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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 28, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD
FROM TO
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COMMISSION FILE NUMBER 0-19924
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RARE HOSPITALITY INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
GEORGIA 58-1498312
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
8215 ROSWELL ROAD, BLDG 200; 30350
ATLANTA, GA (Zip Code)
(Address of principal executive offices)
770-399-9595
(Registrant's telephone number, including area code)
Securities Registered Pursuant to Section 12(b) of the Act:
NONE
Securities Registered Pursuant to Section 12(g) of the Act:
COMMON STOCK, NO PAR VALUE
(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 [ ]
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 11, 1998, the aggregate market value of the voting stock held
by non-affiliates (assuming for these purposes, but not conceding, that all
executive officers and directors are "affiliates" of the Registrant) of the
Registrant was $109,723,582 based upon the last reported sale price in the
Nasdaq National Market on March 11, 1998 of $10.375.
As of March 11, 1998, the number of shares outstanding of the Registrant's
Common Stock, no par value, was 11,979,308.
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DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Proxy Statement for the Annual Meeting of
Shareholders scheduled to be held on May 20, 1998 are incorporated by reference
in Part III hereof.
FORWARD-LOOKING STATEMENTS
Certain of the matters discussed in the following pages, particularly
regarding estimates of the number and locations of new restaurants that the
Company intends to open during fiscal 1998, constitute "forward-looking
statements" within the meaning of the Securities Act of 1933, as amended and the
Exchange Act of 1934, as amended. Forward-looking statements involve a number of
risks and uncertainties, and in addition to the factors discussed in this Form
10-K, among the other factors that could cause actual results to differ
materially are the following: failure of facts to conform to necessary
management estimates and assumptions; the Company's ability to identify and
secure suitable locations on acceptable terms, open new restaurants in a timely
manner, hire and train additional restaurant personnel and integrate new
restaurants into its operations; the continued implementation of the Company's
business discipline over a large restaurant base; the economic conditions in the
new markets into which the Company expands and possible uncertainties in the
customer base in these areas; changes in customer dining patterns; competitive
pressures from other national and regional restaurant chains; business
conditions, such as inflation or a recession, and growth in the restaurant
industry and the general economy; changes in monetary and fiscal policies, laws
and regulations; and other risks identified from time to time in the Company's
SEC reports, registration statements and public announcements.
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RARE HOSPITALITY INTERNATIONAL, INC.
INDEX
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PAGE
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Part I
<S> <C> <C>
Item 1. Business........................................... 4
Item 2. Properties......................................... 14
Item 3. Legal Proceedings.................................. 14
Item 4. Submission of Matters to a Vote of Security
Holders........................................... 15
Part II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters............................... 16
Item 6. Selected Financial Data............................ 17
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations............... 18
Item 7A. Quantitative and Qualitative Disclosures About
Market Risk....................................... 25
Item 8. Financial Statements and Supplementary Data........ 25
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure............... 43
Part III
Item 10 Directors and Executive Officers of the Registrant. 43
Item 11 Executive Compensation............................. 43
Item 12 Security Ownership of Certain Beneficial Owners
and Management.................................... 43
Item 13 Certain Relationships and Related Transactions..... 44
Part IV
Item 14 Exhibits, Financial Statement Schedules, and
Reports on Form 8-K............................... 45
Signatures...................................................... 47
Financial Statement Schedules
Exhibits
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PART I
ITEM 1. BUSINESS
GENERAL
RARE Hospitality International, Inc. (the "Company"), formerly known as
Longhorn Steaks, Inc., operates and franchises 124 restaurants as of March 11,
1998, including 96 LongHorn Steakhouse restaurants, 16 Bugaboo Creek Steak House
restaurants, and 10 The Capital Grille restaurants, as well as two additional
restaurants (the "specialty restaurants"), Hemenway's Seafood Grille & Oyster
Bar ("Hemenway's") and The Old Grist Mill Tavern. The Company was incorporated
in Georgia in December 1982.
On September 13, 1996, the Company completed the acquisition of Bugaboo
Creek Steak House, Inc., along with certain related restaurant and real estate
properties. The Company issued 2,939,062 shares of the Company's common stock to
the stockholders of Bugaboo Creek Steak House, Inc. and 240,410 shares of the
Company's common stock for the purchase of three affiliated entities and certain
related real estate. Such acquisition was accounted for using the pooling of
interests method. Bugaboo Creek Steak House, Inc. operated 14 Bugaboo Creek
Steak Houses, five The Capital Grille restaurants, and the affiliated entities
operated three specialty concept restaurants, at the time of the merger. Bugaboo
Creek Steak House, Inc., now a wholly-owned subsidiary of the Company, owns and
operates the Bugaboo Creek Steak House restaurants and The Capital Grille
restaurants. Another wholly-owned subsidiary, Whip Pooling Corporation, which
was acquired concurrently with Bugaboo Creek Steak House, Inc., owns and
operates Hemenway's and The Old Grist Mill Tavern.
On January 13, 1997, the Company changed its name from Longhorn Steaks, Inc.
to RARE Hospitality International, Inc., to reflect the organization of its
operations into three distinct restaurant operating businesses. The Company
believes that the new name and corporate structure more adequately reflect its
position as a multi-concept operator. As a result of this change, the Company's
common stock, which had traded on the Nasdaq National Market under the symbol
"LOHO", began trading under its current symbol "RARE".
CONCEPTS
LongHorn Steakhouse restaurants, which are located primarily in the
southeastern and midwestern United States, are casual dining, full-service
restaurants that serve lunch and dinner, offer full liquor service and feature a
menu consisting of fresh cut steaks, as well as salmon, shrimp, chicken, ribs,
pork chops and prime rib. LongHorn Steakhouses emphasize high quality,
moderately-priced food and attentive, friendly service, provided in a casual
atmosphere resembling a Texas roadhouse.
The 16 Bugaboo Creek Steak House restaurants are currently located in the
northeastern and mid-Atlantic regions of the United States. The Bugaboo Creek
Steak Houses are casual dining restaurants designed to resemble a Canadian Rocky
Mountain lodge. Menu offerings include seasoned steaks, prime rib, spit-roasted
half chickens, smoked baby back ribs, grilled salmon and a variety of freshwater
fish.
The 10 The Capital Grille restaurants are located in major metropolitan
areas across the United States. These restaurants are fine-dining restaurants
with menu offerings ranging from chilled baby lobster and beluga caviar
appetizers to entrees of dry-aged steaks, lamb and veal steaks, lobster, grilled
salmon and chicken to a wine list of over 300 selections.
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RESTAURANT LOCATIONS
The following tables set forth the location of each existing restaurant by
concept at March 11, 1998 and the number of restaurants in each area.
LONGHORN STEAKHOUSE RESTAURANTS
EXISTING COMPANY-OWNED/JOINT VENTURE RESTAURANTS
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FLORIDA
Destin ........................................................ 1
Cypress Creek ................................................. 1
Miami/Ft. Lauderdale .......................................... 4
Jacksonville .................................................. 4
Largo ......................................................... 1
Tallahassee ................................................... 1
Orlando ....................................................... 7
Ocala ......................................................... 1
West Palm ..................................................... 3
Ft. Myers ..................................................... 1
St. Augustine ................................................. 1
Tampa/ St. Petersburg ......................................... 2
GEORGIA
Albany ........................................................ 1
Athens ........................................................ 1
Atlanta ....................................................... 21
Cartersville .................................................. 1
Columbus ...................................................... 1
Macon ......................................................... 1
Rome .......................................................... 1
Savannah ...................................................... 1
Statesboro .................................................... 1
Augusta ....................................................... 1
Valdosta ...................................................... 1
ALABAMA
Dothan ........................................................ 1
Montgomery .................................................... 1
Mobile ........................................................ 1
TENNESSEE
Chattanooga ................................................... 1
Nashville ..................................................... 4
OHIO
Cincinnati .................................................... 4
Cleveland ..................................................... 7
Columbus ...................................................... 3
MISSOURI
St. Louis ..................................................... 1
NORTH CAROLINA
Greensboro/High Point/Winston-Salem ........................... 2
Burlington .................................................... 1
Concord ....................................................... 1
Charlotte ..................................................... 3
Columbia ...................................................... 2
Lake Norman ................................................... 1
SOUTH CAROLINA
Greenville/Spartanburg ........................................ 2
Hilton Head ................................................... 1
Columbia ...................................................... 1
Total Existing Company-Owned/Joint Venture Restaurants ..... 95
</TABLE>
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EXISTING FRANCHISE-OWNED RESTAURANTS
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FLORIDA
Tampa ................................................... 1
Total Existing Franchise-Owned Restaurants ........ 1
Total LongHorn Steakhouse Restaurants ............. 96
BUGABOO CREEK STEAK HOUSE RESTAURANTS
EXISTING COMPANY-OWNED RESTAURANTS
MASSACHUSETTS
Boston ................................................... 4
VIRGINIA
Springfield .............................................. 1
NEW YORK
Albany ................................................... 1
Rochester ................................................ 1
Poughkeepsie ............................................. 1
PENNSYLVANIA
Philadelphia ............................................. 1
RHODE ISLAND
Providence ............................................... 2
CONNECTICUT
Manchester ............................................... 1
MAINE
Bangor ................................................... 1
Portland ................................................. 1
MARYLAND
Gaithersburg ............................................. 1
NEW HAMPSHIRE
Newington ................................................ 1
Total Bugaboo Creek Steak House Restaurants ........ 16
THE CAPITAL GRILLE RESTAURANTS
EXISTING COMPANY-OWNED RESTAURANTS
MASSACHUSETTS
Boston ................................................... 2
DISTRICT OF COLUMBIA
Washington ............................................... 1
CALIFORNIA
San Francisco ............................................ 1
FLORIDA
Miami .................................................... 1
ILLINOIS
Chicago .................................................. 1
RHODE ISLAND
Providence ............................................... 1
MICHIGAN
Troy ..................................................... 1
MINNESOTA
Minneapolis .............................................. 1
TEXAS
Houston .................................................. 1
Total The Capital Grille Restaurants ............... 10
</TABLE>
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SPECIALTY RESTAURANTS
EXISTING COMPANY-OWNED RESTAURANTS
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RHODE ISLAND
Hemenway's Seafood Grille & Oyster Bar, Providence ............... 1
MASSACHUSETTS
The Old Grist Mill Tavern, Seekonk ............................... 1
Total Specialty Restaurants................................. 2
RESTAURANTS UNDER CONSTRUCTION
DELAWARE
Bugaboo Creek Steak House, Newark .............................. 1
GEORGIA
LongHorn Steakhouse, Atlanta ................................... 1
LongHorn Steakhouse, Cumming ................................... 1
ILLINOIS
LongHorn Steakhouse, Fairview Heights .......................... 1
MISSOURI
LongHorn Steakhouse, Ballwin ................................... 1
NORTH CAROLINA
The Capital Grille, Charlotte .................................. 1
OHIO
LongHorn Steakhouse, Beavercreek ............................... 1
Total Restaurants Under Construction...................... 7
</TABLE>
UNIT ECONOMICS
LongHorn Steakhouse
The Company's modified LongHorn Steakhouse restaurant design, which has been
developed and refined over the past four years, has increased capacity from an
average of 150 seats for LongHorn Steakhouse restaurants open prior to 1994 to
an average of 236 seats for LongHorn Steakhouse restaurants opened in 1997. The
objective of this modification was to increase the revenues of the Company's new
LongHorn Steakhouse restaurants while reducing capital expenditures as a
percentage of revenues. The Company intends to continue to emphasize leasing as
its preferred arrangement for LongHorn Steakhouse sites and currently leases all
but 20 of its LongHorn Steakhouses in operation, owns one site for a restaurant
under construction and owns one site held for resale. The Company purchases land
only in those circumstances it believes are cost-effective. Four of the 19
LongHorn Steakhouse restaurants opened in 1997 were located on property
purchased at an average cost of $683,000 per location. Excluding real estate
costs, the average cash investment to open a LongHorn Steakhouse restaurant in
1997 was $1,571,000 including pre-opening expenses of $171,000. The Company
amortizes pre-opening expenses over the first 12 months of a restaurant's
operation.
Bugaboo Creek Steak House
The Company developed a modified Bugaboo Creek Steak House restaurant design
which served as the new prototype for Bugaboo Creek Steak House restaurants
constructed in 1997. The two Bugaboo Creek Steak House restaurants constructed
in 1997 utilized this design.
The Company is in the process of further refining the prototype, with the
objective of reducing the capital expenditure required for new restaurant
construction and reducing ongoing operating costs at these new restaurants due
to lower square footage and a more efficient layout. The Company intends to
continue to emphasize leasing as its preferred arrangement for Bugaboo Creek
Steak House sites and currently leases all but two of its Bugaboo Creek Steak
House sites. The Company purchases land only in those circumstances it believes
are cost-effective. Neither of the two Bugaboo Creek Steak House restaurants
opened in 1997 were located on purchased property. Excluding real estate costs,
the average cash investment to open
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a Bugaboo Creek Steak House restaurant in 1997 was $1,937,000, including
pre-opening expenses of $155,000. The Company amortizes pre-opening expenses
over the first 12 months of a restaurant's operation.
The Capital Grille
Due to the historic nature of many of the sites selected for The Capital
Grille restaurants (which is incorporated into the design of the facility), the
development of a prototype is not feasible. Instead, the Company is evaluating
methods with which to lower construction costs while retaining the unique
ambiance of each location. The Company intends to continue to emphasize leasing
as its preferred arrangement for The Capital Grille sites and currently leases
all of its The Capital Grille sites. The Company intends to purchase land only
in those circumstances it believes are cost-effective. The average cash
investment to open a The Capital Grille restaurant in 1997 was $3,314,000,
including pre-opening expenses of $338,000. The Company amortizes pre-opening
expenses over the first 12 months of a restaurant's operation.
EXPANSION STRATEGY
LongHorn Steakhouse and Bugaboo Creek Steak House:
The Company plans to expand through the development of existing joint
venture partnerships and additional Company-owned LongHorn Steakhouse
restaurants and additional Company-owned Bugaboo Creek Steak House restaurants
in existing markets and in other selected metropolitan markets in the
southeastern, midwestern, northeastern and mid-Atlantic regions of the United
States. Under its joint venture arrangements, the Company intends to continue to
expand in those markets by utilizing the joint venture partners who are
experienced restaurant operators with knowledge of the market in which the joint
venture operates. Currently, the Company has joint venture arrangements covering
territories in various areas of Florida, North Carolina, South Carolina and
Ohio, and in the St. Louis area. The Company plans to continue to expand its
Company-owned restaurant base by clustering its restaurants in existing and new
markets, with LongHorn Steakhouse restaurants primarily in the southeastern and
midwestern regions of the United States and Bugaboo Creek Steak House
restaurants primarily in the northeastern and mid-Atlantic regions of the United
States. The Company believes this clustering enhances its ability to supervise
operations, market the Company's concept and distribute supplies. The Company
also intends to open single restaurants in smaller markets in sufficiently close
proximity to the Company's other markets to enable the Company to efficiently
supervise operations and distribute supplies.
The Capital Grille:
The Company plans to expand through the development of additional
Company-owned The Capital Grille restaurants in selected metropolitan markets
nationwide.
Overall:
The Company's objective is to increase earnings by expanding market share in
existing markets and by developing restaurants in new markets. The Company
intends to open approximately 12 Company-owned and joint venture restaurants in
1998: eight LongHorn Steakhouse restaurants; two Bugaboo Creek Steak House
restaurants and two The Capital Grille restaurants. Of the restaurants proposed
for 1998, the Company has opened one restaurant in North Carolina, has seven
restaurants under construction in Delaware, Georgia, Illinois, Missouri, North
Carolina and Ohio and has signed letters of intent or leases on sites for five
additional restaurants as of March 11, 1998. The Company expects that 4 of the 8
LongHorn Steakhouse restaurants to be opened in 1998 will be developed under
joint ventures, and that all of the Bugaboo Creek Steak House and The Capital
Grille restaurants will be Company-owned.
In January 1997, the Company acquired two previously franchised LongHorn
Steakhouse restaurants in Greenville and Spartanburg, South Carolina and the
attendant territory franchise development rights for the Greenville-Spartanburg
market area and the Raleigh, North Carolina market area. The Company may
transfer other Company-owned restaurants to joint ventures in connection with
the future development of existing territories. In the fourth quarter of 1997,
the Company acquired joint venture partner ownership interests in 10 LongHorn
Steakhouse restaurants located in South Georgia, Southern Alabama, and the
Panhandle of Florida for an aggregate purchase price of $1,088,000 in cash,
notes payable, and the Company's common stock.
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The Company is not currently a party to any agreement, arrangement or
understanding in connection with any other potential acquisition of existing
restaurants other than in the ordinary course of business, but the Company will
continue to evaluate suitable acquisitions in the restaurant industry as they
are identified.
The Company will consider on a selective basis qualified applicants with
substantial restaurant experience and financial resources for franchises of
either LongHorn Steakhouse restaurants or Bugaboo Creek Steak House restaurants.
The Company does not currently anticipate offering franchises for The Capital
Grille restaurants. The Company expects that it will grant franchises to
operators who are not joint venture partners with the Company primarily in
markets in which the Company would not otherwise expand itself.
The preceding discussion of expansion strategy contains certain
forward-looking statements. Forward-looking statements involve a number of risks
and uncertainties, and in addition to the factors discussed in this Form 10-K,
among the other factors that could cause actual results to differ materially are
the following: the Company's ability to identify and secure suitable locations
on acceptable terms, open new restaurants in a timely manner, hire and train
additional restaurant personnel and integrate new restaurants into its
operations; the continued implementation of the Company's strict business
discipline over a large restaurant base; the economic conditions in the new
markets into which the Company expands and possible uncertainties in the
customer base in these areas; changes in customer dining patterns; competitive
pressures from other national and regional restaurant chains; business
conditions and growth in the restaurant industry and the general economy; and
other risks identified from time to time in the Company's SEC reports and public
announcements. See the discussion of forward-looking statements found in
"Documents Incorporated by Reference."
SITE SELECTION AND RESTAURANT LAYOUT
The Company considers the location of a restaurant to be a critical factor
to the unit's long-term success and devotes significant effort to the
investigation and evaluation of potential sites. The site selection process
focuses on trade area demographics, target population density and household
income level as well as specific site characteristics, such as visibility,
accessibility and traffic volumes. 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 typically
takes 100 to 120 days to construct and open a new LongHorn Steakhouse
restaurant, 130 to 140 days to construct and open a new Bugaboo Creek Steak
House restaurant and 170 to 185 days to construct and open a new The Capital
Grille restaurant. While the Company will consider the option of purchasing
sites for its new restaurants where it is cost-effective to do so, currently all
but 24 of the Company's restaurant sites are leased.
Over the past four years, the Company has modified its prototypical LongHorn
Steakhouse restaurant, increasing its average seating capacity from
approximately 150 seats for LongHorn Steakhouse restaurants open prior to 1994
to an average of 236 seats in approximately 6,000 square feet of space for
LongHorn Steakhouse restaurants opened in 1997. An expanded kitchen design
incorporating equipment needed for a broader menu is also part of the prototype.
The Company believes the kitchen design simplifies training, lowers costs and
improves the consistency and quality of the food. The prototype restaurant
design also includes cosmetic changes that provide a total restaurant concept
intended to be inviting and comfortable while maintaining the ambiance of a
Texas roadhouse.
Over the past three years, the Company renovated and remodeled those
LongHorn Steakhouse restaurants that had been opened prior to the development of
its new prototype in late 1994. The remodeling involved the installation of
kitchen equipment needed for new menu items, as well as the installation of
kitchen printers in conjunction with the new point-of-sale ("POS") system. The
remodeling also included cosmetic improvements such as repainting and
refinishing, new lighting and various decor adjustments. Exterior improvements
encompassed repainting and additional lighting designed to convey a more
inviting image, as well as new signage to reflect the change in the name of the
restaurant to LongHorn Steakhouse from Longhorn Steaks.
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The Company is in the process of modifying its prototype Bugaboo Creek Steak
House restaurant to incorporate a smaller seating capacity than its average
restaurant. The Company expects the new prototype will reduce labor, utilities
and other operating costs as well as capital required for expansion.
RESTAURANT OPERATIONS
Management and Employees. The management staff of a typical restaurant
consists of one general manager or managing partner, two or three assistant
managers and one kitchen manager. In addition, a typical LongHorn Steakhouse
restaurant employs approximately 30 to 80 staff members, a typical Bugaboo Creek
Steak House restaurant employs approximately 85 staff members, and a typical The
Capital Grille restaurant employs approximately 60 staff members. The general
manager or managing partner of each restaurant has primary responsibility for
the day-to-day operation of the restaurant and is responsible for maintaining
Company-established operating standards. The Company employs nine LongHorn
Steakhouse regional managers, who each have responsibility for the operating
performance of five to nine Company-owned LongHorn Steakhouse restaurants and
report directly to either the Director of Operations or Vice President of
Operations for the LongHorn Steakhouse concept. There are also five joint
venture partners, who each have responsibility for the operating performance of
from one to 11 joint-venture LongHorn Steakhouse restaurants and report directly
to either the Director of Operations or Vice President of Operations for the
LongHorn Steakhouse concept. The Company employs three Bugaboo Creek Steak House
regional managers, who each have responsibility for the operating performance of
from four to eight Bugaboo Creek Steakhouse restaurants plus one regional
manager who has responsibility for the operating performance of the two
specialty restaurants. All four of these regional managers report directly to
the Executive Vice President for the Bugaboo Creek Steak House concept. The
Company also employs two regional managers who each have responsibility for from
four to six The Capital Grille restaurants, reporting directly to the Executive
Vice President of Operations for The Capital Grille.
The Company seeks to recruit managers with substantial restaurant
experience. The Company selects its restaurant personnel utilizing a selection
process which includes psychological and analytical testing which is designed to
identify individuals with those traits the Company believes are important to
success in the restaurant industry. The Company requires new managers to
complete an intensive training program focused on both on-the-job training as
well as a rigorous in-house classroom-based educational course. The program is
designed to encompass all phases of restaurant operations, including the
Company's philosophy, management strategy, policies, procedures and operating
standards. Through its management information systems, senior management
receives weekly reports on daily sales, customer counts, payroll and cost of
sales. Based upon these various reports, management believes that it is able to
closely monitor the Company's operations.
The Company maintains a performance measurement and an incentive
compensation program for its management-level employees. The performance
programs reward restaurant management teams with cash bonuses for meeting
profitability targets and for improved restaurant profitability. In addition, if
profitability targets are met, the management team is also awarded cash bonuses
for improvements in restaurant sales. Incentive compensation is also sometimes
provided to management in the form of stock options. During 1997, no stock
options were awarded to LongHorn Steakhouse restaurant-level managers. However,
stock options were awarded to joint venture-owned LongHorn Steakhouse
restaurant-level managing partners upon execution of their employment
agreements.
Management Information Systems. The Company utilizes a Windows-based
accounting software package and a network that enables electronic communication
throughout the entire Company. In addition, the LongHorn Steakhouse restaurants
utilize a Windows-based POS system. The Company utilizes these management
information systems to develop pricing strategies, monitor new product reception
and evaluate restaurant-level productivity. The Company expects to continue to
develop its management information systems in each concept to assist restaurant
management in analyzing their business and to improve efficiency.
Purchasing. The Company establishes product quality standards for beef, then
negotiates directly with suppliers to obtain the lowest possible prices for the
required quality. The Company also utilizes select long-term contracts on
certain items to avoid short-term meat cost fluctuations. For the Bugaboo Creek
Steak House restaurants, beef is received from suppliers at age specifications.
For the LongHorn Steakhouse restaurants, beef is aged at the facility of the
Company's largest distributor, who delivers the beef to the LongHorn Steakhouse
restaurants when the age reaches specified guidelines; this arrangement is
closely
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monitored by Company personnel and management believes it provides for efficient
and cost-effective meat processing and distribution, while maintaining the
Company's control and supervision of purchasing and aging.
The Company's management negotiates directly with suppliers for most other
food and beverage products to ensure uniform quality and adequate supplies and
to obtain competitive prices. The Company purchases its meat, food and other
supplies from a sufficient number of suppliers such that the loss of any one
supplier would not have a material effect on the Company. In mid-1996, the
Company completed a transition from a distribution system utilizing various
regional distributors to a consolidated system under which a single distributor
services all LongHorn Steakhouse restaurants. In early 1997, this system was
commenced for Bugaboo Creek Steak House restaurants. There are no plans to
expand this to The Capital Grille restaurants, which are more geographically
diverse and require a wider selection of raw products than the LongHorn
Steakhouse restaurants and Bugaboo Creek Steak House restaurants.
Seasonality. Although individual restaurants have seasonal patterns of
performance that depend on local factors, aggregate sales by the Company's
restaurants have not displayed pronounced seasonality, other than lower sales
during the "back-to-school" season, which falls in the Company's third fiscal
quarter, and higher sales during the Christmas holiday season, which falls in
the Company's fourth fiscal quarter. Extreme weather, especially during the
winter months, may adversely affect sales.
OWNERSHIP STRUCTURES
The Company's interests in its restaurants are divided into three
categories: (1) Company-owned restaurants, (2) joint venture restaurants and (3)
franchised restaurants.
Company-owned restaurants. 53 LongHorn Steakhouse restaurants, all Bugaboo
Creek Steak House restaurants, all The Capital Grille restaurants, Hemenway's
and The Old Grist Mill Tavern are owned and operated by the Company. The general
manager of each of these restaurants is employed and compensated by the Company.
See "Restaurant Operations -- Management and Employees" above.
Joint Venture Restaurants. The Company is a partner in various joint venture
partnerships and limited partnerships that in the aggregate operate 42 LongHorn
Steakhouse restaurants as of March 11, 1998. In each case, the Company's partner
is an experienced restaurant operator who owns from 10% to 50% of the
partnership. While the scope and terms of these joint ventures vary, they are
generally formed with the goal of developing multiple restaurants in a
particular market under the supervision of the Company's joint venture partner.
The joint ventures generally contemplate that the general manager of each
restaurant developed or operated by the joint venture will purchase a 10%
interest in the cash flow of the restaurant managed, thereby ratably diluting
the interest of the Company and its joint venture partner.
The joint ventures generally pay fees to the managing partner at a rate of
$1,000 to $2,500 per restaurant per month and pay fees to the Company at a rate
of $1,500 to $4,000 per restaurant per month. Those joint ventures that operate
under franchise agreements pay royalties at the rate of 1.5% of gross sales. In
addition, under the terms of the Company's 50/50 joint ventures, the Company is
generally paid a $15,000 opening supervision fee from the joint venture for
services performed in connection with each restaurant opening.
The joint ventures either operate their restaurants under the control of the
Company or under franchise agreements with the Company. Franchise agreements for
joint ventures are modified by an addendum that provides that no franchise fee
is payable and reduces the royalty rate. In the event that the Company's partner
in the joint venture or any other entity should acquire the joint venture's
restaurants, this addendum to the franchise agreement would terminate and the
operation of the restaurants would continue under the terms of the franchise
agreement. Three of the joint ventures have area development agreements with the
Company for the development of additional restaurants. Six other joint ventures
do not have specific development rights although the Company has agreed, during
a specified time, not to establish restaurants in their market areas except
through the joint venture, so long as a specified development schedule is met.
The joint ventures are terminable by either joint venture partner upon
default by the other partner. Certain of the joint ventures give the Company the
option under certain circumstances to acquire the interest of the 10% joint
venture partner for cash or shares of the Company's common stock. Five of the
joint ventures obligate the Company to purchase the interest of its 10% joint
venture partner upon the death of the principal of the joint venture partner and
three include a provision permitting either partner
11
<PAGE> 12
to set a price at which the other partner must either buy the interest of the
terminating partner or sell its interest to the terminating partner.
Franchised Restaurants. As of March 11, 1998, 27 of the 42 restaurants
operated by the Company's joint ventures are operated under franchise
agreements. In addition, the Company has one unaffiliated franchisee that
currently operates one LongHorn Steakhouse restaurant in Florida. The Company
has also entered into an area development agreement with an unaffiliated entity
with the right to operate franchised LongHorn Steakhouse restaurants in Puerto
Rico. In 1997, there were no changes in the unaffiliated franchise restaurants,
while in 1996, no unaffiliated franchise restaurants were opened and two were
closed, one each in Roanoke, Virginia and in Birmingham, Alabama.
Original Franchise Agreements. The Company entered into its first generation
of franchise agreements during the years 1987 through 1993. These franchise
agreements were typically for a ten-year period and were usually renewable for
two or three subsequent five year periods. The franchise agreements permitted
the operation of multiple restaurants in a specified territory and typically
provided for payment of a franchise fee in the aggregate amount of $50,000,
generally payable in installments upon execution and the opening of the second
and third units. The franchise fee could vary depending on the territorial size
and location of the franchise area and the number of restaurants the Company
estimates could be developed within the designated franchise area. One LongHorn
Steakhouse restaurant currently operates under the original franchise agreement.
The Company no longer receives royalties with respect to this restaurant.
The franchisee has the right to terminate a franchise agreement at any time
upon 30 days written notice to the Company. The Company has the right to
terminate a franchise agreement for a variety of reasons, including the
franchisee's failure to pay all amounts due when required or the willful failure
to adhere to the Company's methods and standards.
New Franchise Agreements. In 1994, the Company revised its form of franchise
agreement and all franchises granted since 1993 have been on this revised form.
27 LongHorn Steakhouse restaurants operate under the new franchise agreement,
all of which are operated by joint ventures. The Company may grant additional
franchises to operate LongHorn Steakhouse restaurants and Bugaboo Creek Steak
House restaurants under the revised form. The franchise agreements are granted
with respect to individual restaurants and are either for a term of ten years
with a right of the franchisee to acquire a successor franchise for an
additional ten-year period if specified conditions are met or for a period of
twenty years. The franchise agreements provide for a franchise fee of $60,000,
which amount is reduced for subsequent franchises acquired by the same
franchisee. The franchise fee is payable in full upon execution. The franchise
agreements provide for royalties with respect to each restaurant of 4% of gross
sales and require the franchisee to expend on local advertising during each
calendar month an amount equal to at least 1.5% of gross sales and, if the
Company establishes an advertising fund, to contribute an additional amount of
0.5% of gross sales to such fund or up to 4.5% of the restaurant's gross sales
during the conduct of a market, regional or national advertising campaign.
The franchisee has the right to terminate the franchise agreement upon
default by the Company. The Company also retains the right to terminate a
franchise for a variety of reasons, including the franchisee's failure to pay
amounts due under the agreement or to otherwise comply with the terms of the
franchise agreement.
General. An important element of the Company's franchise program is the
training the Company provides for each franchisee. With respect to each new
franchisee, the Company provides the same training program provided to the
Company's management and employees. In addition to this initial training, the
Company provides supervision at the opening of the franchisee's first
restaurant, beginning one week prior to opening, and routine supervision
thereafter.
All franchisees are required to operate their 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. The franchisee has full discretion to determine the prices to
be charged to all customers. In addition, all franchisees are required to
purchase food, ingredients, supplies and materials that meet standards
established by the Company or which are provided by suppliers approved by the
Company. Although not required to do so by the franchise agreements, all of the
franchisees currently purchase beef from the Company's suppliers. The Company
does not receive fees or profits on sales by third-party suppliers to
franchisees.
Many state franchise laws limit the ability of a franchisor to terminate or
refuse to renew a franchise.
12
<PAGE> 13
Area Development Agreements. The Company has also entered into area
development agreements with developers, including joint ventures in which the
Company is a partner. Under these agreements, the developer has exclusive rights
to establish and operate LongHorn Steakhouse restaurants in a defined territory
generally for a period of five years, conditioned upon meeting a development
schedule provided in the area development agreement. The Company may enter into
similar agreements with respect to Bugaboo Creek Steak House restaurants. The
area development agreements provide the developer with the option to renew the
agreement, usually for an additional five-year period, predicated upon the
establishment of new performance goals and the Company's determination that the
developer has the capability to comply with the new performance goals.
Development fees paid upon execution of area development agreements reflect the
size of the territory involved and are non-refundable, but are applied to the
payment of franchise fees for restaurants opened pursuant to franchises granted
to the developer.
TRADEMARKS
The Company has registered LONGHORN STEAKS and BUGABOO CREEK STEAK HOUSE and
design and THE CAPITAL GRILLE as service marks with the United States Patent and
Trademark Office and has applied for registration of its LONGHORN STEAKHOUSE and
design service mark. The Company regards its service marks as having significant
value and as being important factors in the marketing of its restaurants. The
Company is aware of names and marks similar to the service marks of the Company
used by other persons in certain geographic areas; however, the Company believes
such uses will not adversely affect the Company. It is the Company's policy to
pursue registration of its mark whenever possible and to oppose vigorously any
infringement of its marks.
COMPETITION
The restaurant industry is intensely competitive with respect to price,
service, location and food quality, and there are many well-established
competitors, both steakhouses and non-steakhouses, with substantially greater
financial and other resources than the Company. Such competitors include a large
number of national and regional restaurant chains. 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 such as inflation, increased food,
labor and benefits costs and the lack of experienced management and hourly
employees may adversely affect the restaurant industry in general and the
Company's restaurants in particular.
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, safety, sanitation, building and fire agencies in the
state or municipality in which the restaurant is located. In addition, most
municipalities in which the Company's restaurants are located require local
business licenses. 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. The Company is also subject to federal and state
environmental regulations, but they have not had a material effect on the
Company's operations.
Approximately 17% of the Company's restaurant sales are 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. The Company has not experienced and does not
presently anticipate experiencing any delays or other problems in obtaining or
renewing licenses or permits to sell alcoholic beverages; however, the failure
of a restaurant to obtain or retain liquor or food service licenses would
adversely affect the restaurant's operations.
The Company and its franchisees are subject in each state in which they
operate restaurants to "dramshop" statutes or case law interpretations, 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.
13
<PAGE> 14
The Company is also subject to federal and state laws regulating the offer
and sale of franchises administered by the Federal Trade Commission and various
similar state agencies. Such laws impose registration and disclosure
requirements on franchisors in the offer and sale of franchises. These laws
often apply substantive standards to the relationship between franchisor and
franchisee and limit the ability of a franchisor to terminate or refuse to renew
a franchise.
The Federal Americans With Disabilities Act prohibits discrimination on the
basis of disability in public accommodations and employment. The Company designs
its restaurants to be accessible to the disabled and believes that it is in
substantial compliance with all current applicable regulations relating to
restaurant accommodations for the disabled.
The Company's restaurant operations are also subject to federal and state
laws governing such matters as wages, working conditions, citizenship
requirements, 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.
Various proposals for comprehensive health care reform have been or are
expected to be submitted to Congress. To the extent that proposals are enacted
which require employers to pay for employees' health insurance or other
coverage, such legislation may have a significant effect on the Company.
EMPLOYEES
As of March 11, 1998, the Company employed approximately 8,100 persons, 113
of whom were corporate personnel, 514 of whom were restaurant management
personnel and the remainder of whom were hourly personnel. Of the 113 corporate
employees, 50 are in management positions and 63 are administrative or office
employees. None of the Company's employees is covered by a collective bargaining
agreement. The Company considers its employee relations to be good.
ITEM 2. PROPERTIES
As of March 11, 1998, all but 24 of the Company's restaurants were located
in leased space. The Company's Tucker, Georgia restaurant is leased from a
partnership that is 50% owned by the four original shareholders of the Company.
Initial lease expirations typically range from five to ten years, with the
majority of these 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 approximately half of the leases call for additional rent based on sales
volume (generally 2.0% to 8.0%) 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.
The leases on the operating Company-owned restaurants will expire (assuming
exercise of all renewal options) on the following schedule: two in 1998; two in
1999; four in 2000 and the remainder over the period from 2001 through 2028.
The Company owns a 10,000 square feet office building and leases 5,000
square feet of office building in which its corporate offices, LongHorn
Steakhouse restaurant operations and The Capital Grille restaurant operations
are headquartered in Atlanta, Georgia. In addition, the Company leases
approximately 1,500 square feet of space in East Providence, Rhode Island to
house staff to support the operation of Bugaboo Creek Steak House restaurants.
ITEM 3. LEGAL PROCEEDINGS
The Company is involved in various legal actions incidental to the normal
conduct of its business. Management does not believe that the ultimate
resolution of these incidental actions will have a material adverse effect on
the Company's financial position or results of operations.
On March 25, 1997, Michael Blocker, a former employee of the Company filed a
complaint, styled Michael Blocker v. RARE Hospitality International, Inc. d/b/a
Longhorn Steaks, Inc., in the United States District Court, Northern District of
Georgia,
14
<PAGE> 15
Atlanta Division. Civil Action File No. 1:97-CV-0794-JEC. The individual
plaintiff, who purports to represent a class of all male applicants who have
sought wait staff positions with the Company, filed this putative class action
alleging a pattern and practice of discrimination on the basis of race and
gender in the hiring of wait staff employees. The complaint further alleges the
individual plaintiff has been discriminated against on the basis of his race and
gender, and has been retaliated against upon complaining of the discrimination.
The Company has answered this complaint, denies any liability and intends to
vigorously defend the case. On August 4, 1997 the plaintiff filed a motion to
certify the action as a class action. On December 16, 1997, the court denied the
plaintiff's motion for class certification, requiring the action to proceed on
an individual basis. Although it is not possible at this time to determine the
outcome of the lawsuit or the effect of its resolution on the Company's
financial position or operating results, management believes that the Company's
defenses have merit and that the resolution of this matter will not have a
material adverse effect on the Company's financial condition or results of
operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted for a vote of security holders during the
fourth quarter of 1997.
15
<PAGE> 16
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Common Stock was traded on the Nasdaq National Market under the symbol
"LOHO" from March 31, 1992 to January 10, 1997. The stock now trades under the
symbol "RARE". The table below sets forth the high and low sales prices of the
Company's Common Stock, as reported on the Nasdaq National Market, during the
periods indicated.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED DECEMBER 29, 1996 HIGH LOW
-------------------------------------------- -------- ------
<S> <C> <C>
First Quarter............................. $24 3/4 $15 1/2
Second Quarter............................ 29 1/2 21 3/4
Third Quarter............................. 25 1/2 14 1/2
Fourth Quarter............................ 21 1/8 14 3/4
FISCAL YEAR ENDED DECEMBER 28, 1997
-------------------------------------------
First Quarter............................. $19 1/2 $12 3/4
Second Quarter............................ 16 3/4 10 3/4
Third Quarter............................. 14 1/8 9 1/2
Fourth Quarter............................ 11 1/8 8 5/8
</TABLE>
As of March 11, 1998, there were 385 holders of record of Common Stock.
Since the Company's public offering in 1992, the Company has not declared or
paid any cash dividends or distributions on its capital stock. The Company does
not intend to pay any cash dividends on its Common Stock in the foreseeable
future, as the current policy of the Company's Board of Directors is to retain
all earnings to support operations and finance expansion. The Company's existing
revolving line of credit restricts the payment of cash dividends without prior
lender approval. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources." Future
declaration and payment of dividends, if any, will be determined in light of
then current conditions, including the Company's earnings, operations, capital
requirements, financial condition, restrictions in financing arrangements and
other factors deemed relevant by the Board of Directors.
While the Company has not declared or paid any cash dividends on its capital
stock since its initial public offering, due to the accounting for a subsequent
acquisition as a pooling of interests the Company's consolidated financial
statements reflect distributions made by certain entities acquired by the
Company prior to such acquisition.
On December 28, 1997, the registrant issued 36,183 shares of its common
stock (the "Shares") and issued a note payable in the amount of $361,832 to
Pangulf Ventures, Inc. ("Pangulf") in exchange for Pangulf's interest in Eagle
Ventures, a joint venture partnership between Pangulf and the registrant.
Exemption from registration of the Shares was claimed under Rules 504, 505 and
506 promulgated under the Securities Act of 1933, as amended.
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<PAGE> 17
ITEM 6. SELECTED FINANCIAL DATA
Following is selected consolidated financial data as of and for each of the
years in the five-year period ended December 28, 1997. The Consolidated
Financial Statements as of December 28, 1997 and December 29, 1996 and for each
of the years in the three-year period ended December 28, 1997 and the
independent auditors' report thereon are included in this Form 10-K. The data
should be read in conjunction with the Consolidated Financial Statements of the
Company and related notes in this Form 10-K and "Management's Discussion and
Analysis of Financial Condition and Results of Operations," also included in
this Form 10-K.
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
-----------------------------------------------------------------
DEC. 28, DEC. 29, DEC. 31, DEC. 31, DEC. 31,
1997 1996 1995 1994 1993
--------- --------- --------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Restaurant sales ......................................... $ 264,727 $ 212,894 $ 149,279 $ 111,025 $ 85,710
Wholesale meat sales ..................................... -- 2,547 6,495 3,389 3,504
Franchise revenues ....................................... 27 308 606 615 478
--------- --------- --------- --------- --------
Total revenues ...................................... 264,754 215,749 156,380 115,029 89,692
--------- --------- --------- --------- --------
Costs and expenses:
Cost of restaurant sales ................................. 97,568 78,637 54,074 39,956 30,143
Cost of wholesale meat sales ............................. -- 2,491 6,159 3,137 3,174
Operating expenses-- restaurants ......................... 119,480 94,587 67,629 50,924 37,622
Operating expenses-- meat division ....................... -- 234 766 702 734
Provision for asset impairments,
restaurant closings, and other charges ................. 23,666 1,436 155 1,120 --
Merger and conversion expenses ........................... -- 2,900 -- -- --
Depreciation and amortization-- restaurants .............. 15,218 12,191 7,171 5,025 3,946
General and administrative expenses ...................... 23,590 13,732 11,082 10,131 6,896
--------- --------- --------- --------- ---------
Total costs and expenses ............................ 279,522 206,208 147,036 110,995 82,515
--------- --------- --------- --------- ---------
Operating (loss) income ............................. (14,768) 9,541 9,344 4,034 7,177
Interest expense (income), net ............................. 1,245 (79) (291) (794) (372)
Provision for litigation settlement ........................ -- 605 -- -- --
Minority interest .......................................... 1,219 602 5 -- --
--------- --------- --------- --------- ---------
(Loss) earnings before income taxes ................. (17,232) 8,413 9,630 4,828 7,549
Income tax (benefit) expense ............................... (5,000) 3,170 3,047 1,286 1,855
--------- --------- --------- --------- ---------
Net (loss) earnings ................................ $ (12,232) $ 5,243 $ 6,583 $ 3,542 $ 5,694
========= ========= ========= ========= =========
Basic (loss) earnings per common share ..................... $ (1.04) $ 0.46 $ 0.67 $ 0.37 $ 0.69
========= ========= ========= ========= =========
Weighted average common shares outstanding (basic) ......... 11,751 11,302 9,753 9,517 8,227
========= ========= ========= ========= =========
Diluted (loss) earnings per common share ................... $ (1.04) $ 0.45 $ 0.66 $ 0.37 $ 0.69
========= ========= ========= ========= =========
Weighted average common shares outstanding (diluted) ....... 11,751 11,631 9,955 9,526 8,227
========= ========= ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
-----------------------------------------------------------------
DEC. 28, DEC. 29, DEC. 31, DEC. 31, DEC. 31,
1997 1996 1995 1994 1993
--------- --------- --------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital (deficit) .................................. $ (2,905) $ 2,065 $ 561 $ 22,488 $ 19,076
Total assets ............................................... 193,051 151,594 107,735 81,951 62,319
Debt, net of current installments .......................... 43,000 7,100 13,858 1,808 5,108
Obligations under capital leases, net of
current installments ..................................... 5,051 -- -- -- --
Minority interest .......................................... 4,890 3,301 615 -- --
Total shareholders' equity ................................. 111,980 121,384 78,133 70,289 49,446
</TABLE>
17
<PAGE> 18
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL
On September 13, 1996, the Company completed the acquisition of Bugaboo
Creek Steak House, Inc., along with related restaurant and real estate
properties. The acquisition provided for the issuance of 2,939,062 shares of the
Company's common stock to the stockholders of Bugaboo Creek Steak House, Inc.
and 240,410 shares of the Company's common stock for the purchase of three other
related restaurants and certain related real estate. The exchange of shares was
accounted for as a pooling of interests, and accordingly, the accompanying
consolidated financial statements have been restated to include the accounts and
operations of Bugaboo Creek Steak House, Inc. and the related restaurant and
real estate properties that were acquired for all periods presented.
Effective July 1, 1996, the Company changed its fiscal year-end from
December 31 to a 52- or 53-week year ending on the last Sunday in December.
Interim reporting periods within 1996 contained three months for the first two
quarters. The third and fourth quarters of 1996 each contained 13 weeks. Each
quarter within 1997 contained 13 weeks. Fiscal 1996, which ended on December 29,
1996, and fiscal 1997, which ended on December 28, 1997, each contained 52
weeks. All general references to years relate to fiscal years, unless otherwise
noted.
The Company's revenues are derived primarily from restaurant sales from
Company-owned and joint venture restaurants. The Company also derives a small
percentage of its total revenue from franchise revenues from unaffiliated
franchised restaurants. Cost of restaurant sales consists of food and beverage
costs for Company-owned and joint venture restaurants. Restaurant operating
expenses consist of all other restaurant-level costs. These expenses include the
cost of labor, advertising, operating supplies, rent, and utilities.
Depreciation and amortization includes only the depreciation attributable to
restaurant-level capital expenditures and amortization primarily associated with
pre-opening expenditures.
General and administrative expenses include finance, accounting, management
information systems, and other administrative overhead related to support
functions for Company-owned, joint venture, and franchise restaurant operations.
Minority interest consists of partners' share of earnings in joint venture
restaurants.
In April 1996, the Company discontinued the meat cutting and distribution
operations of its meat division, but retained the purchasing and quality control
functions. As a result, the Company no longer generates wholesale meat sales to
franchises or unaffiliated businesses. Prior to April 1996, the LongHorn
Steakhouse restaurants were not charged distribution costs, which were absorbed
by the Company's meat division. Subsequent to April 1996 the LongHorn Steakhouse
restaurants absorb the full cost of purchased beef.
The Company defines the comparable restaurant base for 1997 to include those
restaurants open prior to October 1, 1995. The Company defines the comparable
restaurant base for 1996 to include those restaurants open prior to October 1,
1994. Average weekly sales are defined as total restaurant sales divided by
restaurant weeks. A "restaurant week" is one week during which a single
restaurant is open, so that two restaurants open during the same week
constitutes two restaurant weeks.
The Company's revenues and expenses can be significantly affected by the
number and timing of the opening of additional restaurants. The timing of
restaurant openings also can affect the average sales and other period-to-period
comparisons.
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<PAGE> 19
The following table sets forth the percentage relationship to total revenues
of the listed items included in the Company's statement of earnings, except as
indicated:
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
----------------------------------------
DECEMBER 28, DECEMBER 29, DECEMBER 31,
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Revenues:
Restaurant Sales:
LongHorn Steakhouse ............................ 64.3% 63.3% 62.7%
Bugaboo Creek Steak House ...................... 16.9 20.4 16.6
The Capital Grille ............................. 14.9 9.4 9.1
Other restaurants .............................. 3.9 5.6 7.1
----- ----- -----
Total restaurant sales ..................... 100.0 98.7 95.5
Wholesale meat sales ............................ -- 1.2 4.1
Franchise revenues .............................. -- 0.1 0.4
----- ----- -----
Total revenues ............................. 100.0 100.0 100.0
----- ----- -----
Costs and expenses:
Cost of restaurant sales(1) ..................... 36.9 36.9 36.2
Cost of wholesale meat sales(1) ................ -- 97.8 94.8
Operating expenses--restaurants(1) .............. 45.1 44.4 45.3
Operating expenses-- meat division .............. -- 0.1 0.5
Provision for asset impairments,
restaurant closings, and other charges ........ 8.9 0.7 0.1
Merger and conversion expenses .................. -- 1.3 --
Depreciation and amortization--restaurants(1) ... 5.7 5.7 4.6
General and administrative expenses ............. 8.9 6.4 7.1
Total costs and expenses ................... 105.5 95.6 94.0
----- ----- -----
Operating (loss) income .................... (5.5) 4.4 6.0
Interest expense (income), net ................... 0.5 (0.1) (0.2)
Provision for settlement of shareholder suit ..... -- 0.3 --
Minority interest ................................ 0.5 0.3 --
----- ----- -----
(Loss) earnings before income taxes ........ (6.5) 3.9 6.2
Income tax (benefit) expense .................... (1.9) 1.5 2.0
----- ----- -----
Net (loss) earnings ........................ (4.6)% 2.4% 4.2%
===== ===== =====
</TABLE>
(1) Cost of restaurant sales, restaurant operating expenses, and depreciation
and amortization are expressed as a percentage of restaurant sales, and cost
of wholesale meat sales is expressed as a percentage of wholesale meat
sales.
RESULTS OF OPERATIONS
Year Ended December 28, 1997 Compared to Year Ended December 29, 1996
REVENUES
Total revenues increased 22.7% to $264.8 million for 1997 compared to $215.7
million for 1996. Restaurant sales increased 24.3% to $264.7 million in 1997
compared to $212.9 million in 1996.
LongHorn Steakhouse:
Sales in the LongHorn Steakhouse restaurants increased 24.8% to $170.3 million
for 1997 compared to $136.5 million for 1996. The increase reflects a 23.7%
increase in restaurant operating weeks in 1997 as compared to 1996, resulting
from an increase in the number of LongHorn Steakhouse restaurants. Average
weekly sales for all LongHorn Steakhouse restaurants in 1997 were $39,035, a
0.5% increase over 1996. Sales for the 54 comparable LongHorn Steakhouse
restaurants increased 0.2% in 1997 as compared to 1996.
Bugaboo Creek Steak House:
Sales in the Bugaboo Creek Steak House restaurants increased 1.3% to $44.6
million for 1997 compared to $44.1 million for 1996. The increase reflects a
6.9% increase in restaurant weeks in 1997 as compared to 1996, resulting from an
increase in the number of
19
<PAGE> 20
Bugaboo Creek Steak House restaurants. Average weekly sales for all Bugaboo
Creek Steak House restaurants in 1997 were $59,114, a 5.2% decrease from 1996.
Sales for the ten comparable Bugaboo Creek Steak House restaurants decreased
5.3% in 1997 as compared to 1996. The decrease in comparable restaurants sales
at Bugaboo Creek Steak House restaurants is primarily attributable to a decrease
in customer counts.
The Capital Grille:
Sales in The Capital Grille restaurants increased 94.4% to $39.5 million for
1997 compared to $20.3 million for 1996. The increase reflects a 96.4% increase
in restaurant operating weeks in 1997 as compared to 1996, resulting from an
increase in the number of The Capital Grille Restaurants. Average weekly sales
for all The Capital Grille restaurants in 1997 were $98,169, a 1.0% decrease
from 1996. Sales for the three comparable The Capital Grille restaurants
increased 8.7% in 1997 as compared to 1996. The increase in comparable
restaurant sales at The Capital Grille restaurants is primarily attributable to
an increase in customer counts.
Company-wide:
A contracted meat distribution system was implemented for the LongHorn
Steakhouse restaurants during the first half of 1996, thereby eliminating the
need for an internal meat production and distribution facility. Accordingly, the
Company's meat cutting and distribution activities ceased during 1996 and
wholesale meat sales were eliminated. Franchise revenues decreased to $27,000 in
1997 compared to $308,000 in 1996 due to i) the termination of the franchise
agreement for the Hoover Alabama franchised LongHorn Steakhouse restaurant, ii)
the Company's acquisition of two franchised LongHorn Steakhouse restaurants in
the first quarter of 1997, iii) the closure of two franchised LongHorn
Steakhouse restaurants (one each, in the first and third quarters of 1996), and
iv) the formation of a joint venture to operate three previously franchised
LongHorn Steakhouse restaurants in the second quarter of 1996.
COSTS AND EXPENSES
Cost of restaurant sales, as a percentage of restaurant sales, remained flat in
1997 and 1996 at 36.9%. Due to the elimination of wholesale meat sales during
1996, there were no wholesale meat costs in 1997, compared to 97.8% of wholesale
meat sales in 1996.
Restaurant operating expenses increased as a percentage of restaurant sales in
1997 to 45.1% from 44.4% in 1996. The increase was primarily attributable to i)
incremental labor, controllable expenses and start-up expenses associated with
increased activity in the Company's new store opening program, as the Company
opened 25 restaurants in 1997; and ii) increased labor and controllable expenses
as the Company focused on better execution and higher standards in the LongHorn
Steakhouse concept.
The provision for asset impairments, restaurant closings, and other charges of
$23.7 million in 1997 was determined primarily under Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and Long-Lived Assets to be Disposed Of" ("SFAS No. 121") by comparing
expected future cash flows to the carrying value of these assets. This
determination was the result of a decision by management, in the fourth quarter,
to close seven restaurants and certain administrative facilities, as well as the
Company's assessment of the impairment of certain assets based upon the
Company's current plans. The Company's current plans resulted from significant
changes in key management and a strategic review process employed by new
management. The provision for asset impairments, restaurant closings, and other
charges includes adjustments of $8.3 million to impaired long-lived assets to be
disposed of, adjustments of $6.0 million to the carrying values of impaired
long-lived assets to be held and used, $4.2 million of goodwill write-offs and
approximately $5.2 million in accrued costs primarily associated with closed
facilities. The provision for asset impairments, restaurant closings, and other
charges of $1.4 million in 1996, represented adjustments to the carrying value
of two restaurants that the Company determined would be closed.
General and administrative expenses increased to $23.6 million in 1997, or 8.9%
of total revenues, from $13.7 million in 1996, or 6.4% of total revenues. The
increase as a percentage of total revenues was primarily due to increased costs
related to the accelerated pace of restaurant openings in 1997 and costs
resulting from a higher level of management turnover plus $5.0 million in
nonrecurring expenses. These non-recurring expenses include charges resulting
from current asset reconciliation and evaluation processes and severance, hiring
and other employment-related charges.
Interest expense increased to $1.2 million in 1997 compared to $79,000 in
interest income in 1996. The increase in interest expense is due to higher
average borrowings outstanding under the Company's revolving credit agreement.
20
<PAGE> 21
Minority interest increased to $1.2 million in 1997 from $602,000 in 1996. This
reflects an increase in the number of joint-venture restaurants to 43 at
December 28, 1997, from 35 at December 29, 1996, partially offset by the
purchase of joint venture partners' partnership interests in 10 joint venture
restaurants during the fourth quarter of 1997.
Income tax benefit for 1997 was $5.0 million due to the pre-tax loss reported by
the Company, resulting primarily from the aggregate $28.7 million in SFAS No.
121 charges and non-recurring general and administrative expenses recorded
during 1997. Income tax expense in 1996 was 37.7% of earnings before income
taxes, reflecting $2.5 million of nondeductible merger and conversion expenses,
offset primarily by the benefits of FICA tip credits.
The net loss of $12.2 million in 1997, as compared to net earnings of $5.2
million in 1996, reflected the net effect of the items discussed above.
Year Ended December 29, 1996 Compared to Year Ended December 31, 1995
REVENUES
Total revenues increased 37.9% to $215.7 million for 1996 compared to $156.4
million for 1995. Restaurant sales increased 42.5% to $212.8 million in 1996
compared to $149.3 million in 1995.
LongHorn Steakhouse:
Sales in the LongHorn Steakhouse restaurants increased 39.3% to $136.5
million for 1996 compared to $98.0 million for 1995. The increase reflects a
28.8% increase in restaurant weeks in 1996 as compared to 1995, resulting
primarily from the opening of 14 new LongHorn Steakhouse restaurants and the
acquisition of 3 additional LongHorn Steakhouse restaurants. Average weekly
sales for all LongHorn Steakhouse restaurants in 1996 were $38,858, a 8.1%
increase over 1995. Sales for the 45 comparable LongHorn Steakhouse restaurants
increased 3.0% in fiscal 1996 as compared to fiscal 1995. The increase in
comparable restaurant sales at the LongHorn Steakhouse restaurants is primarily
attributable to an increase in customer counts.
Bugaboo Creek Steak House:
Sales in the Bugaboo Creek Steak House restaurants increased 70.0% to $44.1
million for 1996 compared to $25.9 million for 1995. The increase reflects a
77.6% increase in restaurant weeks in 1996 as compared to 1995, resulting
primarily from the opening of 3 new Bugaboo Creek Steak House restaurants.
Average weekly sales for all Bugaboo Creek Steak House restaurants in 1996 were
$62,370, a 4.3% decrease from 1995. Sales for the 5 comparable Bugaboo Creek
Steak House restaurants decreased 9.4% in fiscal 1996 as compared to fiscal
1995. The decrease in comparable restaurants sales at the Bugaboo Creek Steak
House restaurants is primarily attributable to a decrease in customer counts.
Bugaboo Creek Steak House restaurant customer counts and sales in 1996 were
severely impacted by record-setting winter storms in the northeastern and
mid-Atlantic regions of the United States.
The Capital Grille:
Sales in The Capital Grille restaurants increased 43.0% to $20.3 million for
1996 compared to $14.2 million for 1995. The increase reflects a 32.1% increase
in restaurant weeks in 1996 as compared to 1995, resulting primarily from the
opening of 3 new The Capital Grille restaurants. Average weekly sales for all
The Capital Grille restaurants in 1996 were $99,166, a 8.3% increase over 1995.
Sales for the 2 comparable The Capital Grille restaurants increased 15.2% in
fiscal 1996 as compared to fiscal 1995. The increase in comparable restaurants
sales at The Capital Grille restaurants is primarily attributable to an increase
in customer counts.
Company-wide:
Wholesale meat sales decreased $4.0 million to $2.5 million in 1996 from
$6.5 million in 1995. This decrease resulted from the cessation of meat cutting
and distribution at the Company's meat division, Superior Meats, Ltd. As a
result, the Company discontinued selling meat to its LongHorn Steakhouse
franchisees and other unaffiliated parties.
