter (a "Check Meter ") for the Premises as part of the Tenant
Improvements. It is anticipated that the Check Meter will measure all
electricity supplied to the Premises (i) to operate lights and light fixtures
therein, (ii) to operate equipment and fixtures that are connected to electrical
outlets therein and (iii) to operate any HVAC system or unit that exclusively
serves the Premises (or any portion thereof) [the base Building HVAC for a
single tenant floor shall not be deemed exclusively serving tenant premises]. As
contemplated in Paragraph 8(c) herein, Landlord shall pay the local electrical
utility company prior to delinquency for the electricity supplied to the
Premises through the Check Meter. Provided, however, in the event the amount
paid by Landlord to the local electrical utility company for electricity
supplied to the Premises (as measured by the Check Meter) for any given period
of time is greater than the allocable portion of the Premises Electrical Expense
Stop (allocated to the Premises for the relevant period of time), Landlord may
submit an invoice to Tenant periodically for the cost of such excess electricity
supplied to the Premises and Tenant shall pay the full invoiced amount (as
Additional Rent) to Landlord within ten (10) days after Tenant's receipt of each
such invoice. The following formula shall be used to determine the invoice
amount for Tenant's excess electrical usage in the Premises:
Invoice Amount = Total Electrical Costs Per Check Meter - [(Tenant's
Proportionate Share x Premises Electrical Expense
Stop) x (Number of Days in Period a Number of Days in Year)]
For example, presuming (for purposes of this illustration only) that the
Premises Net Rentable Area is 10,000 square feet, that the Check Meter indicates
$2,000.00 of electricity was supplied to the Premises during a given 90-day
period and that the calendar year in which such 90-day period falls contains 365
days, Landlord shall be entitled hereunder to send an invoice to Tenant in the
amount of $321.28 for excess electrical usage in the Premises during such 90-day
period, computed as follows:
Invoice Amount = $2,000.00 - [.025 x $272,300.00) x (90/365)]
= $2,000.00 -[$6,807.50 x .2466]
<PAGE> 20
= $2,000.00 - $1,628.72
= $321.28
In computing invoices to be sent to Tenant for electricity supplied to the
Premises through the Check Meter, Landlord shall use the same billing rate and
structure as used by the local electrical utility company. Additionally, with
regard to any period of time that Landlord elects to use a Check Meter to bill
Tenant for excess electricity supplied to the Premises, Landlord also shall use
a Check Meter to bill other tenants in the Building for excess electricity
supplied to their respective premises; and in such case, the cost of electricity
supplied to the Premises and to other premises in the Building for which
Landlord separately bills Tenant and other tenants in the Building (i.e. such
electrical costs that exceed the Electrical Expense Stop) shall not be included
in Basic Costs hereunder, Landlord shall be entitled to bill Tenant pursuant to
this Paragraph 13 for excess electrical usage in the Premises quarterly or
annually, as determined by Landlord from time to time during the Lease Term.
. Graphics and Signage.
All letters and numerals on doors or other signs on the Premises shall
be in the standard form of graphics for the Building, and no others shall be
used or permitted without Landlord's prior written consent. Furthermore, Tenant
shall not place signs on or in the Premises which are visible from outside the
Premises. Tenant's name and suite number shall be included by Landlord on the
lobby directory for the Building. Additionally, Landlord will provide Tenant's
name in the top position on the Buildings ground monument sign immediately
adjacent to the Premises on a non-exclusive basis with other tenants in the
Building. The size and style of lettering and location of the monument sign
immediately adjacent to the Premises shall be approved by Landlord. The
corporate logo of Tenant is deemed approved by Landlord. Tenant acknowledges
that the monument sign shall comply design standards applicable to International
Plaza and applicable City of Tampa codes, rules and regulations.
. Parking.
During the Lease Term, Tenant shall have, without charge, the
non-exclusive right to use, in common with Landlord, other tenants of the
Building, and their respective guests and invitees, the automobile parking
areas, driveways, and footways located on the Land. Notwithstanding the terms
and provisions in the immediately preceding sentence, (i) Tenant and Tenant's
guests and invitees shall not, at any given time, be entitled to use more than
five (5) parking spaces for each 1,000 square feet of Premises Net Rentable
Area, and (ii) Landlord shall have the right during the Lease Term to reserve
parking spaces on the Land for the exclusive use of other tenants in the
Building, provided the reservation of such spaces for the exclusive use of other
tenants in the Building does not have the effect of denying Tenant the
non-exclusive use of five (5) parking spaces for each 1,000 square feet of
Premises Net Rentable Area. As part of the five (5) parking spaces per 1,000
square feet of Premises Net Rentable Area, Landlord will provide Tenant with
fifteen (15) covered, reserved parking spaces at no additional cost in an area
closest to the Premises as mutually agreed upon by Landlord and Tenant.
<PAGE> 21
. Compliance with Laws.
Tenant agrees to comply with all applicable laws, ordinances, rules and
regulations of the Association or any governmental entity or agency having
jurisdiction over the Premises. Without limiting the generality of the
foregoing, in the event the Premises must be modified or any other action
relating to the Premises must be undertaken in the future to comply with the
Americans With Disabilities Act or any similar federal, state or local statute,
law, or ordinance, the responsibility for such modification or action (including
the payment of all costs incurred in connection therewith) shall belong to
Tenant. If the Common Areas or the Building Exterior Common Areas must be
modified or any other action relating to the Common Areas or the Building
Exterior Common Areas must be undertaken in the future to comply with the
Americans With Disabilities Act or any similar federal, state or local statute,
law, or ordinance and if such modification or action is required because of (i)
any special or unique use or activity in the Premises or (ii) the performance of
any alterations within the Premises, the responsibility for such modification or
action (including the payment of all costs incurred in connection therewith)
shall belong to Tenant. Except as provided in the immediately preceding
sentence, in the event the Common Areas or the Building Exterior Common Areas
must be modified or any other action relating to the Common Areas or the
Building Exterior Common Areas must be undertaken in the future to comply with
the Americans With Disabilities Act or any similar federal, state or local
statute, law, or ordinance, the responsibility for such modification or action
(including the payment of all costs incurred in connection therewith, subject to
the terms and provisions of this Lease relating to the pass-through of Basic
Costs) shall belong to Landlord.
. Building Rules and Regulations.
Tenant shall comply with the rules and regulations applicable to the
Building and the Building Exterior Common Areas (the "Rules and Regulations")
adopted and altered by Landlord from time to time and shall cause all of its
agents, employees, invitees and visitors to do so; all changes to the Rules and
Regulations will be sent by Landlord to Tenant in writing. Landlord shall apply
the Rules and Regulations uniformly to all tenants in the Building. The initial
Rules and Regulations, which have been reviewed and approved by Tenant, are
attached hereto as Exhibit E.
. Entry by Landlord.
Tenant agrees to permit Landlord and Landlord's agents and
representatives to enter into and upon any part of the Premises at all
reasonable hours (and in emergencies at all times) to inspect the same, to show
the Premises to prospective purchasers, mortgagees, tenants or insurers, to
install or maintain Check Meters and other devices to determine if Tenant's
electrical usage is in excess of design loads and capacities, and to clean or
make repairs, alterations or additions thereto, and Tenant shall not be entitled
to any abatement or reduction of rent by reason thereof.
. Assignment and Subletting.
() Tenant shall not assign this Lease or sublet all or any part of the
Premises or make any other transfer of its interest in the whole or any portion
thereof, directly or indirectly, at any
<PAGE> 22
time during the Lease Term without the prior written consent of Landlord, which
such consent shall not be unreasonably withheld. Any attempted assignments,
subleases or other transfers by Tenant in violation of the terms and conditions
of this Paragraph 19(a) shall be null and void. In the event that Tenant desires
at any time to assign this Lease or sublet all or any part of the Premises,
Tenant shall submit to Landlord at least thirty (30) days prior to the proposed
effective date of the assignment or sublease, in writing, (i) a request for
permission to assign or sublet setting forth the proposed effective date which
shall be no less than thirty days after the sending of such notice; (ii) the
name of the proposed subtenant or assignee or other party; (iii) the nature of
the business to be carried on in the Premises after the assignment or sublet;
(iv) the terms and provisions of the proposed assignment or sublet; and (v)
current financial statements of the proposed subtenant or assignee; and such
additional information that Landlord may reasonably request in order to make a
reasoned judgment. Notwithstanding the foregoing, Landlord consent shall not be
required for an assignment of sublease to a successor of Tenant resulting from a
merger, consolidation, sale or acquisition of all of the stock of Tenant,
provided that such resulting entity is of equal or better creditworthiness as
Tenant and Tenant continues to be primarily liable under the Lease, or a
sublease to a wholly-owned affiliate or subsidiary of Tenant and Tenant
continues to be primarily liable under the Lease.
() If Tenant requests Landlord's consent to an assignment of this Lease
or subletting of all of the Premises, or any other transfer of its interest(s),
Landlord shall have the option (without limiting Landlord's other rights
hereunder) of terminating this Lease with respect to the entire Premises subject
to the proposed assignment, subletting or transfer upon fifteen (15) days'
notice and of dealing directly with the proposed assignee, subtenant or
transferee. If Landlord should fail to notify Tenant in writing of its decision
within a fifteen (15) day period after Landlord is notified in writing of the
proposed assignment, sublease or other transfer, Tenant shall give a second
notice to Landlord, and in the event that Landlord should fail to notify Tenant
of it decision within ten (10) days after receipt of the second notice, Landlord
shall be deemed to have elected to keep this Lease in full force and effect.
() Any assignee, subtenant or purchaser of Tenant's interest in this
Lease (all such assignees, subtenants and purchasers being hereinafter referred
to as "Successors"), by assuming Tenant's obligations hereunder, shall assume
liability to Landlord for all rental or other amounts paid to persons other than
Landlord by such Successor in consideration of any such sale, assignment or
subletting, in violation of the provisions herein. Landlord hereby reserves the
right to condition Landlord's consent to any assignment or sublet upon
Landlord's receipt from Tenant of a written agreement, in form and substance
acceptable to Landlord, pursuant to which Tenant shall pay over to Landlord
fifty percent (50%) of all rent or other consideration received by Tenant from
any such subtenant or assignee, over the term of the assignment or sublease, in
excess of the Base Rental called for hereunder, or, in case of the sublease of a
portion of the Premises, in excess of such rent fairly allocable to such
portion, after appropriate adjustments to assure that all other payments called
for hereunder are taken into account, and after taking into account Tenant's
reasonable expenses incurred in connection with such subletting or assignment,
including, but not limited to, commissions, retrofit, marketing and legal fees.
() If Tenant assigns, sublets or makes any other transfer of all or any
portion of its interest(s) hereunder, Tenant named in this Lease shall remain
directly and primarily responsible
<PAGE> 23
for the faithful performance and observance of all of the covenants and
obligations on Tenant's part to be performed in this Lease. No assignment or
subletting shall affect the continuing primary liability of Tenant hereunder
(which, following any assignment or sublet, shall be joint and several with the
assignee or subtenant), and Tenant shall not be released from performing any of
the terms, covenants and conditions of this Lease.
() Any assignee or subtenant hereunder shall be bound by and shall
comply with all of the terms and provisions in this Lease, including, without
limitation, the use restriction set forth in Paragraph 4 herein. As a condition
to the effectiveness of any assignment that is permitted hereunder, the assignee
shall, by an instrument in writing, assume and agree to perform (for the express
benefit of Landlord) the terms hereof; and as a condition to the effectiveness
of any sublease that is permitted hereunder, the subtenant shall acknowledge in
writing (for the express benefit of Landlord) the existence of this Lease and
shall covenant not to do or permit to be done anything that would constitute a
breach hereof.
() Landlord's consent to any one assignment, sublease or other transfer
hereunder shall not waive the requirement of its consent to any subsequent
assignment, sublease or other transfer as required herein.
() Tenant shall not advertise (except to real estate brokers) its space
for assignment or subletting at a rental rate lower than the rental schedule
established from time to time by Landlord for comparable space in International
Plaza for a comparable term in the Building or in any other building owned by
Landlord in International Plaza. Further, no assignment or subletting shall be
made: (i) to any person or entity which shall at that time be a tenant,
subtenant or other occupant of any part of the Building or any other building
owned by Landlord in International Plaza when Landlord has other comparable
space in the Building or in another building in International Plaza available
for leasing by Landlord; (ii) to any one who has expressed an interest in
leasing space from Landlord or Landlord's agent (directly or through a broker)
with respect to space in the Building or in another building in International
Plaza during the two (2) months immediately preceding Tenant's request for
Landlord's consent; or (iii) to any person or entity for the conduct of business
which is not in keeping with the standards and general character of the
Building. All rights and options of Tenant hereunder, if any, to expand the
Premises, contract the Premises, extend or renew the Term, shorten the Term, and
any right of first refusal shall automatically terminate upon the assignment of
this Lease or upon sublet of all or any part of the Premises unless Landlord
specifically agrees in writing that such rights and options shall continue.
Tenant acknowledges that the restrictions on assignments and subleases described
herein are a material inducement for Landlord entering into this Lease and shall
be enforceable by Landlord against Tenant and against any assignee or subtenant
or any other party acquiring an interest in this Lease.
. Liens.
Tenant will not permit any mechanic's lien(s) or other liens to be
placed upon the Premises, the Building or the Land and nothing in this Lease
shall be deemed or construed in any way as constituting the consent or request
of Landlord, express or implied, by inference or otherwise, to any person for
the performance of any labor or the furnishing of any materials to
<PAGE> 24
the Premises, or any part thereof, nor as giving Tenant any right, power or
authority to contract for or permit the rendering of any services or the
furnishing of any materials that would give rise to any mechanics' or other
liens against the Premises, the Building or the Land. In the event any such lien
is attached to the Premises, the Building or the Land, then, in addition to any
other right or remedy of Landlord, Landlord may, but shall not be obliged to,
discharge the same. Any amount paid by Landlord for any of the aforesaid
purposes shall be reimbursed by Tenant to Landlord on demand as Additional Rent.
The interest of Landlord shall not be subject to liens for improvements
made by Tenant in and to the Premises. Tenant shall notify every contractor
making such improvements of the provisions set forth in the preceding sentence
of this paragraph. The parties agree, should Landlord so request, to execute,
acknowledge and deliver without charge to Tenant, a Short Form Lease in
recordable form in accordance with Chapter 713, Florida Statutes containing a
confirmation that the interest of Landlord shall not be subject to liens for
improvements made by Tenant to the Premises.
. Property Insurance.
Landlord shall maintain fire and extended coverage insurance on the
Building and the Premises, such policy(ies) to cover Landlord's interest in the
Building and Premises for not less than the full replacement value thereof. Such
insurance shall be maintained at the expense of Landlord (as a part of Basic
Costs), and payments for losses thereunder shall be made solely to Landlord or
the mortgagees of Landlord relative to the Land and the Building (collectively,
"Mortgagees"; each, a "Mortgagee"), as their respective interests shall appear.
Tenant shall maintain, at its expense, in an amount equal to full replacement
cost, fire and extended coverage insurance on all of its personal property,
including removable trade fixtures, located in the Premises. Tenant shall, at
Landlord's request from time to time, provide Landlord with current certificates
of insurance evidencing Tenant's compliance with the terms and requirements of
this Paragraph 21 and Paragraph 22 herein. All policies required to be
maintained by Tenant under this Paragraph 21 and Paragraph 22 herein shall
contain a provision whereby the insurer is not allowed to cancel, fail to renew
or change materially the coverage without first giving thirty (30) days prior
written notice to Landlord. Tenant shall also obtain the agreement of Tenant's
insurers to notify Landlord that a policy is due to expire at least thirty (30)
days prior to such expiration.
. Liability Insurance.
Tenant and Landlord shall, each at its own expense, maintain a policy
or policies of comprehensive general liability insurance (occurrence coverage)
with respect to the respective activities of each on the Land and in the
Building with the premiums thereon fully paid on or before the due date, issued
by and binding upon an insurance company authorized to conduct such business in
the State of Florida. Such comprehensive general liability insurance to be
maintained by Tenant and Landlord under this Paragraph 22 shall afford minimum
protection of not less than $1,000,000 combined single limit coverage of bodily
injury, property damage or combination thereof; and such comprehensive general
liability insurance to be maintained by Tenant shall name Landlord as an
additional insured. Such insurance coverage maintained by Tenant also shall
include, without limitation, personal injury and contractual liability coverage
<PAGE> 25
for the performance by Tenant of the indemnity agreements set forth in this
Lease. Landlord shall not be required to maintain insurance against thefts
within the Premises or the Building or on the Land.
. Indemnities.
Landlord shall not be liable to Tenant, or to Tenant's agents,
servants, employees, customers, or invitees for any injury to person or damage
to property caused by any act, omission, or neglect of Tenant, its agents,
servants, employees, invitees, licensees or any other person entering the Land,
the Building Exterior Common Areas, the Building or the Premises under the
invitation of Tenant or arising out of a default by Tenant in the performance of
its obligations hereunder or arising out of the use and occupancy of the
Premises by Tenant. Tenant hereby indemnifies and holds Landlord harmless from
all liability and claims for any such damage or injury. Landlord hereby
indemnifies and holds Tenant harmless from all liability and claims for damage
to property of Tenant incurred or suffered by Tenant or its employees to the
extent arising from the negligent acts or omissions of Landlord or any agent or
employee of Landlord in or about the Building Exterior Common Areas.
. Waiver and Waiver of Subrogation Rights.
