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 31, 2013	
 	Or	
[ ]	Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934	
 	For the transition period from ______ to ______	
Commission File Number: 001-35625

BLOOMIN’ BRANDS, INC.
(Exact name of registrant as specified in its charter) 

Delaware	 	 	 	20-8023465	
(State or other jurisdiction of incorporation or organization)	 	 	 	(I.R.S. Employer
Identification No.)	
2202 North West Shore Boulevard, Suite 500, Tampa, Florida 33607
(Address of principal executive offices) (Zip Code)

(813) 282-1225
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	 	 	 	Name of each exchange on which registered	
Common Stock, $0.01 par value	 	 	 	The Nasdaq Stock Market LLC
(Nasdaq Global Select Market)	
 
Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  
YES ý   NO o

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. YES   o   NO   ý

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  ý    NO  o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  
YES ý   NO o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) 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.  ý

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. 

Large accelerated filer ý Accelerated filer  o
Non-accelerated filer o (Do not check if smaller reporting company)  Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  YES  o  NO  ý

The aggregate market value of common stock held by non-affiliates (based on the closing price on the last business day of the registrant’s most recently completed second fiscal quarter as reported on the Nasdaq Global Select Market) was approximately $1.2 billion. All executive officers and directors of the registrant and all persons filing a Schedule 13G with the Securities and Exchange Commission in respect to registrant’s common stock have been deemed, solely for the purpose of the foregoing calculation, to be “affiliates” of the registrant.

As of February 25, 2014, 124,921,652 shares of common stock of the registrant were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s definitive Proxy Statement for its Annual Meeting of Stockholders on April 29, 2014, to be filed with the Securities and Exchange Commission pursuant to Regulation 14A not later than 120 days after December 31, 2013, are incorporated by reference into Part III, Items 10-14 of this Annual Report on Form 10-K.

 	

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BLOOMIN’ BRANDS, INC.

INDEX TO ANNUAL REPORT ON FORM 10-K
For the Year Ended December 31, 2013 

TABLE OF CONTENTS

 	 	
 	PAGE NO.	
PART I	 	
Item 1. Business	5	
Item 1A. Risk Factors	25	
Item 1B. Unresolved Staff Comments	43	
Item 2. Properties	44	
Item 3. Legal Proceedings	45	
Item 4. Mine Safety Disclosures	45	
PART II	 	
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	46	
Item 6. Selected Financial Data	50	
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations	53	
Item 7A. Quantitative and Qualitative Disclosures About Market Risk	95	
Item 8. Financial Statements and Supplementary Data	97	
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	153	
Item 9A. Controls and Procedures	153	
Item 9B. Other Information	154	
PART III	 	
Item 10. Directors, Executive Officers and Corporate Governance	155	
Item 11. Executive Compensation	155	
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	155	
Item 13. Certain Relationships and Related Transactions, and Director Independence	155	
Item 14. Principal Accounting Fees and Services	156	
PART IV	 	
Item 15. Exhibits, Financial Statement Schedules	157	
Signatures	165	

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PART I

Cautionary Statement

This Annual Report on Form 10-K (the “Report”) includes statements that express our opinions, expectations, beliefs, plans, objectives, assumptions or projections regarding future events or future results and therefore are, or may be deemed to be, “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements can generally be identified by the use of forward-looking terminology, including the terms “believes,” “estimates,” “anticipates,” “expects,” “feels,” “seeks,” “forecasts,” “projects,” “intends,” “plans,” “may,” “will,” “should,” “could” or “would” or, in each case, their negative or other variations or comparable terminology. These forward-looking statements include all matters that are not historical facts. They appear in a number of places throughout this Report and include statements regarding our intentions, beliefs or current expectations concerning, among other things, our results of operations, financial condition, liquidity, prospects, growth, strategies and the industry in which we operate.

By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. Although we base these forward-looking statements on assumptions that we believe are reasonable when made, we caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and industry developments may differ materially from statements made in or suggested by the forward-looking statements contained in this Report. In addition, even if our results of operations, financial condition and liquidity, and industry developments are consistent with the forward-looking statements contained in this Report, those results or developments may not be indicative of results or developments in subsequent periods. Important factors that could cause actual results to differ materially from statements made or suggested by forward-looking statements include, but are not limited to, those described in the “Risk Factors” section of this filing and the following:
 	 	
(i)	The restaurant industry is a highly competitive industry with many well-established competitors;	

(ii)	Challenging economic conditions may affect our liquidity by adversely impacting numerous items that include, but are not limited to: consumer confidence and discretionary spending; the availability of credit presently arranged from our revolving credit facilities; the future cost and availability of credit; interest rates; foreign currency exchange rates; and the liquidity or operations of our third-party vendors and other service providers;	

(iii)	Our ability to expand is dependent upon various factors such as the availability of attractive sites for new restaurants; our ability to obtain appropriate real estate sites at acceptable prices; our ability to obtain all required governmental permits including zoning approvals and liquor licenses on a timely basis; the impact of government moratoriums or approval processes, which could result in significant delays; our ability to obtain all necessary contractors and subcontractors; union activities such as picketing and hand billing that could delay construction; our ability to generate or borrow funds; our ability to negotiate suitable lease terms; our ability to recruit and train skilled management and restaurant employees; and our ability to receive the premises from the landlord’s developer without any delays;	

(iv)	Our results can be impacted by changes in consumer tastes and the level of consumer acceptance of our restaurant concepts (including consumer tolerance of our prices); local, regional, national and international economic and political conditions; the seasonality of our business; demographic trends; patterns of customer traffic and our ability to effectively respond in a timely manner to changes in patterns of customer traffic; changes in consumer dietary habits; product mix; employee availability; the cost of advertising and media; the timing of restaurant operating expenses; government actions and policies; inflation or deflation; unemployment rates; interest rates; foreign exchange rates; and increases in various costs, including construction, real estate and health insurance costs;	

(v)	Weather, natural disasters and other disasters could result in construction delays or slower customer traffic and could adversely affect the results of one or more restaurants for an indeterminate amount of time;	

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(vi)	Our results can be negatively impacted by the effects of acts of war; periods of widespread civil unrest; actual or threatened armed conflicts or terrorist attacks, efforts to combat terrorism, or other military action affecting countries in which we do business and by the effects of heightened security requirements on local, regional, national, or international economies or consumer confidence;	

(vii)	Our results can be impacted by tax and other legislation and regulation in the jurisdictions in which we operate and by accounting standards or pronouncements;	

(viii)	Our results can be impacted by anticipated or unanticipated changes in our tax rates, exposure to additional income tax liabilities and a change in our ability to realize deferred tax benefits;	

(ix)	Minimum wage increases and mandated employee benefits could cause a significant increase in our labor costs;	

(x)	Commodities, including but not limited to, beef, chicken, shrimp, pork, seafood, dairy, produce, potatoes, onions and energy supplies, are subject to fluctuation in price and availability, and prices could increase or decrease more than we expect;	

(xi)	Our results can be impacted by consumer reaction to public health issues and perception of food safety;	

(xii)	We could face liabilities if we are unable to protect our information technology systems or experience an interruption or breach of security that could prevent us from effectively operating our business, protecting customer credit and debit card data or personal employee information; and	

(xiii)	Our substantial leverage and significant restrictive covenants in our various credit facilities could adversely affect our ability to raise additional capital to fund our operations, limit our ability to make capital expenditures to invest in new or renovate restaurants, limit our ability to react to changes in the economy or our industry, and expose us to interest rate risk in connection with our variable-rate debt.	

In light of these risks and uncertainties, we caution you not to place undue reliance on these forward-looking statements. Any forward-looking statement that we make in this Report speaks only as of the date of such statement, and we undertake no obligation to update any forward-looking statement or to publicly announce the results of any revision to any of those statements to reflect future events or developments. Comparisons of results for current and any prior periods are not intended to express any future trends or indications of future performance, unless specifically expressed as such, and should only be viewed as historical data.

Note: Numerical figures included in this Report have been subject to rounding adjustments.

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Item 1.    Business

GENERAL

Bloomin’ Brands, Inc. (“Bloomin’ Brands,” the “Company,” “we,” “us,” “our,” and other similar terms mean Bloomin’ Brands, Inc. and its subsidiaries, except where the context indicates otherwise) is one of the largest casual dining restaurant companies in the world, with a portfolio of leading, differentiated restaurant concepts. As of December 31, 2013, we owned and operated 1,344 restaurants and franchised 164 restaurants across 48 states, Puerto Rico, Guam and 21 countries. We have five founder-inspired concepts: Outback Steakhouse, Carrabba’s Italian Grill, Bonefish Grill, Fleming’s Prime Steakhouse and Wine Bar and Roy’s. Each of our concepts maintains its unique, founder-inspired brand identity and entrepreneurial culture to provide a compelling customer experience combining great food, highly-attentive service and lively ambience at attractive prices. Our restaurants attract customers across a variety of occasions, including everyday dining, celebrations and business entertainment.

Our strategic plan and operating model keep the customer at the center of our decision-making and focus on continuous innovation and productivity to drive sustainable sales and profit growth while preserving our entrepreneurial culture at the operating level. Our restaurant managing partners are a key element of this culture, each of whom shares in the cash flows of his or her restaurant after making a required initial cash investment.

OUR HISTORY

Our predecessor, OSI Restaurant Partners, Inc., was incorporated in August 1987, and we opened our first Outback Steakhouse restaurant in 1988. We became a Delaware corporation in 1991 as part of a corporate reorganization completed in connection with our predecessor’s initial public offering. Between 1993 and 2002, we acquired or developed our other restaurant concepts, and in 1996, we began expanding the Outback Steakhouse concept internationally.

Bloomin’ Brands was incorporated in Delaware in October 2006 by an investor group comprising funds advised by Bain Capital Partners, LLC (“Bain Capital”) and Catterton Management Company, LLC (“Catterton”), collectively, our “Sponsors,” and Chris T. Sullivan, Robert D. Basham and J. Timothy Gannon, collectively, our “Founders,” and members of our management. On June 14, 2007, we acquired OSI Restaurant Partners, Inc. by means of a merger and related transactions, referred to in this Report as the “Merger.” At the time of the Merger, OSI Restaurant Partners, Inc. was converted into a Delaware limited liability company named OSI Restaurant Partners, LLC (“OSI”). In connection with the Merger, we implemented a new ownership and financing arrangement for our owned restaurant properties, pursuant to which Private Restaurant Properties, LLC (“PRP”), our indirect wholly-owned subsidiary, acquired 343 restaurant properties then owned by OSI and leased them back to subsidiaries of OSI. In March 2012, we refinanced the commercial mortgage-backed securities loan (the “CMBS Loan”) that we entered into in 2007 in connection with the Merger with a new commercial mortgage-backed securities loan. Following the refinancing, OSI remains our primary operating entity and New Private Restaurant Properties, LLC, another indirect wholly-owned subsidiary of ours, continues to lease 261 of our owned restaurant properties to OSI subsidiaries. In August 2012, we completed an initial public offering (the “IPO”) of our common stock. An investor group comprising funds advised by our Sponsors and one of our Founders continues to beneficially own a controlling interest in our common stock.

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OUR RESTAURANT CONCEPTS

As of December 31, 2013, the 1,508 full-service restaurants in our restaurant system consisted of the following, identified by concept and ownership structure:

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 
Outback
Steakhouse
(domestic)	 	 
Outback
Steakhouse
(international)(1)	 	Carrabba’s
Italian
Grill	 	Bonefish
Grill	 	Fleming’s
Prime
Steakhouse and Wine Bar	 	Roy’s	 	Total	
Company-owned	 	663	 	169	 	239	 	187	 	65	 	21	 	1,344	
Franchise	 	105	 	51	 	1	 	7	 	—	 	—	 	164	
 Total	 	768	 	220	 	240	 	194	 	65	 	21	 	1,508	
____________________
 	 	
(1)	The restaurant count for Brazil is reported as of November 30, 2013 to correspond with the balance sheet date of this subsidiary and, therefore, excludes two restaurants that opened in December 2013. See “Outback Steakhouse - International” below for additional information.	

Our core concepts are Outback Steakhouse, Carrabba’s Italian Grill, Bonefish Grill and Fleming’s Prime Steakhouse and Wine Bar. We are evaluating a plan to exit our Roy’s concept, but have not established a timeframe or committed to a specific plan to do so.

Our restaurant concepts range in price point and degree of formality from casual (Outback Steakhouse and Carrabba’s Italian Grill) to polished casual (Bonefish Grill) and fine dining (Fleming’s Prime Steakhouse and Wine Bar and Roy’s). Polished casual seeks to deliver the design elements, food quality and knowledgeable service suggestive of fine dining restaurants, except that the atmosphere is more relaxed and the prices are lower than fine dining. We source ingredients from around the world, which we believe allows us to achieve a high degree of freshness and quality and maintain the authenticity of our recipes, while keeping costs in line with the target pricing for our concepts.

Outback Steakhouse - Domestic

Outback Steakhouse is a casual dining steakhouse featuring high quality, freshly prepared food, attentive service and Australian décor. As of December 31, 2013, we owned and operated 663 restaurants and 105 restaurants were franchised across 48 states and Puerto Rico.

The Outback Steakhouse menu offers several cuts of uniquely seasoned and seared or wood-fire grilled steaks, chops, chicken, seafood, pasta, salads and seasonal specials. We use fresh and authentic ingredients, such as USDA Choice steaks and imported Danish blue cheese, and make items such as our sauces, soups, salad dressings, and chocolate sauce from scratch. The menu also includes several specialty appetizers, including our signature “Bloomin’ Onion ® ,” and desserts, together with full bar service featuring Australian wine and beer. Alcoholic beverages account for approximately 11% of domestic Outback Steakhouse’s restaurant sales. The average check per person, which varies for all of our concepts based on limited-time offers, special menu items and promotions, was approximately $20 during 2013.

The décor includes a contemporary, casual atmosphere with blond woods, large booths and tables and Australian artwork. Outback Steakhouse restaurants serve dinner every day of the week and most locations are open for lunch on Saturday and Sunday. Many locations are also open for lunch Monday through Friday.

Carrabba’s Italian Grill

Carrabba’s Italian Grill is an authentic Italian casual dining restaurant featuring high quality handcrafted dishes, an exhibition kitchen and a welcoming atmosphere. As of December 31, 2013, we owned and operated 239 restaurants and franchised one restaurant across 32 states.

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The Carrabba’s Italian Grill menu includes a variety of Italian pasta, chicken and seafood dishes and wood-fired pizza. Our use of a wood-fired grill, combined with our signature grill seasoning, produces Italian dishes with flavors we believe are unique to the category. Our ingredients are sourced from around the world, such as our Prince Edward Island mussels, our extra virgin olive oil imported from Spain, and our pasta imported from a small town outside Pompeii, to meet our quality specifications. We grate our fresh romano cheese daily and prepare items such as soups, sauces, lasagna, mozzarella sticks, salad dressings and desserts from scratch. The menu also includes specialty appetizers, desserts and coffees, together with full bar service featuring Italian wines and specialty drinks. Alcoholic beverages account for approximately 16% of Carrabba’s Italian Grill’s restaurant sales. The average check per person was approximately $21 during 2013.

The décor includes dark woods, large booths and tables and Italian memorabilia featuring Carrabba family photos and authentic Italian pottery. Our traditional Italian exhibition kitchen allows customers to watch hand-made dishes being prepared. Carrabba’s Italian Grill restaurants serve dinner every day of the week and the majority are open for lunch on Saturday and Sunday. Many locations are also open for lunch Monday through Friday.

Bonefish Grill

Bonefish Grill is a polished casual seafood restaurant featuring market fresh grilled fish, high-end yet approachable service and a lively bar. Servers wear chef coats to underscore their knowledge and professionalism, and guide customers through a comfortable rather than stuffy dining experience. As of December 31, 2013, we owned and operated 187 and franchised seven restaurants across 34 states.

The Bonefish Grill menu is anchored by fresh fish, hand-cut and topped with freshly prepared sauces, and seasonal seafood specials. These selections are based on the types of seafood available to the restaurant seasonally to ensure a fresh and flavorful meal. In addition, Bonefish Grill offers beef, pork and chicken entrees, several specialty appetizers, including our signature “Bang Bang Shrimp ® ,” and desserts. Bonefish Grill’s bar provides an energetic setting for drinks, dining and socializing, with large tables, music from emerging artists and a bar menu featuring a large variety of hand crafted cocktails, a specialty martini list, wine and regional beer selections. Alcoholic beverages account for approximately 24% of Bonefish Grill’s restaurant sales. The average check per person was approximately $23 in 2013.

The décor is warm and inviting, with hardwood floors, large booths and tables and distinctive artwork inspired by regional coastal settings. Bonefish Grill restaurants serve dinner every day of the week and brunch on Sunday.

Fleming’s Prime Steakhouse and Wine Bar

Fleming’s Prime Steakhouse and Wine Bar is an upscale, contemporary prime steakhouse for food and wine lovers seeking a stylish, lively and indulgent dining experience. As of December 31, 2013, we owned and operated 65 Fleming’s Prime Steakhouse and Wine Bar restaurants across 28 states.

The Fleming’s Prime Steakhouse and Wine Bar menu features prime cuts of beef, fresh seafood, pork and chicken entrees accompanied by an extensive assortment of freshly prepared salads and side dishes available a la carte, plus several specialty appetizers and desserts. The steak selection features USDA Prime corn-fed beef, both wet- and dry-aged for flavor and texture, in a selection of sizes and cuts, either broiled at 1,600 degrees to seal in the beef’s natural juices and flavors or iron crusted. Among national high-end steak concepts, Fleming’s Prime Steakhouse and Wine Bar offers the largest selection of wines by the glass, with 100 quality wines available, as well as specialty cocktails. Alcoholic beverages account for approximately 29% of Fleming’s Prime Steakhouse and Wine Bar’s restaurant sales. The average check per person was approximately $69 in 2013.

The décor features an open dining room built around an exhibition kitchen and expansive bar, with lighter woods and colors with rich cherry wood accents and high ceilings. Private dining rooms are available for private gatherings or corporate functions. Fleming’s Prime Steakhouse and Wine Bar restaurants typically serve dinner only.

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Roy’s

Roy’s provides an upscale dining experience featuring Pacific Rim cuisine. As of December 31, 2013, we owned and operated 21 Roy’s restaurants located across seven states. We did not have an economic interest in nine Roy’s as of December 31, 2013, including six in Hawaii and one each in the continental United States, Japan and Guam.

The Roy’s menu features Pacific Rim cuisine, a style pioneered by Chef Roy Yamaguchi, that is a fusion of bold Asian spices, European sauces and local ingredients, with a focus on fresh fish and seafood, steaks, short ribs, pork and chicken. The menu also includes several specialty appetizers and desserts. In addition to full bar service, Roy’s offers a large selection of highly rated wines. Alcoholic beverages account for approximately 28% of Roy’s restaurant sales. The average check per person was approximately $57 during 2013.

The décor features large dining rooms, a lounge area, an outdoor dining patio in certain locations and Roy’s signature exhibition kitchen. Private dining rooms are available for private gatherings or corporate functions. The majority of Roy’s restaurants serve dinner only.

Outback Steakhouse - International

Outback Steakhouse International is our business unit for developing and operating Outback Steakhouse restaurants outside of the U.S. We have an international organizational structure consisting of talent recruited internally and externally from market-leading companies with the experience we believe is needed to drive international growth. This team is integrated into our corporate headquarters to leverage enterprise-wide capabilities, including marketing, finance, consumer research and analytics, real estate development, information technology, legal, supply chain management and productivity in order to support both Company-owned and franchised locations. In addition, we have cross-functional, local management staff in place in each of the countries where we have Company-owned operations to support and grow restaurants in those locations.

Our Outback Steakhouse International locations in Brazil were operated as an unconsolidated joint venture, of which we owned a 50% interest until November 1, 2013 when we acquired a controlling interest in the joint venture. To ensure timely reporting, we have elected to consolidate the results of our Brazilian operations on a one-month lag effective as of the acquisition date.  Accordingly, our operating results for 2013 include the operating  results of the Brazilian operations for only a one-month post-acquisition period ended November 30, 2013. Prior to the acquisition, we accounted for the unconsolidated joint venture under the equity method of accounting. Income and loss derived from the unconsolidated joint venture for periods prior to the acquisition are presented in Income from operations of unconsolidated affiliates in our Consolidated Statements of Operations and Comprehensive Income.

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Our other concepts currently do not operate outside of the U.S. As of December 31, 2013, we owned and operated 169 international Outback Steakhouse restaurants and 51 were franchised across 21 countries and Guam as follows:

 	 	 	 	 	 	
Country/Territory	 	Ownership Type	 	Total	
South Korea	 	Company-owned	 	110	
 	
Brazil (1)	 	Company-owned	 	48	
 	
Hong Kong	 	Company-owned	 	8	
 	
China (Mainland)	 	Company-owned	 	2	
 	
Mexico	 	Company-owned	 	1	
 	
Japan	 	Franchise	 	10	
 	
Australia	 	Franchise	 	7	
 	
Mexico	 	Franchise	 	5	
 	
Taiwan	 	Franchise	 	5	
 	
Saudi Arabia	 	Franchise	 	4	
 	
Canada	 	Franchise	 	3	
 	
Indonesia	 	Franchise	 	3	
 	
Philippines	 	Franchise	 	3	
 	
Dominican Republic	 	Franchise	 	2	
 	
Bahamas	 	Franchise	 	1	
 	
Costa Rica	 	Franchise	 	1	
 	
Egypt	 	Franchise	 	1	
 	
Guam	 	Franchise	 	1	
 	
Malaysia	 	Franchise	 	1	
 	
Qatar	 	Franchise	 	1	
 	
Singapore	 	Franchise	 	1	
 	
Thailand	 	Franchise	 	1	
 	
United Arab Emirates	 	Franchise	 	1	
 	
Total	 	 	 	220	
 	
____________________
 	 	
(1)	The restaurant count for Brazil is reported as of November 30, 2013 to correspond with the balance sheet date of this subsidiary and, therefore, excludes two restaurants that opened in December 2013.	

Financial information about geographic areas is included in this Form 10-K in Item 8, Note 2 of our Notes to consolidated financial statements. Risks associated with our international operations are discussed in this Form 10-K in Item 1A.

We utilize a global core menu policy to ensure consistency and quality in our menu offerings. We allow local tailoring of the menu to address the preference of local customers in a market. Before we add an item to the core menu, we conduct customer research, and the item is reviewed and approved by our research and development (“R&D”) team. In South Korea, for example, we serve “lunch box sets,” offering affordable options to busy customers seeking a quick lunch at Outback Steakhouse. Similarly, in China, we offer “set pricing” options that provide customers a known price point for a complete dining experience.

Our international Outback Steakhouse locations are similar in the look and feel of our domestic locations, although there is more diversity in certain restaurant locations, layouts and sizes. The prices that we charge in individual locations are reflective of local demographics and related local costs involved in procuring product. Most of our international locations serve lunch and dinner.

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RESTAURANT DESIGN AND DEVELOPMENT

Site Design

We generally construct freestanding buildings on leased properties, although our leased sites are also located in strip shopping centers. Construction of a new restaurant takes approximately 90 to 180 days from the date the location is leased or under contract and fully permitted. In the future, we intend to either convert existing third-party leased retail space or construct new restaurants through leases in the majority of circumstances. We typically design the interior of our restaurants in-house, utilizing outside architects when necessary.

A typical Outback Steakhouse is approximately 6,200 square feet and features a dining room and a full-service liquor bar. The dining area of a typical Outback Steakhouse consists of 45 to 48 tables and seats approximately 220 people. The bar area has approximately ten tables and seating capacity for approximately 54 people. Appetizers and complete dinners are served in the bar area.

Outback Steakhouse international restaurants range in size from 3,500 to 10,000 square feet and may be basement, ground level or upper floor locations.

A typical Carrabba’s Italian Grill is approximately 6,500 square feet and features a dining room, pasta bar seating that overlooks the exhibition kitchen and a full-service liquor bar. The dining area of a typical Carrabba’s Italian Grill consists of 40 to 45 tables and seats approximately 230 people. The liquor bar area typically includes six tables and seating capacity for approximately 60 people, and the pasta bar has seating capacity for approximately ten people. Appetizers and complete dinners are served in both the pasta bar and liquor bar areas.

A typical Bonefish Grill is approximately 5,500 square feet and features a dining room and full-service liquor bar. The dining area of a typical Bonefish Grill consists of approximately 38 tables and seats approximately 145 people. The bar area is generally in the front of the restaurant and offers community-style seating with approximately ten tables and bar seating with a capacity for approximately 72 people. Appetizers and complete dinners are served in the bar area.

A typical Fleming’s Prime Steakhouse and Wine Bar is approximately 7,100 square feet and features a dining room, a private dining area, an exhibition kitchen and full-service liquor bar. The main dining area of a typical Fleming’s Prime Steakhouse and Wine Bar consists of approximately 35 tables and seats approximately 170 people, while the private dining area seats approximately 30 additional people. The bar area has approximately six tables and bar seating with a capacity for approximately 35 people. Appetizers and complete dinners are served in the bar area.

A typical Roy’s is approximately 7,100 square feet and features a dining room, a private dining area, an exhibition kitchen and full-service liquor bar. The main dining area of a typical Roy’s consists of approximately 41 tables and seats approximately 155 people, while the private dining area seats an additional 50 people. The bar area has tables and bar seating with a capacity for approximately 35 people. Appetizers and complete dinners are served in the bar area.

Remodel, Renovation and Relocation Plans

We have an ongoing renovation program across all of our concepts to maintain the relevance of our restaurants’ ambience.

Our remodeling program at Outback Steakhouse, which began in 2009, refreshes our restaurants and modernizes the look and feel of the dining experience. The Outback Steakhouse layout now features larger, more comfortable waiting areas, a brighter more upscale bar and a natural, contemporary dining area. Additionally, in 2014, we will begin expanding our remodeling program to contemporize and update the exterior façade of our Outback Steakhouse restaurants. We have remodeled 490 restaurants since the beginning of the remodeling program through December 31,

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2013, including 84 in 2013. Going forward, we expect to remodel approximately 10% of our locations annually. Our average remodel cost per restaurant was approximately $245,000 in 2013.

Carrabba’s Italian Grill has a similar renovation program to refresh the interior and exterior of our restaurants, which includes the creation of a more contemporary Italian-themed décor that maintains its welcoming atmosphere and matches the high quality of our food. We remodeled 41 locations in 2013 and expect to remodel between 30 and 40 locations in 2014. Our average remodel cost per restaurant was approximately $385,000 in 2013.

In addition, in April 2013, we accelerated our restaurant relocation plan primarily related to the Outback Steakhouse brand. This multi-year relocation plan is focused on driving additional traffic to our restaurants by moving legacy restaurants from non-prime to prime locations within the same trade area.

Site Selection Process

We consider the location of a restaurant to be critical to its long-term success and as such, we devote significant effort to the investigation and evaluation of potential sites. We have a central team serving all of our concepts comprising real estate development, property/lease management and design and construction personnel. Our site selection team utilizes a combination of existing field operations managers, internal development personnel and outside real estate brokers to identify and qualify potential sites. We have developed a robust analytical infrastructure, aided by site selection software customized to assist our site selection team in implementing our restaurant growth plan. We are improving site selection by employing expanded data regarding potential sites, developing success criteria and using predictive models.

We follow a phased approach to new site selection and approval, with all proposed sites reviewed and approved by the appropriate concept president, Chief Development Officer, Chief Resources Officer, Chief Financial and Administrative Officer and Chief Executive Officer.

Restaurant Development

We remain committed to new unit development after curtailing expansion from 2009 to 2011. We believe that a substantial development opportunity remains for our concepts in the U.S. and internationally. During 2013, we opened 46 new system-wide locations: 20 Bonefish Grill restaurants, five Carrabba’s Italian Grill restaurants, two domestic Outback Steakhouse restaurants and 19 international Outback Steakhouse restaurants comprising 14 Company-owned and five franchised locations. We expect to open between 55 and 60 system-wide locations in 2014. We expect that approximately 50% of our new units in 2014 will be domestic opportunities, but will shift to a higher weight of international units as we continue to implement our international expansion plans.

We recently completed an assessment of our restaurant base in advance of capital and development planning for the 2014 fiscal year. As a result of this assessment, we decided to close 22 underperforming locations primarily within the Outback Steakhouse concept. We expect to substantially complete these store closings by the end of the first quarter of 2014.

Domestic Development

We believe we are well-equipped to continue to accelerate new unit development with a disciplined approach focusing on achieving unit returns at target levels across each of our concepts. In 2014, we plan to open approximately 30 domestic locations. Bonefish Grill unit growth will continue to be our top domestic development priority in 2014, with 15 or more new restaurants planned utilizing a new restaurant design format. We believe we have the potential to increase the units in our Bonefish Grill concept to over 300 in the next four to six years. Currently, the majority of Bonefish Grill restaurants are located in the southern and eastern U.S., with significant geographic expansion potential in the top 100 U.S. markets. We also see an opportunity to expand Carrabba’s Italian Grill from an existing base of 240 units as of December 31, 2013. Currently, the majority of Carrabba’s Italian Grill restaurants are also located in the southern and eastern U.S., with significant geographic expansion potential in the top 100 U.S. markets. We began

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implementing an updated Carrabba’s Italian Grill restaurant design for new units in 2013. In 2014, we plan to accelerate new unit development. In addition, we believe that Fleming’s Prime Steakhouse and Wine Bar has existing geography fill-in and market expansion opportunities based on its current location mix.