21
<PAGE> 22
Franchise revenues decreased $298,000 to $308,000 in 1996 from $606,000 in
1995. This decrease resulted primarily from the closure of a franchised LongHorn
Steakhouse restaurant in Roanoke, Virginia in the first quarter of 1996, the
Company's purchase of the two franchised LongHorn Steakhouse restaurants in
Greensboro and High Point, North Carolina in the third quarter of 1995, the
formation of a joint venture to own and operate these two restaurants along with
the three franchised LongHorn Steakhouse restaurants in Charlotte, North
Carolina and Columbia, South Carolina in the second quarter of 1996 and the
closure of a franchised LongHorn Steakhouse restaurant in Birmingham, Alabama in
the third quarter of 1996.
COSTS AND EXPENSES
Cost of restaurant sales in 1996 as a percentage of restaurant sales
increased to 36.9% from 36.2% in 1995. During 1995 and early 1996, the cost of
restaurant sales in the LongHorn Steakhouse restaurants was reduced by the
distribution costs absorbed by the Company's meat division. If these
distribution costs absorbed by the meat division in 1995 and 1996 had been
charged directly to the LongHorn Steakhouse restaurants, cost of restaurant
sales would have been 37.1% in 1996 compared to 36.9% in 1995. The increase was
primarily due to higher contracted beef prices and late-year increases in dairy
and baked good costs during 1996.
The cost of wholesale meat sales increased to 97.8% of wholesale meat sales
in 1996 as compared to 94.8% in 1995, primarily as the result of the resale of
certain overstocks of beef at lower than normal margins.
Restaurant operating expenses decreased as a percentage of restaurant sales
in 1996 to 44.4% from 45.3% in 1995. This decrease was primarily attributable to
higher sales levels and relatively stable fixed costs in the LongHorn Steakhouse
restaurants and The Capital Grille restaurants. Meat division operating costs
decreased to 0.1% of revenues in 1996 as compared to 0.5% in 1995 as the meat
cutting and distribution operations were discontinued.
In 1996, the Company recorded $1.4 million in before-tax benefits related to
the closure of two LongHorn Steakhouse restaurants in Cincinnati, Ohio and
Knoxville, Tennessee. The Ohio restaurant was closed in the fourth quarter of
1996. In 1995, the Company recorded $155,000 in before-tax benefits related to
the closure of one LongHorn Steakhouse restaurant in Jacksonville, Florida,
which was closed in the first quarter of 1996. The provisions included estimated
future net lease obligations and other costs of closing the facilities and the
writedown of restaurant assets to estimated net realizable value.
In 1996, the Company expensed transaction costs of $2.9 million associated
with the acquisition of Bugaboo Creek Steak House, Inc. and related restaurant
and real estate properties. These transaction costs consisted of investment
banking, accounting, legal and regulatory agency fees and other expenses related
to completing the acquisition and integrating the management information
systems.
General and administrative expenses increased to $13.7 million in 1996, or
6.4% of total revenues, from $11.1 million in 1995, or 7.1% of total revenues.
The dollar amount increase was primarily due to increased labor and support
expenses related to managing a larger number of restaurants; further, in the
restated 1995 and 1996 periods, two full support offices were maintained, one of
which (Providence, Rhode Island) was reduced to an operations support office
during the last quarter of 1996. The decreased percentage is due to restaurant
revenues increasing at a faster rate than general and administrative expenses,
which have a large fixed component.
Operating income increased to $9.5 million for 1996 from $9.3 million for
1995. After adjusting for one-time merger and conversion expenses, operating
income increased a total of $3.1 million, or 33.3%. This increase is primarily
attributable to higher sales levels resulting from an increase in the Company's
restaurant base, relatively stable fixed costs and decrease in general and
administrative costs as a percentage of revenues, but is partially offset by the
provision for restaurant closings discussed above.
Interest income, net decreased to $79,000 for 1996 from $291,000 for 1995.
The reduction was due to lower average levels of cash and cash equivalents and
higher average levels of long-term debt in 1996 as compared to 1995.
In 1996, the Company recorded a $605,000 provision associated with the
defense and settlement of a shareholder litigation matter.
22
<PAGE> 23
Minority interest increased to $602,000 in 1996 from $5,000 in 1995. This
reflects the increase in the number of joint venture restaurants to 35
restaurants at fiscal year end 1996 from 16 at fiscal year end 1995.
Income tax expense for 1996 was 37.7% of earnings before income taxes,
reflecting $2.5 million of non-deductible merger and conversion expenses, offset
primarily by the benefits of FICA tip credits.
Net earnings decreased 21.2% to $5.2 million for 1996 from net earnings of
$6.6 million for 1995, reflecting the net effect of the items discussed above.
LIQUIDITY AND CAPITAL RESOURCES
The Company requires capital primarily for the development of new
restaurants, selected acquisitions and the refurbishment of existing
restaurants. Capital expenditures and asset acquisitions totaled $56.2 million
in 1997, $45.5 million in 1996, and $45.8 million in 1995. The Company's primary
sources of working capital have been the proceeds of its previous public
offerings of Common Stock in 1992, 1993 and 1996, the public offering of Bugaboo
Creek Steak House, Inc. in 1994, cash flow from operations and borrowings under
its line of credit.
As of March 11, 1998, the Company had borrowings of $43.0 million under a
$60.0 million line of credit, which bears interest at the rate of either (i) 75
to 150 basis points over LIBOR (depending upon the Company's leverage ratio)
with a term that the Company selects, ranging from 30 days to 6 months or (ii)
prime. As of March 11, 1998, the weighted average rate on all outstanding
borrowings under the Company's line of credit was 7.15%. Borrowings under the
line of credit are unsecured. The line of credit contains certain financial
covenants including a debt to capitalization ratio, a leverage ratio, an
interest coverage ratio, a minimum net worth and a limit on capital expenditures
and payment of dividends. The Company is currently in compliance with or has
obtained waivers for events of non-compliance with the covenants of its debt
agreement.
The Company intends to open approximately 12 Company-owned and joint venture
restaurants in 1998. The Company estimates that its capital expenditures
(without consideration of contributions from joint venture partners) will be
approximately $38 million in 1998. The capital expenditure estimate for 1998
includes the estimated cost of developing 12 new restaurants, ongoing
refurbishment in the restaurants, a planned expansion of the corporate offices
in Atlanta, and continued investment in improved management information systems.
The Company expects that available borrowings under the Company's line of
credit, together with cash on hand and cash provided by operating activities,
will provide sufficient funds to finance its expansion plans through 1998.
Since substantially all sales in the Company's restaurants are for cash, and
accounts payable are generally due in seven to 30 days, the Company operates
with little or negative working capital.
The preceding discussion of liquidity and capital resources contains certain
forward-looking statements. Forward-looking statements involve a number of risks
and uncertainties, and in addition to the factors discussed in this Form 10-K,
among the other factors that could cause actual results to differ materially are
the following: failure of facts to conform to necessary management estimates and
assumptions; the Company's ability to identify and secure suitable locations on
acceptable terms, open new restaurants in a timely manner, hire and train
additional restaurant personnel and integrate new restaurants into its
operations; the continued implementation of the Company's business discipline
over a large restaurant base; the economic conditions in the new markets into
which the Company expands and possible uncertainties in the customer base in
these areas; changes in customer dining patterns; competitive pressures from
other national and regional restaurant chains; business conditions, such as
inflation or a recession, and growth in the restaurant industry and the general
economy; and other risks identified from time to time in the Company's SEC
reports, registration statements and public announcements. See the description
of forward-looking statements found in "Documents Incorporated by Reference."
EFFECT OF INFLATION
Management believes that inflation has not had a material effect on earnings
during the past several years. Inflationary increases in the cost of labor, food
and other operating costs could adversely affect the Company's restaurant
operating margins. In the past, however, the Company generally has been able to
modify its operations to offset increases in its operating costs.
23
<PAGE> 24
Federal law, enacted during 1996, increased the hourly minimum wage by $0.50
to $4.75 on October 1, 1996 and by another $0.40 to $5.15 on September 1, 1997.
The legislation, however, froze the wages of tipped employees at $2.13 per hour
if the difference is earned in tip income. Although the Company experienced a
slight increase in hourly labor costs during 1997, the effect of the increase in
minimum wage was significantly diluted due to the fact that the majority of the
Company's hourly employees are tipped and the Company's non-tipped employees
have historically earned wages greater than the federal minimum. As such, the
Company's increases in hourly labor cost were not proportionate to the increases
in minimum wage rates. The impact of minimum wage increases is expected to
slightly increase hourly labor costs in 1998.
YEAR 2000
The Company has implemented plans to address its potential exposure to
so-called "Year 2000" problems. The Company's key financial, informational and
operational systems have been assessed and detailed plans have been developed to
address system modifications required by December 31, 1999. The Company expenses
all costs associated with these system changes as the costs are incurred. The
financial impact of making the required system changes is not expected to be
material to the Company's consolidated financial position or results of
operations. However, the Company is unable to estimate the costs that it may
incur as a result of Year 2000 problems suffered by the parties with which it
deals, such as suppliers, and there can be no assurance that the Company will
successfully address the Year 2000 problems present in its own systems.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board (the "FASB") issued
Statement of Financial Accounting Standards No. 130 ("SFAS No. 130"), "Reporting
Comprehensive Income". SFAS No. 130, which will be effective for the Company's
fiscal 1998, establishes standards for reporting and display of comprehensive
income and its components in a full set of general-purpose financial statements.
Comprehensive income is defined as the change in equity of a business enterprise
during a period from transactions and other events and circumstances from
nonowner sources. It includes all changes in equity during a period, except
those resulting from investments by owners and distributions to owners. The
Company expects that implementation of SFAS No. 130 will not have a material
effect on its consolidated financial position or results of operations.
Additionally, during 1997, the FASB issued Statement of Financial
Accounting Standards No. 131 "Disclosures About Segments of an Enterprise and
Related Information" ("SFAS No. 131"). SFAS No. 131, which is effective for
1998, significantly modifies disclosures associated with segments of an entity.
Disclosures of segment information under the requirements of SFAS No. 131 are
made pursuant to the "Management Approach." Under this approach, operating
segments for disclosure correspond to the organizational units management uses
internally to monitor performance and make operating decisions. Segment
aggregation would be permitted if it can be determined that the segments have
essentially the same business activities in essentially similar economic
environments. Management is currently evaluating the disclosure impact of the
adoption of SFAS No. 131.
24
<PAGE> 25
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
RARE HOSPITALITY INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 28, 1997, DECEMBER 29, 1996 AND DECEMBER 31, 1995
WITH INDEPENDENT AUDITORS' REPORT THEREON
25
<PAGE> 26
RARE HOSPITALITY INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 28, 1997, DECEMBER 29, 1996 AND DECEMBER 31, 1995
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report.......................................... 27
Consolidated Balance Sheets........................................... 28
Consolidated Statements of Operations................................. 29
Consolidated Statements of Shareholders' Equity....................... 30
Consolidated Statements of Cash Flows................................. 31
Notes to Consolidated Financial Statements............................ 32
</TABLE>
26
<PAGE> 27
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
RARE Hospitality International, Inc.:
We have audited the accompanying consolidated balance sheets of RARE
Hospitality International, Inc. and subsidiaries (the "Company") as of December
28, 1997 and December 29, 1996, and the related consolidated statements of
operations, shareholders' equity, and cash flows for each of the years in the
three-year period ended December 28, 1997. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated 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, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of RARE
Hospitality International, Inc. and subsidiaries as of December 28, 1997 and
December 29, 1996, and the results of their operations and their cash flows for
each of the years in the three-year period ended December 28, 1997 in conformity
with generally accepted accounting principles.
KPMG PEAT MARWICK LLP
Atlanta, Georgia
February 27, 1998
27
<PAGE> 28
RARE HOSPITALITY INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 28, 1997 AND DECEMBER 29, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................ $ 1,752 $ 6,478
Marketable debt securities............................... 609 861
Accounts receivable...................................... 2,054 2,522
Inventories.............................................. 9,152 7,883
Prepaid expenses......................................... 1,373 1,465
Preopening costs, net of accumulated amortization........ 3,385 2,665
Refundable income taxes ................................. 6,900 --
--------- ---------
Total current assets............................. 25,225 21,874
Property and equipment, less accumulated depreciation and
amortization (notes 4 and 9)............................. 155,758 120,431
Goodwill, less accumulated amortization.................... 5,304 6,139
Deferred income taxes (note 7)............................. 4,408 816
Other...................................................... 2,356 2,334
--------- ---------
Total assets..................................... $ 193,051 $ 151,594
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable......................................... 12,739 11,385
Accrued expenses (note 5)................................ 14,873 7,652
Current installments of obligations under
capital leases (note 9)................................ 518 --
Income taxes payable..................................... -- 500
Deferred income taxes (note 7)........................... -- 272
--------- ---------
Total current liabilities................................ 28,130 19,809
Debt, net of current installments (note 6)................. 43,000 7,100
Obligations under capital leases, net of current
installments (note 9).................................... 5,051 --
--------- ---------
Total liabilities................................ 76,181 26,909
--------- ---------
Minority interest.......................................... 4,890 3,301
Shareholders' equity (notes 2, 6, 11, and 12):
Preferred stock, no par value. Authorized 10,000 shares,
none issued........................................... -- --
Common stock, no par value. Authorized 25,000 shares;
issued and outstanding 11,979 shares and 11,653 shares
at December 28, 1997 and December 29, 1996,
respectively.......................................... 103,981 101,099
Retained earnings........................................ 7,999 20,231
Unrealized gain on marketable debt securities............ -- 54
--------- ---------
Total shareholders' equity....................... 111,980 121,384
Commitments and contingencies (notes 8, 9, and 13) --------- ---------
Total liabilities and shareholders' equity....... $ 193,051 $ 151,594
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
28
<PAGE> 29
RARE HOSPITALITY INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 28, 1997, DECEMBER 29, 1996 AND DECEMBER 31, 1995
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Revenues:
Restaurant sales:
LongHorn Steakhouse .................................... $ 170,343 $ 136,547 $ 98,034
Bugaboo Creek Steak House .............................. 44,631 44,060 25,929
The Capital Grille ..................................... 39,520 20,329 14,201
Other restaurants ...................................... 10,233 11,958 11,115
--------- --------- ---------
Total restaurant sales ............................... 264,727 212,894 149,279
Wholesale meat sales ................................... -- 2,547 6,495
Franchise revenues ..................................... 27 308 606
--------- --------- ---------
Total revenues ....................................... 264,754 215,749 156,380
--------- --------- ---------
Costs and expenses:
Cost of restaurant sales .................................. 97,568 78,637 54,074
Cost of wholesale meat sales .............................. -- 2,491 6,159
Operating expenses-- restaurants .......................... 119,480 94,587 67,629
Operating expenses-- meat division ........................ -- 234 766
Provision for asset impairments, restaurant
closings, and other charges (note 3) .................... 23,666 1,436 155
Merger and conversion expenses (note 3) ................... -- 2,900 --
Depreciation and amortization-- restaurants ............... 15,218 12,191 7,171
General and administrative expenses ....................... 23,590 13,732 11,082
--------- --------- ---------
Total costs and expenses ............................. 279,522 206,208 147,036
--------- --------- ---------
Operating (loss) income .............................. (14,768) 9,541 9,344
Interest expense (income), net ............................ 1,245 (79) (291)
Provision for settlement of shareholder suit (note 13) .... -- 605 --
Minority interest (note 2) ................................ 1,219 602 5
--------- --------- ---------
(Loss) earnings before income taxes .................. (17,232) 8,413 9,630
Income tax (benefit) expense (note 7) ..................... (5,000) 3,170 3,047
--------- --------- ---------
Net (loss) earnings .................................. $ (12,232) $ 5,243 $ 6,583
========= ========= =========
Basic (loss) earnings per common share .................... $ (1.04) $ 0.46 $ 0.67
========= ========= =========
Weighted average common shares outstanding (basic) ........ 11,751 11,302 9,753
========= ========= =========
Diluted (loss) earnings per common share .................. $ (1.04) $ 0.45 $ 0.66
========= ========= =========
Weighted average common shares outstanding (diluted) ...... 11,751 11,631 9,955
========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
29
<PAGE> 30
RARE HOSPITALITY INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED DECEMBER 28, 1997, DECEMBER 29, 1996 AND DECEMBER 31, 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
UNREALIZED
GAIN (LOSS) ON
COMMON STOCK MARKETABLE TOTAL
--------------------- RETAINED DEBT SHAREHOLDERS'
SHARES DOLLARS EARNINGS SECURITIES EQUITY
--------- --------- --------- ----------- --------------
<S> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1994 ............................ 9,701 $ 61,437 $ 8,766 $ (246) $ 69,957
Net earnings .......................................... -- -- 6,583 -- 6,583
Exercise of stock options ............................. 8 93 -- -- 93
Issuance of shares in connection with acquisition .... 96 1,250 -- -- 1,250
Unrealized gain on marketable debt securities ......... -- -- -- 250 250
--------- --------- --------- --------- ---------
BALANCE, DECEMBER 31, 1995 ............................ 9,805 62,780 15,349 4 78,133
Net earnings .......................................... -- -- 5,243 -- 5,243
Issuance of shares pursuant to public offering ........ 1,781 37,638 -- -- 37,638
Exercise of stock options ............................. 67 681 -- -- 681
Distributions made by acquired companies .............. -- -- (361) -- (361)
Unrealized gain on marketable debt securities ......... -- -- -- 50 50
--------- --------- --------- --------- ---------
BALANCE, DECEMBER 29, 1996 ............................ 11,653 101,099 20,231 54 121,384
Net loss .............................................. -- -- (12,232) -- (12,232)
Exercise of stock options ............................. 290 2,543 -- -- 2,543
Issuance of stock in connection with purchase
of minority interest ................................ 36 339 -- -- 339
Unrealized loss on marketable debt securities ......... -- -- -- (54) (54)
--------- --------- --------- --------- ---------
BALANCE, DECEMBER 28, 1997 ............................ 11,979 $ 103,981 $ 7,999 $ -- $ 111,980
========= ========= ========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
30
<PAGE> 31
RARE HOSPITALITY INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 28, 1997, DECEMBER 29, 1996 AND DECEMBER 31, 1995
(IN THOUSANDS)
<TABLE>
<CAPTION> DECEMBER 28 DECEMBER 29 DECEMBER 31
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net (loss) earnings ............................................ $(12,232) $ 5,243 $ 6,583
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization ................................ 16,418 12,856 7,475
Non-cash portion of provision for asset impairments,
restaurant closings and other charges....................... 22,367 1,436 155
Provision for litigation settlement .......................... -- 605 --
Minority interest ............................................ 1,219 602 5
Preopening costs ............................................. (5,208) (4,341) (4,293)
Deferred tax (benefit) expense ............................... (3,864) (743) 15
Loss on sale of property and equipment ....................... -- -- 68
Changes in assets and liabilities:
Accounts receivable .......................................... 468 (230) (263)
Inventories .................................................. (1,269) (1,746) (2,961)
Prepaid expenses ............................................. 92 2 (572)
Other assets ................................................. (22) (97) --
Refundable income taxes ...................................... (6,900) -- 507
Accounts payable ............................................. (126) 1,020 1,628
Accrued expenses ............................................. 1,222 885 2,396
Other liabilities ............................................ -- (133) (347)
-------- -------- --------
Net cash provided by operating activities ................ 12,165 15,359 10,396
-------- -------- --------
Cash flows from investing activities:
Purchase of marketable debt securities ......................... -- -- (2,288)
Proceeds from sale of marketable debt securities ............... 252 6 6,728
Proceeds from maturity of marketable debt securities ........... -- -- 1,200
Purchase of property and equipment ............................. (52,970) (45,524) (41,115)
Proceeds from sale of property and equipment ................... -- -- 16
Purchase of joint venture partnership interests ................ (535) -- --
Asset acquisitions ............................................. (3,262) -- (4,716)
-------- -------- --------
Net cash used in investing activities .................... (56,515) (45,518) (40,175)
-------- -------- --------
Cash flows from financing activities:
Proceeds from (repayments of) borrowings on
lines of credit, net ......................................... 35,900 (5,950) 13,050
Principal payments on long-term debt ........................... -- (1,833) (13)
Principal payments on capital lease obligations ................ (31) -- --
Proceeds from issuance of shares pursuant to public offering ... -- 37,638 --
Proceeds from minority partner contributions ................... 2,660 1,796 833
Distributions to minority partners ............................. (2,928) (1,634) (223)
Increase in bank overdraft included in accounts payable ........ 1,480 3,873 647
Distributions made by acquired companies ....................... -- (361) --
Proceeds from exercise of stock options ........................ 2,543 681 93
-------- -------- --------
Net cash provided by financing activities ................ 39,624 34,210 14,387
-------- -------- --------
Net (decrease) increase in cash and cash equivalents ..... (4,726) 4,051 (15,392)
Cash and cash equivalents at beginning of year .................. 6,478 2,427 17,819
-------- -------- --------
Cash and cash equivalents at end of year ........................ $ 1,752 $ 6,478 $ 2,427
======== ======== ========
Supplemental disclosure of cash flow information:
Cash paid for income taxes .................................... $ 6,265 $ 2,807 $ 983
======== ======== ========
Cash paid for interest, net of interest capitalized ........... $ 1,039 $ 109 $ 147
======== ======== ========
Supplemental disclosure of non-cash financing and
investing activities:
Assets acquired under capital lease ........................... $ 5,600 $ -- $ --
======== ======== ========
Issuance of common stock in purchase of minority interest ..... $ 339 $ -- $ --
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements
31
<PAGE> 32
RARE HOSPITALITY INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 28, 1997, DECEMBER 29, 1996 AND DECEMBER 31, 1995
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
OPERATIONS
RARE Hospitality International, Inc., including its wholly owned
subsidiaries (the "Company"), is a multi-concept restaurant company operating
primarily in the Eastern United States. At December 28, 1997, the Company
operated the following restaurants:
<TABLE>
<CAPTION>
CONCEPT NUMBER IN OPERATION
-------------------------- --------------------
<S> <C>
LongHorn Steakhouse.......................... 96
Bugaboo Creek Steak House.................... 16
The Capital Grille........................... 10
Other specialty concepts..................... 3
</TABLE>
The Company is a partner in several joint ventures organized for the purpose
of operating LongHorn Steakhouse restaurants. As of December 28, 1997, 42 of the
Company's restaurants operate in joint ventures.
FISCAL YEAR
Effective July 1, 1996, the Company changed its fiscal year-end from
December 31 to a 52- or 53-week year ending on the last Sunday in December.
Fiscal 1996, which ended on December 29, 1996, and fiscal 1997, which ended on
December 28, 1997, each contained 52 weeks. All general references to years
relate to fiscal years, unless otherwise noted.
CASH EQUIVALENTS
For purposes of the consolidated statements of cash flows, the Company
considers all highly liquid investments which have original maturities of three
months or less to be cash equivalents. Cash equivalents, comprised of overnight
repurchase agreements, totalled $563,000 at December 28, 1997. The carrying
amount of these instruments approximates their fair market values. All bank
overdraft balances have been reclassified to accounts payable.
MARKETABLE DEBT SECURITIES
Marketable debt securities are classified as available-for-sale and are
reported at fair market value, with any unrealized gains or losses, net of
deferred income taxes, reflected as a separate component of shareholders'
equity.
INVENTORIES
Inventories, consisting principally of food and beverages, are stated at the
lower of cost or market. Cost is determined using the first-in, first-out (FIFO)
method.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Property under capital leases are
stated at the present value of minimum lease payments. Leasehold improvements
and property held under capital leases are amortized on the straight-line method
over the shorter of the term of the lease, which may include renewals, or the
estimated useful life of the assets (generally 15 years for non-ground lease
sites and 25 years for ground lease sites). Depreciation on property and
equipment is calculated on the straight-line method over the estimated useful
lives of the related assets, which approximates 25 years for buildings, seven
years for equipment and 25 years for land improvements.
32
<PAGE> 33
BASIS OF PRESENTATION
The consolidated financial statements include the financial statements of
RARE Hospitality International, Inc., its wholly owned subsidiaries, and joint
ventures over which the Company exercises control. All significant intercompany
balances and transactions have been eliminated in consolidation.
PRE-OPENING COSTS
Preopening costs are incurred before a restaurant is opened and consist
primarily of wages and salaries, meals, lodging, plus costs related to hiring
and training the management teams and other direct costs associated with opening
new restaurants. These costs are capitalized and amortized over the first 12
months of a new restaurant's operations.
UNREDEEMED GIFT CERTIFICATES
The Company records a liability for outstanding gift certificates at the
time they are issued. Upon redemption, sales are recorded and the liability is
reduced by the amount of certificates redeemed.
GOODWILL
Goodwill, net of accumulated amortization of $466,000 and $499,000 at
December 28, 1997 and December 29, 1996, respectively, represents the excess of
purchase price over fair value of net assets acquired. Goodwill is amortized
using the straight-line method over the expected period to be benefited (from 13
to 25 years). The Company assesses the recoverability of goodwill by determining
whether the amortization of the goodwill balance over its remaining life can be
recovered through undiscounted future operating cash flows of the acquired
operation. The amount of goodwill impairment, if any, is measured based on
projected discounted future operating cash flows using a discount rate
reflecting the Company's average cost of funds. The assessment of the
recoverability of goodwill will be impacted if estimated future operating cash
flows are not achieved. In 1997, the Company's provision for asset impairments,
restaurant closings and other charges included a $4.2 million charge for the
write-off of goodwill recorded upon the acquisition of i) the Company's meat
company; ii) the assets of Lone Star Steaks, Inc. (see note 2); and iii) the
franchise rights obtained from Longhorn Steaks of Alabama (see note 2).
OTHER ASSETS
Other assets consist of organization costs, debt issuance costs, trademarks,
and liquor licenses. Organization costs, trademarks, and liquor licenses are
amortized on a straight-line basis over five years. Debt issuance costs are
amortized on a straight-line basis over the term of the debt.
RESTAURANT CLOSING COSTS
Upon the decision to close or relocate a restaurant, estimated unrecoverable
costs are charged to expense. Such costs include the write-down of buildings
and/or leasehold improvements, equipment, and furniture and fixtures, to the
estimated fair market value less costs of disposal, and a provision for future
lease obligations, less estimated subrental income. The Company provided for the
closure of seven restaurants in 1997, two restaurants in 1996, and one
restaurant in 1995.
RECOVERABILITY OF LONG-LIVED ASSETS
The Company adopted the provisions of Statement of Financial Accounting
Standards No. 121 ("SFAS No. 121"), "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of", on January 1, 1996. SFAS
No. 121 requires the Company to review its long-lived assets related to each
restaurant periodically or whenever events or changes in circumstances indicate
that the carrying amount of a restaurant may not be recoverable. Recoverability
of assets to be held and used is measured by a comparison of the carrying amount
of an asset to future undiscounted net cash flows expected to be generated by
the asset. If such assets are considered to be impaired, the impairment to be
recognized is measured by the amount by which the carrying amount of the assets
exceed the fair value of the assets. Assets to be disposed of are reported at
the lower of the carrying amount or fair value less costs to sell. Considerable
management judgment is required to estimate discounted cash flows and fair value
less costs to sell. Accordingly, actual results could vary significantly from
such estimates. Adoption of SFAS No. 121 did not have a material impact on the
Company's financial position, results of operations, or liquidity.
33
<PAGE> 34
INCOME TAXES
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.
In connection with the merger of the Company with Bugaboo Creek Steak House,
Inc. ("Bugaboo Creek") (see note 2), the Company acquired certain enterprises
affiliated with Bugaboo Creek in a transaction accounted for as a pooling of
interests. Prior to the merger, these affiliated entities were either S
Corporations or partnerships, and as such, their stockholders or partners, and
not the enterprises, were responsible for Federal and state income taxes.
DEVELOPMENT COSTS
Certain direct and indirect costs are capitalized in conjunction with
acquiring and developing new restaurant sites. These costs are amortized over
the life of the related building. Development costs were capitalized as follows:
$737,000 in 1997, $389,000 in 1996, and $411,000 in 1995.
STOCK-BASED COMPENSATION
Prior to January 1, 1996, the Company accounted for its stock option plan in
accordance with the provisions of Accounting Principles Board Opinion No. 25
("APB 25"), "Accounting for Stock Issued to Employees", and related
interpretations. As such, compensation expense would be recorded on the date of
grant only if the current market price of the underlying stock exceeded the
exercise price. On January 1, 1996, the Company adopted Statement of Financial
Accounting Standards No. 123 ("SFAS No. 123"), "Accounting for Stock-Based
Compensation", which permits entities to recognize as expense over the vesting
period the fair value of all stock-based awards on the date of grant.
Alternatively, SFAS No. 123 also allows entities to continue to apply the
provisions of APB 25 and provide pro forma net earnings (loss) and pro forma
earnings (loss) per share disclosures for employee stock option grants made in
1995 and future years as if the fair-value-based method defined in SFAS No. 123
had been applied. The Company has elected to continue to apply the provisions of
APB 25 and provide the pro forma disclosure provisions of SFAS No. 123.
ADVERTISING AND PROMOTION EXPENSES
Advertising and promotion costs are expensed over the period covered by the
related promotion. Total advertising expense included in other operating
expenses was $5,498,000, $4,929,000, and $3,438,000 for the years ended December
28, 1997, December 29, 1996 and December 31, 1995, respectively.
EARNINGS (LOSS) PER SHARE
Effective for the year ending December 28, 1997, the Company adopted the
provisions of Statement of Financial Accounting Standards No. 128 ("SFAS No.
128"), "Earnings Per Share". SFAS No. 128 requires dual disclosure of earnings
(loss) per share-basic and diluted. Basic earnings (loss) per share equals net
earnings (loss) divided by the weighted average number of common shares
outstanding and does not include the dilutive effects of stock options. Diluted
earnings (loss) per share is computed by dividing adjusted net earnings (loss)
by the weighted average number of common shares outstanding after giving effect
to dilutive stock options. For purposes of computing the diluted loss per share,
the potentially dilutive impact of stock options is excluded since the effect
would be antidilutive. In accordance with SFAS No. 128, disclosure of all prior
period earnings per share have been restated.
The following table presents a reconciliation of weighted average shares and
earnings (loss) per share amounts (amounts in thousands, except per share data):
34
<PAGE> 35
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- ------
<S> <C> <C> <C>
Weighted average number of common shares used
in basic calculation ................................ 11,751 11,302 9,753
Dilutive effect of net shares issuable
pursuant to stock option plans ...................... -- 329 202
-------- -------- ------
Weighted average number of common shares used
in diluted calculation .............................. 11,751 11,631 9,955
======== ======= ======
Net (loss) earnings for computation of basic and
diluted earnings per common share ................... $(12,232) $ 5,243 $6,583
Basic earnings per common share ....................... $ (1.04) $ 0.46 $ 0.67
Diluted earnings per common share ..................... $ (1.04) $ 0.45 $ 0.66
</TABLE>
Options to purchase 1,473,093 shares of common stock were outstanding at
December 28, 1997 but were excluded from the computation of diluted loss per
share. Options to purchase 916,392 shares of common stock had exercise prices
ranging from $12.94 to $27.25, which were greater than the average market price
for 1997 and would have been antidilutive.
ACCOUNTS RECEIVABLE
Accounts receivable represent amounts due from restaurant customers and
suppliers and interest receivable relating to marketable debt securities.
FINANCIAL INSTRUMENTS
The carrying value of the Company's cash and cash equivalents, marketable
debt securities, accounts receivable, accounts payable, accrued expenses, debt,
and obligations under capital leases approximates their fair value. The fair
value of a financial instrument is the amount which the instrument could be
exchanged in a current transaction between willing parties. The following
methods and assumptions were used to estimate the fair value of each class of
financial instruments:
For cash and cash equivalents, marketable debt securities, accounts
receivable, accounts payable and accrued expenses the carrying amounts
approximate fair value because of the short maturity of these financial
instruments. The fair value of the Company's debt and obligations under capital
leases is estimated by discounting future cash flows for these instruments at
rates currently offered to the Company for similar debt or long-term leases, as
appropriate.
The fair value of the marketable debt security is obtained from publicly
available sources.
USE OF ESTIMATES
Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities to prepare these financial statements in
conformity with generally accepted accounting principles. Actual results could
differ from those estimates.
RECLASSIFICATIONS
Certain reclassifications have been made to the 1996 consolidated financial
statements to conform with the 1997 presentation.
BUSINESS COMBINATIONS AND JOINT VENTURES
In the fourth quarter of 1997, the Company acquired the ownership interests
of its joint venture partner in ten LongHorn Steakhouse restaurants located in
South Georgia, Southern Alabama, and the Panhandle of Florida for an aggregate
purchase price of $1,088,000 in cash, notes payable, and the Company's common
stock.
In January, 1997, the Company purchased the assets of two previously
franchised locations in Greenville and Spartanburg, South Carolina, in a
transaction accounted for under the purchase method, for approximately $2.0
million in cash. The excess of
35
<PAGE> 36
cost over fair value of tangible assets acquired was approximately $1.4 million
and was recorded as an intangible asset to be amortized over the 13-year period
remaining under the acquired franchise agreement.
In September, 1996, the Company exchanged 3,179,472 newly issued shares of
its common stock for all of the outstanding shares of Bugaboo Creek Steak House,
Inc. and certain affiliated entities (2,939,062 shares for Bugaboo Creek Steak
House, Inc. and 240,410 shares for other nonpublic affiliated enterprises).
Bugaboo Creek Steak House, Inc. operated 14 Bugaboo Creek Steak Houses and five
The Capital Grille restaurants and the affiliated entities operated three
specialty concept restaurants at the time of the merger.
The exchange of shares was accounted for as a pooling of interests, and
accordingly, the accompanying consolidated financial statements have been
restated to include the accounts and operations of Bugaboo Creek Steak House,
Inc. for all periods presented. Separate results for the combining entities for
the year ended December 31, 1995, and for the most recent interim period prior
to the acquisition (the six-month period ended June 30, 1996) are as follows (in
thousands):
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1996 1995
-------- --------
<S> <C> <C>
Revenues:
Previously reported .............................. $ 69,139 $102,188
Bugaboo Creek and affiliated enterprises ......... 34,720 54,192
-------- --------
$103,859 $156,380
======== ========
Net earnings:
Previously reported .............................. $ 3,204 $ 4,137
Bugaboo Creek and affiliated enterprises ......... 1,221 2,446
-------- --------
$ 4,425 $ 6,583
======== ========
</TABLE>
There were no adjustments required to conform Bugaboo Creek Steak House,
Inc.'s accounting policies to those of the Company.
During 1996, the Company entered into a joint venture arrangement whereby
the Company contributed two LongHorn Steakhouse restaurants and agreed to
contribute funds to construct a third LongHorn Steakhouse restaurant to a joint
venture. The other partners in the joint venture contributed three restaurants
with a fair market value of approximately $2,340,000 for a 49% minority
interest. The Company recorded goodwill of $1,050,000 on this joint venture,
based on the fair value of assets the Company contributed for its 51% interest
versus joint venture partner contributions.
During 1995, the Company purchased certain assets and trademark rights of
Lone Star Steaks, Inc. ("Lone Star-Georgia") for a purchase price, including
acquisition expenses, of $3,402,000. The purchase price included cash
consideration of $2,152,000 and 96,153 newly issued shares of the Company's
common stock. These shares had a market value at the time of the transaction of
$1,250,000. Goodwill on this acquisition of $3,002,000 was being amortized over
25 years. As discussed in note 3, during 1997, the Company decided to close this
acquired restaurant and all associated intangible assets were determined to be
impaired and were written off.
In 1995, the Company also purchased the assets of two previously franchised
locations in Greensboro and High Point, North Carolina for $2,564,000 (the
"Bullhead acquisition"). Goodwill on this acquisition of $1,358,000 is being
amortized over 25 years.
The Company, combined with the assets acquired in the Lone Star-Georgia and
Bullhead acquisitions for the year ended December 31, 1995, as if the purchase
business combinations had been completed as of January 1, 1995, would have had
unaudited proforma net earnings of $6,382,000, or $0.64 per common share: basic
and diluted. These unaudited proforma results consider the impact of certain
adjustments, such as amortization of intangibles, elimination of franchise
revenues, and increased interest expense (or reduced interest income).
(3) PROVISION FOR ASSET IMPAIRMENTS, RESTAURANT CLOSINGS, AND OTHER CHARGES
The provision for asset impairments, restaurant closings, and other charges
of $23,666,000 in 1997 was the result of a decision by management, in the fourth
quarter, to close seven restaurants and certain administrative facilities, as
well as the Company's assessment of the impairment of certain assets based upon
the Company's current plans. The Company's current plans resulted
36
<PAGE> 37
from significant changes in key management and a strategic review process
employed by new management. The provision for asset impairments, restaurant
closings, and other charges consists primarily of adjustments of $8,300,000 to
impaired long-lived assets to be disposed of, adjustments of $6,000,000 to the
carrying values of impaired long-lived assets to be held and used and $4,200,000
of goodwill write-offs. These adjustments reduced carrying values for long-lived
assets to be held and used to estimated fair value and of long-lived assets to
be disposed of in connection with the closure of the seven restaurants and the
administrative facilities to estimated fair market value less costs to sell.
The long-lived assets to be disposed of are primarily included in property and
equipment in the accompanying consolidated balance sheet at December 28, 1997,
and have an adjusted carrying value of $1,520,000. Additionally, the provision
included $5,166,000 in accrued costs primarily associated with closed
facilities.
The charge in 1996 and 1995 was comprised principally of the write-off of
abandoned leasehold improvements and the accrual of the future lease payments on
restaurants closed in those periods.
Merger and conversion expenses in 1996 were nonrecurring costs related to
the merger with Bugaboo Creek Steak House, consisting primarily of investment
banking fees, accounting and legal fees, printing costs, and costs to integrate
point-of-sale systems.
(4) PROPERTY AND EQUIPMENT
Major classes of property and equipment at December 28, 1997 and December
29, 1996 are summarized as follows (in thousands):
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
Land and improvements.................... $ 17,347 $ 13,294
Buildings................................ 23,883 15,032
Leasehold improvements................... 91,935 68,039
Restaurant equipment..................... 36,578 28,220
Furniture and fixtures................... 19,004 16,300
Construction in progress................. 1,177 4,131
--------- ---------
189,924 145,016
Less accumulated depreciation and
amortization........................... 34,166 24,585
--------- ---------
$ 155,758 $ 120,431
========= =========
</TABLE>
During 1997, 1996 and 1995, the Company capitalized interest during
construction of approximately $663,000, $135,000, and $183,000, respectively, as
a component of property and equipment.
The Company has, in the normal course of business, entered into agreements
with vendors for the purchase of restaurant equipment, furniture, fixtures,
buildings, and improvements for restaurants that have not yet opened. At
December 28, 1997, such commitments totaled approximately $6,000,000.
37
<PAGE> 38
(5) ACCRUED EXPENSES
Accrued expenses consist of the following at December 28, 1997 and December
29, 1996 (in thousands):
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Accrued future lease obligations and other
charges ........................................ $ 3,867 --
Accrued rent ..................................... 1,620 $ 1,212
Payroll and related .............................. 1,263 1,456
Other taxes accrued and withheld ................. 649 1,096
Gift certificates ................................ 3,766 3,689
Other ............................................ 3,708 199
------- -------
$14,873 $ 7,652
======= =======
</TABLE>
(6) DEBT
LINE OF CREDIT
The Company has a variable interest rate revolving credit agreement which
permits the Company to borrow up to $60,000,000 through December 1999 (the "1996
Facility"). The 1996 Facility bears interest at the Company's option of LIBOR
plus a margin of .75% to 1.50% (depending on the Company's leverage ratio) or
the administrative agent's prime rate of interest. At December 28, 1997 and
December 29, 1996, the interest rate on outstanding obligations under the 1996
Facility was 6.898% and 6.375%, respectively, based on LIBOR plus 0.75%. At
December 28, 1997 and December 29, 1996, debt outstanding under the 1996
Facility totaled $43,000,000 and $7,100,000, respectively. Amounts available
under the 1996 Facility totaled $17,000,000 and $52,900,000 at December 28, 1997
and December 29, 1996, respectively.
The 1996 Facility restricts payment of dividends, without prior approval of
the lender, and contains certain financial covenants, including debt to
capitalization, leverage and interest coverage ratios, as well as minimum net
worth and maximum capital expenditure covenants. The agreement is unsecured. At
December 28, 1997, the Company was in compliance with or had obtained waivers
for non-compliance with, the provisions of the 1996 Facility.
(7) INCOME TAXES
Income tax (benefit) expense consists of (in thousands):
<TABLE>
<CAPTION>
CURRENT DEFERRED TOTAL
------- -------- -----
<S> <C> <C> <C>
Year ended December 28, 1997:
U.S. Federal............... $ (923) $(3,215) $(4,138)
State and local............ (213) (649) (862)
------- ------- -------
$(1,136) $(3,864) $(5,000)
======= ======= =======
Year ended December 29, 1996:
U.S. Federal............... $ 2,884 $ (534) $ 2,350
State and local............ 1,029 (209) 820
------- ------ -------
$ 3,913 $ (743) $ 3,170
======= ====== =======
Year ended December 31, 1995:
U.S. Federal............... $2,403 $ 12 $ 2,415
State and local............ 629 3 632
------ ------ -------
$3,032 $ 15 $ 3,047
====== ====== =======
</TABLE>
The differences between income taxes at the statutory Federal income tax
rate of 34% and income tax (benefit) expense reported in the consolidated
statements of operations are as follows:
<TABLE>
<CAPTION>
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
Federal statutory income tax rate ................ 34.0% 34.0% 34.0%
State income taxes, net of federal benefit ....... 5.0 5.0 4.2
Nondeductible merger and conversion expenses ..... -- 11.1 --
Meals and entertainment .......................... 1.5 .6 .3
FICA tip credit .................................. (7.3) (11.2) (5.2)
Other ............................................ (4.2) (1.8) (1.7)
---- ---- ----
Effective tax rates .................... 29.0% 37.7% 31.6%
==== ==== ====
</TABLE>
38
<PAGE> 39
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and liabilities at December 28, 1997 and
December 29, 1996 are presented below:
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Deferred tax assets:
Provisions for restaurant closings, and other charges...... $ 4,558 $ 599
Deferred rent ............................................. 556 490
Alternative minimum taxes and general
business credit carryforwards ............................ 2,704 785
Conversion costs not currently deductible ................. 122 129
Net operating loss carryforwards .......................... 681 --
Accrued health insurance not currently deductible ......... 132 122
Accrued workers' compensation not currently deductible .... 212 36
Other ..................................................... 217 47
------- -------
Total gross deferred tax assets ...................... 9,182 2,208
Less valuation allowance .................................. (1,700) --
------- -------
Net deferred tax assets .............................. 7,482 2,208
------- -------
Deferred tax liabilities:
Property and equipment due to differences in
depreciation and amortization ............................ (2,347) (1,187)
Preopening costs expensed for tax purposes when incurred .. (720) (430)
Other ..................................................... (7) (47)
------- -------
Total gross deferred liabilities ..................... (3,074) (1,664)
------- -------
Net deferred tax assets............................... $4,408 $ 544
======= =======
</TABLE>
The valuation allowance for deferred tax assets as of December 28, 1997 was
$1,700,000. No valuation allowance was established at December 29, 1996. The net
change in the valuation allowance for the years ended December 28, 1997,
December 29, 1996 and December 31, 1995 was an increase of $1,700,000, a
decrease of $45,000 and an increase of $45,000, respectively. In assessing the
realizability of deferred tax assets, the Company's management considers whether
it is more likely than not that some portion or all of the deferred tax assets
will not be realized. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during the periods in
which those temporary differences become deductible. The Company's management
considers the scheduled reversal of deferred tax liabilities, projected future
taxable income, and tax planning strategies in making this assessment. Based
upon the level of historical taxable income and projections of future taxable
income over the periods in which the deferred tax assets are deductible, the
Company's management believes it is more likely than not the Company will
realize the benefits of these deductible differences, net of the existing
valuation allowance, at December 28, 1997. The amount of the deferred tax asset
considered realizable, however, could be reduced in the near term if estimates
of future taxable income during the carryforward period are reduced.
At December 28, 1997, the Company had net operating loss carryforwards for
federal income tax purposes of $2,350,000 which are available to offset future
taxable income, if any, through 2012. In addition, the Company had alternative
minimum tax and other general business credit carryforwards of approximately
$2,700,000 which are available to reduce federal regular income taxes, if any,
over an indefinite period.
(8) EMPLOYEE BENEFIT PLANS
The Company provides employees who meet minimum service requirements with
retirement benefits under a 401(k) salary reduction and profit sharing plan (the
"RARE Plan"). Under the plan, employees may make contributions of between 1% and
20% of their annual compensation. The Company is required to make an annual
matching contribution up to a maximum of 2.5% of employee compensation.
Additional contributions are made at the discretion of the Board of Directors.
The Company's expense under the plan was $260,000, $220,000, and $200,000 for
1997, 1996 and 1995, respectively.
Commencing April 1, 1996, the Company provided a 401(k) salary reduction
plan to Bugaboo Creek Steak House employees (the "Bugaboo Creek Plan"). Under
the Bugaboo Creek Plan, employees made contributions of between 1% and 15% of
their annual compensation. The Company made a matching contribution of 10% of
the first 6% contributed by each employee. All employees of Bugaboo Creek Steak
House prior to the merger with one year and 1,000 hours of service are eligible
for the Bugaboo Creek Plan. The Company's expense under the Bugaboo Creek Plan
was $20,000 for 1996. Effective in 1997, the Company merged the Bugaboo Creek
Plan into the RARE Plan.
(9) LEASES AND RELATED COMMITMENTS
The Company is obligated under various capital leases for certain restaurant
facilities that expire at various dates during the next 25 years. At December
28, 1997, the gross amount of restaurant facilities and related accumulated
amortization recorded under capital leases were as follows:
39
<PAGE> 40
<TABLE>
<CAPTION>
DECEMBER 28,
1997
-----------
<S> <C>
Buildings................................ $5,600
Less accumulated amortization............ 142
------
Net book value of assets held under
capital leases......................... $5,458
======
</TABLE>
Amortization of assets held under capital leases is included with
depreciation and amortization - restaurants.
The Company has noncancelable operating leases for restaurant facilities.
Rental payments include minimum rentals, plus contingent rentals based on
restaurant sales at the individual stores. These leases generally contain
renewal options for periods ranging from five to 15 years and require the
Company to pay all executory costs such as insurance and maintenance. Under the
provisions of certain leases, there are certain rent holidays and/or escalations
in payments over the base lease term, as well as renewal periods. The effects of
the holidays and escalations have been reflected in rent expense on a
straight-line basis over the life of the anticipated lease terms. The Company
also leases vehicles and equipment under operating leases.
Future minimum lease payments under capital lease obligations and
noncancelable operating leases at December 28, 1997 are as follows (in
thousands):
<TABLE>
<CAPTION>
YEARS ENDING AT OR
ABOUT DECEMBER 31: CAPITAL OPERATING
-------------------- ------- ---------
<S> <C> <C>
1998......... $ 518 $ 9,684
1999......... 518 9,959
2000......... 518 9,756
2001......... 518 9,453
2002......... 549 9,178
Thereafter... 10,062 44,369
------- -------
Total minimum lease
payments 12,683 $92,399
=======
Less imputed
interest (at 9%) 7,114
-------
Present value of
minimum lease
payments 5,569
Less current
maturities 518
-------
Obligations under
capital leases,
excluding current
maturities $ 5,051
=======
</TABLE>
Rental expense consisted of the following amounts (in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
Minimum lease payments ............ $8,252 $6,218 $5,207
Contingent rentals ................ 686 640 536
------ ------ ------
Total rental expense ........ $8,938 $6,858 $5,743
====== ====== ======
</TABLE>
Future minimum lease payments to related parties aggregated $197,000 at
December 28, 1997.
Rental expense includes approximately $106,000, $120,000, and $163,000 for
1997, 1996, and 1995, respectively, for rents paid to entities in which certain
of the Company's directors have a financial interest.
The Company has guaranteed a restaurant lease of a franchisee that expires
in 1999. Future minimum lease payments under this lease aggregated approximately
$267,000 at December 28, 1997. The stockholders of the franchisee have agreed to
indemnify the Company for any loss under this lease guarantee. In addition, the
Company has guaranteed lease
40
<PAGE> 41
payments of a lease assignee in a former Company-leased location. Future minimum
lease payments under this lease aggregate approximately $323,000 at December 28,
1997. The Company does not believe that these guarantees subject it to a
material risk of loss.
A standby letter of credit in the amount of $750,000 has been issued to
secure the Company's obligations under a lease of real estate. Drafts may be
presented against this letter of credit in the event that the Company is in
default of the terms of the lease, all applicable grace periods have expired and
the Company has failed to cure all such defaults. The amount of such drafts may
be for the amount presently due and owing by the Company to the landlord or the
full amount of the letter of credit if the landlord has notified tenant that it
has terminated the lease or has exercised its right to repossess the leased
premises.
(10) RELATED PARTY TRANSACTIONS
During 1997, 1996, and 1995, RDM Design, a company owned by a relative of
two Company directors, provided architectural design services to the Company.
Fees paid for these services (including payments for subcontracted engineering
services) amounted to $11,000, $114,000, and $961,000 for the years 1997, 1996,
and 1995, respectively.
(11) SHAREHOLDERS' EQUITY
On April 1, 1996, the Company closed a public offering for 1,875,000
shares of common stock. Net proceeds to the Company from this offering were
approximately $38,000,000, including the underwriters' overallotment.
In 1997, the Company entered into a Shareholder Protection Rights Agreement
(the "Rights Agreement") and declared a dividend distribution of one "Right"
for each outstanding share of common stock. The Rights initially have an
exercise price of $48.00 per share, and will become exercisable only under
certain conditions relating to an actual or threatened change in control of the
Company. Under certain conditions the rights will entitle the holder thereof to
purchase from the Company that number of shares of the Company's Common Stock
(or, under certain conditions, an acquiring company's equity securities) having
a value equal to twice the exercise price for an amount equal to the exercise
price. The Company will be entitled to redeem the Rights at $0.01 at any time
prior to the "Flip-in Date" (as that term is defined in the Rights Agreement).
Until such time as they become exercisable, the Rights have no dilutive effect
on the earnings per share of the Company.
(12) STOCK OPTIONS
The Company's 1997 Long-Term Incentive Plan (the "1997 Stock Option Plan")
provides for the granting of incentive stock options (subject to shareholder
approval), nonqualified stock options, stock appreciation rights, performance
units, restricted stock, dividend equivalents and other stock based awards to
employees, officers, directors, consultants, and advisors. The Company's 1992
Incentive Plan (the "1992 Stock Option Plan") provides for the granting of
incentive stock options, nonqualified stock options, and stock appreciation
rights to key employees and directors, based upon selection by the Stock Option
Committee. All stock options issued under the 1997 Stock Option Plan and the
1992 Stock Option Plan were granted at prices which equate to or were higher
than current market value on the date of the grant and must be exercised within
ten years from the date of grant. The 1997 Stock Option Plan and the 1992 Stock
Option Plan authorized the granting of options to purchase 750,000 shares of
common stock and 1,500,000 shares of common stock, respectively.
The 1994 Bugaboo Creek Stock Option Plan (the "1994 Stock Option Plan")
provides for the granting of options to acquire approximately 306,550 shares of
the Company's common stock to directors, officers, and key employees. Through
December 28, 1997, approximately 214,050 options have been awarded pursuant to
the terms of the 1994 Stock Option Plan. Options awarded under the 1994 Stock
Option Plan prior to the merger were adjusted based on the exchange ratio of
1.78 shares of common stock of Bugaboo Creek Steak House, Inc. for each share of
the Company's common stock. Options awarded under the 1994 Stock Option Plan are
generally granted at prices which equate to current market value on the date of
the grant, are generally exercisable after two to three years, and expire ten
years subsequent to award.
During 1995, the Company granted 2,500 nonqualifying options to a director
of the Company at the closing price of $9.50 on the date of grant.
The Company applies APB 25 in accounting for its stock option plans.
Accordingly, no compensation expense has been recognized for the Company's
stock-based compensation plans. Had compensation cost for the Company's stock
option plans been determined based upon the fair value methodology prescribed
under SFAS No. 123 the Company's 1997, 1996 and 1995 net (loss) earnings and net
(loss) earnings per
41
<PAGE> 42
share would have been reduced by approximately $1,002,000, $705,000, and $84,000
or approximately $0.09, $0.06 and $0.01 per share, respectively. The effects of
disclosing compensation cost under SFAS No. 123 may not be representative of the
effects on reported earnings for future years. The fair value of the options
granted during 1997, 1996 and 1995 is estimated at $3,384,000, $1,593,000 and
$2,998,000, respectively, on the date of grant, using the Black-Scholes
option-pricing model with the following assumptions: dividend yield of zero,
volatility of 20%, risk-free interest rate of 6%, and an average expected life
of eight years.
As of December 28, 1997 and December 29, 1996 options to purchase 367,281
and 436,898 shares, respectively, were exercisable at a weighted-average
exercise price of $16.37 and $14.10 per share, respectively. Option activity
under the Company's stock option plans is as follows:
<TABLE>
<CAPTION>
WEIGHTED
SHARES AVERAGE PRICE
----------- -------------
<S> <C> <C>
Outstanding at December 31, 1994 1,126,818 $14.10
Granted in 1995........................ 512,586 18.68
Exercised in 1995...................... (8,300) 11.20
Canceled in 1995....................... (61,127) 19.45
-----------
Outstanding at December 31, 1995....... 1,569,977 15.40
Granted in 1996........................ 162,115 21.56
Exercised in 1996...................... (67,367) 10.10
Canceled in 1996....................... (253,959) 21.39
Outstanding at December 29, 1996....... 1,410,766 15.28
-----------
Granted in 1997........................ 995,150 14.47
Exercised in 1997...................... (289,980) 8.81
Canceled in 1997....................... (642,843) 17.72
------------
Outstanding at December 28, 1997....... 1,473,093 14.79
===========
</TABLE>
The following table summarizes information concerning currently outstanding and
exercisable options:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------ ------------------------
WEIGHTED- WEIGHTED- WEIGHTED-
AVERAGE AVERAGE AVERAGE
NUMBER REMAINING EXERCISE NUMBER EXERCISE
RANGE OF EXERCISE PRICES (IN DOLLARS) OUTSTANDING LIFE PRICE EXERCISABLE PRICE
- -------------------------------------------------------------------------- -----------------------
<C> <C> <C> <C> <C> <C>
$8.75 to $10...................... 301,400 9.0 $ 9.39 54,840 $ 9.39
$10.01 to $15..................... 627,850 9.2 13.44 95,980 13.04
$15.01 to $20..................... 330,263 8.2 17.60 116,265 17.60
$20.01 to $25..................... 208,580 7.5 21.88 98,696 22.00
$25.01 to $27.25.................. 5,000 8.3 27.25 1,500 27.25
</TABLE>
(13) COMMITMENTS AND CONTINGENCIES
JOINT VENTURES
Several of the Company's joint venture agreements and employment agreements
with joint venture partners and restaurant managers require or provide the
Company with the option to purchase the managers' interests upon termination of
the joint venture. The purchase prices are based upon certain multiples of the
relevant restaurant's cash flow.
SHAREHOLDER SUIT
In February 1994, the Company, several directors, and the two managing
underwriters of its previous public offering were named as defendants in a
lawsuit filed as a class action in the United States District Court in Atlanta,
Georgia. The suit was filed by a shareholder of the Company who claimed to
represent a class of all persons who purchased the Company's common stock
between July 27, 1992 and June 17, 1993.
The plaintiff alleged that the defendants made material misrepresentations
and omissions in connection with the financial condition of the Company and
sought compensatory damages and other relief. A total consideration of $1.4
million was paid in settlement of the case in 1997, the major portion of which
was funded by an officers and directors liability insurance policy.
The cost to the Company, including related attorneys' fees, was approximately
$605,000.
42
<PAGE> 43
PURCHASE COMMITMENTS
The Company has entered into certain purchasing agreements with certain meat
suppliers requiring the Company to purchase contracted quantities of meat at
established prices through their expiration on varying dates in 1998. The
quantities contracted for are based on usage projections management believes to
be conservative estimates of actual requirements during the contract terms. The
Company does not anticipate any material adverse effect on its results of
operations or financial position from these contracts.
OTHER
Under the Company's insurance programs, coverage is obtained for significant
exposures as well as those risks required to be insured by law or contract. It
is the Company's preference to retain a significant portion of certain expected
losses related primarily to workers' compensation and employee medical costs.
Provisions for losses expected under these programs are recorded based upon the
Company's estimates of the aggregate liability for claims incurred.
Letters of credit for $1,352,000 at December 28, 1997 are being maintained
as security under the Company's workers' compensation policies.
The Company is involved in various legal actions incidental to the normal
conduct of its business. Management does not believe that the ultimate
resolution of these incidental actions will have a material adverse effect on
the Company's financial position or results of operations.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information about directors and nominees for director and executive officers
of the Registrant is incorporated herein by reference from the sections of the
Registrant's definitive Proxy Statement to be delivered to shareholders of the
Registrant in connection with the annual meeting of shareholders to be held May
20, 1998 (the "Proxy Statement") entitled "Election of Directors -- Certain
Information Concerning Nominees and Directors," and "-- Meetings of the Board of
Directors and Committees" and "Executive Officers of the Company."
ITEM 11. EXECUTIVE COMPENSATION
Information regarding executive compensation is incorporated herein by
reference from the section of the Proxy Statement entitled "Executive
Compensation." In no event shall the information contained in the Proxy
Statement under the sections entitled "Shareholder Return Analysis," or
"Compensation and Stock Option Committees' Report on Executive Compensation" be
incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information required by this item is incorporated herein by reference from
the section of the Proxy Statement entitled "Beneficial Owners of More Than Five
Percent of the Company's Common Stock; Shares Held by Directors and Executive
Officers."