Anything in this Lease to the contrary notwithstanding (including,
without limitation, Paragraph 23 herein), Landlord and Tenant each hereby waive
any and all rights of recovery, claim, action, or cause of action, against the
other, its agents, officers, or employees, for any loss or damage that may occur
to the Premises or a part thereof, or any improvements thereto, or any personal
property of such party therein, by reason of fire, the elements, or any other
cause(s) which are insured against under the terms of the standard fire and
extended coverage insurance policies referred to in Paragraph 21 herein,
regardless of cause or origin, including negligence of the other party hereto,
its agents, officers, or employees. All insurance policies carried with respect
to Paragraph 21 herein, if permitted under applicable law, shall contain a
provision whereby the insurer waives, prior to loss, all rights of subrogation
against Landlord and Tenant.
. Casualty Damage.
If the Premises or any part thereof shall be damaged by fire or other
casualty, Tenant shall give prompt written notice thereof to Landlord. In case
the Building shall be so damaged that substantial alteration or reconstruction
of the Building shall be required (whether or not the Premises shall have been
damaged by such casualty) or in the event any Mortgagee should require that the
insurance proceeds payable as a result of a casualty be applied to the payment
of the mortgage debt or in the event of any material uninsured loss to the
Building, Landlord may, at its option, terminate this Lease by notifying Tenant
in writing of such termination within ninety (90) days after the date of such
casualty. If, by reason of such casualty, the Premises are rendered untenantable
in some material portion, and the amount of time required to repair the damage
is reasonably determined by Landlord, by written notice to Tenant within such
ninety (90) day period, to be in excess of one hundred eighty (180) days from
the date upon which Landlord is required to determine whether to terminate this
Lease, then Tenant shall have the right to terminate this Lease by giving
Landlord written notice of termination within thirty (30)
<PAGE> 26
days after the date Landlord delivers Tenant notice that the amount of time
required to repair the damage has been determined by Landlord to be in excess of
one hundred eighty (180) days. If Landlord fails to give such notice within such
ninety (90) day period, as provided for in the immediately preceding sentence,
Tenant shall be entitled to assume that the Landlord believes that the amount of
time to complete such repairs will not be in excess of such one hundred eighty
(180) day period and Tenant shall have no rights to terminate this Lease. If
Landlord (or Tenant, if applicable) does not thus elect to terminate this Lease,
Landlord shall commence and proceed with reasonable diligence to restore the
Building to substantially the same condition as existed immediately prior to the
occurrence of the casualty, except that Landlord's obligation to restore shall
not exceed the scope of the work required to be done by Landlord in originally
constructing the Building Shell Improvements and installing the Tenant
Improvements in the Premises, nor shall Landlord be obligated to restore the
Building Shell Improvements or the Premises if the cost of the restoration work
required under this Lease and all other leases of space in the Building exceeds
the insurance proceeds actually received by Landlord as a result of the
casualty. Landlord shall not be liable for any inconvenience or annoyance to
Tenant or injury to the business of Tenant resulting in any way from such damage
or the repair thereof, except that, subject to the provisions of the next
sentence, Landlord shall allow Tenant a fair diminution of rent during the time
and to the extent the Premises are untenantable. If the Premises or any other
portion of the Building is damaged by fire or other casualty resulting from the
fault or negligence of Tenant or any of Tenant's agents or employees, the rent
hereunder shall not be diminished during the repair of such damage and Tenant
shall be liable to Landlord for the cost of the repair and restoration of the
Building caused thereby to the extent such cost and expense are not covered by
insurance proceeds.
. Condemnation.
If the whole or substantially the whole of the Building or the Premises
should be taken for any public or quasi-public use, by right of eminent domain
or otherwise or should be sold in lieu of condemnation, then this Lease shall
terminate as of the date when physical possession of the Building or the
Premises is taken by the condemning authority. If less than the whole or
substantially the whole of the Building or Premises is thus taken or sold and
the remaining portion of the Building can no longer be operated as a
multi-tenant office building on a financially sound basis, in Landlord's sole
opinion, or if any Mortgagee should require that the condemnation proceeds
payable as a result of such taking or sale be applied to the payment of the
mortgage debt, Landlord (whether or not the Premises are affected by the taking
or sale) may terminate this Lease by giving written notice thereof to Tenant, in
which event this Lease shall terminate as of the date when physical possession
of such portion of the Building or Premises is taken by the condemning
authority. If this Lease is not so terminated upon any such taking or sale and
if a portion of the Premises is affected thereby, the Base Rental payable
hereunder shall be diminished by an equitable amount, and Landlord shall, to the
extent Landlord deems feasible, restore the Building and the Premises to
substantially their former condition, except Landlord's obligation to restore
shall not exceed the scope of the work required to be done by Landlord in
originally constructing the Building Shell Improvements and installing the
Tenant Improvements, nor shall Landlord in any event be obligated to restore the
Building Shell Improvements or the Tenant Improvements if the cost of the
restoration work required under this Lease and all other leases of space in the
Building exceeds the amount received by Landlord for
<PAGE> 27
such taking. All amounts awarded upon a taking of any part or all of the
Building or the Premises shall belong to Landlord, and Tenant shall not be
entitled to and expressly waives all claims to any such compensation. Tenant
shall be entitled to make a separate claim against the condemning authority for
its personal property and moving expenses provided that such claim does not
diminish Landlord's award.
. Damages from Certain Causes.
Landlord shall not be liable to Tenant for any loss or damage to any
property or person occasioned by theft, fire, act of God, public enemy,
injunction, riot, strike, insurrection, war, court order, requisition, or order
of governmental body or authority or by any other Force Majeure Matter. Nor
shall Landlord be liable for any damage or inconvenience which may arise through
repair or alteration of any part of the Building or premises. The preceding
sentence shall not limit Tenant's rights for the failure of Landlord to complete
the Tenant Improvements as provided for in Paragraph 3 of this Lease.
. Events of Default/Remedies.
() The following events shall be deemed to be events of default by
Tenant under this Lease: (i) Tenant fails to pay any installment of Base Rental
or Additional Rent when due and such failure continues for more than ten (10)
days after Tenant is given written notice of such failure (provided, however,
Tenant shall not be entitled to such notice and cure period more than twice in
any calendar year during the Lease Term); (ii) Tenant fails to comply with any
provision of this Lease (other than clauses (iii), (iv), (v), (vi) and (vii) in
this Paragraph 28(a)), all of which terms, provisions and covenants shall be
deemed material and such failure continues for more than thirty (30) days after
Tenant is given written notice of such failure (provided such 30-day notice and
cure period for non-monetary defaults shall be decreased or dispensed with, as
reasonably required, in cases of emergency or in circumstances where such
failure will result in a default by Landlord under other leases of space in the
Building); (iii) the leasehold hereunder demised is taken on execution or other
process of law in any action against Tenant; (iv)Tenant becomes insolvent or
unable to pay its debts as they become due; (v) Tenant takes any action to or
notifies Landlord that Tenant intends to file a petition under any section or
chapter of the United States Bankruptcy Code, as amended from time to time, or
under any similar law or statute of the United States or any State thereof; or a
petition shall be filed against Tenant under any such statute or Tenant or any
creditor of Tenant's notifies Landlord that it knows such a petition will be
filed or Tenant notifies Landlord that it expects such a petition to be filed;
or (vi) a receiver or trustee is appointed for Tenant's leasehold interest in
the Premises or for all or a substantial part of the assets of Tenant. Provided,
however, and notwithstanding the foregoing provisions in this Paragraph 28(a),
Tenant shall not be entitled to any notice and cure period in connection with
Tenant's obligation to vacate the Premises at the end of the Lease Term.
() Upon the occurrence under this Lease of any event or events of
default which are not cured within any applicable grace period by Tenant,
whether enumerated in Paragraph 28(a) herein or not, Landlord shall have the
option to pursue any one or more of the following remedies: (i) terminate this
Lease, in which event Tenant shall immediately surrender the Premises to
Landlord; (ii) terminate Tenant's right to occupy the Premises and re-enter and
take
<PAGE> 28
possession of the Premises (without terminating this Lease) and relet or attempt
to relet the Premises for the account of Tenant and Landlord shall not be deemed
to have thereby accepted a surrender of the Premises, and Tenant shall remain
liable for all Basic Rent, Additional Rent or other sums due under this Lease
and for all damages suffered by Landlord because of Tenant's breach of any
provision of this Lease; (iii) enter upon the Premises and do whatever Tenant is
obligated to do under the terms of this Lease, and Tenant agrees to reimburse
Landlord on demand for any expense which Landlord may incur in effecting
compliance with Tenant's obligations under this Lease, and Tenant further agrees
that Landlord shall not be liable for any damages resulting to Tenant from such
action; (iv) accelerate and declare the entire remaining unpaid Basic Rent and
Additional Rent for the balance of the Lease Term to be immediately due and
payable forthwith, and may, at once, take legal action to recover and collect
the same, provided that Tenant shall be entitled to an offset of any rentals
received by Landlord from another tenant that occupies the Premises during the
term of this Lease for which rental has been accelerated; and (v) exercise all
other remedies and seek all damages available to Landlord at law or in equity,
including, without limitation, injunctive relief of all varieties.
In the event Landlord elects to re-enter or take possession of the
Premises after Tenant's default, Tenant hereby waives notice of such re-entry or
repossession and of Landlord's intent to re-enter or take possession. Landlord
may, without prejudice to any other remedy which it may have for possession or
arrearages in rent, expel or remove Tenant and any other person who may be
occupying said Premises or any part thereof. In addition, the provisions of
Paragraph 31 herein shall apply with respect to the period from and after the
giving of notice of such termination to Tenant. All of Landlord's remedies under
this Lease shall be cumulative and not exclusive. Forbearance by Landlord to
enforce one or more of the remedies herein provided upon an event of default
shall not be deemed or construed to constitute a waiver of such default or an
election of remedies.
() Any installment of Base Rental and any Additional Rent not paid
within ten (10) days following the date when due and payable shall bear interest
from the date due until paid at the lesser of (i) eighteen percent (18%) per
annum or (ii) the maximum lawful contract rate per annum.
() This Paragraph 28 shall be enforceable to the maximum extent not
prohibited by applicable law, and the unenforceability of any portion thereof
shall not thereby render unenforceable any other portion. To the extent any
provision of applicable law requires some action by Landlord to evidence or
effect the termination of this Lease or to evidence the termination of Tenant's
right of occupancy, Tenant and Landlord hereby agree that notice, in writing
only and delivered in accordance with Paragraph 37 herein, shall be sufficient
to evidence and effect the termination therein provided for.
(e) Landlord shall be in default hereunder in the event Landlord has
not begun and pursued with reasonable diligence the cure of any failure of
Landlord to meet its obligations hereunder within fifteen (15) days of receipt
by Landlord of written notice from Tenant of the alleged failure to perform.
Except as otherwise provided in Paragraph 3 herein, in no event shall Tenant
have the right to terminate or rescind this Lease or otherwise withhold or abate
Basic
<PAGE> 29
Rent or Additional Rent as a result of Landlord's default as to any
covenant or agreement contained in this Lease or as a result of the breach of
any promise or inducement hereof, whether in this Lease or elsewhere. Tenant
hereby waives such remedies for default hereunder and Tenant's remedies for
default by Landlord hereunder shall be limited to action for damages and/or
injunction.
. Security Deposit. [Intentionally deleted].
. Peaceful Enjoyment.
Tenant shall, and may peacefully have, hold, and enjoy the Premises
against Landlord and all persons claiming by and through or under Landlord for
the Lease Term, subject to the other terms hereof, provided Tenant pays the rent
and other sums herein recited to be paid by Tenant and performs all of Tenant's
covenants and agreements herein contained. This covenant and any and all other
covenants of Landlord shall be binding upon Landlord and its successors only
with respect to breaches occurring during its or their respective periods of
ownership of Landlord's interest hereunder.
. Holding Over.
If Tenant remains in possession of the Premises or any part thereof
after the expiration or earlier termination of this Lease, whether with or
without Landlord's acquiescence, Tenant shall be deemed a tenant at will. In the
event of any such holding over by Tenant after the expiration or other
termination of this Lease or in the event Tenant continues to occupy the
Premises after the termination of Tenant's right of possession pursuant to
Paragraph 28(b) herein, Tenant shall, throughout the entire holdover period, pay
Base Rental equal to greater of one hundred twenty-five percent (125%) of the
Base Rental in effect immediately before the holdover period began or the
"Prevailing Market Rate" (to be determined in the same manner as provided for in
Paragraph 2 of the Special Stipulations set forth on Exhibit F attached hereto),
together with all applicable Additional Rent which would have been applicable
had the Lease Term continued through the period of such holding over by Tenant.
Tenant shall also remain liable for any and all damages, direct and
consequential, suffered by Landlord as a result of any holdover without
Landlord's unequivocal written acquiescence. No holding over by Tenant after the
expiration of the Lease Term shall be construed to extend the Lease Term.
. Subordination to Mortgage.
Provided that Tenant receives an agreement of non-disturbance, Tenant
accepts this Lease subject and subordinate to any mortgage, deed of trust, or
other lien presently existing or hereafter arising upon the Premises, the
Building and/or the Land, and to any renewals, modifications, refinancings and
extensions thereof, but Tenant agrees that any such Mortgagee shall have the
right (without seeking or obtaining Tenant's consent) at any time to subordinate
such mortgage, deed of trust or other lien to this Lease. Tenant agrees to
cooperate and execute and deliver such further instruments subordinating this
Lease or attorning to the holder of any such liens as Landlord may request
within fifteen (15) days of the date of such request.
<PAGE> 30
. Estoppel Certificate.
Tenant agrees that it will, from time to time upon request by Landlord
and within fifteen ( 15) days of such request, cooperate and execute and deliver
to such persons as Landlord shall request an estoppel certificate in recordable
form certifying that this Lease is unmodified and in full force and effect (or
if there have been modifications, that this Lease is in full force and effect as
so modified), stating the dates to which rent and other charges payable under
this Lease have been paid, stating that, to the best knowledge of Tenant,
Landlord is not in default hereunder (or if Tenant alleges a default, stating
the nature of such alleged default) and further stating such other matters as
Landlord shall reasonably require. In the event that Tenant should fail to
execute any such estoppel certificate promptly as requested, Tenant hereby
irrevocably constitutes Landlord as its attorney-in-fact to execute such
estoppel certificate in Tenant's name, place and stead, it being agreed that
such power is one coupled with an interest.
. Attorneys' Fees.
In the event either party defaults in the performance of any of the
terms of this Lease and the other party employs attorney(s) in connection
therewith, the defaulting party agrees to pay the prevailing party's reasonable
attorneys' and paralegals' fees (calculated at such attorneys' reasonable and
customary hourly rates and without regard to the amount in controversy) and
costs of litigation, whether at the trial level, on appeal or in any bankruptcy
or administrative proceedings.
. No Implied Waiver.
The failure of Landlord to insist at any time upon the strict
performance of any covenant or agreement herein or to exercise any option,
right, power or remedy contained in this Lease shall not be construed as a
waiver or a relinquishment thereof for the future. No payment by Tenant or
receipt by Landlord of a lesser amount than the monthly installment of rent due
under this Lease shall be deemed to be other than on account of the earliest
rent due hereunder, nor shall any endorsement or statement on any check or any
letter accompanying any check or payment as rent be deemed an accord and
satisfaction, and Landlord may accept such check or payment without prejudice to
Landlord's right to recover the balance of such rent or to pursue any other
remedy in this Lease provided.
. Personal Liability.
The liability of Landlord to Tenant for any default by Landlord under
the terms of this Lease shall be limited to the equity of Landlord in the
Building and the Land, and Tenant agrees to look solely to Landlord's equity in
the Building and the Land for recovery of any judgment from Landlord, it being
intended that neither Landlord nor the shareholders, parents, affiliates,
partners, members, or owners of Landlord shall be personally liable for any
judgment or deficiency.
<PAGE> 31
. Notices.
Any notice in this Lease provided for must, unless otherwise expressly
provided herein, be in writing, and may, unless otherwise in this Lease
expressly provided, be served by depositing the same in the United States mail,
postpaid and certified or registered and addressed to the party to be notified,
with return receipt requested, or by delivering the same in person to an officer
of such party, or by prepaid telegram or overnight delivery service (e.g.,
Federal Express), addressed to the party to be notified at the applicable
address stated in the Lease Summary or such other address, notice of which has
been given to the other party pursuant to this Paragraph 37. Notice deposited in
the mail in the manner hereinabove described shall be effective from and after
the expiration of five (5) calendar days after it is so deposited. Notice by
prepaid telegram or overnight delivery service shall be effective on the first
business day after said notice is sent. Notice by facsimile shall be effective
on the day sent by facsimile (provided the original is sent by one of the other
permitted means).
. Severability.
If any term or provision of this Lease, or the application thereof to
any person or circumstance shall, to any extent, be invalid or unenforceable,
the remainder of this Lease, or the application of such term or provision to
persons or circumstances other than those as to which it is held invalid or
unenforceable, shall not be affected thereby, and each term and provision of
this Lease shall be valid and enforced to the fullest extent permitted by law,
notwithstanding the invalidity of any other term or provision hereof.
. Recordation.
Tenant agrees not to record this Lease; provided, however, Landlord
shall execute and deliver a memorandum of this Lease, in recordable form, and
suitable to provide record notice of this Lease, if so requested by Tenant.
. Governing Law and Venue.
This Lease and the rights and obligations of the parties hereto shall
be interpreted, construed, and enforced in accordance with the laws of the State
of Florida and venue for any actions initiated by Landlord or Tenant shall be in
Hillsborough County.
. Force Majeure.