International Development

We believe we are well-positioned to continue to expand internationally and plan to approach such growth in a disciplined, prioritized manner, leveraging established markets in South Korea, Brazil and Hong Kong, while expanding in strategically selected new emerging and high growth developed markets, focusing on China and Mexico. The system-wide sales of our international Outback Steakhouse restaurants represented approximately 14% of our total system-wide sales in 2013. We believe the international business represents a significant growth opportunity. We will continue to leverage our market position by offering our top-ranked Outback Steakhouse concept in a format adapted to local cultural preferences. For example, we believe that we can leverage existing infrastructure and expertise in the Asia-Pacific and Latin American regions to grow in those areas and accelerate entry into nearby countries.

Our Company-owned operations in South Korea and Hong Kong, where we have 118 restaurants, provide operational expertise in running multi-unit operations, but also cultural insights and available talent to deploy into new Asian markets. In addition, our Outback Steakhouse International leadership team has significant experience opening retail outlets in China. In December 2012, we opened our first Outback Steakhouse restaurant in mainland China and currently operate two locations in this country.

Effective November 1, 2013, we acquired a controlling interest in our former joint venture partner in Brazil. As of the date of the acquisition, our Company-owned locations include 47 restauants in Brazil that were previously operated as an unconsolidated joint venture. The addition of these restaurants to our Company-owned operations builds our local base of operational expertise, cultural insights and in-region talent for expansion and development into other South American countries. We see significant potential for growth in Brazil to approximately 100 restaurants. New restaurant growth in Brazil will be our top international development priority in 2014.

We will utilize the ownership structure and market entry strategy that best fits the needs for a particular market, including Company-owned units, joint ventures and franchises. In markets where there is potential for a significant number of restaurants, we expect to focus on Company-owned units and joint ventures rather than franchises.

RESEARCH & DEVELOPMENT / INNOVATION

Our R&D function blends strong culinary creativity with operational expertise to ensure effective innovation and execution. We believe we have strengthened our innovation capability by establishing a focused, collaborative process and by enhancing our R&D capabilities, and we have expanded the scope of innovation to focus on new product development, product efficiency and core menu quality. As a result, we believe we continuously evolve our product offerings based on consumer trends and feedback and improve productivity. We have a 12-month pipeline of new menu and promotional items, and we are able to quickly introduce new items. In addition, we have dedicated resources focused on productivity across the portfolio.

Our cross-functional innovation processes leverage practices of the consumer products industry to continuously research and enhance every dimension of the customer experience. Our innovation teams collaborate across R&D, supply chain, operations, marketing, finance and consumer insights. Our goal is continuous innovation of our new menu, service and marketing initiatives to improve brand relevance, productivity and competitiveness based on evolving consumer trends and direct customer feedback on our products. For example, as the direct result of market and consumer research, we have delivered new menu innovation through multiple limited-time offers and new optimized menus for each of our brands, including many items under 600 calories, which have broadened the appeal of our menus. By incorporating analytics, customer testing and in-store customer and operator feedback, we have refined and reduced the potential risks associated with menu introductions or changes. For new menu items and significant product changes, we have a meaningful testing process that includes internal testing, testing at one restaurant and testing at a group of

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restaurants before the roll-out is staged system-wide. Throughout this process, our customers provide direct feedback on the product as well as pricing.

We also utilize our cross-functional processes to develop limited-time offers with compelling price points and attractive margins. This requires more occasion-based testing and research to validate that the special offer was valued by customers based on the occasion. For example, Outback Steakhouse offered a four-course meal promotion (the Outback 4) in 2012 and 2013, which included a soup, salad, entree and dessert for $15.00 and Carrabba’s Italian Grill featured a new promotion in 2013 (Pasta Seconds) that offered our customers the option of a second bowl of pasta to share at the table, both of which were very popular with our customers, and met our profitability and food quality objectives.

STRATEGY AND MARKET INTELLIGENCE

Our strategy and market intelligence (“SMI”) function identifies consumer and marketplace opportunities for profitable growth, and helps improve returns on the investments we make in capital and operations, through the targeted application of analytics. Our rapid “test and learn” platform enables us to assess the traffic and profit impact of key consumer and market facing initiatives, before they are fully launched in our system. Pricing actions are guided by the targeted application of price elasticity models. Our investments in new trade areas and real estate sites are guided by the targeted application of development analytics.

Our consumer insight techniques provide an in-depth perspective into consumer behavior. We employ a variety of qualitative and quantitative approaches designed to capture deeper consumer insights based on both rational and emotional responses. Application of these consumer insight techniques have been instrumental in the development of new menus, new menu items, interior and exterior restaurant design and consumer communication, and also for our understanding of brand positioning and segment health.

As the casual dining landscape evolves with the consumer, our SMI function helps our business to evolve in a parallel manner based on tested best practices in areas ranging from menu, restaurant format, pricing, location dynamics and food preferences.

INFORMATION SYSTEMS

We have significant resources that focus on building our competencies in human resources, information technology and real estate, design and construction, including the completion of standardized Point of Sale (“POS”) systems across our core concepts, the implementation of a Human Resources Information System (“HRIS”), uniform and comprehensive training programs, expanded data warehousing capability, and increased resources and tools to accelerate renovations and new unit site selection.

We have a multi-year information technology strategy to further transform information technology into a growth enabling function by focusing on building infrastructure, increasing technical staff, creating a technology platform to support sales growth and enabling productivity improvements.

Restaurant level financial and accounting controls are handled through the POS system and network in each restaurant that communicates with our corporate headquarters. The POS system is also used to authorize and transmit credit card sales transactions and to manage the business and control costs, such as labor. Our Company-owned restaurants are connected through data centers and a portal to provide our corporate employees and regional partners with access to business information and tools that allow them to collaborate, communicate, train and share information between restaurants and the corporate office. During 2012, we upgraded our wireless access points in all of our restaurants. This provided enhanced capability to pilot and roll out new mobile technology devices within our restaurants. During 2013, we continued to enhance our corporate office and restaurant information system infrastructure and began a financial system implementation of SAP, which went live in January 2014, as the groundwork for continued improvements to our operational capability.

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ADVERTISING AND MARKETING

Our marketing strategy is designed to drive comparable restaurant sales growth by increasing the frequency of visits and adding occasions for visits by our current customers, as well as attracting new customers through compelling offers driven by menu innovation, attractive ambience and highly-rated service at affordable prices.

Outback Steakhouse and Carrabba’s Italian Grill advertise through national and spot television and/or radio media and Bonefish Grill advertises through radio media only. We purchase television advertising in selective markets where we have a sufficient number of restaurants to make the media purchase efficient (generally three to 10 restaurants in a market, depending on the media cost in that market). Our concepts have an active public relations program and also rely on national promotions, site visibility, local marketing, digital marketing, direct mail and billboards to promote our restaurants. In addition, we utilize point-of-sale materials to communicate and promote key brand initiatives to our customers while they are dining in our restaurants. We have increased our use of digital marketing tools, including advertising and personal engagement, which enables us to reach a significant number of people in a timely and targeted fashion at a fraction of the cost of traditional media.

To help maintain customer interest and relevance, each concept leverages limited-time offers featuring seasonal specials, ingredients and flavors that are consistent with the concept’s positioning, while providing something new to discover on the menu. Outback Steakhouse, Carrabba’s Italian Grill and Bonefish Grill generally offer five to seven promotion periods each year, each designed to increase traffic by encouraging a prompt visit to the restaurant to enjoy a featured item. For example, for the past few years, Outback Steakhouse has leveraged a “Back By Popular Demand” steak and lobster entree for $14.99. This offer reinforces the high quality food at affordable prices available at Outback Steakhouse. We promote limited-time offers through integrated marketing programs that utilize all of our advertising resources.

New restaurant openings provide another opportunity to utilize a comprehensive marketing campaign. To create awareness for a new location, we reach out to local television and radio stations to secure appearances where we engage with customers through events ranging from menu sampling to cooking demonstrations, covering topics such as how to properly purchase seafood and how to cook a steak. We also establish relationships with local charities through pre-opening fundraising events. The managing partner in each restaurant is the visible face of his or her restaurant, and through local involvement, such as contributing goods, time and money to charitable, civic and cultural programs, reinforces our role as an active member of the community.

RESTAURANT OPERATIONS

We believe the success of our restaurants depends on our service-oriented employees and consistent execution of our menu items in a well-managed restaurant.

Management and Employees

The management staff of a typical Outback Steakhouse, Carrabba’s Italian Grill or Bonefish Grill consists of one managing partner, one assistant manager and one kitchen manager. The management staff of a typical Fleming’s Prime Steakhouse and Wine Bar or Roy’s consists of one managing partner, a chef partner and two assistant managers. Each restaurant also employs approximately 50 to 95 hourly employees, many of whom work part-time. The managing partner of each restaurant has primary responsibility for the day-to-day operation of his or her restaurant and is required to abide by Company-established operating standards. Area operating partners are responsible for overseeing the operations of typically six to 14 restaurants and managing partners in a specific region.

Area Operating, Managing and Chef Partner Programs

We have established a compensation structure for our area operating, managing and chef partners that we believe encourages high quality restaurant operations, fosters long-term employee commitment and generally results in profitable restaurants.

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The managing partner of each Company-owned domestic restaurant and the chef partner of each Fleming’s Prime Steakhouse and Wine Bar and Roy’s restaurant are required, as a condition of employment, to sign five-year employment agreements. Under these agreements, managing and chef partners have the right to receive monthly distributions based on a percentage of their restaurant’s monthly cash flows for the duration of the agreement, which vary by concept from 6% to 10% for managing partners and 2% to 5% for chef partners.

The employment agreements also provide for an annual bonus, known as the President’s Club, which is paid in addition to the monthly distributions of cash flow and is designed to reward increases in a restaurant’s annual sales above the concept sales plan with a required flow-through percentage of the incremental sales to cash flow. Managing and chef partners whose restaurants achieve certain annual sales targets above the concept’s sales plan (and the required flow-through percentage) receive a bonus equal to a percentage of the incremental sales. Such percentage is determined by the sales target achieved.

Managing partners and chef partners are eligible to receive deferred compensation payments under our Partner Ownership Account Plan (the “POAP”), upon completion of their five-year employment agreement. All managing and chef partners who executed new employment agreements after May 1, 2011 were required to participate in the current partner program, including the POAP.

The POAP requires managing and chef partners to make an initial deposit of up to $10,000 into their “Partner Investment Account.” We make a bookkeeping contribution to each partner’s “Company Contributions Account” no later than the end of February of each year following the completion of each year (or partial year where applicable) under the partner’s employment agreement. The value of each of our contributions is equal to a percentage of cash flow of the partner’s restaurant plus, if the restaurant has been open at least 18 calendar months, a percentage of the year-over-year increase in the restaurant’s cash flow.

Our managing and chef partners who executed employment agreements prior to May 1, 2011 were eligible to participate in our prior partner program. Under that program, they were required to sign five-year employment agreements and received monthly distributions of the same percentage of their restaurant’s cash flow as under the current program. Upon completion of their five-year employment agreement, they were eligible to participate in the Partner Equity Plan (“PEP”), a deferred compensation program. Managing and chef partners were also required to purchase a non-transferable ownership interest in a partnership (“Management Partnership”) that provided management and supervisory services to his or her restaurant. The purchase price for a managing partner’s ownership interest was fixed at $25,000, and the purchase price for a chef partner’s ownership interest ranged from $10,000 to $15,000 (see “Liquidity and Capital Resources—Deferred Compensation Plans” included in “Management’s Discussion and Analysis of Financial Condition and Results of Operations”). Approximately, 15% of our managing and chef partners participate in the PEP as of December 31, 2013.

Many Outback Steakhouse international restaurant managing partners enter into employment agreements and purchase participation interests in the cash distributions from the restaurants they manage. The amount and terms vary by country. This interest gives the managing partner the right to receive a percentage of his or her restaurant’s annual cash flows for the duration of the agreement. Additionally, each new unaffiliated franchisee is required to provide the same opportunity to the managing partner of each new restaurant opened by that franchisee.

An area operating partner is required, as a condition of employment, to make a deposit of $10,000 within 30 days of the opening of each new restaurant that he or she oversees, up to a maximum deposit of $50,000 (taking into account investments under prior programs). This deposit gives the area operating partner the right to monthly payments based on a percentage of his or her restaurants’ monthly cash flows for the time period that the area operating partner oversees the restaurant, typically ranging from 4.0% to 4.5%. After the restaurant has been open for a five-year period, the area operating partner will receive a bonus equal to a multiple of the area operating partner’s average monthly payments for the 24 months immediately preceding the bonus date. The bonus will be paid within 90 days or over a two-year period, depending on the bonus amount.

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In 2011, we also began a version of the President’s Club annual bonus described above for area operating partners to provide additional rewards for achieving sales targets with a required flow-through of the incremental sales to cash flow as defined in the President’s Club bonus program.

Area operating partners for restaurants opened on or before December 31, 2011 were eligible to participate in our prior program. Under the prior program, an area operating partner was required, as a condition of employment and within 30 days of the opening of his or her first restaurant, to make an initial investment of $50,000 in a Management Partnership that provides supervisory services to the restaurants that the area operating partner was overseeing. This interest gave the area operating partner the right to distributions from the Management Partnership based on a percentage of his or her restaurants’ monthly cash flows for the duration of the agreement, typically ranging from 4.0% to 9.0%. We have the option to purchase an area operating partner’s interest in the Management Partnership after the restaurant has been open for a five-year period on the terms specified in the agreement. For restaurants opened between January 1, 2007 and December 31, 2011, the area operating partner’s percentage of cash distributions and buyout percentage is calculated based on the associated restaurant’s return on investment compared to our targeted return on investment and may range from 3.0% to 12.0% depending on the concept. Restaurants opened after December 31, 2011 are governed by our current operating partner compensation program discussed above.

We also have field operations performance evaluations and development processes. All field managing partners and area managers receive feedback on performance with consistent metrics linked to quarterly restaurant, area and concept business objectives.

By offering these types of compensation arrangements and by providing the area operating, managing and chef partners a significant interest in the success of their restaurants, we believe we are able to attract and retain experienced and highly motivated area operating, managing and chef partners.

Supervision and Training

We require our area operating partners and restaurant managing partners to have significant experience in the full-service restaurant industry. As part of our management development programs, we engage in succession planning at a total Company and concept level to identify promotable personnel, with focused training programs to prepare managers for the next level of responsibility. Our current core concept presidents have been with us for an average of 13 years and have an average of 29 years of industry experience. Our regional field management team has an average of 11 years of experience working with us at the managing partner level or above.

All operating partners and managing partners are required to complete a comprehensive training program that emphasizes our operating strategy, procedures and standards. Our senior management meets quarterly with our area operating partners to discuss business-related issues and to share ideas. In addition, members of senior management visit restaurants regularly to ensure that our concept, strategy and standards of quality are being adhered to in all aspects of restaurant operations.

The restaurant managing and area operating partners, together with our Presidents, Regional Vice Presidents, Senior Vice Presidents of Training and Directors of Training, are responsible for selecting and training the employees for each new restaurant. The training period for new non-management employees lasts approximately one week and is characterized by on-the-job supervision by an experienced employee. Ongoing employee training remains the responsibility of the restaurant manager. Written tests and observation in the work place are used to evaluate each employee’s performance. Special emphasis is placed on the consistency and quality of food preparation and service, which is monitored through monthly meetings between kitchen managers and management.

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Service

We seek to deliver superior service to each customer at every opportunity. We offer customers prompt, friendly and efficient service, keep wait staff-to-table ratios high and staff each restaurant with experienced management teams to ensure consistent and attentive customer service. Members of our wait staff demonstrate an attention to detail, culinary expertise and focus on execution and complete training programs specific to the concept’s menu (including the specific flavors of each dish), culture and brand positioning. They are trained to be responsive to the needs of our customers as they assist customers in selecting menu items complementing individual preferences.

In order to better assess and improve our performance, we use Service Management Group (“SMG”) to conduct an ongoing satisfaction measurement program that utilizes a random invitation to participate in a web-based survey printed on approximately 25% of our customer checks per week and provides us with benchmarking information from other restaurant concepts. The program measures satisfaction across a wide range of experience elements, from the pace of the experience to the temperature of the food. Results are compiled and reported through a central website at the national, regional and individual restaurant level. As of December 31, 2013, 44 casual dining restaurant concepts, including Outback Steakhouse, Carrabba’s Italian Grill and Bonefish Grill, and eight fine dining concepts, including Fleming’s Prime Steakhouse and Wine Bar, participate in the SMG survey web methodology and contribute to the SMG average comparison measures for casual and fine dining, respectively, that we utilize in assessing our performance. The minimum sample size for our SMG customer surveys is 100 customers per restaurant per month.

Food Preparation and Quality Control

We focus on using high quality ingredients in our menu items, including the grade of our beef and freshness of our seafood and produce, while keeping costs in line with target pricing for our concepts. Food safety is a critical priority, and we dedicate resources to ensuring that our customers enjoy safe food products. We take various steps to mitigate food quality and safety risks and have central teams focused on this goal together with our supply chain, food safety/quality assurance and R&D teams.

We have a central R&D facility located in Tampa, Florida that serves as a test kitchen and vendor product qualification site. Our supply chain team manages internal auditors for supplier evaluations along with external third parties to inspect supplier adherence to quality, food safety and product specification on a risk-based schedule. Our suppliers also utilize third party labs for food safety and quality verification. Suppliers that do not comply with quality, food safety and other specifications are not utilized until they have corrective actions in place and are re-certified for compliance.

Our operational teams have multiple touch points in the restaurants ensuring food safety, quality and freshness throughout all phases of the preparation process. In addition, we employ third party auditors to verify our standards of food safety, training and sanitation. We also utilize an outside advisory council comprised of external subject matter experts to advise our senior management on industry trends, food quality and safety, and animal well-being strategies and procedures, as well as food regulatory updates.

SOURCING AND SUPPLY

We take a centralized approach to purchasing and supply chain management, with our corporate team serving all concepts domestically and internationally. In addition, we have dedicated supply chain management personnel at the local level in our larger international operations in Asia and South America. The supply chain management organization is responsible for all food and operating supply purchases as well as a large percentage of field and home office services. In addition, we have logistics teams and supplier alliances dedicated to optimizing freight costs. The supply chain management organization’s mission is to create a competitive advantage by encouraging continuous innovation through collaborative value engineering coupled with delivering “total quality” food and services to our restaurants.

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We address the end-to-end costs (from the source to the fork) associated with the products and goods we purchase by utilizing a combination of centralized domestic and locally based supply to capture the efficiencies and economics of scale that come from making strategic buys. Our “total cost of ownership” (“TCO”) approach focuses on the initial purchase price, coupled with the cost structure underlying the procurement and order fulfillment process. The TCO approach includes monitoring commodity markets and trends to execute product purchases at the most advantageous times. We develop sourcing strategies for all major commodity categories based on the dynamics of each category. These strategies include both spot purchases and long-term contracts of generally one year or less in those cases where we believe long-term contract prices are more attractive than anticipated spot prices. In addition, we require our supplier partners to meet or exceed our quality assurance standards.

We have a national distribution program that includes food, beverage, smallwares and packaging goods. This program is with a custom distribution company that uses a limited number of warehouses that provide only products approved for our system. This customized relationship also enables our purchasing staff to effectively manage and prioritize our supply chain.

Proteins represent about 60% of our commodity purchasing composition, with beef representing slightly over half of total purchased proteins. In 2013, we purchased more than 90% of our beef raw materials from four beef suppliers that represent approximately 90% of the total beef marketplace in the U.S. Due to the nature of our industry, we expect to continue purchasing a substantial amount of our beef from a small number of suppliers. Other major commodity categories purchased include produce, dairy, bread and pasta, and energy sources to operate our restaurants, such as natural gas.

RESTAURANT OWNERSHIP STRUCTURES

Our restaurants are predominately Company-owned or operated under franchise arrangements. We generate our revenues primarily from our Company-owned restaurants and secondarily through ongoing royalties from our franchised restaurants and sales of franchise rights.

Company-Owned Restaurants

Company-owned restaurants include restaurants owned directly by us, by limited liability companies in which we are a member, by partnerships in which we are a general partner and by corporations in which we are a shareholder. Our legal ownership interests in these limited liability companies, as general partner, in these limited partnerships and as a shareholder in these corporations generally range, in each case, from 55% to 100%. Our cash flows from these entities are limited to the portion of our ownership. The results of operations of Company-owned restaurants are included in our consolidated operating results. The portion of income or loss attributable to the other partners’ interests is eliminated in Net income attributable to noncontrolling interests in our Consolidated Statements of Operations and Comprehensive Income.

We do not plan to continue utilizing partnerships for domestic Company-owned restaurants, except where required by laws regulating licensing of alcoholic beverages. Instead, the restaurants will be wholly-owned by us through corporations or limited liability companies and the area operating, managing and chef partners will receive their distributions of restaurant cash flows as employee compensation rather than partnership distributions.

We pay royalties on approximately 95% of our Carrabba’s Italian Grill restaurants ranging from 1.0% to 1.5% of sales pursuant to agreements we entered into with the Carrabba’s Italian Grill founders.

Historically, Company-owned restaurants also included restaurants owned by our Roy’s joint venture and our consolidated financial statements included the accounts and operations of our Roy’s joint venture even though we had less than majority ownership due to our status as primary beneficiary of the joint venture and ability to control its significant activities. Effective October 1, 2012, we purchased the remaining interests in our Roy’s joint venture from our joint venture partner, RY-8, Inc. (“RY-8”), for $27.4 million.

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Prior to November 1, 2013, we held a 50% ownership interest in PGS Consultoria e Serviços Ltda. (the “Brazilian Joint Venture”) through a joint venture arrangement with PGS Participaçơes Ltda (“PGS Par”). The Brazilian Joint Venture was formed in 1998 for the purpose of operating Outback Steakhouse restaurants in Brazil. Effective November 1, 2013, we, through a wholly owned subsidiary, completed the acquisition of a controlling interest in the Brazilian Joint Venture by purchasing 80% of the issued and outstanding capital stock of PGS Par. We now hold a 90% interest in the Brazilian Joint Venture. We completed the acquisition for total consideration of approximately R$240.8 million (BRL) (or approximately $110.4 million) in cash (see “Liquidity and Capital Resources—Transactions” included in “Management’s Discussion and Analysis of Financial Condition and Results of Operations”).

Prior to the acquisition, we accounted for the Brazilian Joint Venture under the equity method of accounting. We were responsible for 50% of the costs of restaurants operated by the Brazilian Joint Venture, and our joint venture partner was responsible for the other 50% and had operating control. Income and loss derived from the Brazilian Joint Venture for periods prior to the acquisition are presented in Income from operations of unconsolidated affiliates in our Consolidated Statements of Operations and Comprehensive Income. Restaurants owned by the Brazilian Joint Venture are included in “Unconsolidated Joint Venture” restaurants for periods prior to the acquisition.

In connection with the settlement of litigation with T-Bird Nevada, LLC and its affiliates (collectively, “T-Bird”), which included the franchisees of 56 Outback Steakhouse restaurants in California, T-Bird had a right (referred to as the “Put Right”), to require us to purchase for cash all of the ownership interests in the T-Bird entities that own Outback Steakhouse restaurants and certain rights under the development agreement with T-Bird. The Put Right was exercised by T-Bird on August 5, 2013 (the “Put Notice”). As permitted pursuant to the Put Right, T-Bird revoked the Put Notice on November 16, 2013. As a result, T-Bird’s Put Right terminated as of the date of the revocation, and we are no longer obligated to purchase the T-Bird entities.

UNAFFILIATED FRANCHISE PROGRAM

Our unaffiliated franchise arrangements grant third parties a license to establish and operate a restaurant using one of our concepts, our systems and our trademarks in a given area. The unaffiliated franchisee pays us for the concept ideas, strategy, marketing, operating system, training, purchasing power and brand recognition.

Franchised restaurants must be operated in compliance with their respective concept’s methods, standards and specifications, including regarding menu items, ingredients, materials, supplies, services, fixtures, furnishings, decor and signs, although the franchisee has full discretion to determine menu prices. In addition, all franchisees are required to purchase all food, ingredients, supplies and materials from approved suppliers. Our regional vice presidents semi-annually inspect franchised restaurants to confirm compliance with our requirements.

At December 31, 2013, there were 105 domestic franchised Outback Steakhouse restaurants and 51 international (including Guam) franchised Outback Steakhouse restaurants. Each domestic franchisee paid an initial franchise fee of $40,000 for each restaurant and is required to pay a continuing monthly royalty of 3.0% of gross restaurant sales and a monthly marketing administration fee of 0.5% of gross restaurant sales. Initial fees and royalties for international franchisees vary by market. Generally, each international franchisee paid an initial franchise fee of $40,000 to $200,000 for each restaurant and is expected to pay a continuing monthly royalty of 3.0% to 6.0% of gross restaurant sales. Certain international franchisees enter into an international development agreement that requires them to pay a development fee in exchange for the right and obligation to develop and operate up to five restaurants within a defined development territory for a defined period of time. Domestic franchisees are required to expend an annually adjusted percentage of gross restaurant sales, up to a maximum of 3.5%, for national advertising on a monthly basis (3.0% in 2012 and increased to 3.2% in 2013). International franchisees are required to expend 3.5% of gross restaurant sales for advertising on a monthly basis, which is calculated each month, based on the previous month’s gross restaurant sales.

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At December 31, 2013, there was one domestic franchised Carrabba’s Italian Grill. The franchisee paid an initial franchise fee of $40,000 and pays a continuing monthly royalty of 5.75% of gross restaurant sales.

At December 31, 2013, there were seven domestic franchised Bonefish Grills. Four of these franchisees paid an initial franchise fee of $50,000 for each restaurant and pay a continuing monthly royalty of 4.0% of gross restaurant sales. Three of these franchisees pay royalties up to 4.0%, depending on sales volumes. Under the terms of the franchise agreement, the franchisees are required to expend, on a monthly basis, a minimum of 1.5% of gross restaurant sales on local advertising and pay a monthly marketing administration fee of 0.5% of gross restaurant sales.

There were no unaffiliated franchises associated with Fleming’s Prime Steakhouse and Wine Bar or Roy’s at December 31, 2013.

Under the development agreement granted to one of the T-Bird entities, the T-Bird entities have the exclusive right through 2031 to develop and operate Outback Steakhouse restaurants as a franchisee in the State of California. We have agreed to waive all rights of first refusal in our franchise arrangements with the T-Bird entities in connection with a sale of all, and not less than all, of the assets, or at least 75% of the ownership of the T-Bird entities.

COMPETITION

The restaurant industry is highly competitive with a substantial number of restaurant operators that compete directly and indirectly with us in respect to price, service, location and food quality, and there are other well-established competitors with significant financial and other resources. There is also active competition for management personnel, attractive suitable real estate sites, supplies and restaurant employees. Further, we face growing competition from the supermarket industry, with improved selections of prepared meals, and from quick service and fast casual restaurants, as a result of higher-quality food and beverage offerings. We expect intense competition to continue in all of these areas.

Industry and internal research conducted suggests that consumers consider casual dining restaurants within a given trade area when making dining decisions. As a result, an individual restaurant’s competitors will vary based on its trade area and will include both independent and chain restaurants. At an aggregate level, all major casual dining restaurants would be considered competitors of our concepts.

We believe our principal strategies, which include but are not limited to, the use of high quality ingredients that are in line with our target pricing, the variety of our menu and concepts, the quality and consistency of our food and service, the use of various promotions and the selection of appropriate locations for our restaurants, allow us to effectively and efficiently compete in the restaurant industry.

GOVERNMENT REGULATION

We are subject to various federal, state, local and international laws affecting our business. Each of our restaurants is subject to licensing and regulation by a number of governmental authorities, which may include, among others, alcoholic beverage control, health and safety, nutritional menu labeling, health care, environmental and fire agencies in the state, municipality or country in which the restaurant is located. Difficulty in obtaining or failing to obtain the required licenses or approvals could delay or prevent the development of a new restaurant in a particular area. Additionally, difficulties or inabilities to retain or renew licenses, or increased compliance costs due to changed regulations, could adversely affect operations at existing restaurants.

Approximately 15% of our consolidated restaurant sales are attributable to the sale of alcoholic beverages. Alcoholic beverage control regulations require each of our restaurants to apply to a state authority and, in certain locations, county or municipal authorities for a license or permit to sell alcoholic beverages on the premises and to provide service for extended hours and on Sundays. Typically, licenses must be renewed annually and may be revoked or suspended for cause at any time. Alcoholic beverage control regulations relate to numerous aspects of daily operations of our restaurants, including minimum age of patrons and employees, hours of operation, advertising, training, wholesale

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purchasing, inventory control and handling and storage and dispensing of alcoholic beverages. The failure of a restaurant to obtain or retain liquor or food service licenses would adversely affect the restaurant’s operations. Additionally, we are subject in certain states to “dram shop” statutes, which generally provide a person injured by an intoxicated person the right to recover damages from an establishment that wrongfully served alcoholic beverages to the intoxicated person.