43
<PAGE> 44
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information regarding Certain Relationships and Related Transactions is
incorporated herein by reference from the section of the Proxy Statement
entitled "Certain Transactions."
44
<PAGE> 45
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(A)(1) LISTING OF FINANCIAL STATEMENTS
The following financial statements of the Registrant are set forth herein in
Part II, Item 8:
Consolidated Balance Sheets as of December 28, 1997 and December 29, 1996
Consolidated Statements of Operations - For Each of the Years in the
Three-Year Period Ended December 28, 1997
Consolidated Statements of Shareholders' Equity - For Each of the Years in
the Three-Year Period Ended December 28, 1997
Consolidated Statements of Cash Flows - For Each of the Years in the
Three-Year Period Ended December 28, 1997
Notes to Consolidated Financial Statements
Independent Auditors' Report
(A)(2) LISTING OF FINANCIAL STATEMENT SCHEDULES
Not applicable.
45
<PAGE> 46
(A)(3) LISTING OF EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ---------- -----------------------------------------------------
<S> <C>
3(a) --Articles of Incorporation of the Registrant
3(b) --Bylaws of the Registrant
4(a) -- See Exhibits 3(a) and 3(b) for provisions of the Amended
and Restated Articles of Incorporation and Bylaws of the
Registrant defining rights of holders of Common Stock of the
Registrant
4(b) -- Specimen Stock Certificate for the Common Stock of the
Registrant
4(c) -- Shareholder Protection Rights Agreement, dated as of
November 4, 1997, between RARE Hospitality International, Inc.
and SunTrust Bank, Atlanta, as Rights Agent (which includes as
Exhibit B thereto the Form of Right Certificate) (incorporated
herein by reference from Exhibit 99.1 of the Registrant's Form
8-K dated November 4, 1997).
10(a) -- Line of Credit Agreement dated as of December 18, 1996 by
and among Longhorn Steaks, Inc. and First Union National Bank
of Georgia (incorporated herein by reference from Exhibit
10(a) of the Registrant's annual report on Form 10-K for the
fiscal year ended December 29, 1996).
10(b) -- First Amendment to Line of Credit Agreement dated as of
November 6, 1997, by and among RARE Hospitality International,
Inc. and First Union National Bank (incorporated herein by
reference from Exhibit 10.1 of the registrant's quarterly
report on Form 10-Q for the quarter ended September 28, 1997).
10(c) -- Second Amendment to Line of Credit Agreement dated as of
March 27, 1998, by and among RARE Hospitality International,
Inc. and First Union National Bank.
10(d) -- Credit Agreement dated as of December 18, 1996 by and among
Longhorn Steaks, Inc. and several lenders with First Union
National Bank of Georgia as Agent and Fleet National Bank as
Co-Agent (incorporated herein by reference from Exhibit
10(b) of the Registrant's annual report on Form 10-K for the
fiscal year ended December 29, 1996).
10(e) -- First Amendment to Credit Agreement dated as of November 6,
1997, by and among RARE Hospitality International, Inc. and
several lenders with First Union National Bank as Agent and
Fleet National Bank as Co-Agent (incorporated herein by
reference from Exhibit 10.1 of the registrant's quarterly
report on Form 10-Q for the quarter ended September 28, 1997).
10(f) -- Second Amendment to Credit Agreement dated as of March 27,
1998, by and among RARE Hospitality International, Inc. and
several lenders with First Union National Bank as Agent and
Fleet National Bank as co-Agent.
Executive Compensation Plans and Arrangements.
10(g) -- Longhorn Steaks, Inc. Amended and Restated 1992 Incentive
Plan (incorporated by reference from Exhibit 10(n) to
Registration Statement on Form S-1, Registration Statement No.
33-45695).
10(h) -- Longhorn Steaks, Inc. 1996 Stock Plan for Outside Directors
(incorporated by reference from Exhibit 4(c) to Registration
Statement on Form S-8, Registration No. 333-11963).
10(i) -- RARE Hospitality International, Inc. 1997 Long-Term
Incentive Plan.
10(j) -- Amendment No. 1 to RARE Hospitality International, Inc.
1997 Long-Term Incentive Plan.
10(k) -- Employment Agreement dated February 13, 1992 between the
Registrant and George W. McKerrow, Sr. (incorporated by
reference from Exhibit 10(o) to Registration Statement on Form
S-1, Registration Statement No. 33-45695).
10(l) -- Employment Agreement dated February 13, 1992 between the
Registrant and George W. McKerrow, Jr. (incorporated by
reference from Exhibit 10(p) to Registration Statement on Form
S-1, Registration Statement No. 33-45695).
10(m) -- Employment Agreement dated September 30, 1997 between the
Registrant and Philip J. Hickey, Jr.
10(n) -- Employment Agreement dated October 16, 1997 between the
Registrant and Eugene I. Lee.
10(o) -- Employment Agreement dated November 3, 1997 between the
Registrant and William A. Burnett.
21 -- Subsidiaries of the Company.
23(a) -- Consent of KPMG Peat Marwick LLP.
27(a) -- 1997 Financial Data Schedule.
27(b) -- 1996 Restated Financial Data Schedule.
</TABLE>
(B) REPORTS ON FORM 8-K
One report on Form 8-K was filed during the last quarter of the period
covered by this report, a report dated November 4, 1997.
(C) EXHIBITS
The exhibits in response to this Report are listed under Item 14(a)(3)
above.
(D) FINANCIAL STATEMENT SCHEDULES
See Item 14(a)(2) above.
46
<PAGE> 47
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.
RARE Hospitality International, Inc.
By: /s/ Philip J. Hickey, Jr.
--------------------------------
Philip J. Hickey, Jr.
President and COO
Date: March 30, 1998
47
<PAGE> 48
Pursuant to the requirements of the Securities and Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
By /s/ George W. McKerrow, Jr.
------------------------------------------------- Date March 30, 1998
George W. McKerrow, Jr.
Chairman and Chief Executive Officer
(Principal Executive Officer)
By /s/ Philip J. Hickey, Jr.
------------------------------------------------- Date March 30, 1998
Philip J. Hickey, Jr.
President, Chief Operating Officer and Director
By /s/ Benjamin A. Waites
------------------------------------------------- Date March 30, 1998
Benjamin A. Waites
Controller and Assistant Secretary (Principal
Financial and Accounting Officer)
By /s/ George W. McKerrow, Sr.
------------------------------------------------- Date March 30, 1998
George W. McKerrow, Sr.
Director
By
------------------------------------------------- Date March , 1998
Edward P. Grace, III
Director
By /s/ Ronald W. San Martin
------------------------------------------------- Date March 30, 1998
Ronald W. San Martin
Director
By /s/ John G. Pawly
------------------------------------------------- Date March 30, 1998
John G. Pawly
Director
By /s/ Don L. Chapman
------------------------------------------------- Date March 30, 1998
Don L. Chapman
Director
48
<PAGE> 1
EXHIBIT 3(a)
ARTICLES OF AMENDMENT
TO THE AMENDED AND RESTATED ARTICLES OF
INCORPORATION OF
RARE HOSPITALITY INTERNATIONAL, INC.
1.
The name of the corporation is "Rare Hospitality International, Inc."
2.
The articles of incorporation of Rare Hospitality International, Inc. are
amended by adding the attached Exhibit A as Exhibit A to the Company's Amended
and Restated Articles of Incorporation and by adding the following sentence at
the end of Article Four of the Company's Amended and Restated Articles of
Incorporation:
A designation of the preferences, limitations and relative rights of the
corporation's Series A Junior Participating Preferred Stock is attached as
Exhibit A to these Amended and Restated Articles of Incorporation.
3.
The amendment was adopted on November 4, 1997.
4.
The amendment was duly adopted by the board of directors of Rare
Hospitality International, Inc.
IN WITNESS WHEREOF, Rare Hospitality International, Inc. has caused these
Articles of Amendment to be executed as of November 17, 1997.
RARE HOSPITALITY
INTERNATIONAL, INC.
By: /s/ G.W. McKerrow, Jr.
-------------------------------
Name: George W. McKerrow, Jr.
-------------------------------
Title: Chairman/CEO
-------------------------------
<PAGE> 2
EXHIBIT A
TO THE AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF RARE HOSPITALITY INTERNATIONAL, INC.
DESIGNATING THE PREFERENCES, LIMITATIONS AND RELATIVE
RIGHTS OF SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
There is hereby designated, of the authorized but unissued shares of
Preferred Stock of the corporation, a series thereof, and the number of shares,
voting powers, designation, preferences, and relative, participating, optional,
and other special rights, and the qualifications, limitations, and restrictions
thereof, of the shares of such series (in addition to those set forth in the
Amended and Restated Articles of Incorporation, which are applicable to the
Preferred Stock of all series), shall be as follows:
(1) Designation and Number of Shares. The designation of this series of
Preferred Stock shall be "Series A Junior Participating Preferred Stock"
(hereinafter called "this Series"), to initially consist of 500,000 shares,
which number may from time to time be increased or decreased (but not below the
number then outstanding) by the Board of Directors by filing additional articles
of amendment to the corporation's amended and restated articles of
incorporation. The shares of this Series are sometimes hereinafter referred to
as the "Shares." Shares of this Series may be issued in fractional shares, which
fractional shares shall entitle the holder, in proportion to such holder's
fractional share, to all rights of a holder of a whole share of this Series.
(2) Distributions.
(a) Distribution Rights. The holders of whole or fractional Shares
shall be entitled to receive, when, as, and if declared by the Board of
Directors, subject to restrictions imposed by the Georgia Business
Corporation Code or the Amended and Restated Articles of Incorporation on
distributions to shareholders, and subject to the rights of the holders of
any shares of any series of Preferred Stock ranking prior and superior to
this series with respect to dividends, (i) on each date that dividends or
other distributions (other than dividends or distributions payable in
Common Stock of the corporation) are payable on or in respect of Common
Stock comprising part of the Reference Package (as defined below), in an
amount per whole share of this Series equal to the aggregate amount of
dividends or other distributions (other than dividends or distributions
payable in Common Stock of the corporation) that would be payable on such
date to a holder of the Reference Package and (ii) on the last day of
March, June, September and December in each year, in an amount per whole
share of this Series equal to the excess (if any) of $1.00
<PAGE> 3
over the aggregate dividends paid per whole share of this Series during the
three-month period ending on such last day. Each such dividend shall be
paid to the holders of record of shares of this Series on the date, not
exceeding sixty days preceding such dividend or distribution payment date,
fixed for that purpose by the Board of Directors in advance of payment of
each particular dividend or distribution. Dividends on each full and each
fractional share of this Series shall be cumulative from the date such full
or fractional share is originally issued; provided that any such full or
fractional share originally issued after a dividend record date and on or
prior to the dividend payment date to which such record date relates shall
not be entitled to receive the dividend payable on such dividend payment
date or any amount in respect of the period from such original issuance to
such dividend payment date. The term "Reference Package" shall initially
mean 100 shares of Common Stock, no par value ("Common Stock"), of the
corporation. In the event the corporation shall at any time (i) declare or
pay a dividend on any Common Stock payable in Common Stock, (ii) subdivide
any Common Stock or (iii) combine any Common Stock into a smaller number of
shares, then and in each such case the Reference Package after such event
shall be the Common Stock that a holder of the Reference Package
immediately prior to such event would hold thereafter as a result thereof.
Holders of shares of this Series shall not be entitled to any dividends,
whether payable in cash, property or stock, in excess of full cumulative
dividends, as herein provided on this Series.
So long as any shares of this Series are outstanding, no dividend
(other than a dividend in Common Stock or in any other stock ranking junior
to this Series as to dividends and upon liquidation) shall be declared or
paid or set aside for payment or other distribution declared or made upon
the Common Stock or upon any other stock ranking junior to this Series as
to dividends or upon liquidation, nor shall any Common Stock nor any other
stock of the corporation ranking junior to or on a parity with this Series
as to dividends or upon liquidation be redeemed, purchased or otherwise
acquired for any consideration (or any moneys to be paid to or made
available for a sinking fund for the redemption of any shares of any such
stock) by the corporation (except by conversion into or exchange for stock
of the corporation ranking junior to this Series as to dividends and upon
liquidation), unless, in each case, the full cumulative dividends
(including the dividend to be due upon payment of such dividend,
distribution, redemption, purchase or other acquisition) on all outstanding
shares of this Series shall have been, or shall contemporaneously be, paid.
(b) Shares Purchased by Corporation. Shares of this Series purchased
by the corporation shall be canceled and shall revert to authorized but
unissued shares of Preferred Stock undesignated as to series, which shares
may thereafter be provided for and designated by the
-2-
<PAGE> 4
Board of Directors pursuant to Article Four of the Amended and Restated
Articles of Incorporation as part of a series of Preferred Stock to the
same extent as if such shares had not previously been provided for and
designated as part of a series of Preferred Stock; but such shares shall
not be reissued as shares of this Series.
(3) Rights of Redemption. The shares of this Series shall not be
redeemable.
(4) Rights on Liquidation, Dissolution, or Winding Up.
(a) In the event of any liquidation, dissolution or winding up of the
affairs of the corporation, whether voluntary or involuntary, the holders
of full and fractional shares of this Series shall be entitled, before any
distribution or payment is made on any date to the holders of the Common
Stock or any other stock of the corporation ranking junior to this Series
upon liquidation, to be paid in full an amount per whole share of this
Series equal to the greater of (A) $1.00 or (B) the aggregate amount
distributed or to be distributed prior to such date in connection with such
liquidation, dissolution or winding up to a holder of the Reference Package
(such greater amount being hereinafter referred to as the "Liquidation
Preference"), together with accrued dividends to such distribution or
payment date, whether or not earned or declared. If such payment shall have
been made in full to all holders of shares of this Series, the holders of
shares of this Series as such shall have no right or claim to any of the
remaining assets of the corporation.
(b) In the event the assets of the corporation available for
distribution to the holders of shares of this Series upon any liquidation,
dissolution or winding up of the corporation, whether voluntary or
involuntary, shall be insufficient to pay in full all amounts to which such
holders are entitled pursuant to paragraph (a) above, no such distribution
shall be made on account of any shares of any other class or series of
Preferred Stock ranking on a parity with the shares of this Series upon
such liquidation, dissolution or winding up unless proportionate
distributive amounts shall be paid on account of the shares of this Series,
ratably in proportion to the full distributable amounts for which holders
of all such parity shares are respectively entitled upon such liquidation,
dissolution or winding up.
(c) Upon the liquidation, dissolution or winding up of the
corporation, the holders of shares of this Series then outstanding shall be
entitled to be paid out of assets of the corporation available for
distribution to its shareholders all amounts to which such holders are
entitled pursuant to paragraph (a) above before any payment shall be made
to the holders of
-3-
<PAGE> 5
Common Stock or any other stock of the corporation ranking junior upon
liquidation to this Series.
(d) For purposes of this Section (4), the consolidation or merger of,
or binding share exchange by, the corporation with any other corporation
shall not be deemed to constitute a liquidation, dissolution or winding up
of the corporation.
(5) Merger, Consolidation, Share Exchange. In the event of any merger,
consolidation, reclassification or other transaction in which the shares of
Common Stock are exchanged for or changed into other stock or securities, cash
and/or any other property, then in any such case the shares of this Series shall
at the same time be similarly exchanged or changed in an amount per whole share
equal to the aggregate amount of stock, securities, cash and/or any other
property (payable in kind), as the case may be, that a holder of the Reference
Package would be entitled to receive as a result of such transaction.
(6) Voting Rights. In addition to any other vote or consent of shareholders
required by law or by the Amended and Restated Articles of Incorporation, as
amended, of the corporation, each whole share of this Series shall, on any
matter, vote as a class with any other capital stock comprising part of the
Reference Package and voting on such matter and shall have the number of votes
thereon that a holder of the Reference Package would have.
-4-
<PAGE> 6
CERTIFICATE OF RESTATEMENT
Pursuant to Section 14-2-1007 of the Georgia Business Corporation Code,
Contemporary Restaurant Concepts, Ltd., a Georgia corporation (the
"Corporation") hereby certifies that:
ONE
The name of the corporation is Contemporary Restaurant Concepts, Ltd.
TWO
On February 13, 1992, Amended and Restated Articles of Incorporation of the
Corporation (the "Restatement") were duly adopted by the Board of Directors of
the Corporation.
THREE
The Restatement contains an amendment to the Articles of Incorporation
requiring shareholder approval (the "Amendment").
FOUR
On February 13, 1992, the shareholders of the Corporation duly approved the
entirety of the Restatement including the Amendment pursuant to Section
14-2-1003 of the Georgia Business Corporation Code.
FIVE
The Restatement supersedes the original Articles of Incorporation and all
amendments to them.
IN WITNESS WHEREOF, Contemporary Restaurant Concepts, Ltd. has caused this
Certificate of Restatement to be executed by its duly authorized officer on this
13th day of February, 1992.
CONTEMPORARY RESTAURANT
CONCEPTS, LTD.
By: /s/ G.W. McKerrow, Jr.
------------------------------
George W. McKerrow, Jr.
President
<PAGE> 7
ARTICLES OF RESTATEMENT
OF
CONTEMPORARY RESTAURANT CONCEPTS, LTD.
ONE
The name of the corporation is Contemporary Restaurant Concepts, Ltd.
TWO
The original Articles of Incorporation and all amendments thereto are
hereby amended and restated in their entirety.
THREE
The Amended and Restated Articles of Incorporation attached hereto as
Exhibit "A" are hereby inserted as the new Articles of Incorporation.
FOUR
The Amended and Restated Articles of Incorporation supersede the original
Articles of Incorporation and all amendments to them.
IN WITNESS WHEREOF, Contemporary Restaurant Concepts, Ltd. has caused these
Articles of Restatement to be executed by its duly authorized officer, on this
13th day of February, 1992.
CONTEMPORARY RESTAURANT
CONCEPTS, LTD.
By: /s/ G.W. McKerrow, Jr.
--------------------------------------------
George W. McKerrow, Jr.
President
<PAGE> 8
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
LONGHORN STEAKS, INC.
ARTICLE ONE
Name
The name of the corporation is Longhorn Steaks, Inc.
ARTICLE TWO
Perpetual Duration
The corporation shall have perpetual duration.
ARTICLE THREE
Purpose
The corporation is organized for the purpose of engaging in any lawful
business.
ARTICLE FOUR
Authorized Shares
The corporation shall have authority to be exercised by the Board of
Directors to issue not more than 25,000,000 shares of common stock, no par
value, and not more than 10,000,000 shares of preferred stock, no par value. The
shares of common stock shall have unlimited voting rights and shall be entitled
to receive the net assets of the corporation upon dissolution. Subject to the
provisions of these Amended and Restated Articles of Incorporation and to the
provisions of the Georgia Business Corporation Code, the Board of Directors may
determine (a) the preferences, limitations, and relative rights of any class of
shares prior to the issuance of any shares of that class and (b) the
preferences, limitations, and relative rights of one or more series within a
class and may designate the number of shares within that series prior to the
issuance of any shares of that series.
<PAGE> 9
ARTICLE FIVE
Preemptive Right
The holders of the corporation's shares do not have a preemptive right to
acquire the corporation's unissued or treasury shares.
ARTICLE SIX
Limitation of Director Liability
6.1. A director of the corporation shall not be personally liable to the
corporation or its shareholders for monetary damages for breach of duty of care
or other duty as a director, except for liability (i) for any appropriation, in
violation of his duties, of any business opportunity of the corporation, (ii)
for acts or omissions which involve intentional misconduct or a knowing
violation of law, (iii) of the types set forth in Section 14-2-832 of the
Georgia Business Corporation Code, or (iv) for any transaction from which the
director derived an improper personal benefit.
6.2. Any repeal or modification of the provisions of this Article by the
shareholders of the corporation shall be prospective only, and shall not
adversely affect any limitation on the personal liability of a director of the
corporation with respect to any act or omission occurring prior to the effective
date of such repeal or modification.
6.3. If the Georgia Business Corporation Code is hereafter amended to
authorize the further elimination or limitation of the liability of directors,
then the liability of a director of the corporation, in addition to the
limitation on personal liability provided herein, shall be limited to the
fullest extent permitted by the amended Georgia Business Corporation Code.
6.4. In the event that any of the provisions of this Article (including any
provision within a single sentence) is held by a court of competent jurisdiction
to be invalid, void or otherwise unenforceable, the remaining provisions are
severable and shall remain enforceable to the fullest extent permitted by law.
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<PAGE> 10
ARTICLE SEVEN
Constituency Considerations
In discharging the duties of their respective positions and in determining
what is believed to be in the best interests of the corporation, the Board of
Directors, committees of the Board of Directors, and individual directors, in
addition to considering the effects of any action on the corporation or its
shareholders, may consider the interests of the employees, customers, suppliers,
and creditors of the corporation and its subsidiaries, the communities in which
offices or other establishments of the corporation and its subsidiaries are
located, and all other factors such directors consider pertinent; provided,
however, that this Article shall be deemed solely to grant discretionary
authority to the directors and shall not be deemed to provide to any
constituency any right to be considered.
ARTICLE EIGHT
Directors
8.1. The number of directors of the corporation shall not be less than
three (3) nor more than eleven (11), the precise number to be fixed by
resolution of the Board of Directors from time to time. The directors shall be
divided into three classes, each consisting, as nearly equal in number as
possible, of one-third of the total number of directors constituting the entire
Board of Directors. At the first election of directors occurring following the
date of approval of these Amended and Restated Articles of Incorporation by the
shareholders of the corporation, the first class of directors (Class 1) shall be
elected for a term expiring upon the next following annual meeting of
shareholders and upon the election and qualification of their respective
successors, the second class of directors (Class 2) shall be elected for a term
expiring upon the second next annual meeting of shareholders and upon the
election and qualification of their respective successors, and the third class
of directors (Class 3) shall be elected for a term expiring upon the third next
annual meeting of shareholders and upon the election and qualification
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<PAGE> 11
of their respective successors. At each succeeding annual meeting of
shareholders, successors to the class of directors whose term expires at the
annual meeting of shareholders shall be elected for a three-year term. Except as
provided in paragraph 8.4 of this Article Eight, a director shall be elected by
the affirmative vote of a majority of the shares represented at the meeting of
shareholders at which the director stands for election and entitled to elect
such director.
8.2. The number of directors may be increased or decreased from time to
time as provided by the bylaws of the corporation and in the Amended and
Restated Articles of Incorporation; provided, however, that the total number of
directors at any time shall not be less than three (3); and provided further,
that no decrease in the number of directors shall have the effect of shortening
the term of an incumbent director. In the event that preferred stock of the
corporation is issued and authorizes the election of one or more directors by
the holders of such preferred stock, the number of directors may be increased in
accordance with the terms of the preferred stock.
In the event of any increase or decrease in the authorized number of
directors, each director then serving shall continue as a director of the class
of which he is a member until the expiration of his current term, or his earlier
resignation, removal from office or death, and the newly created or eliminated
directorships resulting from such increase or decrease shall be apportioned by
the Board of Directors among the three classes of directors so as to maintain
such classes as nearly equal as possible; provided, however, that there shall be
no classification of additional directors elected by the Board until the next
meeting of the shareholders called for the purpose of electing directors. Each
director shall serve until his successor is elected and qualified or until his
earlier resignation, retirement, disqualification, removal from office, or
death.
8.3. The entire Board of Directors or any individual director may be
removed from the office but only for cause and only by the affirmative vote of
at least 75% of all classes of stock of the corporation entitled to vote in the
election of such director or
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<PAGE> 12
directors, considered for purposes of this Section as one class. Notwithstanding
the foregoing, in the event that preferred stock of the corporation is issued
and authorizes the election of one or more directors by the holders of such
preferred stock, any individual director elected by the preferred shareholders
may be removed only by the holders of the outstanding shares of the preferred
stock in accordance with the terms of the preferred stock as provided therein.
Removal action may be taken at any shareholders' meeting with respect to which
notice of such purpose has been given, and a removed director's successor may be
elected at the same meeting to serve the unexpired term.
8.4. A vacancy occurring on the Board of Directors, other than by
reason of removal of a director by the shareholders but including vacancies
arising from resignation, death or through an increase in the number of
directors, may be filled, until the next election of directors by the
shareholders, by the affirmative vote of at least two thirds (2/3) of the total
number of directors then remaining in office, though they constitute less than a
quorum of the Board of Directors.
ARTICLE NINE
Special Meetings and Actions Without a Meeting
9.1. The shareholders of the corporation shall not have the right to
call a special meeting of shareholders, including but not limited to, a special
meeting in lieu of the annual meeting of shareholders.
9.2. Action required or permitted to be taken at a meeting of
shareholders may be taken without a meeting if the action is taken by all
shareholders entitled to vote on the action. The action must be evidenced by one
or more written consents describing the action taken, signed by all shareholders
and delivered to the corporation for inclusion in the minutes or filing with the
corporate records.
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<PAGE> 13
ARTICLE TEN
Certain ByLaw Amendments
10.1. Subject to the other provisions of this Article, the Board of
Directors of the corporation shall have the power to alter, amend or repeal the
bylaws of the corporation or to adopt new bylaws, but any bylaws adopted by the
Board of Directors may be altered, amended or repealed or new bylaws may be
adopted by the shareholders of the corporation. The shareholders may prescribe,
by so expressing in the action that they take in adopting or amending, that any
bylaws so adopted or amended by them shall not be altered, amended or repealed
by the Board of Directors.
10.2. Notwithstanding the foregoing and anything contained in these
Amended and Restated Articles of Incorporation or the bylaws of the corporation
to the contrary, any alteration, amendment or repeal of any provision of the
bylaws of the corporation, or adoption of new bylaws, as applicable, containing
any provision inconsistent in any manner with the provisions contained in
Articles SIX, SEVEN, EIGHT, NINE AND TEN of these Amended and Restated Articles
of Incorporation or Sections 2.3, 2.12, 3.2, 3.3, 3.4, 9.1 through 9.18 and 12.1
of the bylaws of the corporation, shall be effected only by that procedure
required under Georgia law for amendment of articles of incorporation.
IN WITNESS WHEREOF, Longhorn Steaks, Inc. executes these Amended and
Restated Articles of Incorporation by its duly authorized officer on this 13th
day of February, 1992.
/s/ G.W. McKerrow, Jr.
-------------------------------------------
George W. McKerrow, Jr.
President
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<PAGE> 1
EXHIBIT 3(b)
------------------------------------------
RARE HOSPITALITY INTERNATIONAL, INC.
BYLAWS
AS AMENDED THROUGH OCTOBER 13, 1997
------------------------------------------
<PAGE> 2
RARE HOSPITALITY INTERNATIONAL, INC.
BYLAWS
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE ONE - OFFICES AND AGENT
Section 1.1 Registered Office and Agent 1
Section 1.2 Other Offices 1
ARTICLE TWO - SHAREHOLDERS' MEETINGS
Section 2.1 Place of Meetings 1
Section 2.2 Annual Meetings 1
Section 2.3 Special Meetings 1
Section 2.4 Notice of Meetings 1
Section 2.5 Voting Group 2
Section 2.6 Quorum 2
Section 2.7 Vote Required for Action 2
Section 2.8 Voting of Shares 2
Section 2.9 Proxies 2
Section 2.10 Presiding Officer 3
Section 2.11 Adjournments 3
Section 2.12 Action of Shareholders
Without a Meeting 3
ARTICLE THREE - THE BOARD OF DIRECTORS
Section 3.1 General Powers 3
Section 3.2 Number of Directors and Term of Office 4
Section 3.3 Removal 4
Section 3.4 Vacancies 5
Section 3.5 Compensation 5
ARTICLE FOUR - MEETINGS OF THE BOARD OF DIRECTORS
Section 4.1 Regular Meetings 5
Section 4.2 Special Meetings 5
Section 4.3 Place of Meetings 5
Section 4.4 Notice of Meetings 5
Section 4.5 Quorum 6
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C> <C>
Section 4.6 Vote Required for Action 6
Section 4.7 Participation by Conference
Telephone 6
Section 4.8 Action by Directors Without a Meeting 6
Section 4.9 Adjournments 6
Section 4.10 Committees of the Board of Directors 7
ARTICLE FIVE - MANNER OF NOTICE AND WAIVER AS TO SHAREHOLDERS AND DIRECTORS
Section 5.1 Procedure 7
Section 5.2 Waiver 8
ARTICLE SIX - OFFICERS
Section 6.1 Number 8
Section 6.2 Election and Term 8
Section 6.3 Compensation 9
Section 6.4 Chairman; Vice Chairman 9
Section 6.5 Chief Executive Officer 9
Section 6.6 President 9
Section 6.7 Vice Presidents 9
Section 6.8 Secretary 9
Section 6.9 Treasurer 10
Section 6.10 Bonds 10
ARTICLE SEVEN - DISTRIBUTIONS AND SHARE DIVIDENDS
Section 7.1 Authorization or Declaration 10
Section 7.2 Record Date with Regard to Distributions
and Share Dividends 10
ARTICLE EIGHT - SHARES
Section 8.1 Authorization and Issuance of Shares 10
Section 8.2 Share Certificates 10
Section 8.3 Rights of Corporation with Respect
to Registered Owners 11
Section 8.4 Transfers of Shares 11
Section 8.5 Duty of Corporation to Register Transfer 11
Section 8.6 Lost, Stolen or Destroyed Certificates 11
Section 8.7 Fixing of Record Date with regard to
Shareholder Action 12
</TABLE>
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<PAGE> 4
<TABLE>
<C> <C>
ARTICLE NINE - INDEMNIFICATION
Section 9.1 Certain Definitions 12
Section 9.2 Basic Indemnification Arrangement 13
Section 9.3 Advances for Expenses 14
Section 9.4 Authorization of and Determination of
Entitlement to Indemnification 15
Section 9.5 Court-Ordered Indemnification and
Advances for Expenses 16
Section 9.6 Indemnification of Employees and Agents 17
Section 9.7 Limitations on Indemnification 17
Section 9.8 Liability Insurance 18
Section 9.9 Witness Fees 18
Section 9.10 Report to Shareholders 18
Section 9.11 Security for Indemnification
Obligations 18
Section 9.12 No Duplication of Payments 18
Section 9.13 Subrogation 18
Section 9.14 Contract Rights 19
Section 9.15 Specific Performance 19
Section 9.16 Non-exclusivity, Etc. 19
Section 9.17 Amendments 19
Section 9.18 Severability 19
ARTICLE TEN - MISCELLANEOUS
Section 10.1 Inspection of Books and Records 20
Section 10.2 Fiscal Year 20
Section 10.3 Corporate Seal 20
Section 10.4 Annual Financial Statements 20
Section 10.5 Conflict with Articles of Incorporation 20
ARTICLE ELEVEN - AMENDMENTS
Section 11.1 Power to Amend Bylaws 20
ARTICLE TWELVE - RESTRICTIONS ON CERTAIN BUSINESS
COMBINATIONS WITH INTERESTED
SHAREHOLDERS
Section 12.1 Business Combinations 21
</TABLE>
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<PAGE> 5
ARTICLE ONE
Offices and Agent
Section 1.1. Registered Office and Agent. The corporation shall maintain a
registered office in the State of Georgia and shall have a registered agent
whose business office is identical to the registered office.
Section 1.2. Other Offices. In addition to its registered office, the
corporation may have offices at any other place or places, within or without the
State of Georgia, as the Board of Directors may from time to time select or as
the business of the corporation may require or make desirable.
ARTICLE TWO
Shareholders' Meetings
Section 2.1. Place of Meetings. Meetings of shareholders may be held at any
place within or without the State of Georgia as set forth in the notice thereof
or in the event of a meeting held pursuant to waiver of notice, as set forth in
the waiver, or if no place is so specified, at the principal office of the
corporation.
Section 2.2. Annual Meetings. The annual meeting of shareholders shall be
held during the month of April or May on a date determined by the Board of
Directors, for the purpose of electing directors and transacting any and all
business that may properly come before the meeting. If the annual meeting of
shareholders is not held on the day designated as provided in this Section 2.2,
any business, including the election of directors, that might properly have been
acted upon at that meeting may be acted upon at a special meeting in lieu of the
annual meeting held pursuant to these bylaws or held pursuant to a court order.
Section 2.3. Special Meetings. Special meetings of shareholders or a
special meeting in lieu of the annual meeting of shareholders may be called at
any time by the Board of Directors, the Chairman, or the President. The
shareholders of the Corporation shall not have the right to call a special
meeting of shareholders, including but not limited to, a special meeting in lieu
of the annual meeting of shareholders.
Section 2.4. Notice of Meetings. Unless waived as contemplated in Section
5.2, a notice of each meeting of shareholders stating the date, time and place
of the meeting shall be given not less than ten (10) days nor more than sixty
(60) days before the date thereof, by or at the direction of the President, the
Secretary, or the officer or persons calling the meeting, to each shareholder
entitled to vote at that meeting. In the case of an annual meeting, the notice
need not state the purpose or purposes of the
<PAGE> 6
meeting unless the articles of incorporation or the Georgia Business Corporation
Code (the "Code") requires the purpose or purposes to be stated in the notice of
the meeting. In the case of a special meeting, including a special meeting in
lieu of an annual meeting, the notice of meeting shall state the purpose or
purposes for which the meeting is called.
Section 2.5 Voting Group. Voting group means all shares of one or more
classes or series that are entitled to vote and be counted together collectively
on a matter at a meeting of shareholders. All shares entitled to vote generally
on the matter are for that purpose a single voting group.
Section 2.6 Quorum. With respect to shares entitled to vote as a separate
voting group on a matter at a meeting of shareholders, the presence, in person
or by proxy, of a majority of the votes entitled to be cast on the matter by the
voting group shall constitute a quorum of that voting group for action on that
matter unless the articles of incorporation or the Code provides otherwise. Once
a share is represented for any purpose at a meeting, other than solely to object
to holding the meeting or to transacting business at the meeting, it is deemed
present for quorum purposes for the remainder of the meeting and for any
adjournment of the meeting unless a new record date is or must be set for the
adjourned meeting pursuant to Section 8.7 of these bylaws.
Section 2.7 Vote Required for Action. If a quorum exists, action on a
matter (other than the election of directors) by a voting group is approved if
the votes cast within the voting group favoring the action exceed the votes cast
opposing the action, unless the articles of incorporation, provisions of these
bylaws validly adopted by the shareholders, or the Code requires a greater
number of affirmative votes. If the articles of incorporation or the Code
provide for voting by two or more voting groups on a matter, action on that
matter is taken only when voted upon by each of those voting groups counted
separately. Action may be taken by one voting group on a matter even though no
action is taken by another voting group entitled to vote on the matter. With
regard to the election of directors, unless otherwise provided in the articles
of incorporation, if a quorum exists, action on the election of directors is
taken by a plurality of the votes cast by the shares entitled to vote in the
election.
Section 2.8 Voting of Shares. Unless the articles of incorporation or the
Code provides otherwise, each outstanding share having voting rights shall be
entitled to one vote on each matter submitted to a vote at a meeting of
shareholders. Voting on all matters shall be by voice vote or by show of hands
unless any qualified voter, prior to the voting on any matter, demands vote by
ballot, in which case each ballot shall state the name of the shareholder voting
and the number of shares voted by him, and if the ballot be cast by proxy, it
shall also state the name of the proxy.
Section 2.9 Proxies. A shareholder entitled to vote pursuant to Section 2.8
may vote in person or by proxy pursuant to an appointment of proxy executed in
writing by the shareholder or by his attorney in fact. An appointment of proxy
shall be valid for only one meeting to be specified therein, and any
adjournments of such meeting,
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<PAGE> 7
but shall not be valid for more than eleven months unless expressly provided
therein. Appointments of proxy shall be dated and filed with the records of the
meeting to which they relate. If the validity of any appointment of proxy is
questioned, it must be submitted to the secretary of the meeting of shareholders
for examination or to a proxy officer or committee appointed by the person
presiding at the meeting. The secretary of the meeting or, if appointed, the
proxy officer or committee, shall determine the validity or invalidity of any
appointment of proxy submitted and reference by the secretary in the minutes of
the meeting to the regularity of an appointment of proxy shall be received as
prima facie evidence of the facts stated for the purpose of establishing the
presence of a quorum at the meeting and for all other purposes.
Section 2.10 Presiding Officer. The Chairman shall serve as the chairman of
every meeting of shareholders unless another person is elected by shareholders
to serve as chairman at the meeting. The chairman shall appoint any persons he
deems required to assist with the meeting.
Section 2.11 Adjournments. Whether or not a quorum is present to organize a
meeting, any meeting of shareholders (including an adjourned meeting) may be
adjourned by the holders of a majority of the voting shares represented at the
meeting to reconvene at a specific time and place, but no later than 120 days
after the date fixed for the original meeting unless the requirements of the
Code concerning the selection of a new record date have been met. At any
reconvened meeting within that time period, any business may be transacted that
could have been transacted at the meeting that was adjourned. If notice of the
adjourned meeting was properly given, it shall not be necessary to give any
notice of the reconvened meeting or of the business to be transacted, if the
date, time and place of the reconvened meeting are announced at the meeting that
was adjourned and before adjournment; provided, however, that if a new record
date is or must be fixed, notice of the reconvened meeting must be given to
persons who are shareholders as of the new record date.
Section 2.12 Action of Shareholders Without a Meeting. Action required or
permitted to be taken at a meeting of shareholders may be taken without a
meeting if the action is taken by all shareholders entitled to vote on the
action. The action must be evidenced by one or more written consents describing
the action taken, signed by all shareholders and delivered to the corporation
for inclusion in the minutes or filing with the corporate records.
ARTICLE THREE
The Board of Directors
Section 3.1 General Powers. All corporate powers shall be exercised by or
under the authority of, and the business and affairs of the corporation shall be
managed under the direction of the Board of Directors. In addition to the powers
and authority expressly conferred upon it by these bylaws, the Board of
Directions may exercise all such
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<PAGE> 8
lawful acts and things as are not by law, by the articles of incorporation or by
these bylaws directed or required to be exercised or done by the shareholders.
Section 3.2 Number of Directors and Term of Office. The number of directors
of the corporation shall not be less than three (3) nor more than eleven (11),
the precise number to be fixed by resolution of the Board of Directors from time
to time. The directors shall be divided into three classes, each consisting, as
nearly equal in number as possible, of one-third of the total number of
directors constituting the entire Board of Directors. At the first election of
directors occurring following the date of approval of amended and restated
articles of incorporation of the corporation containing a provision comparable
to this Section 3.2 by the shareholders of the corporation, the first class of
directors (Class I) shall be elected for a term expiring upon the next following
annual meeting of shareholders and upon the election and qualification of their
respective successors, the second class of directors (Class II) shall be elected
for a term expiring upon the second next annual meeting of shareholders and upon
the election and qualification of their respective successors, and the third
class of directors (Class III) shall be elected for a term expiring upon the
third next annual meeting of shareholders and upon the election and
qualification of their respective successors. At each succeeding annual meeting
of shareholders, successors to the class of directors whose term expires at the
annual meeting of shareholders shall be elected for a three-year term. Except as
provided in Section 3.4, a director shall be elected by the affirmative vote of
a majority of the shares represented at the meeting of shareholders at which the
director stands for election and entitled to elect such director.
The number of directors may be increased or decreased from time to time as
provided herein or by amendment to these bylaws and the articles of
incorporation; provided, however, that the total number of directors at any time
shall not be less than three (3); and provided further, that no decrease in the
number of directors shall have the effect of shortening the term of an incumbent
director. In the event that preferred stock of the corporation is issued and
authorizes the election of one or more directors by the holders of such
preferred stock, the number of directors may be increased in accordance with the
terms of the preferred stock. In the event of any increase or decrease in the
authorized number of directors, each director then serving shall continue as a
director of the class of which he is a member until the expiration of his
current term, or his earlier resignation, removal from office or death, and the
newly created or eliminated directorships resulting from such increase or
decrease shall be apportioned by the Board of Directors among the three classes
of directors so as to maintain such classes as nearly equal as possible;
provided, however, that there shall be no classification of additional directors
elected by the Board until the next meeting of the shareholders called for the
purpose of electing directors. Each director shall serve until his successor is
elected and qualified or until his earlier resignation, retirement,
disqualification, removal from office, or death.
Section 3.3 Removal. The entire Board of Directors or any individual
director may be removed from the office but only for cause and only
by the affirmative
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<PAGE> 9
vote of at least 75% of all classes of stock of the corporation entitled to vote
in the election of such director or directors, considered for purposes of this
Section as one class. Notwithstanding the foregoing, in the event that preferred
stock of the corporation is issued and authorizes the election of one or more
directors by the holders of such preferred stock, any individual director
elected by the preferred shareholders may be removed only by the holders of the
outstanding shares of the preferred stock in accordance with the terms of the
preferred stock as provided therein. Removal action may be taken at any
shareholders' meeting with respect to which notice of such purpose has been
given, and a removed director's successor may be elected at the same meeting to
serve the unexpired term.
Section 3.4 Vacancies. A vacancy occurring on the Board of Directors, other
than by reason of removal of a director by the shareholders but including
vacancies arising from resignation, death or through an increase in the number
of directors, may be filled, until the next election of directors by the
shareholders, by the affirmative vote of at least two thirds (2/3) of the total
number of directors then remaining in office, though they constitute less than a
quorum of the Board of Directors.
Section 3.5 Compensation. Unless the articles of incorporation provide
otherwise, the Board of Directors may determine from time to time the
compensation, if any, directors may receive for their services as directors. A
director may also serve the corporation in a capacity other than that of
director and receive compensation, as determined by the Board of Directors, for
services rendered in any other capacity.
ARTICLE FOUR
Meetings of the Board of Directors
Section 4.1 Regular Meetings. Regular meetings of the Board of Directors
shall be held immediately after the annual meeting of shareholders or a special
meeting in lieu of the annual meeting. In addition, the Board of Directors may
schedule other meetings to occur at regular intervals throughout the year.
Section 4.2 Special Meetings. Special meetings of the Board of Directors
may be called by or at the request of the Chairman, the President or by any two
directors in office at that time.
Section 4.3 Place of Meetings. Directors may hold their meetings at any
place within or without the State of Georgia as the Board of Directors may from
time to time establish for regular meetings or as set forth in the notice of
special meetings or, in the event of a meeting held pursuant to waiver of
notice, as set forth in the waiver.
Section 4.4 Notice of Meetings. No notice shall be required for any
regularly scheduled meeting of the directors. Unless waived as contemplated in
Section
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<PAGE> 10
5.2, each director shall be given at least one day's notice (as set forth in
Section 5.1) of each special meeting stating the date, time, and place of the
meeting.
Section 4.5 Quorum. Unless a greater number is required by the articles of
incorporation, these bylaws, or the Code, a quorum of the Board of Directors
consists of a majority of the total number of directors that has been prescribed
by resolution of shareholders or of the Board of Directors pursuant to Section
3.2.
Section 4.6 Vote Required for Action. (a) If a quorum is present when a
vote is taken, the affirmative vote of a majority of directors present is the
act of the Board of Directors unless the Code, the articles of incorporation, or
these bylaws require the vote of a greater number of directors.
(b) A director who is present at a meeting of the Board of Directors or a
committee of the Board of Directors when corporate action is taken is deemed to
have assented to the action taken unless:
(1) He objects at the beginning of the meeting (or promptly upon his
arrival) to holding it or transacting business at the meeting;
(2) His dissent or abstention from the action taken is entered in the
minutes of the meeting; or
(3) He delivers written notice of his dissent or abstention to the
presiding officer of the meeting before its adjournment or to the corporation
immediately after adjournment of the meeting. The right of dissent or abstention
is not available to a director who votes in favor of the action taken.
Section 4.7 Participation by Conference Telephone. Any or all directors may
participate in a meeting of the Board of Directors or of a committee of the
Board of Directors through the use of any means of communication by which all
directors participating may simultaneously hear each other during the meeting.
Section 4.8 Action by Directors Without a Meeting. Unless the articles of
incorporation or these bylaws provide otherwise, any action required or
permitted to be taken at any meeting of the Board of Directors or any action
that may be taken at a meeting of a committee of Board of Directors may be taken
without a meeting if the action is taken by all the members of the Board of
Directors (or of the committee as the case may be). The action must be evidenced
by one or more written consents describing the action taken, signed by each
director (or each director serving on the committee, as the case may be), and
delivered to the corporation for inclusion in the minutes or filing with the
corporate records.
Section 4.9 Adjournments. Whether or not a quorum is present to organize a
meeting, any meeting of directors (including an adjourned meeting) may be
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adjourned by a majority of the directors present, to reconvene at a specific
time and place. At any reconvened meeting any business may be transacted that
could have been transacted at the meeting that was adjourned. If notice of the
adjourned meeting was properly given, it shall not be necessary to give any
notice of the reconvened meeting or of the business to be transacted, if the
date, time and place of the reconvened meeting are announced at the meeting that
was adjourned.
Section 4.10 Committees of the Board of Directors. The Board of Directors
by resolution may designate from among its members an executive committee and
one or more other committees, each consisting of one or more directors all of
whom serve at the pleasure of the Board of Directors. Except as limited by the
Code, each committee shall have the authority set forth in the resolution
establishing the committee. The provisions of this Article Four as to the Board
of Directors and its deliberations shall be applicable to any committee of the
Board of Directors.
ARTICLE FIVE
Manner of Notice and Waiver as to Shareholders and Directors
Section 5.1 Procedure. Whenever these bylaws require notice to be given to
any shareholder or director, the notice shall be given in accordance with this
Section 5.1. Notice under these bylaws shall be in writing unless oral notice is
reasonable under the circumstances. Any notice to directors may be written or
oral. Notice may be communicated in person; by telephone, telegraph, teletype,
or other form of wire or wireless communication; or by mail or private carrier.
If these forms of personal notice are impracticable, notice may be communicated
by a newspaper of general circulation in the area where published, or by radio,
television, or other form of public broadcast communication. Written notice to
the shareholders, if in a comprehensible form, is effective when mailed, if
mailed with first-class postage prepaid and correctly addressed to the
shareholder's address shown in the corporation's current record of shareholders.
Except as provided above, written notice, if in a comprehensible form, is
effective at the earliest of the following:
(1) When received or when delivered, properly addressed, to the
addressee's last known principal place of business or residence;
(2) Five days after its deposit in the mail, as evidenced by the postmark,
if mailed with first-class postage prepaid and correctly addressed; or
(3) On the date shown on the return receipt, if sent by registered or
certified mail, return receipt requested, and the receipt is signed by
or on behalf of the addressee.
Oral notice is effective when communicated if communicated in a comprehensible
manner.
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In calculating time periods for notice, when a period of time measured in days,
weeks, months, years, or other measurement of time is prescribed for the
exercise of any privilege or the discharge of any duty, the first day shall not
be counted but the last day shall be counted.
Section 5.2 Waiver.
(a) A shareholder may waive any notice before or after the date and time
stated in the notice. Except as provided below in (b), the waiver must be in
writing, be signed by the shareholder entitled to the notice, and be delivered
to the corporation for inclusion in the minutes or filing with the corporate
records.
(b) A shareholder's attendance at a meeting (i) waives objection to lack of
notice or defective notice of the meeting, unless the shareholder at the
beginning of the meeting objects to holding the meeting or transacting business
at the meeting; and (ii) waives objection to consideration of a particular
matter at the meeting that is not within the purpose or purposes described in
the meeting notice, unless the shareholder objects to considering the matter
when it is presented.
(c) Unless required by the Code, neither the business transacted nor the
purpose of the meeting need be specified in the waiver.
(d) A director may waive any notice before or after the date and time
stated in the notice. Except as provided below in (e), the waiver must be in
writing, signed by the director entitled to the notice, and delivered to the
corporation for inclusion in the minutes or filing with the corporate records.
(e) A director's attendance at or participation in a meeting waives any
required notice to him of the meeting unless the director at the beginning of
the meeting (or promptly upon his arrival) objects to holding the meeting or
transacting business at the meeting and does not thereafter vote for or assent
to action taken at the meeting.
ARTICLE SIX
Officers
Section 6.1 Number. The officers of the corporation shall consist of a
Chairman, a President, a Secretary and a Treasurer and any other officers as may
be appointed by the Board of Directors or appointed by a duly appointed officer
pursuant to this Article Six. The Board of Directors shall from time to time
create and establish the duties of the other officers. Any two or more offices
may be held by the same person.
Section 6.2 Election and Term. All officers shall be appointed by the Board
of Directors or by a duly appointed officer pursuant to this Article Six and
shall
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serve at the pleasure of the Board of Directors or the appointing officers as
the case may be. All officers, however appointed, may be removed with or without
cause by the Board of Directors and any officer appointed by another officer may
also be removed by the appointing officer with or without cause.
Section 6.3 Compensation. The compensation of all officers of the
corporation appointed by the Board of Directors shall be fixed by the Board of
Directors.
Section 6.4 Chairman; Vice Chairman. The Chairman shall preside at all
meetings of the Board of Directors. The Chairman shall perform such other duties
and have such other authority and powers as the Board of Directors may from time
to time prescribe. If the Board of Directors shall designate one or more of its
members as a Vice Chairman, in the absence or disability of the Chairman, or at
the direction of the Chairman, the Vice Chairman shall perform the duties and
exercise the powers of the Chairman.
Section 6.5 Chief Executive Officer. The Chief Executive Officer shall be
the chief executive officer of the corporation and shall have general
supervision of the business of the corporation. He shall see that all orders and
resolutions of the Board of Directors are carried into effect. the Chief
Executive Officer shall perform such other duties as may from time to time be
delegated to him by the Board of Directors.
Section 6.6 President. The President shall be the chief operating officer
of the corporation and shall have general supervision of the day-to-day
operations of the corporation. The President shall perform such other duties as
may from time to time be delegated to him by the Board of Directors or the Chief
Executive Officer.
Section 6.7 Vice Presidents. In the absence or disability of the President,
or at the direction of the President, the Vice President, if any, shall perform
the duties and exercise the powers of the President. If the corporation has more
than one Vice President the one designated by the Board of Directors shall act
in lieu of the President. Vice Presidents shall perform whatever duties and have
whatever powers the Board of Directors may from time to time assign.
Section 6.8 Secretary. The Secretary shall be responsible for preparing
minutes of the acts and proceedings of all meetings of shareholders and of the
Board of Directors and any committees thereof. He shall have authority to give
all notices required by law or these bylaws. He shall be responsible for the
custody of the corporate books, records, contracts and other documents. The
Secretary may affix the corporate seal to any lawfully executed documents and
shall sign any instruments as may require his signature. The Secretary shall
authenticate records of the corporation. The Secretary shall perform whatever
additional duties and have whatever additional powers the Board of Directors may
from time to time assign him. In the absence or disability of the Secretary or
at the direction of the President, any assistant secretary may perform the
duties and exercise the powers of the Secretary.
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Section 6.9 Treasurer. The Treasurer shall be responsible for the custody
of all funds and securities belonging to the corporation and for the receipt,
deposit or disbursement of funds and securities under the direction of the Board
of Directors. The Treasurer shall cause to be maintained full and true accounts
of all receipts and disbursements and shall make reports of the same to the
Board of Directors and the President upon request. The Treasurer shall perform
all duties as may be assigned to him from time to time by the Board of
Directors.
Section 6.10 Bonds. The Board of Directors by resolution may require any or
all of the officers, agents or employees of the corporation to give bonds to the
corporation, with sufficient surety or sureties, conditioned on the faithful
performance of the duties of their respective offices or positions, and to
comply with any other conditions as from time to time may be required by the
Board of Directors.
ARTICLE SEVEN
Distributions and Share Dividends
Section 7.1 Authorization or Declaration. Unless the articles of
incorporation provide otherwise, the Board of Directors from time to time in its
discretion may authorize or declare distributions or share dividends in
accordance with the Code.
Section 7.2 Record Date With Regard to Distributions and Share Dividends.
For the purpose of determining shareholders entitled to a distribution (other
than one involving a purchase, redemption, or other reacquisition of the
corporation's shares) or a share dividend the Board of Directors may fix a date
as the record date. If no record date is fixed by the Board of Directors, the
record date shall be determined in accordance with the provisions of the Code.
ARTICLE EIGHT
Shares
Section 8.1 Authorization and Issuance of Shares. In accordance with the
Code, the Board of Directors may authorize shares of any class or series
provided for in the articles of incorporation to be issued for any consideration
valid under the provisions of the Code. To the extent provided in the articles
of incorporation, the Board of Directors shall determine the preferences,
limitations, and relative rights of the shares.
Section 8.2 Share Certificates. The interest of each shareholder in the
corporation shall be evidenced by a certificate or certificates representing
shares of the corporation which shall be in such form as the Board of Directors
from time to time may adopt. Share certificates shall be numbered consecutively,
shall be in registered form, shall indicate the date of issuance, the name of
the corporation and that it is organized under the laws of the State of Georgia,
the name of the shareholder, and the number and class of
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shares and the designation of the series, if any, represented by the
certificate. Each certificate shall be signed by any one of the President, a
Vice President, the Secretary, or the Treasurer. The corporate seal need not be
affixed.
Section 8.3 Rights of Corporation with Respect to Registered Owners. Prior
to due presentation for transfer of registration of its shares, the corporation
may treat the registered owner of the shares as the person exclusively entitled
to vote the shares, to receive any share dividend or distribution with respect
to the shares, and for all other purposes; and the corporation shall not be
bound to recognize any equitable or other claim to or interest in the shares on
the part of any other person, whether or not it shall have express or other
notice thereof, except as otherwise provided by law.
Section 8.4 Transfers of Shares. Transfers of shares shall be made upon the
transfer books of the corporation, kept at the office of the transfer agent
designated to transfer the shares, only upon direction of the person named in
the certificate, or by an attorney lawfully constituted in writing; and before a
new certificate is issued, the old certificate shall be surrendered for
cancellation or, in the case of a certificate alleged to have been lost, stolen,
or destroyed, the requirements of Section 8.6 of these bylaws shall have been
met.
Section 8.5 Duty of Corporation to Register Transfer. Notwithstanding any
of the provisions of Section 8.4 of these bylaws, the corporation is under a
duty to register the transfer of its shares only if:
(a) the certificate is endorsed by the appropriate person or persons; and
(b) reasonable assurance is given that the endorsement or affidavit is
genuine and effective; and
(c) the corporation either has no duty to inquire into adverse claims or
has discharged that duty; and
(d) the requirements of any applicable law relating to the collection of
taxes have been met; and
(e) the transfer in fact is rightful or is to a bona fide purchaser.
Section 8.6 Lost, Stolen or Destroyed Certificates. Any person claiming a
share certificate to be lost, stolen or destroyed shall make an affidavit or
affirmation of the fact in the manner required by the Board of Directors and, if
the Board of Directors requires, shall give the corporation a bond of indemnity
in form and amount, and with one or more sureties satisfactory to the Board of
Directors, as the Board of Directors may require, whereupon an appropriate new
certificate may be issued in lieu of the one alleged to have been lost, stolen
or destroyed.
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Section 8.7 Fixing of Record Date with regard to Shareholder Action. For
the purpose of determining shareholders entitled to notice of a shareholders'
meeting, to demand a special meeting, to vote, or to take any other action, the
Board of Directors may fix a future date as the record date, which date shall be
not more than seventy (70) days prior to the date on which the particular
action, requiring a determination of shareholders, is to be taken. A
determination of shareholders entitled to notice of or to vote at a
shareholders' meeting is effective for any adjournment of the meeting unless the
Board of Directors fixes a new record date, which it must do if the meeting is
adjourned to a date more than 120 days after the date fixed for the original
meeting. If no record date is fixed by the Board of Directors, the record date
shall be determined in accordance with the provisions of the Code.
ARTICLE NINE
Indemnification
Section 9.1 Certain Definitions. As used in this Article, the term:
(a) "Corporation" includes any domestic or foreign predecessor entity
of this corporation in a merger or other transaction in which the
predecessor's existence ceased upon consummation of the
transaction.
(b) "Director" means an individual who is or was a director of the
corporation or an individual who, while a director of the
corporation, is or was serving at the corporation's request as a
director, officer, partner, trustee, employee, or agent of
another foreign or domestic corporation, partnership, joint
venture, trust, employee benefit plan, or other enterprise. A
director is considered to be serving an employee benefit plan at
the corporation's request if his duties to the corporation also
impose duties on, or otherwise involve services by, him to the
plan or to participants in or beneficiaries of the plan.
"Director" includes, unless the context requires otherwise, the
estate or personal representative of a director.
(c) "Expenses" includes attorneys' fees.
(d) "Liability" means the obligation to pay a judgment, settlement,
penalty, fine (including an excise tax assessed with respect to
an employee benefit plan), or reasonable expenses incurred with
respect to a proceeding.
(e) "Officer" means an individual who is or was an officer of the
corporation or an individual who, while an officer of the
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corporation, is or was serving at the corporation's request as a
director, officer, partner, trustee, employee, or agent of
another foreign or domestic corporation, partnership, joint
venture, trust, employee benefit plan, or other enterprise. An
officer is considered to be serving an employee benefit plan at
the corporation's request if his duties to the corporation also
impose duties on, or otherwise involve services by, him to the
plan or to participants in or beneficiaries of the plan.
"Officer" includes, unless the context requires otherwise, the
estate or personal representative of an officer.
(f) "Party" includes an individual who was, is, or is threatened to
be made a named defendant or respondent in a proceeding.
(g) "Proceeding" means any threatened, pending, or completed action,
suit, or proceeding, whether civil, criminal, administrative, or
investigative and whether formal or informal.
(h) "Reviewing Party" shall mean the person or persons making the
entitlement determination pursuant to Section 9.4 of this
Article, and shall not include a court making any determination
under this Article or otherwise.
Section 9.2 Basic Indemnification Arrangement.