Whenever a period of time is herein prescribed for the taking of any
action by Landlord, Landlord shall not be liable or responsible for, and there
shall be excluded from the computation of such period of time, any delays
(except for delays in Landlord's construction and delivery obligation(s)
relative to the Premises discussed in the following paragraph) due to any
condition, matter or circumstance beyond the reasonable control of Landlord
(collectively, "Force Majeure Matters"; each, a "Force Majeure Matter"),
including, without limitation, the following: strikes; defaults or failures to
perform by contractors or subcontractors; unavailability of materials; lockouts;
acts of God; governmental restrictions, war or enemy action or invasion; civil
commotion; insurrection; riot; mob violence; malicious mischief or sabotage;
fire or any other casualty; adverse weather conditions or unusual inclement
weather; a condemnation; failure of a
<PAGE> 32
governmental instrumentality to act in a timely fashion; any litigation or other
legal proceeding which delays the approval of plans or the issuance of any
grading or building permit for construction, including, without limitation, the
issuance of an injunction enjoining such approval and/or issuance, as the case
may be; any law, order or regulation of any governmental, quasi-governmental,
judicial or military authority; or other similar cause.
Any reasonable delays due to acts of God, war or enemy action or
invasion; civil commotion; insurrection; riot, mob violence; malicious mischief
or sabotage (provided that reasonably adequate security is in place); fire,
earthquake, lightning, tropical storms or hurricanes shall be referred to in
this Lease as "Construction Force Majeure Matters." Landlord shall provide
written notice to Tenant at the time that a Construction Force Majeure Matter(s)
has occurred for which a delay will be claimed by Landlord.
. Time of Performance.
Except as expressly otherwise herein provided, with respect to all
required acts of Tenant, time is of the essence of this Lease.
. Transfers by Landlord.
Landlord shall have the right to transfer and assign, in whole or in
part, all its rights and obligations hereunder and in the Building and property
referred to herein, and in such event and upon such transfer Landlord shall be
released from any further obligations hereunder, and Tenant agrees to look
solely to such successor in interest of Landlord for the performance of such
obligations, except those obligations of Landlord with respect to which a
default exists as of the effective date of such transfer or assignment.
. Commissions.
Landlord warrants and represents to Tenant that Landlord has not
engaged or contracted with any person, firm or entity to serve or act as a
broker, agent or finder, other than Broker (if any), for the purpose of leasing
the Premises or in regard to this Lease. Tenant warrants and represents to
Landlord that Tenant has not engaged, contracted with or dealt with any person,
firm or entity (other than Broker, if any) to serve or act as a broker, agent or
finder, for the purpose of leasing the Premises or in regard to this Lease.
Landlord agrees to be solely responsible for the payment of any commission to
Broker (if any) relating to this Lease pursuant to a separate agreement between
Landlord and Broker (if any). Tenant shall and does hereby indemnify and hold
harmless Landlord from and against any claim for any consulting fee, finder's
fee, commission, or like compensation, including reasonable attorneys' fees in
defense thereof, payable in connection with this Lease and asserted by any party
arising out of any act or agreement by Tenant, excluding the commission payable
by Landlord to Broker (if any) as described above.
<PAGE> 33
. Effect of Delivery of this Lease.
Landlord has delivered a copy of this Lease to Tenant for Tenant's
review only, and such delivery does not constitute an offer to Tenant or an
option in favor of Tenant. This Lease shall not be effective until an original
executed by both Landlord and Tenant is delivered to and accepted by Landlord.
. Real Estate Investment Trust.
During the Lease Term, should a real estate investment trust become
Landlord hereunder, all provisions of this Lease shall remain in full force and
effect except as modified by this Paragraph 46. If Landlord in good faith
determines that its status as a real estate investment trust under the
provisions of the Internal Revenue Code of 1986, as heretofore or hereafter
amended, will be jeopardized because of any provision of this Lease, Landlord
may request reasonable amendments to this Lease and Tenant will not unreasonably
withhold, delay or defer its consent thereto, provided that such amendments do
not (a) increase the monetary obligations of Tenant pursuant to this Lease or
(b) in any other manner adversely affect Tenant's interest in the Premises.
. Hazardous Materials.
() Throughout the Lease Term, Tenant shall not knowingly cause, permit
or allow any chemical substances, asbestos or asbestos-containing materials,
formaldehyde, polychlorinated biphenyls, and toxic, carcinogenic, radioactive,
dangerous or hazardous material, substance, waste, contaminant, or pollutant
regulated now or hereafter by any governmental entity or agency (collectively,
"Hazardous Materials") to be placed, stored, dumped, dispensed, released,
discharged, used, sold, transported, or located on or within any portion of the
Premises, the Building or the Land by itself or its servants, agents, employees,
contractors, subcontractors, licensees, assignees or subtenants; provided,
however, minor quantities of Hazardous Materials may be used or stored in the
Premises for cleaning purposes only or in connection with the use of office
equipment and the normal operation of Tenant's office only, so long as such
quantities and the use thereof are permitted by or are exempt from applicable
governmental regulation. Tenant agrees to give Landlord prompt written notice of
any discovery, discharge, release or threatened discharge or threatened release
of any Hazardous Materials on or about the Premises, the Building or the Land.
Tenant agrees to promptly clean up any Hazardous Materials which are placed in
the Premises or on the Land by Tenant or its servants, agents, employees,
contractors, subcontractors, licensees, assignees or subtenants and to remediate
and remove any such contamination relating to the Premises, the Building and/or
the Land, as appropriate, at Tenant's cost and expense, in compliance with all
applicable laws, ordinances, rules and regulations then in effect and to
Landlord's satisfaction, at no cost or expense to Landlord. Additionally, Tenant
hereby agrees to indemnify and hold harmless Landlord and Landlord's partners,
officers, directors, members, affiliates, employees and agents from and against
all loss, cost, damage, liability and expense (including attorneys' fees and
expenses) arising from or relating to any Hazardous Materials (other than those
permitted above) which are placed in the Premises or the Building or on the Land
by Tenant or its servants, agents, employees, contractors, subcontractors,
licensees, assignees or subtenants.
<PAGE> 34
() The terms and provisions in this Paragraph 47 shall survive the
termination or earlier expiration of this Lease.
. Landlord's Right of Relocation. [Intentionally deleted].
. Evidence of Authority.
If requested by Landlord, Tenant shall furnish appropriate legal
documentation evidencing the valid existence and good standing of Tenant and the
authority of any parties signing this Lease to act for Tenant. By signing this
Lease on Tenant's behalf, the signatory for Tenant hereby represents the truth
of such facts to Landlord.
. Survival of Obligations.
Notwithstanding any term or provision in this Lease to the contrary,
any liability or obligation of Landlord or Tenant arising during or accruing
with respect to the Lease Term shall survive the expiration or earlier
termination of this Lease, including, without limitation, obligations and
liabilities relating to (i) rent payments, (ii) the condition of the Premises
and the removal of Tenant's property, and (ii) indemnity and hold harmless
provisions in this Lease.
. Confidentiality.
Tenant agrees, on behalf of Tenant and Tenant's employees, agents,
contractors, consultants, partners, affiliates, assignees and subtenants, not to
disclose the terms of this Lease or the results of any audit of Landlord's books
and records under this Lease to any third party except (i) legal counsel to
Tenant, (ii) any assignee of Tenant's interest in this Lease or any subtenant of
Tenant relative to the Premises (or any portion thereof), (iii) as required by
applicable law or by subpoena or other similar legal process, or (iv) for
financial reporting purposes.
. Contractual Landlord's Lien. [Intentionally deleted].
. Rent a Separate Covenant. Tenant shall not for any reason withhold or
reduce Tenant's required payments of Basic Rent and other charges provided in
this Lease, it being expressly understood and agreed contractually by the
parties that the payment of Basic Rent, Additional Rent, and other charges
provided under this Lease is a contractual covenant by Tenant that is
independent of the other covenants of the parties under this Lease.
. Radon.
As required by Florida Statutes, 404.056(6) 1995, Landlord notifies
Tenant as follows:
"RADON GAS: Radon is a naturally occurring radioactive gas, that when
it has accumulated in a building in sufficient quantities, it may present health
risk to persons who are exposed to it over time. Levels of Radon that exceed
federal and state guidelines have been found in buildings in Florida. Additional
information regarding Radon and Radon testing may be obtained from your county
public health unit."
<PAGE> 35
. Miscellaneous Provisions.
The entire agreement, intent and understanding between Landlord and
Tenant is contained in the provisions of this Lease and the exhibits attached
hereto and any stipulations, representations, promises or agreements, written or
oral, made prior to or contemporaneously with this Lease shall have no legal or
equitable effect or consequence unless reduced to writing herein or in the
exhibits attached hereto. This Lease may not be modified except by a written
instrument by the parties hereto. The terms "Landlord" and "Tenant" and all
pronouns relating thereto shall be deemed to mean and include corporations,
partnerships and individuals as may fit the context, and the masculine gender
shall be deemed to include the feminine and the neuter, and the singular number,
the plural.
. Special Stipulations.
The special stipulations, if any, set forth on Exhibit F attached to
this Lease are incorporated herein by reference. If there is no Exhibit F
attached to this Lease, there are no such special stipulations. Such special
stipulations shall control if in conflict with any of the foregoing provisions
of this Lease.
. WAIVER OF JURY TRIAL.
THE PARTIES HERETO SHALL, AND THEY HEREBY DO, WAIVE TRIAL BY JURY IN
ANY ACTION, PROCEEDING, OR COUNTERCLAIM BROUGHT BY EITHER OF THE PARTIES HERETO
AGAINST THE OTHER ON ANY MATTERS WHATSOEVER ARISING OUT OF, OR IN ANY WAY
CONNECTED WITH, THIS LEASE, THE RELATIONSHIP OF LANDLORD AND TENANT, TENANT'S
USE OR OCCUPANCY OF THE PREMISES AND/OR BUILDING AND/OR CLAIM OR INJURY OR
DAMAGE. IN THE EVENT LANDLORD COMMENCES ANY PROCEEDINGS TO ENFORCE THIS LEASE OR
THE LANDLORD/TENANT RELATIONSHIP BETWEEN THE PARTIES OR FOR NON-PAYMENT OF BASIC
RENT OF ANY NATURE WHATSOEVER, OR ADDITIONAL MONIES DUE LANDLORD FROM TENANT
UNDER THIS LEASE, TENANT WILL NOT INTERPOSE ANY COUNTERCLAIM OF WHATEVER NATURE
OR DESCRIPTION IN ANY SUCH PROCEEDINGS. IN THE EVENT TENANT MUST, BECAUSE OF
APPLICABLE COURT RULES, INTERPOSE ANY COUNTERCLAIM OR OTHER CLAIM AGAINST SUCH
PROCEEDING THE LANDLORD AND TENANT COVENANT AND AGREE THAT, IN ADDITION TO ANY
OTHER LAWFUL REMEDY OF LANDLORD UPON MOTION OF LANDLORD, SUCH COUNTERCLAIM OR
OTHER CLAIM ASSERTED BY TENANT SHALL BE SEVERED OUT OF THE PROCEEDINGS
INSTITUTED BY LANDLORD AND, IF NECESSARY, TRANSFERRED TO A COURT OF DIFFERENT
JURISDICTION, AND THE PROCEEDINGS INSTITUTED BY LANDLORD MAY PROCEED TO FINAL
JUDGMENT SEPARATELY AND APART FROM AND WITHOUT CONSOLIDATION WITH OR REFERENCE
TO THE STATUS OF EACH COUNTERCLAIM OR ANY CLAIM ASSERTED BY TENANT.
<PAGE> 36
IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease in
multiple original counterparts as of the day and year first above written.
Signed, sealed and delivered LANDLORD
in the presence of:
CRESCENT RESOURCES, INC.,
a South Carolina corporation
- ------------------------------ By:
Print Name: --------------------------
Name:
- ------------------------------ ------------------------
Title: President
- ------------------------------ --------------------------
Print Name:
------------------- [CORPORATE SEAL]
TENANT:
OUTBACK STEAKHOUSE, INC.,
a Florida corporation
- ------------------------------ By:
Print Name: --------------------------
Name:
- ------------------------------ ------------------------
Title: President
- ------------------------------ --------------------------
Print Name:
------------------- [CORPORATE SEAL]
<PAGE> 37
EXHIBIT A
Description of Land
All that certain tract or parcel of land lying and being in the City of
Tampa, Hillsborough County, Florida, and being more particularly described as
follows:
<PAGE> 38
EXHIBIT B
Designation of Premises
See attached Exhibit B-1 and Exhibit B-2.
<PAGE> 39
EXHIBIT C
Construction of Improvements
. Building Shell Improvements. Landlord, at Landlord's sole cost, shall
complete or has completed the following as part of the Building Shell
Improvements:
- 2' x 2' ceiling grid installed at 9' above the
finished floor
- 2' x 2' tegular acoustical ceiling tile installed
- columns wrapped with drywall
- high efficiency 2' x 4, 3 lamp fixtures with 18-cell
parabolic lenses and lights at a ratio of one fixture per 75
square feet of Premises Net Usable Area installed
- low pressure and medium pressure duct work
- interior VAV boxes installed with thermostats at the
rate of approximately one (1) per 1,115 usable square feet
- perimeter VAV boxes installed to perimeter slot
diffusers at the rate of approximately one (1) per 1,115
usable square feet
- Building standard fire sprinkler system (in
accordance with applicable code requirements), with heads
turned up
- demising walls: Landlord shall pay for the cost of
the demising walls
- blinds for exterior windows
- base building electrical sufficient to accommodate at least 6
watts per foot below ceiling, excluding lighting and HVAC
and electrical
. Construction Supervision. Landlord shall co-ordinate the design and
construction of the Tenant Improvements for Tenant as outlined below in
sections 3 through 8 of this Exhibit C. Landlord shall not receive a
fee for this construction administration/management service.
. Architect. Hellmuth Obata & Kassabaum, Inc. is hereby approved by
Tenant and Landlord as the architect for the Tenant Improvements and
shall hereinafter be referred to as "Tenant Architect". Landlord shall
enter into a contract with the Tenant Architect to prepare the Tenant
Improvements Plans and Specifications. Landlord shall have the right to
use any mechanical, electrical and plumbing architects/engineers
required to complete the Tenant Improvement Plans and Specifications.
. Preliminary Plans. Tenant shall work with Tenant Architect to prepare a
set of design development plans (the "Preliminary Plans") acceptable to
Tenant for the interior build out of the Premises by November 1, 1998.
Tenant shall submit a signed set of the Preliminary Plans to Landlord
for review and approval which shall not be unreasonably withheld or
denied. Landlord shall have five (5) business days from receipt of the
Preliminary Plans to review and request any changes. In the event that
Landlord fails to respond within such five (5) business day period,
Tenant shall notify Landlord, in writing, that Landlord has failed to
reply. In the event that Landlord fails to respond to this second
notice within five (5) business days from receipt of the second notice,
Landlord shall be deemed to have approved the Preliminary Plans. If
changes are requested during the review period, Tenant shall have
fifteen (15) days to work with Landlord and Tenant Architect to modify
the Preliminary Plans so they are acceptable to both Landlord and
<PAGE> 40
Tenant. If Tenant does not approve the Preliminary Plans within this
fifteen (15) day period, it shall be considered a Tenant Delay Factor
for each day thereafter that the Preliminary Plans have not been
approved.
. Preliminary Budget. Once the Preliminary Plans have been approved by
both Tenant and Landlord, Landlord shall co-ordinate having a
construction budget prepared with a detailed line item breakdown of all
costs and contractor fees. Such budget shall hereinafter be referred to
as "Preliminary Budget". Landlord shall have the Preliminary Budget
completed for review by Tenant within fifteen (15) days after the
Preliminary Plans have been approved. Tenant shall have fifteen (15)
days upon receipt of the Preliminary Budget to review and approve the
Preliminary Budget. If Tenant does not respond within the fifteen (15)
day review period, the Preliminary Budget shall be considered approved
by Tenant. If Tenant does not approve the budget, in writing, Landlord
and Tenant shall have thirty (30) days from the date that Tenant
informs Landlord of its disapproval to work with Landlord and Tenant
Architect to approve the Preliminary Plans accordingly. If Tenant does
not approve the Preliminary Budget within this thirty (30) day period,
it shall be considered a Tenant Delay Factor for each day thereafter
that the Preliminary Budget is not approved.
. Tenant Improvement Plans and Specifications. Immediately after the
Preliminary Plans and Preliminary Budget have been approved by both
Tenant and Landlord, Landlord shall direct the Tenant Architect to
prepare Tenant Improvements Plans and Specifications. Landlord shall
have forty-five (45) days to complete the Tenant Improvement Plans and
Specifications complete with finishes and mechanical, electrical and
plumbing engineered drawings.
. Construction Bid. Landlord shall deliver the completed Tenant
Improvement Plans and Specifications to three (3) general contractors
to obtain bids from each contractor for the construction of the Tenant
Improvements in accordance with the Tenant Improvements Plans and
Specifications and shall obtain such bids on or before thirty (30) days
from the approval of the Tenant Improvements Plans and Specifications.