Our restaurant operations are also subject to federal and state labor laws, including the Fair Labor Standards Act, governing such matters as minimum wages, overtime, tip credits and worker conditions. Our employees who receive tips as part of their compensation, such as servers, are paid at a minimum wage rate, after giving effect to applicable tip credits. We rely on our employees to accurately disclose the full amount of their tip income, and we base our FICA tax reporting on the disclosures provided to us by such tipped employees. In September 2013, the Internal Revenue Service (“IRS”) informed us that it proposes to issue an audit adjustment for the employer’s share of FICA taxes related to cash tips allegedly received and unreported by our tipped employees during calendar year 2010, for which we recorded a liability in the third quarter of 2013 for $5.0 million. The cash tips allegedly unreported by the tipped employees are based on an IRS estimate of the aggregate amount of tips directly received by tipped employees from our customers. Subsequently, we have had additional communications with the IRS representatives, which indicate that the scope of the proposed adjustment will be expanded to include the 2011 and 2012 periods. As a result, we have reassessed the established liability balance and recorded an additional $12.0 million in the fourth quarter of 2013. As of December 31, 2013, we had $5.0 million and $12.0 million recorded in Accrued and other current liabilities and Other long-term liabilities, net, respectively, in our Consolidated Balance Sheet at December 31, 2013. Our other personnel, such as our kitchen staff, are typically paid in excess of minimum wage. As significant numbers of our food service and preparation personnel are paid at rates related to the applicable minimum wage, further increases in the minimum wage or other changes in these laws could increase our labor costs. Our ability to respond to minimum wage increases by increasing menu prices will depend on the responses of our competitors and customers. Our distributors and suppliers also may be affected by higher minimum wage and benefit standards and tracking costs, which could result in higher costs for goods and services supplied to us.

Further, we continue to assess our health care benefit costs. Due to the breadth and complexity of federal health care legislation and the staggered implementation of its provisions and corresponding regulations, it is difficult to predict the overall impact of the health care legislation on our business over the coming years. Although these laws do not mandate that employers offer health insurance to all employees who are eligible under the legislation, beginning in 2015 penalties will be assessed on large employers who do not offer health insurance that meets certain affordability or benefit requirements. We believe our plans currently meet these requirements, however, providing health insurance benefits to a potentially larger proportion of our employees, or the payment of penalties if the specified level of coverage is not provided at an affordable cost to employees, could have a material adverse effect on our results of operations and financial position. These laws also subject employers to significant reporting and notice requirements from the Departments of Treasury, Labor and Health and Human Services, which can also impact compliance costs as we continue to gather and submit information.

We may also be subject to lawsuits from our employees, the U.S. Equal Employment Opportunity Commission or others alleging violations of federal and state laws regarding workplace and employment matters, discrimination and similar matters. A number of lawsuits have resulted in the payment of substantial damages by the defendants. See Item 3, Legal Proceedings.

The Patient Protection and Affordability Act of 2010 (the “PPACA”) enacted in March 2010 requires chain restaurants with 20 or more locations in the United States to comply with federal nutritional disclosure requirements. The FDA has indicated that it intends to issue final regulations by the first part of 2014 and the expected compliance deadline is uncertain. A number of states, counties and cities have also enacted menu labeling laws requiring multi-unit restaurant operators to disclose certain nutritional information to customers, or have enacted legislation restricting the use of certain types of ingredients in restaurants. Although the federal legislation is intended to preempt conflicting state or local laws on menu labeling, until we are required to comply with the federal law we may be subject to a patchwork of state and local laws and regulations regarding nutritional content disclosure requirements. Many of these requirements are inconsistent or are interpreted differently from one jurisdiction to another. While our ability to adapt

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to consumer preferences is a strength of our concepts, the effect of such labeling requirements on consumer choices, if any, is unclear at this time.

There is potential for increased regulation of food in the United States under the recent changes in Hazard Analysis & Critical Control Points (“HACCP”) system requirements. HACCP refers to a management system in which food safety is addressed through the analysis and control of potential hazards from production, procurement and handling, to manufacturing, distribution and consumption of the finished product. Many states have required restaurants to develop and implement HACCP Systems and the United States government continues to expand the sectors of the food industry that must adopt and implement HACCP programs. For example, the Food Safety Modernization Act (the “FSMA”), signed into law in January 2011, granted the FDA new authority regarding the safety of the entire food system, including through increased inspections and mandatory food recalls. Although restaurants are specifically exempted from or not directly implicated by some of these new requirements, we anticipate that the new requirements may impact our industry. Additionally, our suppliers may initiate or otherwise be subject to food recalls that may impact the availability of certain products, result in adverse publicity or require us to take actions that could be costly for us or otherwise harm our business.

We are subject to the Americans with Disabilities Act (“ADA”), which, among other things, requires our restaurants to meet federally mandated requirements for the disabled. The ADA prohibits discrimination in employment and public accommodations on the basis of disability. Under the ADA, we could be required to expend funds to modify our restaurants to provide service to, or make reasonable accommodations for the employment of, disabled persons. In addition, our employment practices are subject to the requirements of the Immigration and Naturalization Service relating to citizenship and residency.

Government regulations could affect and change the items we procure for resale. We may also become subject to legislation or regulation seeking to tax and/or regulate high-fat and high-sodium foods, particularly in the United States, which could be costly to comply with. Our results may be impacted by tax legislation and regulation in the jurisdictions in which we operate and by accounting standards or pronouncements.

We are also subject to laws and regulations relating to information security, privacy, cashless payments, gift cards and consumer credit, protection and fraud, and any failure or perceived failure to comply with these laws and regulations could harm our reputation or lead to litigation, which could adversely affect our financial condition.

See “Risk Factors” for a discussion of risks relating to federal, state, local and international regulation of our business.

EXECUTIVE OFFICERS
Below is a list of the names, ages and positions as of February 25, 2014, and a brief description of the business experience, of each of our executive officers.

 	 	 	 	 	
NAME	 	AGE	 	POSITION	
Elizabeth A. Smith	 	50	 	Chairman of the Board of Directors and Chief Executive Officer	
David J. Deno	 	56	 	Executive Vice President and Chief Financial and Administrative Officer	
Stephen K. Judge	 	45	 	Executive Vice President and President of Bonefish Grill	
Joseph J. Kadow	 	57	 	Executive Vice President, Chief Legal Officer and Secretary	
Patrick C. Murtha	 	56	 	Executive Vice President and President of Outback Steakhouse International	
David A. Pace	 	54	 	Executive Vice President and Chief Resource Officer	
Amanda L. Shaw	 	42	 	Senior Vice President,Technology and Chief Accounting Officer	
Jeffrey S. Smith	 	51	 	Executive Vice President and President of Outback Steakhouse	

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Elizabeth A. Smith has served as the Chairman of our Board of Directors since January 2012 and as our Chief Executive Officer (“CEO”) and a director since November 2009. From September 2007 to October 2009, Ms. Smith was President of Avon Products, Inc. and was responsible for its worldwide product-to-market processes, infrastructure and systems, including Global Brand Marketing, Global Sales, Global Supply Chain and Global Information Technology. In January 2005, Ms. Smith joined Avon Products, Inc. as President, Global Brand, and was given the additional role of leading Avon North America in August 2005. From September 1990 to November 2004, Ms. Smith worked in various capacities at Kraft Foods Inc. and from November 2004 to December 2008, served as a director of Carter’s Inc. Ms. Smith is a member of the board of directors of Staples, Inc. and Hilton Worldwide Holdings, Inc.

David J. Deno has served as our Executive Vice President and Chief Financial and Administrative Officer since November 2013 and served as Executive Vice President and Chief Financial Officer from May 2012 to November 2013. Prior to May 2012, Mr. Deno served as Chief Financial Officer of the international division of Best Buy Co., Inc. since December 2009. Prior to joining Best Buy Co., Inc. Mr. Deno was a consultant with Obelysk Capital from February 2009 to December 2009. Prior to joining Obelysk Inc., Mr. Deno was a Managing Director of CCMP Capital Advisors, LLC (“CCMP”), a private equity firm from August 2006 to February 2009. While with CCMP, Mr. Deno was the President and then CEO of Quiznos, LLC, an operator of quick service restaurants. Prior to this, he had a 15 year career with YUM! Brands, Inc. where he served as Chief Financial Officer and later as Chief Operating Officer.

Stephen K. Judge joined Bloomin’ Brands as Executive Vice President and President of Bonefish Grill in January 2013. Prior to January 2013, he was President of Seasons 52, which is a restaurant concept owned by Darden Restaurants, Inc., from March 2007 to December 2012. Prior to Seasons 52, Mr. Judge held Food & Beverage and Operations leadership positions at the MGM Grand, one of the world’s largest hotels, Rosewood Hotels and Resorts, LLC, Princess Cruise Lines, Ltd. and Premier Cruise Lines.

Joseph J. Kadow has been our Executive Vice President and Chief Legal Officer since April 2005 and served as our Senior Vice President and General Counsel from April 1994 to April 2005. Mr. Kadow has also served as Secretary since April 1994.

Patrick C. Murtha joined Bloomin’ Brands as Executive Vice President and President of Outback Steakhouse International in November 2013. Prior to November 2013, he held leadership roles at Yum! Brands, Inc. where he spent 17 years in a variety of positions including Chairman of the Board and Managing Director of KFC, Japan, Ltd., Chief Operating Officer of Pizza Hut, Inc. and Chief People Officer for Yum! Restaurants International. Mr. Murtha has also held leadership roles at Ameritech and PepsiCo., Inc.

David A. Pace has served as our Chief Resource Officer and Executive Vice President since August 2010. Mr. Pace served as a consultant for Egon Zehnder International from 2009 to 2010. From 2002 to 2008, Mr. Pace served as Executive Vice President of Partner Resources for Starbucks Corporation. Mr. Pace has also held various positions with other companies prior to his position with Starbucks Corporation, including PepsiCo, Inc. and YUM! Brands, Inc. Mr. Pace is a member of the board of directors of Jamba Inc.

Amanda L. Shaw has been our Senior Vice President, Technology and Chief Accounting Officer since August 2013. Ms. Shaw served as Group Vice President and Corporate Controller from October 2012 to August 2013 and Vice President and Corporate Controller from December 2006 until October 2012.

Jeffrey S. Smith has served as President of Outback Steakhouse since April 2007 and our Executive Vice President since January 1, 2012. Mr. Smith served as a Vice President of Bonefish Grill from May 2004 to April 2007 and as Regional Vice President—Operations of Outback Steakhouse from January 2002 to May 2004.

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EMPLOYEES

As of December 31, 2013, we employed approximately 101,000 persons, of which approximately 1,000 are corporate personnel, approximately 5,500 are restaurant management personnel and the remainder are hourly restaurant personnel. Of the approximately 1,000 corporate employees, approximately 220 are in management and 780 are administrative or office employees. None of our U.S. employees are covered by a collective bargaining agreement. Various national industry-wide labor agreements apply to certain of our employees in Brazil and Mexico. We believe that we have good labor relations with our employees.

TRADEMARKS

We regard our “Outback Steakhouse,” “Carrabba’s Italian Grill,” “Bonefish Grill,” “Fleming’s Prime Steakhouse and Wine Bar” and “Roy’s” service marks and our “Bloomin’ Onion” trademark as having significant value and as being important factors in the marketing of our restaurants. We have also obtained trademarks for several of our other menu items and for various advertising slogans. We are aware of names and marks similar to the service marks of ours used by other persons in certain geographic areas in which we have restaurants. However, we believe such uses will not adversely affect us. Our policy is to pursue registration of our marks whenever possible and to oppose vigorously any infringement of our marks.

We license the use of our registered trademarks to franchisees and third parties through franchise arrangements and licenses. The franchise and license arrangements restrict franchisees’ and licensees’ activities with respect to the use of our trademarks, and impose quality control standards in connection with goods and services offered in connection with the trademarks.

SEASONALITY AND QUARTERLY RESULTS

Our business is subject to seasonal fluctuations. Historically, customer traffic patterns to our established restaurants are generally highest in the first quarter of the year and lowest in the third quarter of the year. Additionally, holidays, severe winter weather, hurricanes, thunderstorms and similar conditions may affect sales volumes seasonally in some of our markets. Quarterly results have been and will continue to be significantly affected by general economic conditions, the timing of new restaurant openings and their associated pre-opening costs, restaurant closures and exit-related costs and impairments of goodwill, definite and indefinite-lived intangible assets and property, fixtures and equipment. As a result of these and other factors, our financial results for any given quarter may not be indicative of the results that may be achieved for a full fiscal year.

ADDITIONAL INFORMATION

We make available, free of charge, through our internet website www.bloominbrands.com, our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, Proxy Statements and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, as soon as reasonably practicable after electronically filing such material with the Securities and Exchange Commission (“SEC”). You may read and copy any materials filed with the SEC at the Securities and Exchange Commission’s Public Reference Room at 100 F Street, NE, Washington, DC 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. This information is also available at www.sec.gov. The reference to these website addresses does not constitute incorporation by reference of the information contained on the websites and should not be considered part of this Report.

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Item 1A.    Risk Factors

The risk factors set forth below should be carefully considered. The risks described below are those that we believe are risks that we face that could materially and adversely affect our business, financial condition or results of operations, however, they are not the only risks facing us. Additional risks and uncertainties not currently known to us or those we currently view to be immaterial may also materially and adversely affect our business, financial condition or results of operations.

Risks Related to Our Business and Industry

We face significant competition for customers, real estate and employees and competitive pressure to adapt to changes in conditions driving customer traffic. Our inability to compete effectively may affect our traffic, sales and profit margins, which could adversely affect our business, financial condition and results of operations.

The restaurant industry is intensely competitive with a substantial number of restaurant operators that compete directly and indirectly with us in respect to price, service, location and food quality, and there are other well-established competitors with significant financial and other resources. There is also active competition for management personnel as well as attractive suitable real estate sites. Consumer tastes, nutritional and dietary trends, traffic patterns and the type, number and location of competing restaurants often affect the restaurant business, and our competitors may react more efficiently and effectively to those conditions. Further, we face growing competition from the supermarket industry, with the improvement of their “convenient meals” in the deli and prepared food sections, and from quick service and fast casual restaurants, as a result of higher-quality food and beverage offerings by those restaurants. If we are unable to continue to compete effectively, our traffic, sales and margins could decline and our business, financial condition and results of operations would be adversely affected.

Challenging economic conditions may have a negative effect on our business and financial results through lower consumer confidence and discretionary spending, availability and cost of credit, foreign currency exchange rates and other items.

Challenging economic conditions may negatively impact consumer confidence and discretionary spending and thus cause a decline in our cash flows from operations. For example, the ongoing impacts of high unemployment, continued reduced access to credit, financial market volatility and unpredictability, governmental spending and budget matters, other national, regional and local regulatory and economic conditions, gasoline prices, reduced disposable consumer income and consumer confidence have had a negative effect on discretionary consumer spending. This has negatively affected customer traffic and comparable restaurant sales for us and throughout our industry. We believe these factors and conditions are continuing to result in a challenging sales environment in the casual dining sector. If challenging economic conditions persist for an extended period of time or worsen, consumers might make long-lasting changes to their discretionary spending behavior, including dining out less frequently. The ability of the U.S. economy to continue to recover from these challenging economic conditions is likely to be affected by many national and international factors that are beyond our control, including current economic trends in Europe. Continued weakness in or a further worsening of the economy, generally or in a number of our markets, and our customers’ reactions to these trends could result in increased pressure with respect to our pricing, traffic levels, commodity costs and the continuation of our innovation and productivity initiatives, which could negatively impact our business and results of operations. These factors could also cause us to, among other things, reduce the number and frequency of new restaurant openings, close restaurants or delay remodeling of our existing restaurant locations. Further, poor economic conditions may force nearby businesses to shutdown, which could cause our restaurant locations to be less attractive due to diminished retail activity in the area.

In addition, as noted in our other risk factors, our high degree of leverage could increase our vulnerability to general economic and industry conditions and require that a substantial portion of cash flow from operations be dedicated to the payment of principal and interest on our indebtedness. Further, the availability of credit already arranged for under our revolving credit facilities and the cost and availability of future credit may be adversely impacted by economic challenges. Foreign currency exchange rates for the countries in which we operate may decline. In addition, we may

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experience interruptions in supplies and other services from our third-party vendors as a result of market conditions. These disruptions in the economy are beyond our control, and there is no guarantee that any government response will restore consumer confidence, stabilize the economy or increase the availability of credit.

Loss of key management personnel could hurt our business and inhibit our ability to operate and grow successfully.

Our success will continue to depend, to a significant extent, on our leadership team and other key management personnel. If we are unable to attract and retain sufficiently experienced and capable management personnel, our business and financial results may suffer. If members of our leadership team or other key management personnel leave, we may have difficulty replacing them, and our business may suffer. There can be no assurance that we will be able to successfully attract and retain our leadership team and other key management personnel that we need.

Risks associated with our expansion plans may have adverse effects on our ability to increase revenues.

As part of our business strategy, we intend to continue to expand our current portfolio of restaurants. Current development schedules call for the construction of between 55 and 60 new system-wide locations in 2014. A variety of factors could cause the actual results and outcome of those expansion plans to differ from the anticipated results, including among other things:
 	 	
•	the availability of attractive sites for new restaurants and the ability to acquire or lease appropriate real estate at those sites at acceptable prices;	

•	our ability to generate sufficient funds from operations or to obtain acceptable financing to support our development;	

•	our ability to obtain all required governmental permits, including zoning approvals and liquor licenses, on a timely basis;	

•	the impact of moratoriums or approval processes of state, local or foreign governments, which could result in significant delays;	

•	our ability to obtain all necessary contractors and sub-contractors;	

•	union activities such as picketing and hand billing, which could delay construction;	

•	our ability to negotiate suitable lease terms;	

•	our ability to recruit and train skilled management and restaurant employees;	

•	our ability to receive the premises from the landlord’s developer without any delays;	

•	weather, natural disasters and disasters beyond our control resulting in construction delays; and	

•	consumer tastes in new geographic regions and acceptance of our restaurant concepts.	

Some of our new restaurants may take several months to reach planned operating levels due to lack of market awareness, start-up costs and other factors typically associated with new restaurants. There is also the possibility that new restaurants may attract customers away from other restaurants we own, thereby reducing the revenues of those existing restaurants.

Development rates for each concept may differ significantly. The development of each concept may not be as successful as our experience in the past. It is difficult to estimate the performance of newly opened restaurants. Earnings achieved to date by restaurants open for less than two years may not be indicative of future operating results. Should enough of these new restaurants not meet targeted performance, it could have a material adverse effect on our operating results.

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We could face labor shortages that could slow our growth and adversely impact our ability to operate our restaurants.

Our success depends in part upon our ability to attract, motivate and retain a sufficient number of qualified employees, including managing partners, restaurant managers, kitchen staff and servers, necessary to keep pace with our anticipated expansion schedule and meet the needs of our existing restaurants. A sufficient number of qualified individuals of the requisite caliber to fill these positions may be in short supply in some communities. Competition in these communities for qualified staff could require us to pay higher wages and provide greater benefits. Any inability to recruit and retain qualified individuals may also delay the planned openings of new restaurants and could adversely impact our existing restaurants. Any such inability to retain or recruit qualified employees, increased costs of attracting qualified employees or delays in restaurant openings could adversely affect our business and results of operations.

Although we have no collective bargaining agreements covering U.S. employees, certain of our employees located in Brazil and Mexico are covered by either industry-sponsored and/or state-sponsored collective bargaining arrangements. Additional employees in our restaurants located outside of the United States may become subject to collective bargaining arrangements in the future. Approximately 13% of our employees are located in foreign jurisdictions as of December 31, 2013. We believe that our present labor relations with all of our international employees are good, however, any work stoppages or other concerted actions by these employees could adversely affect our business and results of operations.

Our business is subject to seasonal fluctuations and past results are not indicative of future results.

Historically, customer traffic patterns for our established restaurants are generally highest in the first quarter of the year and lowest in the third quarter of the year. Additionally, holidays may affect sales volumes seasonally in some of the markets in which we operate. Our quarterly results have been and will continue to be affected by the timing of new restaurant openings and their associated pre-opening costs, as well as restaurant closures and exit-related costs and impairments of goodwill, intangible assets and property, fixtures and equipment. As a result of these and other factors, our financial results for any quarter may not be indicative of the results that may be achieved for a full fiscal year.

Significant adverse weather conditions and other disasters could negatively impact our results of operations.

Adverse weather conditions and natural disasters, such as regional winter storms, floods, major hurricanes and earthquakes, severe thunderstorms and other disasters, such as oil spills or water supply disruptions, could negatively impact our results of operations. Temporary and prolonged restaurant closures may occur and customer traffic may decline due to the actual or perceived effects from these events.

We have limited control with respect to the operations of our franchisees, which could have a negative impact on our business.

Our franchisees are obligated to operate their restaurants according to the specific guidelines we set forth. We provide training opportunities to these franchisees to fully integrate them into our operating strategy. However, since we do not have control over these restaurants, we cannot give assurance that there will not be differences in product quality or that there will be adherence to all of our guidelines at these restaurants. The failure of these restaurants to operate effectively or in accordance with our guidelines could adversely affect our cash flows from those operations or have a negative impact on our reputation or our business.

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Our failure to comply with government regulation, and the costs of compliance or non-compliance, could adversely affect our business.

We are subject to various federal, state, local and foreign laws affecting our business. Each of our restaurants is subject to licensing and regulation by a number of governmental authorities, which may include, among others, alcoholic beverage control, health and safety, nutritional menu labeling, health care, environmental and fire agencies in the state, municipality or country in which the restaurant is located. Difficulty in obtaining or failing to obtain the required licenses or approvals could delay or prevent the development of a new restaurant in a particular area. Additionally, difficulties or inabilities to retain or renew licenses, or increased compliance costs due to changed regulations, could adversely affect operations at existing restaurants.

Approximately 15% of our consolidated restaurant sales are attributable to the sale of alcoholic beverages. Alcoholic beverage control regulations require each of our restaurants to apply to a state authority and, in certain locations, county or municipal authorities for a license or permit to sell alcoholic beverages on the premises and to provide service for extended hours and on Sundays. Typically, licenses must be renewed annually and may be revoked or suspended for cause at any time. Alcoholic beverage control regulations relate to numerous aspects of daily operations of our restaurants, including minimum age of patrons and employees, hours of operation, advertising, training, wholesale purchasing, inventory control and handling and storage and dispensing of alcoholic beverages. The failure of a restaurant to obtain or retain liquor or food service licenses would adversely affect the restaurant’s operations. Additionally, we are subject in certain states to “dram shop” statutes, which generally provide a person injured by an intoxicated person the right to recover damages from an establishment that wrongfully served alcoholic beverages to the intoxicated person.

Our restaurant operations are also subject to federal and state labor laws, including the Fair Labor Standards Act, governing such matters as minimum wages, overtime, tip credits and worker conditions. Our employees who receive tips as part of their compensation, such as servers, are generally paid at a minimum wage rate, after giving effect to applicable tip credits. We rely on our employees to accurately disclose the full amount of their tip income, and we base our FICA tax reporting on the disclosures provided to us by such tipped employees. In September 2013, the IRS informed us that it proposes to issue an audit adjustment for the employer’s share of FICA taxes related to cash tips allegedly received and unreported by our tipped employees during calendar year 2010, for which we recorded a liability in the third quarter of 2013 for $5.0 million. The cash tips allegedly unreported by the tipped employees are based on an IRS estimate of the aggregate amount of tips directly received by tipped employees from our customers. Subsequently, we have had additional communications with the IRS representatives, which indicate that the scope of the proposed adjustment will be expanded to include the 2011 and 2012 periods. As a result, we have reassessed the established liability balance and recorded an additional $12.0 million in the fourth quarter of 2013. As of December 31, 2013, we had $5.0 million and $12.0 million recorded in Accrued and other current liabilities and Other long-term liabilities, net, respectively, in our Consolidated Balance Sheet at December 31, 2013. Our other personnel, such as our kitchen staff, are typically paid in excess of minimum wage. As significant numbers of our food service and preparation personnel are paid at rates related to the applicable minimum wage, further increases in the minimum wage, including the recent proposal by President Obama to increase the federal minimum wage by $1.75 per hour and index future increases to inflation, or other changes in these laws could increase our labor costs. Our ability to respond to minimum wage increases by increasing menu prices will depend on the responses of our competitors and customers. Our distributors and suppliers also may be affected by higher minimum wage and benefit standards and tracking costs, which could result in higher costs for goods and services supplied to us.

Further, we continue to assess our health care benefit costs. Due to the breadth and complexity of federal health care legislation and the staggered implementation of its provisions and corresponding regulations, it is difficult to predict the overall impact of the health care legislation on our business over the coming years. Although these laws do not mandate that employers offer health insurance to all employees who are eligible under the legislation, beginning in 2015 penalties will be assessed on large employers who do not offer health insurance that meets certain affordability or benefit requirements. We believe our plans currently meet these requirements, however, providing health insurance benefits to a potentially larger proportion of our employees, or the payment of penalties if the specified level of coverage is not provided at an affordable cost to employees, could have a material adverse effect on our results of operations

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and financial position. These laws subject employers to significant reporting and notice requirements from the Departments of Treasury, Labor and Health and Human Services, which can also impact compliance costs as we continue to gather and submit information. Significant increases in costs due either to the recent federal legislation or general health care cost increases could adversely impact our operating results, as there is no assurance that we would be able to absorb and/or pass through those costs.

The PPACA enacted in March 2010 requires chain restaurants with 20 or more locations in the United States to comply with federal nutritional disclosure requirements. Although the FDA published proposed regulations to implement the nutritional menu labeling provisions of the PPACA in April 2011, the agency has delayed the release of final regulations implementing these requirements. A number of states, counties and cities have also enacted menu labeling laws requiring multi-unit restaurant operators to disclose certain nutritional information to customers, or have enacted legislation restricting the use of certain types of ingredients in restaurants. Although the federal legislation is intended to preempt conflicting state or local laws on menu labeling, until we are required to comply with the federal law we may be subject to a patchwork of state and local laws and regulations regarding nutritional content disclosure requirements. Many of these requirements are inconsistent or are interpreted differently from one jurisdiction to another. The effect of such labeling requirements on consumer choices, if any, is unclear at this time. We may also become subject to other legislation or regulation seeking to tax or regulate high fat and high sodium foods, particularly in the U.S., which could be costly to comply with.

There is also a potential for increased regulation of food in the United States under the recent changes in the HACCP system requirements. HACCP refers to a management system in which food safety is addressed through the analysis and control of potential hazards from production, procurement and handling, to manufacturing, distribution and consumption of the finished product. Many states have required restaurants to develop and implement HACCP Systems and the United States government continues to expand the sectors of the food industry that must adopt and implement HACCP programs. For example, the FSMA, enacted in January 2011, granted the FDA new authority regarding the safety of the entire food system, including through increased inspections and mandatory food recalls. Although restaurants are specifically exempted from or not directly implicated by some of these new requirements, we anticipate that the new requirements may impact our industry. Additionally, our suppliers may initiate or otherwise be subject to food recalls that may impact the availability of certain products, result in adverse publicity or require us to take actions that could be costly for us or otherwise harm our business.

We are subject to the ADA, which, among other things, requires our restaurants to meet federally mandated requirements for the disabled. The ADA prohibits discrimination in employment and public accommodations on the basis of disability. Under the ADA, we could be required to expend funds to modify our restaurants to provide service to, or make reasonable accommodations for the employment of, disabled persons. In addition, our employment practices are subject to the requirements of the Immigration and Naturalization Service relating to citizenship and residency. Government regulations could affect and change the items we procure for resale such as commodities. We may also become subject to legislation or regulation seeking to tax or regulate high fat and high sodium foods, particularly in the United States, which could be costly to comply with. Our results can be impacted by tax legislation and regulation in the jurisdictions in which we operate and by accounting standards or pronouncements.

We rely heavily on information technology in our operations and any material failure, weakness, interruption or breach of security could prevent us from effectively operating our business.

We rely heavily on information systems across our operations and corporate functions, including point-of-sale processing in our restaurants, management of our supply chain, payment of obligations, collection of cash, data warehousing to support analytics, finance and accounting systems and other various processes and procedures, some of which are handled by third parties. Our ability to efficiently and effectively manage our business depends significantly on the reliability and capacity of these systems. The failure of these systems to operate effectively, maintenance problems, upgrading or transitioning to new platforms, or a breach in security of these systems could result in delays in customer service and reduce efficiency in our operations. Remediation of such problems could result in significant unplanned capital investments.

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In 2013, we began a project to transform its technology platforms and enhance its business information and transaction systems with SAP software. The project includes implementation of a new general ledger, consolidations system and reporting tools. We implemented SAP in the U.S. during the first quarter of 2014 to support both operating and accounting activities.

Large-scale system implementations are complex and time-consuming projects that are capital intensive and can span several months or even years. Certain business and financial processes also required transformation in order to effectively leverage the system’s benefits. Our business and results of operations may be adversely affected if we experience system usage problems and/or cost overruns as a result of implementing the new system, or if associated process changes do not give rise to the benefits that we expect. Additionally, if the system does not operate as intended, it could adversely affect the effectiveness of our internal controls over financial reporting. There may be other challenges and risks as we upgrade and standardize our systems and processes on a worldwide basis.