(a) Except as provided in Section 9.7 and subsections 9.2(d) and
9.2(e) below, the corporation shall indemnify an individual who
is made a party to a proceeding because he is or was a director
or officer against liability incurred by him in the proceeding if
he acted in a manner he believed in good faith to be in or not
opposed to the best interests of the corporation and, in the case
of any criminal proceeding, he had no reasonable cause to believe
his conduct was unlawful.
(b) A person's conduct with respect to an employee benefit plan for a
purpose he believed in good faith to be in the interests of the
participants in and beneficiaries of the plan is conduct that
satisfies the requirement of subsection 9.2(a).
(c) The termination of a proceeding by judgment, order, settlement,
or conviction, or upon a plea of nolo contendere or its
equivalent shall not, of itself, be determinative that the
proposed indemnitee did not meet the standard of conduct set
forth in subsection 9.2(a).
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(d) The corporation shall not indemnify a person under this Article
in connection with (i) a proceeding by or in the right of the
corporation in which such person was adjudged liable to the
corporation, unless, and then only to the extent that, the
Reviewing Party, or a court of competent jurisdiction acting
pursuant to Section 9.5 of this Article or Section 14-2-854 of
the Georgia Business Corporation Code, determines that, in view
of the circumstances of the case, the indemnitee is fairly and
reasonably entitled to indemnification, or (ii) any proceeding in
which such person was adjudged liable on the basis that he
improperly received a personal benefit, unless, and then only to
the extent that, a court of competent jurisdiction acting
pursuant to Section 9.5 of this Article or Section 14-2-854 of
the Georgia Business Corporation Code determines that, in view of
the circumstances of the case, such person is fairly and
reasonably entitled to indemnification.
(e) Indemnification permitted under this Article in connection with a
proceeding by or in the right of the corporation shall include
reasonable expenses, penalties, fines (including an excise tax
assessed with respect to an employee benefit plan) and amounts
paid in settlement in connection with the proceeding, but, unless
ordered by a court, shall not include judgments.
Section 9.3 Advances for Expenses.
(a) The corporation shall pay for or reimburse the reasonable
expenses incurred by a director or officer as a party to a
proceeding in advance of final disposition of the proceeding if:
(i) Such person furnishes the corporation a written affirmation
of his good faith belief that he has met the standard of
conduct set forth in subsection 9.2(a) above and that his
conduct does not constitute behavior of the kind described
in subsections 9.7 (i)-(iv) below; and
(ii) Such person furnishes the corporation a written undertaking
(meeting the qualifications set forth below in subsection
9.3(b)), executed personally or on his behalf, to repay any
advances if it is ultimately determined that he is not
entitled to indemnification under this Article or otherwise.
(b) The undertaking required by subsection 9.3(a)(ii) above must be
an unlimited general obligation of the proposed indemnitee but
need
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not be secured and shall be accepted without reference to
financial ability to make repayment.
Section 9.4 Authorization of and Determination of Entitlement to
Indemnification.
(a) The corporation acknowledges that indemnification of a director
or officer under Section 9.2 has been pre-authorized by the
corporation in the manner described in subsection 9.4(b) below.
Nevertheless, except as set forth in subsection 9.4(d) below, the
corporation shall not indemnify a director or officer under
Section 9.2 unless a separate determination has been made in the
specific case that indemnification of such person is permissible
in the circumstances because he has met the standard of conduct
set forth in subsection 9.2(a); provided, however, that
regardless of the result or absence of any such determination,
and unless limited by the articles of incorporation of this
corporation, to the extent that a director or officer has been
successful, on the merits or otherwise, in the defense of any
proceeding to which he was a party, or in defense of any claim,
issue or matter therein, because he is or was a director or
officer, the corporation shall indemnify such person against
reasonable expenses incurred by him in connection therewith.
(b) The determination referred to in subsection 9.4(a) above shall be
made, at the election of the board of directors:
(i) by the board of directors of the corporation by majority
vote of a quorum consisting of directors not at the time
parties to the proceeding;
(ii) if a quorum cannot be obtained under subdivision (i), by
majority vote of a committee duly designated by the board
of directors (in which designation directors who are
parties may participate), consisting solely of two or more
directors not at the time parties to the proceeding;
(iii) by special legal counsel:
(1) selected by the board of directors or its committee in
the manner prescribed in subdivision (i) or (ii); or
(2) if a quorum of the board of directors cannot be
obtained under subdivision (i) and a committee cannot
be designated under subdivision (ii), selected by a
majority vote of the full board of directors (in
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which selection directors who are parties may
participate); or
(iv) by the shareholders; provided that shares owned by or
voted under the control of directors or officers who
are at the time parties to the proceeding may not be
voted on the determination.
(c) As acknowledged above, the corporation has pre-authorized
the indemnification of directors and officers hereunder,
subject to a case-by-case determination that the proposed
indemnitee met the applicable standard of conduct under
subsection 9.2(a). Consequently, no further decision need or
shall be made on a case-by-case basis as to the
authorization of the corporation's indemnification of
directors and officers hereunder. Nevertheless, except as
set forth in subsection 9.4(d) below, evaluation as to
reasonableness of expenses of a director or officer in the
specific case shall be made in the same manner as the
determination that indemnification is permissible, as
described in subsection 9.4(b) above, except that if the
determination is made by special legal counsel, evaluation
as to reasonableness of expenses shall be made by those
entitled under subsection 9.4(b)(iii) to select counsel.
(d) Notwithstanding the requirement under subsection 9.4(a) that
the Reviewing Party make a determination as to the proposed
indemnitee's entitlement to indemnification, the proposed
indemnitee shall be deemed to have met the standard of
conduct set forth in subsection 9.2(a) if the Reviewing
Party fails to make such a determination within thirty (30)
days following the proposed indemnitee's written request for
indemnification. Likewise, notwithstanding the requirement
under subsection 9.4(c) that the Reviewing Party evaluate
the reasonableness of expenses claimed by the proposed
indemnitee, any expenses claimed by the proposed indemnitee
shall be deemed reasonable if the Reviewing Party fails to
make the evaluation required by subsection 9.4(c) within
thirty (30) days following the proposed indemnitee's written
request for indemnification for, or advancement of,
expenses.
Section 9.5 Court-Ordered Indemnification and Advances for Expenses. Unless
this corporation's articles of incorporation provide otherwise, a director or
officer who is a party to a proceeding may apply for indemnification or advances
for expenses to the court conducting the proceeding or to another court of
competent jurisdiction. For purposes of this Article, the corporation hereby
consents to personal jurisdiction and venue in any court in which is pending a
proceeding to which a director or officer is a party. Regardless of any
determination by the Reviewing Party that the proposed indemnitee is
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not entitled to indemnification or advancement of expenses or as to the
reasonableness of expenses, and regardless of any failure by the Reviewing Party
to make a determination as to such entitlement or the reasonableness of
expenses, such court's review shall be a de novo review, and its determination
shall be binding, on the questions of whether:
(i) The applicant is entitled to mandatory indemnification
under the final clause of subsection 9.4(a) above (in which
case the corporation shall pay the indemnitee's reasonable
expenses incurred to obtain court-ordered indemnification);
(ii) The applicant is fairly and reasonably entitled to
indemnification in view of all the relevant circumstances,
whether or not he met the standard of conduct set forth in
subsection 9.2(a) above or was adjudged liable as described
in subsection 9.2(d) above (in which case any court-ordered
indemnification need not be limited to reasonable expenses
incurred by the indemnitee but may include expenses,
penalties, fines, judgments, amounts paid in settlement and
any other amounts ordered by the court to be indemnified,
and, whether or not so ordered, the corporation shall pay
the applicant's reasonable expenses incurred to obtain
court-ordered indemnification); or
(iii) In the case of advances for expenses, the applicant is
entitled pursuant to the articles of incorporation, bylaws
or applicable resolution or agreement to payment for or
reimbursement of his reasonable expenses incurred as a
party to a proceeding in advance of final disposition of
the proceeding (in which case the corporation shall pay the
applicant's reasonable expenses incurred to obtain
court-ordered advancement of expenses).
Section 9.6 Indemnification of Employees and Agents. Unless this
corporation's articles of incorporation provide otherwise, the corporation may
indemnify and advance expenses under this Article to an employee or agent of the
corporation who is not a director or officer to the same extent as to a director
or officer, or to any lesser extent (or greater extent if permitted by law)
determined by the board of directors.
Section 9.7 Limitations on Indemnification. Regardless of whether a
proposed indemnitee has met the applicable standard of conduct set forth in
subsection 9.2(a), the corporation shall not indemnify a person under this
Article for any liability incurred in a proceeding in which the person is
adjudged liable to the corporation or is subjected to injunctive relief in favor
of the corporation:
(i) for any appropriation, in violation of his duties, of any
business opportunity of the corporation;
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(ii) for acts or omissions which involve intentional misconduct
or a knowing violation of law;
(iii) for the types of liability set forth in Section 14-2-832 of
the Georgia Business Corporation Code; or
(iv) for any transaction from which he received an improper
personal benefit.
Section 9.8 Liability Insurance. The corporation may purchase and maintain
insurance on behalf of a director or officer or an individual who is or was an
employee or agent of the corporation or who, while an employee or agent of the
corporation, is or was serving at the request of the corporation as a director,
officer, partner, trustee, employee or agent of another foreign or domestic
corporation, partnership, joint venture, trust, employee benefit plan, or other
enterprise against liability asserted against or incurred by him in that
capacity or arising from his status as a director, officer, employee, or agent,
whether or not the corporation would have power to indemnify him against the
same liability under Section 9.2, Section 9.3 or Section 9.4 above.
Section 9.9 Witness Fees. Nothing in this Article shall limit the
corporation's power to pay or reimburse expenses incurred by a person in
connection with his appearance as a witness in a proceeding at a time when he
has not been made a named defendant or respondent in the proceeding.
Section 9.10 Report to Shareholders. If the corporation indemnifies or
advances expenses to a director in connection with a proceeding by or in the
right of the corporation, the corporation shall report the indemnification or
advance, in writing, to the shareholders with or before the notice of the next
shareholders' meeting.
Section 9.11 Security for Indemnification Obligations. The corporation may
at any time and in any manner, at the discretion of the board of directors,
secure the corporation's obligations to indemnify or advance expenses to a
person pursuant to this Article.
Section 9.12 No Duplication of Payments. The corporation shall not be
liable under this Article to make any payment to a person hereunder to the
extent such person has otherwise actually received payment (under any insurance
policy, agreement or otherwise) of the amounts otherwise payable hereunder.
Section 9.13 Subrogation. In the event of payment under this Article, the
corporation shall be subrogated to the extent of such payment to all of the
rights of recovery of the indemnitee, who shall execute all papers required and
shall do everything that may be necessary to secure such rights, including the
execution of such documents necessary to enable the corporation effectively to
bring suit to enforce such rights.
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Section 9.14 Contract Rights. The right to indemnification and advancement
of expenses conferred hereunder to directors and officers shall be a contract
right and shall not be affected adversely to any director or officer by any
amendment of these bylaws with respect to any action or inaction occurring prior
to such amendment; provided, however, that this provision shall not confer upon
any indemnitee or potential indemnitee (in his capacity as such) the right to
consent or object to any subsequent amendment of these bylaws.
Section 9.15 Specific Performance. In any proceeding brought by or on
behalf of an officer or director to specifically enforce the provisions of this
Article, the corporation hereby waives the claim or defense therein that the
plaintiff or claimant has an adequate remedy at law, and the corporation shall
not urge in any such proceeding the claim or defense that such remedy at law
exists. The provisions of this Section 9.15, however, shall not prevent the
officer or director from seeking a remedy at law in connection with any breach
of the provisions of this Article.
Section 9.16 Non-exclusivity, Etc. The rights of a director or officer
hereunder shall be in addition to any other rights with respect to
indemnification, advancement of expenses or otherwise that he may have under
contract or the Georgia Business Corporation Code or otherwise.
Section 9.17 Amendments. It is the intent of the Corporation to indemnify
and advance expenses to its directors and officers to the full extent permitted
by the Georgia Business Corporation Code, as amended from time to time. To the
extent that the Georgia Business Corporation Code is hereafter amended to permit
a Georgia business corporation to provide to its directors greater rights to
indemnification or advancement of expenses than those specifically set forth
hereinabove, this Article shall be deemed amended to require such greater
indemnification or more liberal advancement of expenses to its directors and
officers, in each case consistent with the Georgia Business Corporation Code as
so amended from time to time. No amendment, modification or rescission of this
Article, or any provision hereof, the effect of which would diminish the rights
to indemnification or advancement of expenses as set forth herein shall be
effective as to any person with respect to any action taken or omitted by such
person prior to such amendment, modification or rescission.
Section 9.18 Severability. To the extent that the provisions of this
Article are held to be inconsistent with the provisions of Part 5 of Article 8
of the Georgia Business Corporation Code, such provisions of such Code shall
govern. In the event that any of the provisions of this Article (including any
provision within a single section, subsection, division or sentence) is held by
a court of competent jurisdiction to be invalid, void or otherwise
unenforceable, the remaining provisions of this Article shall remain enforceable
to the fullest extent permitted bylaw.
-19-
<PAGE> 24
ARTICLE TEN
Miscellaneous
Section 10.1 Inspection of Books and Records. The Board of Directors shall
have power to determine which accounts, books and records of the corporation
shall be opened to the inspection of shareholders, except those as may by law
specifically be made open to inspection, and shall have power to fix reasonable
rules and regulations not in conflict with the applicable law for the inspection
of accounts, books and records which by law or by determination of the Board of
Directors shall be open to inspection. Without the prior approval of the Board
of Directors in their discretion, the right of inspection set forth in Section
14-2-1602(c) of the Code shall not be available to any shareholder owning two
(2%) percent or less of the shares outstanding.
Section 10.2 Fiscal Year. The Board of Directors is authorized to fix the
fiscal year of the corporation and to change the same from time to time as it
deems appropriate.
Section 10.3 Corporate Seal. If the Board of Directors determines that
there should be a corporate seal for the corporation, it shall be in the form as
the Board of Directors may from time to time determine.
Section 10.4 Annual Financial Statements. In accordance with the Code, the
corporation shall prepare and provide to shareholders such financial statements
as may be required by the Code.
Section 10.5 Conflict with Articles of Incorporation. In the event that any
provision of these bylaws conflicts with any provision of the articles of
incorporation, the articles of incorporation shall govern.
ARTICLE ELEVEN
Amendments
Section 11.1 Power to Amend Bylaws. The Board of Directors shall have power
to alter, amend or repeal these bylaws or adopt new bylaws, but any bylaws
adopted by the Board of Directors may be altered, amended or repealed, and new
bylaws adopted, by the shareholders. The shareholders may prescribe by so
expressing in the action they take in adopting or amending any bylaw or bylaws
that the bylaw or bylaws so adopted or amended shall not be altered, amended or
repealed by the Board of Directors. Notwithstanding the foregoing, the
provisions of Sections 2.3, 2.12, 3.2, 3.3, 3.4, Article Nine, this Article
Eleven or Article Twelve of these bylaws may be amended only by the procedure
provided in the Code for the amendment of articles of incorporation.
-20-
<PAGE> 25
ARTICLE TWELVE
Restrictions on Certain Business Combinations
with Interested Shareholders
Section 12.1 Business Combinations. All of the requirements of Article 11,
Part 3, of the Code, included in Sections 14-2-1131 through 1133 (and any
successor provisions thereto), shall be applicable to the corporation in
connection with any business combination, as defined therein, with any
interested shareholder, as defined therein.
-21-
<PAGE> 1
EXHIBIT 4(b)
[BUGABOO CREEK [LONGHORN [THE CAPITAL
STEAK HOUSE LOGO] STEAKS LOGO] GRILLE LOGO]
NUMBER SHARES
COMMON STOCK SEE REVERSE FOR
CERTAIN DEFINITIONS
CUSIP [__________]
LONGHORN STEAKS, INC.
(CERTIFICATE IS STAMPED "NAME CHANGED TO
RARE HOSPITALITY INTERNATIONAL, INC.")
INCORPORATED UNDER THE LAWS
OF THE STATE OF GEORGIA
THIS IS TO CERTIFY THAT
IS THE REGISTERED HOLDER OF
FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK OF
LONGHORN STEAKS, INC. transferable on the books of the Corporation by the holder
hereof in person or by duly authorized attorney, upon surrender of this
certificate properly endorsed.
This certificate is not valid unless countersigned by the Transfer Agent and
registered by the Registrar.
WITNESS the facsimile seal of the Corporation and the facsimile signatures of
its duly authorized officers.
Dated:
/s/ Anne D. Huemme [LONGHORN STEAKS, /s/ Richard E. Rivera
Chief Financial Officer INC. CORPORATE SEAL] President and Chief
Executive Officer
<PAGE> 2
LONGHORN STEAKS, INC.
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM -- as tenants in common UNIF GIFT MIN ACT_______ Custodian _______
TEN ENT -- as tenants by the entireties (Cust) (Minor)
JT TEN -- as joint tenants with right under Uniform Gifts to Minors
minor survivorship and not as Act ___________________
tenants in common (State)
Additional abbreviations may also be used though not in the above list.
For value received, _________________________________ hereby sell, assign and
transfer unto __________________________ Please insert social security or other
identifying number of assignee /___________________/
- --------------------------------------------------------------------------------
Please print or typewrite name and address including postal zip code of assignee
______________________________________________________ shares of the Common
Stock represented by the within Certificate, and do hereby irrevocably
constitute and appoint
- --------------------------------------------------------------------------------
Attorney to transfer the said stock on the books of the within-named Corporation
with full power of substitution in the premises.
Dated _____________________
Notice: The signature of this assignment must correspond with the name as
written upon the face of the certificate in every particular, without alteration
or enlargement or any change whatever.
Signature(s) Guaranteed:
----------------------------------------------------
The signature(s) should be guaranteed by an eligible
guarantor institution (banks, stockbrokers, savings
and loan associations and credit unions with
membership in an approved signature guarantee
medallion program), pursuant to S.E.C. Rule 17Ad-15.
KEEP THIS CERTIFICATE IN A SAFE PLACE. IF IT IS LOST, STOLEN, MUTILATED OR
DESTROYED, THE CORPORATION WILL REQUIRE A BOND OF INDEMNITY AS A CONDITION TO
THE ISSUANCE OF A REPLACEMENT CERTIFICATE.
LEGEND: Until the Separation Time (as defined in the Rights Agreement referred
to below), this certificate also evidences and entitles the holder hereof to
certain Rights as set forth in a Rights Agreement, dated as of November 4, 1997
(as such may be amended from time to time, the "Rights Agreement"), between RARE
Hospitality International, Inc. (the "Company") and SunTrust Bank,
-2-
<PAGE> 3
Atlanta, as Rights Agent, the terms of which are hereby incorporated herein by
reference and a copy of which is on file at the principal executive offices of
the Company. Under certain circumstances, as set forth in the Rights Agreement,
such Rights may be redeemed, may become exercisable for securities or assets of
the Company or of another entity, may be exchanged for shares of Common Stock or
other securities or assets of the Company, may expire, may become void (if they
are "Beneficially Owned" by an "Acquiring Person" or an Affiliate or Associate
thereof, as such terms are defined in the Rights Agreement, or by any transferee
of any of the foregoing) or may be evidenced by separate certificates and may no
longer be evidenced by this certificate. The Company will mail or arrange for
the mailing of a copy of the Rights Agreement to the holder of this certificate
without charge promptly after the receipt of a written request therefor.
-3-
<PAGE> 1
EXHIBIT 10(c)
SECOND AMENDMENT TO LINE OF CREDIT AGREEMENT
THIS SECOND AMENDMENT TO LINE OF CREDIT AGREEMENT (this "Second
Amendment") is made and entered into as of this 27th day of March, 1998 by and
among RARE HOSPITALITY INTERNATIONAL, INC. (formerly known as Longhorn Steaks,
Inc.), a corporation organized under the laws of Georgia (the "Borrower"), and
FIRST UNION NATIONAL BANK (formerly known as First Union National Bank of
Georgia), as Lenders (the "Lender").
Statement of Purpose
The Lender agreed to extend certain Loans to the Borrower pursuant to
the Line of Credit Agreement dated as of December 18, 1996 by and among the
Borrower and the Lender, as amended by the First Amendment to Line of Credit
Agreement dated as of November 6, 1997 (as so amended and as further amended or
supplemented from time to time, the "Line of Credit Agreement").
The parties now desire to amend the Line of Credit Agreement in certain
respects on the terms and conditions set forth below.
NOW THEREFORE, for good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto agree as follows:
1. Effect of Amendment. Except as expressly amended hereby, the Line of
Credit Agreement and Loan Documents shall be and remain in full force and
effect.
2. Capitalized Terms. All capitalized undefined terms used in this
Second Amendment shall have the meanings assigned thereto in the Line of Credit
Agreement.
3. Modification of Line of Credit Agreement. The Line of Credit
Agreement is hereby amended as follows:
(a) The definition of "Revolving Credit Agreement" in Section 1.1 of
the Line of Credit Agreement is hereby deleted in its entirety and the following
definition shall be substituted in lieu thereof (such amendment to be effective
as of the date hereof):
" `Revolving Credit Agreement' means the credit agreement of even date
herewith (as amended, restated, supplemented or otherwise modified from
time to time), by and among Rare Hospitality International, Inc.
(formerly known as Longhorn Steaks, Inc.) and certain Subsidiaries
thereof listed on the signature pages thereto, as Borrowers, the
lenders referred to therein, and First Union National Bank (formerly
known as First Union National Bank of Georgia), as Agent for the
lenders."
<PAGE> 2
(b) The definition of "Termination Date" in Section 1.1 of the Line of
Credit Agreement is hereby deleted in its entirely and the following definition
shall be substituted in lieu thereof (such amendment to be effective as of
December 1, 1997):
" `Termination Date' means September 1, 1998."
4. Representations and Warranties/No Default. By its execution hereof,
the Borrower hereby certifies that (giving effect to this Second Amendment): (i)
each of the representations and warranties set forth in the Line of Credit
Agreement and the other Loan Documents is true and correct in all material
respects as of the date hereof as if fully set forth herein, except to the
extent that such representations and warranties expressly relate to an earlier
date (in which case such representations and warranties shall have been true and
correct in all material respects on and as of such earlier date), and (ii) as of
the date hereof no Default or Event of Default has occurred and is continuing.
5. Expenses. The Borrower shall pay all reasonable out-of-pocket
expenses of the Lender in connection with the preparation, execution and
delivery of this Second Amendment, including without limitation, the reasonable
fees and disbursements of counsel for the Lender.
6. Governing Law. This Second Amendment shall be governed by and
construed in accordance with the laws of the State of North Carolina.
7. Counterparts. This Second Amendment may be executed in separate
counterparts, each of which when executed and delivered is an original but all
of which taken together constitute one and the same instrument.
8. Fax Transmission. A facsimile, telecopy or other reproduction of
this Second Amendment may be executed by one or more parties hereto, and an
executed copy of this Second Amendment may be delivered by one or more parties
hereto by facsimile or similar instantaneous electronic transmission device
pursuant to which the signature of or on behalf of such party can be seen, and
such execution and delivery shall be considered valid, binding and effective for
all purposes. At the request of any party hereto, all parties hereto agree to
execute an original of this Second Amendment as well as any facsimile, telecopy
or other reproduction hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Second
Amendment to be duly executed as of the date and year first above written.
[CORPORATE SEAL] RARE HOSPITALITY INTERNATIONAL, INC.
By: /s/ W. Douglas Benn
---------------------------------
Name: W. Douglas Benn
-------------------------------
Title: CFO
------------------------------
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<PAGE> 3
FIRST UNION NATIONAL BANK, as
Agent and Lender
By: /s/ James R. Mortimer
---------------------------------
Name: James R. Mortimer
-------------------------------
Title: Senior Vice President
------------------------------
-3-
<PAGE> 1
EXHIBIT 10(f)
SECOND AMENDMENT TO CREDIT AGREEMENT
THIS SECOND AMENDMENT TO CREDIT AGREEMENT (this "Second Amendment") is
made and entered into as of this 27th day of March, 1998 by and among RARE
HOSPITALITY INTERNATIONAL, INC. (formerly known as Longhorn Steaks, Inc.), a
corporation organized under the laws of Georgia ("RHI"), certain Subsidiaries of
RHI listed on the signature pages hereto (the "Subsidiary Borrowers" and,
together with RHI, the "Borrowers"), the Lenders who are or may become a party
to the Credit Agreement referred to below, and FIRST UNION NATIONAL BANK
(formerly known as First Union National Bank of Georgia), as Agent for the
Lenders (the "Agent"), and FLEET NATIONAL BANK, as Co-Agent for the Lenders.
Statement of Purpose
The Lenders agreed to extend certain Loans to the Borrowers pursuant to
the Credit Agreement dated as of December 18, 1996 by and among the Borrowers,
the Lenders, the Agent and the Co-Agent, as amended by the First Amendment to
Credit Agreement dated as of November 6, 1997 (as so amended and as further
amended or supplemented from time to time, the "Credit Agreement").
The parties now desire to amend the Credit Agreement in certain
respects on the terms and conditions set forth below.
NOW THEREFORE, for good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto agree as follows:
1. Effect of Amendment. Except as expressly amended hereby, the Credit
Agreement and Loan Documents shall be and remain in full force and effect.
2. Capitalized Terms. All capitalized undefined terms used in this
Second Amendment shall have the meanings assigned thereto in the Credit
Agreement.
3. Modification of Credit Agreement. The Credit Agreement is hereby
amended as follows:
(a) The following definition is hereby added to Section 1.1 of the
Credit Agreement (in alphabetical order):
" `RHI' means Rare Hospitality International, Inc. (formerly
known as Longhorn Steaks, Inc.)."
(b) Section 2.6 of the Credit Agreement is hereby deleted in its
entirety and the following Section 2.6 shall be substituted in lieu thereof:
<PAGE> 2
" Section 2.6. Termination of Credit Facility. The Credit
Facility shall terminate on the earliest of (i) December 18, 1999, (ii)
the date of permanent reduction of the Aggregate Commitment in whole
pursuant to Section 2.5 and (iii) the date of termination by the Agent
on behalf of the Lenders pursuant to Section 10.2(a); provided, that
not earlier than the one hundred and twentieth (120th) day and not
later than the ninetieth (90th) day prior to the then existing
Termination Date (the "Extension Date"), RHI, on behalf of the
Borrowers, may, by written notice (an "Extension Request") given to the
Agent, request that the date set forth in clause (a) above be extended
for one (1) year. The Agent shall promptly advise each Lender of its
receipt of any Extension Request and furnish each Lender with a copy
thereof. Each Lender may, in its sole discretion, consent to the
requested extension by giving written notice thereof to the Agent not
later than the Business Day (the "Extension Confirmation Date")
immediately preceding the date which is thirty (30) days after receipt
of the Extension Request. No Lender shall be under any obligation or
commitment to extend such date and no such obligation or commitment on
the part of any Lender shall be inferred from the provisions of this
Section 2.6. Failure on the part of any Lender to respond to an
Extension Request by the applicable Extension Confirmation Date shall
be deemed to be a denial of such request by such Lender. The requested
extension shall not be granted unless one hundred percent (100%) of the
Lenders shall have consented in writing to such extension."
(c) The grid set forth in Section 3.1(c)(ii) of the Credit Agreement is
hereby deleted in its entirety and the following grid shall be substituted in
lieu thereof:
<TABLE>
<CAPTION>
" Applicable Margin Per Annum
Leverage Ratio Base Rate + LIBOR Rate +
-------------- ----------- ------------
<S> <C> <C>
greater than or
equal to 3.25 0.00% 1.50%
greater than or
equal to 2.75 but
less than 3.25 0.00% 1.25%
greater than or
equal to 2.25 but
less than 2.75 0.00% 1.00%
less than 2.25 0.00% 0.75%"
</TABLE>
-2-
<PAGE> 3
(d) Sections 8.1, 8.2, 8.3 and 8.4 of the Credit Agreement are hereby
deleted in their entirety and the following Sections 8.1, 8.2, 8.3 and 8.4 shall
be substituted in lieu thereof:
" SECTION 8.1. Leverage Ratio. As of the end of any fiscal
quarter, permit the ratio of (a) the sum of (i) the Consolidated Debt
of RHI and its Subsidiaries as of such date plus (ii) the product of
Rental Expense for the period of four (4) consecutive fiscal quarters
ending on such date multiplied by eight (8) to (b) EBITDAR for the
period of four (4) consecutive fiscal quarters ending on such date, to
exceed (i) 3.50 to 1.00 for the fiscal quarters ending March 29, 1998,
June 28, 1998 and September 27, 1998 and (ii) 3.25 to 1.00 for each
fiscal quarter thereafter.
SECTION 8.2. Minimum Net Worth. Permit, at any time, Net Worth
to be less than (a) $110,000,000 plus (b) 50% of cumulative quarterly
Consolidated Net Income of RHI and its Subsidiaries commencing on March
29, 1998 (without deduction for any quarterly losses) plus (c) 100% of
the net proceeds received by RHI or any of its Subsidiaries of any
equity issuance by RHI or any of its Subsidiaries subsequent to the
Closing Date.
SECTION 8.3. Fixed Charge Coverage Ratio. As of the end of any
fiscal quarter, permit the ratio of (a) EBITR for the period of four
(4) consecutive fiscal quarters ending on such date to (b) the sum of
Interest Expense for such period plus Rental Expense for such period,
to be less than (i) 1.70 to 1.00 for the fiscal quarters ending March
29, 1998, June 28, 1998 and September 27, 1998 and (ii) 2.00 to 1.00
for each fiscal quarter thereafter.
SECTION 8.4. Capital Expenditures; Investments. Permit Capital
Expenditures and investments in joint ventures permitted pursuant to
Section 9.4(e) to be greater than $40,000,000 in the aggregate during
any Fiscal Year; provided, that (a) investments in any single
Non-Controlled Joint Venture shall not exceed $3,500,000, (b)
investments in Non-Controlled Joint Ventures shall not exceed
$20,000,000 in the aggregate on any date of determination and (c) in no
event shall more than sixty percent (60%) of aggregate Capital
Expenditures and investments permitted in any Fiscal Year be used for
Capital Expenditures or investments with respect to restaurants in any
one specific restaurant concept (e.g. Longhorn Steakhouse, Bugaboo
Creek Steak House or The Capital Grille). For the purposes of this
Section 8.4 "Non-Controlled Joint Venture" shall mean a joint venture
in which (a) RHI and its Subsidiaries own less than fifty percent (50%)
of the outstanding capital stock or other ownership interests having
ordinary voting power to elect a majority of the board of directors or
other managers of such Person or (b) RHI and its Subsidiaries own fifty
percent (50%) of the outstanding capital stock or other ownership
interests having ordinary voting power to elect a majority of the board
of directors or other managers of such Person and are not otherwise in
control of the management of such Person."
-3-
<PAGE> 4
4. Amendment Fee. The Borrowers hereby agree to pay to the Agent, to be
distributed pro rata among the Lenders, an amendment fee equal to $50,000.
5. Representations and Warranties/No Default. By their execution
hereof, the Borrowers hereby certify that (giving effect to this Second
Amendment): (i) each of the representations and warranties set forth in the
Credit Agreement and the other Loan Documents is true and correct in all
material respects as of the date hereof as if fully set forth herein, except to
the extent that such representations and warranties expressly relate to an
earlier date (in which case such representations and warranties shall have been
true and correct in all material respects on and as of such earlier date), and
(ii) as of the date hereof no Default or Event of Default has occurred and is
continuing.
6. Expenses. The Borrowers shall pay all reasonable out-of-pocket
expenses of the Agent in connection with the preparation, execution and delivery
of this Second Amendment, including without limitation, the reasonable fees and
disbursements of counsel for the Agent.
7. Governing Law. This Second Amendment shall be governed by and
construed in accordance with the laws of the State of North Carolina.
8. Counterparts. This Second Amendment may be executed in separate
counterparts, each of which when executed and delivered is an original but all
of which taken together constitute one and the same instrument.
9. Fax Transmission. A facsimile, telecopy or other reproduction of
this Second Amendment may be executed by one or more parties hereto, and an
executed copy of this Second Amendment may be delivered by one or more parties
hereto by facsimile or similar instantaneous electronic transmission device
pursuant to which the signature of or on behalf of such party can be seen, and
such execution and delivery shall be considered valid, binding and effective for
all purposes. At the request of any party hereto, all parties hereto agree to
execute an original of this Second Amendment as well as any facsimile, telecopy
or other reproduction hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Second
Amendment to be duly executed as of the date and year first above written.
[CORPORATE SEAL] RARE HOSPITALITY INTERNATIONAL, INC.
By: /s/ Philip J. Hickey, Jr.
---------------------------------
Name: Philip J. Hickey, Jr.
-------------------------------
Title: President & COO
------------------------------
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<PAGE> 5
[CORPORATE SEAL] BUGABOO CREEK STEAK HOUSE, INC.
ATTEST:
By: /s/ B. A. Waites By: /s/ Philip J. Hickey, Jr.
-------------------------- -------------------------------
Name: Benjamin A. Waites Name: Philip J. Hickey, Jr.
------------------------ -------------------------------
Title: Asst. Corp. Secretary (RARE) Title: President & COO
Asst. Corp. Secretary(Bugaboo) ------------------------------
-------------------------------
FIRST UNION NATIONAL BANK, as Agent and
Lender
By: /s/ Thomas Hackett
---------------------------------
Name: Thomas Hackett
-------------------------------
Title: AVP
------------------------------
FLEET NATIONAL BANK, as Lender
By: /s/ O. Bennett
---------------------------------
Name: Oliver Bennett
-------------------------------
Title: VP
------------------------------
AMSOUTH BANK OF ALABAMA, as Lender
By: /s/ Alan Lott
---------------------------------
Name: Alan Lott
-------------------------------
Title: Vice President
------------------------------
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<PAGE> 1
EXHIBIT 10(i)
RARE HOSPITALITY INTERNATIONAL, INC.
1997 LONG-TERM INCENTIVE PLAN
ARTICLE I
PURPOSE
1.1. GENERAL. The purpose of the RARE Hospitality International, Inc.
1997 Long-Term Incentive Plan (the "Plan") is to promote the success, and
enhance the value, of RARE Hospitality International, Inc. (the "Corporation"),
by linking the personal interests of its employees, officers, directors,
consultants and advisors to those of Corporation shareholders and by providing
its employees, officers, directors, consultants and advisors with an incentive
for outstanding performance. The Plan is further intended to provide flexibility
to the Corporation in its ability to motivate, attract, and retain the services
of employees, officers, directors, consultants and advisors upon whose judgment,
interest, and special effort the successful conduct of the Corporation's
operation is largely dependent. Accordingly, the Plan permits the grant of
incentive awards from time to time to selected employees, officers, directors,
consultants and advisors.
ARTICLE 2
EFFECTIVE DATE
2.1. EFFECTIVE DATE. The Plan shall be effective as of the date upon
which it shall be approved by the Board. However, the Plan shall be submitted to
the shareholders of the Corporation for approval within 12 months of the Board's
approval thereof. No Incentive Stock Options granted under the Plan may be
exercised prior to approval of the Plan by the shareholders and if the
shareholders fail to approve the Plan within 12 months of the Board's approval
thereof, any Incentive Stock Options previously granted hereunder shall be
automatically converted to Non-Qualified Stock Options without any further act.
In the discretion of the Committee, Awards may be made to Covered Employees
which are intended to constitute qualified performance-based compensation under
Code Section 162(m). Any such Awards shall be contingent upon the shareholders
having approved the Plan.
ARTICLE 3
DEFINITIONS
3.1. DEFINITIONS. When a word or phrase appears in this Plan with the
initial letter capitalized, and the word or phrase does not commence a sentence,
the word or phrase shall generally be given the meaning ascribed to it in this
Section or in Section 1.1 unless a clearly different meaning is required by the
context. The following words and phrases shall have the following meanings:
(a) "Award" means any Option, Stock Appreciation Right,
Restricted Stock Award, Performance Share Award, Dividend Equivalent
Award, or Other Stock-Based
<PAGE> 2
Award, or any other right or interest relating to Stock or cash,
granted to a Participant under the Plan.
(b) "Award Agreement" means any written agreement, contract,
or other instrument or document evidencing an Award.
(c) "Board" means the Board of Directors of the Corporation.
(d) "Change in Control" means and includes each of the
following:
(1) The acquisition by any individual, entity or
group (within the meaning of Section 13(d)(3) or 14(d)(2) of
the 1934 Act) (a "Person") of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the 1934 Act) of 25%
or more of the combined voting power of the then outstanding
voting securities of the Corporation entitled to vote
generally in the election of directors (the "Outstanding
Corporation Voting Securities"); provided, however, that for
purposes of this subsection (1), the following acquisitions
shall not constitute a Change of Control: (i) any acquisition
by a Person who is on the Effective Date the beneficial owner
of 25% or more of the Outstanding Corporation Voting
Securities, (ii) any acquisition by the Corporation, (iii) any
acquisition by any employee benefit plan (or related trust)
sponsored or maintained by the Corporation or any corporation
controlled by the Corporation, or (iv) any acquisition by any
corporation pursuant to a transaction which complies with
clauses (i), (ii) and (iii) of subsection (3) of this
definition;
(2) Individuals who, as of the Effective Date,
constitute the Board (the "Incumbent Board") cease for any
reason to constitute at least a majority of the Board;
provided, however, that any individual becoming a director
subsequent to the Effective Date whose election, or nomination
for election by the Corporation's shareholders, was approved
by a vote of at least a majority of the directors then
comprising the Incumbent Board shall be considered as though
such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial
assumption of office occurs as a result of an actual or
threatened election contest with respect to the election or
removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a
Person other than the Board; or
(3) Consummation of a reorganization, merger, share
exchange or consolidation or sale or other disposition of all
or substantially all of the assets of the Corporation (a
"Business Combination"), in each case, unless, following such
Business Combination, (i) all or substantially all of the
individuals and entities who were the beneficial owners of the
Outstanding Corporation Voting Securities immediately prior to
such Business Combination beneficially own, directly or
indirectly, more than 50% of the combined voting power of the
then outstanding voting securities entitled to vote generally
in the election of directors of the
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<PAGE> 3
corporation resulting from such Business Combination
(including, without limitation, a corporation which as a
result of such transaction owns the Corporation or all or
substantially all of the Corporation's assets either directly
or through one or more subsidiaries) in substantially the same
proportions as their ownership, immediately prior to such
Business Combination of the Outstanding Corporation Voting
Securities, and (ii) no Person (excluding any corporation
resulting from such Business Combination or any employee
benefit plan (or related trust) of the Corporation or such
corporation resulting from such Business Combination)
beneficially owns, directly or indirectly, 25% or more of the
combined voting power of the then outstanding voting
securities of such corporation except to the extent that such
ownership existed prior to the Business Combination, and (iii)
at least a majority of the members of the board of directors
of the corporation resulting from such Business Combination
were members of the Incumbent Board at the time of the
execution of the initial agreement, or of the action of the
Board, providing for such Business Combination; or
(4) approval by the shareholders of the Corporation of a
complete liquidation or dissolution of the Corporation.
(e) "Code" means the Internal Revenue Code of 1986, as amended
from time to time.
(f) "Committee" means the committee of the Board described in
Article 4.
(g) "Corporation" means RARE Hospitality International, Inc.,
a Delaware corporation.
(h) "Covered Employee" means a covered employee as defined in
Code Section 162(m)(3).
(i) "Disability" shall mean any illness or other physical or
mental condition of a Participant that renders the Participant
incapable of performing his customary and usual duties for the
Corporation, or any medically determinable illness or other physical or
mental condition resulting from a bodily injury, disease or mental
disorder which, in the judgment of the Committee, is permanent and
continuous in nature. The Committee may require such medical or other
evidence as it deems necessary to judge the nature and permanency of
the Participant's condition.
(j) "Dividend Equivalent" means a right granted to a
Participant under Article 11.
(k) "Effective Date" has the meaning assigned such term in
Section 2.1.
(l) "Fair Market Value", on any date, means (i) if the Stock
is listed on a securities exchange or is traded over the Nasdaq
National Market, the closing sales price
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on such exchange or over such system on such date or, in the absence of
reported sales on such date, the closing sales price on the immediately
preceding date on which sales were reported, or (ii) if the Stock is
not listed on a securities exchange or traded over the Nasdaq National
Market, the mean between the bid and offered prices as quoted by Nasdaq
for such date, provided that if it is determined that the fair market
value is not properly reflected by such Nasdaq quotations, Fair Market
Value will be determined by such other method as the Committee
determines in good faith to be reasonable.
(m) "Incentive Stock Option" means an Option that is intended
to meet the requirements of Section 422 of the Code or any successor
provision thereto.
(n) "Non-Qualified Stock Option" means an Option that is not
an Incentive Stock Option.
(o) "Option" means a right granted to a Participant under
Article 7 of the Plan to purchase Stock at a specified price during
specified time periods. An Option may be either an Incentive Stock
Option or a Non-Qualified Stock Option.
(p) "Other Stock-Based Award" means a right, granted to a
Participant under Article 12, that relates to or is valued by reference
to Stock or other Awards relating to Stock.
(r) "Parent" means a corporation which beneficially owns a
majority of the outstanding voting stock or voting power of the
Corporation. For Incentive Stock Options, the term shall have the same
meaning as set forth in Code Section 424(e).
(q) "Participant" means a person who, as an employee, officer,
director, consultant or advisor of the Corporation or any Parent or
Subsidiary, has been granted an Award under the Plan.
(o) "Performance Share" means a right granted to a Participant
under Article 9, to receive cash, Stock, or other Awards, the payment
of which is contingent upon achieving certain performance goals
established by the Committee.
(p) "Plan" means the RARE Hospitality International, Inc. 1997
Long-Term Incentive Plan, as amended from time to time.
(q) "Restricted Stock Award" means Stock granted to a
Participant under Article 10 that is subject to certain restrictions
and to risk of forfeiture.
(r) "Retirement" means a Participant's termination of
employment with the Corporation, Parent or Subsidiary after attaining
any normal or early retirement age specified in any pension, profit
sharing or other retirement program sponsored by the Corporation, or,
in the event of the inapplicability thereof with respect to the person
in question, as determined by the Committee in its reasonable judgment.
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(s) "Stock" means the no par value common stock of the
Corporation and such other securities of the Corporation as may be
substituted for Stock pursuant to Article 14.
(t) "Stock Appreciation Right" or "SAR" means a right granted
to a Participant under Article 8 to receive a payment equal to the
difference between the Fair Market Value of a share of Stock as of the
date of exercise of the SAR over the grant price of the SAR, all as
determined pursuant to Article 8.
(u) "Subsidiary" means any corporation, limited liability
company, partnership or other entity of which 50% or more the
outstanding voting stock, voting power, general partnership interest,
or membership interest is beneficially owned directly or indirectly by
the Corporation. For Incentive Stock Options, the term shall have the
meaning set forth in Code Section 424(f).
(v) "1933 Act" means the Securities Act of 1933, as amended
from time to time.
(w) "1934 Act" means the Securities Exchange Act of 1934, as
amended from time to time.
ARTICLE 4
ADMINISTRATION
4.1. COMMITTEE. The Plan shall be administered by the Compensation
Committee of the Board or, at the discretion of the Board from time to time, by
the Board. The Committee shall consist of two or more members of the Board who
are (i) "outside directors" as that term is used in Section 162(m) of the Code
and the regulations promulgated thereunder, and (ii) "non-employee directors" as
such term is defined in Rule 16b-3 promulgated under Section 16 of the 1934 Act
or any successor provision. During any time that the Board is acting as
administrator of the Plan, it shall have all the powers of the Committee
hereunder, and any reference herein to the Committee (other than in this Section
4.1) shall include the Board.
4.2. ACTION BY THE COMMITTEE. For purposes of administering the Plan,
the following rules of procedure shall govern the Committee. A majority of the
Committee shall constitute a quorum. The acts of a majority of the members
present at any meeting at which a quorum is present, and acts approved
unanimously in writing by the members of the Committee in lieu of a meeting,
shall be deemed the acts of the Committee. Each member of the Committee is
entitled to, in good faith, rely or act upon any report or other information
furnished to that member by any officer or other employee of the Corporation or
any Parent or Subsidiary, the Corporation's independent certified public
accountants, or any executive compensation consultant or other professional
retained by the Corporation to assist in the administration of the Plan.
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4.3. AUTHORITY OF COMMITTEE. The Committee has the exclusive power,
authority and discretion to:
(a) Designate Participants;
(b) Determine the type or types of Awards to be granted to each
Participant;
(c) Determine the number of Awards to be granted and the number of
shares of Stock to which an Award will relate;
(d) Determine the terms and conditions of any Award granted under
the Plan, including but not limited to, the exercise price, grant price,
or purchase price, any restrictions or limitations on the Award, any
schedule for lapse of forfeiture restrictions or restrictions on the
exercisability of an Award, and accelerations or waivers thereof, based in
each case on such considerations as the Committee in its sole discretion
determines;
(e) Accelerate the vesting or lapse of restrictions of any
outstanding Award, based in each case on such considerations as the
Committee in its sole discretion determines;
(f) Determine whether, to what extent, and under what circumstances
an Award may be settled in, or the exercise price of an Award may be paid
in, cash, Stock, other Awards, or other property, or an Award may be
canceled, forfeited, or surrendered;
(g) Prescribe the form of each Award Agreement, which need not be
identical for each Participant;
(h) Decide all other matters that must be determined in connection
with an Award;
(i) Establish, adopt or revise any rules and regulations as it may
deem necessary or advisable to administer the Plan;
(j) Make all other decisions and determinations that may be required
under the Plan or as the Committee deems necessary or advisable to
administer the Plan; and
(k) Amend the Plan or any Award Agreement as provided herein.
4.4. DECISIONS BINDING. The Committee's interpretation of the Plan, any
Awards granted under the Plan, any Award Agreement and all decisions and
determinations by the Committee with respect to the Plan are final, binding, and
conclusive on all parties.
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ARTICLE 5
SHARES SUBJECT TO THE PLAN
5.1. NUMBER OF SHARES. Subject to adjustment as provided in Section
14.1, the aggregate number of shares of Stock reserved and available for Awards
or which may be used to provide a basis of measurement for or to determine the
value of an Award (such as with a Stock Appreciation Right or Performance Share
Award) shall be 500,000, no more than 20% of which shall be Restricted Stock
Awards.
5.2. LAPSED AWARDS. To the extent that an Award is canceled,
terminates, expires or lapses for any reason, any shares of Stock subject to the
Award will again be available for the grant of an Award under the Plan and
shares subject to SARs or other Awards settled in cash will be available for the
grant of an Award under the Plan.
5.3. STOCK DISTRIBUTED. Any Stock distributed pursuant to an Award may
consist, in whole or in part, of authorized and unissued Stock, treasury Stock
or Stock purchased on the open market.
5.4. LIMITATION ON AWARDS. Notwithstanding any provision in the Plan to
the contrary, the maximum number of shares of Stock with respect to one or more
Options and/or SARs that may be granted during any one calendar year under the
Plan to any one Covered Employee shall be 250,000. The maximum fair market value
of any Awards (other than Options and SARs) that may be received by a Covered
Employee (less any consideration paid by the Participant for such Award) during
any one calendar year under the Plan shall be $1,000,000.
ARTICLE 6
ELIGIBILITY
6.1. GENERAL. Awards may be granted only to individuals who are
employees, officers, directors, consultants or advisors of the Corporation or a
Parent or Subsidiary.
ARTICLE 7
STOCK OPTIONS
7.1. GENERAL. The Committee is authorized to grant Options to
Participants on the following terms and conditions:
(a) EXERCISE PRICE. The exercise price per share of Stock under an
Option shall be determined by the Committee.
(b) TIME AND CONDITIONS OF EXERCISE. The Committee shall determine
the time or times at which an Option may be exercised in whole or in
part. The Committee also shall determine the performance or other
conditions, if any, that must be satisfied before all or part of an
Option may be exercised. The Committee may waive any exercise provisions
at any time in whole or in part based upon factors as the Committee
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may determine in its sole discretion so that the Option becomes
exercisable at an earlier date.
(c) PAYMENT. The Committee shall determine the methods by which
the exercise price of an Option may be paid, the form of payment,
including, without limitation, cash, shares of Stock, or other property
(including "cashless exercise" arrangements), and the methods by which
shares of Stock shall be delivered or deemed to be delivered to
Participants. Without limiting the power and discretion conferred on the
Committee pursuant to the preceding sentence, the Committee may, in the
exercise of its discretion, but need not, allow a Participant to pay the
Option price by directing the Corporation to withhold from the shares of
Stock that would otherwise be issued upon exercise of the Option that
number of shares having a Fair Market Value on the exercise date equal to
the Option price, all as determined pursuant to rules and procedures
established by the Committee.
(d) EVIDENCE OF GRANT. All Options shall be evidenced by a written
Award Agreement between the Corporation and the Participant. The Award
Agreement shall include such provisions as may be specified by the
Committee.
7.2. INCENTIVE STOCK OPTIONS. The terms of any Incentive Stock Options
granted under the Plan must comply with the following additional rules:
(a) EXERCISE PRICE. The exercise price per share of Stock shall be
set by the Committee, provided that the exercise price for any Incentive
Stock Option shall not be less than the Fair Market Value as of the date
of the grant.
(b) EXERCISE. In no event may any Incentive Stock Option be
exercisable for more than ten years from the date of its grant.
(c) LAPSE OF OPTION. An Incentive Stock Option shall lapse under
the earliest of the following circumstances; provided, however, that the
Committee may, prior to the lapse of the Incentive Stock Option under the
circumstances described in paragraphs (3), (4) and (5) below, provide in
writing that the Option will extend until a later date, but if the Option
is exercised after the dates specified in paragraphs (3), (4) and (5)
above, it will automatically become a Non-Qualified Stock Option:
(1) The Incentive Stock Option shall lapse as of the option
expiration date set forth in the Award Agreement.
(2) The Incentive Stock Option shall lapse ten years after
it is granted, unless an earlier time is set in the Award
Agreement.
(3) If the Participant terminates employment for any reason
other than as provided in paragraph (4) or (5) below, the
Incentive Stock Option shall lapse, unless it is previously
exercised, three months after the Participant's termination of
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employment; provided, however, that if the Participant's
employment is terminated by the Corporation for cause or by the
Participant without the consent of the Corporation, the Incentive
Stock Option shall (to the extent not previously exercised) lapse
immediately.
(4) If the Participant terminates employment by reason of
his Disability, the Incentive Stock Option shall lapse, unless it
is previously exercised, one year after the Participant's
termination of employment.
(5) If the Participant dies while employed, or during the
three-month period described in paragraph (3) or during the
one-year period described in paragraph (4) and before the Option
otherwise lapses, the Option shall lapse one year after the
Participant's death. Upon the Participant's death, any exercisable
Incentive Stock Options may be exercised by the Participant's
beneficiary.
Unless the exercisability of the Incentive Stock Option is
accelerated as provided in Article 13, if a Participant exercises an
Option after termination of employment, the Option may be exercised only
with respect to the shares that were otherwise vested on the
Participant's termination of employment.
(d) INDIVIDUAL DOLLAR LIMITATION. The aggregate Fair Market Value
(determined as of the time an Award is made) of all shares of Stock with
respect to which Incentive Stock Options are first exercisable by a
Participant in any calendar year may not exceed $100,000.00.
(e) TEN PERCENT OWNERS. No Incentive Stock Option shall be granted
to any individual who, at the date of grant, owns stock possessing more
than ten percent of the total combined voting power of all classes of
stock of the Corporation or any Parent or Subsidiary unless the exercise
price per share of such Option is at least 110% of the Fair Market Value
per share of Stock at the date of grant and the Option expires no later
than five years after the date of grant.
(f) EXPIRATION OF INCENTIVE STOCK OPTIONS. No Award of an
Incentive Stock Option may be made pursuant to the Plan after the day
immediately prior to the tenth anniversary of the Effective Date.
(g) RIGHT TO EXERCISE. During a Participant's lifetime, an
Incentive Stock Option may be exercised only by the Participant or, in
the case of the Participant's Disability, by the Participant's guardian
or legal representative.
(h) DIRECTORS. The Committee may not grant an Incentive Stock
Option to a non-employee director. The Committee may grant an Incentive
Stock Option to a director who is also an employee of the Corporation or
Parent or Subsidiary, but only in that individual's position as an
employee and not as a director.
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ARTICLE 8
STOCK APPRECIATION RIGHTS
8.1. GRANT OF SARs. The Committee is authorized to grant SARs to
Participants on the following terms and conditions:
(a) RIGHT TO PAYMENT. Upon the exercise of a Stock Appreciation
Right, the Participant to whom it is granted has the right to receive the
excess, if any, of:
(1) The Fair Market Value of one share of Stock on the date
of exercise; over
(2) The grant price of the Stock Appreciation Right as
determined by the Committee, which shall not be less than the Fair
Market Value of one share of Stock on the date of grant in the
case of any SAR related to an Incentive Stock Option.
(b) OTHER TERMS. All awards of Stock Appreciation Rights shall be
evidenced by an Award Agreement. The terms, methods of exercise, methods
of settlement, form of consideration payable in settlement, and any other
terms and conditions of any Stock Appreciation Right shall be determined
by the Committee at the time of the grant of the Award and shall be
reflected in the Award Agreement.
ARTICLE 9
PERFORMANCE SHARES
9.1. GRANT OF PERFORMANCE SHARES. The Committee is authorized to grant
Performance Shares to Participants on such terms and conditions as may be
selected by the Committee. The Committee shall have the complete discretion to
determine the number of Performance Shares granted to each Participant. All
Awards of Performance Shares shall be evidenced by an Award Agreement.
9.2. RIGHT TO PAYMENT. A grant of Performance Shares gives the
Participant rights, valued as determined by the Committee, and payable to, or
exercisable by, the Participant to whom the Performance Shares are granted, in
whole or in part, as the Committee shall establish at grant or thereafter. The
Committee shall set performance goals and other terms or conditions to payment
of the Performance Shares in its discretion which, depending on the extent to
which they are met, will determine the number and value of Performance Shares
that will be paid to the Participant.
9.3. OTHER TERMS. Performance Shares may be payable in cash, Stock, or
other property, and have such other terms and conditions as determined by the
Committee and reflected in the Award Agreement.
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ARTICLE 10
RESTRICTED STOCK AWARDS
10.1. GRANT OF RESTRICTED STOCK. The Committee is authorized to make
Awards of Restricted Stock to Participants in such amounts and subject to such
terms and conditions as may be selected by the Committee. All Awards of
Restricted Stock shall be evidenced by a Restricted Stock Award Agreement.
10.2. ISSUANCE AND RESTRICTIONS. Restricted Stock shall be subject to
such restrictions on transferability and other restrictions as the Committee may
impose (including, without limitation, limitations on the right to vote
Restricted Stock or the right to receive dividends on the Restricted Stock).
These restrictions may lapse separately or in combination at such times, under
such circumstances, in such installments, upon the satisfaction of performance
goals or otherwise, as the Committee determines at the time of the grant of the
Award or thereafter.
10.3. FORFEITURE. Except as otherwise determined by the Committee at the
time of the grant of the Award or thereafter, upon termination of employment
during the applicable restriction period or upon failure to satisfy a
performance goal during the applicable restriction period, Restricted Stock that
is at that time subject to restrictions shall be forfeited and reacquired by the
Corporation; provided, however, that the Committee may provide in any Award
Agreement that restrictions or forfeiture conditions relating to Restricted
Stock will be waived in whole or in part in the event of terminations resulting
from specified causes, and the Committee may in other cases waive in whole or in
part restrictions or forfeiture conditions relating to Restricted Stock.
10.4. CERTIFICATES FOR RESTRICTED STOCK. Restricted Stock granted under
the Plan may be evidenced in such manner as the Committee shall determine. If
certificates representing shares of Restricted Stock are registered in the name
of the Participant, certificates must bear an appropriate legend referring to
the terms, conditions, and restrictions applicable to such Restricted Stock.
ARTICLE 11 DIVIDEND EQUIVALENTS
11.1. GRANT OF DIVIDEND EQUIVALENTS. The Committee is authorized to grant
Dividend Equivalents to Participants subject to such terms and conditions as may
be selected by the Committee. Dividend Equivalents shall entitle the Participant
to receive payments equal to dividends with respect to all or a portion of the
number of shares of Stock subject to an Option Award or SAR Award, as determined
by the Committee. The Committee may provide that Dividend Equivalents be paid or
distributed when accrued or be deemed to have been reinvested in additional
shares of Stock, or otherwise reinvested.
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ARTICLE 12
OTHER STOCK-BASED AWARDS
12.1. GRANT OF OTHER STOCK-BASED AWARDS. The Committee is authorized,
subject to limitations under applicable law, to grant to Participants such other
Awards that are payable in, valued in whole or in part by reference to, or
otherwise based on or related to shares of Stock, as deemed by the Committee to
be consistent with the purposes of the Plan, including without limitation shares
of Stock awarded purely as a "bonus" and not subject to any restrictions or
conditions, convertible or exchangeable debt securities, other rights
convertible or exchangeable into shares of Stock, and Awards valued by reference
to book value of shares of Stock or the value of securities of or the
performance of specified Parents or Subsidiaries. The Committee shall determine
the terms and conditions of such Awards.
ARTICLE 13
PROVISIONS APPLICABLE TO AWARDS
13.1. STAND-ALONE, TANDEM, AND SUBSTITUTE AWARDS. Awards granted under
the Plan may, in the discretion of the Committee, be granted either alone or in
addition to, in tandem with, or in substitution for, any other Award granted
under the Plan. If an Award is granted in substitution for another Award, the
Committee may require the surrender of such other Award in consideration of the
grant of the new Award. Awards granted in addition to or in tandem with other
Awards may be granted either at the same time as or at a different time from the
grant of such other Awards.
13.2. EXCHANGE PROVISIONS. The Committee may at any time offer to
exchange or buy out any previously granted Award for a payment in cash, Stock,
or another Award (subject to Section 14.1), based on the terms and conditions
the Committee determines and communicates to the Participant at the time the
offer is made.