After receipt of such bids, Landlord shall select the contractor that
Landlord reasonably believes to be the best for the job, taking into
consideration prior experience, price and financial stability. Landlord
shall not be obligated to accept the lowest bid. The selected
contractor shall hereinafter be referred to as the "Contractor" and the
bid submitted by the Contractor shall hereinafter be referred to as the
"Final Construction Budget". If the Final Construction Budget is not
more than five percent (5%) over the Preliminary Budget, the Final
Construction Budget and the Tenant Improvement Plans and Specifications
shall be considered approved and Landlord shall be released to submit
the Tenant Improvement Plans and Specifications to the Contractor for
the construction of the Tenant Improvements. If the Final Construction
Budget is six percent (6%) or more than the Preliminary Budget, then
Tenant shall have ten (10) days from receipt of such to review the
Final Construction Budget to approve or disapprove. If Tenant does not
respond within the ten (10) day review period, the Final Construction
Budget and Tenant Improvement Plans and Specifications shall be
considered approved. If Tenant disapproves the Final Construction
Budget, then Tenant shall have thirty (30 ) days to work with
Contractor, Tenant Architect and Landlord to modify the Tenant
Improvement Plans and Specifications and Final Construction Budget so
they are acceptable to Tenant and Landlord. If Tenant does not approve
the Final Construction Budget and the Tenant Improvements Plans and
Specifications within this
<PAGE> 41
thirty (30) day period, it shall be considered a Tenant Delay Factor
for each day thereafter that they are not approved.
. Change Order. After the approval of the Final Construction Budget and
the Tenant Improvement Plans and Specifications, any changes to the
Tenant Improvement Plans and Specifications shall be deemed a Change
Order. In the event Tenant desires a Change Order, Tenant shall deliver
written notice to Landlord. Upon receipt of such written notice,
Landlord shall, within four (4) business days, notify Tenant's Contact
Person as to the cost of such Change Order and whether such Change
Order will cause a Tenant Delay Factor. Upon notice to Tenant's Contact
Person, Tenant shall have five (5) days to advise Landlord of either
going forward with the Change Order or withdrawing the request for the
Change Order. In the event that Tenant fails to respond within such
five (5) day period, Tenant shall be deemed to have withdrawn such
Change Order request.
<PAGE> 42
EXHIBIT D
Cleaning and Janitorial Services
LANDLORD SHALL FURNISH CLEANING AND JANITORIAL SERVICES TO THE PREMISES AS
DESCRIBED BELOW:
DAILY (Monday - Friday):
- Sweep, dry mop or vacuum, as appropriate, all floor
areas; remove material such as gum and tar which has adhered
to the floor.
- Empty and damp wipe all ash trays, waste baskets and
containers, remove all trash from the leased premises.
- Dust all cleared horizontal surfaces with treated dust cloth,
including furniture, files, telephones, equipment that can be
reached without a ladder.
- Spot wash to remove smudges, marks and fingerprints from such
areas that can be reached without a ladder.
- Clean water fountains, cafeteria tables and chairs.
Damp mop all non-resilient floors such as terrazzo and ceramic
tile.
- Clean freight and passenger elevator cabs and landing doors.
- Clean mirrors, soap dispensers, shelves, wash basins,
exposed plumbing, dispenser and disposal container exteriors,
damp wipe all ledges, toilet stalls and toilet doors.
- Clean toilets and urinals with detergent disinfectants.
- Furnish and refill all soap, toilet, sanitary napkin
and towel dispensers.
- Spot clean carpet stains.
- Wash glass in Building directory, entrance doors and
frames. Remove all litter from the parking lot and grounds.
WEEKLY:
- Dust vertical blinds and louvers.
- Spot wash interior partition glass and door glass to
remove smudge marks.
- Sweep all stairs areas.
- Dust all baseboards.
<PAGE> 43
- Vacuum or brush all fabric covered chairs.
MONTHLY:
- Scrub and recondition resilient floor areas.
- Wash all stairwell landings and treads.
- Wash all interior glass both sides.
QUARTERLY:
- High dust all horizontal and vertical surfaces not reached by
nightly cleaning.
- Vacuum all ceiling and wall air supply and exhaust diffusers
and grills.
- Wash and polish vertical terrazzo and marble surfaces.
- Spot clean carpeted areas.
SEMI-ANNUALLY:
- Vacuum drapes, cornices and wall hangings.
- Dust all storage areas and shelves and contents.
- Damp wash diffusers, grills, and other such items.
ANNUALLY:
- Strip and refinish all resilient floors.
- Wash all building exterior glass both sides.
- Clean light fixtures, reflectors, globes, diffusers and trim.
- Wash walls in corridors, lounges, classrooms, demonstration
areas, cafeterias, break rooms, washrooms.
- Clean all vertical surfaces not attended to during nightly,
weekly, quarterly or semi-annually cleaning.
Landlord will provide a day porter for use throughout the Building on
business days, Monday through Friday.
<PAGE> 44
EXHIBIT E
Rules and Regulations
. Sidewalks, doorways, vestibules, halls, stairways, and similar areas
shall not be obstructed nor shall refuse, furniture, boxes or other items be
placed therein by any tenant or its officers, agents, servants, and employees,
or be used for any purpose other than ingress and egress to and from premises in
the Building, or for going from one part of the Building to another part of the
Building. Canvassing, soliciting and peddling in the Building are prohibited.
. Plumbing, fixtures and appliances shall be used only for the purposes
for which constructed, and no unsuitable material shall be placed therein.
. No signs, directories, posters, advertisements, or notices shall be
painted or affixed on or to any of the windows or doors, or in corridors or
other parts of the Building, except in such color, size, and style, and in such
places, as shall be first approved in writing by Landlord in its discretion.
However, the prohibition in the immediately preceding sentence shall not limit
or restrict any tenant's right to maintain within the premises occupied by such
tenant any signs, directories, posters, advertisements, or notices so long as
such items are not visible from the exterior of the premises occupied by such
tenant or from the Common Areas of the Building. Landlord shall have the right
to remove all unapproved signs without notice to any tenant, at the expense of
the responsible tenant.
. No tenant shall do, or permit anything to be done, in or about the
Building, or bring or keep anything therein, that will in any way increase the
rate of fire or other insurance on the Building, or on property kept therein or
otherwise increase the possibility of fire or other casualty.
. Landlord shall have the power to prescribe the weight and position of
heavy equipment or objects which may overstress any portion of the floor. All
damage done to the Building by the improper placing of such heavy items will be
repaired at the sole expense of the responsible tenant.
. Each tenant shall notify the Building manager when safes or other
heavy equipment are to be taken in or out of the Building, and the moving shall
be done after written permission is obtained from Landlord on such conditions as
Landlord shall require.
. All deliveries must be made via the service entrance and service
elevator, when provided, during normal working hours. Landlord's written
approval must be obtained for any delivery after normal working hours.
. Each tenant shall cooperate with Landlord's employees in keeping such
tenant's premises neat and clean.
<PAGE> 45
. Each tenant shall not cause or permit any improper noises in the
Building, allow any unpleasant odors to emanate from the Premises, or otherwise
interfere, injure or annoy in any way other tenants or persons having business
with them. However, Landlord acknowledges that, if permitted by the applicable
lease, a tenant may operate a food services facility within the premises of such
tenant for the sole use and benefit of the occupants of such premises and that
such food services facility may emit odors normally associated with the
operation of such on-site food services facilities.
. No animals shall be brought into or kept in or about the Building.
. When conditions are such that a tenant must dispose of crates, boxes,
etc. on the sidewalk, it will be the responsibility of such tenant to dispose of
same prior to 7:30 a.m. or after 5:30 p.m.
. No machinery of any kind, other than ordinary office machines such as
typewriters, information processing systems, copy machines, communications
equipment and calculators, shall be operated in any premises in the Building
without the prior written consent of Landlord, nor shall any tenant use or keep
in the Building any inflammable or explosive fluid or substance (including
Christmas trees and ornaments), or any illuminating materials. No space heaters
or fans shall be operated in the Building.
. No motorcycles or similar vehicles will be allowed in the Building.
. No nails, hooks, or screws shall be driven into or inserted in any
part of the Building, except as approved by Building maintenance personnel.
Notwithstanding the foregoing, a tenant may decorate the interior of such
tenant's premises at such tenant's sole discretion provided such decorations do
not impact the structural integrity of the Building and cannot be seen from the
exterior of the Building or from any Common Areas of the Building.
. Landlord has the right to evacuate the Building in the event of an
emergency or catastrophe.
. No food and/or beverages shall be distributed from any tenant's
office without the prior written approval of the Building manager. But a tenant
may prepare coffee and similar beverages and warm typical luncheon items for the
consumption of such tenant's employees and invitees. Furthermore, Landlord
acknowledges that, if permitted by the applicable lease, a tenant may operate a
food services facility within the premises of such tenant for the sole use and
benefit of the occupants of such premises.
. No additional locks shall be placed upon any doors without the prior
written consent of Landlord. All necessary keys or access cards or codes shall
be furnished by Landlord, and the same shall be surrendered upon termination of
the applicable lease, and each tenant shall then give Landlord or Landlord's
agent an explanation of the combination of all locks on the doors or vaults.
Replacement keys or access cards or codes (i.e., replacements for keys or access
cards or codes previously issued by Landlord) shall be obtained only from
Landlord, and Tenant shall pay to Landlord (as Additional Rent, within thirty
(30) days after Tenant receives an invoice therefor) the actual costs incurred
by Landlord in obtaining and issuing replacement keys or access cards or codes
for keys or access cards or codes previously issued.
<PAGE> 46
. Tenants will not locate furnishings or cabinets adjacent to
mechanical or electrical access panels or over air conditioning outlets so as to
prevent operating personnel from servicing such units as routine or emergency
access may require. Cost of moving such furnishings for Landlord's access will
be for the responsible tenant's account. The lighting and air conditioning
equipment of the Building will remain the exclusive charge of the Building
designated personnel.
. Each tenant shall comply with reasonable parking rules and
regulations as may be posted and distributed by Landlord from time to time.
. No portion of the Building shall be used for the purpose of lodging
rooms.
. Prior written approval, which shall be at Landlord's sole discretion,
must be obtained for installation of window shades, blinds, drapes, or any other
window treatment of any kind whatsoever. Landlord will control all internal
lighting that may be visible from the exterior of the Building and shall have
the right to change any unapproved lighting, without notice to the responsible
tenant, at the responsible tenant's expense.
. No tenant shall make any changes or alterations to any portion of the
Building without Landlord's prior written approval, which may be given on such
conditions as Landlord may elect. All such work shall be done by Landlord or by
licensed contractors and/or workmen.
. Tenant shall not employ any service or contractor for services or
work to be performed in the Building except as approved by Landlord.
. No tenant, employee or invitee shall go upon the roof of the
Building, without prior approval and consent by Landlord.
. Landlord reserves the right to waive any one of these rules or
regulations. With respect to any particular tenant and any such waiver shall not
constitute a waiver of any other rule or regulation or any subsequent
application thereof to the same or any other tenant. Notwithstanding the
foregoing, Landlord shall not selectively enforce the rules or act in a
discriminatory manner.
. Tenant assumes all risks from theft or vandalism and agrees to keep
its Premises locked.
. Landlord reserves the right to amend these rules and regulations or
make such additional reasonable rules and regulations it may from time to time
deem necessary for the appropriate operation and safety of the Building and
their occupants. Tenant agrees to abide by such additional or amended rules and
regulations.
. The following are established as reasonable and usual business for
access to the Building: 7:00 a.m. through 7:00 p.m. Monday through Friday,
except for January 1 (New Year's Day), the last Monday in May (Memorial Day),
July 4 (Independence Day), the first Monday in September (Labor Day), the last
Thursday in November (Thanksgiving) and December 25 (Christmas), or as may be
modified by Landlord pursuant to any law. Access to the building at any time
other than 7:00 a.m. through 7:00 p.m.; Monday through Friday (and on holidays
as described above) shall be through utilization of the building card reader
access system.
<PAGE> 47
EXHIBIT F
Special Stipulations
. Right of First Refusal. Landlord and Tenant agree that, provided
Tenant in is possession of the Premises and is not in default of any of the
terms, covenants and conditions of this Lease, Tenant shall have an on-going
right of first refusal to lease from Landlord the last remaining 25,000 square
feet of space on a Contiguous Multi-Tenant Floor that has not been initially
leased by Landlord (the "Additional Premises") on the same terms and conditions
that Landlord shall have received and deemed acceptable in a bonafide offer from
a third party, except that the term shall be co-terminous with the Lease Term
(but in no event less than five (5) years) and the tenant improvement allowance
provided for in such offer shall be prorated based upon the term for the
Additional Premises. Upon the initial leasing of all space on the Contiguous
Multi-Tenant Floor, Tenant shall no longer have a right of first refusal as
provided for in this Paragraph 1.
Tenant shall exercise its right of first refusal by written notice to
Landlord within seven (7) business days following receipt of written notice from
Landlord containing the terms of the third party's offer, acceptable to the
Landlord, for the Additional Premises. In the event that Tenant exercises the
right granted herein, Landlord and Tenant shall enter into an amendment to this
Lease to incorporate the Additional Premises and to make the necessary
adjustments to the Basic Rent and similar provisions to this Lease. In the event
Tenant declines to exercise its rights as provided for, or fails to deliver or
fails to deliver notice thereof within the time period stipulated above, or
fails to execute the requisite amendment of this Lease; this right of first
refusal shall lapse and be of no further force and effect as to the instant
offer. In the event that the lease for which Tenant declined to exercise its
right of first refusal is not executed within six (6) months from the date of
written notice, Landlord agrees to again offer such lease to Tenant on the same
terms and conditions that have been agreed to by such tenant. This right of
first refusal shall not be severed from this Lease or separately sold, assigned,
or transferred.
. Renewal Option. Provided Tenant is in possession of the Premises and
is not in default of any term, covenant or condition of this Lease, Tenant shall
have the option to renew the term of this Lease for two (2) additional periods
of five (5) years each (the "Renewal Term(s)") to commence immediately upon the
expiration of the initial Lease Term or the expiration of the first Renewal
Term, as applicable, upon the same terms, covenants and conditions as contained
in this Lease except that (i) the Base Rental for the first five (5) year
Renewal Term shall be equal to one hundred and four percent (104%) of the Base
Rental due immediately prior to the first year of the first five (5) year
Renewal Term and Base Rental shall increase by four percent (4%) thereafter for
each year of the first five (5) year Renewal Term and the Base Rental during the
second five (5) year Renewal Term shall be the greater of (a) the Base Rental
received under this Lease for the rental year immediately preceding the second
five (5) year Renewal Term or (b) the "Prevailing Market Rate"; (ii) there shall
be no abatement of rent;(iii) Landlord shall not be obligated to construct, pay
for, or grant an allowance with respect to improvements to the premises unless
otherwise specifically provided for in this Lease, and (iv) there shall be no
further option to renew the Lease Term, except as specifically provided herein.
The Prevailing Market Rate shall mean the then current market renewal rental
activity for Class A office space in Westshore area of Tampa, Florida.
In order to exercise the options granted herein, Tenant shall notify
Landlord in writing, not less than twelve (12) months prior to the expiration of
the initial Lease Term or the first Renewal Term, if applicable, that it is
exercising its option to renew the Lease Term. On receipt of such notice for the
second five (5) year Renewal Term, Landlord will in writing, not less than
thirty (30) days after receipt of a notice from Tenant, notify Tenant what the
base rental will be for such Renewal Term. Tenant shall within fifteen (15) days
of Landlord of the notice of the Base Rental for such Renewal Term notify
Landlord if Tenant accepts or disputes such Base Rental. If Tenant notifies
Landlord within the aforesaid fifteen (15) day period that Tenant disputes the
Base Rental quoted by Landlord, the parties shall during the following thirty
(30)
<PAGE> 48
days negotiate in good faith to determine the Base Rental for such Renewal Term.
If within said thirty (30) day period the parties are unable to agree on the
Base Rental, then within ten (10) days thereafter, each party shall select a
duly qualified licensed appraiser experienced in appraising commercial property
in the vicinity of the Building who will submit appraisals for the Premises
within thirty (30) days of their appointment. If the difference between the
appraisals is five percent (5%) or less, the Base Rental shall be determined by
the average of the two appraisals. If the difference is greater than five
percent (5%) then the two appraisers shall select a third qualified appraiser
who will submit an appraisal within thirty (30) days following the submission of
the first appraisal. The Base Rental shall then be the average of the two
closest appraisals. The fees of such appraiser shall be paid by the party
appointing the appraiser. The fees of the third appraiser, if any, shall be
shared equally by the parties. In the event the Tenant exercises the option,
Landlord and Tenant shall execute a modification of this Lease acknowledging
said renewal and setting forth the Base Rental.
Additionally, provided that Tenant is in possession of the Premises and
is not in default of any term, covenant or condition of this Lease, Tenant shall
have the option of extending the term of the Lease for six (6) months (the "6
Month Option") under the same terms and conditions of this Lease, except that
the Base Rental shall be equal to One Hundred Twenty-Five Percent (125%) of the
Base Rental immediately due and owing under the Lease at the expiration of the
Initial Lease term. In order to exercise the option granted herein, Tenant shall
notify Landlord in writing not less than twelve (12) months prior to expiration
of the Initial Lease Term that it is exercising the 6 Month Option. In the event
Tenant exercises the 6 Month Option and other options to renew the terms of the
Lease shall be deemed null and void.
The options granted in this Section 2 shall be void if at the time of
such option Tenant is not in possession of the Premises or is in default of this
Lease or Tenant fails to deliver the requisite notice thereof within the time
period specified. The options granted herein shall not be severed from the
Lease, separately sold, assigned or transferred.
3. Expansion Option. Subject to the provisions set forth hereinafter,
and subject to other tenant's superior rights, Tenant shall have the one time
option to lease from Landlord any unleased space on a Contiguous Multi-Tenant
Floor (the "Additional Expansion Premises"). In order to exercise this option to
lease the Additional Expansion Premises, Tenant must notify Landlord in writing
one hundred twenty (120) days prior to the date that such larger space is
required by Tenant. The notice from Tenant shall include the size of the
Additional Expansion Premises required by Tenant. If the Additional Expansion
Premises are available, Landlord shall notify Tenant within thirty (30) days
from Tenant's notice.