Any such events described above could result in legal claims or proceedings, liability or penalties under privacy laws, disruption in operations, and damage to our reputation, which could adversely affect our business. Security breaches and other disruptions to our information technology infrastructure could interfere with our operations, compromise information belonging to us, our customers, our employees and our suppliers, and expose us to liability which could adversely impact our business and reputation.

Security breaches of confidential customer information or personal employee information may adversely affect our business.

The majority of our restaurant sales are by credit or debit cards. Other restaurants and retailers have experienced security breaches in which credit and debit card information or other personal information of their customers has been stolen.  Such a breach could result in widespread negative publicity and a loss of customers. Despite our implementation of security measures, all of our technology systems are vulnerable to damage, disability or failures due to physical theft, fire, power loss telecommunications failure or other catastrophic events, as well as from internal and external security breaches, employee error or malfeasance, denial of service attacks, viruses, worms and other disruptive problems caused by hackers. We also maintain certain personal information regarding our employees. If our technology systems were to fail, and we were unable to recover in a timely way, we could experience an interruption in our operations and incur remediation costs which could have a material adverse effect on our financial condition and results of operations. Furthermore, to the extent that some of our worldwide reporting systems require or rely on manual processes, it could increase the risk of a breach.

We may in the future become subject to lawsuits or other proceedings for purportedly fraudulent transactions arising out of the actual or alleged theft of our customers’ credit or debit card information or if customer or employee information is obtained by unauthorized persons or used inappropriately.  Any such claim or proceeding, or any adverse publicity resulting from such an event, may have a material adverse effect on our business.

Changes in tax laws and unanticipated tax liabilities could adversely affect the taxes we pay and our profitability.

We are subject to income and other taxes in the United States and numerous foreign jurisdictions. Our effective income tax rate in the future could be adversely affected by a number of factors, including: changes in the mix of earnings in countries with different statutory tax rates; changes in the valuation of deferred tax assets and liabilities; changes in tax laws; the outcome of income tax audits; and any repatriation of non-U.S. earnings for which we have not previously provided for U.S. taxes. Although we believe our tax estimates are reasonable, the final determination of tax audits could be materially different from our historical income tax provisions and accruals. The results of a tax audit could have a material effect on our income tax provision, results of operations or cash flows in the period or periods for which that determination is made. In addition, our effective income tax rate and our results may be impacted by our ability to realize deferred tax benefits and by any release of our valuation allowances applied to our existing deferred tax assets.

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We face a variety of risks associated with doing business in foreign markets that could have a negative impact on our financial performance.

We have a significant number of Outback Steakhouse restaurants outside the United States, and we intend to continue our efforts to grow internationally. Although we believe we have developed an appropriate support structure for international operations and growth, there is no assurance that international operations will be profitable or international growth will continue.

Our foreign operations are subject to all of the same risks as our domestic restaurants, as well as additional risks including, among others, international economic, political, social and legal conditions and the possibility of instability and unrest, differing cultures and consumer preferences, diverse government regulations and tax systems, corruption, anti-American sentiment, the ability to source high quality ingredients and other commodities in a cost-effective manner, uncertain or differing interpretations of rights and obligations in connection with international franchise agreements and the collection of ongoing royalties from international franchisees, the availability and costs of land and construction, and the availability of experienced management, appropriate franchisees and area operating partners.

Currency regulations and fluctuations in exchange rates could also affect our performance. We have direct investments in restaurants in South Korea, Brazil, Hong Kong, China and Mexico, as well as international franchises, in a total of 21 countries and Guam. As a result, we may experience losses from foreign currency translation, and such losses could adversely affect our overall sales and earnings.

We are subject to governmental regulation throughout the world, including antitrust and tax requirements, anti-boycott regulations, import/export/customs regulations and other international trade regulations, the USA Patriot Act and the Foreign Corrupt Practices Act. Any new regulatory or trade initiatives could impact our operations in certain countries. Failure to comply with any such legal requirements could subject us to monetary liabilities and other sanctions, which could harm our business, results of operations and financial condition.

Increased commodity, energy and other costs could decrease our profit margins or cause us to limit or otherwise modify our menus, which could adversely affect our business.

The performance of our restaurants depends on our ability to anticipate and react to changes in the price and availability of food commodities, including among other things beef, chicken, seafood, butter, cheese and produce. Prices may be affected due to market changes, increased competition, the general risk of inflation, shortages or interruptions in supply due to weather, disease or other conditions beyond our control, or other reasons. Increased prices or shortages could affect the cost and quality of the items we buy or require us to raise prices or limit our menu options. For example, in 2013, commodity costs increased by approximately 3.2% and, as a result, we increased our prices at each of our concepts in the range of 2.1% to 3.4%. These events, combined with other more general economic and demographic conditions, could impact our pricing and negatively affect our sales and profit margins.

The performance of our restaurants is also adversely affected by increases in the price of utilities, such as natural gas, whether as a result of inflation, shortages or interruptions in supply, or otherwise. We use derivative instruments to mitigate some of our overall exposure to material increases in natural gas prices. We do not apply hedge accounting to these instruments, and changes in the fair value of the derivative instruments are marked-to-market through earnings in the period of change. To date, the effects of these derivative instruments have been immaterial to our financial statements for all periods presented.

Our business also incurs significant costs for insurance, labor, marketing, taxes, real estate, borrowing and litigation, all of which could increase due to inflation, changes in laws, competition or other events beyond our control.

Our ability to respond to increased costs by increasing menu prices or by implementing alternative processes or products will depend on our ability to anticipate and react to such increases and other more general economic and demographic conditions, as well as the responses of our competitors and customers. All of these things may be difficult to predict and beyond our control. In this manner, increased costs could adversely affect our performance.

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Infringement of our intellectual property could diminish the value of our restaurant concepts and harm our business.

We regard our service marks, including “Outback Steakhouse,” “Carrabba’s Italian Grill,” “Bonefish Grill,” “Fleming’s Prime Steakhouse and Wine Bar” and “Roy’s” and our “Bloomin’ Onion” trademark as having significant value and as being important factors in the marketing of our restaurants. We have also obtained trademarks for several of our other menu items and for various advertising slogans. In addition, the overall layout, appearance and designs of our restaurants are valuable assets. We believe that these and other intellectual property are valuable assets that are critical to our success. We rely on a combination of protections provided by contracts, copyrights, trademarks, and other common law rights, such as trade secret and unfair competition laws, to protect our restaurants and services from infringement. We have registered certain trademarks and service marks and have other registration applications pending in the United States and foreign jurisdictions. However, not all of the trademarks or service marks that we currently use have been registered in all of the countries in which we do business, and they may never be registered in all of these countries. There may not be adequate protection for certain intellectual property such as the overall appearance of our restaurants. We are aware of names and marks similar to our service marks being used by other persons in certain geographic areas in which we have restaurants. Although we believe such uses will not adversely affect us, further or currently unknown unauthorized uses or other misappropriation of our trademarks or service marks could diminish the value of our brands and restaurant concepts and may adversely affect our business. We may be unable to detect such unauthorized use of, or take appropriate steps to enforce, our intellectual property rights.

Effective intellectual property protection may not be available in every country in which we have or intend to open or franchise a restaurant. Failure to adequately protect our intellectual property rights could damage or even destroy our brands and impair our ability to compete effectively. Even where we have effectively secured statutory protection for intellectual property, our competitors may misappropriate our intellectual property and our employees, consultants and suppliers may breach their obligations not to reveal our confidential information, including trade secrets. Although we have taken appropriate measures to protect our intellectual property, there can be no assurance that these protections will be adequate or that our competitors will not independently develop products or concepts that are substantially similar to our restaurants and services. Despite our efforts, it may be possible for third parties to reverse-engineer, otherwise obtain, copy, and use information that we regard as proprietary. Furthermore, defending or enforcing our trademark rights, branding practices and other intellectual property, and seeking injunctions against and/or compensation for misappropriation of confidential information, could result in the expenditure of significant resources.

Restaurant companies, including ours, have been the target of class action lawsuits and other proceedings alleging, among other things, violations of federal and state workplace and employment laws. Proceedings of this nature are costly, divert management attention and, if successful, could result in our payment of substantial damages or settlement costs.

Our business is subject to the risk of litigation by employees, consumers, suppliers, franchisees, minority investors, stockholders or others through private actions, class actions, administrative proceedings, regulatory actions or other litigation. The outcome of litigation, particularly class action and regulatory actions, is difficult to assess or quantify. In recent years, we and other restaurant companies have been subject to lawsuits, including class action lawsuits, alleging violations of federal and state laws regarding workplace and employment matters, discrimination and various federal and state wage and hour laws. These claims have related to, among other things, employee meal deductions, the sharing of tips among certain employees, overtime eligibility of assistant managers, failure to pay for all hours worked, failure to provide meal and rest periods and termination compensation. A number of these lawsuits have resulted in the payment of substantial damages by the defendants. If we are required to pay substantial damages and expenses as a result of these or other types of lawsuits our business and results of operations would be adversely affected.

Occasionally, our customers file complaints or lawsuits against us alleging that we are responsible for some illness or injury they suffered at or after a visit to one of our restaurants, including actions seeking damages resulting from food-borne illness and relating to notices with respect to chemicals contained in food products required under state law. We are also subject to a variety of other claims from third parties arising in the ordinary course of our business, including

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personal injury claims, contract claims and claims alleging violations of federal and state laws. In addition, our restaurants are subject to state “dram shop” or similar laws which generally allow a person to sue us if that person was injured by a legally intoxicated person who was wrongfully served alcoholic beverages at one of our restaurants. The restaurant industry has also been subject to a growing number of claims that the menus and actions of restaurant chains have led to the obesity of certain of their customers. We may also be subject to lawsuits from our employees, the U.S. Equal Employment Opportunity Commission or others alleging violations of federal and state laws regarding workplace and employment matters, discrimination and similar matters.

Regardless of whether any claims against us are valid or whether we are liable, claims may be expensive to defend and may divert time and money away from our operations. In addition, they may generate negative publicity, which could reduce customer traffic and sales. Although we maintain what we believe to be adequate levels of insurance, insurance may not be available at all or in sufficient amounts to cover any liabilities with respect to these or other matters. A judgment or other liability in excess of our insurance coverage for any claims or any adverse publicity resulting from claims could adversely affect our business and results of operations.

Our insurance policies may not provide adequate levels of coverage against all claims, and fluctuating insurance requirements and costs could negatively impact our profitability.

We are self-insured, or carry insurance programs with specific retention levels or deductibles, for a significant portion of our risks and associated liabilities with respect to workers’ compensation, general liability, liquor liability, employment practices liability, property, health benefits and other insurable risks. However, there are types of losses we may incur that cannot be insured against or that we believe are not commercially reasonable to insure. These losses, if they occur, could have a material and adverse effect on our business and results of operations. Additionally, health insurance costs in general have risen significantly over the past few years and are expected to continue to increase. These increases could have a negative impact on our profitability, and there can be no assurance that we will be able to successfully offset the effect of such increases with plan modifications and cost control measures, additional operating efficiencies or the pass-through of such increased costs to our customers or employees.

Conflict or terrorism could negatively affect our business.

We cannot predict the effects of actual or threatened armed conflicts or terrorist attacks, efforts to combat terrorism, military action against any foreign state or group located in a foreign state or heightened security requirements on local, regional, national, or international economies or consumer confidence. Such events could negatively affect our business, including by reducing customer traffic or the availability of commodities.

If our advertising and marketing programs are unsuccessful in maintaining or driving increased customer traffic or are ineffective in comparison to those of our competitors, our results of operations could be adversely affected.

We conduct ongoing promotion-based brand awareness advertising campaigns and customer loyalty programs. If these programs are not successful or conflict with evolving customer preferences, we may not increase or maintain our customer traffic and will incur expenses without the benefit of higher revenues. In addition, if our competitors increase their spending on marketing and advertising programs, or develop more effective campaigns, this could have a negative effect on our brand relevance, customer traffic and results of operations.

Unfavorable publicity could harm our business by reducing demand for our concepts or specific menu offerings.

Our business could be negatively affected by publicity resulting from complaints or litigation, either against us or other restaurant companies, alleging poor food quality, food-borne illness, personal injury, adverse health effects (including obesity) or other concerns. Regardless of the validity of any such allegations, unfavorable publicity relating to any number of restaurants or even a single restaurant could adversely affect public perception of the entire brand.

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Additionally, unfavorable publicity towards a food product generally could negatively impact our business. For example, publicity regarding health concerns or outbreaks of disease in a food product, such as bovine spongiform encephalopathy (also known as “mad cow” disease), could reduce demand for our menu offerings. These factors could have a material adverse effect on our business.

Consumer reaction to public health issues, such as an outbreak of flu viruses or other diseases, could have an adverse effect on our business.

Our business could be harmed if the United States or other countries in which we operate experience an outbreak of flu viruses or other diseases. If a virus is transmitted by human contact, our employees or customers could become infected or could choose or be advised to avoid gathering in public places. This could adversely affect our restaurant traffic, our ability to adequately staff our restaurants, our ability to receive deliveries on a timely basis or our ability to perform functions at the corporate level. Our business could also be negatively affected if mandatory closures, voluntary closures or restrictions on operations are imposed in the jurisdictions in which we operate. Even if such measures are not implemented and a virus or other disease does not spread significantly, the perceived risk of infection or significant health risk may have a material adverse effect on our business.

Food safety and food-borne illness concerns throughout the supply chain may have an adverse effect on our business by reducing demand and increasing costs.

Food safety issues could be caused by food suppliers or distributors and, as a result, be out of our control. In addition, regardless of the source or cause, any report of food-borne illnesses and other food safety issues including food tampering or contamination at one of our restaurants could adversely affect the reputation of our brands and have a negative impact on our sales. Even instances of food-borne illness, food tampering or food contamination occurring solely at restaurants of our competitors could result in negative publicity about the food service industry generally and adversely impact our sales. The occurrence of food-borne illnesses or food safety issues could also adversely affect the price and availability of affected ingredients, resulting in higher costs and lower margins.

The food service industry is affected by consumer preferences and perceptions, including the increasing prevalence of food allergies. Changes in these preferences and perceptions may lessen the demand for our products, which would reduce sales and harm our business.

Food service businesses are affected by changes in consumer tastes and demographic trends. For instance, if prevailing health or dietary preferences cause consumers to avoid steak and other products we offer in favor of foods that are perceived as more healthy, our business and operating results would be harmed. The increasing prevalence of food allergies and consumers with vegan and gluten-free diets, for example, may cause customers to choose to dine out less frequently or choose other restaurants with different menu options.

Inappropriate use of social media vehicles presents new risks.
The inappropriate use of certain media vehicles could cause brand damage or information leakage or could lead to legal implications from the improper collection of personal information. Negative posts or comments about us on a social networking website could seriously damage our reputation. In addition, the disclosure of our non-public sensitive information through external media channels could lead to information loss as there might not be structured processes in place to secure and archive this information. Our inability or failure to recognize, respond to and effectively manage the accelerated impact of social media could materially adversely impact our business.

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We have a limited number of suppliers for our major products and rely on one custom distribution company for our national distribution program in the U.S. If our suppliers or custom distributor are unable to fulfill their obligations under their contracts or we are unable to develop or maintain relationships with these or new suppliers or distributors, if needed, we could encounter supply shortages and incur higher costs.

We have a limited number of suppliers for our major products, such as beef. In 2013, we purchased more than 90% of our beef raw materials from four beef suppliers that represent approximately 90% of the total beef marketplace in the U.S. Due to the nature of our industry, we expect to continue to purchase a substantial amount of our beef from a small number of suppliers. In addition, we use one distribution company to provide distribution services in the U.S. Although we have not experienced significant problems with our suppliers or distributor, if our suppliers or distributor are unable to fulfill their obligations under their contracts, we could encounter supply shortages and incur higher costs.

In addition, if we are unable to maintain current purchasing terms or ensure service availability with our suppliers and distributor, we may lose customers and experience an increase in costs in seeking alternative supplier services. The failure to develop and maintain supplier and distributor relationships and any resulting disruptions to the provision of food and other supplies to our restaurant locations could adversely affect our operating results.
 
Shortages or interruptions in the supply or delivery of fresh food products could adversely affect our operating results.

We are dependent on frequent deliveries of fresh food products that meet our specifications. Shortages or interruptions in the supply of fresh food products caused by unanticipated demand, problems in production or distribution, inclement weather or other conditions could adversely affect the availability, quality and cost of ingredients, which would adversely affect our operating results.

We outsource certain accounting processes to a third-party vendor, which subjects us to many risks that could disrupt our business, increase our costs and negatively impact our internal control processes.

In early 2011, we began to outsource certain accounting processes to a third-party vendor. The third-party vendor may not be able to handle the volume of activity or perform the quality of service that we have thus far achieved at a cost-effective rate, which could adversely affect our business. The decision to outsource was made based on cost savings initiatives; however, we may not achieve these savings because of unidentified intangible costs and legal and regulatory matters, which could adversely affect our results of operations or financial condition. In addition, the performance of certain business processes in an outsourced capacity could negatively impact our internal control processes.

An impairment in the carrying value of our goodwill or other intangible assets could adversely affect our financial condition and results of operations.

We test goodwill for impairment in the second quarter of each fiscal year and whenever events or changes in circumstances indicate that impairment may have occurred. A significant amount of judgment is involved in determining if an indication of impairment exists. Factors may include, among others:

•	a significant decline in our expected future cash flows;	

•	a significant adverse change in legal factors or in the business climate;	

•	unanticipated competition;	

•	the testing for recoverability of a significant asset group within a reporting unit; and	

•	slower growth rates.	

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Any adverse change in these factors would have a significant impact on the recoverability of these assets and negatively affect our financial condition and results of operations. Prior to performing a quantitative test comparing the fair value of the reporting units to their carrying amounts, we may elect to perform a qualitative assessment. This qualitative assessment is referred to as a “step zero” approach and allows us the option to assess qualitative factors to determine whether the existence of events or circumstances leads to the determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. In considering the step zero approach, we evaluate factors including, but not limited to, macro-economic conditions, market and industry conditions, commodity cost fluctuations, competitive environment, share price performance, results of prior impairment tests, operational stability and the overall financial performance of the reporting units. If, based on the review of the qualitative factors, we determine there is sufficient evidence to support a more likely than not (greater than 50%) probability that the fair value of a reporting unit is greater than its carrying value, we may skip the two-step quantitative impairment test.

In the two-step quantitative impairment test, we first compare the carrying value of a reporting unit, including goodwill, to the fair value of the reporting unit. Carrying value is based on the assets and liabilities associated with the operations of that reporting unit. If the carrying value is less than the fair value, no impairment exists. If the carrying value is higher than the fair value, there is an indication of impairment and a second step is required to measure a goodwill impairment loss, if any. We are required to record a non-cash impairment charge if the testing performed indicates that goodwill has been impaired.

We evaluate our other intangible assets, primarily the Outback Steakhouse (domestic and international), Carrabba’s Italian Grill, Bonefish Grill, Fleming’s Prime Steakhouse and Wine Bar and Roy’s trademarks or trade names, to determine if they are definite or indefinite-lived. Reaching a determination on useful life requires significant judgments and assumptions regarding the future effects of obsolescence, demand, competition, other economic factors (such as the stability of the industry, legislative action that results in an uncertain or changing regulatory environment, and expected changes in distribution channels), the level of required maintenance expenditures, and the expected lives of other related groups of assets.

As with goodwill, we test our indefinite-lived intangible assets for impairment in the second quarter of each fiscal year and whenever events or changes in circumstances indicate that their carrying value may not be recoverable. We estimate the fair value of these indefinite-lived intangible assets based on an income valuation model using the relief from royalty method, which requires assumptions related to projected revenues from our annual long-range plan, assumed royalty rates that could be payable if we did not own the assets and a discount rate.

During the years ended December 31, 2013, 2012 and 2011, we did not record any goodwill or material intangible asset impairment charges. However, during the year ended December 31, 2009, we recorded goodwill and intangible asset impairment charges of $58.1 million and $43.7 million, respectively. We cannot accurately predict the amount and timing of any impairment of assets. Should the value of goodwill or other intangible assets become impaired in the future, there could be an adverse effect on our financial condition and results of operations.

Changes to estimates related to our property, fixtures and equipment and definite-lived intangible assets or operating results that are lower than our current estimates at certain restaurant locations may cause us to incur impairment charges on certain long-lived assets, including reacquired franchise rights, which may adversely affect our results of operations.

In accordance with accounting guidance as it relates to the impairment of long-lived assets, we make certain estimates and projections with regard to individual restaurant operations, as well as our overall performance, in connection with our impairment analyses for long-lived assets. When impairment triggers are deemed to exist for any location, the estimated undiscounted future cash flows are compared to its carrying value. If the carrying value exceeds the undiscounted cash flows, an impairment charge equal to the difference between the carrying value and the sum of the discounted cash flows is recorded. The projections of future cash flows used in these analyses require the use of judgment and a number of estimates and projections of future operating results, including projected growth rates and the appropriate period over which to assume asset recovery. If actual results differ from our estimates, additional charges

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for asset impairments may be required in the future. If impairment charges are significant, our results of operations could be adversely affected.

The possibility of future misstatement exists due to inherent limitations in our control systems, which could adversely affect our business.

We cannot be certain that our internal control over financial reporting and disclosure controls and procedures will prevent all possible error and fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of error or fraud, if any, in our company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake, which could have an adverse impact on our business.

Our reported financial results may be adversely affected by changes in accounting principles applicable to us.

Generally accepted accounting principles in the U.S. are subject to interpretation by the Financial Accounting Standards Board, or FASB, the American Institute of Certified Public Accountants, the Securities and Exchange Commission and various bodies formed to promulgate and interpret appropriate accounting principles. A change in these principles or interpretations could have a significant effect on our reported financial results, and could affect the reporting of transactions completed before the announcement of a change, such as standards relating to leasing. In addition, the SEC has announced a multi-year plan that could ultimately lead to the use of International Financial Reporting Standards by U.S. issuers in their SEC filings. Any such change could have a significant effect on our reported financial results.

We are a holding company and rely on dividends, distributions and other payments, advances and transfers of funds from our subsidiaries to fund our operations, which could prevent us from meeting our obligations.

We have no direct operations and derive all of our cash flow from our subsidiaries. Because we conduct our operations through our subsidiaries, we depend on those entities for dividends and other payments or distributions to fund our operations. Our ability to obtain funds from our subsidiaries is limited by our debt agreements.  Our inability to comply with these covenants and the deterioration of the earnings from, or other available assets of, our subsidiaries for any reason could limit or impair their ability to pay dividends or other distributions to us.

Risks Related to Our Indebtedness

Our substantial leverage could adversely affect our ability to raise additional capital to fund our operations, limit our ability to react to changes in the economy or our industry and expose us to interest rate risk in connection with our variable-rate debt.

We are highly leveraged. As of December 31, 2013, our total indebtedness was approximately $1.4 billion. As of December 31, 2013, we also had approximately $193.4 million in available unused borrowing capacity under our revolving credit facility (after giving effect to undrawn letters of credit of approximately $31.6 million).

Our high degree of leverage could have important consequences, including:

•	making it more difficult for us to make payments on indebtedness;	

•	increasing our vulnerability to general economic, industry and competitive conditions;	

•	increasing our cost of borrowing;	

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•	requiring a substantial portion of cash flow from operations to be dedicated to the payment of principal and interest on our indebtedness, thereby reducing our ability to use our cash flow to fund our operations, capital expenditures and future business opportunities;	

•	exposing us to the risk of increased interest rates because certain of our borrowings under our senior secured credit facilities and commercial mortgage-backed securities loans are at variable rates of interest;	

•	restricting us from making strategic acquisitions or causing us to make non-strategic divestitures;	

•	limiting our ability to obtain additional financing for working capital, capital expenditures, restaurant development, debt service requirements, acquisitions and general corporate or other purposes; and	

•	limiting our ability to adjust to changing market conditions and placing us at a competitive disadvantage compared to our competitors who may not be as highly leveraged.	

We may incur substantial additional indebtedness in the future, subject to the restrictions contained in our senior secured credit facilities entered into in October 2012 (the “Credit Facilities”) and the commercial mortgage-backed securities loans entered into in March 2012 (the “2012 CMBS Loan”). If new indebtedness is added to our current debt levels, the related risks that we now face could increase.

Approximately $935.0 million of debt outstanding under our Credit Facilities and approximately $48.7 million of our 2012 CMBS Loan bear interest based on a floating rate index. An increase in these floating rates could cause a material increase in our interest expense.

Our debt agreements contain restrictions that limit our flexibility in operating our business.

We are a holding company and conduct our operations through our subsidiaries, certain of which have incurred their own indebtedness. Our subsidiaries’ debt agreements contain various covenants that limit our ability to obtain funds from our subsidiaries through dividends, loans or advances. In addition, certain of our debt agreements limit our and our subsidiaries’ ability to, among other things, incur or guarantee additional indebtedness, pay dividends on, redeem or repurchase our capital stock, make certain acquisitions or investments, incur or permit to exist certain liens, enter into transactions with affiliates or sell our assets to, merge or consolidate with or into, another company. Our debt agreements require us to satisfy certain financial tests and ratios. Our ability to satisfy such tests and ratios may be affected by events outside of our control.

If we breach the covenants under our debt agreements, the lenders could elect to declare all amounts outstanding under the agreements to be immediately due and payable and terminate all commitments to extend further credit. If we are unable to repay those amounts, the lenders under the Credit Facilities and the 2012 CMBS Loan could proceed against the collateral granted to them to secure that indebtedness. We have pledged substantially all of our assets as collateral under our Credit Facilities and the 2012 CMBS Loan. If the lenders under the Credit Facilities and the 2012 CMBS Loan accelerate the repayment of borrowings, we cannot be certain that we will have sufficient assets to repay them.

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We may not be able to generate sufficient cash to service all of our indebtedness and operating lease obligations, and we may be forced to take other actions to satisfy our obligations under our indebtedness and operating lease obligations, which may not be successful. If we fail to meet these obligations, we would be in default under our debt agreements and the lenders could elect to declare all amounts outstanding under them to be immediately due and payable and terminate all commitments to extend further credit.

Our ability to make scheduled payments on or to refinance our debt obligations and to satisfy our operating lease obligations depends on our financial condition and operating performance, which is subject to prevailing economic and competitive conditions and to financial, business and other factors beyond our control. We cannot be certain that we will maintain a level of cash flow from operating activities sufficient to permit us to pay the principal, premium, if any, and interest on our indebtedness, or to pay our operating lease obligations. If our cash flow and capital resources are insufficient to fund our debt service obligations and operating lease obligations, we may be forced to reduce or delay capital expenditures, sell assets, seek additional capital or restructure or refinance our indebtedness. These alternative measures may not be successful and may not permit us to meet our scheduled debt service obligations. In the absence of sufficient operating results and resources, we could face substantial liquidity problems and might be required to dispose of material assets or operations or take other actions to meet our debt service and other obligations. Our debt agreements restrict our ability to dispose of assets and how we may use the proceeds from the disposition. We may not be able to consummate those dispositions or to obtain the proceeds that we could otherwise realize from such dispositions and any such proceeds that are realized may not be adequate to meet any debt service obligations then due. The failure to meet our debt service obligations or the failure to remain in compliance with the financial covenants under our debt agreements would constitute an event of default under those agreements and the lenders could elect to declare all amounts outstanding under them to be immediately due and payable and terminate all commitments to extend further credit.

Risks Related to Our Common Stock

We are a “controlled company” within the meaning of Nasdaq Stock Market Rules (“Nasdaq”), and as a result, we qualify for, and rely on, exemptions from certain corporate governance requirements. You will not have the same protections afforded to stockholders of companies that are subject to such requirements.

An investor group consisting of funds advised by our Sponsors and one of our Founders controls a majority of the voting power of our outstanding common stock. As a result, we qualify as a “controlled company” within the meaning of the corporate governance rules of Nasdaq. “Controlled companies” under those rules are companies of which more than 50% of the voting power is held by an individual, a group or another company. Each member of the investor group has filed a Statement of Beneficial Ownership on Schedule 13G with the SEC relating to its respective holdings and the group’s arrangements with respect to disposition of the shares. On this basis, we currently avail ourselves of the “controlled company” exception under the Nasdaq rules and elect not to comply with certain corporate governance requirements, including:

•	the requirement that a majority of our Board of Directors consist of independent Directors;	

•	the requirement that we have a nominating and corporate governance committee that is composed entirely of independent Directors with a written charter addressing the committee’s purpose and responsibilities, or otherwise have Director nominees selected by vote of a majority of the independent directors;	

•	the requirement that we have a compensation committee that is composed entirely of independent Directors with a written charter addressing the committee’s purpose and responsibilities; and	

•	the requirement for an annual performance evaluation of the nominating and corporate governance and compensation committees.	

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We utilize these exemptions, as we do not currently have a majority of independent Directors, and our compensation committee and nominating and corporate governance committee do not consist entirely of independent Directors. Accordingly, you do not have the same protections afforded to stockholders of companies that are subject to all of the Nasdaq corporate governance requirements.

The investor group, however, is not subject to any contractual obligation to retain its controlling interest. There can be no assurance as to the period of time during which such group will maintain their ownership of our common stock.

Our stock price is subject to volatility and, as a result, you may not be able to resell your shares at or above the price you paid for them.