13.3. TERM OF AWARD. The term of each Award shall be for the period as
determined by the Committee, provided that in no event shall the term of any
Incentive Stock Option or a Stock Appreciation Right granted in tandem with the
Incentive Stock Option exceed a period of ten years from the date of its grant
(or, if Section 7.2(e) applies, five years from the date of its grant).
13.4. FORM OF PAYMENT FOR AWARDS. Subject to the terms of the Plan and
any applicable law or Award Agreement, payments or transfers to be made by the
Corporation or a Parent or Subsidiary on the grant or exercise of an Award may
be made in such form as the Committee determines at or after the time of grant,
including without limitation, cash, Stock, other Awards, or other property, or
any combination, and may be made in a single payment or transfer, in
installments, or on a deferred basis, in each case determined in accordance with
rules adopted by, and at the discretion of, the Committee.
13.5. LIMITS ON TRANSFER. No right or interest of a Participant in any
unexercised or restricted Award may be pledged, encumbered, or hypothecated to
or in favor of any party
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other than the Corporation or a Parent or Subsidiary, or shall be subject to any
lien, obligation, or liability of such Participant to any other party other than
the Corporation or a Parent or Subsidiary. No unexercised or restricted Award
shall be assignable or transferable by a Participant other than by will or the
laws of descent and distribution or, except in the case of an Incentive Stock
Option, pursuant to a domestic relations order that would satisfy Section
414(p)(1)(A) of the Code if such Section applied to an Award under the Plan;
provided, however, that the Committee may (but need not) permit other transfers
where the Committee concludes that such transferability (i) does not result in
accelerated taxation, (ii) does not cause any Option intended to be an incentive
stock option to fail to be described in Code Section 422(b), and (iii) is
otherwise appropriate and desirable, taking into account any state or federal
tax or securities laws applicable to transferable Awards.
13.6. BENEFICIARIES. Notwithstanding Section 13.5, a Participant may, in
the manner determined by the Committee, designate a beneficiary to exercise the
rights of the Participant and to receive any distribution with respect to any
Award upon the Participant's death. A beneficiary, legal guardian, legal
representative, or other person claiming any rights under the Plan is subject to
all terms and conditions of the Plan and any Award Agreement applicable to the
Participant, except to the extent the Plan and Award Agreement otherwise
provide, and to any additional restrictions deemed necessary or appropriate by
the Committee. If no beneficiary has been designated or survives the
Participant, payment shall be made to the Participant's estate. Subject to the
foregoing, a beneficiary designation may be changed or revoked by a Participant
at any time provided the change or revocation is filed with the Committee.
13.7. STOCK CERTIFICATES. All Stock certificates delivered under the Plan
are subject to any stop-transfer orders and other restrictions as the Committee
deems necessary or advisable to comply with federal or state securities laws,
rules and regulations and the rules of any national securities exchange or
automated quotation system on which the Stock is listed, quoted, or traded. The
Committee may place legends on any Stock certificate to reference restrictions
applicable to the Stock.
13.8. ACCELERATION UPON CERTAIN EVENTS. Upon the occurrence of a Change
in Control or in the event of the occurrence of any circumstance, transaction or
event not constituting a Change in Control but which the Board of Directors
deems to be, or to be reasonably likely to lead to, an effective change in
control of the Corporation of a nature that would be required to be reported in
response to Item 6(e) of Schedule 14A of the 1934 Act, the Committee may in its
sole discretion declare all outstanding Options, Stock Appreciation Rights, and
other Awards in the nature of rights that may be exercised to be fully
exercisable, and/or all restrictions on all outstanding Awards to have lapsed,
in each case as of such date as the Committee may, in its sole discretion,
declare, which may be on or before the consummation of such transaction or
event. To the extent that this provision causes Incentive Stock Options to
exceed the dollar limitation set forth in Section 7.2(d), the excess Options
shall be deemed to be Non-Qualified Stock Options.
13.9. ACCELERATION FOR ANY OTHER REASON. Regardless of whether an event
has occurred as described in Section 13.8 above, the Committee may in its sole
discretion at
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any time determine that all or a portion of a Participant's Options, Stock
Appreciation Rights, and other Awards in the nature of rights that may be
exercised shall become fully or partially exercisable, and/or that all or a part
of the restrictions on all or a portion of the outstanding Awards shall lapse,
in each case as of such date as the Committee may, in its sole discretion,
declare. The Committee may discriminate among Participants and among Awards
granted to a Participant in exercising its discretion pursuant to this Section
13.9.
13.10. EFFECT OF ACCELERATION. If an Award is accelerated under Section
13.8, the Committee may, in its sole discretion, provide (i) that the Award will
expire after a designated period of time after such acceleration to the extent
not then exercised, (ii) that the Award will be settled in cash rather than
Stock, (iii) that the Award will be assumed by another party to the transaction
giving rise to the acceleration or otherwise be equitably converted in
connection with such transaction, or (iv) any combination of the foregoing. The
Committee's determination need not be uniform and may be different for different
Participants whether or not such Participants are similarly situated.
13.11. PERFORMANCE GOALS. The Committee may determine that any Award
granted pursuant to this Plan to a Participant (including, but not limited to,
Participants who are Covered Employees) shall be determined solely on the basis
of (a) the achievement by the Corporation or a Parent or Subsidiary of a
specified target return, or target growth in return, on equity or assets, (b)
the Corporation's, Parent's or Subsidiary's stock price, (c) the achievement by
a business unit of the Corporation, Parent or Subsidiary of a specified target,
or target growth in, net income or earnings per share, or (d) any combination of
the goals set forth in (a) through (c) above. Furthermore, the Committee
reserves the right for any reason to reduce (but not increase) any Award,
notwithstanding the achievement of a specified goal. If an Award is made on such
basis, the Committee shall establish goals prior to the beginning of the period
for which such performance goal relates (or such later date as may be permitted
under Code Section 162(m) or the regulations thereunder). Any payment of an
Award granted with performance goals shall be conditioned on the written
certification of the Committee in each case that the performance goals and any
other material conditions were satisfied.
13.12. TERMINATION OF EMPLOYMENT OR SERVICE. Whether military, government
or other service or other leave of absence shall constitute a termination of
employment or service in any other capacity shall be determined in each case by
the Committee at its discretion, and any determination by the Committee shall be
final and conclusive. A termination of employment or service in any other
capacity shall not occur in a circumstance in which a Participant transfers from
the Corporation to one of its Parents or Subsidiaries, transfers from a Parent
or Subsidiary to the Corporation, or transfers from one Parent or Subsidiary to
another Parent or Subsidiary.
13.13. LOAN PROVISIONS. With the consent of the Committee, the
Corporation may make, guarantee or arrange for a loan or loans to a Participant
with respect to the exercise of any Option granted under this Plan and/or with
respect to the payment of the purchase price, if any, of any Award granted
hereunder and/or with respect to the payment by the Participant of any or all
federal and/or state income taxes due on account of the granting or exercise of
any Award
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hereunder. The Committee shall have full authority to decide whether to make a
loan or loans hereunder and to determine the amount, terms and provisions of any
such loan or loans, including the interest rate to be charged in respect of any
such loan or loans, whether the loan or loans are to be made with or without
recourse against the borrower, the terms on which the loan is to be repaid and
the conditions, if any, under which the loan or loans may be forgiven.
ARTICLE 14
CHANGES IN CAPITAL STRUCTURE
14.1. GENERAL. In the event a share dividend is declared upon the Stock,
the shares of Stock then subject to each Award shall be increased
proportionately without any change in the aggregate purchase price therefor. In
the event the Stock shall be changed into or exchanged for a different number or
class of shares of stock or securities of the Corporation or of another
corporation or other entity, whether through reorganization, recapitalization,
stock split-up, combination of shares, merger or consolidation, there shall be
substituted for each such share of Stock then subject to each Award the number
and class of shares or other securities into which each outstanding share of
Stock shall be so changed or for which it shall be so exchanged, all without any
change in the aggregate purchase price for the shares or other securities then
subject to each Award.
ARTICLE 15
AMENDMENT, MODIFICATION AND TERMINATION
15.1. AMENDMENT, MODIFICATION AND TERMINATION. The Board or the Committee
may, at any time and from time to time, amend, modify or terminate the Plan
without stockholder approval; provided, however, that the Board or Committee may
condition any amendment or modification on the approval of shareholders of the
Corporation if such approval is necessary or deemed advisable with respect to
tax, securities or other applicable laws, policies or regulations.
15.2. AWARDS PREVIOUSLY GRANTED. At any time and from time to time, the
Committee may amend, modify or terminate any outstanding Award without approval
of the Participant; provided, however, that such amendment, modification or
termination shall not, without the Participant's consent, reduce or diminish the
value of such Award determined as if the Award had been exercised, vested,
cashed in or otherwise settled on the date of such amendment or termination. No
termination, amendment, or modification of the Plan shall adversely affect any
Award previously granted under the Plan, without the written consent of the
Participant.
ARTICLE 16
GENERAL PROVISIONS
16.1. NO RIGHTS TO AWARDS. No Participant or employee, officer, director,
consultant or advisor shall have any claim to be granted any Award under the
Plan, and neither the Corporation nor the Committee is obligated to treat
Participants and employees, officers, directors, consultants or advisors
uniformly.
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16.2. NO STOCKHOLDER RIGHTS. No Award gives the Participant any of the
rights of a stockholder of the Corporation unless and until shares of Stock are
in fact issued to such person in connection with such Award.
16.3. WITHHOLDING. The Corporation or any Parent or Subsidiary shall have
the authority and the right to deduct or withhold, or require a Participant to
remit to the Corporation, an amount sufficient to satisfy federal, state, and
local taxes (including the Participant's FICA obligation) required by law to be
withheld with respect to any taxable event arising as a result of the Plan. With
respect to withholding required upon any taxable event under the Plan, the
Committee may, at the time the Award is granted or thereafter, require that any
such withholding requirement be satisfied, in whole or in part, by withholding
shares of Stock having a Fair Market Value on the date of withholding equal to
the amount to be withheld for tax purposes, all in accordance with such
procedures as the Committee establishes.
16.4. NO RIGHT TO EMPLOYMENT, DIRECTORSHIP OR SERVICE IN OTHER CAPACITY.
Nothing in the Plan or any Award Agreement shall interfere with or limit in any
way the right of the Corporation or any Parent or Subsidiary to terminate any
Participant's employment or status as an officer, director, consultant or
advisor at any time, nor confer upon any Participant any right to continue as an
employee, officer, director, consultant or advisor of the Corporation or any
Parent or Subsidiary.
l6.5. UNFUNDED STATUS OF AWARDS. The Plan is intended to be an "unfunded"
plan for incentive and deferred compensation. With respect to any payments not
yet made to a Participant pursuant to an Award, nothing contained in the Plan or
any Award Agreement shall give the Participant any rights that are greater than
those of a general creditor of the Corporation or any Parent or Subsidiary.
16.6. RELATIONSHIP TO OTHER BENEFITS. No payment under the Plan shall be
taken into account in determining any benefits under any pension, retirement,
savings, profit sharing, group insurance, welfare or benefit plan of the
Corporation or any Parent or Subsidiary unless provided otherwise in such other
plan.
16.7. EXPENSES. The expenses of administering the Plan shall be borne by
the Corporation and its Parents or Subsidiaries.
16.8. TITLES AND HEADINGS. The titles and headings of the Sections in the
Plan are for convenience of reference only, and in the event of any conflict,
the text of the Plan, rather than such titles or headings, shall control.
16.9. GENDER AND NUMBER. Except where otherwise indicated by the context,
any masculine term used herein also shall include the feminine; the plural shall
include the singular and the singular shall include the plural.
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16.10. FRACTIONAL SHARES. No fractional shares of Stock shall be issued
and the Committee shall determine, in its discretion, whether cash shall be
given in lieu of fractional shares or whether such fractional shares shall be
eliminated by rounding up.
16.11. GOVERNMENT AND OTHER REGULATIONS. The obligation of the
Corporation to make payment of awards in Stock or otherwise shall be subject to
all applicable laws, rules, and regulations, and to such approvals by government
agencies as may be required. The Corporation shall be under no obligation to
register under the 1933 Act, any of the shares of Stock paid under the Plan. If
the shares paid under the Plan may in certain circumstances be exempt from
registration under the 1933 Act, the Corporation may restrict the transfer of
such shares in such manner as it deems advisable to ensure the availability of
any such exemption.
16.12. GOVERNING LAW. To the extent not governed by federal law, the Plan
and all Award Agreements shall be construed in accordance with and governed by
the laws of the State of Georgia.
16.13. ADDITIONAL PROVISIONS. Each Award Agreement may contain such other
terms and conditions as the Committee may determine; provided that such other
terms and conditions are not inconsistent with the provisions of this Plan.
The foregoing is hereby acknowledged as being the RARE Hospitality
International, Inc. 1997 Long-Term Incentive Plan as adopted by the Board of
Directors of the Corporation on October ___, 1997.
RARE HOSPITALITY INTERNATIONAL, INC.
By: /s/ George W. McKerrow, Jr
---------------------------------------
George W. McKerrow, Jr.
Chairman and Chief Executive Officer
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<PAGE> 1
EXHIBIT 10(j)
AMENDMENT NO. 1 TO THE
RARE HOSPITALITY INTERNATIONAL, INC.
1997 LONG-TERM INCENTIVE PLAN
THIS AMENDMENT NO. 1 (this "Amendment") to the RARE Hospitality
International, Inc. 1997 Long-Term Incentive Plan (the "Plan") is made this 20th
day of March, 1998.
The Board of Directors of RARE Hospitality International, Inc. (the
"Company") has determined that it is in the best interests of the Company and
its shareholders to increase the number of shares of the Company's common stock
subject to the Plan to a total of 750,000 shares.
The Board of Directors intends that the amendment to the Plan provided
in this Amendment No. 1 shall be submitted to the shareholders of the Company
for approval within one year from the date of adoption of this Amendment by the
Board of Directors..
1.
Section 5.1 of the Plan is hereby amended by deleting Section
5.1 in its entirety and substituting in lieu thereof a new Section 5.1 to read
as follows:
"5.1. NUMBER OF SHARES. Subject to adjustment as provided in
Section 14.1, the aggregate number of shares of Stock reserved
and available for Awards or which may be used to provide a
basis of measurement for or to determine the value of an Award
(such as with a Stock Appreciation Right or Performance Share
Award) shall be 750,000, no more than 20% of which shall be
Restricted Stock Awards."
2.
Except as expressly amended hereby, the terms of the Plan shall be and
remain unamended and the Plan as amended shall remain in full force and effect.
IN WITNESS WHEREOF, the Company has caused this Amendment to be
executed by its duly authorized representative on the day and year first above
written.
RARE HOSPITALITY INTERNATIONAL, INC.
By: /s/ Philip J. Hickey, Jr.
--------------------------------
Its: President and COO
-------------------------------
<PAGE> 1
EXHIBIT 10(m)
EMPLOYMENT AGREEMENT
THIS AGREEMENT, made and entered into as of the 30th day of September,
1997, by and between RARE HOSPITALITY INTERNATIONAL, INC., a Georgia corporation
(hereinafter referred to as the "Company"), and PHILIP J. HICKEY, Jr. a resident
of the State of Georgia (hereinafter referred to as the "Executive");
WITNESSETH:
The Company is engaged in the business of owning, operating and
franchising the operation of restaurants under the names Longhorn Steakhouse(R),
The Capital Grille(R), Bugaboo Creek Steak House(R) and others. The Company
desires to employ Executive in an executive capacity and to be assured of his
services in such capacity on the terms and conditions set forth in this
Agreement. Executive desires to accept such employment on such terms and
conditions.
The Company acknowledges and agrees that Executive has (i) previously
been and is currently engaged in the restaurant industry throughout the United
States including in particular and without limit within the State of Georgia,
(ii) has extensive background and expertise in the development, opening,
operation and management of restaurants, and (iii) has developed professional
relationships with clients, customers, suppliers and other individuals within
the restaurant industry all of which experience and expertise of Executive (the
"Executive's Information Base") has been developed outside the scope of
Executive's employment with the Company.
In the course of Executive's employment, Executive will gain knowledge
of the business, affairs, customers, franchisees, plans and methods of the
Company, will be trained at the expense of the Company in the development,
opening, operation and management of the Company's restaurants through the use
of techniques, systems, practices and methods used and devised by the Company,
will have access to information relating to the Company's customers and their
preferences and dining habits and will become personally known to and acquainted
with the Company's suppliers and managers in the Restricted Area thereby
establishing a personal relationship with such suppliers and managers for the
benefit of the Company.
The Company would suffer irreparable harm if Executive were to use such
knowledge, information and personal relationships, other than the Executive's
Information Base, related to the Company and its business that are obtained and
developed in the course of Executive's employment with the Company other than in
the proper performance of his duties for the Company.
In consideration of the sum of $1.00 in hand paid by the Company to
Executive, the receipt and sufficiency of which are hereby acknowledged, and the
mutual covenants and obligations contained herein, the Company and Executive
hereby agree as follows:
<PAGE> 2
1. Employment. The Company hereby employs Executive and
Executive hereby accepts such employment and agrees to perform his duties and
responsibilities hereunder, in accordance with the terms and conditions
hereinafter set forth.
1.1. Employment Term. The employment term of this
Agreement shall commence on November 1, 1997 or such later date within 30 days
thereafter as designated by Executive (the "Commencement Date") and shall
continue until and end on December 31, 2000, unless terminated prior thereto in
accordance with Section 3 hereof. Notwithstanding the foregoing, as of January
1, 2001 and the same day of each calendar year thereafter, this Agreement shall
be automatically renewed for an additional period of one (1) year unless either
Executive or the Company provides the other with at least six (6) months prior
written notice of such party's intention not to renew this Agreement as of the
next ensuing January 1; provided, that this Agreement shall during all such
renewal terms remain subject to earlier termination in accordance with Section 3
hereof. All periods during which this Agreement remains in effect are
hereinafter referred to as the "Employment Term."
1.2. Duties of Executive. Executive agrees that during the
term of this Agreement, he will devote his full professional and
business-related time, skills and best efforts to the business of the Company,
initially in the capacity of President and Chief Operating Officer; provided,
that no material changes in title or Executive's duties or the principal office
from which Executive shall perform those duties shall occur without Executive's
consent. In addition, Executive shall devote his full time and his best efforts
in the performance of any other reasonable duties as may be assigned to him from
time to time by the Company; provided, that all such duties assigned to
Executive shall be of a nature and type reasonably and customarily assigned by
companies to employees holding the office or offices occupied by Executive.
Executive shall devote all of his full professional and business-related skills
solely to the affairs of the Company, and shall not, during his employment,
unless otherwise agreed to in advance in writing by the Company, seek or accept
other employment, become self-employed in any other capacity during the term of
his employment, or engage in any activities which are detrimental to the
business of the Company. Notwithstanding the foregoing, Executive may engage in
personal investment activities provided such activities do not interfere with
Executive's performance of his full-time employment duties under this Agreement.
The Company acknowledges that Executive currently resides in metropolitan
Atlanta, Georgia and shall remain entitled to continue to reside at such
location throughout the Employment Term. As a result, Executive shall be
required to perform his duties from the offices of the Company located in
metropolitan Atlanta, Georgia, and Executive may not be required by the Company
to move his residence and principal business location outside of metropolitan
Atlanta, Georgia without Executive's prior written consent; provided, that
Executive acknowledges that the discharge of his duties for the Company will
involve travel on a regular basis from the Company's offices in Atlanta,
Georgia. No refusal by Executive to move his residence or the principal office
of the Company from which he performs his duties from metropolitan Atlanta,
Georgia will be deemed a breach of this Agreement by Executive or a failure of
Executive to perform his obligations under this Agreement.
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<PAGE> 3
1.3. Service on Board of Directors. During the Employment
Term, the Company shall use its best efforts to cause Executive to be nominated
and elected as a member of the Board of Directors of the Company.
1.4. Insurance/Bond. For so long as Executive serves as
either an officer or director of the Company, the Company shall, at its sole
cost and expense, (i) obtain and maintain Directors' and Officers' and Corporate
Liability Insurance covering Executive and his acts and omissions and having
coverage levels, terms, and conditions not substantially less favorable than
those contained in such insurance currently maintained by the Company and (ii)
obtain and post any bond or other fiduciary security (including without
limitation any such items required under Section 6.9 of the Company's By-Laws)
required by the Company to be maintained by, in the name of, or on behalf of the
Executive.
2. Compensation and Benefits.
2.1. Base Compensation. For all the services rendered by
Executive hereunder, the Company shall pay Executive an annual salary at the
rate of $250,000 for each full year of the Employment Term, plus such additional
amounts, if any as may be approved by the Company's Board of Directors, ("Base
Compensation) payable in installments at such times as the Company customarily
pays its other senior officers (but in any event no less often than monthly).
The Company agrees that the Executive's salary will be reviewed at least
annually by the Compensation Committee of the Company's Board of Directors to
determine if an increase is appropriate, which increase shall be in the sole
discretion of the Company's Board of Directors. Executive's salary shall be
prorated for any partial calendar year during which this Agreement remains in
effect.
2.2 Bonus Awards. (a) In addition to the Base
Compensation, promptly following the Commencement Date, the Company shall pay
Executive as initial, additional compensation, and on a one-time basis only, the
sum of $50,000 in consideration for his entering into this Agreement and his
services rendered and to be rendered to the Company during the term hereof.
(b) In addition to the Base Compensation, during the
Employment Term Executive shall be eligible for an annual bonus of up to 100% of
the Base Compensation, which bonus shall be determined and paid in accordance
with the bonus program for executive officers of the Company as approved by the
Company's Board of Directors from time to time. The Company shall seek and
receive Executive's input in establishing and implementing the Company's bonus
program for its executive officers. The Company shall use its best and good
faith efforts to cause such bonus program to be implemented within ninety (90)
days after the Commencement Date. From and after the date of such
implementation, Executive will be entitled to participate with the Compensation
Committee of the Board of Directors of the Company in any alteration,
modification or termination of such bonus program. To the extent reasonably
calculable under the bonus program, Executive's bonus shall be prorated for any
partial calendar year during which this Agreement remains in effect.
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<PAGE> 4
2.3. Stock Options. (a) The Company shall grant to
Executive, effective as of the Commencement Date, the following options to
acquire shares of the Company's common stock:
(i) 90,910 shares with an exercise price equal to
the fair market value of the Company's common stock on the date of
grant, which option shall become exercisable with respect to one-half
of such shares six (6) months following the date of this Agreement and
with respect to the remainder of such shares on the first anniversary
of the date of this Agreement; and
(ii) 91,667 shares with an exercise price of $12.00
per share, which option shall become exercisable on the second
anniversary of the date of this Agreement; and
(iii) 93,334 shares with an exercise price of $15.00
per share, which option shall become exercisable on the third
anniversary of the date of this Agreement.
Those options granted to Executive under subclauses (i) and (ii) above are
hereinafter referred to as the "Initial Non-qualified Options" and the options
granted to Executive under subclause (iii) above are sometimes hereinafter
referred to as the "Remaining Non-qualified Options." The Initial Non-Qualified
Options shall be granted to Executive pursuant to the Company's Amended and
Restated 1992 Incentive Plan (the "Existing Plan") The terms and conditions
governing the Initial Non-Qualified Options shall be as set forth in the form of
the Stock Option Agreement attached hereto as Exhibit A and made a part hereof.
The Remaining Non-Qualified Options shall be granted to Executive pursuant to
that certain Rare Hospitality International, Inc. 1997 Long-Term Incentive Plan
(the "1997 Plan"). The terms and conditions governing the Remaining
Non-Qualified Options shall be as set forth in the form of the Stock Option
Agreement attached hereto as Exhibit B and made a part hereof.
(b) The Company shall grant to Executive, effective as of
the Commencement Date, the following incentive stock options to acquire shares
of the company's common stock;
(i) 9,090 shares with an exercise price equal to
the fair market value of the Company's common stock on the date of
grant, which option shall become exercisable with respect to one-half
of such shares six (6) months following the date of this Agreement and
with respect to the remainder of such shares on the first anniversary
of the date of this Agreement; and
(ii) 8,333 shares with an exercise price equal to the
fair market value of the Company's common stock on the date of grant,,
which option shall become exercisable with respect to all of such
shares on the second anniversary of the date of this Agreement; and
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<PAGE> 5
(iii) 6,666 shares with an exercise price equal to
the fair market value of the Company's common stock on the date of
grant, which option shall become exercisable with respect to all of
such shares on the third anniversary of the date of this Agreement.
The options described in this Section 2.3(d) shall be granted to Executive
pursuant to the Existing Plan. The terms and conditions governing such options
shall be as set forth in the form of the Stock Option Agreement attached hereto
as Exhibit C and made a part hereof.
(c) The options described in Sections 2.3(a) and (b) are
sometimes hereinafter collectively referred to as the "Options." The Company
represents and warrants to Executive that (i) during the Employment Term,
Executive shall be within the category of persons for which awards may be
granted under the Existing Plan and the 1997 Plan; (ii) the Existing Plan has
been approved by the Company's Board of Directors and shareholders and all
Options granted to Executive under the Existing Plan are and shall remain in
full force and effect as the legally binding obligation of the Company
throughout the Employment Term, (iii) the 1997 Plan has been approved by the
Company's Board of Directors and all Options granted to Executive under the 1997
Plan are and shall remain in full force and effect as the legally binding
obligation of the Company throughout the Employment Term, (iv) the Company shall
submit the 1997 Plan to the Company's shareholders and shall use its best
efforts to cause the 1997 Plan to be approved by said shareholders, (v) the
Company shall cause this Agreement, the grant to Executive of the Options, and
Exhibits A, B and C to each be duly and properly approved by all officers and
members of the Board of Directors (including all compensation or other
committees thereof) of the Company so as to cause the same to be and remain in
full force and effect as the legally binding obligation of the Company
throughout the Employment Term, and (vi) the Company shall cause all shares of
stock in the Company acquired by Executive through the exercise of any one or
more of the Options to be registered and freely tradable, whether by means of
the Company's filing of all necessary S-8 registrations or otherwise, by
Executive from and after the date Executive exercises any one or more of the
Options; subject to restriction on sale or transfer of such shares under
applicable securities laws by virtue of Executive's position with the Company or
ownership of the Company's securities.
2.4. Other Benefits. In addition to all other compensation
paid or payable from the Company to Executive hereunder, during the Employment
Term, the Company shall provide and Executive shall be entitled to participate
in and receive the following employment benefits:
(a) The Company shall provide and pay all health,
hospitalization and long term care insurance premiums necessary to provide
Executive and Executive's dependent family members with coverage under the
Company's group health insurance program.
(b) The Company shall provide and pay all life insurance
premiums necessary to provide Executive with Fifty Thousand ($50,000) Dollars of
unencumbered
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<PAGE> 6
death benefit; provided, that Executive shall have the full and unencumbered
right to designate the beneficiary of such life insurance coverage.
(c) The Company shall provide and pay all short term and
long term disability income insurance premiums necessary to provide Executive
with coverage not substantially less favorable to Executive than the coverage
currently provided by the Company to its executive employees. To the extent
practicable under the Company's group coverage, such payment shall be reported
as compensation paid by the Company to Executive and as such shall be included
in the taxable income of Executive.
(d) Executive shall be entitled to participate in all
qualified deferred compensation plans maintained by the Company in accordance
with the applicable provisions thereof. To the extent the same can be waived,
the Company shall cause all entry, waiting, and vesting periods imposed under
such plans to be waived with respect to Executive's participation therein.
(e) Executive shall be entitled to participate in any and
all other employee benefit programs maintained by the Company for the benefit of
its executive employees generally, in accordance with and subject to the terms
and conditions of such programs.
2.5. Expenses. In addition to the compensation described
in this Agreement, the Company shall promptly reimburse Executive for all
reasonable expenses incurred by him in the performance of his duties under this
Agreement and vouched to the reasonable satisfaction of the Board of Directors
or appropriate officers of the Company, pursuant to established procedures.
3. Termination; Effect of Termination.
3.1. Termination. Anything in this Agreement to the
contrary notwithstanding, this Agreement, the Employment Term and the employment
of Executive pursuant hereto shall terminate upon the first to occur of the
following events:
(i) The death of Executive.
(ii) The lapse of thirty (30) days following the
date on which the Company shall give written notice to
Executive of termination of his employment hereunder by reason
of his physical or mental incapacity. Executive shall be
deemed to be physically or mentally incapacitated for purposes
of this section if by reason of any physical or mental
incapacity he has been unable, or it is reasonably expected
that he will be unable, for a period of at least one hundred
and eighty (180) substantially continuous days to perform his
regular duties and responsibilities hereunder. In the event of
any disagreement between Executive and the Company as to
whether Executive is physically or mentally incapacitated such
as to permit the Company to terminate his employment pursuant
to this paragraph (ii), the question of such incapacity shall
be submitted to an impartial and reputable
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<PAGE> 7
physician for determination, selected by mutual agreement of
Executive and the Company or, failing such agreement, selected
by two physicians (one of which shall be selected by the
Company and the other by Executive), and such determination of
the question of such incapacity by such physician shall be
final and binding on Executive and the Company. The Company
shall pay the reasonable fees and expenses of such physician.
(iii) The lapse of three (3) days following
written notice by the Company to Executive of termination for
"cause" which notice shall reasonably describe the cause for
which Executive's employment is being terminated. For purposes
of this Agreement, "cause" shall mean:
(A) Commission by Executive of a willful or
grossly negligent act which causes material harm
to the Company,
(B) The commission or perpetration by
Executive of any criminal act involving a felony
for which Executive is indicted or with respect
to which Executive pleads nolo contendere (or
any similar response),
(C) Habitual and unauthorized absenteeism by
reason other than physical or mental illness,
chronic alcoholism or other form of substance
abuse resulting in material harm or actual or
potential physical danger to the Company or its
employees,
(D) Any material violation by Executive of
his obligations under this Agreement, or
(E) Any misrepresentation or breach by
Executive of warranty contained in Section 13 of
this Agreement,
provided, however, that if the cause specified in such notice is such that there
is a reasonable prospect that it can be cured with diligent effort within a
reasonable time, Executive shall have such reasonable time (having regard for
the nature of the cause) to cure such cause, which time shall not in any event
exceed thirty (30) days from the date of such notice, and Executive's employment
shall continue in effect during such reasonable time so long as Executive makes
diligent efforts during such time to cure such cause. If such cause shall be
cured by Executive during such reasonable time his employment and the
obligations of the Company hereunder shall not terminate as a result of the
notice which has been given with respect to such cause. Cure of any cause with
or without notice from the Company shall not relieve Executive from any
obligations to the Company under this Agreement or otherwise and shall not
affect the Company's rights upon the reoccurrence of the same, or the occurrence
of any other, cause. If such cause shall not be cured within such reasonable
time the employment of Executive under this Agreement shall terminate upon the
expiration of such reasonable time.
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<PAGE> 8
(iv) The lapse of ten (10) days following written
notice by the Company to Executive of termination other than
for "cause".
(v) The lapse of thirty (30) days following
written notice by Executive to the Company of his resignation
from the Company; provided, however, that the Company, in its
discretion, may cause such termination to be effective at any
time during such thirty (30) day period.
(vi) The lapse of ten (10) days following written
notice by Executive to the Company of termination for
"reason," which notice shall reasonably describe the reason
for which Executive is terminating his employment hereunder.
For purposes of this Agreement, "reason" shall mean (i) any
material breach or default by the Company with respect to any
payment, undertaking or other obligation owed, made or
extended by the Company to Executive hereunder, or (ii) the
occurrence of any "Change in Control" (as defined in Exhibit D
attached hereto and made a part hereof). Notwithstanding the
foregoing, (x) if the reason specified in any notice is the
Company's failure to make any payment to Executive, the
Company shall have five (5) business days to make such payment
(provided that such cure period shall not apply with respect
to the Company's third or subsequent failure to make any
payment due Executive hereunder in any twelve-month period)
and (y) if the reason specified in any notice is not monetary
in nature and is such that there is a reasonable prospect that
it can be cured with diligent effort within a reasonable time,
the Company shall have such reasonable time (having regard for
the nature of the reason) to cure such reason, which time
shall not in any event exceed thirty (30) days from the date
of such notice. In either such event, Executive's employment
shall continue in effect during such cure period so long as
the Company makes diligent efforts during such time to cure
such reason. If the reason shall be cured by the Company
during its applicable cure period, Executive's employment
shall not terminate as a result of the notice which has been
given with respect to such reason. Cure of any reason with or
without notice from Executive shall not relieve the Company
from any obligations to the Executive under this Agreement or
otherwise and shall not affect the Executive's rights upon the
recurrence of the same or the occurrence of any other reason.
If such reason shall not be cured within the applicable cure
period, Executive's employment under this Agreement shall
terminate upon expiration of such applicable cure period.
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<PAGE> 9
3.2. Payment upon Termination.
(a) Upon termination of this Agreement for any reason
described in Section 3.1 above, other than termination pursuant to clauses (i),
(ii) (iv) or (vi), Executive shall be entitled to receive the compensation owed
to Executive but unpaid for performance rendered under this Agreement as of the
date of termination and any additional compensation he may be entitled to
receive under the terms of any employee benefit plan.
(b) Upon termination of this Agreement pursuant to clause (i)
of Section 3.1, Executive shall be entitled to receive the compensation
consisting of both base salary and bonus under Sections 2.1 and 2.2(b) as
calculated and owed to Executive but unpaid for performance rendered under this
Agreement as of the date of termination and any additional compensation he may
be entitled to receive under the terms of any employee benefit plan plus the
Company will pay to the personal representative of Executive, a lump sum amount
equal to one-half of Executive's annual Base Compensation under Section 2.1 as
in effect on the date of his death. In addition to the foregoing, upon such
termination (i) the exercisability of the Options shall accelerate as provided
in the agreements governing such Options, and (ii) the Company shall continue to
provide and pay for those employment benefits contemplated under Section 2.4(a)
hereof for Executive's dependent family members for a period of twelve (12)
months from and after the date of Executive's termination of employment (from
and after the expiration of such twelve (12) month period, all applicable laws
shall continue to apply to any person's or persons' rights to continue such
benefits).
(c) In the event that the Company terminates Executive's
employment pursuant to clause (ii) of Section 3.1, Executive shall be entitled
to receive the compensation consisting of both base salary and bonus under
Sections 2.1 and 2.2(b) as calculated and owed to Executive but unpaid for
performance rendered under this Agreement as of the date of termination and any
additional compensation he may be entitled to receive under the terms of any
employee benefit plan. In addition, the Company shall pay to Executive, for up
to ninety (90) days, an amount equal to the difference between the amount of
Executive's then level of Base Compensation payable pursuant to Section 2.1 and
100% of the amount paid to Executive under any short-term disability insurance
policy obtained by the Executive and paid by the Company through the Company's
group coverage until the Company's long-term disability insurance begins to pay.
In addition to the foregoing, upon such termination (i) the exercisability of
the Options shall accelerate as provided in the agreements governing such
Options and (ii) the Company shall continue to provide and pay for those
employment benefits contemplated under Section 2.4(a) hereof for Executive and
Executive's dependent family members for a period of twelve (12) months from and
after the date of Executive's termination of employment (from and after the
expiration of such twelve (12) month period, all applicable laws shall continue
to apply to any person's or persons' rights to continue such benefits).
(d) In the event that the Company terminates Executive's
employment pursuant to clause (iv) of Section 3.1 or Executive terminates his
employment pursuant to clause (vi) of Section 3.1, Executive shall be entitled
to receive the compensation consisting
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<PAGE> 10
of both base salary and bonus under Sections 2.1 and 2.2(b) as calculated and
owed to Executive but unpaid for performance rendered under this Agreement as of
the date of termination and the Company will be obligated to pay Executive his
annual Base Compensation under Section 2.1 as of the date of termination of such
employment from the date of such termination for the greater of (i) eighteen
(18) months or (ii) the period of time from the date of such termination (if
prior to the second anniversary of the Commencement Date) to the second
anniversary of the Commencement Date. In addition to the foregoing, upon such
termination (i) the exercisability of the Options shall accelerate as provided
in the agreements governing such Options, and (ii) the Company shall continue to
provide and pay for those employment benefits contemplated under Section 2.4(a)
hereof for Executive and Executive's dependent family members for a period of
twelve (12) months from and after the date of Executive's termination of
employment (from and after the expiration of such twelve (12) month period, all
applicable laws shall continue to apply to any person's or persons' rights to
continue such benefits). Such payment shall be made as and when otherwise due
under this Agreement.
(e) Payments made pursuant to this Section 3.2 are in lieu of
any other obligations to Executive pursuant to the terms of this Agreement.
4. Noncompetition. Executive covenants and agrees that during the
term of his employment by the Company and for a period of one (1) year
immediately following the termination of Executive's employment by the Company
for any reason whatsoever, Executive will not, within the area described on
Exhibit E hereto (the "Restricted Area") directly or indirectly compete with the
Company by carrying on a business any significant portion of which involves the
development, opening, operation or franchising of restaurants that offer steak
as a principal portion of their menu ( with a principal portion of the menu
defined as products from which the restaurant derives more than thirty percent
(30%) of its food sales), if the Company is still engaged in such business in
such area. The provisions of this Section 4 shall terminate and be of no further
force and effect from and after the date on which the Company fails to make any
payment owed to Employee under this Agreement following the Employment Term,
which payment remains unpaid five (5) business days following the receipt of
written notice from Executive that such payment has not been made (provided that
such cure period shall not apply with respect to the Company's third or
subsequent failure to make any payment due Executive hereunder in any twelve
(12) month period); provided, however, that in the event that there is any
reasonable and good faith dispute between the Company and Executive as to any
amount payable to Executive, for purposes of this Section 4 the disputed amount
shall not be considered due and payable until such dispute shall have been
finally resolved in an appropriate proceeding and any time for appeal of such
resolution shall have run without an appropriate appeal having been taken.
4.1 Definition of "Compete." For the purposes of this
Agreement, the term "compete" shall mean the providing of general management or
supervisory services for the development or operation or franchising of
restaurants that offer steak as a principal portion of their menu ( with a
principal portion of the menu defined as products from which the restaurant
derives more than thirty percent (30%) of its food sales).
- 10 -
<PAGE> 11
4.2. Direct or Indirect Competition. For the purposes of
this Agreement, the words "directly or indirectly" as they modify the word
"compete" shall mean (i) acting as an agent, representative, consultant,
officer, director, independent contractor, or employee engaged in a management
capacity with any entity or enterprise which is carrying on a business any
significant portion of which involves the development, opening, or operation of
restaurants offering steak as a principal portion of their menu, (ii)
participating in any such competing entity or enterprise as an owner, partner,
limited partner, joint venturer, creditor or stockholder (except as a
stockholder holding less than two percent (2%) interest in a corporation whose
shares are actively traded on a regional or national securities exchange or in
the over-the-counter market), and (iii) communicating to any such competing
entity or enterprise the names or addresses or any other information concerning
any employee or supplier of the Company or any successor to the goodwill of the
Company with respect to the business of the Company.
5. Confidentiality. Executive recognizes and acknowledges that by
reason of his employment by and service to the Company, he will have access to
all trade secrets and other confidential information of the Company including,
but not limited to, confidential: pricing information, marketing information,
sales techniques of the Company, confidential records, the Company's expansion
plans, restaurant development and marketing techniques, operating procedures,
training programs and materials, business plans, franchise arrangements, plans
and agreements, information regarding suppliers, product quality and control
procedures, financial statements and projections and other information regarding
the operation of the Company's restaurants (hereinafter referred to as the
"Confidential Information"). The Company acknowledges that information in
Executive's Information Base is not Confidential Information. Executive
acknowledges that such Confidential Information is a valuable and unique asset
of the Company and covenants that he will not, either during the term of his
employment by the Company or for a period of two (2) years thereafter, disclose
any such Confidential Information to any person for any reason whatsoever
(except as his duties as President may require) without the prior written
authorization of the Company's Board of Directors. Executive agrees that he will
not copy any Confidential Information except as the performance of his duties
for the Company may require and that upon the termination of his employment by
the Company, he shall return all Confidential Information and any copies thereof
in his possession to the Company. Executive hereby acknowledges and agrees that
the prohibitions against disclosure of Confidential Information recited herein
are in addition to, and not in lieu of, any rights or remedies which the Company
may have available pursuant to the laws of any jurisdiction or at common law to
prevent the disclosure of trade secrets or proprietary information, and the
enforcement by the Company of its rights and remedies pursuant to this Agreement
shall not be construed as a waiver of any other rights or available remedies
which it may possess in law or equity absent this Agreement. Notwithstanding the
foregoing, the Company acknowledges and agrees that nothing contained herein
shall restrict or otherwise prohibit or prevent (i) Executive's use or
disclosure of Executive's Information Base or (ii) disclosure of Confidential
Information pursuant to legal proceedings, subpoena, civil investigative demand
or other similar process. Executive agrees that if disclosure of Confidential
Information is requested or required pursuant to any such process, he shall
provide the Company with prompt written notice of any such request or
requirement so that
- 11 -
<PAGE> 12
the Company may seek a protective order or other appropriate remedy and/or waive
compliance with the provisions of this Agreement. If, in the absence of a
protective order or other remedy or the receipt of a waiver by the Company,
Executive is nonetheless, legally compelled to disclose Confidential Information
to any tribunal or other agency, Executive may, without liability hereunder,
disclose to such tribunal or other agency only that portion of the Confidential
Information which Executive is legally required to disclose, Executive agrees to
cooperate with the Company to obtain an appropriate protective order or other
reliable assurance that such tribunal or other agency will accord the
Confidential Information confidential treatment. The Company also acknowledges
and agrees that Confidential Information shall not include any information (a)
known by Executive prior to the date of this Agreement and learned by Executive
other than as a result of his employment relationship with the Company, (b)
independently developed by the Executive outside of the scope of his employment
relationship with the Company or (c) is or becomes publicly available through no
breach by the Executive of his obligation to the Company.
6. Non-Solicitation of Employees. Executive covenants that during
the term of his employment by the Company, and during the two (2) year period
immediately following the termination of such employment, Executive will neither
directly nor indirectly induce or attempt to induce any employee of the Company
to terminate his or her employment to go to work for any other employer in a
business competing with that of the Company. The provisions of this Section 6
shall terminate and be of no further force and effect from and after the date on
which the Company fails to make any payment owed to Employee under this
Agreement following the Employment Term, which payment remains unpaid five (5)
business days following the receipt of written notice from Executive that such
payment has not been made (provided that such cure period shall not apply with
respect to the Company's third or subsequent failure to make any payment due
Executive hereunder in any twelve (12) month period); provided, however, that in
the event that there is any reasonable and good faith dispute between the
Company and Executive as to any amount payable to Executive, for purposes of
this Section 6 the disputed amount shall not be considered due and payable until
such dispute shall have been finally resolved in an appropriate proceeding and
any time for appeal of such resolution shall have run without an appropriate
appeal having been taken.
7. Hiring of Employees. Executive covenants that during the term
of his employment by the Company, and during the one (1) year period immediately
following the termination of such employment, Executive will neither directly
nor indirectly hire any management level employee of the Company. The provisions
of this Section 7 shall terminate and be of no further force and effect from and
after the date on which the Company fails to make any payment owed to Employee
under this Agreement following the Employment Term, which payment remains unpaid
five (5) business days following the receipt of written notice from Executive
that such payment has not been made (provided that such cure period shall not
apply with respect to the Company's third or subsequent failure to make any
payment due Executive hereunder in any twelve (12) month period); provided,
however, that in the event that there is any reasonable and good faith dispute
between the Company and Executive as to any amount payable to Executive, for
purposes of this Section 7 the disputed amount shall not be considered due and
payable until such
- 12 -
<PAGE> 13
dispute shall have been finally resolved in an appropriate proceeding and any
time for appeal of such resolution shall have run without an appropriate appeal
having been taken.
8. Property of Company. Executive acknowledges that from time to
time in the course of providing services pursuant to this Agreement he shall
have the opportunity to inspect and use certain property, both tangible and
intangible, of the Company, and Executive hereby agrees that said property shall
remain the exclusive property of the Company and the Executive shall have no
right or proprietary interest in such property, whether tangible or intangible,
including, without limitation, the Company's franchise and supplier lists,
contract forms, books of account, training and operating materials and similar
property.
9. Developments. All developments, including inventions, whether
patentable or otherwise, trade secrets, discoveries, improvements, ideas and
writings which either directly or indirectly relate to or may be useful in the
business of the Company or any of its affiliates (the "Developments") which
Executive, either by himself or in conjunction with any other person or persons,
has conceived, made, developed, acquired or acquired knowledge of during his
employment by the Company or which Executive, either by himself or in
conjunction with any other person or persons, shall conceive, make, develop,
acquire or acquire knowledge of during the Employment Term, shall become and
remain the sole and exclusive property of the Company. Executive hereby assigns,
transfers and conveys, and agrees to so assign, transfer and convey, all of his
right, title and interest in and to any and all such Developments and to
disclose fully as soon as practicable, in writing, all such Developments to the
Chairman of the Company. At any time and from time to time, upon the request and
at the expense of the Company, Executive will execute and deliver any and all
instruments, documents and papers, give evidence and do any and all other acts
which, in the opinion of counsel for the Company, are or may be necessary or
desirable to document such transfer or to enable the Company to file and
prosecute applications for and to acquire, maintain and enforce any and all
patents, trademark registrations or copyrights under United States or foreign
law with respect to any such Developments or to obtain any extension,
validation, reissue, continuance or renewal of any such patent, trademark or
copyright. The Company will be responsible for the preparation of any such
instruments, documents and papers and for the prosecution of any such
proceedings and will reimburse Executive for all reasonable expenses incurred by
him in compliance with the provisions of this Section.
10. Reasonableness. The restrictions contained in Sections 4,5,6
and 7 are considered by the parties hereto to be fair and reasonable and
necessary for the protection of the legitimate business interests of the
Company.
11. Equitable Relief. Executive acknowledges that the services to
be rendered by him are of a special, unique, unusual, extraordinary, and
intellectual character, which gives them a peculiar value, and the loss of which
cannot reasonably or adequately be compensated in damages in an action at law;
and that a breach by him of any of the provisions contained in Sections 4, 5, 6
and 7 of this Agreement will cause the Company irreparable injury and damage.
Executive further acknowledges that he possesses unique
- 13 -
<PAGE> 14
skills, knowledge and ability and that any material breach of the provisions of
Sections 4, 5, 6 and 7 of this Agreement would be extremely detrimental to the
Company. By reason thereof, Executive agrees that the Company shall be entitled,
in addition to any other remedies it may have under this Agreement or otherwise,
to injunctive and other equitable relief to prevent or curtail any breach of the
provisions of Sections 4, 5, 6 and 7 of this Agreement by him.
12. Survival of Provisions. The provisions of Sections 4 through
14, inclusive, of this Agreement shall survive the termination of this Agreement
to the extent required to give full effect to the covenants and agreements
contained in those sections. All provisions of this Agreement which contemplate
the making of payments or the provision of consideration or other items of
economic value by the Company to the Executive after the termination of this
Agreement shall likewise survive the termination of this Agreement to the extent
required to give full effect to such undertakings or obligations of the Company
to Executive hereunder.
13. Warranties and Representations. In order to induce the
Company to enter into this Employment Agreement, Executive hereby warrants and
represents to the Company as follows:
(a) Executive is not under any obligation, contractual or
otherwise, to any party which would prohibit or be contravened by Executive's
acceptance of employment by the Company and the performance of Executive's
duties as President, Chief Operating Officer and director of the Company or the
performance of Executive's obligations under this Agreement; and
(b) The answers to the questions contained in the
Questionnaire attached hereto as Exhibit F are true and correct as of the date
of execution of this agreement.
Notwithstanding the foregoing, the Company acknowledges and agrees that (i)
Executive has provided the Company with a copy of the provisions contained under
Section 10,11 and 12 (the "Subject Provisions") of Executive's employment
agreement with Executive's employer, Applebee's International, Inc., and (ii)
any actions or claims raised by any person or entity with respect to the Subject
Provisions, whether successful or unsuccessful, shall not constitute a breach or
violations of the provisions of this Section 13 by Employee.
14. Successors Bound; Assignability. This Agreement shall be
binding upon Executive, the Company and their successors in interest, including
without limitation, any corporation into which the Company may be merged or by
which it may be acquired. This Agreement is nonassignable except that the
Company's rights, duties and obligations under this Agreement may be assigned to
the Company's acquiror in the event the Company is merged, acquired or sells
substantially all of its assets. Nothing contained herein shall be deemed,
interpreted or construed to prevent or constitute a waiver by Executive of his
right and entitlement to terminate this Agreement for reason as contemplated by
clause (vi) of Section 3.1 of this Agreement.
- 14 -
<PAGE> 15
15. Severability. In the event that any one or more of the
provisions of this Agreement or any word, phrase, clause, sentence or other
portion thereof shall be deemed to be illegal or unenforceable for any reason,
such provision or portion thereof shall be modified or deleted, to the extent
permissible under applicable law, in such a manner so as to make this Agreement
as modified legal and enforceable to the fullest extent permitted under
applicable laws.
16. Withholding. Notwithstanding any of the terms or provisions
of this Agreement, all amounts payable by the Company hereunder shall be subject
to withholding of such sums related to taxes as the Company may reasonably
determine it should withhold pursuant to applicable law or regulation.
17. Headings. The headings and captions used in this Agreement
are for convenience of reference only, and shall in no way define, limit, expand
or otherwise affect the meaning or construction of any provision of this
Agreement.
18. Notices. Any notice required or permitted to be given
pursuant to this Agreement shall be deemed sufficiently given when delivered in
person or when deposited in the United States mail, registered or certified
mail, postage prepaid, addressed as follows:
If to the Company, to: RARE Hospitality International, Inc.
8215 Roswell Road
Building 200
Atlanta, Georgia 30350
Attention: Chairman
With a copy to: Alston & Bird
One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309-3424
Attention: William H. Avery
If to Executive, to: Philip J. Hickey, Jr.
867 Waterford Green
Marietta, Georgia 30068
With a copy to: Altman, Kritzer & Levick, P.C.
6400 Powers Ferry Road, N.W.
Suite 224
Atlanta, Georgia 30339
Attn: Craig H. Kritzer or Duane D. Sitar
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<PAGE> 16
Any party may by written notice change the address to which notices to such
party are to be delivered or mailed.
19. Entire Agreement. This Agreement, together with Exhibits A, B,
C, D, E and F hereto which are incorporated herein by this reference,
constitutes the entire Agreement between the parties hereto with regard to the
subject matter hereof, and there are no agreements, understandings, specific
restrictions, warranties or representations relating to said subject matter
between the parties other than those set forth herein or herein provided for.
20. Counterparts. This Agreement may be executed in two or more
counterparts, each of which will take effect as an original and all of which
shall evidence one and the same Agreement.
21. Amendment, Modification and Waiver. This Agreement may only
be amended, modified or terminated prior to the end of its term by the mutual
agreement of the parties. The waiver by either party to this Agreement of a
breach of any of the provisions of this Agreement shall not operate or be
construed as a waiver of any subsequent or simultaneous breach.
22. Mitigation. Executive shall have no duty to attempt to
mitigate the compensation or level of benefits payable by the Company to him
hereunder and the Company shall not be entitled to set off against the amounts
payable by the Company to Executive hereunder any amounts received by the
Executive from any other source, including any subsequent employer.
23. Governing Law. All of the terms and provisions of this
Agreement shall be construed in accordance with and governed by the applicable
laws of the State of Georgia.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
RARE HOSPITALITY INTERNATIONAL, INC.
By: /s/ George W. McKerrow, Jr.
------------------------------------
Title: President
EXECUTIVE
/s/ Philip J. Hickey, Jr.
---------------------------------------
PHILIP J. HICKEY, JR.
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<PAGE> 17
INDEX TO EXHIBITS
-----------------
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- ------- -----------
<S> <C>
A INITIAL NON-QUALIFIED STOCK OPTION AGREEMENT
B REMAINING NON-QUALIFIED STOCK OPTION AGREEMENT
C INCENTIVE STOCK OPTION AGREEMENT
D DEFINITION OF CHANGE IN CONTROL
E RESTRICTED AREA
F QUESTIONNAIRE
</TABLE>
<PAGE> 18
EXHIBIT A
NON-QUALIFIED STOCK OPTION AGREEMENT
under the
RARE HOSPITALITY INTERNATIONAL, INC.
AMENDED AND RESTATED 1992 INCENTIVE PLAN
This Stock Option Agreement is made as of the ___ day of _______ 1997
by and between RARE HOSPITALITY INTERNATIONAL, INC., a Georgia corporation
(hereinafter referred to as the "Company"), and PHILIP J. HICKEY, JR., a
resident of the State of Georgia (hereinafter referred to as the "Optionee").
Simultaneously with the execution and delivery of this Option
Agreement, the Company and the Optionee have entered into an agreement pursuant
to which the Optionee will become an employee of the Company as of _________,
1997 (the "Employment Agreement").
In order to induce the Optionee to enter into the Employment Agreement
and to become an employee of the Company and in consideration of the Optionee's
entering into the Employment Agreement, accepting employment with the Company
and performing services on behalf of the Company, the Company desires to grant
to Optionee options to purchase shares of the Company's common stock on the
terms, and subject to the conditions contained in this Agreement.
In consideration of Optionee's entering into the Employment Agreement
and the services of the Optionee for the Company, the receipt and sufficiency of
which are hereby acknowledged, the Company and the Optionee hereby agree as
follows:
1. Grant of Option. The Company hereby grants to the Optionee,
under the RARE Hospitality International, Inc. Amended and Restated 1992 Plan
(the "Plan"), a Non-Qualified Stock Option to purchase, on the terms and
conditions set forth in this agreement (this "Option Agreement"), 182,577 shares
of the Company's no par value common stock (the "Stock"), at the exercise prices
per share set forth below (the "Option"):
(a) 90,910 shares at $ ____ per share; and
(b) 91,667 shares at $12.00 per share.
Capitalized terms used herein and not otherwise defined shall have the meanings
assigned such terms in the Plan.
2. Vesting of Option. Unless the exercisability of the
Option is accelerated in accordance with Article 13 of the Plan or as provided
in Section 5 hereof, the Option shall vest (become exercisable) only in
cumulative periodic installments as follows:
<PAGE> 19
(a) During the six months following the date of this
Agreement, the Option shall be exercisable as to none of the shares
subject to the Option;
(b) During the period beginning six months after the date
of this Agreement and for a period of six months thereafter, the Option
shall be exercisable as to one-half of the shares described in
paragraph 1(a) above, minus the number of shares, if any, as to which
the Option has been previously exercised;
(c) During the period beginning one year after the date
of this Agreement and for a period of one year thereafter, the Option
shall be exercisable as to all of the shares described in paragraph
1(a) above, minus the number of shares, if any, as to which the Option
has been previously exercised;
(d) During the period beginning two years after the date
of this Agreement and for the remainder of its term, the Option shall
be exercisable with respect to all of the shares described in paragraph
1(a) and 1(b) above, minus the number of shares, if any, as to which
the Option has been previously exercised.
3. Period of Option and Limitations on Right to Exercise. The
Option will, to the extent not previously exercised, lapse under the earliest of
the following circumstances; provided, however, that the Committee may, prior to
the lapse of the Option under the circumstances described in paragraphs (b), (c)
and (d) below, provide in writing that the Option will extend until a later
date:
(a) The Option shall lapse as of 5:00 p.m., Eastern Time,
on the day immediately prior to the tenth anniversary of the date of
grant (the "Expiration Date").
(b) The Option shall lapse three months after the
termination of Optionee's employment for any reason other than the
Optionee's death or Disability; provided, however, that if the
Optionee's employment is terminated by the Company for cause or by the
Optionee without reason and without the consent of the Company, the
Option shall lapse immediately.
(c) If the Optionee's employment terminates by reason of
Disability, the Option shall lapse one year after the date of the
Optionee's termination of employment.
(d) If the Optionee dies while employed, or during the
three-month period described in subsection (b) above or during the
one-year period described in subsection (c) above and before the Option
otherwise lapses, the Option shall lapse one year after the date of the
Optionee's death. Upon the Optionee's death, the Option may be
exercised by the Optionee's beneficiary.
If the Optionee or his beneficiary exercises an Option after
termination of employment, the Option may be exercised only with respect to the
shares that were otherwise vested on the Optionee's termination of employment
including vesting by acceleration in accordance with Article 13 of the Plan and
Section 5 hereof.
- 2 -
<PAGE> 20
4. Exercise of Option. The Option shall be exercised by written
notice directed to the Secretary of the Company at the principal executive
offices of the Company, in substantially the form attached hereto as Exhibit A,
or such other form as the Committee may approve. Such written notice shall be
accompanied by full payment in cash, shares of Stock previously acquired by the
Optionee, or any combination thereof, for the number of shares specified in such
written notice; provided, however, that if shares of Stock are used to pay the
exercise price, such shares must have been held by the Optionee for at least six
months. The Fair Market Value of the surrendered Stock as of the date of the
exercise shall be determined in valuing Stock used in payment of the exercise
price. To the extent permitted under Regulation T of the Federal Reserve Board,
and subject to applicable securities laws, the Option may be exercised through a
broker in a so-called "cashless exercise" whereby the broker sells the Option
shares and delivers cash sales proceeds to the Company in payment of the
exercise price. The Committee may, in the exercise of its discretion, but need
not, allow the Optionee to pay the exercise price by directing the Company to
withhold from the shares of Stock that would otherwise be issued upon exercise
of the Option that number of shares having a Fair Market Value on the exercise
date equal to the exercise price, all as determined pursuant to rules and
procedures established by the Committee.
Subject to the terms of this Option Agreement, the Option may be
exercised at any time and without regard to any other option held by the
Optionee to purchase stock of the Company.