<PAGE> 49
The foregoing right to lease the Additional Expansion Premises shall
not be severed from this Lease or separately sold, assign or transferred and
shall be subject to the following additional conditions, namely:
(a) the Lease Term for the Additional Expansion Premises shall run
currently with the Term of this Lease and shall be for a term
of not less than three (3) years;
(b) the Base Rental for the Additional Expansion Premises shall be
equal to the Base Rental provided for in the Lease provided,
however, there shall be no free rent and the Tenant
Improvement Allowance shall be prorated based upon the length
of the term for the Additional Expansion Premises compared to
the length of the Lease Term;
(c) if at the time Tenant exercises its option to lease the
Additional Expansion Premises, no event of default shall exist
under this Lease;
(d) that at the time Tenant exercises its option to lease the
Additional Expansion Premises, Tenant shall be in occupancy
and possession of the Premises;
(e) Landlord and Tenant shall enter into an amendment to this
Lease to incorporate the Additional Expansion Premises and
make corresponding modifications to the provisions of this
Lease regarding Base Rental and other required modifications;
and
(f) the Additional Expansion Premises are available and not
subject to any rights of other tenants.
4. Exclusive Provision. Landlord hereby agrees not to lease space in
the Building to a tenant with a permitted use as a full service, sit down
restaurant (not including any delis, sandwich shops, cafe, coffee shop) during
the Lease Term.
5. Interim Space Contribution. In the event that Tenant is forced to
move from any space that it is currently occupying, Landlord agrees to
contribute toward the actual out of pocket costs of Tenant in relocation to
additional space up to, but not in excess, of the sum of $25,000.00. Upon such
required relocation, Tenant shall provide documentation from Tenant's current
landlord that evidences that Tenant is required to vacate together with copies
of invoices documenting the expenses of Tenant in occupying additional space,
which such expense shall include rental associated with such additional space.
Upon receipt of such documentation acceptable to Landlord, the Landlord will
reimburse Tenant for its actual out of pocket expenses up to the sum of
$25,000.00 upon Tenant's occupancy of such additional premises.
<PAGE> 50
EXHIBIT G
Commencement Date Stipulation
Pursuant to that certain Lease Agreement (the "Lease) between CRESCENT
RESOURCES, INC. (the "Landlord") and (the "Tenant") dated as of________________
199___, for certain premises in the____________________ Office Building located
at__________________________________________________, Landlord and Tenant hereby
stipulate and certify that:
. The Commencement Date under the Lease is expiration date of
the Lease Term is _______________, 199___, and the expiration
date of the Lease Term is ___________________, ______.
. Tenant's obligation to pay Rent under the Lease commenced on
the Commencement Date.
The terms and provisions of this Commencement Date Stipulation are
hereby incorporated into the Lease and modify any and all provisions to the
contrary contained therein.
Executed under seal as of the _____ day of _______________________,
199__.
TENANT:
a
-------------------------------
[CORPORATE SEAL]
ATTEST: By:
-----------------------------
Name:
- ------------------------------ ---------------------------
, Secretary Title: President
- ------------------- --------------------------
LANDLORD:
CRESCENT RESOURCES, INC., a South
Carolina corporation
[CORPORATE SEAL]
ATTEST: By:
-----------------------------
Name:
- ------------------------------ ---------------------------
, Secretary Title: President
- ------------------- --------------------------
<PAGE> 1
EXHIBIT 13.01
Management's Discussion and Analysis of Financial Condition and Results of
Operations
- --------------------------------------------------------------------------------
Introduction
At December 31, 1998, Outback Steakhouse, Inc. and Affiliates (the
"Company") had 422 domestic and one international Outback Steakhouse restaurants
in which it had a direct ownership interest ("Company owned" restaurants), 95
Outback Steakhouse restaurants operated by unaffiliated domestic franchisees,
and 22 Outback Steakhouse restaurants operated by unaffiliated international
franchisees. The system also included 52 Company owned Carrabba's Italian Grills
("Carrabba's") and 12 Carrabba's operated by joint ventures in which the Company
had a 45% ownership interest ("Development Joint Ventures").
All of the Company owned restaurants are organized as partnerships in
which the Company is a general partner. The Company's ownership interests range
from 51% to 90%, and the minority interests are owned by the restaurant managers
and area operating partners. The results of operations of Company owned
restaurants are included in the consolidated operating results of the Company.
The portion of the income attributable to the minority interests of restaurant
managers and area operating partners is eliminated in the line item in the
Company's Consolidated Statements of Income entitled "Elimination of minority
partners' interest."
The Development Joint Venture restaurants are organized as general
partnerships in which the Company owns 50% of the partnership and its joint
venture partner owns 50%. The restaurant manager of each restaurant owned by a
Development Joint Venture purchases a 10% interest in the restaurant he or she
manages. The Company is responsible for 50% of the costs of new restaurants
operated as Development Joint Ventures and the Company's joint venture partner
is responsible for the other 50%. The income derived from restaurants operated
as Development Joint Ventures is presented in the line item "(Income) loss from
operations of unconsolidated affiliates" in the Company's Consolidated
Statements of Income.
The Company derives no direct income from the operations of franchised
restaurants other than initial franchise fees and royalties, which are included
in the Company's other revenues.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
91 $ 91,000 91 $ 91,000 91 $0.11 91 $ 6,064
92 $ 196,000 92 $ 190,568 92 $0.23 92 $14,666
93 $ 348,000 93 $ 336,885 93 $0.35 93 $24,926
94 $ 557,000 94 $ 516,926 94 $0.57 94 $41,196
95 $ 827,000 95 $ 733,692 95 $0.79 95 $57,911
96 $1,077,000 96 $ 937,400 96 $0.97 96 $71,613
97 $1,368,000 97 $1,151,637 97 $0.84+ $1.07+ 97 $61,452+ $ 78,145+
98 $1,668,000 98 $1,358,921 98 $1.23* 1.29* 98 $92,335* $ 97,215*
System-wide Sales Company Revenues Diluted Earnings Net Income
in Thousands of Dollars in Thousands of Dollars Per Share in Thousands of Dollars
</TABLE>
+Net income and earnings per share amounts for 1997 are depicted before and
after the "Provision for impaired assets and restaurant closings." See Note 15
of Notes to Consolidated Financial Statements.
*Net income and earnings per share amounts for 1998 are depicted before and
after the "Cumulative Effect of Change in Accounting Principle." See Note 13 of
Notes to Consolidated Financial Statements.
Note: All applicable per share data has been restated to reflect the retroactive
effect of a three-for-two stock split effective March 2, 1999. See Note 8 of
Notes to Consolidated Financial Statements.
1
<PAGE> 2
Results of Operations
- --------------------------------------------------------------------------------
The following table sets forth, for the periods indicated, (i) the percentages
which the items in the Company's Consolidated Statements of Income bear to total
revenues or restaurant sales, as indicated, and (ii) selected operating data:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Statements of Income Data: Years Ended December 31,
1998 1997 1996
<S> <C> <C> <C>
Revenues:
Restaurant sales 99.0% 99.2% 99.3%
Other revenues 1.0 0.8 0.7
------ ------ ------
Total revenues 100.0 100.0 100.0
------ ------ ------
Costs and expenses:
Cost of sales (1) 39.1 38.5 39.0
Labor and other related (1) 23.5 23.8 23.0
Other operating 21.4 21.9 20.8
General and administrative 3.9 3.8 3.6
Provision for impaired assets and restaurant closings 2.3
(Income) loss from operations of unconsolidated affiliates (2)
Income from operations 12.7 10.2 13.9
Interest expense (0.1) (0.2) (0.1)
------ ------ ------
Income before elimination of minority partners' interest
and provision for income taxes 12.6 10.0 13.8
Elimination of minority partners' interest 1.6 1.7 1.9
------ ------ ------
Income before provision for income taxes 11.0 8.3 11.9
Provision for income taxes 3.9 3.0 4.3
------ ------ ------
Income before cumulative effect
of a change in accounting principle 7.1 5.3 7.6
Cumulative effect of a change in accounting principle (net of income taxes) (0.3)
------ ------ ------
Net income 6.8% 5.3% 7.6%
====== ====== ======
System-wide restaurant sales (millions of dollars):
Outback Steakhouses
Company owned $1,227 $1,045 $ 892
Domestic franchised and joint venture 247 181 124
International franchised 48 20 1
------ ------ ------
1,522 1,246 1,017
------ ------ ------
Carrabba's Italian Grills
Company owned 119 98 39
Joint venture 27 24 21
------ ------ ------
146 122 60
------ ------ ------
System-wide total $1,668 $1,368 $1,077
====== ====== ======
Number of restaurants (at end of period):
Outback Steakhouses
Company owned 422 373 318
Domestic franchised and joint venture 95 72 54
International franchised 23 14 1
------ ------ ------
540 459 373
------ ------ ------
Carrabba's Italian Grills
Company owned 52 49 36
Joint venture 12 11 12
------ ------ ------
64 60 48
------ ------ ------
System-wide total 604 519 421
====== ====== ======
</TABLE>
(1) As a percentage of restaurant sales.
(2) Percentages are less than 1/10(th) of one percent of total revenues.
2
<PAGE> 3
- --------------------------------------------------------------------------------
Fiscal years 1998, 1997 and 1996
Revenues. Total revenues increased by 18.0% in 1998 as compared with 1997, and
by 22.9% in 1997 as compared with 1996. The increases in 1998 and 1997 were
primarily attributable to the opening of new restaurants and to increased same
store customer counts and menu price increases. Although Outback Steakhouse and
Carrabba's are not considered separate reportable segments for purposes of SFAS
No.131, differences in certain operating ratios are discussed in this section
in order to enhance the Financial Statement users understanding of the Company's
results of operation and its changes in financial condition. The following table
sets forth additional information regarding year to year changes in revenues:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Average unit volumes: 1998 1997 1996
<S> <C> <C> <C>
Outback Steakhouses $3,135,000 $3,039,000 $3,122,000
Carrabba's 2,368,000 2,134,000 1,982,000
Operating weeks:
Outback Steakhouses 20,170 17,654 14,943
Carrabba's 2,579 2,396 985
Per person average checks:
Outback Steakhouses $ 17.10 $ 16.76 $ 16.79
Carrabba's 17.47 17.14 17.40
Year to year same store percentage change:
Sales:
Outback Steakhouses 5.20% (0.11%) (1.11%)
Carrabba's 8.80% 10.08% 7.47%
Customer counts:
Outback Steakhouses 3.00% 0.04% (2.33%)
Carrabba's 4.30% 11.75% 5.19%
</TABLE>
Costs and expenses. Cost of sales, consisting of food and beverage costs,
increased by 0.6% of restaurant sales to 39.1% in 1998 as compared with 38.5% in
1997.The increase was attributable to commodity cost increases, particularly in
butter, shrimp and produce, which was partially offset by a decrease in meat
costs and higher menu prices. Cost of sales decreased by 0.5% of restaurant
sales to 38.5% in 1997 as compared with 39.0% in 1996. Of the decrease, 0.2%
resulted from an increase in the proportion of Company owned Carrabba's in
operation which have lower average food costs than Outback Steakhouses. The
remainder of the decrease resulted from a 1.2% menu price increase in May 1997,
and commodity cost decreases in meat, produce, and dairy products. The decrease
was partially offset by increases in the cost of liquor and wine.
Labor and other related expenses include all direct and indirect labor
costs incurred in operations. Labor and other related expenses decreased as a
percentage of restaurant sales by 0.3% to 23.5% in 1998 as compared with 23.8%
in 1997. The decrease resulted from higher average unit volumes at Outback
Steakhouse and Carrabba's, partially offset by higher hourly wage rates which
are the result of a competitive labor market and the effect of the increase in
the federal minimum wage. Labor and other related expenses as a percentage of
restaurant sales increased by 0.8% to 23.8% in 1997 as compared with 23.0% in
1996. Of the increase, 0.2% was attributable to an increase in the proportion
of Carrabba's in operation which have higher average labor costs than Outback
Steakhouses. The remainder of the increase resulted from an overall increase in
wage rates for kitchen employees due to a competitive labor market, increases in
the statutory minimum wage rate, and lower average unit volumes generated by
Outback Steakhouses.
Other operating expenses include all other unit-level operating costs,
the major components of which are operating supplies, rent, repairs and
maintenance, advertising, utilities, depreciation and amortization and other
occupancy costs. A substantial portion of these expenses are fixed or indirectly
variable. These costs as a percentage of total revenues decreased by 0.5%, to
21.4% in 1998, as compared with 21.9% in 1997. The decrease resulted from higher
average unit volumes for both Outback Steakhouse and Carrabba's during the year
which reduces the fixed and indirectly variable costs as a percentage of
revenues. These costs as a percentage of total revenues increased by 1.1%, to
21.9% in 1997, as compared with 20.8% in 1996. Of the increase, 0.5% resulted
from an increase in the proportion of Carrabba's in operation which have higher
average operating expenses as a percentage of restaurant sales than Outback
Steakhouses due to lower average unit volumes. The remainder of the increase
resulted from increases in utilities costs, repairs and maintenance expenses,
and advertising spending.
General and administrative expenses increased by $9,793,000 to $53,556,000
in 1998 as compared with $43,763,000 in 1997. The increase resulted from
additional
3
<PAGE> 4
- --------------------------------------------------------------------------------
staffs employed to manage Outback Steakhouse international franchising
operations, an increase in salary expenses related to higher restaurant
management training costs, and an increase in overall administrative costs
associated with operating additional Outback Steakhouses. General and
administrative expenses increased by $9,934,000 to $43,763,000 in 1997 as
compared with $33,829,000 in 1996. This increase resulted from an increase in
management training costs, additional staffs employed to manage Outback
Steakhouse international franchising operations and Carrabba's, and an increase
in overall administrative costs associated with operating additional Outback
Steakhouses.
PROVISION FOR IMPAIRED ASSETS AND RESTAURANT CLOSINGS. In the fourth
quarter of 1997, the Company recorded a pre-tax charge to earnings of
$26,001,000 which includes approximately $23,113,000 for the write down of
certain impaired assets and $2,888,000 related to restaurant closings, severance
and other costs. The write down primarily related to Carrabba's restaurant
properties, nine of which were closed during the fourth quarter of 1997 (See
Notes 2 and 15 of Notes to Consolidated Financial Statements). The Company
intends to continue developing the Carrabba's concept in markets where it has
demonstrated success. See "Liquidity and Capital Resources" for a discussion of
the Company's expansion strategy.
(INCOME) LOSS FROM OPERATIONS OF UNCONSOLIDATED AFFILIATES. (Income)
loss from operations of unconsolidated affiliates represents the Company's
portion of net income or loss from Carrabba's and Outback Steakhouses operated
as Development Joint Ventures. Income from Development Joint Ventures was
$514,000 in 1998 compared with a loss of $467,000 in 1997. This increase was
attributable to the increases in average unit volumes and improved operating
margins at Carrabba's joint venture restaurants. Loss from Development Joint
Ventures was $467,000 in 1997 compared with a loss of $102,000 in 1996. This
decrease was attributable to losses from Carrabba's Texas operations, and to
fewer Outback Steakhouses operating as Development Joint Ventures as a result of
the restructuring of the Company's Nevada operations in April 1996.
INCOME FROM OPERATIONS. As a result of the increase in revenues, the
changes in the relationship between revenues and expenses discussed above, the
opening of new restaurants, and the provision for impaired assets and restaurant
closings in 1997, income from operations increased by $56,040,000 to
$173,116,000 in 1998, as compared with $117,076,000 in 1997,and decreased by
$13,841,000 to $117,076,000 in 1997,as compared with $130,917,000 in 1996.
INTEREST EXPENSE. Interest expense was $1,157,000 in 1998 as compared
with $2,489,000 in 1997 and $1,096,000 in 1996. The year to year changes in
interest expense resulted from changes in borrowing needs as funds were expended
to finance the construction of new restaurants, fluctuations in interest rates
on the Company's line of credit and a lower average line of credit balance in
1998 as compared with 1997 and a higher average balance in 1997 as compared with
1996. (See Note 6 of Notes to Consolidated Financial Statements.)
<TABLE>
<CAPTION>
<S> <C> <C>
91 $ 3,298 91 $ 48,010 91 $ 32,769
92 $ 5,570 92 $ 131,436 92 $ 103,997
93 $ 11,718 93 $ 174,794 93 $ 139,059
94 $ 20,699 94 $ 259,118 94 $ 186,697
95 $ 37,905 95 $ 372,271 95 $ 266,764
96 $ 47,595 96 $ 469,843 96 $ 342,439
97 $ 68,276 97 $ 592,780 97 $ 434,717
98 $ 37,475 98 $ 705,211 98 $ 545,046
LONG-TERM DEBT TOTAL ASSETS STOCKHOLDERS' EQUITY
in Thousands of Dollars in Thousands of Dollars in Thousands of Dollars
</TABLE>
4
<PAGE> 5
- --------------------------------------------------------------------------------
ELIMINATION OF MINORITY PARTNERS' INTEREST. This line item represents the
portion of income from operations included in consolidated operating results
attributable to the ownership interests of restaurant managers and area
operating partners in Company owned restaurants. As a percentage of revenues,
these costs were 1.6%, 1.7%, and 1.9% in 1998, 1997 and 1996, respectively. The
decrease in this ratio from 1997 to 1998 reflected changes in overall restaurant
operating margins, and decreases in minority partners' ownership interests
resulting from the purchase of minority interests in the Company's Indiana and
Kentucky markets in the second quarter of 1998 and the South Florida, Houston,
Detroit, Washington D.C. and Carolina markets in the fourth quarter of 1997 (See
Note 11 of Notes to Consolidated Financial Statements). The decrease in this
ratio from 1996 to 1997 reflected changes in overall restaurant operating
margins, and decreases in minority partners' ownership interests resulting from
the purchase of minority interests in the Company's South Florida, Houston,
Detroit, Washington D.C. and Carolina markets in the fourth quarter of 1997.