Volatility in the market price of our common stock may prevent you from being able to sell your shares at or above the price you paid for your shares. Since our IPO in August 2012 through February 25, 2014, the price of our common stock, as reported by Nasdaq, has ranged from a low of $11.57 on August 8, 2012 to a high of $27.27 on November 26, 2013. The stock market in general has been highly volatile. As a result, the market price of our common stock is similarly volatile. You may experience a decrease, which could be substantial, in the value of your stock, including decreases unrelated to our operating performance or prospects, and could lose part or all of your investment. The price of our common stock could be subject to wide fluctuations in response to a number of factors, including those described elsewhere in this filing and others such as:

•	actual or anticipated fluctuations in our quarterly or annual operating results and the performance of our competitors;	

•	publication of research reports by securities analysts about us, our competitors or our industry;	

•	our failure or the failure of our competitors to meet analysts’ projections or guidance that we or our competitors may give to the market;	

•	additions and departures of key personnel;	

•	sales, or anticipated sales, of large blocks of our stock or of shares held by our Directors, executive officers, Sponsors and/or Founders;	

•	strategic decisions by us or our competitors, such as acquisitions, divestitures, spin-offs, joint ventures, strategic investments or changes in business strategy;	

•	the passage of legislation or other regulatory developments affecting us or our industry;	

•	speculation in the press or investment community, whether or not correct, involving us, our suppliers or our competitors;	

•	changes in accounting principles;	

•	litigation and governmental investigations;	

•	terrorist acts, acts of war or periods of widespread civil unrest;	

•	a food borne illness outbreak;	

•	natural disasters and other calamities; and	

•	changes in general market and economic conditions.	

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As we operate in a single industry, we are especially vulnerable to these factors to the extent that they affect our industry or our products. In the past, securities class action litigation has often been initiated against companies following periods of volatility in their stock price. This type of litigation could result in substantial costs and divert our management’s attention and resources, and could also require us to make substantial payments to satisfy judgments or to settle litigation.

There may be sales of a substantial amount of our common stock by our current stockholders, and these sales could cause the price of our common stock to fall.

Sales of substantial amounts of our common stock in the public market, or the perception that such sales will occur, could adversely affect the market price of our common stock and make it difficult for us to raise funds through securities offerings in the future.

At February 25, 2014, there were 124,921,652 shares of our common stock issued and outstanding. Of these shares, 40,243,690 shares sold in our public offerings are eligible for immediate sale in the public market without restriction by persons other than our affiliates.

Approximately 53.7% of our issued and outstanding shares are held by investment funds associated with our Sponsors and one of our Founders as of February 25, 2014. Our Sponsors and Founder may require us to register their shares for resale under federal securities laws. Registration of such shares would allow the holders to immediately sell the shares into the public market and shares that are sold pursuant to any such registration statement would become eligible for sale without restriction by persons other than our affiliates.

In addition, we registered with the SEC the issuance of shares of common stock pursuant to outstanding options under our 2007 Equity Incentive Plan (the “2007 Equity Plan”) and shares of common stock that are reserved for issuance under our 2012 Incentive Award Plan (the “2012 Equity Plan”).

Provisions in our certificate of incorporation and bylaws, our 2012 CMBS Loan documents, our Credit Facilities and Delaware law may discourage, delay or prevent a change of control of our company or changes in our management and, therefore, may depress the trading price of our stock.

Our certificate of incorporation and bylaws include certain provisions that could have the effect of discouraging, delaying or preventing a change of control of our company or changes in our management, including, among other things:

•	our Board of Directors is classified into three classes of Directors with only one class subject to election each year;	

•	restrictions on the ability of our stockholders to fill a vacancy on the Board of Directors;	

•	our ability to issue preferred stock with terms that the Board of Directors may determine, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer;	

•	the inability of our stockholders to call a special meeting of stockholders;	

•	our Directors may only be removed from the Board of Directors for cause by the affirmative vote of the holders of at least 75% of the voting power of outstanding shares of our capital stock entitled to vote generally in the election of Directors;	

•	the absence of cumulative voting in the election of Directors, which may limit the ability of minority stockholders to elect Directors; and	

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•	advance notice requirements for stockholder proposals and nominations, which may discourage or deter a potential acquirer from soliciting proxies to elect a particular slate of Directors or otherwise attempting to obtain control of us.	

In addition, the mortgage loan agreement for the 2012 CMBS Loan and our Credit Facilities require that our Sponsors, one of our Founders and our management stockholders or other permitted holders either own no less than 51% of our common stock or if they do not, that certain other conditions are satisfied, including a new stockholder has not obtained ownership above certain thresholds. These provisions in our certificate of incorporation, bylaws, the 2012 CMBS Loan documents and Credit Facilities may discourage, delay or prevent a transaction involving a change in control of our company that is in the best interests of our minority stockholders. Even in the absence of a takeover attempt, the existence of these provisions may adversely affect the prevailing market price of our common stock if they are viewed as discouraging future takeover attempts.

Section 203 of the Delaware General Corporation Law may affect the ability of an “interested stockholder” to engage in certain business combinations, including mergers, consolidations or acquisitions of additional shares, for a period of three years following the time that the stockholder becomes an “interested stockholder.” An “interested stockholder” is defined to include persons owning directly or indirectly 15% or more of the outstanding voting stock of a corporation. We have elected in our certificate of incorporation not to be subject to Section 203 of the Delaware General Corporation Law. However, our certificate of incorporation contains provisions that have the same effect as Section 203, except that they provide that our Sponsors and their respective affiliates will not be deemed to be “interested stockholders,” regardless of the percentage of our voting stock owned by them, and accordingly will not be subject to such restrictions.

If securities analysts or industry analysts downgrade our stock, publish negative research or reports, or do not publish reports about our business, or if our financial results are different than analysts’ projections with respect to those results, our stock price and/or trading volume could decline.

We expect that the trading market for our common stock will be influenced by the research and reports that industry or securities analysts publish about us, our business and our industry. If one or more analysts adversely change their recommendation regarding our stock or our competitors’ stock, or if our reported financial results are different than analysts’ projections with respect to the reported period, our stock price would likely decline. If one or more analysts cease coverage of us or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline.

Our Sponsors and one of our Founders have significant influence over us, including control over decisions that require the approval of stockholders, which could limit your ability to influence the outcome of key transactions, including a change of control.

We are currently controlled by an investor group consisting of funds advised by our Sponsors and one of our Founders. At February 25, 2014, such group beneficially owned an aggregate of approximately 53.7% of our outstanding common stock. For as long as such group continues to beneficially own shares of common stock representing more than 50% of the voting power of our common stock, it will be able to direct the election of all of the members of our Board of Directors and could exercise a controlling influence over our business and affairs, including any determinations with respect to mergers or other business combinations, the acquisition or disposition of assets, the incurrence of indebtedness, the issuance of any additional common stock or other equity securities, the repurchase or redemption of common stock and the payment of dividends. Similarly, the investor group will have the power to determine matters submitted to a vote of our stockholders without the consent of our other stockholders, will be able to prevent or approve a change in our control and could take other actions that might be favorable to the members of the group. Even if the investor group’s ownership falls below 50%, our Sponsors will continue to be able to strongly influence or effectively control our decisions.

Additionally, certain of our Directors are also officers or control persons of our Sponsors. Although these Directors owe a fiduciary duty to manage us in a manner beneficial to us and our stockholders, these individuals also owe fiduciary duties to these other entities and their stockholders, members and limited partners. Because our Sponsors have such

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interests in other companies and engage in other business activities, certain of our Directors may experience conflicts of interest in allocating their time and resources among our business and these other activities. One of our Founders also serves as our Director and, due to his interests in certain transactions with us and our affiliates, he may also experience such conflicts of interest. Furthermore, this individual could make substantial profits as a result of investment opportunities allocated to entities other than us. As a result, this individual could pursue transactions that may not be in our best interest, which could have a material adverse effect on our operations and your investment.

Because we have no plans to pay cash dividends on our common stock for the foreseeable future, you may not receive any return on investment unless you sell your common stock for a price greater than that which you paid for it.

We may retain future earnings, if any, for future operations, expansion and debt repayment and have no current plans to pay any cash dividends for the foreseeable future. Any decision to declare and pay dividends in the future will be made at the discretion of our Board of Directors and will depend on, among other things, our results of operations, financial condition, cash requirements, contractual restrictions and other factors that our Board of Directors may deem relevant. In addition, our ability to pay dividends may be limited by covenants of any existing and future outstanding indebtedness we or our subsidiaries incur, including our Credit Facilities. As a result, you may not receive any return on an investment in our common stock unless you sell our common stock for a price greater than that which you paid for it.

Our ability to raise capital in the future may be limited, which could make us unable to fund our capital requirements.

Our business and operations may consume resources faster than we anticipate. In the future, we may need to raise additional funds through the issuance of new equity securities, debt or a combination of both. Additional financing may not be available on favorable terms or at all. If adequate funds are not available on acceptable terms, we may be unable to fund our capital requirements. If we issue new debt securities, the debt holders would have rights senior to common stockholders to make claims on our assets, and the terms of any debt could restrict our operations, including our ability to pay dividends on our common stock. If we issue additional equity securities, existing stockholders may experience dilution, and the new equity securities could have rights senior to those of our common stock. Because our decision to issue securities in any future offering will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of our future offerings. Thus, our stockholders bear the risk of our future securities offerings reducing the market price of our common stock and diluting their interest.

Item 1B. Unresolved Staff Comments

Not applicable.

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Item 2.    Properties

During the year ended December 31, 2013, we added 46 new restaurant sites and closed nine others. As of December 31, 2013, we had 1,508 system-wide restaurants located across the following states, territories or countries:

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
COMPANY-OWNED	
Alabama	 	22	 	Kansas	 	9	 	New Jersey	 	41	 	Utah	 	6	
Arizona	 	31	 	Kentucky	 	17	 	New Mexico	 	5	 	Vermont	 	1	
Arkansas	 	11	 	Louisiana	 	21	 	New York	 	46	 	Virginia	 	61	
California	 	22	 	Maryland	 	42	 	North Carolina	 	64	 	West Virginia	 	8	
Colorado	 	30	 	Massachusetts	 	21	 	Ohio	 	48	 	Wisconsin	 	11	
Connecticut	 	14	 	Michigan	 	35	 	Oklahoma	 	11	 	Wyoming	 	2	
Delaware	 	2	 	Minnesota	 	9	 	Pennsylvania	 	45	 	 	 	 	
Florida	 	223	 	Mississippi	 	2	 	Puerto Rico	 	1	 	Brazil (1)	 	48	
Georgia	 	51	 	Missouri	 	16	 	Rhode Island	 	4	 	China (Mainland)	 	2	
Hawaii	 	6	 	Montana	 	1	 	South Carolina	 	38	 	Hong Kong	 	8	
Illinois	 	28	 	Nebraska	 	7	 	South Dakota	 	2	 	Mexico	 	1	
Indiana	 	22	 	Nevada	 	15	 	Tennessee	 	37	 	South Korea	 	110	
Iowa	 	8	 	New Hampshire	 	2	 	Texas	 	77	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
FRANCHISE	
Alabama	 	1	 	Oregon	 	7	 	Dominican Republic	 	2	 	Saudia Arabia	 	4	
Alaska	 	1	 	South Carolina	 	1	 	Egypt	 	1	 	Singapore	 	1	
California	 	63	 	Tennessee	 	3	 	Guam	 	1	 	Taiwan	 	5	
Florida	 	3	 	Washington	 	18	 	Indonesia	 	3	 	Thailand	 	1	
Idaho	 	6	 	 	 	 	 	Japan	 	10	 	United Arab Emirates	 	1	
Mississippi	 	6	 	Australia	 	7	 	Malaysia	 	1	 	 	 	 	
Montana	 	2	 	Bahamas	 	1	 	Mexico	 	5	 	 	 	
 	
North Carolina	 	1	 	Canada	 	3	 	Philippines	 	3	 	 	 	 	
Ohio	 	1	 	Costa Rica	 	1	 	Qatar	 	1	 	 	 	 	
____________________
 	 	
(1)	The restaurant count for Brazil is reported as of November 30, 2013 to correspond with the balance sheet date of this subsidiary and, therefore, excludes two restaurants that opened in December 2013.	

As of December 31, 2013, approximately 20% of our restaurant sites were owned by our subsidiaries. The remaining 80% of our restaurant sites were leased by our subsidiaries from third parties.

In the future, we intend to either convert existing third-party leased retail space or construct new restaurants through leases in the majority of circumstances. Initial lease expirations for our other leased properties typically range from five to ten years, with the majority of the leases providing for an option to renew for two or more additional terms. All of our leases provide for a minimum annual rent, and many leases call for additional rent based on sales volume at the particular location over specified minimum levels. Generally, the leases are net leases that require us to pay our share of the costs of insurance, taxes and common area operating costs.

As of December 31, 2013, we leased approximately 168,000 square feet of office space in Tampa, Florida for our corporate headquarters and research and development facilities under leases expiring on January 31, 2025.

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Item 3.    Legal Proceedings

On October 4, 2013, Brooke Cardoza and Cody Hancock (collectively, the “Nevada Plaintiffs”), two current employees, filed a purported collective action lawsuit against us in the U.S. District Court for the District of Nevada. The complaint alleges violations of the Fair Labor Standards Act by requiring employees to work off the clock, complete online training without pay, and attend meetings in the restaurant without pay. The suit seeks to certify a nationwide collective action that all hourly employees in all Outback Steakhouse restaurants would be permitted to join. The suit seeks an unspecified amount in back pay for the employees that join the lawsuit, an equal amount in liquidated damages, costs, expenses, and attorney’s fees. The Nevada Plaintiffs also filed a companion lawsuit in Nevada state court alleging that we violated the state break time rules. We believe these lawsuits are without merit, and we are vigorously defending all allegations. However, we are unable to predict the outcome of this case.

On November 8, 2013, Holly Gehl, Chris Armenta, and Trent Broadstreet (collectively, the “California Plaintiffs”), individuals employed by our franchisee, filed a purported class action lawsuit against us, OSI and OS Restaurant Services, LLC, two of our subsidiaries, and T-Bird, one of our franchisees. The lawsuit is filed in the California Superior Court, County of Alameda. The complaint alleges, among other things, violations of the California Labor Code, failure to pay overtime, failure to provide meal and rest periods and termination compensation, and violations of California’s Business and Professions Code. The complaint seeks, among other relief, class certification of the lawsuit, unspecified damages, costs and expenses, including attorney’s fees, and such other relief as the Court determines to be appropriate. We do not believe the California Plaintiffs have any standing to bring claims against us or our subsidiaries as all were employed by our franchisee. We intend to request that the court dismiss us and our subsidiaries from this action. Should the court deny our request for dismissal we will vigorously defend the lawsuit. However, we are unable to predict the outcome of this case.

In addition, we are subject to legal proceedings, claims and liabilities, such as liquor liability, sexual harassment and slip and fall cases, which arise in the ordinary course of business and are generally covered by insurance if they exceed specified retention or deductible amounts. In the opinion of management, the amount of ultimate liability with respect to those actions will not have a material adverse impact on our financial position or results of operations and cash flows. We accrue for loss contingencies that are probable and reasonably estimable. Legal costs are reported in General and administrative expense in the Consolidated Statements of Operations and Comprehensive Income. We generally do not accrue for legal costs expected to be incurred with a loss contingency until those services are provided.

Item 4. Mine Safety Disclosures

Not applicable.

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PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

MARKET INFORMATION

Our common stock has been listed on the Nasdaq Global Select Market under the symbol “BLMN” since August 8, 2012. Prior to that time, there was no public market for our common stock. The following table sets forth for the periods indicated the high and low sales prices per share of our common stock as reported on Nasdaq:

 	2013	 	2012	
 	HIGH	 	LOW	 	HIGH	 	LOW	
First Quarter	$	18.99	
 	 	$	15.86	
 	 	n/a	
 	 	n/a	
 	
Second Quarter	26.08	
 	 	17.41	
 	 	n/a	
 	 	n/a	
 	
Third quarter (1)	26.71	
 	 	21.73	
 	 	$	16.53	
 	 	$	11.57	
 	
Fourth quarter	27.27	
 	 	20.91	
 	 	16.98	
 	 	13.01	
 	
____________________
 	 	
(1)	The third quarter of 2012 represents the period from August 8, 2012, the date of our IPO, through September 30, 2012, the end of our third quarter.	

HOLDERS

As of February 25, 2014, there were 192 holders of record of our common stock.

DIVIDENDS

We did not declare or pay any dividends on our common stock during 2012 or 2013. Our Board of Directors does not intend to pay regular dividends on our common stock. However, we expect to reevaluate our dividend policy on a regular basis and may, subject to compliance with the covenants contained in the Credit Facilities and other considerations, determine to pay dividends in the future.

Our ability to pay dividends is dependent on our ability to obtain funds from our subsidiaries. Payment of dividends by OSI to Bloomin’ Brands is restricted under the Credit Facilities to dividends for the purpose of paying Bloomin’ Brands’ franchise and income taxes and ordinary course operating expenses; dividends for certain other limited purposes; and other dividends subject to an aggregate cap over the term of the agreement.

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SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS

The following table presents the securities authorized for issuance under our equity compensation plans at December 31, 2013 (in thousands, except exercise price):

 	 	 	 	 	 	 	 	 	 	 	
 	 	(a)	 	(b)	 	(c)	
PLAN CATEGORY	 	NUMBER OF SECURITIES TO BE ISSUED UPON EXERCISE OF OUTSTANDING OPTIONS, WARRANTS AND RIGHTS	 	WEIGHTED-AVERAGE EXERCISE PRICE OF OUTSTANDING OPTIONS, WARRANTS AND RIGHTS	 	NUMBER OF SECURITIES REMAINING AVAILABLE FOR FUTURE ISSUANCE UNDER EQUITY COMPENSATION PLANS (EXCLUDING SECURITIES REFLECTED IN COLUMN (a)) (1)	
Equity compensation plans approved by security holders	 	10,010	
 	 	$	9.54	
 	 	3,049	
 	
Equity compensation plans not approved by security holders	 	—	
 	 	—	
 	 	—	
 	
Total	 	10,010	
 	 	$	9.54	
 	 	3,049	
 	
____________________
 	 	
(1)	The shares remaining available for issuance may be issued in the form of restricted stock, restricted stock units or other stock awards.	

Our outstanding equity awards were issued under our 2007 Equity Plan and our 2012 Equity Plan. Upon completion of our IPO, the 2012 Equity Plan was adopted and no further awards were or will be made under the 2007 Equity Plan. As of the first business day of each fiscal year, the aggregate number of shares that may be issued pursuant to the 2012 Equity Plan will automatically increase by a number equal to 2% of the total number of shares then issued and outstanding.

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STOCK PERFORMANCE GRAPH

The following graph depicts the total return to stockholders from August 8, 2012, the date our common stock became listed on the Nasdaq Global Select Market, through December 31, 2013, relative to the performance of the Standard & Poor’s 500 Index and the Standard & Poor’s 500 Consumer Discretionary Sector, a peer group. The graph assumes an investment of $100 in our common stock and each index on August 8, 2012 and the reinvestment of dividends paid since that date. The stock price performance shown in the graph is not necessarily indicative of future price performance.

 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	AUGUST 8, 2012	 	DECEMBER 31, 2012	 	DECEMBER 31, 2013	
Bloomin’ Brands, Inc. (BLMN)	 	 	$	100.00	
 	 	$	126.03	
 	 	$	193.47	
 	
Standard & Poor’s 500	 	 	100.00	
 	 	102.72	
 	 	135.96	
 	
Standard & Poor’s Consumer Discretionary	 	 	100.00	
 	 	107.53	
 	 	153.58	

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PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS

The following table provides information regarding our purchases of common stock during the three months ended December 31, 2013:

 	 	 	 	 	 	 	 	 	 	 	 	
MONTH	 	TOTAL NUMBER OF SHARES PURCHASED (1)	 	AVERAGE PRICE PAID PER SHARE	 	TOTAL NUMBER OF SHARES PURCHASED AS PART OF PUBLICLY ANNOUNCED PLANS OR PROGRAMS	 	MAXIMUM NUMBER OF SHARES THAT MAY YET BE PURCHASED UNDER THE PLANS OR PROGRAMS	
October 1, 2013 through October 31, 2013	 	—	
 	 	$	—	
 	 	*	 	*	
November 1, 2013 through November 30, 2013	 	—	
 	 	—	
 	 	*	 	*	
December 1, 2013 through December 31, 2013	 	2,705	
 	 	24.11	
 	 	*	 	*	
Total	 	2,705	
 	 	 	 	*	 	*	
____________________
 	 	
*	These amounts are not applicable as we do not have a share repurchase program in effect.	
 	 	
(1)	Common stock purchased during the three months ended December 31, 2013 represented shares which were withheld for tax payments due upon the vesting of employee restricted stock awards.	

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Item 6. Selected Financial Data

This selected consolidated financial data should be read in conjunction with the consolidated financial statements and notes thereto, included in Item 8 of this Report, Management’s Discussion and Analysis of Financial Condition and Results of Operations, included in Item 7 of this Report and Risk Factors, included in Item 1A of this Report. The following table sets forth our selected consolidated financial data as of the dates and for the periods indicated (in thousands):

 	 	YEARS ENDED DECEMBER 31,	
 	 	2013	 	2012	 	2011	 	2010	 	2009	
Statements of Operations and Comprehensive Income (Loss) Data:	 	 	 	 	 	 	 	 	 	 	
Revenues	 	 	 	 	 	 	 	 	 	 	
Restaurant sales	 	$	4,089,128	
 	 	$	3,946,116	
 	 	$	3,803,252	
 	 	$	3,594,681	
 	 	$	3,573,760	
 	
Other revenues	 	40,102	
 	 	41,679	
 	 	38,012	
 	 	33,606	
 	 	27,896	
 	
Total revenues	 	4,129,230	
 	 	3,987,795	
 	 	3,841,264	
 	 	3,628,287	
 	 	3,601,656	
 	
Costs and expenses	 	 	 	 	 	 	 	 	 	 	
Cost of sales	 	1,333,842	
 	 	1,281,002	
 	 	1,226,098	
 	 	1,152,028	
 	 	1,184,074	
 	
Labor and other related	 	1,157,622	
 	 	1,117,624	
 	 	1,094,117	
 	 	1,034,393	
 	 	1,024,063	
 	
Other restaurant operating	 	964,279	
 	 	918,522	
 	 	890,004	
 	 	864,183	
 	 	849,696	
 	
Depreciation and amortization	 	164,094	
 	 	155,482	
 	 	153,689	
 	 	156,267	
 	 	186,074	
 	
General and administrative (1) (2)	 	268,928	
 	 	326,473	
 	 	291,124	
 	 	252,793	
 	 	252,298	
 	
Recovery of note receivable from affiliated entity (3)	 	—	
 	 	—	
 	 	(33,150	)	 	—	
 	 	—	
 	
Loss on contingent debt guarantee	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	24,500	
 	
Goodwill impairment	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	58,149	
 	
Provision for impaired assets and restaurant closings (4)	 	22,838	
 	 	13,005	
 	 	14,039	
 	 	5,204	
 	 	134,285	
 	
Income from operations of unconsolidated affiliates	 	(7,730	)	 	(5,450	)	 	(8,109	)	 	(5,492	)	 	(2,196	)	
Total costs and expenses	 	3,903,873	
 	 	3,806,658	
 	 	3,627,812	
 	 	3,459,376	
 	 	3,710,943	
 	
Income (loss) from operations	 	225,357	
 	 	181,137	
 	 	213,452	
 	 	168,911	
 	 	(109,287	)	
(Loss) gain on extinguishment and modification of debt (5)	 	(14,586	)	 	(20,957	)	 	—	
 	 	—	
 	 	158,061	
 	
Gain on remeasurement of equity method investment (6)	 	36,608	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	
Other (expense) income, net	 	(246	)	 	(128	)	 	830	
 	 	2,993	
 	 	(199	)	
Interest expense, net (5)	 	(74,773	)	 	(86,642	)	 	(83,387	)	 	(91,428	)	 	(115,880	)	
Income (loss) before (benefit) provision for income taxes	 	172,360	
 	 	73,410	
 	 	130,895	
 	 	80,476	
 	 	(67,305	)	
(Benefit) provision for income taxes (7)	 	(42,208	)	 	12,106	
 	 	21,716	
 	 	21,300	
 	 	(2,462	)	
Net income (loss)	 	214,568	
 	 	61,304	
 	 	109,179	
 	 	59,176	
 	 	(64,843	)	
Less: net income (loss) attributable to noncontrolling interests	 	6,201	
 	 	11,333	
 	 	9,174	
 	 	6,208	
 	 	(380	)	
Net income (loss) attributable to Bloomin’ Brands	 	$	208,367	
 	 	$	49,971	
 	 	$	100,005	
 	 	$	52,968	
 	 	$	(64,463	)	
 	 	 	 	 	 	 	 	 	 	 	
Net income (loss)	 	$	214,568	
 	 	$	61,304	
 	 	$	109,179	
 	 	$	59,176	
 	 	$	(64,843	)	
Other comprehensive income (loss):	 	 	 	 	 	 	 	 	 	 	
Foreign currency translation adjustment	 	(17,597	)	 	7,543	
 	 	(2,711	)	 	4,556	
 	 	10,273	
 	
Reclassification of accumulated foreign currency translation adjustment for previously held equity investment	 	5,980	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	
Comprehensive income (loss)	 	202,951	
 	 	68,847	
 	 	106,468	
 	 	63,732	
 	 	(54,570	)	
Less: comprehensive income (loss) attributable to noncontrolling interests	 	6,201	
 	 	11,333	
 	 	9,174	
 	 	6,208	
 	 	(380	)	
Comprehensive income (loss) attributable to Bloomin’ Brands	 	$	196,750	
 	 	$	57,514	
 	 	$	97,294	
 	 	$	57,524	
 	 	$	(54,190	)	

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BLOOMIN’ BRANDS, INC.

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	YEARS ENDED DECEMBER 31,	
(in thousands, except per share amounts)	 	2013	 	2012	 	2011	 	2010	 	2009	
Basic earnings (loss) per share	 	$	1.69	
 	 	$	0.45	
 	 	$	0.94	
 	 	$	0.50	
 	 	$	(0.62	)	
Diluted earnings (loss) per share	 	$	1.63	
 	 	$	0.44	
 	 	$	0.94	
 	 	$	0.50	
 	 	$	(0.62	)	
Weighted average shares outstanding:	 	 	 	 	 	 	 	 	 	 	
Basic	 	122,972	
 	 	111,999	
 	 	106,224	
 	 	105,968	
 	 	104,442	
 	
Diluted	 	128,074	
 	 	114,821	
 	 	106,689	
 	 	105,968	
 	 	104,442	

 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	DECEMBER 31,	
(in thousands)	 	2013	 	2012	 	2011	 	2010	 	2009	
 	 	 	 	 	 	 	 	 	 	(unaudited)	
Balance Sheet Data:	 	 	 	 	 	 	 	 	 	 	
Cash and cash equivalents (6) (8)	 	$	209,871	
 	 	$	261,690	
 	 	$	482,084	
 	 	$	365,536	
 	 	$	330,957	
 	
Net working capital (deficit) (5) (9)	 	(260,471	)	 	(203,566	)	 	(248,145	)	 	(120,135	)	 	(187,648	)	
Total assets (6)	 	3,274,174	
 	 	3,016,553	
 	 	3,353,936	
 	 	3,243,411	
 	 	3,340,708	
 	
Total debt, net (5)	 	1,419,143	
 	 	1,494,440	
 	 	2,109,290	
 	 	2,171,524	
 	 	2,302,233	
 	
Total stockholders’ equity (deficit) (7) (10)	 	482,709	
 	 	220,205	
 	 	40,297	
 	 	(55,911	)	 	(116,625	)	
____________________
 	 	
(1)	Includes management fees and out-of-pocket and other reimbursable expenses paid to a management company owned by our Sponsors and Founders of $5.8 million, $9.4 million, $11.6 million and $10.7 million for the years ended December 31, 2012, 2011, 2010 and 2009, respectively, under a management agreement that terminated upon the completion of our IPO. In connection with the termination, we paid an $8.0 million termination fee to the management company in the third quarter of 2012.	
 	 	
(2)	The expense in 2012 includes approximately $34.1 million of certain executive compensation costs and non-cash stock compensation charges recorded upon completion of our IPO and approximately $7.4 million of additional legal and other professional fees primarily from the amendment and restatement of a lease between OSI and PRP.	
 	 	
(3)	In November 2011, we received a settlement payment from T-Bird, a limited liability company affiliated with our California franchisees of Outback Steakhouse restaurants, in connection with a settlement agreement that satisfied all outstanding litigation with T-Bird.	
 	 	
(4)	During the fourth quarter of 2013, we incurred asset impairment charges of approximately $18.7 million associated with the decision to close 22 underperforming locations. During 2009, our Provision for impaired assets and restaurant closings primarily included: (i) $46.0 million of impairment charges to reduce the carrying value of the assets of Cheeseburger in Paradise to their estimated fair market value due to our sale of the concept, (ii) $47.6 million of impairment charges and restaurant closing expense for certain of our other restaurants and (iii) $36.0 million of impairment charges for the domestic Outback Steakhouse and Carrabba’s Italian Grill trade names.	
 	 	