5. Acceleration of Exercisability Under Certain Circumstances.
(a) In the event that the Optionee's employment by the
Company shall terminate pursuant to Section 3.1(i) or (ii) of the
Employment Agreement dated as of ___________, 1997 by and between the
Company and the Optionee (the "Employment Agreement"), then any
portions of the Option which would have become exercisable within
twelve (12) months following the date of such termination, shall, for
all purposes of this Option Agreement, be deemed exercisable as of the
date of termination of the Optionee's employment.
(b) In the event that the Optionee's employment by the
Company shall terminate pursuant to clause (iv) or clause (vi) of
Section 3.1 of the Employment Agreement, the Option shall become fully
exercisable with respect to all shares of Stock, other than those with
respect to which the Option has previously been exercised.
(c) Upon the occurrence of a Change in Control (as
defined in Exhibit B attached hereto and incorporated herein), the
Option shall become fully exercisable with respect to all shares of
Stock, other than those with respect to which the Option has previously
been exercised; provided, however, that such acceleration will not
occur if, in the opinion of the Company's accountants ( a copy of which
opinion shall be delivered to Optionee in verification of the
applicability of this proviso), such acceleration would preclude the
use of "pooling of interest" accounting treatment for a Change In
Control transaction that (a) would otherwise qualify for such
accounting treatment, and (b) is contingent upon qualifying for such
accounting treatment.
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<PAGE> 21
6. Limitation of Rights. The Option does not confer to the
Optionee or the Optionee's personal representative any rights of a shareholder
of the Company unless and until shares of Stock are in fact issued to such
person in connection with the exercise of the Option. Nothing in this Option
Agreement shall interfere with or limit in any way the right of the Company or
any Subsidiary to terminate the Optionee's employment at any time, nor confer
upon the Optionee any right to continue in the employ of the Company or any
Subsidiary.
7. Stock Reserve. The Company shall at all times during the term
of this Option Agreement reserve and keep available such number of shares of
Stock as will be sufficient to satisfy the requirements of this Option
Agreement.
8. Optionee's Covenant. The Optionee hereby agrees to use his
best efforts to provide services to the Company in a workmanlike manner and to
promote the Company's interests.
9. Restrictions on Transfer and Pledge. The Option may not be
pledged, encumbered, or hypothecated to or in favor of any party other than the
Company or a Parent or Subsidiary, or be subject to any lien, obligation, or
liability of the Optionee to any other party other than the Company or a Parent
or Subsidiary. The Option is not assignable or transferable by the Optionee
other than by will or the laws of descent and distribution; provided, however,
that the Committee may (but need not) permit other transfers where the Committee
concludes that such transferability (i) does not result in accelerated taxation
and (ii) is otherwise appropriate and desirable, taking into account any state
or federal tax or securities laws applicable to transferable options. The Option
may be exercised during the lifetime of the Optionee only by the Optionee.
10. Restrictions on Issuance of Shares. If at any time the Board
shall determine in its discretion, that listing, registration or qualification
of the shares of Stock covered by the Option upon any securities exchange or
under any state or federal law, or the consent or approval of any governmental
regulatory body, is necessary or desirable as a condition to the exercise of the
Option, the Option may not be exercised in whole or in part unless and until
such listing, registration, qualification, consent or approval shall have been
effected or obtained free of any conditions not acceptable to the Board. The
Company shall be responsible for (i) reasonably and promptly pursuing,
prosecuting and obtaining any listing, registration, qualification, consent or
approval required hereunder on a timely basis in accordance with all applicable
laws and (ii) all costs or expenses incurred in connection therewith.
Notwithstanding the foregoing, the Company shall cause all shares of Stock
acquired by Executive through the exercise of the Option to be registered and
freely tradeable, whether by means of the Company's filing of all necessary S-8
registrations or otherwise, by Executive from and after the date Executive
exercises such Option; subject to restrictions on sale or transfer of such
shares under applicable securities laws by virtue of Executive's position with
the Company or ownership of the Company's securities.
11. Plan Controls. The terms contained in the Plan are
incorporated into and made a part of this Option Agreement and this Option
Agreement shall be governed by and construed in accordance with the Plan. In the
event of any actual or alleged conflict between the provisions of the Plan and
the provisions of this Option Agreement, the provisions of the Plan shall be
controlling and determinative Whenever any provision of the Plan permits or
requires any action or the exercise of
- 4 -
<PAGE> 22
discretion by the Company, the Board of Directors of the Company, or any
committee of the Company or the Board of Directors of the Company, in order to
give effect to the provisions of this Agreement under the terms of the Plan, the
Company, the Board of Directors and any such committee in approving this
Agreement has authorized and approved such action and discretion and hereby
agrees to take any such action or exercise any such discretion in such manner so
as to fully give effect to the provisions of this Agreement under the Plan.
12. Successors. This Option Agreement shall be binding upon
any successor of the Company, in accordance with the terms of this Option
Agreement and the Plan.
13. Severability. If any one or more of the provisions contained
in this Option Agreement are invalid, illegal or unenforceable, the other
provisions of this Option Agreement will be construed and enforced as if the
invalid, illegal or unenforceable provision had never been included.
14. Notice. Notices and communications under this Option
Agreement must be in writing and either personally delivered or sent by
registered or certified United States mail, return receipt requested, postage
prepaid. Notices to the Company must be addressed to:
RARE Hospitality International, Inc.
8215 Roswell Road
Building 200
Atlanta, Georgia 30350
Attention: Chief Financial Officer
or any other address designated by the Company in a written notice to the
Optionee. Notices to the Optionee will be directed to the address of the
Optionee then currently on file with the Company, or at any other address given
by the Optionee in a written notice to the Company.
IN WITNESS WHEREOF, RARE Hospitality International, Inc., acting by and
through its duly authorized officers, has caused this Option Agreement to be
executed, and the Optionee has executed this Option Agreement, all as of the day
and year first above written.
RARE HOSPITALITY INTERNATIONAL, INC.
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
OPTIONEE:
-------------------------------------------
Philip J. Hickey, Jr.
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<PAGE> 23
EXHIBIT A
NOTICE OF EXERCISE OF OPTION TO PURCHASE
COMMON STOCK OF
RARE HOSPITALITY INTERNATIONAL, INC.
Name
------------------------------------
Address:
----------------------------------------
----------------------------------------
Date
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RARE Hospitality International, Inc.
8215 Roswell Road
Building 200
Atlanta, Georgia 30350
Attention: Chief Financial Officer
Re: Exercise of Non-Qualified Stock Option
I elect to purchase ______________ shares of Common Stock of RARE
Hospitality International, Inc. ("RARE") pursuant to the RARE Hospitality
International, Inc. Non-Qualified Stock Option Agreement dated ______________
and the RARE Hospitality International, Inc. Amended and Restated 1992 Incentive
Plan. The purchase will take place on the Exercise Date which will be as soon as
practicable following the date this notice and all other necessary forms and
payments are received by RARE, unless I specify a later date (not to exceed 30
days following the date of this notice).
On or before the Exercise Date, I will pay the full exercise price in
the form specified below (check one):
[ ] Cash Only: by delivering a check to RARE Hospitality
International, Inc. for $___________.
[ ] Cash and Shares: by delivering a check to RARE Hospitality
International, Inc. for $_________ for the part of the
exercise price. I will pay the balance of the exercise price
by delivering to RARE a stock certificate with my endorsement
for shares of RARE Stock that I have owned for at least six
months. If the number of shares of RARE Stock represented by
such stock certificate exceeds the number needed to pay the
exercise price, RARE will issue me a new stock certificate for
the excess.
<PAGE> 24
[ ] Shares Only: by delivering to RARE a stock certificate with
my endorsement for shares of RARE Stock that I have owned for
at least six months. If the number of shares of RARE Stock
represented by such stock certificate exceeds the number
needed to pay the exercise price, RARE will issue me a new
stock certificate for the excess.
[ ] Cash From Broker: by delivering the purchase price from
_______________________, a broker, dealer or other "creditor"
as defined by Regulation T issued by the Board of Governors of
the Federal Reserve System (the "Broker"). I authorize RARE to
issue a stock certificate in the number of shares indicated
above in the name of the Broker in accordance with
instructions received by RARE from the Broker and to deliver
such stock certificate directly to the Broker (or to any other
party specified in the instructions from the Broker) upon
receiving the exercise price from the Broker.
Please deliver the stock certificate to me (unless I have chosen to pay
the purchase price through a broker).
Very truly yours,
---------------------------------------
AGREED TO AND ACCEPTED:
RARE HOSPITALITY INTERNATIONAL, INC.
By:
-------------------------------
Title:
----------------------------
Number of Option Shares
Exercised:
------------------------
Number of Option Shares
Remaining:
------------------------
Date:
-----------------------------
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<PAGE> 25
EXHIBIT B
TO
RARE HOSPITALITY, INC.
STOCK OPTION AGREEMENT
"Change in Control" means and includes each of the following:
(1) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the 1934 Act) (a "Person") of
beneficial ownership (within the meaning of Rule 13d-3 promulgated under
the 1934 Act) of 25% or more of the combined voting power of the then
outstanding voting securities of the Company entitled to vote generally in
the election of directors (the "Outstanding Company Voting Securities");
provided, however, that for purposes of this subsection (1), the following
acquisitions shall not constitute a Change of Control: (i) any acquisition
by a Person who is on the date of this Agreement (the "Effective Date") the
beneficial owner of 25% or more of the Outstanding Company Voting
Securities, (ii) any acquisition by the Company, (iii) any acquisition by
any employee benefit plan (or related trust) sponsored or maintained by the
Company or any corporation controlled by the Company, or (iv) any
acquisition by any corporation pursuant to a transaction which complies
with clauses (i), (ii) and (iii) of subsection (3) of this definition; or
(2) Individuals who, as of the Effective Date, constitute the Board of
Directors of the Company (the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board of Directors of the Company;
provided, however, that any individual becoming a director subsequent to
September 28, 1997 whose election, or nomination for election by the
Company's shareholders, was approved by a vote of at least a majority of
the directors then comprising the Incumbent Board shall be considered as
though such individual were a member of the Incumbent Board, but excluding,
for this purpose, any such individual whose initial assumption of office
occurs as a result of an actual or threatened election contest with respect
to the election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than
the Board of Directors of the Company; or
(3) Consummation of a reorganization, share
exchange, merger or consolidation or sale or other disposition
of all or substantially all of the assets of the Company (a
"Business Combination"), in each case, unless, following such
Business Combination, (i) all or substantially all of the
individuals and entities who were the beneficial owners of the
Outstanding Company Voting Securities immediately prior to
such Business Combination beneficially own, directly or
indirectly, more than 50% of the combined voting power of the
then outstanding voting securities entitled to vote generally
in the election of directors of the corporation resulting from
such Business Combination (including, without
<PAGE> 26
limitation, a corporation which as a result of such
transaction owns the Company or all or substantially all of
the Company's assets either directly or through one or more
subsidiaries) in substantially the same proportions as their
ownership, immediately prior to such Business Combination of
the Outstanding Company Voting Securities, and (ii) no Person
(excluding any corporation resulting from such Business
Combination or any employee benefit plan (or related trust) of
the Company or such corporation resulting from such Business
Combination) beneficially owns, directly or indirectly, 25% or
more of the combined voting power of the then outstanding
voting securities of such corporation except to the extent
that such ownership existed prior to the Business Combination,
and (iii) at least a majority of the members of the board of
directors of the corporation resulting from such Business
Combination were members of the Incumbent Board at the time of
the execution of the initial agreement, or of the action of
the Board of Directors of the Company, providing for such
Business Combination; or
(4) approval by the shareholders of the
Corporation of a complete liquidation or dissolution of the
Corporation.
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<PAGE> 27
EXHIBIT B
NON-QUALIFIED STOCK OPTION AGREEMENT
under the
RARE HOSPITALITY INTERNATIONAL, INC.
1997 LONG-TERM INCENTIVE PLAN
This Stock Option Agreement is made as of the ____ day of _______ 1997
by and between RARE HOSPITALITY INTERNATIONAL, INC., a Georgia corporation
(hereinafter referred to as the "Corporation"), and PHILIP J. HICKEY, JR., a
resident of the State of Georgia (hereinafter referred to as the "Optionee").
Simultaneously with the execution and delivery of this Option
Agreement, the Corporation and the Optionee have entered into an agreement
pursuant to which the Optionee will become an employee of the Corporation as of
__________, 1997 (the "Employment Agreement").
In order to induce the Optionee to enter into the Employment Agreement
and to become an employee of the Corporation and in consideration of the
Optionee's entering into the Employment Agreement, accepting employment with the
Corporation and performing services on behalf of the Corporation, the
Corporation desires to grant to Optionee options to purchase shares of the
Corporation's common stock on the terms, and subject to the conditions contained
in this Agreement.
In consideration of Optionee's entering into the Employment Agreement
and the services of the Optionee for the Corporation, the receipt and
sufficiency of which are hereby acknowledged, the Corporation and the Optionee
hereby agree as follows:
1. Grant of Option. The Corporation hereby grants to the
Optionee, under the RARE Hospitality International, Inc. 1997 Long-Term
Incentive Plan (the "Plan"), a Non-Qualified Stock Option to purchase, on the
terms and conditions set forth in this agreement (this "Option Agreement"),
93,334 shares of the Corporation's no par value common stock (the "Stock"), at a
price of $15.00 per share. Capitalized terms used herein and not otherwise
defined shall have the meanings assigned such terms in the Plan.
2. Vesting of Option. Unless the exercisability of the
Option is accelerated in accordance with Article 13 of the Plan or as provided
in Section 5 hereof, the Option shall vest (become exercisable) only as follows:
(a) During the first three years following the date of
this Agreement, the Option shall be exercisable as to none of the
shares subject to the Option;
(b) During the period beginning three years after the
date of this Agreement and for the remainder of its term, the Option
shall be exercisable with respect to all of the shares described in
Section 1 above minus the number of shares, if any, as to which the
Option has been previously exercised.
<PAGE> 28
3. Period of Option and Limitations on Right to Exercise. The
Option will, to the extent not previously exercised, lapse under the earliest of
the following circumstances; provided, however, that the Committee may, prior to
the lapse of the Option under the circumstances described in paragraphs (b), (c)
and (d) below, provide in writing that the Option will extend until a later
date:
(a) The Option shall lapse as of 5:00 p.m., Eastern Time,
on the day immediately prior to the tenth anniversary of the date of
grant (the "Expiration Date").
(b) The Option shall lapse three months after the
termination of Optionee's employment for any reason other than the
Optionee's death or Disability; provided, however, that if the
Optionee's employment is terminated by the Corporation for cause or by
the Optionee without reason and without the consent of the Corporation,
the Option shall lapse immediately.
(c) If the Optionee's employment terminates by reason of
Disability, the Option shall lapse one year after the date of the
Optionee's termination of employment.
(d) If the Optionee dies while employed, or during the
three-month period described in subsection (b) above or during the
one-year period described in subsection (c) above and before the Option
otherwise lapses, the Option shall lapse one year after the date of the
Optionee's death. Upon the Optionee's death, the Option may be
exercised by the Optionee's beneficiary.
If the Optionee or his beneficiary exercises an Option after
termination of employment, the Option may be exercised only with respect to the
shares that were otherwise vested on the Optionee's termination of employment
including vesting by acceleration in accordance with Article 13 of the Plan and
Section 5 hereof.
4. Exercise of Option. The Option shall be exercised by written
notice directed to the Secretary of the Corporation at the principal executive
offices of the Corporation, in substantially the form attached hereto as Exhibit
A, or such other form as the Committee may approve. Such written notice shall be
accompanied by full payment in cash, shares of Stock previously acquired by the
Optionee, or any combination thereof, for the number of shares specified in such
written notice; provided, however, that if shares of Stock are used to pay the
exercise price, such shares must have been held by the Optionee for at least six
months. The Fair Market Value of the surrendered Stock as of the date of the
exercise shall be determined in valuing Stock used in payment of the exercise
price. To the extent permitted under Regulation T of the Federal Reserve Board,
and subject to applicable securities laws, the Option may be exercised through a
broker in a so-called "cashless exercise" whereby the broker sells the Option
shares and delivers cash sales proceeds to the Corporation in payment of the
exercise price. The Committee may, in the exercise of its discretion, but need
not, allow the Optionee to pay the exercise price by directing the Corporation
to withhold from the shares of Stock that would otherwise be issued upon
exercise of the Option that number of shares having a Fair Market Value on the
exercise date equal to the exercise price, all as determined pursuant to rules
and procedures established by the Committee.
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<PAGE> 29
Subject to the terms of this Option Agreement, the Option may be
exercised at any time and without regard to any other option held by the
Optionee to purchase stock of the Corporation.
5. Acceleration of Exercisability Under Certain Circumstances.
(a) In the event that the Optionee's employment by the
Corporation shall terminate pursuant to Section 3.1(i) or (ii) of the
Employment Agreement dated as of ____________, 1997 by and between the
Corporation and the Optionee (the "Employment Agreement"), then any
portions of the Option which would have become exercisable within
twelve (12) months following the date of such termination, shall, for
all purposes of this Option Agreement, be deemed exercisable as of the
date of termination of the Optionee's employment.
(b) In the event that the Optionee's employment by the Company
shall terminate pursuant to clause (iv) or clause (vi) of Section 3.1
of the Employment Agreement, then the Option shall become fully
exercisable with respect to all shares of Stock, other than those with
respect to which the Option has previously been exercised.
(c) Upon the occurrence of a Change in Control, the Option
shall become fully exercisable with respect to all shares of Stock,
other than those with respect to which the Option has previously been
exercised; provided, however, that such acceleration will not occur if,
in the opinion of the Corporation's accountants ( a copy of which
opinion shall be delivered to Optionee in verification of the
applicability of this proviso), such acceleration would preclude the
use of "pooling of interest" accounting treatment for a Change In
Control transaction that (a) would otherwise qualify for such
accounting treatment, and (b) is contingent upon qualifying for such
accounting treatment.
6. Limitation of Rights. The Option does not confer to the
Optionee or the Optionee's personal representative any rights of a shareholder
of the Corporation unless and until shares of Stock are in fact issued to such
person in connection with the exercise of the Option. Nothing in this Option
Agreement shall interfere with or limit in any way the right of the Corporation
or any Subsidiary to terminate the Optionee's employment at any time, nor confer
upon the Optionee any right to continue in the employ of the Corporation or any
Subsidiary.
7. Stock Reserve. The Corporation shall at all times during the
term of this Option Agreement reserve and keep available such number of shares
of Stock as will be sufficient to satisfy the requirements of this Option
Agreement.
8. Optionee's Covenant. The Optionee hereby agrees to use his
best efforts to provide services to the Corporation in a workmanlike manner and
to promote the Corporation's interests.
9. Restrictions on Transfer and Pledge. The Option may not be
pledged, encumbered, or hypothecated to or in favor of any party other than the
Corporation or a Parent or Subsidiary, or be subject to any lien, obligation, or
liability of the Optionee to any other party other than the Corporation or a
Parent or Subsidiary. The Option is not assignable or transferable by the
Optionee
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<PAGE> 30
other than by will or the laws of descent and distribution; provided, however,
that the Committee may (but need not) permit other transfers where the Committee
concludes that such transferability (i) does not result in accelerated taxation
and (ii) is otherwise appropriate and desirable, taking into account any state
or federal tax or securities laws applicable to transferable options. The Option
may be exercised during the lifetime of the Optionee only by the Optionee.
10. Restrictions on Issuance of Shares. If at any time the Board
shall determine in its discretion, that listing, registration or qualification
of the shares of Stock covered by the Option upon any securities exchange or
under any state or federal law, or the consent or approval of any governmental
regulatory body, is necessary or desirable as a condition to the exercise of the
Option, the Option may not be exercised in whole or in part unless and until
such listing, registration, qualification, consent or approval shall have been
effected or obtained free of any conditions not acceptable to the Board. The
Company shall be responsible for (i) reasonably and promptly pursuing,
prosecuting and obtaining any listing, registration, qualification, consent or
approval required hereunder on a timely basis in accordance with all applicable
laws and (ii) all costs or expenses incurred in connection therewith.
Notwithstanding the foregoing, the Company shall cause all shares of Stock
acquired by Executive through the exercise of the Option to be registered and
freely tradeable, whether by means of the Company's filing of all necessary S-8
registrations or otherwise, by Executive from and after the date Executive
exercises such Option; subject to restrictions on sale or transfer of such
shares under applicable securities laws by virtue of Executive's position with
the Company or ownership of the Company's securities.
11. Plan Controls. The terms contained in the Plan are
incorporated into and made a part of this Option Agreement and this Option
Agreement shall be governed by and construed in accordance with the Plan. In the
event of any actual or alleged conflict between the provisions of the Plan and
the provisions of this Option Agreement, the provisions of the Plan shall be
controlling and determinative. Notwithstanding the foregoing, nothing contained
in Section 13.10 or 15.2. of the Plan shall be exercised by any person, persons,
entity or entities having authority to do the same and contravention of
Optionee's rights under this Agreement or so as to cause any diminution in the
value or benefit of Optionee's rights or entitlements hereunder. Whenever any
provision of the Plan permits or requires any action or the exercise of
discretion by the Company, the Board of Directors of the Company, or any
committee of the Company or the Board of Directors of the Company, in order to
give effect to the provisions of this Agreement under the terms of the Plan, the
Company, the Board of Directors and any such committee in approving this
Agreement has authorized and approved such action and discretion and hereby
agrees to take any such action or exercise any such discretion in such manner so
as to fully give effect to the provisions of this Agreement under the Plan.
12. Successors. This Option Agreement shall be binding upon any
successor of the Corporation, in accordance with the terms of this Option
Agreement and the Plan.
13. Severability. If any one or more of the provisions contained
in this Option Agreement are invalid, illegal or unenforceable, the other
provisions of this Option Agreement will be construed and enforced as if the
invalid, illegal or unenforceable provision had never been included.
- 4 -
<PAGE> 31
14. Notice. Notices and communications under this Option
Agreement must be in writing and either personally delivered or sent by
registered or certified United States mail, return receipt requested, postage
prepaid. Notices to the Corporation must be addressed to:
RARE Hospitality International, Inc.
8215 Roswell Road
Building 200
Atlanta, Georgia 30350
Attention: Chief Financial Officer
or any other address designated by the Corporation in a written notice to the
Optionee. Notices to the Optionee will be directed to the address of the
Optionee then currently on file with the Corporation, or at any other address
given by the Optionee in a written notice to the Corporation.
IN WITNESS WHEREOF, RARE Hospitality International, Inc., acting by and
through its duly authorized officers, has caused this Option Agreement to be
executed, and the Optionee has executed this Option Agreement, all as of the day
and year first above written.
RARE HOSPITALITY INTERNATIONAL, INC.
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
OPTIONEE:
----------------------------------------
Philip J. Hickey, Jr.
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<PAGE> 32
EXHIBIT A
NOTICE OF EXERCISE OF OPTION TO PURCHASE
COMMON STOCK OF
RARE HOSPITALITY INTERNATIONAL, INC.
Name
------------------------------------
Address:
----------------------------------------
----------------------------------------
Date
------------------------------------
RARE Hospitality International, Inc.
8215 Roswell Road
Building 200
Atlanta, Georgia 30350
Attention: Chief Financial Officer
Re: Exercise of Non-Qualified Stock Option
I elect to purchase ______________ shares of Common Stock of RARE
Hospitality International, Inc. ("RARE") pursuant to the RARE Hospitality
International, Inc. Non-Qualified Stock Option Agreement dated ______________
and the RARE Hospitality International, Inc. 1997 Long-Term Incentive Plan. The
purchase will take place on the Exercise Date which will be as soon as
practicable following the date this notice and all other necessary forms and
payments are received by RARE, unless I specify a later date (not to exceed 30
days following the date of this notice).
On or before the Exercise Date, I will pay the full exercise price in
the form specified below (check one):
[ ] Cash Only: by delivering a check to RARE Hospitality
International, Inc. for $___________.
[ ] Cash and Shares: by delivering a check to RARE Hospitality
International, Inc. for $_________ for the part of the
exercise price. I will pay the balance of the exercise price
by delivering to RARE a stock certificate with my endorsement
for shares of RARE Stock that I have owned for at least six
months. If the number of shares of RARE Stock represented by
such stock certificate exceeds the number needed to pay the
exercise price, RARE will issue me a new stock certificate for
the excess.
<PAGE> 33
[ ] Shares Only: by delivering to RARE a stock certificate with
my endorsement for shares of RARE Stock that I have owned for
at least six months. If the number of shares of RARE Stock
represented by such stock certificate exceeds the number
needed to pay the exercise price, RARE will issue me a new
stock certificate for the excess.
[ ] Cash From Broker: by delivering the purchase price from
_______________________, a broker, dealer or other "creditor"
as defined by Regulation T issued by the Board of Governors of
the Federal Reserve System (the "Broker"). I authorize RARE to
issue a stock certificate in the number of shares indicated
above in the name of the Broker in accordance with
instructions received by RARE from the Broker and to deliver
such stock certificate directly to the Broker (or to any other
party specified in the instructions from the Broker) upon
receiving the exercise price from the Broker.
Please deliver the stock certificate to me (unless I have chosen to pay
the purchase price through a broker).
Very truly yours,
---------------------------------------
AGREED TO AND ACCEPTED:
RARE HOSPITALITY INTERNATIONAL, INC.
By:
-------------------------------
Title:
----------------------------
Number of Option Shares
Exercised:
------------------------
Number of Option Shares
Remaining:
------------------------
Date:
-----------------------------
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<PAGE> 34
EXHIBIT C
INCENTIVE STOCK OPTION AGREEMENT
under the
RARE HOSPITALITY INTERNATIONAL, INC.
AMENDED AND RESTATED 1992 INCENTIVE PLAN
This Stock Option Agreement is made as of the ____ day of _______, 1997
by and between RARE HOSPITALITY INTERNATIONAL, INC., a Georgia corporation
(hereinafter referred to as the "Corporation"), and PHILIP J. HICKEY, JR., a
resident of the State of Georgia (hereinafter referred to as the "Optionee").
1. Grant of Option. The Corporation hereby grants to the Optionee under
the RARE Hospitality International, Inc. Amended and Restated 1992 Incentive
Plan (the "Plan"), an Incentive Stock Option to purchase, on the terms and
conditions set forth in this agreement (this "Option Agreement"), 24,089 shares
of the Corporation's no par value common stock (the "Stock"), at the exercise
prices per share set forth below (the "Option"):
(a) 9,090 shares at $____ per share;
(b) 8,333 shares at $____ per share; and
(c) 6,666 shares at $____ per share.
Capitalized terms used herein and not otherwise defined shall have the meanings
assigned such terms in the Plan.
2. Vesting of Option. Unless the exercisability of the Option
is accelerated in accordance with Article 13 of the Plan or as provided in
Section 5 hereof, the Option shall vest (become exercisable) only in cumulative
periodic installments as follows:
(a) during the first six months following the date of
this Agreement, the Option shall be exercisable as to none of the
shares subject to the Option;
(b) during the period beginning six months after the date
of this Agreement and for a period of six months thereafter, the Option
shall be exercisable as to one-half of the shares described in
paragraph 1(a) above, minus the number of shares, if any, as to which
the Option has been previously exercised;
(c) during the period beginning one year after the date
of this Agreement and for a period of one year thereafter, the Option
shall be exercisable as to all of the shares described in paragraph
1(a) above, minus the number of shares, if any, as to which the Option
has been previously exercised;
<PAGE> 35
(d) during the period beginning two years after the date
of this Agreement and for a period of one year thereafter, the Option
shall be exercisable with respect to the shares described in paragraphs
1(a) and (b) above, minus the number of shares, if any, as to which the
initial option has been previously exercised; and
(e) during the period beginning three years after the
date of this Agreement and for the remainder of its term, the Option
shall be exercisable with respect to all of the shares described in
paragraphs 1(a), 1(b) and 1(c) above, minus the number of shares, if
any, as to which the Option has been previously exercised.
3. Period of Option and Limitations on Right to Exercise. The
Option will, to the extent not previously exercised, lapse under the earliest of
the following circumstances; provided, however, that the Committee may, prior to
the lapse of the Option under the circumstances described in paragraphs (b), (c)
and (d) below, provide in writing that the Option will extend until a later
date, but if Option is exercised after the dates specified in paragraphs (b),
(c) and (d) above, it will automatically become a Non-Qualified Stock Option:
(a) The Option shall lapse as of 5:00 p.m., Eastern Time,
on the day immediately prior to the tenth anniversary of the date of
grant (the "Expiration Date").
(b) The Option shall lapse three months after the
termination of Optionee's employment for any reason other than the
Optionee's death or Disability; provided, however, that if the
Optionee's employment is terminated by the Corporation for cause or by
the Optionee without reason and without the consent of the Corporation,
the Option shall lapse immediately.
(c) If the Optionee's employment terminates by reason of
Disability, the Option shall lapse one year after the date of the
Optionee's termination of employment.
(d) If the Optionee dies while employed, or during the
three-month period described in subsection (b) above or during the
one-year period described in subsection (c) above and before the Option
otherwise lapses, the Option shall lapse one year after the date of the
Optionee's death. Upon the Optionee's death, the Option may be
exercised by the Optionee's beneficiary.
If the Optionee or his beneficiary exercises an Option after
termination of employment, the Option may be exercised only with respect to the
shares that were otherwise vested on the Optionee's termination of employment
(including vesting by acceleration in accordance with Article 13 of the Plan and
Section 5 hereof ).
4. Exercise of Option. The Option shall be exercised by written
notice directed to the Secretary of the Corporation at the principal executive
offices of the Corporation, in substantially the form attached hereto as Exhibit
A, or such other form as the Committee may approve. Such written notice shall be
accompanied by full payment in cash, shares of Stock previously acquired by the
Optionee, or any combination thereof, for the number of shares specified in such
written notice; provided, however, that if shares of Stock are used to pay the
exercise price, such shares
- 2 -
<PAGE> 36
must have been held by the Optionee for at least six months The Fair Market
Value of the surrendered Stock as of the date of the exercise shall be
determined in valuing Stock used in payment of the exercise price. To the extent
permitted under Regulation T of the Federal Reserve Board, and subject to
applicable securities laws, the Option may be exercised through a broker in a
so-called "cashless exercise" whereby the broker sells the Option shares and
delivers cash sales proceeds to the Corporation in payment of the exercise
price. The Committee may, in the exercise of its discretion, but need not, allow
the Optionee to pay the exercise price by directing the Corporation to withhold
from the shares of Stock that would otherwise be issued upon exercise of the
Option that number of shares having a Fair Market Value on the exercise date
equal to the exercise price, all as determined pursuant to rules and procedures
established by the Committee.
Subject to the terms of this Option Agreement, the Option may be
exercised at any time and without regard to any other option held by the
Optionee to purchase stock of the Corporation.
5. Acceleration of Exercisability Under Certain Circumstances.
(a) In the event that the Optionee's employment by the
Corporation shall terminate pursuant to Section 3.1(i) or (ii) of the
Employment Agreement dated as of ____________, 1997 by and between the
Corporation and the Optionee (the "Employment Agreement"), then any
portions of the Option which would have become exercisable within
twelve (12) months following the date of such termination, shall, for
all purposes of this Option Agreement, be deemed exercisable as of the
date of termination of the Optionee's employment.
(b) In the event that the Optionee's employment by the
Company shall terminate pursuant to clause (iv) of Section 3.1 of the
Employment Agreement then the Option shall become fully exercisable
with respect to all shares of Stock, other than those with respect to
which the Option has previously been exercised.
(c) Upon the occurrence of a Change in Control (as
defined in Exhibit B attached hereto and incorporated herein), the
Option shall become fully exercisable with respect to all shares of
Stock, other than those with respect to which the Option has previously
been exercised; provided, however, that such acceleration will not
occur if, in the opinion of the Corporation's accountants ( a copy of
which opinion shall be delivered to Optionee in verification of the
applicability of this proviso), such acceleration would preclude the
use of "pooling of interest" accounting treatment for a Change In
Control transaction that (a) would otherwise qualify for such
accounting treatment, and (b) is contingent upon qualifying for such
accounting treatment. To the extent that this provision causes
Incentive Stock Options to exceed the dollar limitation set forth in
Section 7.2(d) of the Plan, the excess Options shall be deemed to be
Non-Qualified Stock Options.
6. Limitation of Rights. The Option does not confer to the
Optionee or the Optionee's personal representative any rights of a shareholder
of the Corporation unless and until shares of Stock are in fact issued to such
person in connection with the exercise of the Option. Nothing in this Option
Agreement shall interfere with or limit in any way the right of the Corporation
or any
- 3 -
<PAGE> 37
Subsidiary to terminate the Optionee's employment at any time, nor confer upon
the Optionee any right to continue in the employ of the Corporation or any
Subsidiary.
7. Stock Reserve. The Corporation shall at all times during the
term of this Option Agreement reserve and keep available such number of shares
of Stock as will be sufficient to satisfy the requirements of this Option
Agreement.
8. Optionee's Covenant. The Optionee hereby agrees to use his
best efforts to provide services to the Corporation in a workmanlike manner and
to promote the Corporation's interests.
9. Restrictions on Transfer and Pledge. The Option may not be
pledged, encumbered, or hypothecated to or in favor of any party other than the
Corporation or a Parent or Subsidiary, or be subject to any lien, obligation, or
liability of the Optionee to any other party other than the Corporation or a
Parent or Subsidiary. The Option is not assignable or transferable by the
Optionee other than by will or the laws of descent and distribution. The Option
may be exercised during the lifetime of the Optionee only by the Optionee.
10. Restrictions on Issuance of Shares. If at any time the Board
shall determine in its discretion, that listing, registration or qualification
of the shares of Stock covered by the Option upon any securities exchange or
under any state or federal law, or the consent or approval of any governmental
regulatory body, is necessary or desirable as a condition to the exercise of the
Option, the Option may not be exercised in whole or in part unless and until
such listing, registration, qualification, consent or approval shall have been
effected or obtained free of any conditions not acceptable to the Board. The
Company shall be responsible for (i) reasonably and promptly pursuing,
prosecuting and obtaining any listing, registration, qualification, consent or
approval required hereunder on a timely basis in accordance with all applicable
laws and (ii) all costs or expenses incurred in connection therewith.
Notwithstanding the foregoing, the Company shall cause all shares of Stock
acquired by Executive through the exercise of the Option to be registered and
freely tradeable, whether by means of the Company's filing of all necessary S-8
registrations or otherwise, by Executive from and after the date Executive
exercises such Option; subject to restrictions on sale or transfer of such
shares under applicable securities laws by virtue of Executive's position with
the Company or ownership of the Company's securities.
11. Plan Controls. The terms contained in the Plan are
incorporated into and made a part of this Option Agreement and this Option
Agreement shall be governed by and construed in accordance with the Plan. In the
event of any actual or alleged conflict between the provisions of the Plan and
the provisions of this Option Agreement, the provisions of the Plan shall be
controlling and determinative. Whenever any provision of the Plan permits or
requires any action or the exercise of discretion by the Company, the Board of
Directors of the Company, or any committee of the Company or the Board of
Directors of the Company, in order to give effect to the provisions of this
Agreement under the terms of the Plan, the Company, the Board of Directors and
any such committee in approving this Agreement has authorized and approved such
action and discretion and hereby agrees to take any such action or exercise any
such discretion in such manner so as to fully give effect to the provisions of
this Agreement under the Plan.
- 4 -
<PAGE> 38
12. Successors. This Option Agreement shall be binding upon any
successor of the Corporation, in accordance with the terms of this Option
Agreement and the Plan.
13. Severability. If any one or more of the provisions
contained in this Option Agreement are invalid, illegal or unenforceable, the
other provisions of this Option Agreement will be construed and enforced as if
the invalid, illegal or unenforceable provision had never been included.
14. Notice. Notices and communications under this Option
Agreement must be in writing and either personally delivered or sent by
registered or certified United States mail, return receipt requested, postage
prepaid. Notices to the Corporation must be addressed to:
RARE Hospitality International, Inc.
8215 Roswell Road
Building 200
Atlanta, Georgia 30350
Attention: Chief Financial Officer
or any other address designated by the Corporation in a written notice to the
Optionee. Notices to the Optionee will be directed to the address of the
Optionee then currently on file with the Corporation, or at any other address
given by the Optionee in a written notice to the Corporation.
15. Interpretation. It is the intent of the parties hereto that
the Option qualify for incentive stock option treatment pursuant to, and to the
extent permitted by, Section 422 of the Code. All provisions hereof are intended
to have, and shall be construed to have, such meanings as are set forth in
applicable provisions of the Code and Treasury Regulations to allow the Option
to so qualify.
IN WITNESS WHEREOF, RARE Hospitality International, Inc., acting by and
through its duly authorized officers, has caused this Option Agreement to be
executed, and the Optionee has executed this Option Agreement, all as of the day
and year first above written.
RARE HOSPITALITY INTERNATIONAL, INC.
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
OPTIONEE:
----------------------------------------
Philip J. Hickey, Jr.
- 5 -
<PAGE> 39
EXHIBIT A
NOTICE OF EXERCISE OF OPTION TO PURCHASE
COMMON STOCK OF
RARE HOSPITALITY INTERNATIONAL, INC.
Name
------------------------------------
Address:
----------------------------------------
----------------------------------------
Date
------------------------------------
RARE Hospitality International, Inc.
8215 Roswell Road
Building 200
Atlanta, Georgia 30350
Attention: Chief Financial Officer
Re: Exercise of Incentive Stock Option
I elect to purchase ______________ shares of Common Stock of RARE
Hospitality International, Inc. pursuant to the RARE Hospitality International,
Inc. Incentive Stock Option Agreement dated ______________ and the RARE
Hospitality International, Inc. Amended and Restated 1992 Incentive Plan. The
purchase will take place on the Exercise Date which will be as soon as
practicable following the date this notice and all other necessary forms and
payments are received by RARE, unless I specify a later date (not to exceed 30
days following the date of this notice).
On or before the Exercise Date, I will pay the full exercise price in
the form specified below (check one):
[ ] Cash Only: by delivering a check to RARE Hospitality
International, Inc. for $___________.
[ ] Cash and Shares: by delivering a check to RARE Hospitality
International, Inc. for $_________ for the part of the
exercise price. I will pay the balance of the exercise price
by delivering to RARE a stock certificate with my endorsement
for shares of RARE Stock that I have owned for at least six
months. If the number of shares of RARE Stock represented by
such stock certificate exceeds the number needed to pay the
exercise price, RARE will issue me a new stock certificate for
the excess.
<PAGE> 40
[ ] Shares Only: by delivering to RARE a stock certificate with
my endorsement for shares of RARE Stock that I have owned for
at least six months. If the number of shares of RARE Stock
represented by such stock certificate exceeds the number
needed to pay the exercise price, RARE will issue me a new
stock certificate for the excess.
[ ] Cash From Broker: by delivering the purchase price from
_______________________, a broker, dealer or other "creditor"
as defined by Regulation T issued by the Board of Governors of
the Federal Reserve System (the "Broker"). I authorize RARE to
issue a stock certificate in the number of shares indicated
above in the name of the Broker in accordance with
instructions received by RARE from the Broker and to deliver
such stock certificate directly to the Broker (or to any other
party specified in the instructions from the Broker) upon
receiving the exercise price from the Broker.
Please deliver the stock certificate to me (unless I have chosen to pay
the purchase price through a broker).
Very truly yours,
---------------------------------------
AGREED TO AND ACCEPTED:
RARE HOSPITALITY INTERNATIONAL, INC.
By:
---------------------------------
Title:
------------------------------
Number of Option Shares
Exercised:
--------------------------
Number of Option Shares
Remaining:
--------------------------
Date:
-------------------------------
- 2 -
<PAGE> 41
EXHIBIT B
TO
RARE HOSPITALITY, INC.
STOCK OPTION AGREEMENT
"Change in Control" means and includes each of the following:
(1) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the 1934 Act) (a "Person") of
beneficial ownership (within the meaning of Rule 13d-3 promulgated under
the 1934 Act) of 25% or more of the combined voting power of the then
outstanding voting securities of the Company entitled to vote generally in
the election of directors (the "Outstanding Company Voting Securities");
provided, however, that for purposes of this subsection (1), the following
acquisitions shall not constitute a Change of Control: (i) any acquisition
by a Person who is on the date of this Agreement (the "Effective Date") the
beneficial owner of 25% or more of the Outstanding Company Voting
Securities, (ii) any acquisition by the Company, (iii) any acquisition by
any employee benefit plan (or related trust) sponsored or maintained by the
Company or any corporation controlled by the Company, or (iv) any
acquisition by any corporation pursuant to a transaction which complies
with clauses (i), (ii) and (iii) of subsection (3) of this definition; or
(2) Individuals who, as of the Effective Date, constitute the Board of
Directors of the Company (the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board of Directors of the Company;
provided, however, that any individual becoming a director subsequent to
September 28, 1997 whose election, or nomination for election by the
Company's shareholders, was approved by a vote of at least a majority of
the directors then comprising the Incumbent Board shall be considered as
though such individual were a member of the Incumbent Board, but excluding,
for this purpose, any such individual whose initial assumption of office
occurs as a result of an actual or threatened election contest with respect
to the election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than
the Board of Directors of the Company; or
(3) Consummation of a reorganization, share
exchange, merger or consolidation or sale or other disposition
of all or substantially all of the assets of the Company (a
"Business Combination"), in each case, unless, following such
Business Combination, (i) all or substantially all of the
individuals and entities who were the beneficial owners of the
Outstanding Company Voting Securities immediately prior to
such Business Combination beneficially own, directly or
indirectly, more than 50% of the combined voting power of the
then outstanding voting securities entitled to vote generally
in the election of directors of the corporation resulting from
such Business Combination (including, without
<PAGE> 42
limitation, a corporation which as a result of such
transaction owns the Company or all or substantially all of
the Company's assets either directly or through one or more
subsidiaries) in substantially the same proportions as their
ownership, immediately prior to such Business Combination of
the Outstanding Company Voting Securities, and (ii) no Person
(excluding any corporation resulting from such Business
Combination or any employee benefit plan (or related trust) of
the Company or such corporation resulting from such Business
Combination) beneficially owns, directly or indirectly, 25% or
more of the combined voting power of the then outstanding
voting securities of such corporation except to the extent
that such ownership existed prior to the Business Combination,
and (iii) at least a majority of the members of the board of
directors of the corporation resulting from such Business
Combination were members of the Incumbent Board at the time of
the execution of the initial agreement, or of the action of
the Board of Directors of the Company, providing for such
Business Combination; or
(4) approval by the shareholders of the
Corporation of a complete liquidation or dissolution of the
Corporation.
- 2 -
<PAGE> 43
EXHIBIT D
DEFINITION OF
CHANGE IN CONTROL
"Change in Control" means and includes each of the following:
(1) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the 1934 Act) (a "Person") of
beneficial ownership (within the meaning of Rule 13d-3 promulgated under
the 1934 Act) of 25% or more of the combined voting power of the then
outstanding voting securities of the Company entitled to vote generally in
the election of directors (the "Outstanding Company Voting Securities");
provided, however, that for purposes of this subsection (1), the following
acquisitions shall not constitute a Change of Control: (i) any acquisition
by a Person who is on the date of this Agreement (the "Effective Date") the
beneficial owner of 25% or more of the Outstanding Company Voting
Securities, (ii) any acquisition by the Company, (iii) any acquisition by
any employee benefit plan (or related trust) sponsored or maintained by the
Company or any corporation controlled by the Company, or (iv) any
acquisition by any corporation pursuant to a transaction which complies
with clauses (i), (ii) and (iii) of subsection (3) of this definition; or
(2) Individuals who, as of the Effective Date, constitute the Board of
Directors of the Company (the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board of Directors of the Company;
provided, however, that any individual becoming a director subsequent to
September 28, 1997 whose election, or nomination for election by the
Company's shareholders, was approved by a vote of at least a majority of
the directors then comprising the Incumbent Board shall be considered as
though such individual were a member of the Incumbent Board, but excluding,
for this purpose, any such individual whose initial assumption of office
occurs as a result of an actual or threatened election contest with respect
to the election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than
the Board of Directors of the Company; or
(3) Consummation of a reorganization, share
exchange, merger or consolidation or sale or other disposition
of all or substantially all of the assets of the Company (a
"Business Combination"), in each case, unless, following such
Business Combination, (i) all or substantially all of the
individuals and entities who were the beneficial owners of the
Outstanding Company Voting Securities immediately prior to
such Business Combination beneficially own, directly or
indirectly, more than 50% of the combined voting power of the
then outstanding voting securities entitled to vote generally
in the election of directors of the corporation resulting from
such Business Combination (including, without limitation, a
corporation which as a result of such transaction owns the
Company or all or substantially all of the Company's assets
either directly or through one or more subsidiaries) in
substantially the same proportions as their ownership,
immediately prior to such Business Combination of the
Outstanding Company Voting Securities, and (ii) no Person
(excluding any corporation resulting from such Business
Combination or any employee benefit plan (or related trust) of
the Company or such corporation resulting from such Business
Combination) beneficially owns, directly or indirectly, 25% or
more of the combined voting power of the then outstanding
voting securities of such corporation except to the extent
that such ownership existed prior to the Business Combination,
and (iii) at least a majority of the members of the board of
directors of the corporation resulting from such Business
Combination were members of the Incumbent Board at the time of
the execution of the initial agreement, or of the action of
the Board of Directors of the Company, providing for such
Business Combination; or
(4) approval by the shareholders of the
Corporation of a complete liquidation or dissolution of the
Corporation.
- 2 -
<PAGE> 44
EXHIBIT E
The area within the Metropolitan Statistical Area ("MSA") surrounding each city
listed below, as said MSA is determined from time to time by the U. S. Bureau of
the Census, or for each city with no MSA within fifty (50) miles of the city
limits.
Alabama Florida
Birmingham Altamonte Springs
Dothan Boynton Beach
Mobile Brandon
Montgomery Coral Springs
Davie
California Destin
San Francisco Ft. Lauderdale
Ft. Myers
Connecticut Jacksonville Beach
Manchester Jacksonville
Jensen Beach
Delaware Kissimmee
Newark Lake Mary
Largo
District of Columbia Merritt Island
Miami
Ocala
Orlando
Sarasota
St. Augustine
St. Petersburg
Tallahassee
Tampa
<PAGE> 45
Georgia Maine
Albany Bangor
Athens Seakonk
Atlanta South Portland
Augusta
Austell Maryland
Cartersville Gaithersburg
Chamblee
College Park Massachusetts
Columbus Boston
Conyers Braintree
Douglasville Chestnut Hill
Duluth Peabody
Gainesville Farmington
Jonesboro Watertown
Kennesaw
Lawrenceville Michigan
Macon Troy
Marietta
Montgomery Minnesota
Peachtree City Minneapolis
Rome
Roswell Missouri
Savannah Florissant
Snellville
Tucker Nevada
Valdosta Las Vegas
Illinois New Hampshire
Chicago Newington
Kentucky New York
Florence Albany
Poughkeepsie
Rochester
- 2 -
<PAGE> 46
North Carolina Pennsylvania
Burlington Philadelphia
Charlotte
Concord Rhode Island
Gastonia Providence
Greensboro Warwick
High Point
Huntersville South Carolina
Pineville Columbia
Ohio Greenville
Cincinnati Hilton Head
Cleveland Spartanburg
Columbus
Cuyahoga Falls Tennessee
Dublin Antioch
Fairview Park Chattanooga
Mayfield Heights Hermitage
Mentor Knoxville
North Canton Nashville
Solon Madison
Springdale
Strongsville Texas
Houston
Virginia
Springfield
Executive acknowledges and agrees that the geographical area described above is
the area in which Executive will initially perform his services for the Company,
and that the area in which such services are performed is intended to expand as
the business of the Company grows. Executive and the Company agree that as the
geographical area in which the Company conducts its business expands, the list
of cities described on this Exhibit E shall be deemed to be amended, from time
to time, without any further consent, action or notice on the part of the
Company or Executive, to include each additional city in which the Company
operates a restaurant or a franchisee of the Company operates a restaurant under
the terms of a franchise from the Company. Executive agrees to execute one or
more amendments hereto upon the request of the Company from time to time in
order to confirm such amended list.
- 3 -
<PAGE> 47
EXHIBIT F
QUESTIONNAIRE
Have any of the following events happened to you at any time
since December 31, 1987:
(NOTE: Answer each question "Yes" or "No." If any answer to
parts (a) through (g) is "Yes," give details in part (h). For purposes of this
question, the date of the event is the date on which the final order, judgment,
or decree was entered, or the date on which any rights of appeal from
preliminary orders, judgments, or decrees have lapsed. With respect to
bankruptcy petitions, the event date shall be the date of filing for uncontested
petitions or the date upon which approval of a contested petition became final.)
(a) Has a petition under the federal bankruptcy laws or any
state insolvency law been filed by or against, or has a receiver, fiscal agent,
or similar officer been appointed by a court for the business or property of (i)
you, (ii) any partnership in which you were a general partner at the time of
filing or within two years before such filing, or (iii) any corporation or
business association of which you were an executive officer at the time of
filing or within two years before such filing?
Answer: Yes No X
----- -----
(b) Have you been convicted in a criminal proceeding, or are
you the named subject of a criminal proceeding which is presently pending
(excluding traffic violations and other minor offenses)?
Answer: Yes No X
----- -----
(c) Have you been the subject of any court order, judgment, or
decree, not subsequently reversed, suspended, or vacated, permanently or
temporarily enjoining you from, or otherwise limiting, the following activities:
(i) acting as a futures commission merchant,
introducing broker, commodity trading advisor, commodity pool operator, floor
broker, leverage transaction merchant, any other person regulated by the
Commodity Futures Trading Commission, or an associated person of any of the
foregoing, or as an investment adviser, underwriter, broker or dealer in
securities, or as an affiliated person, director, or employee of any investment
company, bank, savings and loan association, or insurance company, or engaging
in or continuing any conduct or practice in connection with such activity?
Answer: Yes No X
----- -----
<PAGE> 48
(ii) engaging in any type of business practice?
Answer: Yes No X
----- -----
(iii) engaging in any activity in connection with
the purchase or sale of any security or commodity or in connection with any
violation of Federal or state securities laws or Federal commodities laws?
Answer: Yes No X
----- -----
(d) Have you been the subject of any order, judgment, or
decree, not subsequently reversed, suspended, or vacated, of any Federal or
state authority barring, suspending, or otherwise limiting for more than 60 days
your right to engage in any of the activities described in (c) above, or to be
associated with persons engaged in any such activity?
Answer: Yes No X
----- -----
(e) Have you been found by a court in a civil action or by the
Securities and Exchange Commission to have violated any Federal or state
securities law, which judgment in such civil action or finding by the Securities
and Exchange Commission has not been subsequently reversed, suspended, or
vacated, or are you presently the subject of any investigation by the Securities
and Exchange Commission which could result in the finding of such a violation?
Answer: Yes No X
----- -----
(f) Have you been found by a court in a civil action or by the
Commodity Futures Trading Commission to have violated any Federal commodities
law, which judgment in such civil action or finding by the Commodity Futures
Trading Commission has not been subsequently reversed, suspended, or vacated, or
are you presently the subject of any investigation by the Commodity Futures
Trading Commission which could result in the finding of such a violation?
Answer: Yes No X
----- -----
(g) Are you a party to any legal proceeding (other than one to
which the Company or any of its present subsidiaries is a party) in which you
are charged with any wrongdoing, misfeasance, or nonfeasance, in connection with
your service as a director, officer, or manager of any business, incorporated or
unincorporated, or your practice of any profession?
Answer: Yes No X
----- -----
- 2 -
<PAGE> 49
(h) If your answer to any of the parts of this question is
"Yes," give details. If you believe such incident is not material to an
evaluation of your ability or integrity, or if there are mitigating
circumstances, give details:
----------------------------------------
----------------------------------------
----------------------------------------
----------------------------------------
<PAGE> 1
EXHIBIT 10(n)
EMPLOYMENT AGREEMENT
THIS AGREEMENT, made and entered into as of the 16th day of October,
1997, by and between RARE HOSPITALITY INTERNATIONAL, INC., a Georgia corporation
(hereinafter referred to as the "Company"), and EUGENE I. LEE, a resident of the
Commonwealth of Massachusetts (hereinafter referred to as the "Executive");
WITNESSETH:
The Company is engaged in the business of owning, operating and
franchising the operation of restaurants under the names LongHorn Steakhouse(R),
The Capital Grille(R), Bugaboo Creek Steak House(R) and others. The Company
desires to continue to employ Executive in an executive capacity and to be
assured of his services in such capacity on the terms and conditions set forth
in this Agreement. Executive desires to accept such continued employment on such
terms and conditions.
Executive is currently employed by the Company as Executive Vice
President of its Bugaboo Creek Steak House business on terms described in a
letter from the Company to Executive dated December 28, 1996 (the "Offer
Letter"). The Company and Executive desire to terminate the Offer Letter and the
terms of employment described therein and to continue Executive's employment by
the Company on the terms and conditions set forth in this Agreement.
In the course of Executive's employment, Executive has gained and will
gain knowledge of the business, affairs, customers, franchisees, plans and
methods of the Company, has been and will be trained at the expense of the
Company in the development, opening, operation and management of the Company's
restaurants through the use of techniques, systems, practices and methods used
and devised by the Company, has had and will have access to information relating
to the Company's customers and their preferences and dining habits and has and
will become personally known to and acquainted with the Company's suppliers and
managers in the Restricted Area thereby establishing a personal relationship
with such suppliers and managers for the benefit of the Company.
The Company would suffer irreparable harm if Executive were to use such
knowledge, information and personal relationships, other than the Executive's
Information Base, related to the Company and its business that are obtained and
developed in the course of Executive's employment with the Company other than in
the proper performance of his duties for the Company.
In consideration of the sum of $1.00 in hand paid by the Company to
Executive, the receipt and sufficiency of which are hereby acknowledged, and the
mutual covenants and obligations contained herein, the Company and Executive
hereby agree as follows:
1. Employment. The Company hereby employs Executive and Executive
hereby accepts such employment and agrees to perform his duties and
responsibilities hereunder, in accordance with the terms and conditions
hereinafter set forth.
<PAGE> 2
1.1. Employment Term. The employment term of this Agreement shall
commence on the date hereof (the "Commencement Date") and shall continue as
employment at will until terminated by the Company or Executive. The period from
the Commencement Date until the employment term is terminated by the Company or
Executive is hereinafter referred to as the "Employment Term."
1.2. Duties of Executive. Executive agrees that during the
Employment Term, he will devote his full professional and business-related time,
skills and best efforts to the business of the Company, initially in the
capacity of Executive Vice President, Operations of the Company's LongHorn
Steakhouse business. In addition, Executive shall devote his full time and his
best efforts in the performance of any other reasonable duties as may be
assigned to him from time to time by the Company. Executive shall devote all of
his full professional and business-related skills solely to the affairs of the
Company, and shall not, during his employment, unless otherwise agreed to in
advance in writing by the Company, seek or accept other employment, become
self-employed in any other capacity during the term of his employment, or engage
in any activities which are detrimental to the business of the Company.
Notwithstanding the foregoing, Executive may engage in personal investment
activities provided such activities do not interfere with Executive's
performance of his full-time employment duties under this Agreement. Executive
acknowledges that he shall be required to perform his duties from the offices of
the Company located in metropolitan Atlanta, Georgia, and Executive will
therefore be required to move his residence to metropolitan Atlanta, Georgia.
Executive acknowledges that the discharge of his duties for the Company will
involve travel on a regular basis from the Company's offices in Atlanta,
Georgia.
1.3. Termination of Offer Letter. The Offer Letter is hereby
terminated, and from and after the Commencement Date the terms and conditions of
Executive's employment by the Company shall be solely as provided in this
Agreement.
2. Compensation and Benefits.
2.1. Base Compensation. For all the services rendered by Executive
hereunder, the Company shall pay Executive an annual salary at the rate of
$185,000 for each full year of the Employment Term, plus such additional
amounts, if any as may be approved by the Company's Board of Directors, ("Base
Compensation) payable in installments at such times as the Company customarily
pays its other senior officers (but in any event no less often than monthly).
The Company agrees that the Executive's salary will be reviewed at least
annually by the Compensation Committee of the Company's Board of Directors to
determine if an increase is appropriate, which increase shall be in the sole
discretion of the Company's Board of Directors. Executive's salary shall be
prorated for any partial calendar year during which this Agreement remains in
effect.
2.2. Bonus Awards. In addition to the Base Compensation, during the
Employment Term Executive shall be eligible for a bonus determined and paid in
accordance with the bonus program for executive officers of the Company as
approved by the Company's Board of Directors from time to time. Notwithstanding
the foregoing,
-2-
<PAGE> 3
Executive's bonus for the 1997 calendar year shall be not less than $30,000.
Executive must be employed by the Company on December 31 of a year in order to
be entitled to a bonus for that year.
2.3. Stock Options. (a) The Company shall grant to Executive,
effective as of the Commencement Date, the following options to acquire shares
of the Company's common stock:
(i) 40,910 shares with an exercise price equal to the
fair market value of the Company's common stock on the date of
grant, which option shall become exercisable on the first
anniversary of the date of this Agreement; and
(ii) 41,667 shares with an exercise price of $12.00 per
share, which option shall become exercisable on the second
anniversary of the date of this Agreement; and
(iii) 43,334 shares with an exercise price of $15.00 per
share, which option shall become exercisable on the third
anniversary of the date of this Agreement; and
Those options granted to Executive in this Section 2.3(a) shall be granted to
Executive pursuant to the Company's Amended and Restated 1992 Incentive Plan and
the terms and conditions governing such options shall be as set forth in the
form of the Stock Option Agreement attached hereto as Exhibit A and made a part
hereof.