PROVISION FOR INCOME TAXES. The provision for income taxes, in all
three years presented reflected expected income taxes at the federal statutory
rate and state income tax rates, net of the federal benefit. The effective tax
rate was 35.5% in 1998, 35.4% in 1997, and 36% in 1996. The changes in the
effective rates resulted from the increase or decrease in the FICA tip credit
utilized in the respective years.
CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING PRINCIPLE (NET OF INCOME
TAXES). The cumulative effect of a change in accounting principle is the result
of the Company's early adoption of Statement of Position 98-5,"Reporting on the
Costs of Start-up Activities." The cumulative effect of the change (net of
income taxes), for 1998 was approximately $4,880,000. There was no retroactive
effect of the adoption of the change during 1997 and 1996. Basic and diluted
earnings per share were both reduced by $0.06 during 1998 due to the impact of
the change.
- --------------------------------------------------------------------------------
Liquidity and Capital Resources
The following table presents a summary of the Company's cash flows for the last
three fiscal years (in thousands):
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
Net cash provided by operating activities $ 178,757 $ 123,624 $ 122,799
Net cash used in investing activities (104,922) (111,546) (126,631)
Net cash (used in) provided by financing activities (30,058) 12,078 (7,596)
--------- --------- ---------
Net increase (decrease) in cash $ 43,777 $ 24,156 $ (11,428)
========= ========= =========
</TABLE>
The Company requires capital principally for the development of Company owned
and Development Joint Venture restaurants. Capital expenditures totalled
approximately $103,892,000, $115,213,000 and $130,987,000 in 1998, 1997 and
1996, respectively. The Company either leases its restaurants under operating
leases for periods ranging from five to twenty years (including renewal periods)
or purchases free standing restaurants where it is cost effective. As of
December 31, 1998, there were approximately 249 restaurants developed on
properties which were owned by the Company. (See Note 10 of Notes to
Consolidated Financial Statements.)
The Company has two uncollateralized lines of credit totalling
$132,500,000. Approximately $5,690,000 is committed for the issuance of letters
of credit, some of which are to collateralize loans made by the bank to certain
franchisees, and $35,683,000 has been borrowed to finance the development of new
restaurants.
The Company is the guarantor of an uncollateralized line of credit that
permits borrowing of up to $25,000,000 for one of its franchisees. At December
31, 1998, the borrowings totalled approximately $13,811,000. (See Note 6 of
Notes to Consolidated Financial Statements.)
EXPANSION STRATEGY
The Company's goal is to add new restaurants to the Outback system in each of
1999 and 2000, primarily through the development of 50 to 55 Company owned
restaurants, 15 to 20 domestic franchised restaurants and 10 to 15 international
franchised restaurants each year, of which 3 to 5 will be Development Joint
Venture restaurants primarily in Brazil and Asia. The Company also intends to
add 6 to 10 Carrabba's, the majority of which will be Company owned restaurants,
in each of 1999 and 2000. The Company estimates that its capital expenditures
for the development of new restaurants will be approximately $110 million in
each of 1999 and 2000 and intends to finance this development with income from
operations and the unused portion of the revolving line of credit referred to
above. The Company anticipates that 80% to 90% of the Company owned restaurants
to be opened in 1999 will be free-standing units.
A variety of factors could cause the actual results and experience to differ
from the anticipated results referred to in the previous paragraph. The
Company's forward looking statements regarding its development schedule for new
restaurant openings are subject to a number of risk factors including:
5
<PAGE> 6
- --------------------------------------------------------------------------------
(i) Ability to obtain appropriate real estate sites at acceptable prices;
(ii) Ability to obtain all required governmental permits including zoning
approvals and liquor licenses on a timely basis;
(iii) Impact of government moratoriums or approval processes which could
result in significant delays;
(iv) Ability to obtain all necessary contractors and subcontractors;
(v) Union activities such as picketing and hand billing which could delay
construction; and/or
(vi) Weather and acts of God beyond the Company's control resulting in
construction delays.
INSURANCE
The Company retains direct liability for the first $200,000 of all individual
workers compensation and general liability claims, and $230,000 of all
individual health insurance claims. Claims in excess of these amounts are paid
for by the respective insurance company. The Company records a liability for all
unresolved claims at the anticipated cost to the Company at the end of the
period based on the estimates produced by a third party administrator and
insurance company.
YEAR 2000 ISSUE
Many software applications and operational programs written in the past were not
designed to recognize calendar dates beginning in the Year 2000. The failure of
such applications or systems to properly recognize the dates beginning in
the Year 2000 could result in miscalculations or system failures which could
result in an adverse effect on the Company's operations.
The Company has instituted a Year 2000 task force which has initiated a
comprehensive project to prepare its information technology ("IT") systems and
non-IT systems for the Year 2000. The project includes identification and
assessment of software, hardware and equipment that could potentially be
affected by the Year 2000 issue, remedial action and further testing
procedures. The Company plans to complete this project by June 30, 1999. The
Company believes that the majority of its operations are Year 2000 compliant and
currently estimates the total cost of its Year 2000 project will be
approximately $600,000. The Company's aggregate cost estimate does not include
time and costs that may be incurred by the Company as a result of the failure of
any third parties, including suppliers, to become Year 2000 ready or costs to
implement any contingency plans.
The Company's most significant third-party business partners consist of
restaurant food and supplies vendors who serve the Company. An initial inventory
of our significant third-party partners has been completed and letters mailed
requesting information regarding each party's Year 2000 compliance status. All
responses received to date have indicated the vendor is now or will be Year 2000
compliant prior to January 1, 2000. The Company intends to develop contingency
plans by the third quarter of 1999 for any vendors that appear to have
substantial Year 2000 operational risks. Such contingency plans may include a
change of vendors to minimize our risk. The effect, if any, on the Company's
results of operations from the failure of such parties to be Year 2000 ready is
not reasonably estimable.
Management believes that the Company has an effective plan in place to
resolve the Year 2000 issue in a timely manner. However, due to the unique
nature of the problem and lack of historical experience, it is difficult to
predict with certainty what will happen after December 31, 1999. We may
encounter unanticipated third party failures or a failure to have successfully
concluded our system remediation efforts. Any of these unforeseen events may
have a material adverse impact on the Company's results of operations, financial
condition or cashflows. Potential sources of risk include the inability of
principal suppliers to be Year 2000 ready, which could result in delays in
product deliveries from suppliers, and disruption of the distribution channel,
including transportation vendors. The amount of any potential losses related to
these occurrences cannot be reasonably estimated at this time. The Company is in
the process of developing a contingency plan intended to mitigate the effects of
problems experienced by the Company or key vendors or service providers in the
timely implementation of Year 2000 programs. The Company expects to have the
contingency plan developed by the third quarter of 1999.
The most likely worst case scenario for the Company is that a
significant number of our restaurants will be temporarily unable to operate due
to public infrastructure failures and/or food supply problems. Some restaurants
may have problems for extended periods of time. The failure of restaurants to
operate would result in reduced revenues and cash flows for the Company during
the disruption period. Loss of restaurant sales would be partially mitigated by
reduced costs.
IMPACT OF INFLATION
The Company has not operated in a highly inflationary period and does not
believe that inflation has had a material effect on sales or expenses during the
last three years other than labor costs. The Company's restaurant operations are
subject to federal and state minimum wage laws governing such matters as working
conditions, overtime and tip credits. Significant numbers of the Company's food
service and preparation personnel are paid at rates related to the federal
minimum wage and, accordingly, increases in the minimum wage have increased the
Company's labor costs in the last two years. To the extent permitted by
competition, the Company has mitigated increased costs by increasing menu prices
and may continue to do so if deemed necessary in future years.
6
<PAGE> 1
EXHIBIT 13.02
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Board of Directors and
Stockholders of Outback Steakhouse, Inc.
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of income,stockholders' equity and cash flows present
fairly, in all material respects, the financial position of Outback Steakhouse,
Inc. and Affiliates (the "Company") at December 31, 1998, and the results of
their operations and their cash flows for the year ended December 31, 1998, in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audit. We conducted our audit of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for the opinion expressed
above. The consolidated financial statements of Outback Steakhouse, Inc. and
Affiliates for the years ended December 31, 1997 and 1996, were audited by other
independent accountants, whose report, dated February 20, 1998, expressed an
unqualified opinion on those consolidated statements.
As discussed in Note 13 of Notes to the Consolidated Financial
Statements, the Company changed its method of accounting for the costs of
start-up activities in 1998.
/s/ PricewaterhouseCoopers LLP
- ------------------------------
PricewaterhouseCoopers LLP
Tampa, FL
February 17, 1999
7
<PAGE> 2
OUTBACK STEAKHOUSE, INC. AND AFFILIATES
Consolidated Balance Sheets (in thousands, except per share amounts)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
ASSETS DECEMBER 31,
1998 1997
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 83,594 $ 39,817
Inventories 19,306 20,196
Other current assets 19,152 15,557
--------- ---------
Total current assets 122,052 75,570
PROPERTY, FIXTURES AND EQUIPMENT, NET 526,833 459,069
ASSETS HELD FOR DISPOSAL 3,385 4,681
INVESTMENTS IN AND ADVANCES TO UNCONSOLIDATED AFFILIATES, NET 9,229 7,685
DEFERRED INCOME TAXES 3,265 8,143
OTHER ASSETS 40,447 37,632
--------- ---------
$ 705,211 $ 592,780
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 36,718 $ 23,726
Sales taxes payable 8,497 7,252
Accrued expenses 30,009 24,011
Unearned revenue 32,620 25,086
Current portion of long-term debt 967 715
--------- ---------
Total current liabilities 108,811 80,790
LONG-TERM DEBT 37,475 68,276
OTHER LONG-TERM LIABILITIES 4,000 4,500
--------- ---------
Total liabilities 150,286 153,566
--------- ---------
COMMITMENTS AND CONTINGENCIES (Notes 6 and 10)
INTEREST OF MINORITY PARTNERS IN CONSOLIDATED PARTNERSHIPS 9,879 4,497
--------- ---------
STOCKHOLDERS' EQUITY
Common stock, $0.01 par value, 200,000 shares authorized;
74,821 and 73,875 shares issued; and 73,962 and 72,772
outstanding as of December 31, 1998 and 1997, respectively 748 739
Additional paid-in capital 176,584 156,408
Retained earnings 378,539 291,470
--------- ---------
555,871 448,617
Less treasury stock, 859 shares and 1,103 shares at December 31, 1998
and 1997, respectively, at cost (10,825) (13,900)
--------- ---------
Total stockholders' equity 545,046 434,717
--------- ---------
$ 705,211 $ 592,780
========= =========
</TABLE>
The accompanying notes are an integral part of these Consolidated Financial
Statements.
8
<PAGE> 3
Outback Steakhouse, Inc. and Affiliates
Consolidated Statements of Income (in thousands, except per share amounts)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Years Ended December 31,
1998 1997 1996
<S> <C> <C> <C>
REVENUES
Restaurant sales $ 1,345,762 $ 1,142,588 $ 931,348
Other revenues 13,159 9,049 6,052
----------- ----------- ----------
TOTAL REVENUES 1,358,921 1,151,637 937,400
----------- ----------- ----------
COSTS AND EXPENSES
Cost of sales 526,254 440,172 363,285
Labor and other related 315,970 272,199 214,038
Other operating 290,539 251,959 195,229
General and administrative 53,556 43,763 33,829
Provision for impaired assets and restaurant closings 26,001
(Income) loss from operations of unconsolidated affiliates (514) 467 102
----------- ----------- ----------
1,185,805 1,034,561 806,483
----------- ----------- ----------
INCOME FROM OPERATIONS 173,116 117,076 130,917
INTEREST EXPENSE (1,157) (2,489) (1,096)
----------- ----------- ----------
INCOME BEFORE ELIMINATION OF MINORITY PARTNERS' INTEREST
AND PROVISION FOR INCOME TAXES 171,959 114,587 129,821
ELIMINATION OF MINORITY PARTNERS' INTEREST 21,238 19,411 17,925
----------- ----------- ----------
INCOME BEFORE PROVISION FOR INCOME TAXES 150,721 95,176 111,896
PROVISION FOR INCOME TAXES 53,506 33,724 40,283
----------- ----------- ----------
INCOME BEFORE CUMULATIVE EFFECT OF A CHANGE
IN ACCOUNTING PRINCIPLE 97,215 61,452 71,613
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE
(NET OF INCOME TAXES) (4,880)
----------- ----------- ----------
NET INCOME $ 92,335 $ 61,452 $ 71,613
=========== =========== ==========
BASIC EARNINGS PER SHARE
Income before cumulative effect of a change in accounting principle $ 1.32 $ 0.86 $ 1.00
Cumulative effect of change in accounting principle (net of income taxes) (0.06)
----------- ----------- ----------
Net income $ 1.26 $ 0.86 $ 1.00
=========== =========== ==========
Basic weighted average number of common shares outstanding 73,446 71,751 71,720
=========== =========== ==========
DILUTED EARNINGS PER COMMON SHARE
Income before cumulative effect of a change in accounting principle $ 1.29 $ 0.84 $ 0.97
Cumulative effect of change in accounting principle (net of income taxes) (0.06)
----------- ----------- ----------
Net income $ 1.23 $ 0.84 $ 0.97
=========== =========== ==========
Diluted weighted average number of common shares outstanding 75,228 72,758 73,934
=========== =========== ==========
</TABLE>
The accompanying notes are an integral part of these Consolidated Financial
Statements.
9
<PAGE> 4
Outback Steakhouse, Inc. and Affiliates
Consolidated Statements of Stockholders' Equity (in thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
Common Common Additional Retained Treasury
Stock Shares Stock Amount Paid-In Capital Earnings Stock Total
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1995 71,255 $ 712 $ 107,647 $158,405 $266,764
Issuance of common stock 759 8 4,054 4,062
Net income 71,613 71,613
------ -------- --------- -------- --------- --------
Balance, December 31, 1996 72,014 720 111,701 230,018 342,439
Issuance of common stock 1,861 19 44,707 44,726
Purchase of treasury stock (1,103) $(13,900) (13,900)
Net income 61,452 61,452
------ -------- --------- -------- --------- --------
Balance, December 31, 1997 72,772 739 156,408 291,470 (13,900) 434,717
Issuance of common stock 946 9 19,457 19,466
Purchase of treasury stock (300) (6,345) (6,345)
Reissuance of treasury stock 544 719 (5,266) 9,420 4,873
Net income 92,335 92,335
------ -------- --------- -------- --------- --------
Balance, December 31, 1998 73,962 $ 748 $ 176,584 $378,539 $ (10,825) $545,046
====== ======== ========= ======== ========= ========
</TABLE>
The accompanying notes are an integral part of these Consolidated Financial
Statements.
10
<PAGE> 5
OUTBACK STEAKHOUSE, INC. AND AFFILIATES
Consolidated Statements of Cash Flows (in thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
1998 1997 1996
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 92,335 $ 61,452 $ 71,613
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 37,424 31,963 23,858
Amortization 1,692 12,874 11,670
Provision for impaired assets and restaurant closings 26,001
Cumulative effect of change in accounting principle 4,880
Minority partners' interest in consolidated partnerships' income 21,238 19,411 17,925
(Income) loss from operations of unconsolidated affiliates (514) 467 102
Change in assets and liabilities:
Decrease (increase) in inventories 890 (3,559) (10,163)
(Increase) decrease in other current assets (3,595) (6,326) 4,174
Increase in other assets (7,740) (16,746) (12,010)
Increase in accounts payable, sales taxes payable and accrued expenses 20,235 1,119 15,085
Increase in unearned revenue 7,534 4,752 2,702
(Decrease) increase in other long-term liabilities (500) 1,500 (2,000)
Increase (decrease) in deferred income taxes 4,878 (9,284) (157)
--------- --------- ---------
Net cash provided by operating activities 178,757 123,624 122,799
--------- --------- ---------
Cash flows from investing activities:
Sales of investment securities $ 1,176
Capital expenditures $(103,892) $(115,213) (130,987)
Payments from unconsolidated affiliates 1,596 4,808 4,984
Distributions to unconsolidated affiliates (690) (438) (312)
Investments in and advances to unconsolidated affiliates, net (1,936) (703) (1,492)
--------- --------- ---------
Net cash used in investing activities (104,922) (111,546) (126,631)
--------- --------- ---------
Cash flows from financing activities:
Adjustments from stock transactions $ 19,466 $ 23,558 $ 4,062
Proceeds from issuance of long-term debt 1,013 39,424 48,037
Proceeds from minority partners' contributions 5,450 1,625 2,100
Distributions to minority partners' and shareholders (21,531) (19,895) (21,154)
Repayments of long-term debt (31,562) (18,734) (40,641)
Payments for purchase of treasury stock (6,345) (13,900)
Proceeds from reissuance of treasury stock 3,451
--------- --------- ---------
Net cash (used in) provided by financing activities (30,058) 12,078 (7,596)
--------- --------- ---------
Net increase (decrease) in cash and cash equivalents 43,777 24,156 (11,428)
Cash and cash equivalents at the beginning of the year 39,817 15,661 27,089
--------- --------- ---------
Cash and cash equivalents at the end of the year $ 83,594 $ 39,817 $ 15,661
========= ========= =========
Supplemental disclosures of cash flow information:
Cash paid for interest $ 2,476 $ 4,013 $ 2,419
Cash paid for income taxes 40,170 35,710 53,261
Supplemental disclosures of non-cash items:
Purchase of minority partners' interest $ 1,647 $ 21,168
</TABLE>
The accompanying notes are an integral part of these Consolidated Financial
Statements.