(5)	During 2013, OSI made voluntary prepayments of $65.0 million on its senior secured term loan B facility. During the second quarter of 2013, we recorded a $14.6 million loss on extinguishment and modification of debt in connection with a repricing amendment to OSI’s senior secured term loan B facility. During 2012, OSI completed a refinancing of its senior secured credit facilities from 2007 (the “2007 Credit Facilities”) and entered into a credit agreement, which provided for senior secured financing of up to $1.225 billion, consisting of a $1.0 billion term loan B and a $225.0 million revolving credit facility. The term loan B was issued with an original issue discount of $10.0 million. We recorded a $9.1 million loss related to the extinguishment and modification of the 2007 Credit Facilities during the fourth quarter of 2012. During 2012, OSI paid $248.1 million in aggregate outstanding principal to retire its senior notes due 2015, which resulted in a loss from the extinguishment of debt of $9.0 million. In March 2012, New Private Restaurant Properties, LLC and two of our other indirect wholly-owned subsidiaries (collectively, “New PRP”) entered into the 2012 CMBS Loan, which totaled $500.0 million at origination and comprised a first mortgage loan in the amount of $324.8 million, collateralized by 261 of our properties, and two mezzanine loans totaling $175.2 million. The proceeds from the 2012 CMBS Loan were used to repay PRP’s existing CMBS Loan. As a result of refinancing the CMBS Loan, the net amount repaid along with scheduled maturities within one year, $281.3 million, was classified as current at December 31, 2011. During the first quarter of 2012, we recorded a $2.9 million loss on extinguishment of debt. In March 2009, we repurchased $240.1 million of OSI’s outstanding senior notes for $73.0 million. This repurchase resulted in a gain on extinguishment of debt, after the pro rata reduction of unamortized deferred financing fees and other related costs of $158.1 million.	
 	 	
(6)	Effective November 1, 2013, we acquired a controlling interest in the Brazilian Joint Venture, which was accounted for as a business combination utilizing the step acquisition method. We completed the acquisition for total consideration of R$240.8 million (BRL) (or approximately $110.4 million) in cash. The acquisition resulted in recording $135.7 million of goodwill and $203.9 million of assets, including $86.6 million of intangible assets primarily related to reacquired franchise rights and $81.0 million of property, fixtures and equipment. As a result of the acquisition, we recorded a $36.6 million gain on remeasurement of the previously held equity investment in accordance with applicable accounting guidance and disposed of $52.6 million of goodwill attributable to our former equity investment in the entity.	
 	 	
(7)	During the second quarter of 2013, we recorded a $67.7 million reduction of the valuation allowance against the U.S. net deferred income tax assets of which $52.0 million was recorded as income tax benefit and $15.7 million was recorded as an increase to Additional paid-in capital.	
 	 	
(8)	Excludes restricted cash.	

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(9)	We have, and in the future may continue to have, negative working capital balances (as is common for many restaurant companies). We operate successfully with negative working capital because cash collected on Restaurant sales is typically received before payment is due on our current liabilities, and our inventory turnover rates require relatively low investment in inventories. Additionally, ongoing cash flows from restaurant operations and gift card sales are used to service debt obligations and to make capital expenditures.	
 	 	
(10)	On August 13, 2012, we completed an IPO in which we issued and sold an aggregate of 14,196,845 shares of common stock at a price to the public of $11.00 per share for aggregate gross offering proceeds of $156.2 million. We received net proceeds in the offering of approximately $142.2 million after deducting underwriting discounts and commissions of approximately $9.4 million on our sale of shares and $4.6 million of offering related expenses payable by us. All of the net proceeds, together with cash on hand, were applied to the retirement of OSI’s outstanding senior notes.	

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BLOOMIN’ BRANDS, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Management’s discussion and analysis of financial condition and results of operations should be read in conjunction with our consolidated financial statements and the related notes.  Unless the context otherwise indicates, as used in this Report, the term the “Company,” “we,” “us,” “our” and other similar terms mean Bloomin’ Brands, Inc. and its subsidiaries.

Effective November 1, 2013, we acquired a controlling interest in the Brazilian Joint Venture and began consolidating its results on a calendar-based one-month lag.  Accordingly, our operating results for 2013 include the operating results of the Brazilian operations for only a one-month post-acquisition period ended November 30, 2013. Prior to the acquisition, we accounted for the Brazilian Joint Venture under the equity method of accounting. We were responsible for 50% of the costs of restaurants operated by the Brazilian Joint Venture, and our joint venture partner was responsible for the other 50% and had operating control. Income and loss derived from the Brazilian Joint Venture for periods prior to the acquisition are presented in Income from operations of unconsolidated affiliates in our Consolidated Statements of Operations and Comprehensive Income (see “Liquidity and Capital Resources—Transactions”).

Overview

We are one of the largest casual dining restaurant companies in the world with a portfolio of leading, differentiated restaurant concepts. As of December 31, 2013, we owned and operated 1,344 restaurants and franchised 164 restaurants across 48 states, Puerto Rico, Guam and 21 countries. We have five founder-inspired concepts: Outback Steakhouse, Carrabba’s Italian Grill, Bonefish Grill, Fleming’s Prime Steakhouse and Wine Bar and Roy’s. Our concepts seek to provide a compelling customer experience combining great food, highly attentive service and lively and contemporary ambience at attractive prices. Our restaurants attract customers across a variety of occasions, including everyday dining, celebrations and business entertainment. Each of our concepts maintains a unique, founder-inspired brand identity and entrepreneurial culture, while leveraging our scale and enhanced operating model. We consider Outback Steakhouse, Carrabba’s Italian Grill, Bonefish Grill and Fleming’s Prime Steakhouse and Wine Bar to be our core concepts. We are evaluating a plan to exit our Roy’s concept, but have not established a timeframe or committed to a specific plan to do so.

The restaurant industry is a highly competitive and fragmented industry and is sensitive to changes in the economy, trends in lifestyles, seasonality (customer traffic patterns at restaurants are generally highest in the first quarter of the year and lowest in the third quarter of the year) and fluctuating costs. Operating margins for restaurants can vary due to competitive pricing strategies, labor and fluctuations in prices of commodities, including beef, chicken, seafood, butter, cheese, produce and other necessities to operate a restaurant, such as natural gas or other energy supplies.  Restaurant companies tend to be focused on increasing market share, comparable restaurant sales growth and new unit growth. Competitive pressure for market share, commodity inflation, foreign currency exchange rates and other market conditions have had and could continue to have an adverse impact on our business.

Our industry is characterized by high initial capital investment, coupled with high labor costs. Chain restaurants have been increasingly taking share from independent restaurants over the past several years. We believe that this trend will continue due to increasing barriers that may prevent independent restaurants and/or start-up chains from building scale operations, including menu labeling, burdensome labor regulations and healthcare reforms that will be enforced once chains grow past a certain number of restaurants or number of employees. The combination of these factors underscores our initiative to drive increased sales at existing restaurants in order to raise margins and profits, because the incremental contribution to profits from every additional dollar of sales above the minimum costs required to open, staff and operate a restaurant is relatively high. Historically, we have not focused on growth in the number of restaurants just to generate additional sales. Our expansion and operating strategies have balanced investment and operating cost considerations in order to generate reasonable, sustainable margins and achieve acceptable returns on investment from our restaurant concepts.

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BLOOMIN’ BRANDS, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

Our strategic plan and operating model entails maintaining an experienced executive management team and adapting practices from the consumer products and retail industries to complement our restaurant acumen and enhance our brand management, analytics and innovation. This model keeps the customer at the center of our decision-making and focuses on continuous innovation and productivity to drive sustainable sales and profit growth. In addition, we remain recommitted to new unit development after curtailing expansion from 2009 to 2011. We believe that substantial development opportunities remain for our concepts in the U.S. and internationally.

We continue to balance near-term growth in market share with investments to achieve sustainable growth. Across our restaurant system, we opened 46 restaurants (27 were domestic and 19 were international) and we increased system-wide sales by 3.4% in 2013 as compared to 2012. In addition, we grew blended comparable restaurant sales by 1.2% in 2013. Effective November 1, 2013, we completed the acquisition of a 90% controlling interest in the Brazilian Joint Venture which contributed 47 (as of the acquisition date) Company-owned locations to our restaurant base that were previously operated as an unconsolidated joint venture.

We recently completed an assessment of our restaurant base in advance of capital and development planning for the 2014 fiscal year. As a result of this assessment, we decided to close 22 underperforming locations primarily within the Outback Steakhouse concept. We expect to substantially complete these store closings by the end of the first quarter of 2014. In connection with this initiative, we incurred pre-tax asset impairment charges of approximately $18.7 million in the fourth quarter of 2013 and expect to incur approximately $5.0 million for non-cancelable operating lease liabilities and store closing costs in 2014. The lease liabilities will be recorded at the time that the location is closed.

The combination of macro-economic and other factors have put considerable pressure on sales in the casual dining industry both domestically and in our South Korean market . For example, the ongoing impacts of high unemployment, continued reduced access to credit, financial market volatility and unpredictability, governmental spending and budget matters, other national, regional and local regulatory and economic conditions, gasoline prices, reduced disposable consumer income and consumer confidence have had a negative effect on discretionary consumer spending.  As these conditions persist, we will face increased pressure with respect to our pricing, traffic levels and commodity costs.  We believe that in this environment, we will need to maintain our focus on value and innovation to continue to drive sales.

Partly attributable to the macro-economic conditions identified above, as well as the timing impact of certain items occurring earlier in 2014 than in 2013, we expect lower net income in the first quarter of 2014 as compared to the comparable 2013 period.  Specifically, these items are primarily attributable to lower comparable sales trends driven by unfavorable weather conditions and marketing and initiative-driven increases in certain restaurant operating expenses in the first quarter, partially offset by the timing of our annual managing partner’s conference, which is in the second quarter in 2014 rather than the first quarter in 2013.

Key Performance Indicators

Key measures that we use in evaluating our restaurants and assessing our business include the following:

•	Average restaurant unit volumes—average sales per restaurant to measure changes in customer traffic, pricing and development of the brand;	

•	Comparable restaurant sales—year-over-year comparison of sales volumes for domestic, Company-owned restaurants that are open 18 months or more in order to remove the impact of new restaurant openings in comparing the operations of existing restaurants;	

•	System-wide sales—total restaurant sales volume for all Company-owned, franchise and unconsolidated joint venture restaurants, regardless of ownership, to interpret the overall health of our brands;	

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BLOOMIN’ BRANDS, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

•	Adjusted restaurant-level operating margin, Adjusted income from operations, Adjusted net income, Adjusted diluted earnings per share, Adjusted diluted earnings per pro forma share, EBITDA and Adjusted EBITDA —non-GAAP financial measures utilized to evaluate our operating performance, which definitions, usefulness and reconciliations are described in more detail in the “Non-GAAP Financial Measures” section below; and	

•	Customer satisfaction scores—measurement of our customers’ experiences in a variety of key attributes.	

2013 Business and Financial Highlights

Our 2013 business and financial results include:

•	An increase in consolidated revenues of 3.5% to $4.1 billion in 2013 as compared to 2012, driven primarily by an increase in sales from 69 restaurants not included in our comparable restaurant sales base;	

•	46 system-wide restaurant openings across most brands (41 Company-owned and five franchise locations), and significant progress in restaurant renovations including 84 at Outback Steakhouse and 41 at Carrabba’s Italian Grill in 2013;	

•	Productivity and cost management initiatives that we estimate allowed us to save approximately $59.0 million in the aggregate in 2013, while our costs increased due to rising commodity prices;	

•	Income from operations of $225.4 million in 2013 compared to $181.1 million in 2012, which was primarily due to an increase in expenses of $42.1 million associated with our IPO in August 2012 that were not incurred in 2013, lower General and administrative expenses combined with $4.4 million in higher operating margins at the restaurant level and partially offset by higher charges for asset impairment and restaurant closings and depreciation and amortization;	

•	A reduction of $9.0 million in our required interest payments related to the repricing of OSI’s senior secured term loan B facility; and	

•	Acquiring a controlling interest in our Brazilian Joint Venture representing 47 restaurant locations in Brazil (as of the acquisition date).	

Growth Strategies

In 2014, our key growth strategies include:
 	 	
•	Grow Comparable Restaurant Sales. We plan to continue to remodel our restaurants, use limited-time offers and multimedia marketing campaigns to drive traffic, selectively expand the lunch daypart and introduce innovative menu items, including through extensive menu refresh initiatives at Carrabba’s Italian Grill and Bonefish Grill, that match evolving consumer preferences.	

•	Pursue New Domestic Development Opportunities with Strong Unit Level Economics. We believe that a substantial development opportunity remains for our concepts in the U.S. Our top domestic development priority is Bonefish Grill unit growth. We expect to open between 55 and 60 system-wide locations in 2014 of which we expect that approximately 50% will be domestic opportunities.	

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BLOOMIN’ BRANDS, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

•	Pursue New Strategic International Development in Selected Markets. We believe the international business represents a significant growth opportunity and that we are well-positioned to continue to expand our concepts outside the U.S. We continue to focus on existing geographic regions in Latin America and Asia, with strategic expansion in selected emerging and high growth developed markets. We are focusing our existing market growth in Brazil and new market growth in China and Mexico. We expect that approximately 50% of our new units in 2014 will be international opportunities, but will shift to a higher weight of international units as we continue to implement our international expansion plans.	

We intend to fund our growth efforts utilizing productivity initiatives across our business. Productivity savings will be reinvested in the business to drive revenue growth and margin improvement.

Change in Fiscal Year End

On January 3, 2014, our Board of Directors approved a change in our fiscal year end from a calendar year ending on December 31 to a 52-53 week year ending on the last Sunday in December, effective beginning with fiscal year 2014. In a 52 week fiscal year, each of our quarterly periods will comprise 13 weeks. The additional week in a 53 week fiscal year is added to the fourth quarter, making such quarter consist of 14 weeks. Our first 53 week fiscal year will occur in fiscal year 2017. We will make the fiscal year change on a prospective basis and will not adjust operating results for prior periods. The change to our fiscal year does not impact the full year results for fiscal year 2013 ending on December 31, 2013, which are reported on a calendar year. However, the change will impact the prior year comparability of each of our fiscal quarters and annual period in 2014. We believe this change will provide numerous benefits, including aligning our reporting periods to be more consistent with peer restaurant companies and improving comparability between periods by removing the effect of trading day on Restaurant sales and operating margins.

The reporting periods and applicable reports for fiscal year 2014 will be as follows:

 	 	 	 	 	
FISCAL PERIOD	 	REPORTING PERIOD	 	REPORT TO BE FILED	
First quarter of fiscal 2014	 	January 1, 2014 to March 30, 2014	 	Quarterly Report on Form 10-Q	
Second quarter of fiscal 2014	 	March 31, 2014 to June 29, 2014	 	Quarterly Report on Form 10-Q	
Third quarter of fiscal 2014	 	June 30, 2014 to September 28, 2014	 	Quarterly Report on Form 10-Q	
Fiscal year 2014	 	January 1, 2014 to December 28, 2014	 	Annual Report on Form 10-K	

We will continue reporting our Brazilian operations, on a calendar-based one-month lag. All other international operations will be reported on a 52-53 week reporting period contemporaneously with the domestic operations.

The change in our fiscal year end will result in three fewer operating days in the 2014 fiscal year compared to calendar year reporting. The three operating days lost in the 2014 fiscal year (December 29 - 31, 2014) typically represent high revenue days due to the holiday season. In addition to the loss of operating days in December 2014, there will also be operating day shifts in the quarterly periods in 2014, which will have an impact on our quarterly financial results.

Ownership Structures

Our restaurants are predominantly Company-owned or operated under franchise arrangements. We generate our revenues primarily from our Company-owned restaurants and secondarily through ongoing royalties from our franchised restaurants and sales of franchise rights.

Company-owned restaurants include restaurants owned directly by us, by limited liability companies in which we are a member, by partnerships in which we are a general partner and our managing partners and chef partners are limited partners and by corporations in which we are a shareholder. Our legal ownership interests in these limited liability

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BLOOMIN’ BRANDS, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

companies, as general partner, in these limited partnerships and as a shareholder, in these corporations, generally range from 55% to 100%. Our cash flows from these entities are limited to the portion of our ownership. The results of operations of Company-owned restaurants are included in our consolidated operating results. The portion of income or loss attributable to the other partners’ interests is eliminated in Net income attributable to noncontrolling interests in our Consolidated Statements of Operations and Comprehensive Income.

We do not plan to continue utilizing partnerships for domestic Company-owned restaurants, except where required by laws regulating licensing of alcoholic beverages. Instead, the restaurants will be wholly-owned by us through corporations or limited liability companies and the area operating, managing and chef partners will receive their distributions of restaurant cash flows as employee compensation rather than partnership distributions.

We pay royalties on approximately 95% of our Carrabba’s Italian Grill restaurants ranging from 1.0% to 1.5%  of sales pursuant to agreements we entered into with the Carrabba’s Italian Grill founders.

Historically, Company-owned restaurants also included restaurants owned by our Roy’s joint venture and our consolidated financial statements included the accounts and operations of our Roy’s joint venture even though we had less than majority ownership. Effective October 1, 2012, we purchased the remaining interests in our Roy’s joint venture from our joint venture partner, RY-8, for $27.4 million, (see “—Liquidity and Capital Resources—Transactions”).

Prior to November 1, 2013, we held a 50% ownership interest in the Brazilian Joint Venture through a joint venture arrangement with PGS Participaçơes Ltda (“PGS Par”). The Brazilian Joint Venture was formed in 1998 for the purpose of operating Outback Steakhouse restaurants in Brazil. Effective November 1, 2013, we, through a wholly owned subsidiary, completed the acquisition of a controlling interest in the Brazilian Joint Venture by purchasing 80% of the issued and outstanding capital stock of PGS Par. We now hold a 90% interest in the Brazilian Joint Venture. We completed the acquisition for total consideration of approximately R$240.8 million (BRL) (or approximately $110.4 million) in cash (see “Liquidity and Capital Resources—Transactions”).

Prior to the acquisition, we accounted for the Brazilian Joint Venture under the equity method of accounting. We were responsible for 50% of the costs of restaurants operated by the Brazilian Joint Venture, and our joint venture partner was responsible for the other 50% and had operating control. Income and loss derived from the Brazilian Joint Venture is presented in Income from operations of unconsolidated affiliates in our Consolidated Statements of Operations and Comprehensive Income. Restaurants owned by the Brazilian Joint Venture are included in “Unconsolidated Joint Venture” restaurants for periods prior to the acquisition.

We derive no direct income from operations of franchised restaurants other than initial and developmental franchise fees and ongoing royalties, which are included in Other revenues in our Consolidated Statements of Operations and Comprehensive Income.

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BLOOMIN’ BRANDS, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

The table below presents the number of our restaurants in operation at the end of the periods indicated:

 	 	 	 	 	 	 	
 	 	DECEMBER 31,	
 	 	2013	 	2012	 	2011	
Number of restaurants (at end of the period):	 	 	 	 	 	 	
Outback Steakhouse	 	 	 	 	 	 	
Company-owned—domestic	 	663	 	665	 	670	
Company-owned—international (1) (2)	 	169	 	115	 	110	
Franchised—domestic	 	105	 	106	 	106	
Franchised and joint venture—international (1)	 	51	 	89	 	81	
Total	 	988	 	975	 	967	
Carrabba’s Italian Grill	 	 	 	 	 	 	
Company-owned	 	239	 	234	 	231	
Franchised	 	1	 	1	 	1	
Total	 	240	 	235	 	232	
Bonefish Grill	 	 	 	 	 	 	
Company-owned	 	187	 	167	 	151	
Franchised	 	7	 	7	 	7	
Total	 	194	 	174	 	158	
Fleming’s Prime Steakhouse and Wine Bar	 	 	 	 	 	 	
Company-owned	 	65	 	65	 	64	
Roy’s	 	 	 	 	 	 	
Company-owned	 	21	 	22	 	22	
System-wide total	 	1,508	 	1,471	 	1,443	
____________________
 	 	
(1)	Effective November 1, 2013, we acquired a controlling interest in the Brazilian Joint Venture resulting in the consolidation and reporting of 47 restaurants (as of the acquisition date) as Company-owned locations, which are reported as unconsolidated joint venture locations in the historical periods presented.	
 	 	
(2)	The restaurant count for Brazil is reported as of November 30, 2013 to correspond with the balance sheet date of this subsidiary and, therefore, excludes two restaurants that opened in December 2013. Restaurant counts for our Brazilian operations were reported as of December 31st in the historical periods presented.	

We operate restaurants under brands that have similar economic characteristics, nature of products and services, class of customer and distribution methods, and as a result, we aggregate our operating segments into a single reporting segment.

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BLOOMIN’ BRANDS, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

Results of Operations

The following table sets forth, for the periods indicated, percentages that items in our Consolidated Statements of Operations and Comprehensive Income are in relation to Total revenues or Restaurant sales, as indicated:

 	 	 	 	 	 	 	 	 	 	
 	 	YEARS ENDED DECEMBER 31,	
 	 	2013	 	2012	 	2011	
Revenues	 	 	 	 	 	 	
Restaurant sales	 	99.0	 %	 	99.0	 %	 	99.0	 %	
Other revenues	 	1.0	
 	 	1.0	
 	 	1.0	
 	
Total revenues	 	100.0	
 	 	100.0	
 	 	100.0	
 	
Costs and expenses	 	 	 	 	 	 	
Cost of sales (1)	 	32.6	
 	 	32.5	
 	 	32.2	
 	
Labor and other related (1)	 	28.3	
 	 	28.3	
 	 	28.8	
 	
Other restaurant operating (1)	 	23.6	
 	 	23.3	
 	 	23.4	
 	
Depreciation and amortization	 	4.0	
 	 	3.9	
 	 	4.0	
 	
General and administrative (2)	 	6.5	
 	 	8.2	
 	 	7.6	
 	
Recovery of note receivable from affiliated entity	 	—	
 	 	—	
 	 	(0.9	)	
Provision for impaired assets and restaurant closings	 	0.6	
 	 	0.3	
 	 	0.4	
 	
Income from operations of unconsolidated affiliates	 	(0.2	)	 	(0.1	)	 	(0.2	)	
Total costs and expenses	 	94.5	
 	 	95.5	
 	 	94.4	
 	
Income from operations	 	5.5	
 	 	4.5	
 	 	5.6	
 	
Loss on extinguishment and modification of debt	 	(0.4	)	 	(0.5	)	 	—	
 	
Gain on remeasurement of equity method investment	 	0.9	
 	 	—	
 	 	—	
 	
Other (expense) income, net	 	(*)	
 	 	(*)	
 	 	*	
 	
Interest expense, net	 	(1.8	)	 	(2.2	)	 	(2.2	)	
Income before (benefit) provision for income taxes	 	4.2	
 	 	1.8	
 	 	3.4	
 	
(Benefit) provision for income taxes	 	(1.0	)	 	0.3	
 	 	0.6	
 	
Net income	 	5.2	
 	 	1.5	
 	 	2.8	
 	
Less: net income attributable to noncontrolling interests	 	0.2	
 	 	0.3	
 	 	0.2	
 	
Net income attributable to Bloomin’ Brands	 	5.0	 %	 	1.2	 %	 	2.6	 %	
 	 	 	 	 	 	 	
Net income	 	5.2	 %	 	1.5	 %	 	2.8	 %	
Other comprehensive income:	 	 	 	 	 	 	
Foreign currency translation adjustment	 	(0.4	)	 	0.2	
 	 	(0.1	)	
Reclassification of accumulated foreign currency translation adjustment for previously held equity investment	 	0.1	
 	 	—	
 	 	—	
 	
Comprehensive income	 	4.9	
 	 	1.7	
 	 	2.7	
 	
Less: comprehensive income attributable to noncontrolling interests	 	0.2	
 	 	0.3	
 	 	0.2	
 	
Comprehensive income attributable to Bloomin’ Brands	 	4.7	 %	 	1.4	 %	 	2.5	 %	
____________________
 	 	
(1)	As a percentage of Restaurant sales.	
 	 	
(2)	General and administrative costs exclusive of $42.1 million of IPO related expenses would have been 7.1% of Total revenues for the year ended December 31, 2012 (see “—General and administrative expenses” discussion).	
 	 	
*	Less than 1/10th of one percent of Total revenues.	

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BLOOMIN’ BRANDS, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

REVENUES

Restaurant sales

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	YEARS ENDED	 	 	 	 	 	YEARS ENDED	 	 	 	 	
 	 	DECEMBER 31,	 	 	 	 	 	DECEMBER 31,	 	 	 	 	
(dollars in millions):	 	2013	 	2012	 	$ Change	 	% Change	 	2012	 	2011	 	$ Change	 	% Change	
Restaurant sales	 	$	4,089.1	
 	 	$	3,946.1	
 	 	$	143.0	
 	 	3.6	%	 	3,946.1	
 	 	3,803.3	
 	 	$	142.8	
 	 	3.8	%	

The increase in Restaurant sales in 2013 as compared to 2012 was primarily attributable to (i) a $98.0 million increase in sales from 69 restaurants not included in our comparable restaurant sales base, (ii) a $28.8 million increase in comparable restaurant sales at our existing restaurants (including a 1.2% combined comparable restaurant sales increase in 2013 at our core domestic restaurants), which was primarily due to increases in general menu prices and customer traffic, partially offset by mix in our product sales and (iii) a $23.2 million increase from the consolidation of one month of restaurant sales generated by 47 formerly unconsolidated joint venture restaurants in Brazil that we acquired effective November 1, 2013. The increase in customer traffic was primarily driven by selective daypart expansion across certain concepts, innovations in menu, service, promotions and operations across the portfolio and renovations at additional Outback Steakhouse locations, partially offset by the additional day in February 2012 due to Leap Year. The increase in Restaurant sales in 2013 as compared to 2012 was partially offset by a $7.2 million decrease from the closing of six restaurants during 2013.

The increase in Restaurant sales in 2012 as compared to 2011 was primarily attributable to (i) a $123.2 million increase in comparable restaurant sales at our existing restaurants (including a 3.7% combined comparable restaurant sales increase in 2012 at our core domestic restaurants) which was primarily due to increases in customer traffic and general menu prices and (ii) a $50.6 million increase in sales from 36 restaurants not included in our comparable restaurant sales base. The increase in customer traffic was primarily a result of promotions throughout our concepts, innovations in our menu, service and operations, mild winter weather conditions, the additional day in February due to Leap Year, weekend lunch expansion in our Outback Steakhouse concept and renovations at additional Outback Steakhouse locations. The increase in Restaurant sales in 2012 as compared to 2011 was partially offset by a $6.8 million decrease from the closing of seven restaurants during 2012 and a $24.2 million decrease from the sale (and franchise conversion) of nine of our Company-owned Outback Steakhouse restaurants in Japan in October 2011.

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BLOOMIN’ BRANDS, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

The following table includes additional information about changes in Restaurant sales at domestic Company-owned restaurants for our core brands:

 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	YEARS ENDED DECEMBER 31,	
 	 	2013	 	2012	 	2011	
Average restaurant unit volumes (in thousands):	 	 	 	 	 	 	
Outback Steakhouse	 	$	3,230	
 	 	$	3,165	
 	 	$	3,030	
 	
Carrabba’s Italian Grill	 	$	2,998	
 	 	$	2,999	
 	 	$	2,946	
 	
Bonefish Grill	 	$	3,131	
 	 	$	3,162	
 	 	$	3,023	
 	
Fleming’s Prime Steakhouse and Wine Bar	 	$	4,082	
 	 	$	3,929	
 	 	$	3,730	
 	
Operating weeks:	 	 	
 	 	 	 	 	
Outback Steakhouse	 	34,600	
 	 	34,959	
 	 	34,966	
 	
Carrabba’s Italian Grill	 	12,284	
 	 	12,078	
 	 	12,077	
 	
Bonefish Grill	 	9,238	
 	 	8,163	
 	 	7,600	
 	
Fleming’s Prime Steakhouse and Wine Bar	 	3,389	
 	 	3,350	
 	 	3,337	
 	
Year over year percentage change:	 	 	
 	 	 	 	 	
Menu price increases: (1)	 	 	
 	 	 	 	 	
Outback Steakhouse	 	2.5	 %	 	2.2	%	 	1.5	%	
Carrabba’s Italian Grill	 	2.2	 %	 	2.3	%	 	1.5	%	
Bonefish Grill	 	2.1	 %	 	2.2	%	 	1.9	%	
Fleming’s Prime Steakhouse and Wine Bar	 	3.4	 %	 	2.0	%	 	3.0	%	
Comparable restaurant sales (restaurants open 18 months or more):	 	 	 	 	 	 	
Outback Steakhouse	 	1.6	 %	 	4.4	%	 	4.0	%	
Carrabba’s Italian Grill	 	(0.2	)%	 	1.7	%	 	4.6	%	
Bonefish Grill	 	—	 %	 	3.2	%	 	8.3	%	
Fleming’s Prime Steakhouse and Wine Bar	 	4.5	 %	 	5.1	%	 	7.4	%	
Combined (concepts above)	 	1.2	 %	 	3.7	%	 	4.9	%	
____________________
 	 	
(1)	The stated menu price changes exclude the impact of product mix shifts to new menu offerings.	