(b) The Company shall grant to Executive, effective as of the
Commencement Date, the following incentive stock options to acquire shares of
the company's common stock;
(i) 9090 shares with an exercise price equal to the
fair market value of the Company's common stock on the date of
grant, which option shall become exercisable on the first
anniversary of the date of this Agreement; and
(ii) [8,333] shares with an exercise price of $12.00
per share, which option shall become exercisable with respect to all
of such shares on the second anniversary of the date of this
Agreement; and
(iii) [6,666] shares with an exercise price of $15.00
per share, which option shall become exercisable with respect to all
of such shares on the third anniversary of the date of this
Agreement;
The terms and conditions governing the options described in this Section 2.3(b)
shall be as set forth in the form of the Stock Option Agreement attached hereto
as Exhibit B and made a part hereof.
2.4. Other Benefits. In addition to all other compensation paid or
payable from the Company to Executive hereunder, during the Employment Term
Executive shall
-3-
<PAGE> 4
be entitled to participate in any and all other employee benefit programs
maintained by the Company for the benefit of its executive employees generally,
in accordance with and subject to the terms and conditions of such programs.
Executive acknowledges that the Company is discontinuing automobile allowances
for its executive employees and that Executive will not be entitled to any
automobile allowance from the Company, including but not limited to the
automobile allowance previously paid to him by the Company.
2.5. Expenses. (a) In addition to the compensation described in this
Agreement, the Company shall promptly reimburse Executive for all reasonable
expenses incurred by him in the performance of his duties under this Agreement
and vouched to the reasonable satisfaction of the Board of Directors or
appropriate officers of the Company, pursuant to established procedures.
(b) The Company shall promptly reimburse Executive for the following
expenses incurred by Executive in connection with the relocation of his
residence from metropolitan Boston, Massachusetts to Atlanta, Georgia, which
expenses shall be documented to the reasonable satisfaction of the Company:
(i) Real estate sales commission, not to exceed seven
percent (7%) of the sales price, incurred by Executive in connection
with the sale of Executive's current residence in metropolitan
Boston, Massachusetts;
(ii) Real estate loan closing costs, not to exceed two
and one-half percent (2.5%) of the purchase price (including an
origination fee not to exceed one percent (1%)), incurred in
connection with the financing of the purchase of a new residence by
Executive in metropolitan Atlanta, Georgia on or before January 31,
1998;
(iii) Moving expenses incurred in connection with moving
Executive's family and household possessions from metropolitan
Boston, Massachusetts to metropolitan Atlanta, Georgia; and
(iv) In addition to the specific expenses described in
clauses (i)through (iii) above, an amount equal to $2,000 to cover
other miscellaneous relocation expenses.
3. Payment upon Termination.
(a) Upon termination of the Employment Term for any reason other
than (i) Executive's death, or (ii) by the Company other than for Cause (as
defined in Exhibit C attached hereto) or during Executive's Disability (as
defined in Exhibit C attached hereto), Executive shall be entitled to receive
the compensation owed to Executive but unpaid for performance rendered under
this Agreement as of the date of termination and any additional compensation he
may be entitled to receive under the terms of any employee benefit plan.
(b) Upon termination of the Employment Term by the death of
Executive, Executive's estate shall be entitled to receive the compensation
under Section 2.1 as calculated and owed to Executive but unpaid for performance
rendered under this Agreement as of the date of termination and any additional
compensation he may be entitled
-4-
<PAGE> 5
to receive under the terms of any employee benefit plan plus the Company will
pay to the personal representative of Executive, a lump sum amount equal to
one-half of Executive's annual Base Compensation under Section 2.1 as in effect
on the date of his death.
(c) In the event that during the Employment Term Executive becomes
Disabled and the Company thereafter terminates Executive's employment during the
continuation of such Disability, Executive shall be entitled to receive the
compensation under Section 2.1 as calculated and owed to Executive but unpaid
for performance rendered under this Agreement as of the date of termination and
any additional compensation he may be entitled to receive under the terms of any
employee benefit plan. In addition, the Company shall pay to Executive, for up
to ninety (90) days, an amount equal to the difference between the amount of
Executive's then level of Base Compensation payable pursuant to Section 2.1 and
150% of the amount paid to Executive under any short-term disability insurance
policy obtained by the Executive and paid by the Company through the Company's
group coverage until the Company's long-term disability insurance begins to pay.
(d) In the event that within two (2) years following the
Commencement Date the Company terminates Executive's employment other than for
Cause, unless the provisions of Section 3.2(f) apply, Executive shall be
entitled to receive the compensation under Section 2.1 as calculated and owed to
Executive but unpaid for performance rendered under this Agreement as of the
date of termination and the Company will be obligated to pay Executive his
annual Base Compensation under Section 2.1 as of the date of termination of such
employment from the date of such termination for twelve (12) months. Such
payment shall be made as and when otherwise due under this Agreement.
(e) In the event that at any time that is more than two (2) years
following the Commencement Date the Company terminates Executive's employment
other than for Cause, unless the provisions of Section 3.2(f) apply, Executive
shall be entitled to receive the compensation under Section 2.1 as calculated
and owed to Executive but unpaid for performance rendered under this Agreement
as of the date of termination and the Company will be obligated to pay Executive
at the rate of his annual Base Compensation under Section 2.1 as of the date of
termination of such employment from the date of such termination for six (6)
months. Such payment shall be made as and when otherwise due under this
Agreement.
(f) In the event that the Company terminates Executive's employment
other than for Cause within eighteen (18) months following the occurrence of a
Change in Control (as defined in Exhibit C attached hereto), in lieu of the
amounts payable pursuant to Section 3.2(d) or (e) Executive shall be entitled to
receive the compensation under Section 2.1 as calculated and owed to Executive
but unpaid for performance rendered under this Agreement as of the date of
termination of such employment and the Company will be obligated to pay
Executive an additional amount equal to the sum of (x) his annual Base
Compensation as of the date of termination of such employment plus (y) an amount
equal to the bonus paid to Executive pursuant to Section 2.2 for the calendar
year immediately preceding the calendar year in which the termination of
employment occurs. Such payment shall be made within thirty (30) days following
termination of Executive's employment.
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<PAGE> 6
(g) Payments made pursuant to this Section 3.2 are in lieu of any
other obligations to Executive pursuant to the terms of this Agreement.
4. Noncompetition. Executive covenants and agrees that during the term
of his employment by the Company and for a period of one (1) year immediately
following the termination of Executive's employment by the Company for any
reason whatsoever, Executive will not, within the area described on Exhibit E
hereto (the "Restricted Area") directly or indirectly compete with the Company
by carrying on a business any significant portion of which involves the
development, opening, operation or franchising of restaurants that derive more
than thirty percent (30%) of their food sales from steak products, if the
Company is still engaged in such business in such area.
4.1. Definition of "Compete." For the purposes of this Agreement,
the term "compete" shall mean the providing of general management or supervisory
services for the development or operation or franchising of restaurants that
derive more than thirty percent (30%) of their food sales from steak products.
4.2. Direct or Indirect Competition. For the purposes of this
Agreement, the words "directly or indirectly" as they modify the word "compete"
shall mean (i) acting as an agent, representative, consultant, officer,
director, independent contractor, or employee engaged in a management capacity
with any entity or enterprise which is carrying on a business any significant
portion of which involves the development, opening, or operation of restaurants
offering steak as a principal portion of their menu, (ii) participating in any
such competing entity or enterprise as an owner, partner, limited partner, joint
venturer, creditor or stockholder (except as a stockholder holding less than one
percent (1%) interest in a corporation whose shares are actively traded on a
regional or national securities exchange or in the over-the-counter market), and
(iii) communicating to any such competing entity or enterprise the names or
addresses or any other information concerning any employee or supplier of the
Company or any successor to the goodwill of the Company with respect to the
business of the Company.
5. Confidentiality. Executive recognizes and acknowledges that by
reason of his employment by and service to the Company, he will have access to
all trade secrets and other confidential information of the Company including,
but not limited to, confidential: pricing information, marketing information,
sales techniques of the Company, confidential records, the Company's expansion
plans, restaurant development and marketing techniques, operating procedures,
training programs and materials, business plans, franchise arrangements, plans
and agreements, information regarding suppliers, product quality and control
procedures, financial statements and projections and other information regarding
the operation of the Company's restaurants (hereinafter referred to as the
"Confidential Information"). The Company acknowledges that information in
Executive's Information Base is not Confidential Information. Executive
acknowledges that such Confidential Information is a valuable and unique asset
of the Company and covenants that he will not, either during the term of his
employment by the Company or for a period of two (2) years thereafter, disclose
any such Confidential Information to any person for any reason whatsoever
(except as his duties for the Company may require) without the prior written
authorization of the Company's Board of Directors. Executive agrees that he will
not copy
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<PAGE> 7
any Confidential Information except as the performance of his duties for the
Company may require and that upon the termination of his employment by the
Company, he shall return all Confidential Information and any copies thereof in
his possession to the Company. Executive hereby acknowledges and agrees that the
prohibitions against disclosure of Confidential Information recited herein are
in addition to, and not in lieu of, any rights or remedies which the Company may
have available pursuant to the laws of any jurisdiction or at common law to
prevent the disclosure of trade secrets or proprietary information, and the
enforcement by the Company of its rights and remedies pursuant to this Agreement
shall not be construed as a waiver of any other rights or available remedies
which it may possess in law or equity absent this Agreement. Notwithstanding the
foregoing, the Company acknowledges and agrees that nothing contained herein
shall restrict or otherwise prohibit or prevent (i) Executive's use or
disclosure of Executive's Information Base or (ii) disclosure of Confidential
Information pursuant to legal proceedings, subpoena, civil investigative demand
or other similar process. Executive agrees that if disclosure of Confidential
Information is requested or required pursuant to any such process, he shall
provide the Company with prompt written notice of any such request or
requirement so that the Company may seek a protective order or other appropriate
remedy and/or waive compliance with the provisions of this Agreement. If, in the
absence of a protective order or other remedy or the receipt of a waiver by the
Company, Executive is nonetheless, legally compelled to disclose Confidential
Information to any tribunal or other agency, Executive may, without liability
hereunder, disclose to such tribunal or other agency only that portion of the
Confidential Information which Executive is legally required to disclose,
Executive agrees to cooperate with the Company to obtain an appropriate
protective order or other reliable assurance that such tribunal or other agency
will accord the Confidential Information confidential treatment. The Company
also acknowledges and agrees that Confidential Information shall not include any
information (a) known by Executive prior to the date of his employment by the
Company and learned by Executive other than as a result of his employment
relationship with the Company, (b) independently developed by the Executive
outside of the scope of his employment relationship with the Company or (c) is
or becomes publicly available through no breach by the Executive of his
obligation to the Company. Executive's Information Base means Executive's
experience in the development, opening, operation and management of restaurants,
and professional relationships with clients, customers, suppliers and other
individuals within the restaurant industry, to the extent that such experience
and relationships were developed by Executive prior to his original employment
by the Company in January 1997.
6. Non-Solicitation of Employees. Executive covenants that during the
term of his employment by the Company, and during the two (2) year period
immediately following the termination of such employment, Executive will neither
directly nor indirectly induce or attempt to induce any employee of the Company
to terminate his or her employment to go to work for any other employer in a
business competing with that of the Company.
7. Hiring of Employees. Executive covenants that during the term of his
employment by the Company, and during the one (1) year period immediately
following the termination of such employment, Executive will neither directly
nor indirectly hire any management level employee of the Company.
-7-
<PAGE> 8
8. Property of Company. Executive acknowledges that from time to time
in the course of providing services pursuant to this Agreement he shall have the
opportunity to inspect and use certain property, both tangible and intangible,
of the Company, and Executive hereby agrees that said property shall remain the
exclusive property of the Company and the Executive shall have no right or
proprietary interest in such property, whether tangible or intangible,
including, without limitation, the Company's franchise and supplier lists,
contract forms, books of account, training and operating materials and similar
property.
9. Developments. All developments, including inventions, whether
patentable or otherwise, trade secrets, discoveries, improvements, ideas and
writings which either directly or indirectly relate to or may be useful in the
business of the Company or any of its affiliates (the "Developments") which
Executive, either by himself or in conjunction with any other person or persons,
has conceived, made, developed, acquired or acquired knowledge of during his
employment by the Company or which Executive, either by himself or in
conjunction with any other person or persons, shall conceive, make, develop,
acquire or acquire knowledge of during the Employment Term, shall become and
remain the sole and exclusive property of the Company. Executive hereby assigns,
transfers and conveys, and agrees to so assign, transfer and convey, all of his
right, title and interest in and to any and all such Developments and to
disclose fully as soon as practicable, in writing, all such Developments to the
Chairman of the Company. At any time and from time to time, upon the request and
at the expense of the Company, Executive will execute and deliver any and all
instruments, documents and papers, give evidence and do any and all other acts
which, in the opinion of counsel for the Company, are or may be necessary or
desirable to document such transfer or to enable the Company to file and
prosecute applications for and to acquire, maintain and enforce any and all
patents, trademark registrations or copyrights under United States or foreign
law with respect to any such Developments or to obtain any extension,
validation, reissue, continuance or renewal of any such patent, trademark or
copyright. The Company will be responsible for the preparation of any such
instruments, documents and papers and for the prosecution of any such
proceedings and will reimburse Executive for all reasonable expenses incurred by
him in compliance with the provisions of this Section.
10. Reasonableness. The restrictions contained in Sections 4,5,6 and 7
are considered by the parties hereto to be fair and reasonable and necessary for
the protection of the legitimate business interests of the Company.
11. Equitable Relief. Executive acknowledges that the services to be
rendered by him are of a special, unique, unusual, extraordinary, and
intellectual character, which gives them a peculiar value, and the loss of which
cannot reasonably or adequately be compensated in damages in an action at law;
and that a breach by him of any of the provisions contained in Sections 4, 5, 6
and 7 of this Agreement will cause the Company irreparable injury and damage.
Executive further acknowledges that he possesses unique skills, knowledge and
ability and that any material breach of the provisions of Sections 4, 5, 6 and 7
of this Agreement would be extremely detrimental to the Company. By reason
thereof, Executive agrees that the Company shall be entitled, in addition to any
other remedies it may have under this Agreement or otherwise, to injunctive and
other equitable
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<PAGE> 9
relief to prevent or curtail any breach of the provisions of Sections 4, 5, 6
and 7 of this Agreement by him.
12. Survival of Provisions. The provisions of Sections 4 through 14 ,
inclusive, of this Agreement shall survive the termination of this Agreement to
the extent required to give full effect to the covenants and agreements
contained in those sections. All provisions of this Agreement which contemplate
the making of payments or the provision of consideration or other items of
economic value by the Company to the Executive after the termination of this
Agreement shall likewise survive the termination of this Agreement to the extent
required to give full effect to such undertakings or obligations of the Company
to Executive hereunder.
13. Warranties and Representations. In order to induce the Company to
enter into this Employment Agreement, Executive hereby warrants and represents
to the Company that Executive is not under any obligation, contractual or
otherwise, to any party which would prohibit or be contravened by Executive's
acceptance of employment by the Company and the performance of Executive's
duties as Executive Vice President, Operations of the Company's LongHorn
Steakhouse business or the performance of Executive's obligations under this
Agreement.
14. Successors Bound; Assignability. This Agreement shall be binding
upon Executive, the Company and their successors in interest, including without
limitation, any corporation into which the Company may be merged or by which it
may be acquired. This Agreement is nonassignable except that the Company's
rights, duties and obligations under this Agreement may be assigned to the
Company's acquiror in the event the Company is merged, acquired or sells
substantially all of its assets.
15. Severability. In the event that any one or more of the provisions
of this Agreement or any word, phrase, clause, sentence or other portion thereof
shall be deemed to be illegal or unenforceable for any reason, such provision or
portion thereof shall be modified or deleted, to the extent permissible under
applicable law, in such a manner so as to make this Agreement as modified legal
and enforceable to the fullest extent permitted under applicable laws.
16. Withholding. Notwithstanding any of the terms or provisions of this
Agreement, all amounts payable by the Company hereunder shall be subject to
withholding of such sums related to taxes as the Company may reasonably
determine it should withhold pursuant to applicable law or regulation.
17. Headings. The headings and captions used in this Agreement are for
convenience of reference only, and shall in no way define, limit, expand or
otherwise affect the meaning or construction of any provision of this Agreement.
18. Notices. Any notice required or permitted to be given pursuant to
this Agreement shall be deemed sufficiently given when delivered in person or
when deposited in the United States mail, registered or certified mail, postage
prepaid, addressed as follows:
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<PAGE> 10
If to the Company, to: RARE Hospitality International, Inc.
8215 Roswell Road
Building 200
Atlanta, Georgia 30350
Attention: Chairman
With a copy to: Alston & Bird
One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309-3424
Attention: William H. Avery
If to Executive, to: Eugene I. Lee
---------------------------------------
---------------------------------------
---------------------------------------
With a copy to: ---------------------------------------
---------------------------------------
---------------------------------------
---------------------------------------
---------------------------------------
Any party may by written notice change the address to which notices to such
party are to be delivered or mailed.
19. Entire Agreement. This Agreement, together with Exhibits A, B, C
and D hereto which are incorporated herein by this reference, constitutes the
entire Agreement between the parties hereto with regard to the subject matter
hereof, and there are no agreements, understandings, specific restrictions,
warranties or representations relating to said subject matter between the
parties other than those set forth herein or herein provided for.
20. Counterparts. This Agreement may be executed in two or more
counterparts, each of which will take effect as an original and all of which
shall evidence one and the same Agreement.
21. Amendment, Modification and Waiver. This Agreement may only be
amended, modified or terminated prior to the end of its term by the mutual
agreement of the parties. The waiver by either party to this Agreement of a
breach of any of the provisions of this Agreement shall not operate or be
construed as a waiver of any subsequent or simultaneous breach.
22. Mitigation. Executive shall have no duty to attempt to mitigate the
compensation or level of benefits payable by the Company to him hereunder and
the Company shall not be entitled to set off against the amounts payable by the
Company to
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<PAGE> 11
Executive hereunder any amounts received by the Executive from any other source,
including any subsequent employer.
23. Governing Law. All of the terms and provisions of this Agreement
shall be construed in accordance with and governed by the applicable laws of the
State of Georgia.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
RARE HOSPITALITY INTERNATIONAL, INC.
By: /s/ George W. McKerrow, Jr.
----------------------------
Title: Chairman / CEO
EXECUTIVE
/s/ Eugene I. Lee
------------------------------------
EUGENE I. LEE
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<PAGE> 12
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- ------- -----------
<S> <C>
A NON-QUALIFIED STOCK OPTION AGREEMENT
B INCENTIVE STOCK OPTION AGREEMENT
C DEFINITION OF CHANGE IN CONTROL
D RESTRICTED AREA
</TABLE>
<PAGE> 13
EXHIBIT A
NON-QUALIFIED STOCK OPTION AGREEMENT
under the
RARE HOSPITALITY INTERNATIONAL, INC.
AMENDED AND RESTATED 1992 INCENTIVE PLAN
This Stock Option Agreement is made as of the ____ day of _______, 1997
by and between RARE HOSPITALITY INTERNATIONAL, INC., a Georgia corporation
(hereinafter referred to as the "Company"), and EUGENE I. LEE, a resident of the
State of Georgia (hereinafter referred to as the "Optionee").
1. Grant of Option. The Company hereby grants to the Optionee, under
the RARE Hospitality International, Inc. Amended and Restated 1992 Plan (the
"Plan"), a Non-Qualified Stock Option to purchase, on the terms and conditions
set forth in this agreement (this "Option Agreement"), 125,911 shares of the
Company's no par value common stock (the "Stock"), at the exercise prices per
share set forth below (the "Option"):
(a) 40,910 shares at $____ per share;
(b) 41,667 shares at $12.00 per share; and
(c) 43,334 shares at $15.00 per share.
Capitalized terms used herein and not otherwise defined shall have the meanings
assigned such terms in the Plan.
2. Vesting of Option. Unless the exercisability of the Option is
accelerated in accordance with Section 1.7 of the Plan or as provided in Section
5 hereof, the Option shall vest (become exercisable) only in cumulative periodic
installments as follows:
(a) During the year following the date of this Agreement, the
Option shall be exercisable as to none of the shares subject to the
Option;
(b) During the period beginning one year after the date of
this Agreement and for a period of one year thereafter, the Option
shall be exercisable as to the shares described in paragraph 1(a)
above, minus the number of shares, if any, as to which the Option has
been previously exercised;
(c) During the period beginning two years after the date of
this Agreement and for a period of one year thereafter the Option shall
be exercisable with respect to the shares described in paragraphs 1(a)
and 1(b) above, minus the number of shares, if any, as to which the
Option has been previously exercised; and
<PAGE> 14
(d) During the period beginning three years after the date of
this Agreement and for the remainder of its term, the Option shall be
exercisable with respect to the shares described in paragraphs 1(a),
1(b) and 1(c) above, minus the number of shares, if any, as to which
the Option has been previously exercised.
3. Period of Option and Limitations on Right to Exercise. The Option
will, to the extent not previously exercised, lapse under the earliest of the
following circumstances; provided, however, that the Committee may, prior to the
lapse of the Option under the circumstances described in paragraphs (b), (c) and
(d) below, provide in writing that the Option will extend until a later date:
(a) The Option shall lapse as of 5:00 p.m., Eastern Time, on
the day immediately prior to the tenth anniversary of the date of grant
(the "Expiration Date").
(b) The Option shall lapse three months after the termination
of Optionee's employment for any reason other than the Optionee's death
or Disability; provided, however, that if the Optionee's employment is
terminated by the Company for cause or by the Optionee without the
consent of the Company, the Option shall lapse immediately.
(c) If the Optionee's employment terminates by reason of
Disability, the Option shall lapse one year after the date of the
Optionee's termination of employment.
(d) If the Optionee dies while employed, or during the
three-month period described in subsection (b) above or during the
one-year period described in subsection (c) above and before the Option
otherwise lapses, the Option shall lapse one year after the date of the
Optionee's death. Upon the Optionee's death, the Option may be
exercised by the Optionee's beneficiary.
If the Optionee or his beneficiary exercises an Option after
termination of employment, the Option may be exercised only with respect to the
shares that were otherwise vested on the Optionee's termination of employment
including vesting by acceleration in accordance with Section 1.7 of the Plan and
Section 5 hereof.
4. Exercise of Option. The Option shall be exercised by written notice
directed to the Secretary of the Company at the principal executive offices of
the Company, in substantially the form attached hereto as Exhibit A, or such
other form as the Committee may approve. Such written notice shall be
accompanied by full payment in cash, shares of Stock previously acquired by the
Optionee, or any combination thereof, for the number of shares specified in such
written notice; provided, however, that if shares of Stock are used to pay the
exercise price, such shares must have been held by the Optionee for at least six
months. The Fair Market Value of the surrendered Stock as of the date of the
exercise shall be determined in valuing Stock used in payment of the exercise
price. To the extent permitted under Regulation T of the Federal Reserve Board,
and subject to applicable securities laws, the
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<PAGE> 15
Option may be exercised through a broker in a so-called "cashless exercise"
whereby the broker sells the Option shares and delivers cash sales proceeds to
the Company in payment of the exercise price. The Committee may, in the exercise
of its discretion, but need not, allow the Optionee to pay the exercise price by
directing the Company to withhold from the shares of Stock that would otherwise
be issued upon exercise of the Option that number of shares having a Fair Market
Value on the exercise date equal to the exercise price, all as determined
pursuant to rules and procedures established by the Committee.
Subject to the terms of this Option Agreement, the Option may be
exercised at any time and without regard to any other option held by the
Optionee to purchase stock of the Company.
5. Acceleration of Exercisability Upon Certain Change in Control.
In the event that a Change in Control (as defined in Exhibit B attached
hereto and incorporated herein) shall occur within two (2) years
following the date of this Agreement, upon the occurrence of such
Change in Control, the Option shall become fully exercisable with
respect to all shares of Stock, other than those with respect to which
the Option has previously been exercised; provided, however, that such
acceleration will not occur if, in the opinion of the Company's
accountants , such acceleration would preclude the use of "pooling of
interest" accounting treatment for a Change In Control transaction that
(a) would otherwise qualify for such accounting treatment, and (b) is
contingent upon qualifying for such accounting treatment.
6. Limitation of Rights. The Option does not confer to the Optionee or
the Optionee's personal representative any rights of a shareholder of the
Company unless and until shares of Stock are in fact issued to such person in
connection with the exercise of the Option. Nothing in this Option Agreement
shall interfere with or limit in any way the right of the Company or any
Subsidiary to terminate the Optionee's employment at any time, nor confer upon
the Optionee any right to continue in the employ of the Company or any
Subsidiary.
7. Stock Reserve. The Company shall at all times during the term of
this Option Agreement reserve and keep available such number of shares of Stock
as will be sufficient to satisfy the requirements of this Option Agreement.
8. Optionee's Covenant. The Optionee hereby agrees to use his best
efforts to provide services to the Company in a workmanlike manner and to
promote the Company's interests.
9. Restrictions on Transfer and Pledge. The Option may not be pledged,
encumbered, or hypothecated to or in favor of any party other than the Company
or a Parent or Subsidiary, or be subject to any lien, obligation, or liability
of the Optionee to any other party other than the Company or a Parent or
Subsidiary. The Option is not assignable or transferable by the Optionee other
than by will or the laws of descent and distribution;
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<PAGE> 16
provided, however, that the Committee may (but need not) permit other transfers
where the Committee concludes that such transferability (i) does not result in
accelerated taxation and (ii) is otherwise appropriate and desirable, taking
into account any state or federal tax or securities laws applicable to
transferable options. The Option may be exercised during the lifetime of the
Optionee only by the Optionee.
10. Restrictions on Issuance of Shares. If at any time the Board shall
determine in its discretion, that listing, registration or qualification of the
shares of Stock covered by the Option upon any securities exchange or under any
state or federal law, or the consent or approval of any governmental regulatory
body, is necessary or desirable as a condition to the exercise of the Option,
the Option may not be exercised in whole or in part unless and until such
listing, registration, qualification, consent or approval shall have been
effected or obtained free of any conditions not acceptable to the Board.
11. Plan Controls. The terms contained in the Plan are incorporated
into and made a part of this Option Agreement and this Option Agreement shall be
governed by and construed in accordance with the Plan. In the event of any
actual or alleged conflict between the provisions of the Plan and the provisions
of this Option Agreement, the provisions of the Plan shall be controlling and
determinative.
12. Successors. This Option Agreement shall be binding upon any
successor of the Company, in accordance with the terms of this Option Agreement
and the Plan.
13. Severability. If any one or more of the provisions contained in
this Option Agreement are invalid, illegal or unenforceable, the other
provisions of this Option Agreement will be construed and enforced as if the
invalid, illegal or unenforceable provision had never been included.
14. Notice. Notices and communications under this Option Agreement must
be in writing and either personally delivered or sent by registered or certified
United States mail, return receipt requested, postage prepaid. Notices to the
Company must be addressed to:
RARE Hospitality International, Inc.
8215 Roswell Road
Building 200
Atlanta, Georgia 30350
Attention: Chief Financial Officer
or any other address designated by the Company in a written notice to the
Optionee. Notices to the Optionee will be directed to the address of the
Optionee then currently on file with the Company, or at any other address given
by the Optionee in a written notice to the Company.
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<PAGE> 17
IN WITNESS WHEREOF, RARE Hospitality International, Inc., acting by and
through its duly authorized officers, has caused this Option Agreement to be
executed, and the Optionee has executed this Option Agreement, all as of the day
and year first above written.
RARE HOSPITALITY INTERNATIONAL, INC.
By:
--------------------------------------
Name:
------------------------------------
Title:
-------------------------------------
OPTIONEE:
-----------------------------------------
EUGENE I. LEE
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<PAGE> 18
EXHIBIT A
NOTICE OF EXERCISE OF OPTION TO PURCHASE
COMMON STOCK OF
RARE HOSPITALITY INTERNATIONAL, INC.
Name
-----------------------------------
Address:
---------------------------------------
---------------------------------------
Date
----------------------------------
RARE Hospitality International, Inc.
8215 Roswell Road
Building 200
Atlanta, Georgia 30350
Attention: Chief Financial Officer
Re: Exercise of Non-Qualified Stock Option
I elect to purchase ______________ shares of Common Stock of RARE
Hospitality International, Inc. ("RARE") pursuant to the RARE Hospitality
International, Inc. Non-Qualified Stock Option Agreement dated ______________
and the RARE Hospitality International, Inc. Amended and Restated 1992 Incentive
Plan. The purchase will take place on the Exercise Date which will be as soon as
practicable following the date this notice and all other necessary forms and
payments are received by RARE, unless I specify a later date (not to exceed 30
days following the date of this notice).
On or before the Exercise Date, I will pay the full exercise price in
the form specified below (check one):
[ ] Cash Only: by delivering a check to RARE Hospitality
International, Inc. for $___________.
[ ] Cash and Shares: by delivering a check to RARE Hospitality
International, Inc. for $_________ for the part of the exercise
price. I will pay the balance of the exercise price by delivering
to RARE a stock certificate with my endorsement for shares of
RARE Stock that I have owned for at least six months. If the
number of shares of RARE Stock represented by such stock
certificate exceeds the number needed to pay the exercise price,
RARE will issue me a new stock certificate for the excess.
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<PAGE> 19
[ ] Shares Only: by delivering to RARE a stock certificate with my
endorsement for shares of RARE Stock that I have owned for at
least six months. If the number of shares of RARE Stock
represented by such stock certificate exceeds the number needed
to pay the exercise price, RARE will issue me a new stock
certificate for the excess.
[ ] Cash From Broker: by delivering the purchase price from
_______________________, a broker, dealer or other "creditor" as
defined by Regulation T issued by the Board of Governors of the
Federal Reserve System (the "Broker"). I authorize RARE to issue
a stock certificate in the number of shares indicated above in
the name of the Broker in accordance with instructions received
by RARE from the Broker and to deliver such stock certificate
directly to the Broker (or to any other party specified in the
instructions from the Broker) upon receiving the exercise price
from the Broker.
Please deliver the stock certificate to me (unless I have chosen to pay
the purchase price through a broker).
Very truly yours,
_______________________________________
AGREED TO AND ACCEPTED:
RARE HOSPITALITY INTERNATIONAL, INC.
By: _____________________________
Title: _____________________________
Number of Option Shares
Exercised: ___________________________
Number of Option Shares
Remaining: ___________________________
Date: _________________________________
-7-
<PAGE> 20
EXHIBIT B
to
RARE HOSPITALITY, INC.
STOCK OPTION AGREEMENT
"Change in Control" means and includes each of the following:
(1) The acquisition by any individual, entity or group (within the meaning
of Section 13(d)(3) or 14(d)(2) of the 1934 Act) (a "Person") of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the 1934 Act) of
25% or more of the combined voting power of the then outstanding voting
securities of the Company entitled to vote generally in the election of
directors (the "Outstanding Company Voting Securities"); provided, however, that
for purposes of this subsection (1), the following acquisitions shall not
constitute a Change of Control: (i) any acquisition by a Person who is on the
date of this Agreement (the "Effective Date") the beneficial owner of 25% or
more of the Outstanding Company Voting Securities, (ii) any acquisition by the
Company, (iii) any acquisition by any employee benefit plan (or related trust)
sponsored or maintained by the Company or any corporation controlled by the
Company, or (iv) any acquisition by any corporation pursuant to a transaction
which complies with clauses (i), (ii) and (iii) of subsection (3) of this
definition; or
(2) Individuals who, as of the Effective Date, constitute the Board of
Directors of the Company (the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board of Directors of the Company;
provided, however, that any individual becoming a director subsequent to October
1, 1997 whose election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of an actual or threatened election contest with respect to the election
or removal of directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board of Directors of the
Company; or
(3) Consummation of a reorganization, share exchange, merger or
consolidation or sale or other disposition of all or substantially all of the
assets of the Company (a "Business Combination"), in each case, unless,
following such Business Combination, (i) all or substantially all of the
individuals and entities who were the beneficial owners of the Outstanding
Company Voting Securities immediately prior to such Business Combination
beneficially own, directly or indirectly, more than 50% of the combined voting
power of the then outstanding voting securities entitled to vote generally in
the election of directors of the corporation resulting from such Business
Combination (including, without
<PAGE> 21
limitation, a corporation which as a result of such transaction owns the Company
or all or substantially all of the Company's assets either directly or through
one or more subsidiaries) in substantially the same proportions as their
ownership, immediately prior to such Business Combination of the Outstanding
Company Voting Securities, and (ii) no Person (excluding any corporation
resulting from such Business Combination or any employee benefit plan (or
related trust) of the Company or such corporation resulting from such Business
Combination) beneficially owns, directly or indirectly, 25% or more of the
combined voting power of the then outstanding voting securities of such
corporation except to the extent that such ownership existed prior to the
Business Combination, and (iii) at least a majority of the members of the board
of directors of the corporation resulting from such Business Combination were
members of the Incumbent Board at the time of the execution of the initial
agreement, or of the action of the Board of Directors of the Company, providing
for such Business Combination; or
(4) approval by the shareholders of the Corporation of a complete
liquidation or dissolution of the Corporation.
-2-
<PAGE> 22
EXHIBIT B
INCENTIVE STOCK OPTION AGREEMENT
under the
RARE HOSPITALITY INTERNATIONAL, INC.
AMENDED AND RESTATED 1992 INCENTIVE PLAN
This Stock Option Agreement is made as of the ____ day of _______, 1997 by
and between RARE HOSPITALITY INTERNATIONAL, INC., a Georgia corporation
(hereinafter referred to as the "Corporation"), and EUGENE I. LEE, a resident of
the State of Georgia (hereinafter referred to as the "Optionee").
1. Grant of Option. The Corporation hereby grants to the Optionee under the
RARE Hospitality International, Inc. Amended and Restated 1992 Incentive Plan
(the "Plan"), an Incentive Stock Option to purchase, on the terms and conditions
set forth in this agreement (this "Option Agreement"), 24,089 shares of the
Corporation's no par value common stock (the "Stock"), at the exercise prices
per share set forth below (the "Option"):
(a) 9,090 shares at $____ per share;
(b) 8,333 shares at $12.00 per share; and
(c) 6,666 shares at $15.00 per share.
Capitalized terms used herein and not otherwise defined shall have the meanings
assigned such terms in the Plan.
2. Vesting of Option. Unless the exercisability of the Option is
accelerated in accordance with Section 1.7 of the Plan or as provided in Section
5 hereof, the Option shall vest (become exercisable) only in cumulative periodic
installments as follows:
(a) during the first year following the date of this Agreement, the
Option shall be exercisable as to none of the shares subject to the Option;
(b) during the period beginning one year after the date of this
Agreement and for a period of one year thereafter, the Option shall be
exercisable as to the shares described in paragraph 1(a) above, minus the
number of shares, if any, as to which the Option has been previously
exercised;
(c) during the period beginning two years after the date of this
Agreement and for a period of one year thereafter, the Option shall be
exercisable with respect to the shares described in paragraphs 1(a) and (b)
above, minus the number of shares, if any, as to which the initial option
has been previously exercised; and
<PAGE> 23
(d) during the period beginning three years after the date of this
Agreement and for the remainder of its term, the Option shall be
exercisable with respect to the shares described in paragraphs 1(a), 1(b)
and 1(c) above, minus the number of shares, if any, as to which the Option
has been previously exercised.
3. Period of Option and Limitations on Right to Exercise. The Option will,
to the extent not previously exercised, lapse under the earliest of the
following circumstances; provided, however, that the Committee may, prior to the
lapse of the Option under the circumstances described in paragraphs (b), (c) and
(d) below, provide in writing that the Option will extend until a later date,
but if Option is exercised after the dates specified in paragraphs (b), (c) and
(d) above, it will automatically become a Non-Qualified Stock Option:
(a) The Option shall lapse as of 5:00 p.m., Eastern Time, on the day
immediately prior to the tenth anniversary of the date of grant (the
"Expiration Date").
(b) The Option shall lapse three months after the termination of
Optionee's employment for any reason other than the Optionee's death or
Disability; provided, however, that if the Optionee's employment is
terminated by the Corporation for cause or by the Optionee without the
consent of the Corporation, the Option shall lapse immediately.
(c) If the Optionee's employment terminates by reason of Disability,
the Option shall lapse one year after the date of the Optionee's
termination of employment.
(d) If the Optionee dies while employed, or during the three-month
period described in subsection (b) above or during the one-year period
described in subsection (c) above and before the Option otherwise lapses,
the Option shall lapse one year after the date of the Optionee's death.
Upon the Optionee's death, the Option may be exercised by the Optionee's
beneficiary.
If the Optionee or his beneficiary exercises an Option after
termination of employment, the Option may be exercised only with respect to the
shares that were otherwise vested on the Optionee's termination of employment
(including vesting by acceleration in accordance with Section 1.7 of the Plan
and Section 5 hereof ).
4. Exercise of Option. The Option shall be exercised by written notice
directed to the Secretary of the Corporation at the principal executive offices
of the Corporation, in substantially the form attached hereto as Exhibit A, or
such other form as the Committee may approve. Such written notice shall be
accompanied by full payment in cash, shares of Stock previously acquired by the
Optionee, or any combination thereof, for the number of shares specified in such
written notice; provided, however, that if shares of Stock are used to pay the
exercise price, such shares must have been held by the Optionee for at least six
months The Fair Market Value of the surrendered Stock as of the date of the
exercise shall be determined in valuing Stock used in payment of the exercise
price. To the extent permitted under
-2-
<PAGE> 24
Regulation T of the Federal Reserve Board, and subject to applicable securities
laws, the Option may be exercised through a broker in a so-called "cashless
exercise" whereby the broker sells the Option shares and delivers cash sales
proceeds to the Corporation in payment of the exercise price. The Committee may,
in the exercise of its discretion, but need not, allow the Optionee to pay the
exercise price by directing the Corporation to withhold from the shares of Stock
that would otherwise be issued upon exercise of the Option that number of shares
having a Fair Market Value on the exercise date equal to the exercise price, all
as determined pursuant to rules and procedures established by the Committee.
Subject to the terms of this Option Agreement, the Option may be exercised
at any time and without regard to any other option held by the Optionee to
purchase stock of the Corporation.
5. Acceleration of Exercisability Upon Certain Change in Control. In the
event that a Change in Control (as defined in Exhibit B attached hereto and
incorporated herein) shall occur within two (2) years following the date of this
Agreement, upon the occurrence of such Change in Control, the Option shall
become fully exercisable with respect to all shares of Stock, other than those
with respect to which the Option has previously been exercised; provided,
however, that such acceleration will not occur if, in the opinion of the
Company's accountants (), such acceleration would preclude the use of "pooling
of interest" accounting treatment for a Change In Control transaction that (a)
would otherwise qualify for such accounting treatment, and (b) is contingent
upon qualifying for such accounting treatment. To the extent that this provision
causes Incentive Stock Options to exceed the dollar limitation set forth in
Section 2.3 of the Plan, the excess Options shall be deemed to be Non-Qualified
Stock Options.
6. Limitation of Rights. The Option does not confer to the Optionee or the
Optionee's personal representative any rights of a shareholder of the
Corporation unless and until shares of Stock are in fact issued to such person
in connection with the exercise of the Option. Nothing in this Option Agreement
shall interfere with or limit in any way the right of the Corporation or any
Subsidiary to terminate the Optionee's employment at any time, nor confer upon
the Optionee any right to continue in the employ of the Corporation or any
Subsidiary.
7. Stock Reserve. The Corporation shall at all times during the term of
this Option Agreement reserve and keep available such number of shares of Stock
as will be sufficient to satisfy the requirements of this Option Agreement.
8. Optionee's Covenant. The Optionee hereby agrees to use his best efforts
to provide services to the Corporation in a workmanlike manner and to promote
the Corporation's interests.
9. Restrictions on Transfer and Pledge. The Option may not be pledged,
encumbered, or hypothecated to or in favor of any party other than the
Corporation or a Parent or Subsidiary, or be subject to any lien, obligation, or
liability of the Optionee to any
-3-
<PAGE> 25
other party other than the Corporation or a Parent or Subsidiary. The Option is
not assignable or transferable by the Optionee other than by will or the laws of
descent and distribution. The Option may be exercised during the lifetime of the
Optionee only by the Optionee.
10. Restrictions on Issuance of Shares. If at any time the Board shall
determine in its discretion, that listing, registration or qualification of the
shares of Stock covered by the Option upon any securities exchange or under any
state or federal law, or the consent or approval of any governmental regulatory
body, is necessary or desirable as a condition to the exercise of the Option,
the Option may not be exercised in whole or in part unless and until such
listing, registration, qualification, consent or approval shall have been
effected or obtained free of any conditions not acceptable to the Board.
11. Plan Controls. The terms contained in the Plan are incorporated into
and made a part of this Option Agreement and this Option Agreement shall be
governed by and construed in accordance with the Plan. In the event of any
actual or alleged conflict between the provisions of the Plan and the provisions
of this Option Agreement, the provisions of the Plan shall be controlling and
determinative.
12. Successors. This Option Agreement shall be binding upon any successor
of the Corporation, in accordance with the terms of this Option Agreement and
the Plan.
13. Severability. If any one or more of the provisions contained in this
Option Agreement are invalid, illegal or unenforceable, the other provisions of
this Option Agreement will be construed and enforced as if the invalid, illegal
or unenforceable provision had never been included.
14. Notice. Notices and communications under this Option Agreement must be
in writing and either personally delivered or sent by registered or certified
United States mail, return receipt requested, postage prepaid. Notices to the
Corporation must be addressed to:
RARE Hospitality International, Inc.
8215 Roswell Road
Building 200
Atlanta, Georgia 30350
Attention: Chief Financial Officer
or any other address designated by the Corporation in a written notice to the
Optionee. Notices to the Optionee will be directed to the address of the
Optionee then currently on file with the Corporation, or at any other address
given by the Optionee in a written notice to the Corporation.
15. Interpretation. It is the intent of the parties hereto that the Option
qualify for incentive stock option treatment pursuant to, and to the extent
permitted by, Section 422 of the Code. All provisions hereof are intended to
have, and shall be construed to have, such
-4-
<PAGE> 26
meanings as are set forth in applicable provisions of the Code and Treasury
Regulations to allow the Option to so qualify.
IN WITNESS WHEREOF, RARE Hospitality International, Inc., acting by and
through its duly authorized officers, has caused this Option Agreement to be
executed, and the Optionee has executed this Option Agreement, all as of the day
and year first above written.
RARE HOSPITALITY INTERNATIONAL, INC.
By:
-----------------------------------------
Name:
-----------------------------------------
Title:
-----------------------------------------
OPTIONEE:
--------------------------------------------
EUGENE I. LEE
-5-
<PAGE> 27
EXHIBIT A
NOTICE OF EXERCISE OF OPTION TO PURCHASE
COMMON STOCK OF
RARE HOSPITALITY INTERNATIONAL, INC.
Name
----------------------------------
Address:
--------------------------------------
--------------------------------------
Date
----------------------------------
RARE Hospitality International, Inc.
8215 Roswell Road
Building 200
Atlanta, Georgia 30350
Attention: Chief Financial Officer
Re: Exercise of Incentive Stock Option
I elect to purchase ______________ shares of Common Stock of RARE
Hospitality International, Inc. pursuant to the RARE Hospitality International,
Inc. Incentive Stock Option Agreement dated ______________ and the RARE
Hospitality International, Inc. Amended and Restated 1992 Incentive Plan. The
purchase will take place on the Exercise Date which will be as soon as
practicable following the date this notice and all other necessary forms and
payments are received by RARE, unless I specify a later date (not to exceed 30
days following the date of this notice).
On or before the Exercise Date, I will pay the full exercise price in
the form specified below (check one):
[ ] Cash Only: by delivering a check to RARE Hospitality
International, Inc. for $___________.
[ ] Cash and Shares: by delivering a check to RARE Hospitality
International, Inc. for $_________ for the part of the exercise
price. I will pay the balance of the exercise price by delivering
to RARE a stock certificate with my endorsement for shares of RARE
Stock that I have owned for at least six months. If the number of
shares of RARE Stock represented by such stock certificate exceeds
the number needed to pay the exercise price, RARE will issue me a
new stock certificate for the excess.
-6-
<PAGE> 28
[ ] Shares Only: by delivering to RARE a stock certificate with my
endorsement for shares of RARE Stock that I have owned for at
least six months. If the number of shares of RARE Stock
represented by such stock certificate exceeds the number needed to
pay the exercise price, RARE will issue me a new stock certificate
for the excess.
[ ] Cash From Broker: by delivering the purchase price from
_______________________, a broker, dealer or other "creditor" as
defined by Regulation T issued by the Board of Governors of the
Federal Reserve System (the "Broker"). I authorize RARE to issue a
stock certificate in the number of shares indicated above in the
name of the Broker in accordance with instructions received by
RARE from the Broker and to deliver such stock certificate
directly to the Broker (or to any other party specified in the
instructions from the Broker) upon receiving the exercise price
from the Broker.
Please deliver the stock certificate to me (unless I have chosen to pay
the purchase price through a broker).
Very truly yours,
---------------------------------------
AGREED TO AND ACCEPTED:
RARE HOSPITALITY INTERNATIONAL, INC.
By:
--------------------------------
Title:
------------------------------
Number of Option Shares
Exercised:
--------------------------
Number of Option Shares
Remaining:
---------------------------
Date:
--------------------------------
-7-
<PAGE> 29
EXHIBIT B
TO
RARE HOSPITALITY, INC.
STOCK OPTION AGREEMENT
"Change in Control" means and includes each of the following:
(1) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the 1934 Act) (a "Person") of
beneficial ownership (within the meaning of Rule 13d-3 promulgated under the
1934 Act) of 25% or more of the combined voting power of the then outstanding
voting securities of the Company entitled to vote generally in the election of
directors (the "Outstanding Company Voting Securities"); provided, however, that
for purposes of this subsection (1), the following acquisitions shall not
constitute a Change of Control: (i) any acquisition by a Person who is on the
date of this Agreement (the "Effective Date") the beneficial owner of 25% or
more of the Outstanding Company Voting Securities, (ii) any acquisition by the
Company, (iii) any acquisition by any employee benefit plan (or related trust)
sponsored or maintained by the Company or any corporation controlled by the
Company, or (iv) any acquisition by any corporation pursuant to a transaction
which complies with clauses (i), (ii) and (iii) of subsection (3) of this
definition; or
(2) Individuals who, as of the Effective Date, constitute the Board of
Directors of the Company (the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board of Directors of the Company;
provided, however, that any individual becoming a director subsequent to October
1, 1997 whose election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of an actual or threatened election contest with respect to the election
or removal of directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board of Directors of the
Company; or
(3) Consummation of a reorganization, share exchange, merger or
consolidation or sale or other disposition of all or substantially all of the
assets of the Company (a "Business Combination"), in each case, unless,
following such Business Combination, (i) all or substantially all of the
individuals and entities who were the beneficial owners of the Outstanding
Company Voting Securities immediately prior to such Business Combination
beneficially own, directly or indirectly, more than 50% of the combined voting
power of the then outstanding voting securities entitled to vote generally in
the election of directors of the corporation resulting from such Business
Combination (including, without
-8-
<PAGE> 30
limitation, a corporation which as a result of such transaction owns the Company
or all or substantially all of the Company's assets either directly or through
one or more subsidiaries) in substantially the same proportions as their
ownership, immediately prior to such Business Combination of the Outstanding
Company Voting Securities, and (ii) no Person (excluding any corporation
resulting from such Business Combination or any employee benefit plan (or
related trust) of the Company or such corporation resulting from such Business
Combination) beneficially owns, directly or indirectly, 25% or more of the
combined voting power of the then outstanding voting securities of such
corporation except to the extent that such ownership existed prior to the
Business Combination, and (iii) at least a majority of the members of the board
of directors of the corporation resulting from such Business Combination were
members of the Incumbent Board at the time of the execution of the initial
agreement, or of the action of the Board of Directors of the Company, providing
for such Business Combination; or
(4) approval by the shareholders of the Corporation of a complete
liquidation or dissolution of the Corporation.
-9-
<PAGE> 31
EXHIBIT C
DEFINITIONS
As used in Section 3 of this Agreement, the following terms shall have
the meanings ascribed to each below:
"Cause" means:
(A) Commission by Executive of a willful or grossly negligent act
which causes material harm to the Company,
(B) The commission or perpetration by Executive of any criminal
act involving a felony for which Executive is indicted or with
respect to which Executive pleads nolo contendere (or any
similar response), any act of moral turpitude, or any fraud
upon the Company,
(C) Habitual and unauthorized absenteeism by reason other than
physical or mental illness, chronic alcoholism or other form
of substance abuse resulting in material harm or actual or
potential physical danger to the Company or its employees,
(D) Any material violation by Executive of his obligations under
this Agreement, or
(E) Any misrepresentation or breach by Executive of warranty
contained in Section 13 of this Agreement;
provided, however, that if the cause specified in such notice is such
that there is a reasonable prospect that it can be cured with diligent
effort within a reasonable time, Executive shall have such reasonable
time (having regard for the nature of the cause) to cure such cause,
which time shall not in any event exceed thirty (30) days from the date
of such notice, and Executive's employment shall continue in effect
during such reasonable time so long as Executive makes diligent efforts
during such time to cure such cause. If such cause shall be cured by
Executive during such reasonable time his employment and the
obligations of the Company hereunder shall not terminate as a result of
the notice which has been given with respect to such cause. Cure of any
cause with or without notice from the Company shall not relieve
Executive from any obligations to the Company under this Agreement or
otherwise and shall not affect the Company's rights upon the
reoccurrence of the same, or the occurrence of any other, cause. If
such cause shall not be cured within such reasonable time the
employment of Executive under this Agreement shall terminate upon the
expiration of such reasonable time.
<PAGE> 32
"Change in Control" means and includes each of the following:
(1) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the 1934 Act) (a "Person") of
beneficial ownership (within the meaning of Rule 13d-3 promulgated under the
1934 Act) of 25% or more of the combined voting power of the then outstanding
voting securities of the Company entitled to vote generally in the election of
directors (the "Outstanding Company Voting Securities"); provided, however, that
for purposes of this subsection (1), the following acquisitions shall not
constitute a Change of Control: (i) any acquisition by a Person who is on the
date of this Agreement (the "Effective Date") the beneficial owner of 25% or
more of the Outstanding Company Voting Securities, (ii) any acquisition by the
Company, (iii) any acquisition by any employee benefit plan (or related trust)
sponsored or maintained by the Company or any corporation controlled by the
Company, or (iv) any acquisition by any corporation pursuant to a transaction
which complies with clauses (i), (ii) and (iii) of subsection (3) of this
definition; or
(2) Individuals who, as of the Effective Date, constitute the Board of
Directors of the Company (the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board of Directors of the Company;
provided, however, that any individual becoming a director subsequent to October
1, 1997 whose election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of an actual or threatened election contest with respect to the election
or removal of directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board of Directors of the
Company; or
(3) Consummation of a reorganization, share exchange, merger or
consolidation or sale or other disposition of all or substantially all of the
assets of the Company (a "Business Combination"), in each case, unless,
following such Business Combination, (i) all or substantially all of the
individuals and entities who were the beneficial owners of the Outstanding
Company Voting Securities immediately prior to such Business Combination
beneficially own, directly or indirectly, more than 50% of the combined voting
power of the then outstanding voting securities entitled to vote generally in
the election of directors of the corporation resulting from such Business
Combination (including, without limitation, a corporation which as a result of
such transaction owns the Company or all or substantially all of the Company's
assets either directly or through one or more subsidiaries) in substantially the
same proportions as their ownership, immediately prior to such Business
Combination of the Outstanding Company Voting Securities, and (ii) no Person
(excluding any corporation resulting from such Business Combination or any
employee benefit plan (or related trust) of the Company or such corporation
resulting from such Business Combination) beneficially owns, directly or
indirectly, 25% or more of the combined voting power of the then
-2-
<PAGE> 33
outstanding voting securities of such corporation except to the extent
that such ownership existed prior to the Business Combination, and
(iii) at least a majority of the members of the board of directors of
the corporation resulting from such Business Combination were members
of the Incumbent Board at the time of the execution of the initial
agreement, or of the action of the Board of Directors of the Company,
providing for such Business Combination; or
(4) approval by the shareholders of the Corporation of a complete
liquidation or dissolution of the Corporation.
"Disability" or "Disabled" means that by reason of any physical or mental
incapacity Executive has been unable, or it is reasonably expected that he will
be unable, for a period of at least one hundred and eighty (180) substantially
continuous days to perform his regular duties and responsibilities hereunder. In
the event of any disagreement between Executive and the Company as to whether
Executive is physically or mentally incapacitated, the question of such
incapacity shall be submitted to an impartial and reputable physician for
determination, selected by mutual agreement of Executive and the Company or,
failing such agreement, selected by two physicians (one of which shall be
selected by the Company and the other by Executive), and such determination of
the question of such incapacity by such physician shall be final and binding on
Executive and the Company. The Executive shall pay the fees and expenses of such
physician.
<PAGE> 34
EXHIBIT D
The area within the Metropolitan Statistical Area ("MSA") surrounding each city
listed below, as said MSA is determined from time to time by the U. S. Bureau of
the Census, or for each city with no MSA within fifty (50) miles of the city
limits.
<TABLE>
<S> <C>
Alabama Florida
Birmingham Altamonte Springs
Dothan Boynton Beach
Mobile Brandon
Montgomery Coral Springs
Davie
California Destin
San Francisco Ft. Lauderdale
Ft. Myers
Connecticut Jacksonville Beach
Manchester Jacksonville
Jensen Beach
Delaware Kissimmee
Newark Lake Mary
Largo
District of Columbia Merritt Island
Miami
Ocala
Orlando
Sarasota
St. Augustine
St. Petersburg
Tallahassee
Tampa
</TABLE>
F-1
<PAGE> 35
<TABLE>
<S> <C>
Georgia Maine
Albany Bangor
Athens Seakonk
Atlanta South Portland
Augusta
Austell Maryland
Cartersville Gaithersburg
Chamblee
College Park Massachusetts
Columbus Boston
Conyers Braintree
Douglasville Chestnut Hill
Duluth Peabody
Gainesville Farmington
Jonesboro Watertown
Kennesaw
Lawrenceville Michigan
Macon Troy
Marietta
Montgomery Minnesota
Peachtree City Minneapolis
Rome
Roswell Missouri
Savannah Florissant
Snellville
Tucker Nevada
Valdosta Las Vegas
Illinois New Hampshire
Chicago Newington
Kentucky New York
Florence Albany
Poughkeepsie
Rochester
</TABLE>
F-2
<PAGE> 36
<TABLE>
<S> <C>
North Carolina Pennsylvania
Burlington Philadelphia
Charlotte
Concord Rhode Island
Gastonia Providence
Greensboro Warwick
High Point
Huntersville South Carolina
Pineville Columbia
Ohio Greenville
Cincinnati Hilton Head
Cleveland Spartanburg
Columbus
Cuyahoga Falls Tennessee
Dublin Antioch
Fairview Park Chattanooga
Mayfield Heights Hermitage
Mentor Knoxville
North Canton Nashville
Solon Madison
Springdale
Strongsville Texas
Houston
Virginia
Springfield
</TABLE>
Executive acknowledges and agrees that the geographical area described above is
the area in which Executive will initially perform his services for the Company,
and that the area in which such services are performed is intended to expand as
the business of the Company grows. Executive and the Company agree that as the
geographical area in which the Company conducts its business expands, the list
of cities described on this Exhibit D shall be deemed to be amended, from time
to time, without any further consent, action or notice on the part of the
Company or Executive, to include each additional city in which the Company
operates a restaurant or a franchisee of the Company operates a restaurant under
the terms of a franchise from the Company. Executive agrees to execute one or
more amendments hereto upon the request of the Company from time to time in
order to confirm such amended list.
F-3
<PAGE> 1
EXHIBIT 10(o)
EMPLOYMENT AGREEMENT
THIS AGREEMENT, made and entered into as of the 3rd day of November,
1997, by and between RARE HOSPITALITY INTERNATIONAL, INC., a Georgia corporation
(hereinafter referred to as the "Company"), and WILLLIAM A. BURNETT, a resident
of the State of Georgia (hereinafter referred to as the "Executive");
WITNESSETH:
The Company is engaged in the business of owning, operating and
franchising the operation of restaurants under the names LongHorn Steakhouse(R),
The Capital Grille(R), Bugaboo Creek Steak House(R) and others. The Company
desires to continue to employ Executive in an executive capacity and to be
assured of his services in such capacity on the terms and conditions set forth
in this Agreement. Executive desires to accept such continued employment on such
terms and conditions.
Executive has been employed by the Company since 1994. The Company and
Executive desire to continue Executive's employment by the Company which
employment shall be on the terms and conditions set forth in this Agreement from
and after the date hereof.
In the course of Executive's employment, Executive has gained and will
gain knowledge of the business, affairs, customers, franchisees, plans and
methods of the Company, has been and will be trained at the expense of the
Company in the development, opening, operation and management of the Company's
restaurants through the use of techniques, systems, practices and methods used
and devised by the Company, has had and will have access to information relating
to the Company's customers and their preferences and dining habits and has and
will become personally known to and acquainted with the Company's suppliers and
managers in the Restricted Area thereby establishing a personal relationship
with such suppliers and managers for the benefit of the Company.
The Company would suffer irreparable harm if Executive were to use such
knowledge, information and personal relationships related to the Company and its
business other than in the proper performance of his duties for the Company.
In consideration of the sum of $1.00 in hand paid by the Company to
Executive, the receipt and sufficiency of which are hereby acknowledged, and the
mutual covenants and obligations contained herein, the Company and Executive
hereby agree as follows:
1. Employment. The Company hereby employs Executive and Executive
hereby accepts such employment and agrees to perform his duties and
responsibilities hereunder, in accordance with the terms and conditions
hereinafter set forth.