11
<PAGE> 6
OUTBACK STEAKHOUSE, INC. AND AFFILIATES
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION - Outback Steakhouse, Inc. and Affiliates (the
"Company") develops and operates casual dining restaurants primarily in the
United States. The Company's restaurants are generally organized as
partnerships, with the Company as the general partner.
Profits and losses of each partnership are shared based on respective
partnership interest percentages, as are cash distributions and capital
contributions with exceptions defined in the management agreement.
Additional Outback Steakhouse restaurants in which the Company has no
direct investment are operated under franchise agreements.
PRINCIPLES OF CONSOLIDATION - The consolidated financial statements
include the accounts and operations of the Company and affiliated partnerships
in which the Company is a general partner and owns more than a 50% interest. All
material balances and transactions between the consolidated entities have been
eliminated.
The unconsolidated affiliates are accounted for using the equity
method.
RECLASSIFICATION - Certain amounts shown in the 1996 and 1997
consolidated financial statements have been reclassified to conform with the
1998 presentation. These reclassifications did not have any effect on total
assets, total liabilities, stockholders' equity or net income.
USE OF ESTIMATES - The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimated.
CASH AND CASH EQUIVALENTS - Cash equivalents consist of investments
which are readily convertible to cash with an original maturity date of three
months or less.
INVENTORIES - Inventories consist of food and beverages, and are stated
at the lower of cost (first-in, first-out) or market. The Company will
periodically make advance purchases of various inventory items to ensure
adequate supply or to obtain favorable pricing. At December 31, 1998, 1997 and
1996, inventories included advance purchases of approximately $3,543,000,
$7,785,000 and $7,300,000, respectively.
PREOPENING COSTS - Prior to the adoption during 1998 of Statement of
Position 98-5,"Reporting on the Costs of Start-up Activities" which requires
that preopening and other start-up costs be expensed as incurred rather than
capitalized, pre-opening costs, consisting of training costs and other direct
costs related to new restaurant openings, were amortized primarily over twelve
months. Accordingly, all further preopening costs will be expensed in the period
incurred.
GOODWILL - Goodwill is included in the line item entitled "Other
Assets" in the Company's Consolidated Balance Sheets and is amortized using the
straight line method from 5 to 20 years. On an annual basis, the Company reviews
the recoverability of goodwill based primarily upon an analysis of undiscounted
cash flows as compared to the carrying value.
UNEARNED REVENUES - Unearned revenues primarily represent the Company's
liability for gift certificates, which have been sold but not yet redeemed,
recorded at the anticipated redemption value. When gift certificates are
redeemed, the Company recognizes restaurant sales and reduces the related
deferred liability.
PROPERTY, FIXTURES AND EQUIPMENT - Property, fixtures and equipment are
stated at cost, net of accumulated depreciation. Depreciation is computed on the
straight-line method over the following estimated useful lives:
<TABLE>
<S> <C>
Buildings and building
improvements........................... 20 to 31.5 years
Furniture and fixtures............................ 7 years
Equipment................................... 2 to 15 years
Leasehold improvements...................... 5 to 20 years
</TABLE>
Periodically, the Company evaluates the recoverability of the net
carrying value of its property, fixtures and equipment by estimating its fair
value which is generally measured by discounting expected future cash flows at
the same rate the Company utilizes to evaluate potential investments. The
Company estimates fair value based on the best information available making
whatever estimates, judgements and projections are considered necessary. The
fair value is compared to the carrying amount in the consolidated financial
statements. A deficiency in fair value relative to the carrying amount is an
indication of the need to reduce the carrying value of the assets. If the total
of future undiscounted cash flows were less than the carrying amount of the
property, fixtures and equipment, the carrying amount is written down to the
fair value, and a loss resulting from value impairment is recognized by a charge
to earnings.
12
<PAGE> 7
OUTBACK STEAKHOUSE, INC. AND AFFILIATES
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
CONSTRUCTION IN PROGRESS - The Company capitalizes all direct costs
incurred to construct its restaurants. Upon opening, these costs are depreciated
or amortized and charged to expense based upon their property classification.
The amount of interest capitalized in connection with restaurant construction
was $850,000, $1,800,000, and $1,084,000 in 1998, 1997 and 1996, respectively.
REVENUE RECOGNITION - The Company records revenues from normal
recurring sales upon the performance of services. Revenue from the sales of
franchises are recognized as income when the Company has substantially performed
all of its material obligations under the franchise agreement. Continuing
royalties, which are a percentage of net sales of franchised restaurants, are
accrued as income when earned.
ADVERTISING COSTS - The Company's policy is to report advertising costs
as expenses in the periods in which the costs are incurred. The total amounts
charged to advertising expense were approximately $48,200,000, $36,900,000 and
$28,000,000 in 1998, 1997 and 1996, respectively.
INCOME TAXES - The Company uses the asset and liability method which
recognizes the amount of current and deferred taxes payable or refundable at the
date of the financial statements as a result of all events that have been
recognized in the consolidated financial statements as measured by the
provisions of enacted tax laws.
The minority partners' interest in affiliated partnerships includes no
provision or liability for income taxes as any tax liability related thereto is
the responsibility of the individual minority partners.
EARNINGS PER COMMON SHARE - Earnings per common share are computed in
accordance with SFAS No. 128 "Earnings Per Share,"which requires companies to
present basic earnings per share and diluted earnings per share. Basic earnings
per share are computed by dividing net income by the weighted average number of
shares of common stock outstanding during the year. Diluted earnings per common
share are computed by dividing net income by the weighted average number of
shares of common stock outstanding and dilutive options outstanding during the
year. All applicable share and per share data have been restated to reflect the
retroactive effect of a three-for-two stock split effective on March 2, 1999.
RECENTLY ISSUED FINANCIAL ACCOUNTING STANDARD - In June 1998, the
Financial Accounting Standards Board ("FASB") issued Statement of Financial
Accounting Standards ("SFAS") No. 133 "Accounting for Derivative Instruments and
Hedging Activities." SFAS No. 133 defines derivative instruments and requires
that these items be recognized as assets or liabilities in the statement of
financial position. This statement is effective for fiscal years beginning after
June 15, 1999. As of December 31, 1998 the Company does not have any derivative
instruments.
In June 1997,the FASB issued SFAS No. 131 "Disclosure About Segments of
an Enterprise and Related Information." SFAS No. 131 requires disclosures of
certain information about operating segments and about products and services,
geographic areas in which the Company operate and their major customers.
STOCK BASED COMPENSATION - The company adopted SFAS No. 123,
"Accounting For Stock Based Compensation" during 1996. The Company has elected
to continue accounting for stock based compensation under the intrinsic value
method of accounting for stock based compensation and has disclosed pro forma
net income and earnings per share amounts using the value based method
prescribed by SFAS No. 123.
2. ASSETS HELD FOR DISPOSAL
In November 1997, the Company closed nine of its 68 Carrabba's locations. The
"Assets Held For Disposal" recorded in the Company's Consolidated Balance Sheets
include the property, fixtures, and equipment related to the nine locations at
the lower of cost or fair market value less estimated selling costs. The loss
resulting from the deficiency in fair value relative to the carrying value of
the assets is included in the line item in the Company's Consolidated Statements
of Income entitled "Provision for impaired assets and restaurant closings."
Operating losses included in the Company's operating results attributable to the
nine locations were $1,780,000 and $1,102,000 in 1997 and 1996, respectively.
- --------------------------------------------------------------------------------
3. OTHER CURRENT ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
1998 1997
<S> <C> <C>
Other current assets consisted of the following (in thousands):
Deposits (including income tax deposits) $ 1,395 $ 2,251
Accounts receivable 9,273 6,466
Prepaid expenses 6,532 6,034
Other current assets 1,952 806
-------- -------
$ 19,152 $15,557
======== =======
</TABLE>
13
<PAGE> 8
OUTBACK STEAKHOUSE, INC. AND AFFILIATES
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
4. PROPERTY, FIXTURES AND EQUIPMENT, NET
<TABLE>
<CAPTION>
DECEMBER 31,
1998 1997
<S> <C> <C>
Property, fixtures and equipment consisted of the following (in thousands):
Land $ 111,961 $ 99,774
Buildings and building improvements 249,486 193,667
Furniture and fixtures 59,080 49,484
Equipment 134,309 112,537
Leasehold improvements 94,736 87,624
Construction in progress 7,470 8,768
Accumulated depreciation (130,209) (92,785)
--------- ---------
$ 526,833 $ 459,069
========= =========
</TABLE>
- --------------------------------------------------------------------------------
5. OTHER ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
1998 1997
<S> <C> <C>
Other assets consisted of the following (in thousands):
Preopening costs, net $ 6,640
Intangible assets, net $29,900 27,307
Other assets 10,547 3,685
------- -------
$40,447 $37,632
======= =======
</TABLE>
- --------------------------------------------------------------------------------
6. LONG-TERM DEBT
<TABLE>
<CAPTION>
DECEMBER 31,
1998 1997
<S> <C> <C>
Long-term debt consisted of the following (in thousands):
Notes payable to banks, collateralized by property, fixtures and equipment,
interest at rates ranging from 8.825% to 9.9% at December 31, 1998 and 1997 $ 888 $ 1,127
Note payable to corporation, collateralized by real estate, interest at 9.0% 229 344
Other notes payable, uncollateralized, interest at rates ranging from 5.63% to 7.99% 1,642 1,160
Revolving line of credit, interest at rates ranging from 5.56% to 5.57%
at December 31, 1998 and 6.53% to 6.59% at December 31, 1997 (see below) 35,683 66,360
------- -------
38,442 68,991
Less current portion 967 715
------- -------
Long-term debt $37,475 $68,276
======= =======
</TABLE>
The Company has an uncollateralized revolving line of credit which permits
borrowing up to a maximum of $125,000,000 at rates ranging from 50 to 75 basis
points over the 30, 60, 90 or 180 day London Interbank Offered Rate (LIBOR)
(5.06% to 5.07% at December 31, 1998 and 5.72% to 5.84% at December 31, 1997).
At December 31, 1998, the unused portion of the revolving line of credit was
$89,317,000. The line matures in August 2000.
The revolving line of credit contains certain restrictions and
conditions which require the Company to: maintain tangible net worth of
$375,000,000, a leverage ratio at a maximum of 0.75:1.00, limit the capital
expenditures to $170,000,000 and a maximum debt to EBITDA ratio of 1.50:1.00.
The Company is in compliance with all of the above debt covenants. The Company
is currently restricted from paying dividends other than in the form of
partnership distributions.
The Company has a $7,500,000 uncollateralized line of credit bearing interest at
rates ranging from 50 to 75 basis points over LIBOR. Approximately $5,690,000 of
the line of credit is committed for the issuance of letters of credit,
$1,833,000 of which is to collateralize loans made by the bank to certain
franchisees.
The Company is the guarantor of an uncollateralized line of credit
which permits borrowing of up to $25,000,000, maturing in March 2002, for one of
its franchisees. At December 31, 1998, the outstanding balance was approximately
$13,811,000.
The aggregate payments of long-term debt outstanding at December
31, 1998, for the next four years subsequent to 1999, are summarized as follows:
2000-$36,815,000; 2001-$303,000; 2002-$253,000; 2003-$104,000.
The carrying amount of long-term debt approximates fair value.
14
<PAGE> 9
OUTBACK STEAKHOUSE, INC. AND AFFILIATES
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
7. ACCRUED EXPENSES DECEMBER 31,
1998 1997
<S> <C> <C>
Accrued expenses consisted of the following (in thousands):
Accrued payroll and other compensation $10,998 $ 4,907
Accrued advertising 2,827 5,527
Accrued rent 1,443 1,403
Accrued insurance 6,284 4,985
Accrued ESOP contribution 964 174
Accrued property taxes 4,376 3,921
Other 3,117 3,094
------- -------
$30,009 $24,011
======= =======
- --------------------------------------------------------------------------------
</TABLE>
8. STOCKHOLDERS' EQUITY
During 1997, the Company repurchased 1,103,250 shares of its Common Stock, $.01
par value, for an aggregate purchase price of $13,900,000. During the third
quarter of 1998, the Company repurchased 300,000 shares of its Common Stock,
$.01 par value for an aggregate purchase price of $6,344,700. Repurchased shares
are carried as Treasury Stock on the Consolidated Balance Sheets and are
recorded at cost. During 1998, the Company reissued approximately 544,106 shares
of treasury stock, that had a cost of approximately $9,420,000.
On March 2, 1999, a three-for-two split of the Company's Common Stock
was effected through distribution of one additional share for every two shares
already issued. All applicable share and per share data have been restated to
give retroactive effect to the stock split.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
9. INCOME TAXES YEARS ENDED DECEMBER 31,
1998 1997 1996
Provision for income taxes consisted of the following (in thousands):
<S> <C> <C> <C>
Federal:
Current $37,936 $ 31,010 $29,838
Deferred 5,197 (3,572) 3,765
------- -------- -------
43,133 27,438 33,603
------- -------- -------
State:
Current 9,129 6,639 6,268
Deferred 1,244 (353) 412
------- -------- -------
10,373 6,286 6,680
------- -------- -------
$53,506 $ 33,724 $40,283
======= ======== =======
</TABLE>
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
The Company's effective tax rate differs from the federal 1998 1997 1996
statutory rate for the following reasons:
<S> <C> <C> <C>
Income taxes at federal statutory rate 35.0% 35.0% 35.0%
State taxes, net of federal benefit 4.0 4.0 3.8
Other, net (3.5) (3.6) (2.8)
---- ---- ----
Total 35.5% 35.4% 36.0%
==== ==== ====
</TABLE>
<TABLE>
<CAPTION>
The income tax effects of temporary differences that give rise to
significant portions of deferred tax assets and liabilities
are as follows:
DECEMBER 31,
1998 1997
DEFERRED INCOME TAX ASSETS (IN THOUSANDS):
<S> <C> <C>
Insurance reserves $ 3,708 $ 3,512
Advertising expense reserves 956 1,944
Intangibles 14,250 14,805
Other, net 438 522
------- -------
19,352 20,783
------- -------
DEFERRED INCOME TAX LIABILITIES (IN THOUSANDS):
Depreciation 16,087 10,433
Training and other related costs 2,207
------- -------
16,087 12,640
------- -------
Net deferred tax assets $ 3,265 $ 8,143
======= =======
</TABLE>
15
<PAGE> 10
OUTBACK STEAKHOUSE, INC. AND AFFILIATES
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
10. COMMITMENTS AND CONTINGENCIES AND RELATED PARTY
TRANSACTIONS
OPERATING LEASES - The Company leases restaurant and office facilities and
certain equipment under operating leases having terms expiring between 1999 and
2016. The restaurant facility leases primarily have renewal clauses of five to
20 years exercisable at the option of the Company. Certain of these leases
require the payment of contingent rentals based on a percentage of gross
revenues, as defined by the terms of the applicable lease agreement. Total
rental expense for the years ended December 31, 1998, 1997 and 1996 was
approximately $22,374,000, $20,000,000 and $18,353,000, respectively, and
included contingent rent of approximately $2,306,000, $2,342,000 and $2,369,000,
respectively.
Future minimum lease payments on operating leases (including leases for
corporate headquarters and restaurants scheduled to open in 1999), are as
follows (in thousands):
<TABLE>
<S> <C>
1999 $ 21,019
2000 20,765
2001 18,560
2002 16,666
2003 15,448
Thereafter 46,978
--------
Total minimum lease payments $139,436
========
</TABLE>
The Company leases/charters an airplane from a Corporation owned by two
officers/directors of the Company. Airplane lease/charter payments for the year
ended December 31, 1998 totalled $90,018. On December 23, 1998, the Company
purchased an aircraft from a corporation owned by two officers/directors of the
Company for a purchase price of $1,350,000.
The Company is subject to legal proceedings claims and liabilities which
arise in the ordinary course of business. In the opinion of management, the
amount of the ultimate liability with respect to those actions will not
materially affect the Company's financial position or results of operations.
The Company retains direct liability for the first $200,000 of all
individual workers compensation and general liability claims and $230,000 of all
individual health insurance claims.
11. BUSINESS COMBINATIONS
On April 1, 1998, the Company issued approximately 80,250 shares of Common Stock
to one area operating partner for the outstanding interest in Outback
Steakhouses in Indiana and Kentucky.
On October 1,1997, the Company issued approximately 1,153,500 shares of
Common Stock to five area operating partners for all of the outstanding
interests in 69 Outback Steakhouses in Maryland, Michigan, New Jersey, North
Carolina, Pennsylvania, South Florida, South Carolina, Texas and Virginia.
The 1998 and 1997 mergers were accounted for by the purchase method and the
related goodwill is included in the line item entitled "Other Assets" in the
Company's Consolidated Balance Sheets.
As of January 1,1996, the Company issued approximately 3,522,000 shares of
Common Stock to the shareholders of four of its franchisees in exchange for all
of their outstanding interests in 28 Outback Steakhouses in Ohio, Kentucky,
Virginia, Illinois, Missouri, and Tennessee.
The 1996 mergers were accounted for by the pooling-of-interest method using
historical amounts and the financial statements presented herein have been
restated to give retroactive effect to the mergers for the applicable periods
presented.