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BLOOMIN’ BRANDS, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

COSTS AND EXPENSES

Cost of sales

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	YEARS ENDED	 	 	 	YEARS ENDED	 	 	
 	 	DECEMBER 31,	 	 	 	DECEMBER 31,	 	 	
(dollars in millions):	 	2013	 	2012	 	Change	 	2012	 	2011	 	Change	
Cost of sales	 	$	1,333.8	
 	 	$	1,281.0	
 	 	 	 	$	1,281.0	
 	 	$	1,226.1	
 	 	 	
% of Restaurant sales	 	32.6	%	 	32.5	%	 	0.1	%	 	32.5	%	 	32.2	%	 	0.3	%	

Cost of sales, consisting of food and beverage costs, increased as a percentage of Restaurant sales in 2013 as compared to 2012. The increase as a percentage of Restaurant sales was primarily due to 0.9% from higher beef and other commodity costs and 0.2% from changes in our liquor, beer and wine and product mix. The increase was partially offset by decreases as a percentage of Restaurant sales of 0.6% from the impact of certain cost savings initiatives and 0.5% from menu price increases.

The increase as a percentage of Restaurant sales in 2012 as compared to 2011 was primarily 1.1% from increases in beef, seafood and other commodity costs and 0.5% from changes in our liquor, beer and wine mix and product mix. The increase was partially offset by decreases as a percentage of Restaurant sales of 0.8% from the impact of certain cost savings initiatives and 0.6% from menu price increases.

Labor and other related expenses

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	YEARS ENDED	 	 	 	YEARS ENDED	 	 	
 	 	DECEMBER 31,	 	 	 	DECEMBER 31,	 	 	
(dollars in millions):	 	2013	 	2012	 	Change	 	2012	 	2011	 	Change	
Labor and other related	 	$	1,157.6	
 	 	$	1,117.6	
 	 	 	 	$	1,117.6	
 	 	$	1,094.1	
 	 	 	
% of Restaurant sales	 	28.3	%	 	28.3	%	 	—	 %	 	28.3	%	 	28.8	%	 	(0.5	)%	

Labor and other related expenses include all direct and indirect labor costs incurred in operations, including distribution expense to managing partners, costs related to the PEP and the POAP (see “—Liquidity and Capital Resources—Deferred Compensation Plans”), and other incentive compensation expenses. Labor and other related expenses were consistent as a percentage of Restaurant sales in 2013 as compared to 2012. Increases as a percentage of Restaurant sales were 0.6% from higher kitchen and service labor costs primarily due to daypart expansion across certain concepts and 0.4% from payroll tax audit contingencies. These increases were partially offset by a decrease as a percentage of Restaurant sales primarily due to the following: (i) 0.4% from the impact of certain cost savings initiatives, (ii) 0.2% from a decrease in health insurance costs, (iii) 0.2% from higher average unit volumes at the majority of our restaurants and (iv) 0.2% from changes in deferred compensation participant accounts.

Labor and other related expenses decreased as a percentage of Restaurant sales in 2012 as compared with 2011. Items that contributed to a decrease as a percentage of Restaurant sales primarily included 0.7% from higher average unit volumes at our restaurants and 0.4% from the impact of certain cost savings initiatives. These decreases were partially offset by increases as a percentage of Restaurant sales of the following: (i) 0.5% from higher kitchen and service labor costs, (ii) 0.1% from higher field management labor and bonus expenses and (iii) 0.1% from an increase in health insurance costs.

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BLOOMIN’ BRANDS, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

Other restaurant operating expenses

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	YEARS ENDED	 	 	 	YEARS ENDED	 	 	
 	 	DECEMBER 31,	 	 	 	DECEMBER 31,	 	 	
(dollars in millions):	 	2013	 	2012	 	Change	 	2012	 	2011	 	Change	
Other restaurant operating	 	$	964.3	
 	 	$	918.5	
 	 	 	 	$	918.5	
 	 	$	890.0	
 	 	 	
% of Restaurant sales	 	23.6	%	 	23.3	%	 	0.3	%	 	23.3	%	 	23.4	%	 	(0.1	)%	

Other restaurant operating expenses include certain unit-level operating costs such as operating supplies, rent, repairs and maintenance, advertising expenses, utilities, pre-opening costs and other occupancy costs. A substantial portion of these expenses is fixed or indirectly variable. The increase as a percentage of Restaurant sales in 2013 as compared to 2012 was primarily due to the following: (i) 0.2% higher advertising expense, (ii) 0.2% of higher restaurant occupancy costs as a result of opening new restaurant locations and (iii) 0.2% of higher restaurant utilities and operating supplies costs. The increase was partially offset by decreases as a percentage of Restaurant sales primarily attributable to 0.2% from higher average unit volumes at the majority of our restaurants and 0.2% from certain cost savings initiatives.

The decrease as a percentage of Restaurant sales in 2012 as compared with 2011 was primarily 0.5% from higher average unit volumes at our restaurants and 0.3% from certain cost savings initiatives. The decrease was partially offset by increases as a percentage of Restaurant sales primarily attributable to 0.3% of higher general liability insurance expense and 0.3% of higher restaurant occupancy costs as a result of a sale-leaseback transaction entered into in March 2012.

Depreciation and amortization expenses

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	YEARS ENDED	 	 	 	YEARS ENDED	 	 	
 	 	DECEMBER 31,	 	 	 	DECEMBER 31,	 	 	
(dollars in millions):	 	2013	 	2012	 	Change	 	2012	 	2011	 	Change	
Depreciation and amortization	 	$	164.1	
 	 	$	155.5	
 	 	 	 	$	155.5	
 	 	$	153.7	
 	 	 	
% of Total revenues	 	4.0	%	 	3.9	%	 	0.1	%	 	3.9	%	 	4.0	%	 	(0.1	)%	

Depreciation and amortization expense increased as a percentage of Total revenues in 2013 as compared to 2012. This increase as a percentage of Total revenues was primarily due to additional depreciation expense related to new restaurant openings and renovations and accelerated depreciation resulting from relocations of certain of our existing restaurants.

The decrease as a percentage of Total revenues in 2012 as compared to 2011 was primarily driven by higher average unit volumes at our restaurants. 

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BLOOMIN’ BRANDS, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

General and administrative expenses

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	YEARS ENDED	 	 	 	YEARS ENDED	 	 	
 	 	DECEMBER 31,	 	 	 	DECEMBER 31,	 	 	
(in millions):	 	2013	 	2012	 	Change	 	2012	 	2011	 	Change	
General and administrative	 	$	268.9	
 	 	$	326.5	
 	 	$	(57.6	)	 	$	326.5	
 	 	$	291.1	
 	 	$	35.4	

General and administrative costs decreased in 2013 as compared to 2012 primarily due to $42.1 million of additional expenses associated with our IPO in August 2012, including $18.1 million of accelerated CEO retention bonus and incentive bonus expense, $16.0 million of non-cash stock compensation expense for the vested portion of outstanding stock options and an $8.0 million management agreement termination fee. Exclusive of these IPO related expenses, General and administrative costs decreased $15.5 million in the year ended December 31, 2013 as compared to the same period in 2012 primarily due to the following: (i) $9.6 million of lower legal and other professional fees of which $6.7 million resulted from amendment and restatement of a lease between OSI and PRP in the first quarter of 2012, (ii) $5.6 million of lower management fees due to the termination of the management agreement in connection with our IPO, (iii) $4.7 million of net gains on the termination of split-dollar life insurance policies, (iv) $4.5 million net increase in the cash surrender value of life insurance investments, (v) $3.8 million of net lower corporate compensation and bonus expenses and (vi) $2.4 million of decreased general and administrative costs associated with field-related compensation expense. These decreases were partially offset by (i) $8.3 million of higher stock-based compensation, (ii) $3.5 million gain from the collection of proceeds from the 2009 sale of our Cheeseburger in Paradise concept in 2012 and (iii) $3.2 million gain from the settlement of lawsuits in 2012.

The increase in 2012 as compared to 2011 was primarily due to the aforementioned $42.1 million of additional expenses associated with our IPO in August 2012. Exclusive of these IPO related expenses, General and administrative costs decreased $6.7 million in the year ended December 31, 2012 as compared to the same period in 2011 primarily due to the following: (i) $5.2 million net increase in the cash surrender value of life insurance investments, (ii) $4.3 million loss from the sale of nine of our Company-owned Outback Steakhouse restaurants in Japan in October 2011, (iii) $4.2 million decrease in legal and professional fees, (iv) $3.5 million lower management fees, exclusive of the termination fee, due to the termination of the management agreement in August 2012, (v) $3.5 million gain from the collection of proceeds from the 2009 sale of our Cheeseburger in Paradise concept and (vi) $3.2 million gain from the settlement of lawsuits. This decrease was partially offset by (i) $8.1 million of increased general and administrative costs associated with field support, managers-in-training and field compensation, bonus, distribution and buyout expense, (ii) $7.4 million of additional legal and other professional fees mainly resulting from amendment and restatement of a lease between OSI and PRP and (iii) $2.7 million of net additional corporate compensation, payroll taxes, benefits and bonus expenses primarily as a result of increasing our resources in consumer insights, research and development, productivity and human resources.

Recovery of note receivable from affiliated entity

In November 2011, we received a settlement payment of $33.3 million from T-Bird in connection with a settlement agreement that satisfied all outstanding litigation with that franchisee. The settlement payment satisfied the $33.2 million principal balance of the T-Bird promissory note that we purchased from T-Bird’s former lender and accrued and unpaid interest.

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BLOOMIN’ BRANDS, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

Provision for impaired assets and restaurant closings

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	YEARS ENDED	 	 	 	YEARS ENDED	 	 	
 	 	DECEMBER 31,	 	 	 	DECEMBER 31,	 	 	
(in millions):	 	2013	 	2012	 	Change	 	2012	 	2011	 	Change	
Provision for impaired assets and restaurant closings	 	$	22.8	
 	 	$	13.0	
 	 	$	9.8	
 	 	$	13.0	
 	 	$	14.0	
 	 	$	(1.0	)	

During the years ended December 31, 2013, 2012 and 2011, we recorded a provision for impaired assets and restaurant closings of $22.8 million, $13.0 million and $14.0 million, respectively, for certain of our restaurants, intangible assets and other assets (see “—Liquidity and Capital Resources—Fair Value Measurements”).

Approximately $18.7 million of restaurant impairment charges in 2013 primarily resulted from the decision to close 22 underperforming locations. Restaurant impairment charges in 2012 and 2011 primarily resulted from the carrying value of a restaurant’s assets exceeding its estimated fair market value, primarily due to declining future cash flows from lower projected future sales at existing locations and locations identified for closure, relocation or renovation (see “—Critical Accounting Policies and Estimates—Impairment or Disposal of Long-Lived Assets”).

Income from operations

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	YEARS ENDED	 	 	 	YEARS ENDED	 	 	
 	 	DECEMBER 31,	 	 	 	DECEMBER 31,	 	 	
(dollars in millions):	 	2013	 	2012	 	Change	 	2012	 	2011	 	Change	
Income from operations	 	$	225.4	
 	 	$	181.1	
 	 	 	 	$	181.1	
 	 	$	213.5	
 	 	 	
% of Total revenues	 	5.5	%	 	4.5	%	 	1.0	%	 	4.5	%	 	5.6	%	 	(1.1	)%	

Income from operations increased in 2013 as compared to 2012 primarily as a result of the increased expenses in General and administrative costs associated with our IPO in August 2012. Exclusive of the IPO related expenses of $42.1 million as discussed above, there was an increase in income from operations in 2013 as compared to 2012 of $2.2 million. This increase was primarily driven by decreases in General and administrative expenses as discussed above partially offset by higher charges for asset impairment and restaurant closings and depreciation and amortization.

Income from operations decreased in 2012 as compared to 2011 primarily as a result of the increased expenses in General and administrative associated with our IPO as discussed above partially offset by an increase of 6.1% in operating margins at the restaurant level.

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BLOOMIN’ BRANDS, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

Loss on extinguishment and modification of debt

During the second quarter of 2013, we recorded a $14.6 million loss in connection with a repricing amendment to OSI’s senior secured term loan B facility, which included a prepayment penalty of approximately $9.8 million, $2.4 million of third-party financing costs related to the modified portion of the term loan B and a write-off of $1.2 million each for deferred financing fees and unamortized debt discount, which were associated with the portion of the debt treated as extinguished.
  
During the first quarter of 2012, we recorded a $2.9 million loss related to the extinguishment of PRP’s CMBS Loan in connection with New PRP entering into the 2012 CMBS Loan. During the third quarter of 2012, we recorded a loss from the extinguishment of OSI’s senior notes of $9.0 million. During the fourth quarter of 2012, we recorded a loss from the extinguishment and modification of OSI’s 2007 Credit Facilities of $9.1 million related to the modified portion of the credit facilities.

See “—Liquidity and Capital Resources—Credit Facilities and Other Indebtedness” for further description of each transaction.

Gain on remeasurement of equity method investment 

Effective November 1, 2013, we, through a wholly owned subsidiary, completed the acquisition of a controlling interest in the Brazilian Joint Venture, which was previously operated as an unconsolidated joint venture. The acquisition resulted in a gain on remeasurement to fair value of the previously held equity investment in the Brazilian Joint Venture of $36.6 million for the year ended December 31, 2013 (see “—Liquidity and Capital Resources—Transactions”).

Interest expense, net

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	YEARS ENDED	 	 	 	YEARS ENDED	 	 	
 	 	DECEMBER 31,	 	 	 	DECEMBER 31,	 	 	
(in millions):	 	2013	 	2012	 	Change	 	2012	 	2011	 	Change	
Interest expense, net	 	$	74.8	
 	 	$	86.6	
 	 	$	(11.8	)	 	$	86.6	
 	 	$	83.4	
 	 	$	3.2	

The decrease in net interest expense in 2013 as compared to 2012 was primarily due to a $17.1 million decline in interest expense for OSI’s senior notes that were satisfied and discharged in August 2012. This decrease was partially offset by $3.6 million of net higher interest expense resulting primarily from increased interest rates on OSI’s Credit Facilities, which were refinanced in October 2012 and subsequently repriced in April 2013. The decrease was also partially offset by $1.6 million of higher interest expense resulting from increased interest rates on New PRP’s 2012 CMBS Loan which was refinanced in March 2012.

The increase in net interest expense in 2012 as compared to 2011 was primarily due to higher interest rates from the refinancing of the 2012 CMBS Loan and the Credit Facilities resulting in increased interest expense of $9.8 million and $2.7 million, respectively. This increase was partially offset by an $8.8 million decline in interest expense for OSI’s senior notes that were satisfied and discharged in August 2012.

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BLOOMIN’ BRANDS, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

(Benefit) provision for income taxes

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	YEARS ENDED	 	 	 	YEARS ENDED	 	 	
 	 	DECEMBER 31,	 	 	 	DECEMBER 31,	 	 	
 	 	2013	 	2012	 	Change	 	2012	 	2011	 	Change	
Effective income tax rate	 	(24.5	)%	 	16.5	%	 	(41.0	)%	 	16.5	%	 	16.6	%	 	(0.1	)%	

The net decrease in the effective income tax rate in 2013 as compared to 2012 was primarily due to the benefit of the release of valuation allowance in the second quarter of 2013 and the exclusion of gain on remeasurement of equity method investment, which was partially offset by the benefit of the employment-related credits and the elimination of noncontrolling interests together being a smaller percentage of pretax income. See “—Liquidity and Capital Resources—Income Taxes” for a further description of the release of the valuation allowance. The effective income tax rate in 2012 was consistent with the prior year.

The effective income tax rate for the year ended December 31, 2013 was lower than the blended federal and state statutory rate of 38.8% primarily due to the benefit of the release of valuation allowance, tax credit for excess FICA tax on employee-reported tips, exclusion of gain on remeasurement of equity method investment, elimination of noncontrolling interests and foreign rate differential together being such a large percentage of pretax income. The effective income tax rate for the year ended December 31, 2012 was lower than the blended federal and state statutory rate of 38.6% primarily due to the benefit of the tax credit for excess FICA tax on employee-reported tips, elimination of noncontrolling interests and foreign rate differential together being such a large percentage of pretax income, which was partially offset by the valuation allowance. The effective income tax rate for the year ended December 31, 2011 was lower than the blended federal and state statutory rate of 38.7% primarily due to the benefit of the tax credit for excess FICA tax on employee-reported tips and loss on investments as a result of the sale of assets in Japan together being such a large percentage of pretax income.

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BLOOMIN’ BRANDS, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

Non-GAAP Financial Measures

In addition to the results provided in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”), we provide non-GAAP measures which present operating results on an adjusted or pro forma basis. These are supplemental measures of performance that are not required by or presented in accordance with U.S. GAAP and include the following: (i) system-wide sales, (ii) Adjusted restaurant-level operating margins, (iii) Adjusted income from operations and the corresponding margins, (iv) Adjusted net income, (v) Adjusted diluted earnings per share, (vi) Adjusted diluted earnings per pro forma share and (vi) EBITDA and Adjusted EBITDA. These non-GAAP measures are not measurements of our operating or financial performance under U.S. GAAP and should not be considered as an alternative to performance measures derived in accordance with U.S. GAAP or as an alternative to cash flow from operating activities as measures of our liquidity. These non-GAAP measures may not be comparable to similarly titled measures used by other companies and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with U.S. GAAP.

System-Wide Sales

System-wide sales is a non-GAAP financial measure that includes sales of all restaurants operating under our brand names, whether we own them or not. System-wide sales comprise sales of Company-owned restaurants and sales of franchised and unconsolidated joint venture restaurants. Effective November 1, 2013, we acquired a controlling interest in the Brazilian Joint Venture resulting in the consolidation of the operations of 47 restaurants (as of the acquisition date). Sales from these restaurants that were historically reported as income from unconsolidated joint ventures were consolidated beginning on the acquisition date and, as a result, sales from these restaurants are reported as Company-owned for the period subsequent to the acquisition date. The table below presents the first component of system-wide sales, which is sales of Company-owned restaurants:

 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	YEARS ENDED DECEMBER 31,	
 	 	2013	 	2012	 	2011	
COMPANY-OWNED RESTAURANT SALES (in millions):	 	 	 	 	 	 	
Outback Steakhouse	 	 	 	 	 	 	
Domestic	 	$	2,142	
 	 	$	2,115	
 	 	$	2,031	
 	
International	 	344	
 	 	315	
 	 	332	
 	
Total	 	2,486	
 	 	2,430	
 	 	2,363	
 	
Carrabba’s Italian Grill	 	706	
 	 	693	
 	 	682	
 	
Bonefish Grill	 	555	
 	 	494	
 	 	441	
 	
Fleming’s Prime Steakhouse and Wine Bar	 	265	
 	 	252	
 	 	239	
 	
Other	 	77	
 	 	77	
 	 	78	
 	
Total Company-owned restaurant sales	 	$	4,089	
 	 	$	3,946	
 	 	$	3,803	

The following information presents the second component of system-wide sales, which is sales of franchised and unconsolidated joint venture restaurants. These are restaurants that are not consolidated and from which we only receive a franchise royalty or a portion of their total income. Management believes that franchise and unconsolidated joint venture sales information is useful in analyzing our revenues because franchisees and affiliates pay royalties and/or service fees that generally are based on a percentage of sales. Management also uses this information to make decisions about future plans for the development of additional restaurants and new concepts as well as evaluation of current operations.

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BLOOMIN’ BRANDS, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

The following do not represent our sales and are presented only as an indicator of changes in the restaurant system, which management believes is important information regarding the health of our restaurant concepts.

 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	YEARS ENDED DECEMBER 31,	
 	 	2013	 	2012	 	2011	
FRANCHISE AND UNCONSOLIDATED JOINT VENTURE SALES (in millions) (1):	 	 	 	 	 	 	
Outback Steakhouse	 	 	 	 	 	 	
Domestic	 	$	317	
 	 	$	281	
 	 	$	300	
 	
International	 	335	
 	 	357	
 	 	311	
 	
Total	 	652	
 	 	638	
 	 	611	
 	
Carrabba’s Italian Grill	 	4	
 	 	4	
 	 	4	
 	
Bonefish Grill	 	18	
 	 	18	
 	 	18	
 	
Total franchise and unconsolidated joint venture sales (1)	 	$	674	
 	 	$	660	
 	 	$	633	
 	
Income from franchise and unconsolidated joint ventures (2)	 	$	41	
 	 	$	41	
 	 	$	36	
 	
____________________
 	 	
(1)	Franchise and unconsolidated joint venture sales are not included in revenues in the Consolidated Statements of Operations and Comprehensive Income.	
 	 	
(2)	Represents the franchise royalty and the portion of total income related to restaurant operations included in the Consolidated Statements of Operations and Comprehensive Income in Other revenues and Income from operations of unconsolidated affiliates, respectively. Income from operations of unconsolidated affiliates for the year ended December 31, 2013 includes results for our Brazilian operations for the period from January 1, 2013 to October 31, 2013, which represents the period that such operations were accounted for as an equity method investment prior to our acquisition of a controlling interest in that entity.	

Other Financial Measures

Restaurant-level operating margins are calculated as Restaurant sales after deduction of the main restaurant-level operating costs (comprising Cost of sales, Labor and other related and Other restaurant operating). Adjusted restaurant-level operating margins are calculated by eliminating from Restaurant-level operating margins the impact of items that are not considered indicative of ongoing operations consistent with the other non-GAAP measures discussed below. We provide this non-GAAP measure because we believe it is useful for investors to assess core restaurant operations without the effect of certain adjustments. For the periods presented, Adjusted restaurant-level operating margins include adjustments for payroll tax audit contingencies, which were recorded in Labor and other related during the third and fourth quarters of 2013. No adjustments impacted Restaurant-level operating margins during 2012.

Adjusted income from operations, Adjusted net income, Adjusted diluted earnings per share and Adjusted diluted earnings per pro forma share are calculated by eliminating from Income from operations, Net income attributable to Bloomin’ Brands and Diluted earnings per share the impact of items that are not considered indicative of ongoing operations including application of a normalized annual effective tax rate. We provide these non-GAAP measures because we believe they are useful for investors to assess the operating performance of the business without the effect of certain adjustments. For the periods presented, the non-GAAP adjustments include transaction-related expenses primarily attributable to the completion of the IPO and subsequent secondary offering of our common stock in August 2012 and May 2013, respectively, costs associated with the acquisition of a controlling ownership interest in our Brazilian operations and the refinancing of long-term debt and other deal costs; management fees paid to the management company associated with the Sponsors and Founders; certain store closing impairment charges; payroll tax audit contingencies; purchased intangibles amortization; losses incurred on the extinguishment and modification of long-term debt; collection of a promissory note and other amounts associated with the 2009 sale of one of our restaurant concepts; and an adjustment to the (Benefit) provision for income taxes based on a normalized tax rate for periods in 2013 and the effective income tax rate for periods in 2012 and 2011. In addition, Adjusted diluted earnings per pro forma share gives effect to the issuance of shares in our IPO as if they were all outstanding on January 1, 2012.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

EBITDA and Adjusted EBITDA (calculated by adjusting EBITDA to exclude certain stock-based compensation expenses, non–cash expenses and significant unusual items) are supplemental measures of profitability.  We believe that EBITDA and Adjusted EBITDA are useful measures for investors to assess the operating performance of our business without the effect of non-cash charges such as depreciation and amortization expenses and asset impairment expenses and to facilitate company-to-company comparisons within the restaurant industry by eliminating some of these foregoing variations.

The use of these measures permits a comparative assessment of our operating performance relative to our performance based on U.S. GAAP results, while isolating the effects of certain items that vary from period to period without correlation to core operating performance or that vary widely among similar companies. However, our inclusion of these adjusted measures should not be construed as an indication that our future results will be unaffected by unusual or infrequent items or that the items for which we have made adjustments are unusual or infrequent. In the future, we may incur expenses or generate income similar to the adjusted items. We further believe that the disclosure of these non-GAAP measures is useful to investors as they form the basis for how our management team and Board of Directors evaluate our performance including for achievement of objectives under our cash and equity compensation plans. By disclosing these non-GAAP measures, we believe that we create for investors a greater understanding of, and an enhanced level of transparency into, the means by which our management team operates our business.

Reconciliations of Non-GAAP Financial Measures - Adjusted Restaurant-Level Operating Margins

The following table shows the percentages of certain operating cost financial statement line items in relation to Restaurant sales on both a U.S. GAAP basis and an adjusted basis, as indicated, for the years ended December 31, 2013 ,  2012 and 2011:

 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	YEARS ENDED DECEMBER 31,	
 	 	2013	 	2012	 	2011	
 	 	U.S. GAAP	 	ADJUSTED (1)	 	U.S. GAAP	 	U.S. GAAP	
Restaurant sales	 	100.0	%	 	100.0	%	 	100.0	%	 	100.0	%	
 	 	 	 	 	 	 	 	 	
Cost of sales	 	32.6	%	 	32.6	%	 	32.5	%	 	32.2	%	
Labor and other related	 	28.3	%	 	27.9	%	 	28.3	%	 	28.8	%	
Other restaurant operating	 	23.6	%	 	23.6	%	 	23.3	%	 	23.4	%	
 	 	 	 	 	 	 	 	 	
Restaurant-level operating margin	 	15.5	%	 	15.9	%	 	15.9	%	 	15.6	%	
_________________
 	 	
(1)	Adjusted restaurant-level operating margins include the adjustment for the payroll tax audit contingencies, which were recorded in Labor and other related during the third and fourth quarters of 2013. No adjustments impacted Restaurant-level operating margins during the years ended December 31, 2012 or 2011.	

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BLOOMIN’ BRANDS, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

Reconciliations of Non-GAAP Financial Measures - Adjusted Income from Operations, Adjusted Net Income, Adjusted Diluted Earnings Per Share and Adjusted Diluted Earnings Per Pro Forma Share

The following table reconciles Adjusted income from operations and the corresponding margins, Adjusted net income, Adjusted diluted earnings per share and Adjusted diluted earnings per pro forma share, for the years ended December 31, 2013, 2012 and 2011 to their respective most comparable U.S. GAAP measures (in thousands, except per share amounts):

 	 	 	 	 	 	 	 	 	 	 	 	
 	YEARS ENDED DECEMBER 31,	
 	2013	 	2012	 	2011	
Income from operations	$	225,357	
 	 	$	181,137	
 	 	$	213,452	
 	
Operating income margin	5.5	%	 	4.5	%	 	5.6	%	
Adjustments:	 	 	 	 	 	
Transaction-related expenses (1)	3,888	
 	 	45,495	
 	 	7,583	
 	
Management fees and expenses (2)	—	
 	 	13,776	
 	 	9,370	
 	
Other losses (gains) (3)	18,695	
 	 	(3,500	)	 	(33,150	)	
Payroll tax audit contingency (4)	17,000	
 	 	—	
 	 	—	
 	
Purchased intangibles amortization (5)	560	
 	 	—	
 	 	—	
 	
Adjusted income from operations	$	265,500	
 	 	$	236,908	
 	 	$	197,255	
 	
Adjusted operating income margin	6.4	%	 	5.9	%	 	5.1	%	
 	 	 	 	 	 	
Net income attributable to Bloomin’ Brands	$	208,367	
 	 	$	49,971	
 	 	$	100,005	
 	
Transaction-related expenses (1)	3,888	
 	 	45,495	
 	 	7,583	
 	
Management fees and expenses (2)	—	
 	 	13,776	
 	 	9,370	
 	
Other losses (gains) (3)	18,695	
 	 	(3,500	)	 	(33,150	)	
Payroll tax audit contingency (4)	17,000	
 	 	—	
 	 	—	
 	
Purchased intangibles amortization (5)	560	
 	 	—	
 	 	—	
 	
Loss on extinguishment and modification of debt (6)	14,586	
 	 	20,956	
 	 	—	
 	
Gain on remeasurement of equity method investment (7)	(36,608	)	 	—	
 	 	—	
 	
Total adjustments, before income taxes	18,121	
 	 	76,727	
 	 	(16,197	)	
Adjustment to (benefit) provision for income taxes (8)	(84,114	)	 	(12,660	)	 	(2,689	)	
Net adjustments	(65,993	)	 	64,067	
 	 	(13,508	)	
Adjusted net income	$	142,374	
 	 	$	114,038	
 	 	$	86,497	

Diluted earnings per share	$	1.63	
 	 	$	0.44	
 	 	$	0.94	
 	
Adjusted diluted earnings per share	$	1.11	
 	 	$	0.99	
 	 	$	0.81	
 	
Adjusted diluted earnings per pro forma share (9)	$	1.11	
 	 	$	0.92	
 	 	$	0.72	

Diluted weighted average common shares outstanding	128,074	
 	 	114,821	
 	 	106,689	
 	
Pro forma IPO adjustment (9)	—	
 	 	8,684	
 	 	14,197	
 	
Pro forma diluted weighted average common shares outstanding (9)	128,074	
 	 	123,505	
 	 	120,886	
 	
_________________
 	 	
(1)	Transaction-related expenses primarily relate to the following: (i) costs incurred in association with the IPO and subsequent secondary offering of our common stock completed in August 2012 and May 2013, respectively, (ii) costs incurred during the third and fourth quarters of 2013 to acquire a controlling ownership interest in our Brazilian operations and (iii) the refinancing of the 2012 CMBS Loan in March 2012 and the senior secured credit facility in October 2012 and other deal costs. The expenses related to the IPO in August 2012 primarily included $18.1 million of accelerated CEO retention bonus and incentive bonus and $16.0 million of non-cash stock compensation charges for the vested portion of outstanding stock options recorded upon completion of the IPO.	
 	 	