1.1. Employment Term. The employment term of this
Agreement shall commence on the date hereof (the "Commencement Date") and shall
continue as employment at will until terminated by the Company or Executive. The
period from the
<PAGE> 2
Commencement Date until the employment term is terminated by the Company or
Executive is hereinafter referred to as the "Employment Term."
1.2. Duties of Executive. Executive agrees that during the
Employment Term, he will devote his full professional and business-related time,
skills and best efforts to the business of the Company, initially in the
capacity of Executive Vice President for The Capital Grille and Bugaboo Creek
Steak House. In addition, Executive shall devote his full time and his best
efforts in the performance of any other reasonable duties as may be assigned to
him from time to time by the Company. Executive shall devote all of his full
professional and business-related skills solely to the affairs of the Company,
and shall not, during his employment, unless otherwise agreed to in advance in
writing by the Company, seek or accept other employment, become self-employed in
any other capacity during the term of his employment, or engage in any
activities which are detrimental to the business of the Company. Notwithstanding
the foregoing, Executive may engage in personal investment activities provided
such activities do not interfere with Executive's performance of his full-time
employment duties under this Agreement. Executive acknowledges that he shall be
required to perform his duties from the offices of the Company located in
metropolitan Atlanta, Georgia. Executive acknowledges that the discharge of his
duties for the Company will involve travel on a regular basis from the Company's
offices in Atlanta, Georgia.
2. Compensation and Benefits.
2.1. Base Compensation. For all the services rendered by
Executive hereunder, the Company shall pay Executive an annual salary at the
rate of $160,000 for each full year of the Employment Term, plus such additional
amounts, if any as may be approved by the Company's Board of Directors ("Base
Compensation), payable in installments at such times as the Company customarily
pays its other senior officers (but in any event no less often than monthly).
The Company agrees that the Executive's salary will be reviewed at least
annually by the Compensation Committee of the Company's Board of Directors to
determine if an increase is appropriate, which increase shall be in the sole
discretion of the Company's Board of Directors. Executive's salary shall be
prorated for any partial calendar year during which this Agreement remains in
effect.
2.2. Bonus Awards. In addition to the Base Compensation,
during the Employment Term Executive shall be eligible for a bonus determined
and paid in accordance with the bonus program for executive officers of the
Company as approved by the Company's Board of Directors from time to time.
Executive must be employed by the Company on December 31 of a year in order to
be entitled to a bonus for that year.
2.3. Stock Options. (a) The Company shall grant to
Executive, effective as of the Commencement Date, the following options to
acquire shares of the Company's common stock:
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<PAGE> 3
(i) 50,000 shares with an exercise price equal to
the fair market value of the Company's common stock on the date of
grant, which option shall become exercisable on the first anniversary
of the date of this Agreement; and
(ii) 25,000 shares with an exercise price of $12.00
per share, which option shall become exercisable on the second
anniversary of the date of this Agreement; and
(iii) 21,032 shares with an exercise price of $15.00
per share, which option shall become exercisable on the third
anniversary of the date of this Agreement; and
(iv) 19,445 shares with an exercise price of $18.00
per share, which option shall become exercisable on the fourth
anniversary of the date of this Agreement; and
(v) 20,239 shares with an exercise price of $21.00
per share, which option shall become exercisable on the fifth
anniversary of the date of this Agreement.
Those options granted to Executive in this Section 2.3(a) shall be granted to
Executive pursuant to the Company's 1997 Long-Term Incentive Plan and the terms
and conditions governing such options shall be as set forth in the form of the
Stock Option Agreement attached hereto as Exhibit A and made a part hereof.
(b) The Company shall grant to Executive, effective as of the
Commencement Date, the following incentive stock options to acquire shares of
the company's common stock;
(i) 3,698 shares with an exercise price of $15.00
per share, which option shall become exercisable with respect to all of
such shares on the third anniversary of the date of this Agreement;
(ii) 5,555 shares with an exercise price of $18.00
per share, which option shall become exercisable with respect to all of
such shares on the fourth anniversary of the date of this Agreement;
and
(iii) 4,761 shares with an exercise price of $21.00
per share, which option shall become exercisable with respect to all of
such shares on the fifth anniversary of the date of this Agreement.
The terms and conditions governing the options described in this Section 2.3(b)
shall be as set forth in the form of the Stock Option Agreement attached hereto
as Exhibit B and made a part hereof.
2.4. Other Benefits. In addition to all other compensation
paid or payable from the Company to Executive hereunder, during the Employment
Term Executive shall be entitled to participate in any and all other employee
benefit programs maintained by the
- 3 -
<PAGE> 4
Company for the benefit of its executive employees generally, in accordance with
and subject to the terms and conditions of such programs. Executive acknowledges
that the Company is discontinuing automobile allowances for its executive
employees and that Executive will not be entitled to any automobile allowance
from the Company.
2.5. Expenses. In addition to the compensation described in
this Agreement, the Company shall promptly reimburse Executive for all
reasonable expenses incurred by him in the performance of his duties under this
Agreement and vouched to the reasonable satisfaction of the Board of Directors
or appropriate officers of the Company, pursuant to established procedures.
2.6. Additional, One-Time Payment. In addition to the other
compensation described in this Agreement, the Company shall pay Executive, on a
one-time basis only, the sum of Twenty-Five Thousand Dollars ($25,000) payable
within forty-five (45) days following the date of this Agreement.
3. Payment upon Termination.
(a) Upon termination of the Employment Term for any reason
other than (i) Executive's death, or (ii) by the Company other than for Cause
(as defined in Exhibit C attached hereto) or during Executive's Disability (as
defined in Exhibit C attached hereto), Executive shall be entitled to receive
the compensation owed to Executive but unpaid for performance rendered under
this Agreement as of the date of termination and any additional compensation he
may be entitled to receive under the terms of any employee benefit plan.
(b) Upon termination of the Employment Term by the death of
Executive, Executive's estate shall be entitled to receive the compensation
under Section 2.1 as calculated and owed to Executive but unpaid for performance
rendered under this Agreement as of the date of termination and any additional
compensation he may be entitled to receive under the terms of any employee
benefit plan plus the Company will pay to the personal representative of
Executive, a lump sum amount equal to one-half of Executive's annual Base
Compensation under Section 2.1 as in effect on the date of his death.
(c) In the event that during the Employment Term Executive
becomes Disabled and the Company thereafter terminates Executive's employment
during the continuation of such Disability, Executive shall be entitled to
receive the compensation under Section 2.1 as calculated and owed to Executive
but unpaid for performance rendered under this Agreement as of the date of
termination and any additional compensation he may be entitled to receive under
the terms of any employee benefit plan. In addition, the Company shall pay to
Executive, for up to ninety (90) days, an amount equal to the difference between
the amount of Executive's then level of Base Compensation payable pursuant to
Section 2.1 and 150% of the amount paid to Executive under any short-term
disability insurance policy obtained by the Executive and paid by the Company
through the Company's group coverage until the Company's long-term disability
insurance begins to pay.
- 4 -
<PAGE> 5
(d) In the event that within two (2) years following the
Commencement Date the Company terminates Executive's employment other than for
Cause, unless the provisions of Section 3.2(e) apply, Executive shall be
entitled to receive the compensation under Section 2.1 as calculated and owed to
Executive but unpaid for performance rendered under this Agreement as of the
date of termination and the Company will be obligated to pay Executive his
annual Base Compensation under Section 2.1 as of the date of termination of such
employment from the date of such termination for six (6) months. Such payment
shall be made as and when otherwise due under this Agreement.
(e) In the event that (i) within two (2) years following the
Commencement Date a Change in Control (as defined in Exhibit C attached hereto)
shall occur and (ii) the Company terminates Executive's employment other than
for Cause within eighteen (18) months following the occurrence of the Change in
Control, in lieu of the amounts payable pursuant to Section 3.2(d) Executive
shall be entitled to receive the compensation under Section 2.1 as calculated
and owed to Executive but unpaid for performance rendered under this Agreement
as of the date of termination of such employment and the Company will be
obligated to pay Executive an additional amount equal to the sum of (x) one-half
of his annual Base Compensation as of the date of termination of such employment
plus (y) an amount equal to one-half of the bonus paid to Executive pursuant to
Section 2.2 for the calendar year immediately preceding the calendar year in
which the termination of employment occurs. Such payment shall be made within
thirty (30) days following termination of Executive's employment.
(f) Payments made pursuant to this Section 3.2 are in lieu of
any other obligations to Executive pursuant to the terms of this Agreement.
4. Noncompetition. Executive covenants and agrees that during the
term of his employment by the Company and for a period of one (1) year
immediately following the termination of Executive's employment by the Company
for any reason whatsoever, Executive will not, within the area described on
Exhibit E hereto (the "Restricted Area") directly or indirectly compete with the
Company by carrying on a business any significant portion of which involves the
development, opening, operation or franchising of restaurants that derive more
than thirty percent (30%) of their food sales from steak products, if the
Company is still engaged in such business in such area.
4.1. Definition of "Compete." For the purposes of this
Agreement, the term "compete" shall mean the providing of general management or
supervisory services for the development or operation or franchising of
restaurants that derive more than thirty percent (30%) of their food sales from
steak products.
4.2. Direct or Indirect Competition. For the purposes of
this Agreement, the words "directly or indirectly" as they modify the word
"compete" shall mean (i) acting as an agent, representative, consultant,
officer, director, independent contractor, or employee engaged in a management
capacity with any entity or enterprise which is carrying on a business any
significant portion of which involves the development, opening, or operation of
restaurants offering steak as a principal portion of their menu, (ii)
participating in any such competing entity or enterprise as an owner, partner,
limited partner, joint
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<PAGE> 6
venturer, creditor or stockholder (except as a stockholder holding less than one
percent (1%) interest in a corporation whose shares are actively traded on a
regional or national securities exchange or in the over-the-counter market), and
(iii) communicating to any such competing entity or enterprise the names or
addresses or any other information concerning any employee or supplier of the
Company or any successor to the goodwill of the Company with respect to the
business of the Company.
5. Confidentiality. Executive recognizes and acknowledges that by
reason of his employment by and service to the Company, he will have access to
all trade secrets and other confidential information of the Company including,
but not limited to, confidential: pricing information, marketing information,
sales techniques of the Company, confidential records, the Company's expansion
plans, restaurant development and marketing techniques, operating procedures,
training programs and materials, business plans, franchise arrangements, plans
and agreements, information regarding suppliers, product quality and control
procedures, financial statements and projections and other information regarding
the operation of the Company's restaurants (hereinafter referred to as the
"Confidential Information"). Executive acknowledges that such Confidential
Information is a valuable and unique asset of the Company and covenants that he
will not, either during the term of his employment by the Company or for a
period of two (2) years thereafter, disclose any such Confidential Information
to any person for any reason whatsoever (except as his duties for the Company
may require) without the prior written authorization of the Company's Board of
Directors. Executive agrees that he will not copy any Confidential Information
except as the performance of his duties for the Company may require and that
upon the termination of his employment by the Company, he shall return all
Confidential Information and any copies thereof in his possession to the
Company. Executive hereby acknowledges and agrees that the prohibitions against
disclosure of Confidential Information recited herein are in addition to, and
not in lieu of, any rights or remedies which the Company may have available
pursuant to the laws of any jurisdiction or at common law to prevent the
disclosure of trade secrets or proprietary information, and the enforcement by
the Company of its rights and remedies pursuant to this Agreement shall not be
construed as a waiver of any other rights or available remedies which it may
possess in law or equity absent this Agreement. Notwithstanding the foregoing,
the Company acknowledges and agrees that nothing contained herein shall restrict
or otherwise prohibit or prevent disclosure of Confidential Information pursuant
to legal proceedings, subpoena, civil investigative demand or other similar
process. Executive agrees that if disclosure of Confidential Information is
requested or required pursuant to any such process, he shall provide the Company
with prompt written notice of any such request or requirement so that the
Company may seek a protective order or other appropriate remedy and/or waive
compliance with the provisions of this Agreement. If, in the absence of a
protective order or other remedy or the receipt of a waiver by the Company,
Executive is nonetheless, legally compelled to disclose Confidential Information
to any tribunal or other agency, Executive may, without liability hereunder,
disclose to such tribunal or other agency only that portion of the Confidential
Information which Executive is legally required to disclose, Executive agrees to
cooperate with the Company to obtain an appropriate protective order or other
reliable assurance that such tribunal or other agency will accord the
Confidential Information confidential treatment. The Company also acknowledges
and agrees that
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<PAGE> 7
Confidential Information shall not include any information (a) known by
Executive prior to his employment by the Company and learned by Executive other
than as a result of his employment relationship with the Company, (b)
independently developed by the Executive outside of the scope of his employment
relationship with the Company or (c) is or becomes publicly available through no
breach by the Executive of his obligation to the Company.
6. Non-Solicitation of Employees. Executive covenants that during
the term of his employment by the Company, and during the two (2) year period
immediately following the termination of such employment, Executive will neither
directly nor indirectly induce or attempt to induce any employee of the Company
to terminate his or her employment to go to work for any other employer in a
business competing with that of the Company.
7. Hiring of Employees. Executive covenants that during the term
of his employment by the Company, and during the one (1) year period immediately
following the termination of such employment, Executive will neither directly
nor indirectly hire any management level employee of the Company.
8. Property of Company. Executive acknowledges that from time to
time in the course of providing services pursuant to this Agreement he shall
have the opportunity to inspect and use certain property, both tangible and
intangible, of the Company, and Executive hereby agrees that said property shall
remain the exclusive property of the Company and the Executive shall have no
right or proprietary interest in such property, whether tangible or intangible,
including, without limitation, the Company's franchise and supplier lists,
contract forms, books of account, training and operating materials and similar
property.
9. Developments. All developments, including inventions, whether
patentable or otherwise, trade secrets, discoveries, improvements, ideas and
writings which either directly or indirectly relate to or may be useful in the
business of the Company or any of its affiliates (the "Developments") which
Executive, either by himself or in conjunction with any other person or persons,
has conceived, made, developed, acquired or acquired knowledge of during his
employment by the Company or which Executive, either by himself or in
conjunction with any other person or persons, shall conceive, make, develop,
acquire or acquire knowledge of during the Employment Term, shall become and
remain the sole and exclusive property of the Company. Executive hereby assigns,
transfers and conveys, and agrees to so assign, transfer and convey, all of his
right, title and interest in and to any and all such Developments and to
disclose fully as soon as practicable, in writing, all such Developments to the
Chairman of the Company. At any time and from time to time, upon the request and
at the expense of the Company, Executive will execute and deliver any and all
instruments, documents and papers, give evidence and do any and all other acts
which, in the opinion of counsel for the Company, are or may be necessary or
desirable to document such transfer or to enable the Company to file and
prosecute applications for and to acquire, maintain and enforce any and all
patents, trademark registrations or copyrights under United States or foreign
law with respect to any such Developments or to obtain any extension,
validation, reissue, continuance or renewal of any such patent, trademark or
copyright. The Company will be responsible for the preparation of any such
instruments, documents and papers and for the prosecution of any such
proceedings and will reimburse
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<PAGE> 8
Executive for all reasonable expenses incurred by him in compliance with the
provisions of this Section.
10. Reasonableness. The restrictions contained in Sections 4,5,6
and 7 are considered by the parties hereto to be fair and reasonable and
necessary for the protection of the legitimate business interests of the
Company.
11. Equitable Relief. Executive acknowledges that the services to
be rendered by him are of a special, unique, unusual, extraordinary, and
intellectual character, which gives them a peculiar value, and the loss of which
cannot reasonably or adequately be compensated in damages in an action at law;
and that a breach by him of any of the provisions contained in Sections 4, 5, 6
and 7 of this Agreement will cause the Company irreparable injury and damage.
Executive further acknowledges that he possesses unique skills, knowledge and
ability and that any material breach of the provisions of Sections 4, 5, 6 and 7
of this Agreement would be extremely detrimental to the Company. By reason
thereof, Executive agrees that the Company shall be entitled, in addition to any
other remedies it may have under this Agreement or otherwise, to injunctive and
other equitable relief to prevent or curtail any breach of the provisions of
Sections 4, 5, 6 and 7 of this Agreement by him.
12. Survival of Provisions. The provisions of Sections 4 through
14 , inclusive, of this Agreement shall survive the termination of this
Agreement to the extent required to give full effect to the covenants and
agreements contained in those sections. All provisions of this Agreement which
contemplate the making of payments or the provision of consideration or other
items of economic value by the Company to the Executive after the termination of
this Agreement shall likewise survive the termination of this Agreement to the
extent required to give full effect to such undertakings or obligations of the
Company to Executive hereunder.
13. Warranties and Representations. In order to induce the Company
to enter into this Employment Agreement, Executive hereby warrants and
represents to the Company that Executive is not under any obligation,
contractual or otherwise, to any party which would prohibit or be contravened by
Executive's acceptance of employment by the Company and the performance of
Executive's duties as Vice President of Operations for The Capital Grille and
Bugaboo Creek Steak House or the performance of Executive's obligations under
this Agreement.
14. Successors Bound; Assignability. This Agreement shall be
binding upon Executive, the Company and their successors in interest, including
without limitation, any corporation into which the Company may be merged or by
which it may be acquired. This Agreement is nonassignable except that the
Company's rights, duties and obligations under this Agreement may be assigned to
the Company's acquiror in the event the Company is merged, acquired or sells
substantially all of its assets.
15. Severability. In the event that any one or more of the
provisions of this Agreement or any word, phrase, clause, sentence or other
portion thereof shall be deemed to be illegal or unenforceable for any reason,
such provision or portion thereof shall be
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<PAGE> 9
modified or deleted, to the extent permissible under applicable law, in such a
manner so as to make this Agreement as modified legal and enforceable to the
fullest extent permitted under applicable laws.
16. Withholding. Notwithstanding any of the terms or provisions
of this Agreement, all amounts payable by the Company hereunder shall be subject
to withholding of such sums related to taxes as the Company may reasonably
determine it should withhold pursuant to applicable law or regulation.
17. Headings. The headings and captions used in this Agreement
are for convenience of reference only, and shall in no way define, limit, expand
or otherwise affect the meaning or construction of any provision of this
Agreement.
18. Notices. Any notice required or permitted to be given
pursuant to this Agreement shall be deemed sufficiently given when delivered in
person or when deposited in the United States mail, registered or certified
mail, postage prepaid, addressed as follows:
If to the Company, to: RARE Hospitality International, Inc.
8215 Roswell Road
Building 200
Atlanta, Georgia 30350
Attention: Chairman
With a copy to: Alston & Bird
One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309-3424
Attention: William H. Avery
If to Executive, to: William A. Burnett
-----------------------------------
-----------------------------------
-----------------------------------
With a copy to:
-----------------------------------
-----------------------------------
-----------------------------------
-----------------------------------
Any party may by written notice change the address to which notices to such
party are to be delivered or mailed.
19. Entire Agreement. This Agreement, together with Exhibits A, B,
C and D hereto which are incorporated herein by this reference, constitutes the
entire Agreement
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<PAGE> 10
between the parties hereto with regard to the subject matter hereof, and there
are no agreements, understandings, specific restrictions, warranties or
representations relating to said subject matter between the parties other than
those set forth herein or herein provided for.
20. Counterparts. This Agreement may be executed in two or more
counterparts, each of which will take effect as an original and all of which
shall evidence one and the same Agreement.
21. Amendment, Modification and Waiver. This Agreement may only
be amended, modified or terminated prior to the end of its term by the mutual
agreement of the parties. The waiver by either party to this Agreement of a
breach of any of the provisions of this Agreement shall not operate or be
construed as a waiver of any subsequent or simultaneous breach.
22. Mitigation. Executive shall have no duty to attempt to
mitigate the compensation or level of benefits payable by the Company to him
hereunder and the Company shall not be entitled to set off against the amounts
payable by the Company to Executive hereunder any amounts received by the
Executive from any other source, including any subsequent employer. 23.
Governing Law. All of the terms and provisions of this Agreement shall be
construed in accordance with and governed by the applicable laws of the State of
Georgia.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
RARE HOSPITALITY INTERNATIONAL, INC.
By: /s/ Philip J. Hickey, Jr.
-------------------------------------
Title: President and COO
EXECUTIVE
/s/ William A. Burnett
----------------------------------------
WILLIAM A. BURNETT
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<PAGE> 11
INDEX TO EXHIBITS
-----------------
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- ------- -----------
<S> <C>
A NON-QUALIFIED STOCK OPTION AGREEMENT
B INCENTIVE STOCK OPTION AGREEMENT
C DEFINITION OF CHANGE IN CONTROL
D RESTRICTED AREA
</TABLE>
<PAGE> 12
EXHIBIT A
NON-QUALIFIED STOCK OPTION AGREEMENT
under the
RARE HOSPITALITY INTERNATIONAL, INC.
1997 LONG-TERM INCENTIVE PLAN
This Stock Option Agreement is made as of the ____ day of _________
1997 by and between RARE HOSPITALITY INTERNATIONAL, INC., a Georgia corporation
(hereinafter referred to as the "Corporation"), and WILLIAM A. BURNETT, a
resident of the State of Georgia (hereinafter referred to as the "Optionee").
1. Grant of Option. The Corporation hereby grants to the Optionee,
under the RARE Hospitality International, Inc. 1997 Long-Term Incentive Plan
(the "Plan"), a Non-Qualified Stock Option to purchase, on the terms and
conditions set forth in this agreement (this "Option Agreement"), 135,716 shares
of the Corporation's no par value common stock (the "Stock"), at the exercise
prices per share set forth below (the "Option"):
(a) 50,000 shares at $ ____ per share;
(b) 25,000 shares at $12.00 per share;
(c) 21,032 shares at $15.00 per share;
(d) 19,445 shares at $18.00 per share; and
(e) 20,239 shares at $21.00 per share.
Capitalized terms used herein and not otherwise defined shall have the meanings
assigned such terms in the Plan.
2. Vesting of Option. Unless the exercisability of the Option is
accelerated in accordance with Article 13 of the Plan or as provided in Section
5 hereof, the Option shall vest (become exercisable) only in cumulative periodic
installments as follows:
(a) During the first year following the date of this
Agreement, the Option shall be exercisable as to none of the shares
subject to the Option;
(b) During the period beginning one year after the date
of this Agreement and for a period of one year thereafter, the Option
shall be exercisable as to the shares described in paragraph 1(a)
above, minus the number of shares, if any, as to which the Option has
been previously exercised;
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<PAGE> 13
(c) During the period beginning two years after the date
of this Agreement and for a period of one year thereafter, the Option
shall be exercisable with respect to the shares described in paragraphs
1(a) and (b) above, minus the number of shares, if any, as to which the
Option has been previously exercised;
(d) During the period beginning three years after the
date of this Agreement and for a period of one year thereafter, the
Option shall be exercisable as to the shares described in paragraphs
1(a), (b) and (c) above, minus the number of shares, if any, as to
which the Option has been previously exercised;
(e) During the period beginning four years after the date
of this Agreement and for a period of one year thereafter, the Option
shall be exercisable as to the shares described in paragraphs 1(a),
(b), (c), and (d) above, minus the number of shares, if any, as to
which the Option has been previously exercised; and
(f) During the period beginning five years after the date
of this Agreement and for the remainder of its term, the Option shall
be exercisable with respect to all of the shares minus the number of
shares, if any, as to which the Option has been previously exercised.
3. Period of Option and Limitations on Right to Exercise. The
Option will, to the extent not previously exercised, lapse under the earliest of
the following circumstances; provided, however, that the Committee may, prior to
the lapse of the Option under the circumstances described in paragraphs (b), (c)
and (d) below, provide in writing that the Option will extend until a later
date:
(a) The Option shall lapse as of 5:00 p.m., Eastern Time,
on the day immediately prior to the tenth anniversary of the date of
grant (the "Expiration Date").
(b) The Option shall lapse three months after the
Optionee's termination of employment for any reason other than the
Optionee's death or Disability; provided, however, that if the
Optionee's employment is terminated by the Corporation for cause or by
the Optionee without the consent of the Corporation, the Option shall
lapse immediately.
(c) If the Optionee's employment terminates by reason of
Disability, the Option shall lapse one year after the date of the
Optionee's termination of employment.
(d) If the Optionee dies while employed, or during the
three-month period described in subsection (b) above or during the
one-year period described in subsection (c) above and before the Option
otherwise lapses, the Option shall lapse one year after the date of the
Optionee's death. Upon the Optionee's death, the Option may be
exercised by the Optionee's beneficiary.
If the Optionee or his beneficiary exercises an Option after
termination of employment, the Option may be exercised only with respect to the
shares that were otherwise vested on the Optionee's
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<PAGE> 14
termination of employment (including vesting by acceleration in accordance with
Article 13 of the Plan or Section 5 hereof).
4. Exercise of Option. The Option shall be exercised by written
notice directed to the Secretary of the Corporation at the principal executive
offices of the Corporation, in substantially the form attached hereto as Exhibit
A, or such other form as the Committee may approve. Such written notice shall be
accompanied by full payment in cash, shares of Stock previously acquired by the
Optionee, or any combination thereof, for the number of shares specified in such
written notice; provided, however, that if shares of Stock are used to pay the
exercise price, such shares must have been held by the Optionee for at least six
months. The Fair Market Value of the surrendered Stock as of the date of the
exercise shall be determined in valuing Stock used in payment of the exercise
price. To the extent permitted under Regulation T of the Federal Reserve Board,
and subject to applicable securities laws, the Option may be exercised through a
broker in a so-called "cashless exercise" whereby the broker sells the Option
shares and delivers cash sales proceeds to the Corporation in payment of the
exercise price. The Committee may, in the exercise of its discretion, but need
not, allow the Optionee to pay the exercise price by directing the Corporation
to withhold from the shares of Stock that would otherwise be issued upon
exercise of the Option that number of shares having a Fair Market Value on the
exercise date equal to the exercise price, all as determined pursuant to rules
and procedures established by the Committee.
Subject to the terms of this Option Agreement, the Option may be
exercised at any time and without regard to any other option held by the
Optionee to purchase stock of the Corporation.
5. Acceleration of Exercisability Upon Certain Change in Control. In the
event that a Change in Control shall occur within two (2) years following the
date of this Agreement, upon the occurrence of such Change in Control, the
Option shall become fully exercisable with respect to all shares of Stock, other
than those with respect to which the Option has previously been exercised;
provided, however, that such acceleration will not occur if, in the opinion of
the Corporation's accountants, such acceleration would preclude the use of
"pooling of interest" accounting treatment for a Change In Control transaction
that (a) would otherwise qualify for such accounting treatment, and (b) is
contingent upon qualifying for such accounting treatment.
6. Limitation of Rights. The Option does not confer to the
Optionee or the Optionee's personal representative any rights of a shareholder
of the Corporation unless and until shares of Stock are in fact issued to such
person in connection with the exercise of the Option. Nothing in this Option
Agreement shall interfere with or limit in any way the right of the Corporation
or any Subsidiary to terminate the Optionee's employment at any time, nor confer
upon the Optionee any right to continue in the employ of the Corporation or any
Subsidiary.
7. Stock Reserve. The Corporation shall at all times during the
term of this Option Agreement reserve and keep available such number of shares
of Stock as will be sufficient to satisfy the requirements of this Option
Agreement.
8. Optionee's Covenant. The Optionee hereby agrees to use his
best efforts to provide services to the Corporation in a workmanlike manner and
to promote the Corporation's interests.
- 3 -
<PAGE> 15
9. Restrictions on Transfer and Pledge. The Option may not be
pledged, encumbered, or hypothecated to or in favor of any party other than the
Corporation or a Parent or Subsidiary, or be subject to any lien, obligation, or
liability of the Optionee to any other party other than the Corporation or a
Parent or Subsidiary. The Option is not assignable or transferable by the
Optionee other than by will or the laws of descent and distribution; provided,
however, that the Committee may (but need not) permit other transfers where the
Committee concludes that such transferability (i) does not result in accelerated
taxation and (ii) is otherwise appropriate and desirable, taking into account
any state or federal tax or securities laws applicable to transferable options.
The Option may be exercised during the lifetime of the Optionee only by the
Optionee.
10. Restrictions on Issuance of Shares. If at any time the Board
shall determine in its discretion, that listing, registration or qualification
of the shares of Stock covered by the Option upon any securities exchange or
under any state or federal law, or the consent or approval of any governmental
regulatory body, is necessary or desirable as a condition to the exercise of the
Option, the Option may not be exercised in whole or in part unless and until
such listing, registration, qualification, consent or approval shall have been
effected or obtained free of any conditions not acceptable to the Board.
11. Plan Controls. The terms contained in the Plan are
incorporated into and made a part of this Option Agreement and this Option
Agreement shall be governed by and construed in accordance with the Plan. In the
event of any actual or alleged conflict between the provisions of the Plan and
the provisions of this Option Agreement, the provisions of the Plan shall be
controlling and determinative.
12. Successors. This Option Agreement shall be binding upon any
successor of the Corporation, in accordance with the terms of this Option
Agreement and the Plan.
13. Severability. If any one or more of the provisions contained
in this Option Agreement are invalid, illegal or unenforceable, the other
provisions of this Option Agreement will be construed and enforced as if the
invalid, illegal or unenforceable provision had never been included.
14. Notice. Notices and communications under this Option
Agreement must be in writing and either personally delivered or sent by
registered or certified United States mail, return receipt requested, postage
prepaid. Notices to the Corporation must be addressed to:
RARE Hospitality International, Inc.
8215 Roswell Road
Building 200
Atlanta, Georgia 30350
Attention: Chief Financial Officer
or any other address designated by the Corporation in a written notice to the
Optionee. Notices to the Optionee will be directed to the address of the
Optionee then currently on file with the Corporation, or at any other address
given by the Optionee in a written notice to the Corporation.
- 4 -
<PAGE> 16
IN WITNESS WHEREOF, RARE Hospitality International, Inc., acting by and
through its duly authorized officers, has caused this Option Agreement to be
executed, and the Optionee has executed this Option Agreement, all as of the day
and year first above written.
RARE HOSPITALITY INTERNATIONAL, INC.
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
OPTIONEE:
----------------------------------------
William A. Burnett
- 5 -
<PAGE> 17
EXHIBIT A
NOTICE OF EXERCISE OF OPTION TO PURCHASE
COMMON STOCK OF
RARE HOSPITALITY INTERNATIONAL, INC.
Name
------------------------------------
Address:
----------------------------------------
----------------------------------------
Date
------------------------------------
RARE Hospitality International, Inc.
8215 Roswell Road
Building 200
Atlanta, Georgia 30350
Attention: Chief Financial Officer
Re: Exercise of Non-Qualified Stock Option
I elect to purchase ______________ shares of Common Stock of RARE
Hospitality International, Inc. ("RARE") pursuant to the RARE Hospitality
International, Inc. Non-Qualified Stock Option Agreement dated ______________
and the RARE Hospitality International, Inc. 1997 Long-Term Incentive Plan. The
purchase will take place on the Exercise Date which will be as soon as
practicable following the date this notice and all other necessary forms and
payments are received by RARE, unless I specify a later date (not to exceed 30
days following the date of this notice).
On or before the Exercise Date, I will pay the full exercise price in
the form specified below (check one):
[ ] Cash Only: by delivering a check to RARE Hospitality
International, Inc. for $___________.
[ ] Cash and Shares: by delivering a check to RARE Hospitality
International, Inc. for $_________ for the part of the
exercise price. I will pay the balance of the exercise price
by delivering to RARE a stock certificate with my endorsement
for shares of RARE Stock that I have owned for at least six
months. If the number of shares of RARE Stock represented by
such stock certificate exceeds the number needed to pay the
exercise price, RARE will issue me a new stock certificate for
the excess.
F-1
<PAGE> 18
[ ] Shares Only: by delivering to RARE a stock certificate with
my endorsement for shares of RARE Stock that I have owned for
at least six months. If the number of shares of RARE Stock
represented by such stock certificate exceeds the number
needed to pay the exercise price, RARE will issue me a new
stock certificate for the excess.
[ ] Cash From Broker: by delivering the purchase price from
_______________________, a broker, dealer or other "creditor"
as defined by Regulation T issued by the Board of Governors of
the Federal Reserve System (the "Broker"). I authorize RARE to
issue a stock certificate in the number of shares indicated
above in the name of the Broker in accordance with
instructions received by RARE from the Broker and to deliver
such stock certificate directly to the Broker (or to any other
party specified in the instructions from the Broker) upon
receiving the exercise price from the Broker.
Please deliver the stock certificate to me (unless I have chosen to pay
the purchase price through a broker).
Very truly yours,
---------------------------------------
AGREED TO AND ACCEPTED:
RARE HOSPITALITY INTERNATIONAL, INC.
By:
-------------------------------
Title:
----------------------------
Number of Option Shares
Exercised:
------------------------
Number of Option Shares
Remaining:
------------------------
Date:
-----------------------------
F-2
<PAGE> 19
EXHIBIT B
INCENTIVE STOCK OPTION AGREEMENT
under the
RARE HOSPITALITY INTERNATIONAL, INC.
1997 LONG-TERM INCENTIVE PLAN
This Stock Option Agreement is made as of the ____ day of October 1997
by and between RARE HOSPITALITY INTERNATIONAL, INC., a Georgia corporation
(hereinafter referred to as the "Corporation"), and WILLIAM A. BURNETT, a
resident of the State of Georgia (hereinafter referred to as the "Optionee").
1. Grant of Option. The Corporation hereby grants to the Optionee,
under the RARE Hospitality International, Inc. 1997 Long-Term Incentive Plan
(the "Plan"), an Incentive Stock Option to purchase, on the terms and conditions
set forth in this agreement (this "Option Agreement"), 14,284 shares of the
Corporation's no par value common stock (the "Stock"), at the exercise prices
per share set forth below (the "Option"):
(a) 3,968 shares at $15.00 per share;
(b) 5,555 shares at $18.00 per share; and
(c) 4,761 shares at $21.00 per share.
Capitalized terms used herein and not otherwise defined shall have the meanings
assigned such terms in the Plan.
2. Vesting of Option. Unless the exercisability of the Option is
accelerated in accordance with Article 13 of the Plan or as provided in Section
5 hereof, the Option shall vest (become exercisable) only in cumulative periodic
installments as follows:
(a) during the first three years following the date
of this Agreement, the Option shall be exercisable as to none of the
shares subject to the Option;
(b) during the period beginning three years after the
date of this Agreement and for a period of one year thereafter, the
Option shall be exercisable as to the shares described in paragraph
1(a) above, minus the number of shares, if any, as to which the Option
has been previously exercised;
(c) during the period beginning four years after the
date of this Agreement and for a period of one year thereafter, the
Option shall be exercisable with respect to
<PAGE> 20
the shares described in paragraphs 1(a) and (b) above, minus the number
of shares, if any, as to which the initial option has been previously
exercised;
(d) during the period beginning five years after the date
of this Agreement and for a period of one year thereafter, the Option
shall be exercisable as to the shares described in paragraphs 1(a), (b)
and (c) above, minus the number of shares, if any, as to which the
Option has been previously exercised.
3. Period of Option and Limitations on Right to Exercise. The
Option will, to the extent not previously exercised, lapse under the earliest of
the following circumstances; provided, however, that the Committee may, prior to
the lapse of the Option under the circumstances described in paragraphs (b), (c)
and (d) below, provide in writing that the Option will extend until a later
date, but if Option is exercised after the dates specified in paragraphs (b),
(c) and (d) above, it will automatically become a Non-Qualified Stock Option:
(a) The Option shall lapse as of 5:00 p.m., Eastern Time,
on the day immediately prior to the tenth anniversary of the date of
grant (the "Expiration Date").
(b) The Option shall lapse three months after the
termination of Optionee's employment for any reason other than the
Optionee's death or Disability; provided, however, that if the
Optionee's employment is terminated by the Corporation for cause or by
the Optionee without the consent of the Corporation, the Option shall
lapse immediately.
(c) If the Optionee's employment terminates by reason of
Disability, the Option shall lapse one year after the date of the
Optionee's termination of employment.
(d) If the Optionee dies while employed, or during the
three-month period described in subsection (b) above or during the
one-year period described in subsection (c) above and before the Option
otherwise lapses, the Option shall lapse one year after the date of the
Optionee's death. Upon the Optionee's death, the Option may be
exercised by the Optionee's beneficiary.
If the Optionee or his beneficiary exercises an Option after
termination of employment, the Option may be exercised only with respect to the
shares that were otherwise vested on the Optionee's termination of employment
(including vesting by acceleration in accordance with Article 13 of the Plan or
Section 5 hereof).
4. Exercise of Option. The Option shall be exercised by written
notice directed to the Secretary of the Corporation at the principal executive
offices of the Corporation, in substantially the form attached hereto as Exhibit
A, or such other form as the Committee may approve. Such written notice shall be
accompanied by full payment in cash, shares of Stock previously acquired by the
Optionee, or any combination thereof, for the number of shares specified in such
written notice; provided, however, that if shares of Stock are used to pay the
- 2 -
<PAGE> 21
exercise price, such shares must have been held by the Optionee for at least six
months The Fair Market Value of the surrendered Stock as of the date of the
exercise shall be determined in valuing Stock used in payment of the exercise
price. To the extent permitted under Regulation T of the Federal Reserve Board,
and subject to applicable securities laws, the Option may be exercised through a
broker in a so-called "cashless exercise" whereby the broker sells the Option
shares and delivers cash sales proceeds to the Corporation in payment of the
exercise price. The Committee may, in the exercise of its discretion, but need
not, allow the Optionee to pay the exercise price by directing the Corporation
to withhold from the shares of Stock that would otherwise be issued upon
exercise of the Option that number of shares having a Fair Market Value on the
exercise date equal to the exercise price, all as determined pursuant to rules
and procedures established by the Committee.
Subject to the terms of this Option Agreement, the Option may be
exercised at any time and without regard to any other option held by the
Optionee to purchase stock of the Corporation.
5. Acceleration of Exercisability Upon Certain Change in Control. In the
event that a Change in Control shall occur within two (2) years following the
date of this Agreement, upon the occurrence of such Change in Control, the
Option shall become fully exercisable with respect to all shares of Stock, other
than those with respect to which the Option has previously been exercised;
provided, however, that such acceleration will not occur if, in the opinion of
the Corporation's accountants, such acceleration would preclude the use of
"pooling of interest" accounting treatment for a Change In Control transaction
that (a) would otherwise qualify for such accounting treatment, and (b) is
contingent upon qualifying for such accounting treatment.
6. Limitation of Rights. The Option does not confer to the
Optionee or the Optionee's personal representative any rights of a shareholder
of the Corporation unless and until shares of Stock are in fact issued to such
person in connection with the exercise of the Option. Nothing in this Option
Agreement shall interfere with or limit in any way the right of the Corporation
or any Subsidiary to terminate the Optionee's employment at any time, nor confer
upon the Optionee any right to continue in the employ of the Corporation or any
Subsidiary.
7. Stock Reserve. The Corporation shall at all times during the
term of this Option Agreement reserve and keep available such number of shares
of Stock as will be sufficient to satisfy the requirements of this Option
Agreement.
8. Optionee's Covenant. The Optionee hereby agrees to use his
best efforts to provide services to the Corporation in a workmanlike manner and
to promote the Corporation's interests.
9. Restrictions on Transfer and Pledge. The Option may not be
pledged, encumbered, or hypothecated to or in favor of any party other than the
Corporation or a
- 3 -
<PAGE> 22
Parent or Subsidiary, or be subject to any lien, obligation, or liability of the
Optionee to any other party other than the Corporation or a Parent or
Subsidiary. The Option is not assignable or transferable by the Optionee other
than by will or the laws of descent and distribution. The Option may be
exercised during the lifetime of the Optionee only by the Optionee.
10. Restrictions on Issuance of Shares. If at any time the Board
shall determine in its discretion, that listing, registration or qualification
of the shares of Stock covered by the Option upon any securities exchange or
under any state or federal law, or the consent or approval of any governmental
regulatory body, is necessary or desirable as a condition to the exercise of the
Option, the Option may not be exercised in whole or in part unless and until
such listing, registration, qualification, consent or approval shall have been
effected or obtained free of any conditions not acceptable to the Board.
11. Plan Controls. The terms contained in the Plan are
incorporated into and made a part of this Option Agreement and this Option
Agreement shall be governed by and construed in accordance with the Plan. In the
event of any actual or alleged conflict between the provisions of the Plan and
the provisions of this Option Agreement, the provisions of the Plan shall be
controlling and determinative.
12. Successors. This Option Agreement shall be binding upon any
successor of the Corporation, in accordance with the terms of this Option
Agreement and the Plan.
13. Severability. If any one or more of the provisions contained
in this Option Agreement are invalid, illegal or unenforceable, the other
provisions of this Option Agreement will be construed and enforced as if the
invalid, illegal or unenforceable provision had never been included.
14. Notice. Notices and communications under this Option
Agreement must be in writing and either personally delivered or sent by
registered or certified United States mail, return receipt requested, postage
prepaid. Notices to the Corporation must be addressed to:
RARE Hospitality International, Inc.
8215 Roswell Road
Building 200
Atlanta, Georgia 30350
Attention: Chief Financial Officer
or any other address designated by the Corporation in a written notice to the
Optionee. Notices to the Optionee will be directed to the address of the
Optionee then currently on file with the Corporation, or at any other address
given by the Optionee in a written notice to the Corporation.
15. Interpretation. It is the intent of the parties hereto that
the Option qualify for incentive stock option treatment pursuant to, and to the
extent permitted by, Section 422 of the Code. All provisions hereof are intended
to have, and shall be construed to have, such
- 4 -
<PAGE> 23
meanings as are set forth in applicable provisions of the Code and Treasury
Regulations to allow the Option to so qualify.
IN WITNESS WHEREOF, RARE Hospitality International, Inc., acting by and
through its duly authorized officers, has caused this Option Agreement to be
executed, and the Optionee has executed this Option Agreement, all as of the day
and year first above written.
RARE HOSPITALITY INTERNATIONAL, INC.
By:
-------------------------------------
Name:
Title:
OPTIONEE:
----------------------------------------
WILLIAM A. BURNETT
- 5 -
<PAGE> 24
EXHIBIT A
NOTICE OF EXERCISE OF OPTION TO PURCHASE
COMMON STOCK OF
RARE HOSPITALITY INTERNATIONAL, INC.
Name
------------------------------------
Address:
----------------------------------------
----------------------------------------
Date
------------------------------------
RARE Hospitality International, Inc.
8215 Roswell Road
Building 200
Atlanta, Georgia 30350
Attention: Chief Financial Officer
Re: Exercise of Incentive Stock Option
I elect to purchase ______________ shares of Common Stock of RARE
Hospitality International, Inc. pursuant to the RARE Hospitality International,
Inc. Incentive Stock Option Agreement dated ______________ and the RARE
Hospitality International, Inc. 1997 Long-Term Incentive Plan. The purchase will
take place on the Exercise Date which will be as soon as practicable following
the date this notice and all other necessary forms and payments are received by
RARE, unless I specify a later date (not to exceed 30 days following the date of
this notice).
On or before the Exercise Date, I will pay the full exercise price in
the form specified below (check one):
[ ] Cash Only: by delivering a check to RARE Hospitality
International, Inc. for $___________.
[ ] Cash and Shares: by delivering a check to RARE Hospitality
International, Inc. for $_________ for the part of the
exercise price. I will pay the balance of the exercise price
by delivering to RARE a stock certificate with my endorsement
for shares of RARE Stock that I have owned for at least six
months. If the number of shares of RARE Stock represented by
such stock certificate exceeds the number needed to pay the
exercise price, RARE will issue me a new stock certificate for
the excess.
<PAGE> 25
[ ] Shares Only: by delivering to RARE a stock certificate with
my endorsement for shares of RARE Stock that I have owned for
at least six months. If the number of shares of RARE Stock
represented by such stock certificate exceeds the number
needed to pay the exercise price, RARE will issue me a new
stock certificate for the excess.
[ ] Cash From Broker: by delivering the purchase price from
_______________________, a broker, dealer or other "creditor"
as defined by Regulation T issued by the Board of Governors of
the Federal Reserve System (the "Broker"). I authorize RARE to
issue a stock certificate in the number of shares indicated
above in the name of the Broker in accordance with
instructions received by RARE from the Broker and to deliver
such stock certificate directly to the Broker (or to any other
party specified in the instructions from the Broker) upon
receiving the exercise price from the Broker.
Please deliver the stock certificate to me (unless I have chosen to pay
the purchase price through a broker).
Very truly yours,
---------------------------------------
AGREED TO AND ACCEPTED:
RARE HOSPITALITY INTERNATIONAL, INC.
By:
-------------------------------
Title:
----------------------------
Number of Option Shares
Exercised:
------------------------
Number of Option Shares
Remaining:
------------------------
Date:
-----------------------------
- 2 -
<PAGE> 26
EXHIBIT C
DEFINITIONS
As used in Section 3 of this Agreement, the following terms shall have
the meanings ascribed to each below:
"Cause" means:
(A) Commission by Executive of a willful or grossly negligent act
which causes material harm to the Company,
(B) The commission or perpetration by Executive of any criminal
act involving a felony for which Executive is indicted or with
respect to which Executive pleads nolo contendere (or any
similar response), any act of moral turpitude, or any fraud
upon the Company,
(C) Habitual and unauthorized absenteeism by reason other than
physical or mental illness, chronic alcoholism or other form
of substance abuse resulting in material harm or actual or
potential physical danger to the Company or its employees,
(D) Any material violation by Executive of his obligations under
this Agreement, or
(E) Any misrepresentation or breach by Executive of warranty
contained in Section 13 of this Agreement;
provided, however, that if the cause specified in such notice is such
that there is a reasonable prospect that it can be cured with diligent
effort within a reasonable time, Executive shall have such reasonable
time (having regard for the nature of the cause) to cure such cause,
which time shall not in any event exceed thirty (30) days from the date
of such notice, and Executive's employment shall continue in effect
during such reasonable time so long as Executive makes diligent efforts
during such time to cure such cause. If such cause shall be cured by
Executive during such reasonable time his employment and the
obligations of the Company hereunder shall not terminate as a result of
the notice which has been given with respect to such cause. Cure of any
cause with or without notice from the Company shall not relieve
Executive from any obligations to the Company under this Agreement or
otherwise and shall not affect the Company's rights upon the
reoccurrence of the same, or the occurrence of any other, cause. If
such cause shall not be cured within such reasonable time the
employment of Executive under this Agreement shall terminate upon the
expiration of such reasonable time.
<PAGE> 27
"Change in Control" means and includes each of the following:
(1) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the 1934 Act) (a "Person") of
beneficial ownership (within the meaning of Rule 13d-3 promulgated under
the 1934 Act) of 25% or more of the combined voting power of the then
outstanding voting securities of the Company entitled to vote generally in
the election of directors (the "Outstanding Company Voting Securities");
provided, however, that for purposes of this subsection (1), the following
acquisitions shall not constitute a Change of Control: (i) any acquisition
by a Person who is on the date of this Agreement (the "Effective Date") the
beneficial owner of 25% or more of the Outstanding Company Voting
Securities, (ii) any acquisition by the Company, (iii) any acquisition by
any employee benefit plan (or related trust) sponsored or maintained by the
Company or any corporation controlled by the Company, or (iv) any
acquisition by any corporation pursuant to a transaction which complies
with clauses (i), (ii) and (iii) of subsection (3) of this definition; or
(2) Individuals who, as of the Effective Date, constitute the Board of
Directors of the Company (the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board of Directors of the Company;
provided, however, that any individual becoming a director subsequent to
October 1, 1997 whose election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board shall be considered as though
such individual were a member of the Incumbent Board, but excluding, for
this purpose, any such individual whose initial assumption of office occurs
as a result of an actual or threatened election contest with respect to the
election or removal of directors or other actual or threatened solicitation
of proxies or consents by or on behalf of a Person other than the Board of
Directors of the Company; or
(3) Consummation of a reorganization, share exchange, merger or
consolidation or sale or other disposition of all or substantially all of
the assets of the Company (a "Business Combination"), in each case, unless,
following such Business Combination, (i) all or substantially all of the
individuals and entities who were the beneficial owners of the Outstanding
Company Voting Securities immediately prior to such Business Combination
beneficially own, directly or indirectly, more than 50% of the combined
voting power of the then outstanding voting securities entitled to vote
generally in the election of directors of the corporation resulting from
such Business Combination (including, without limitation, a corporation
which as a result of such transaction owns the Company or all or
substantially all of the Company's assets either directly or through one or
more subsidiaries) in substantially the same proportions as their
ownership, immediately prior to such Business Combination of the
Outstanding Company Voting Securities, and (ii) no Person (excluding any
corporation resulting from such Business Combination or any employee
benefit plan (or related trust) of the Company or such corporation
resulting from such Business Combination) beneficially owns, directly or
indirectly, 25% or more of the combined voting power of the then
- 2 -
<PAGE> 28
outstanding voting securities of such corporation except to the extent that
such ownership existed prior to the Business Combination, and (iii) at
least a majority of the members of the board of directors of the
corporation resulting from such Business Combination were members of the
Incumbent Board at the time of the execution of the initial agreement, or
of the action of the Board of Directors of the Company, providing for such
Business Combination; or
(4) approval by the shareholders of the Corporation of a complete
liquidation or dissolution of the Corporation.
"Disability" or "Disabled" means that by reason of any physical or mental
incapacity Executive has been unable, or it is reasonably expected that he will
be unable, for a period of at least one hundred and eighty (180) substantially
continuous days to perform his regular duties and responsibilities hereunder. In
the event of any disagreement between Executive and the Company as to whether
Executive is physically or mentally incapacitated, the question of such
incapacity shall be submitted to an impartial and reputable physician for
determination, selected by mutual agreement of Executive and the Company or,
failing such agreement, selected by two physicians (one of which shall be
selected by the Company and the other by Executive), and such determination of
the question of such incapacity by such physician shall be final and binding on
Executive and the Company. The Executive shall pay the fees and expenses of such
physician.
- 3 -
<PAGE> 29
EXHIBIT D
The area within the Metropolitan Statistical Area ("MSA") surrounding each city
listed below, as said MSA is determined from time to time by the U. S. Bureau of
the Census, or for each city with no MSA within fifty (50) miles of the city
limits.
Alabama Florida
Birmingham Altamonte Springs
Dothan Boynton Beach
Mobile Brandon
Montgomery Coral Springs
Davie
California Destin
San Francisco Ft. Lauderdale
Ft. Myers
Connecticut Jacksonville Beach
Manchester Jacksonville
Jensen Beach
Delaware Kissimmee
Newark Lake Mary
Largo
District of Columbia Merritt Island
Miami
Ocala
Orlando
Sarasota
St. Augustine
St. Petersburg
Tallahassee
Tampa
<PAGE> 30
Georgia Maine
Albany Bangor
Athens Seakonk
Atlanta South Portland
Augusta
Austell Maryland
Cartersville Gaithersburg
Chamblee
College Park Massachusetts
Columbus Boston
Conyers Braintree
Douglasville Chestnut Hill
Duluth Peabody
Gainesville Farmington
Jonesboro Watertown
Kennesaw
Lawrenceville Michigan
Macon Troy
Marietta
Montgomery Minnesota
Peachtree City Minneapolis
Rome
Roswell Missouri
Savannah Florissant
Snellville
Tucker Nevada
Valdosta Las Vegas
Illinois New Hampshire
Chicago Newington
Kentucky New York
Florence Albany
Poughkeepsie
Rochester
- 2 -
<PAGE> 31
North Carolina Pennsylvania
Burlington Philadelphia
Charlotte
Concord Rhode Island
Gastonia Providence
Greensboro Warwick
High Point
Huntersville South Carolina
Pineville Columbia
Ohio Greenville
Cincinnati Hilton Head
Cleveland Spartanburg
Columbus
Cuyahoga Falls Tennessee
Dublin Antioch
Fairview Park Chattanooga
Mayfield Heights Hermitage
Mentor Knoxville
North Canton Nashville
Solon Madison
Springdale
Strongsville Texas
Houston
Virginia
Springfield
Executive acknowledges and agrees that the geographical area described above is
the area in which Executive will initially perform his services for the Company,
and that the area in which such services are performed is intended to expand as
the business of the Company grows. Executive and the Company agree that as the
geographical area in which the Company conducts its business expands, the list
of cities described on this Exhibit D shall be deemed to be amended, from time
to time, without any further consent, action or notice on the part of the
Company or Executive, to include each additional city in which the Company
operates a restaurant or a franchisee of the Company operates a restaurant under
the terms of a franchise from the Company. Executive agrees to execute one or
more amendments hereto upon the request of the Company from time to time in
order to confirm such amended list.
- 3 -
<PAGE> 1
EXHIBIT 21
<TABLE>
<CAPTION>
Name of Subsidiary State of Organization
- ------------------ ---------------------
<S> <C>
Bugaboo Creek Steak House, Inc. Delaware(1)
Bugaboo Investments, Inc. Delaware
RARE Capital, Inc. Delaware
WHIP Pooling Corporation Georgia
Longhorn Steaks, Inc. Georgia
Buckeye Steak Ventures Georgia
Carolina Steakhouse Ventures Georgia
Denti Restaurant Group Georgia
Gold Coast Restaurant Group Georgia
LSI-Elias Partners Florida
LSI-Elias Partners II Florida
LSI Portrush Joint Venture Georgia
LSI Royal Joint Venture II Georgia
LSI Royal Joint Venture III Georgia
LSI Royal Joint Venture IV Georgia
RMA-LSI Joint Venture Georgia
1110 Augustine Road Limited Partnership Georgia
11102 Causeway Blvd. Limited Partnership Georgia
13701 S. Tamiami Trail Limited Partnership Florida
15135 N. Kendall Drive Limited Partnership Florida
153 Huffman Road Limited Partnership Georgia
1630 Beacon Center Limited Partnership Florida
16641 Statesville Road Limited Partnership Georgia
171 Harbison Boulevard Limited Partnership Georgia
17211 S. Park Center Limited Partnership Georgia
20999 Center Ridge Road Limited Partnership Ohio
2176 Tyrone Boulevard Georgia
2260 University Limited Florida
2733 Dawson Road Limited Partnership Florida
2901 Federal Highway Limited Partnership Georgia
3411 Ross Clark Circle Limited Partnership Georgia
32863 Emerald Coast Parkway Limited Partnership Georgia
4095 Eastern Blvd. Limited Partnership Georgia
443 Howe Avenue Limited Partnership Georgia
505 North Congress, Ltd. Florida
5375 East Bay Limited Partnership Georgia
5440 Fruitville Road Limited Partnership Georgia
6035 Blazer Limited Partnership Georgia
6065 Mayfield Road Limited Partnership Georgia
6201 Airport Blvd. Limited Partnership Georgia
6225 North Andrews Avenue Limited Partnership Florida
719 Northside Drive East Limited Partnership Georgia
9557 Mentor Avenue Limited Partnership Georgia
</TABLE>
(1) Bugaboo Creek Steak House, Inc. has 36 wholly owned subsidiaries that carry
on the business of owning and operating restaurants in the United States, the
names of which are not listed in this exhibit.
<PAGE> 1
EXHIBIT 23(A)
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
RARE Hospitality International, Inc.
We consent to incorporation by reference in the registration statements No.
333-11983, No. 333-11963, No. 333-11969, No. 333-11977, No. 333-1028, No.
333-1030, and No. 33-57900 on Form S-8 of Longhorn Steaks, Inc. of our report
dated February 28, 1998, relating to the consolidated balance sheets of RARE
Hospitality International, Inc. as of December 28, 1997 and December 29, 1996,
and the related consolidated statements of operations, stockholders' equity, and
cash flows for each of the years in the three-year period ended December 28,
1997, which report appears in the December 28, 1997 annual report on Form 10-K
of RARE Hospitality International, Inc.
KPMG Peat Marwick LLP
Atlanta, Georgia
March 29, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-K
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-28-1997
<PERIOD-START> DEC-30-1996
<PERIOD-END> DEC-28-1997
<CASH> 1,752
<SECURITIES> 609
<RECEIVABLES> 2,054
<ALLOWANCES> 0
<INVENTORY> 9,152
<CURRENT-ASSETS> 25,225
<PP&E> 155,758<F1>
<DEPRECIATION> 0
<TOTAL-ASSETS> 193,051
<CURRENT-LIABILITIES> 28,130
<BONDS> 48,051
0
0
<COMMON> 103,981
<OTHER-SE> 7,999
<TOTAL-LIABILITY-AND-EQUITY> 193,051
<SALES> 264,727
<TOTAL-REVENUES> 264,754
<CGS> 97,568
<TOTAL-COSTS> 97,568
<OTHER-EXPENSES> 134,698
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,245
<INCOME-PRETAX> (17,232)
<INCOME-TAX> (5,000)
<INCOME-CONTINUING> (12,232)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (12,232)
<EPS-PRIMARY> (1.04)
<EPS-DILUTED> (1.04)
<FN>
<F1>ASSET VALUES REPRESENT NET AMOUNTS.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-K
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-29-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-29-1996
<CASH> 6,478
<SECURITIES> 861
<RECEIVABLES> 2,522<F1>
<ALLOWANCES> 0
<INVENTORY> 7,883
<CURRENT-ASSETS> 21,874
<PP&E> 120,431<F1>
<DEPRECIATION> 0
<TOTAL-ASSETS> 151,594
<CURRENT-LIABILITIES> 19,809
<BONDS> 7,100
0
0
<COMMON> 101,099
<OTHER-SE> 20,285
<TOTAL-LIABILITY-AND-EQUITY> 151,594
<SALES> 215,441
<TOTAL-REVENUES> 215,749
<CGS> 81,128
<TOTAL-COSTS> 81,128
<OTHER-EXPENSES> 107,012
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (79)
<INCOME-PRETAX> 8,413
<INCOME-TAX> 3,170
<INCOME-CONTINUING> 5,243
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,243
<EPS-PRIMARY> .46
<EPS-DILUTED> .45
<FN>
<F1>ASSET VALUES REPRESENT NET AMOUNTS.
</FN>
</TABLE>