16
<PAGE> 11
OUTBACK STEAKHOUSE, INC. AND AFFILIATES
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
12. STOCK OPTION AND OTHER BENEFIT PLANS
The Company's amended and Restated Stock Option Plan (the "Stock Option Plan")
was approved by the shareholders of the Company in April 1992, and has
subsequently been amended as deemed appropriate by the Company's Board of
Directors or shareholders. There are currently 15,000,000 shares of the
Company's Common Stock which may be issued and sold upon exercise of stock
options ("Options"). The term of Options granted is determined by the Board of
Directors and optionees generally vest in the Options over a five year period.
The purpose of the Stock Option Plan is to attract competent personnel, to
provide long-term incentives to Directors and key employees, and to discourage
employees from competing with the Company.
Options under the Stock Option Plan may be Options which qualify under
Section 422 of the Internal Revenue Code ("Incentive Stock Options") or Options
which do not qualify under Section 422 ("Nonqualified Options"). To date, the
Company has only issued Nonqualified Options. The term of Options granted is
generally 5 years and the price cannot be less than the fair market value of the
shares covered by the Option.
At December 31, 1998, cumulative total Options to purchase 13,073,205 shares
of the Company's Common Stock had been granted to employees of the Company at
prices ranging from $0.19 to $26.71 per share which was the estimated fair
market value at the time of each grant. As of December 31, 1998, Options for
approximately 1,996,343 shares were exercisable.
Options to purchase 1,433,013, 2,188,563 and 1,030,134 of the Company's
Common Stock were issued to employees during 1998, 1997, and 1996 with exercise
prices ranging from $19.28 to $26.71, $14.30 to $18.43 and $16.89 to $25.55 for
each respective period.
Activity in the Company's Stock Option Plan was:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
SHARES EXERCISE PRICE
<S> <C> <C>
Outstanding at
December 31, 1995 6,883,125 $ 10.60
Granted 1,030,134 18.58
Exercised (523,550) 11.63
Forfeited (23,548) 18.73
----------
Outstanding at
December 31, 1996 7,366,161 14.09
Granted 2,188,563 15.76
Exercised (696,344) 7.37
Forfeited (92,098) 19.79
----------
Outstanding at
December 31, 1997 8,766,282 15.11
Granted 1,433,013 23.03
Exercised (1,407,063) 11.77
Forfeited (75,969) 19.41
----------
Outstanding at
December 31, 1998 8,716,263 16.96
==========
</TABLE>
Had the compensation cost for the Company's Stock Option Plan been determined
based on the fair value at the grant dates for awards under the plan consistent
with SFAS No. 123, the Company's net income and earnings per share on a pro
forma basis would have been (in thousands, except per share data):
<TABLE>
<CAPTION>
DECEMBER 31,
1998 1997 1996
<S> <C> <C> <C>
Net income $84,704 $55,513 $68,154
Basic earnings per
common share $ 1.15 $ 0.77 $ 0.95
Diluted earnings per
common share $ 1.13 $ 0.76 $ 0.92
</TABLE>
The preceding pro forma results were calculated with the use of the Black
Scholes option-pricing model. The following assumptions were used for the years
ended December 31, 1998, 1997, 1996, respectively: (1) risk-free interest rates
of 5.30%, 5.45%, and 6.05%; (2) dividend yield of 0.0% in all three periods
presented; (3) expected lives of 3.5 years in all three periods presented; and
(4) volatility of 40%, 25%, and 25%. Results may vary depending on the
assumptions applied within the model.
Tax benefits resulting from the exercise of non-qualified stock options
reduced taxes currently payable by $7,864,000 and $2,845,000 in 1998 and 1997,
respectively. The tax benefits are credited to additional paid in capital.
The Company has a qualified defined contribution 401(K) plan covering
substantially all full-time employees, except officers and certain highly
compensated employees. Assets of this plan are held in trust for the sole
benefit of the employees.
13. ADOPTION OF STATEMENT OF POSITION 98-5, "REPORTING ON THE COSTS OF START-UP
ACTIVITIES."
The Company chose early adoption of a new accounting standard, Statement of
Position 98-5, "Reporting on the Costs of Start-up Activities," which requires
that pre-opening and other start-up costs be expensed as incurred rather than
capitalized. The adoption has been made effective as of the beginning of the
Company's current fiscal year. As a result of the adoption the Company has begun
to report pre-opening costs as part of its store operating expenses which in
turn will result in lower future amortization expense. The cumulative effect of
the change in accounting principle, which was approximately $4,880,000 net of
income taxes or $0.06 per share diluted, was recorded as a one-time charge in
the Company's Financial Statements.
17
<PAGE> 12
OUTBACK STEAKHOUSE, INC. AND AFFILIATES
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
14. SEGMENT REPORTING
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information." The Company operates restaurants under two
brands that have similar investment criteria and economic and operating
characteristics and are considered one reportable operating segment. Management
does not believe that the Company has any material reporting segments.
15. PROVISION FOR IMPAIRED ASSETS AND RESTAURANT CLOSINGS
In the fourth quarter of 1997, the Company recorded a provision of $26,001,000
which includes approximately $23,113,000 for the write down of certain impaired
assets and $2,888,000 related to restaurant closings, severance and other costs.
In accordance with SFAS 121, the Company identified certain long-lived assets
which are held and used in the Carrabba's restaurants as impaired. An impairment
was recognized when the future undiscounted cash flows of certain assets were
estimated to be less than the assets' related carrying value. As such, the
carrying values were written down to the Company's estimates of fair value. Fair
value was estimated utilizing the best information available making whatever
estimates, judgments, and projections were considered necessary.
16. EARNINGS PER SHARE
The Company adopted the provisions of SFAS No. 128 "Earnings Per Share," during
the fourth quarter of 1997, as required. The new standard specifies the
computation, presentation, and disclosure requirements for earnings per share.
The following table represents the computation of basic and diluted earnings per
common share as required by SFAS No.128 (in thousands, except per share data).
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
YEARS ENDED DECEMBER 31,
1998 1997 1996
<S> <C> <C> <C>
Net Income $92,335 $61,452 $71,613
Basic weighted average number of common shares outstanding 73,446 71,751 71,720
Basic earnings per common share $ 1.26 $ 0.86 $ 1.00
Effect of dilutive stock options 1,782 1,007 2,214
Diluted weighted average number of common shares outstanding 75,228 72,758 73,934
Diluted earnings per common share $ 1.23 $ 0.84 $ 0.97
</TABLE>
Diluted earnings per common share excludes antidilutive stock options of
approximately 727,500, 4,147,500 and 897,000, during 1998, 1997, and 1996,
respectively.
17. SUBSEQUENT EVENTS
During January 1999, the Company repaid its outstanding revolving credit line.
On February 3, 1999, the Company announced that its Board of Directors
authorized a 3-for-2 stock split of the Company's Common Stock to be effected in
the form of a stock dividend. The split will be paid on March 2, 1999 to
shareholders of record as of February 16, 1999.
18
<PAGE> 13
OUTBACK STEAKHOUSE, INC. AND AFFILIATES
Notes to Consolidated Financial Statements
- --------------------------------------------------------------------------------
18. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
The following table presents selected quarterly financial data for the periods
indicated (in thousands, except per share data).
<TABLE>
<CAPTION>
1998 MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
<S> <C> <C> <C> <C>
Revenues $324,004 $342,279 $341,811 $350,827
Income from operations 41,116 44,757 42,563 44,680
Income before provision for income taxes 34,669 38,406 37,501 40,145
Income before cumulative effect of a change in accounting principle 22,258 24,657 24,407 25,894
Net income 17,377 24,657 24,407 25,894
Basic earnings per share
Income before change in accounting principle 0.31 0.34 0.33 0.35
Net income 0.24 0.34 0.33 0.35
Diluted earnings per share
Income before change in accounting principle 0.30 0.33 0.32 0.34
Net income 0.23 0.33 0.32 0.34
1997 MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
Revenues $271,037 $287,729 $289,209 $303,662
Income from operations (see Footnote 15) 32,388 35,884 36,176 12,628
Income before provision for income taxes 27,069 30,353 30,598 7,156
Net income 17,189 19,274 20,316 4,673
Basic earnings per share 0.24 0.27 0.28 0.06
Diluted earnings per share 0.24 0.27 0.28 0.06
</TABLE>
- --------------------------------------------------------------------------------
OUTBACK STEAKHOUSE, INC. AND AFFILIATES
Address for all officers: 550 North Reo Street, Suite 200, Tampa, FL 33609
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
OFFICERS
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Chris T. Sullivan Carl W. Sahlsten Steven C. Stanley Benjamin Novello
Chairman of the Board and President, Carrabba's Vice President, Regional Vice President,
Chief Executive Officer Italian Grill Construction Operations
Robert D. Basham Steven T. Shlemon Joseph J. Kadow Mark Wibel
President and Chief Vice President and Vice President, General Regional Vice President,
Operating Officer Director of Operations Counsel and Secretary Operations
Carrabba's Italian Grill
J. Timothy Gannon Lauren C. Cooper Steve Erickson
Sr. Vice President Hugh H. Connerty, Jr. Vice President and Regional Vice President,
President, Outback Controller Operations
Robert S. Merritt Steakhouse International
Sr. Vice President, Lindon Richardson William E. Horne
Chief Financial Officer Trudy I. Cooper Vice President, Design Chairman, Outback Sports
and Treasurer Vice President,
Training and Development Dennis J. Rouse Lance McNeill
Paul E. Avery Vice President, Real Estate CEO, Outback Sports
President, Outback Nancy Schneid and Development
Steakhouse of Florida, Inc. Vice President, Marketing
Irene Wenzel
Vice President, Purchasing
</TABLE>
<TABLE>
<CAPTION>
BOARD OF DIRECTORS
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Chris T. Sullivan Paul Avery W.R. "Max" Carey, Jr. Lee Roy Selmon
Chairman of the Board and President, Outback President, Corporate Associate Athletic Director
Chief Executive Officer Steakhouse of Florida, Inc. Resource Development University of South Florida
Robert D. Basham John A. Brabson, Jr. Edward L. Flom Debbi Fields Rose
President and Chief Chairman and Chief Former Chairman and Founder and Former
Operating Officer Executive Officer, Chief Executive Officer, Chairperson,
Lykes Bros. Inc. Florida Steel Corporation Mrs. Fields Cookies
J. Timothy Gannon
Sr. Vice President Charles H. Bridges Nancy Schneid Toby S. Wilt
Former Chairman and Vice President, Marketing President, TSW
Robert S. Merritt Chief Executive Officer, Investment Company
Sr. Vice President, Francois L. Schwartz, Inc.
Chief Financial Officer
and Treasurer
</TABLE>
19
<PAGE> 1
EXHIBIT 13.03
The Common Stock of the Company is traded in the over-the-counter market and is
quoted on the NASDAQ National Market System under the symbol OSSI. The following
table sets forth, for the fiscal years ended December 31, 1996, 1997, and 1998,
the high and low per share prices of the Company's Common Stock as reported by
NASDAQ after giving effect to the March 1999 stock split. See Note 8 of Notes to
Consolidated Financial Statements.
<TABLE>
<CAPTION>
HIGH LOW
------ ------
<S> <C> <C>
1996
First Quarter.......................... $27.09 $19.83
Second Quarter......................... 27.17 22.67
Third Quarter.......................... 23.33 15.33
Fourth Quarter......................... 19.75 14.33
1997
First Quarter.......................... 18.59 12.17
Second Quarter......................... 16.92 11.92
Third Quarter.......................... 19.17 14.59
Fourth Quarter......................... 21.59 16.59
1998
First Quarter.......................... 26.37 18.67
Second Quarter......................... 26.75 23.00
Third Quarter.......................... 28.09 15.92
Fourth Quarter......................... 26.79 15.59
</TABLE>
The Company has never paid a cash dividend on its Common Stock. As a condition
of the Company's line of credit agreement the Company is currently restricted
from paying dividends, other than in the form of partnership distributions,
without the consent of two thirds of its lenders.
As of February 5,1999 there were approximately 2,045 registered shareholders of
record of the Company's Common Stock.
REPORTS ON FORM 10-K
A copy of the Company's annual report to the Securities and Exchange Commission
on Form 10-K will be furnished to any shareholder without charge upon written
request. Address to Investor Relations Department at: Outback Steakhouse, Inc.,
550 North Reo Street, Suite 200, Tampa, Florida 33609.
Stock Transfer Agent and Registrar: Bank of New York, 101 Barclay Street, 12
West, New York, NY 10286. Requests for changes and updates in shareholder
records can be made to the Bank of New York Customer Service Department at
800-524-4458.
Independent Accountants: PricewaterhouseCoopers LLP, Tampa, Florida
COMPANY NEWS
The Company's news releases, including quarterly earnings announcements, are
available through Company News-On-Call. To receive a faxed copy of recent news
releases, call 1-800-758-5804. Enter the Outback six digit code of 673313 and
the requested release will faxed within minutes of inquiry. This service is
available 24 hours a day, 7 days a week. For additional Company information,
visit the Company's website at www.outback.com.
ANNUAL MEETING
The annual meeting of shareholders will be held on Thursday, April 22, 1999 at
10:00 a.m. local time at the Tampa Convention Center, 333 South Franklin Street,
Tampa, Florida.
20
<PAGE> 1
EXHIBIT 13.04
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and
Stockholders of Outback Steakhouse, Inc.
Tampa, Florida
We have audited the accompanying consolidated balance sheet of Outback
Steakhouse, Inc. and Affiliates (the "Company") as of December 31, 1997, and
the related consolidated statements of income, of stockholders' equity, and of
cash flows for each of the two years in the period ended December 31, 1997.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of the Company as of December 31,
1997, and the results of its operations and its cash flows for each of the
two years in the period ended December 31, 1997 in conformity with generally
accepted accounting principles.
/s/ Deloitte & Touche LLP
- --------------------------
Deloitte & Touche LLP
Tampa, Florida
February 20, 1998
<PAGE> 1
EXHIBIT 21.1
OUTBACK STEAKHOUSE, INC.
A DELAWARE CORPORATION
WHOLLY OWNED SUBSIDIARIES
MARCH 26, 1999
<TABLE>
<CAPTION>
NAME OF SUBSIDIARY DIRECTORS OFFICERS
- - ------------------ --------- --------
<S> <C> <C> <C>
Outback Steakhouse of Florida, Chris T. Sullivan Chris T. Sullivan Co-Chairman of the Board and Chief Executive
Inc. Robert D. Basham Officer
a Florida corporation J. Timothy Gannon Robert D. Basham Co-Chairman and Chief Operating Officer
550 North Reo Street, Suite 200 Robert S. Merritt J. Timothy Gannon Sr. Vice President
Tampa, Florida 33609 Robert S. Merritt Sr. Vice President, Chief Financial Officer,
Treasurer and Assistant Secretary
Paul E. Avery President
Joseph J. Kadow Vice President, General Counsel, and
Secretary
Carrabba's Italian Grill, Inc. Chris T. Sullivan Robert D. Basham Chairman of the Board and Chief Executive
a Florida corporation Robert D. Basham Officer
405 North Reo Street, Suite 210 J. Timothy Gannon Carl W. Sahlsten President
Tampa, Florida 33609 Robert S. Merritt Robert S. Merritt Sr. Vice President, Chief Financial Officer
and Treasurer
Steven T. Shlemon Vice President and Director of Operations
Joseph J. Kadow Vice President and Secretary
Outback Steakhouse Chris T. Sullivan Chris T. Sullivan Chairman of the Board and Chief Executive
International, Inc. Robert D. Basham Officer
a Florida corporation J. Timothy Gannon Robert D. Basham Chief Operating Officer
550 North Reo Street, Suite 200 Robert S. Merritt Hugh H. Connerty, Jr. President
Tampa, Florida 33609 J. Timothy Gannon Sr. Vice President
Robert S. Merritt Chief Financial Officer and Treasurer
Joseph J. Kadow Vice President and Secretary
<CAPTION>
NAME OF SUBSIDIARY MANAGERS OFFICERS
- ------------------ --------- --------
<S> <C> <C> <C>
Outback Sports, LLC Bill Horne Bill Horne Chairman of the Board
a Delaware limited liability Lance McNeill Lance McNeill Chief Executive Officer
company Chris T. Sullivan
550 North Reo Street, Suite 200 Robert D. Basham
Tampa, Florida 33609 Robert S. Merritt
</TABLE>
<PAGE> 1
EXHIBIT 23.01
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of
Outback Steakhouse, Inc.
Tampa, Florida
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (No. 333-50361) of Outback Steakhouse, Inc., of our
report dated February 17, 1999 appearing on page 7 of the Annual Report to
Shareholders which is incorporated in this Annual Report on Form 10-K.
/s/ PricewaterhouseCoopers LLP
- ------------------------------
PricewaterhouseCoopers LLP
Tampa, Florida
March 30, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AND RELATED CONSOLIDATED STATEMENT OF INCOME OF
OUTBACK STEAKHOUSE, INC. AND AFFILIATES AS OF AND FOR THE YEAR ENDED DECEMBER
31, 1998, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 83,594
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 19,306
<CURRENT-ASSETS> 122,052
<PP&E> 657,042
<DEPRECIATION> 130,209
<TOTAL-ASSETS> 705,211
<CURRENT-LIABILITIES> 108,811
<BONDS> 37,475
0
0
<COMMON> 748
<OTHER-SE> 544,298
<TOTAL-LIABILITY-AND-EQUITY> 705,211
<SALES> 1,345,762
<TOTAL-REVENUES> 1,358,921
<CGS> 526,254
<TOTAL-COSTS> 1,132,763
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,157
<INCOME-PRETAX> 150,721
<INCOME-TAX> 53,506
<INCOME-CONTINUING> 97,215
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> (4,880)
<NET-INCOME> 92,335
<EPS-PRIMARY> 1.26
<EPS-DILUTED> 1.23
</TABLE>