(2)	Represents management fees, out-of-pocket expenses and certain other reimbursable expenses paid to a management company owned by our Sponsors and Founders under a management agreement with us. In accordance with the terms of an amendment, this agreement	

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

terminated immediately prior to the completion of our IPO, and a termination fee of $8.0 million was paid to the management company in 2012, in addition to a prorated periodic fee.
 	 	
(3)	During the fourth quarter of 2013, we incurred asset impairment charges associated with the decision to close 22 underperforming locations. During 2012, we recorded a gain associated with the collection of the promissory note and other amounts due to us in connection with the 2009 sale of the Cheeseburger in Paradise concept. During 2011, we recorded a recovery of a note receivable from T-Bird in connection with a settlement agreement that satisfied all outstanding litigation with T-Bird.	
 	 	
(4)	In September 2013, the IRS informed us that it proposes to issue an audit adjustment for the employer’s share of FICA taxes related to cash tips allegedly received and unreported by our tipped employees during calendar year 2010, for which we recorded a liability in the third quarter of 2013 for $5.0 million. The cash tips allegedly unreported by the tipped employees are based on an IRS estimate of the aggregate amount of tips directly received by tipped employees from our customers. Subsequently, we have had additional communications with the IRS representatives, which indicate that the scope of the proposed adjustment will be expanded to include the 2011 and 2012 periods. As a result, we have reassessed the established liability balance and recorded an additional $12.0 million in the fourth quarter of 2013. As of December 31, 2013, we had $5.0 million and $12.0 million recorded in Accrued and other current liabilities and Other long-term liabilities, net, respectively, in our Consolidated Balance Sheet at December 31, 2013. The associated expense is included in Labor and other related expenses for the year ended December 31, 2013. In addition, a deferred income tax benefit has been recorded for the allowable income tax credits for the employer’s share of FICA taxes expected to be paid as result of the assessment. This income tax benefit is included in (Benefit) provision for income taxes and offsets the additional Labor and other related expenses in 2013. As a result of the associated income tax benefit, recording of the liability has no impact on Net income.	
 	 	
(5)	Represents non-cash amortization of intangibles recorded as a result of the acquisition of a controlling ownership interest in our Brazilian operations and includes amortization for reacquired franchise rights and favorable and unfavorable leases.	
 	 	
(6)	Loss on extinguishment and modification of debt is related to the refinancing of OSI’s senior secured credit facility in October 2012 and subsequent repricing in April 2013, retirement of OSI’s senior notes in August 2012 and the extinguishment of the previous CMBS loan in connection with New Private Restaurant Properties, LLC, and two of our other indirect wholly-owned subsidiaries, entering into the 2012 CMBS loan in March 2012.	
 	 	
(7)	As a result of the acquisition of a controlling interest in our Brazilian Joint Venture in the fourth quarter of 2013, we recorded a gain on remeasurement of the previously held equity investment in accordance with applicable accounting guidance.	
 	 	
(8)	Adjustment to (benefit) provision for income taxes for the year ended December 31, 2013 represents an adjustment to the (Benefit) provision for income taxes to apply a normalized annual effective income tax rate, which excludes the income tax benefit of the valuation allowance release, to Adjusted income before (benefit) provision for income taxes. The normalized 2013 full-year tax rate is more comparable to our expectation for future effective income tax rates prior to the acquisition of a controlling interest in our Brazilian operations. Our expected future effective income tax rate is lower than the U.S. blended federal and state statutory rate because of the continued generation of U.S. tax credits and expected earnings in foreign jurisdictions with lower income tax rates. See calculation below of the income tax effect of adjustments for the year ended December 31, 2013. Adjustment to (benefit) provision for income taxes for the years ended December 31, 2012 and 2011 was calculated using our full-year effective tax rate of 16.5% and 16.6%, respectively.	

 	 	 	 	
 	YEAR ENDED	
 	DECEMBER 31, 2013	
Income before (benefit) provision for income taxes	$	172,360	
 	
Transaction-related expenses	3,888	
 	
Other losses (gains)	18,695	
 	
Payroll tax audit contingency	17,000	
 	
Purchased intangibles amortization	560	
 	
Loss on extinguishment and modification of debt	14,586	
 	
Gain on remeasurement of equity method investment	(36,608	)	
Adjusted income before (benefit) provision for income taxes	190,481	
 	
Income tax expense at normalized tax rate of approximately 22.0% for the year ended December 31, 2013	41,906	
 	
Less: (Benefit) provision for income taxes	(42,208	)	
Adjustment to (benefit) provision for income taxes	$	84,114	

(9)	Gives pro forma effect to the issuance of shares in the IPO as if they were all outstanding on January 1, 2011. There is no effect of this adjustment for the year ended December 31, 2013.    	

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BLOOMIN’ BRANDS, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

Reconciliations of Non-GAAP Financial Measures - Adjusted EBITDA

The following table reconciles Net income attributable to Bloomin’ Brands to EBITDA and Adjusted EBITDA for the years ended December 31, 2013, 2012 and 2011 (in thousands):

 	 	 	 	 	 	 	 	 	 	 	 	
 	YEARS ENDED DECEMBER 31,	
 	2013	 	2012	 	2011	
Net income attributable to Bloomin’ Brands	$	208,367	
 	 	$	49,971	
 	 	$	100,005	
 	
(Benefit) provision for income taxes	(42,208	)	 	12,106	
 	 	21,716	
 	
Interest expense, net	74,773	
 	 	86,642	
 	 	83,387	
 	
Depreciation and amortization	164,094	
 	 	155,482	
 	 	153,689	
 	
EBITDA	405,026	
 	 	304,201	
 	 	358,797	
 	
Impairments, closings and disposals (1)	22,411	
 	 	7,945	
 	 	15,062	
 	
Transaction-related expenses (2) (4)	3,888	
 	 	29,495	
 	 	7,583	
 	
Stock-based compensation expense (2)	13,857	
 	 	21,526	
 	 	3,907	
 	
Other losses (gains) (3)	328	
 	 	1,906	
 	 	(90	)	
Payroll tax audit contingency (4)	17,000	
 	 	—	
 	 	—	
 	
Management fees and expenses (4)	—	
 	 	13,776	
 	 	9,370	
 	
Loss on extinguishment and modification of debt (4)	14,586	
 	 	20,957	
 	 	—	
 	
Gain on remeasurement of equity method investment (4)	(36,608	)	 	—	
 	 	—	
 	
Unusual gain (4)	—	
 	 	(3,500	)	 	(33,150	)	
Adjusted EBITDA	$	440,488	
 	 	$	396,306	
 	 	$	361,479	
 	
_________________
 	 	
(1)	Represents the elimination of non-cash impairment charges for fixed assets and intangible assets, cash and non-cash expense from restaurant closings and net gains or losses on the disposal of fixed assets. The amount noted above for the year ended December 31, 2013 includes $18.7 million of asset impairment charges associated with closing 22 underperforming locations in the fourth quarter of 2013.	
 	 	
(2)	For the year ended December 31, 2012, $16.0 million of non-cash stock compensation charges for the vested portion of outstanding stock options recorded upon completion of the IPO were included in the line item titled Transaction-related expenses in the Reconciliations of Non-GAAP Financial Measures - Adjusted Income from Operations, Adjusted Net Income, Adjusted Diluted Earnings Per Share and Adjusted Diluted Earnings Per Pro Forma Share table shown above.	
 	 	
(3)	Represents (income) expense incurred as a result of (losses) gains on our partner deferred compensation participant investment accounts net of the loss (gain) on the corporate-owned life insurance policies that are held for settlement of our obligations under these programs, foreign currency loss (gain) and the loss (gain) on the cash surrender value of executive life insurance.	
 	 	
(4)	See description of adjustment provided in the Reconciliations of Non-GAAP Financial Measures - Adjusted Income from Operations, Adjusted Net Income, Adjusted Diluted Earnings Per Share and Adjusted Diluted Earnings Per Pro Forma Share table shown above.	

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BLOOMIN’ BRANDS, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

Liquidity and Capital Resources

We believe that expected cash flow from operations, planned borrowing capacity, short-term investments and restricted cash balances are adequate to fund debt service requirements, operating lease obligations, capital expenditures and working capital obligations for the next twelve months. However, our ability to continue to meet these requirements and obligations will depend on, among other things, our ability to achieve anticipated levels of revenue and cash flow and our ability to manage costs and working capital successfully.

TRANSACTIONS

On April 10, 2013, OSI completed a repricing of its senior secured term loan B facility pursuant to the First Amendment to Credit Agreement, Guaranty and Security Agreement, among OSI, OSI HoldCo, Inc., OSI’s direct owner and our indirect, wholly-owned subsidiary (“OSI HoldCo”), the subsidiary guarantors named therein, Deutsche Bank Trust Company Americas, as administrative agent and collateral agent, and a syndicate of institutional lenders and financial institutions (the “Amended Credit Agreement”). The Amended Credit Agreement replaced OSI’s existing senior secured term loan B facility with a new senior secured term loan B facility (the “Amended Term Loan B”). The Amended Term Loan B had the same principal amount outstanding (as of the repricing date) of $975.0 million, maturity date, amortization schedule and financial covenants but a lower applicable interest rate than the existing senior secured term loan B facility. The Amended Credit Agreement decreased the interest rate applicable to the Amended Term Loan B to 150 basis points over the Base Rate or 250 basis points over the Eurocurrency Rate as defined in the Credit Agreement and reduced the interest rate floors applicable to the Amended Term Loan B to 2.00% for the Base Rate and 1.00% for the Eurocurrency Rate. As a result of the repricing transaction, we recorded a Loss on extinguishment and modification of debt of $14.6 million in our Consolidated Statement of Operations and Comprehensive Income during the second quarter of 2013 (see “—Credit Facilities and Other Indebtedness”).

In connection with the settlement of litigation with T-Bird, which include the franchisees of 56 Outback Steakhouse restaurants in California, T-Bird had a Put Right, to require us to purchase for cash all of the ownership interests in the T-Bird entities that own Outback Steakhouse restaurants and certain rights under the development agreement with T-Bird. The Put Right was exercised by T-Bird on August 5, 2013. As permitted pursuant to the Put Right, T-Bird revoked the Put Notice on November 16, 2013. As a result, T-Bird’s Put Right terminated as of the date of the revocation, and we are no longer obligated to purchase the T-Bird entities.

On October 31, 2013, we entered into a Quota Purchase and Sale Agreement (the “Purchase Agreement”), by and between us, Outback Steakhouse Restaurantes Brasil S.A. (“OB Brasil”) (formerly known as Bloom Holdco Participaçơes Ltda.), PGS Par, the equity holders of PGS Par (the “Sellers”), the Brazilian Joint Venture, and Bloom Participaçơes Ltda., parent company of OB Brasil. Pursuant to the Purchase Agreement, effective November 1, 2013, we, through our wholly-owned subsidiary, OB Brasil, completed the acquisition of a controlling interest in the Brazilian Joint Venture by purchasing 80% of the issued and outstanding capital stock of PGS Par, our joint venture partner which previously held a 50% interest in the Brazilian Joint Venture (the “Acquisition”). Prior to the Acquisition, we held the other 50% interest in the Brazilian Joint Venture. As a result of the Acquisition, we now hold a 90% interest in the Brazilian Joint Venture, which was subsequently merged with OB Brasil. OB Brasil operates Outback Steakhouse restaurants in Brazil (the “Business”) .  The acquisition of a controlling interest in our Brazilian operations allows us to participate in what we believe are the ongoing and significant growth opportunities in Brazil and supports our international development growth strategy.

We completed the Acquisition for total consideration of R$240.8 million (BRL) (or approximately $110.4 million) in cash. We financed the Acquisition primarily with borrowings of $100.0 million on our existing revolving credit facility and available cash. The revolving credit facility borrowings were subsequently repaid in full prior to December 31, 2013. Approximately $1.8 million of acquisition-related costs have been reported in General and administrative expenses in the Consolidated Statement of Operations and Comprehensive Income for the year ended December 31, 2013.

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BLOOMIN’ BRANDS, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

The Acquisition resulted in a noncontrolling interest of 10% being retained by the Sellers. The Purchase Agreement provides the Sellers with options to sell their remaining interests in the Business to OB Brasil (the “put options”) and provides OB Brasil with options to purchase such remaining interests (the “call options” and together with the put options, the “Options”), in various amounts and at various times from 2015 through 2018, subject to acceleration in certain circumstances. The purchase price under each of the Options is based on a multiple of the EBITDA of the Business, subject to a fair market value adjustment, as determined at the time of exercise pursuant to the Purchase Agreement. Under the accounting guidance, these Options are embedded features within the noncontrolling interest that require the noncontrolling interest to be classified within the balance sheet as redeemable equity. The fair value of the redeemable noncontrolling interest in the Brazilian Joint Venture on the date of the Acquisition was $22.4 million. At December 31, 2013, redeemable noncontrolling interest of $22.5 million is presented at fair value as Mezzanine equity in our Consolidated Balance Sheet.

The Purchase Agreement also contains customary indemnification obligations of each party with respect to breaches of their respective representations, warranties, covenants and obligations, and certain other designated matters.

We accounted for the Acquisition as a business combination utilizing the step acquisition method. Applicable accounting guidance requires that a step acquisition in which control is obtained over a business be accounted for as a business combination. The accounting guidance requires that the previously held equity interest be remeasured at fair value and any difference between the fair value and the carrying value of the equity interest held be recognized as a gain or loss on the statement of operations. The resulting gain on remeasurement to fair value of the previously held equity investment in the Brazilian Joint Venture of $36.6 million has been included in Gain on remeasurement of equity method investment in our Consolidated Statement of Operations and Comprehensive Income for the year ended December 31, 2013. Approximately $6.0 million of the gain related to an accumulated foreign currency translation adjustment associated with the previously held equity investment that has been included as a separate component of Accumulated other comprehensive loss in the Consolidated Statements of Changes in Stockholders’ Equity (Deficit) for the year ended December 31, 2013.

To ensure timely reporting, we will consolidate the results of our Brazilian operations on a one-month lag effective as of the acquisition date.  Accordingly, our operating results for 2013 will include the operating  results of the Brazilian operations for only a one-month post-acquisition period ended November 30, 2013. The net effect of this reporting lag is not material to the consolidated financial statements. Prior to the Acquisition, we accounted for the Brazilian Joint Venture under the equity method of accounting. We were responsible for 50% of the costs of restaurants operated by the Brazilian Joint Venture, and our joint venture partner was responsible for the other 50% and had operating control. Income and loss derived from the Brazilian Joint Venture for periods prior to the Acquisition are presented in Income from operations of unconsolidated affiliates in our Consolidated Statements of Operations and Comprehensive Income.

Effective January 1, 2014, we purchased the remaining partnership interests in certain of our limited partnerships that either owned or had a contractual right to varying percentages of cash flows in 37 Bonefish Grill restaurants for an aggregate purchase price of $17.2 million. These transactions are expected to result in a reduction of approximately $18.4 million in Additional paid-in capital in the first quarter of 2014.

SUMMARY OF CASH FLOWS

We require capital primarily for principal and interest payments on our debt, prepayment requirements under our Amended Term Loan B (see “—Credit Facilities and Other Indebtedness”), obligations related to our deferred compensation plans, the development of new restaurants, remodeling or relocating older restaurants, investments in technology, and acquisitions of franchisees and joint venture partners.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

The following table presents a summary of our cash flows provided by (used in) operating, investing and financing activities for the periods indicated (in thousands):

 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	YEARS ENDED DECEMBER 31,	
 	 	2013	 	2012	 	2011	
Net cash provided by operating activities	 	$	377,264	
 	 	$	340,091	
 	 	$	322,450	
 	
Net cash (used in) provided by investing activities	 	(346,137	)	 	19,944	
 	 	(113,142	)	
Net cash used in financing activities	 	(87,127	)	 	(586,219	)	 	(89,300	)	
Effect of exchange rate changes on cash and cash equivalents	 	4,181	
 	 	5,790	
 	 	(3,460	)	
Net (decrease) increase in cash and cash equivalents	 	$	(51,819	)	 	$	(220,394	)	 	$	116,548	

Operating Activities

Net cash provided by operating activities increased in 2013 as compared to 2012 primarily as a result of the following:
(i) utilization of inventory on hand, (ii) a decrease in cash paid for interest payments and (iii) timing of accounts payable and certain accrual payments. The increase in net cash provided by operating activities was partially offset by (i) a decrease in cash due to timing of collections of holiday gift card sales from third-party vendors, (ii) an increase in cash paid for income taxes and (iii) $5.2 million of cash paid to terminate certain split-dollar life insurance agreements.

Net cash provided by operating activities increased in 2012 as compared to 2011 primarily as a result of the following: (i) timing of third-party gift card receipts, (ii) an increase in cash generated from restaurant operations due to comparable restaurant sales increases and (iii) certain food, labor and other cost savings initiatives. The increase in net cash provided by operating activities was partially offset by a bonus payment to our CEO of $18.1 million and a management agreement termination fee of $8.0 million both made in connection with our IPO as well as timing related increases in payments associated with our trade payables and accrued expenses.

Investing Activities

Net cash used in investing activities during the year ended December 31, 2013 consisted primarily of the following:
(i) capital expenditures of $237.2 million, (ii) net cash paid to acquire a controlling interest in our Brazilian operations of $100.3 million and (iii) the $8.9 million net difference in restricted cash used and restricted cash received. Net cash provided by investing activities during the year ended December 31, 2012 consisted primarily of the following: (i) proceeds from a sale-leaseback transaction of $192.9 million, (ii) the $4.2 million net difference in restricted cash, (iii) proceeds from the sale of property, fixtures and equipment of $4.5 million and (iv) $3.5 million of proceeds from the collection of the promissory note and other amounts due in connection with the 2009 sale of the Cheeseburger in Paradise concept. These increases were partially offset by capital expenditures of $178.7 million and purchases of Company-owned life insurance of $6.5 million. Net cash used in investing activities during the year ended December 31, 2011 consisted primarily of capital expenditures of $120.9 million and a royalty termination fee of $8.5 million. This was partially offset by $10.1 million of proceeds from the sale of nine of our Company-owned Outback Steakhouse restaurants in Japan.
 
We estimate that our capital expenditures will total between approximately $250.0 million and $280.0 million in 2014. The amount of actual capital expenditures may be affected by general economic, financial, competitive, legislative and regulatory factors, among other things, including restrictions imposed by our borrowing arrangements. We expect to continue to review the level of capital expenditures throughout 2014.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

Financing Activities

Net cash used in financing activities during the year ended December 31, 2013 was primarily attributable to the following: (i) the repayment of long-term debt of $80.8 million, (ii) repayments of partner deposits and accrued partner obligations of $23.3 million, (iii)  pa yments of financing fees of $12.5 million for the Amended Term Loan B repricing transaction completed in April 2013 and (iv) distributions to noncontrolling interests of $8.1 million. This was partially offset by the receipt of proceeds from the exercise of stock options of $27.8 million and repayments of notes receivable due from stockholders of $5.8 million. Net cash used in financing activities during the year ended December 31, 2012 was primarily attributable to the following: (i) the extinguishment and modification of the OSI 2007 Credit Facilities and extinguishment of the PRP CMBS Loan and OSI’s senior notes for an aggregate $2.0 billion, (ii) the repayment of borrowings on OSI’s revolving credit facilities of $144.0 million, (iii) the repayment of long-term debt of $46.9 million, (iv) the purchase of outstanding limited partnership interests in certain restaurants of $40.6 million, (v) the repayments of partner deposits and other contributions of $25.4 million, (vi) the financing fees incurred for PRP’s CMBS Refinancing and the refinancing of OSI’s 2007 Credit Facilities of $19.0 million and (vii) the distributions to noncontrolling interests of $14.0 million. This was partially offset by proceeds on the issuance of long-term debt for OSI and New PRP and borrowings on OSI’s revolving credit facilities of $1.6 billion and proceeds from the issuance of common stock of $142.2 million. Net cash used in financing activities during the year ended December 31, 2011 was primarily attributable to the following: (i) repayments of borrowings on long-term debt and OSI’s revolving credit facilities of $103.3 million, (ii) the net difference between repayment and receipt of partner deposit and accrued buyout contributions of $36.0 million and (iii) distributions to noncontrolling interests of $13.1 million. This was partially offset by the collection of the note receivable from T-Bird of $33.3 million and proceeds from borrowings on OSI’s revolving credit facilities of $33.0 million.

FINANCIAL CONDITION

Current assets decreased to $484.0 million at December 31, 2013 as compared with $487.8 million at December 31, 2012 primarily due to a decrease in Cash and cash equivalents of $51.8 million (see “—Summary of Cash Flows”). This decrease was partially offset by a $31.0 million increase in deferred income tax assets primarily associated with the release of the valuation allowance in the second quarter of 2013 and a $16.1 million increase in other current assets primarily related to the consolidation of our Brazilian operations.

Current liabilities increased to $744.5 million at December 31, 2013 as compared with $691.4 million at December 31, 2012 primarily due to a net increase of $34.9 million in Accounts payable and Accrued and other current liabilities primarily related to the timing of payments at year-end and the consolidation of our Brazilian operations and an increase in Unearned revenue of $29.9 million as a result of the increase in third-party gift card and promotional sales and redemptions partially offset by a decrease in accrued bonus expenses driven by our results as compared to established performance targets. This increase was partially offset by a $9.4 million decrease in the Current portion of long-term debt mainly due to the voluntary prepayments on the Amended Term Loan B made in 2013 and the results of our projected covenant calculations, which indicate that additional term loan prepayments will not be required in the next 12 months.

Working capital (deficit) totaled ($260.5) million and ($203.6) million at December 31, 2013 and 2012, respectively, and included Unearned revenue from unredeemed gift cards of $359.4 million and $329.5 million at December 31, 2013 and 2012, respectively. We have, and in the future may continue to have, negative working capital balances (as is common for many restaurant companies). We operate successfully with negative working capital because cash collected on restaurant sales is typically received before payment is due on our current liabilities, and our inventory turnover rates require relatively low investment in inventories. Additionally, ongoing cash flows from restaurant operations and gift card sales are used to service debt obligations and to make capital expenditures.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

CREDIT FACILITIES AND OTHER INDEBTEDNESS

We are a holding company and conduct our operations through our subsidiaries, certain of which have incurred their own indebtedness as described below.

On October 26, 2012, OSI completed a refinancing of the 2007 Credit Facilities and entered into a credit agreement (“Credit Agreement”) with a syndicate of institutional lenders and financial institutions. The Credit Facilities provide for senior secured financing of up to $1.225 billion, consisting of a $1.0 billion term loan B and a $225.0 million revolving credit facility, including letter of credit and swing-line loan sub-facilities and mature on October 26, 2019. The term loan B was issued with an original issue discount of $10.0 million. We recorded a $9.1 million loss related to the extinguishment and modification of the 2007 Credit Facilities in Loss on extinguishment and modification of debt in our Consolidated Statement of Operations and Comprehensive Income during the fourth quarter of 2012.

On April 10, 2013, OSI completed a repricing of its senior secured term loan B facility pursuant to the Amended Credit Agreement which replaced OSI’s existing senior secured term loan B facility with the Amended Term Loan B. The Amended Term Loan B had the same principal amount outstanding (as of the repricing date) of $975.0 million, maturity date, amortization schedule and financial covenants but a lower applicable interest rate than the existing senior secured term loan B facility. Voluntary prepayments made on the principal amount outstanding since the inception of the Credit Agreement will continue to be treated as prepayments for purposes of determining amortization payment and mandatory prepayment requirements under the Amended Term Loan B.

As a result of the repricing transaction, we recorded a Loss on extinguishment and modification of debt of $14.6 million in our Consolidated Statement of Operations and Comprehensive Income during the second quarter of 2013. The loss comprised a prepayment penalty of $9.8 million, third-party financing costs of $2.4 million and the write-off of $1.2 million each of deferred financing fees and unamortized debt discount. The third-party financing costs included in the loss related to debt held by lenders that participated in both the original, and repriced debt and therefore, the debt was treated as modified rather than extinguished. The deferred financing fees and unamortized debt discount amounts included in the loss were related to the extinguished portion of the debt.

The Amended Credit Agreement decreased the interest rate applicable to the Amended Term Loan B to 150 basis points over the Base Rate or 250 basis points over the Eurocurrency Rate and reduced the interest rate floors applicable to the Amended Term Loan B to 2.00% for the Base Rate and 1.00% for the Eurocurrency Rate. The Base Rate option is the highest of (i) the prime rate of Deutsche Bank Trust Company Americas, (ii) the federal funds effective rate plus 0.5 of 1.0% or (iii) the Eurocurrency Rate with a one-month interest period plus 1.0% (“Base Rate”) (3.25% at December 31, 2013 and 2012).  The Eurocurrency Rate option is the 30, 60, 90 or 180-day Eurocurrency Rate (“Eurocurrency Rate”) (ranging from 0.17% to 0.35% and 0.21% to 0.51% at December 31, 2013 and 2012, respectively).  The Eurocurrency Rate may have a nine- or twelve-month interest period if agreed upon by the applicable lenders.

Prior to the repricing of the senior secured term loan B facility, borrowings under this facility bore interest at rates ranging from 225 to 250 basis points over the Base Rate or 325 to 350 basis points over the Eurocurrency Rate. The Base Rate was subject to an interest rate floor of 2.25%, and the Eurocurrency Rate was subject to an interest rate floor of 1.25%.

OSI is required to prepay outstanding term loans, subject to certain exceptions, with:
 	 	
•	50% of its “annual excess cash flow” (with step-downs to 25% and 0% based upon its consolidated first lien net leverage ratio), as defined in the Credit Agreement, subject to certain exceptions;	
 	 	
•	100% of the net proceeds of certain assets sales and insurance and condemnation events, subject to reinvestment rights and certain other exceptions; and	
 	 	
•	100% of the net proceeds of any debt incurred, excluding permitted debt issuances.	

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

The Amended Term Loan B requires amortization payments of approximately $10.0 million per calendar year, payable in scheduled equal quarterly installments through September 2019, which payments are reduced by the application of any prepayments. Any remaining balance is due at maturity. During 2013, OSI made voluntary prepayments of $65.0 million and, as a result, will not be required to make any further required amortization payments until the remaining balance of the loan reaches maturity in October 2019. The outstanding balance on the Amended Term Loan B and term loan B, excluding the unamortized debt discount, was $935.0 million and $1.0 billion at December 31, 2013 and 2012, respectively. The remaining unamortized debt discount on the Amended Term Loan B and term loan B was $7.0 million and $9.7 million at December 31, 2013 and 2012, respectively. At December 31, 2013, none of the outstanding balance on the Amended Term Loan B was classified as current due to voluntary prepayments made by OSI during 2013 and the results of its projected covenant calculations, which indicate the additional term loan prepayments, as described above, will not be required in the next 12 months. The amount of outstanding term loans required to be prepaid in accordance with OSI’s debt covenants may vary based on actual operating results. At December 31, 2012, $10.0 million of the outstanding balance on the term loan B was classified as current due to OSI’s required quarterly amortization payments.

The revolving credit facility matures October 26, 2017 and provides for swing-line loans and letters of credit of up to $225.0 million for working capital and general corporate purposes. The revolving credit facility bears interest at rates ranging from 200 to 250 basis points over the Base Rate or 300 to 350 basis points over the Eurocurrency Rate, with step-downs based upon OSI’s consolidated first lien net leverage ratio. There were no loans outstanding under the revolving credit facility at December 31, 2013 and 2012, respectively, however, $31.6 million and $41.2 million, respectively, of the credit facility was not available for borrowing as $31.3 million of the credit facility was committed for the issuance of letters of credit as required by insurance companies that underwrite our workers’ compensation insurance and $0.3 million was committed for the issuance of other letters of credit. Total outstanding letters of credit issued under OSI’s revolving credit facility may not exceed $100.0 million. Fees for the letters of credit are 3.63% and the commitment fees for unused revolving credit commitments are 0.50%.

The Credit Facilities require OSI to comply with certain covenants, including, in the case of the revolving credit facility, a covenant to maintain a specified quarterly Total Net Leverage Ratio (“TNLR”) test. The TNLR is the ratio of Consolidated Total Debt to Consolidated EBITDA (earnings before interest, taxes, depreciation and amortization and certain other adjustments as defined in the Credit Agreement) and may not exceed 6.00 to 1.00, with step-downs over a four-year period to a maximum level of 5.00 to 1.00 in 2017. The other negative covenants limit, but provide exceptions for, OSI’s ability and the ability of its restricted subsidiaries to take various actions relating to indebtedness, significant payments, mergers and similar transactions. The Credit Agreement also contains customary representations and warranties, affirmative covenants and events of default. At December 31, 2013 and 2012, we were in compliance with our debt covenants.

The Credit Facilities are guaranteed by each of OSI’s current and future domestic 100% owned restricted subsidiaries in the Outback Steakhouse and Carrabba’s Italian Grill concepts and certain other subsidiaries (the “Guarantors”) and by OSI HoldCo.

OSI’s obligations are secured by substantially all of its assets and assets of the Guarantors and OSI HoldCo, in each case, now owned or later acquired, including a pledge of all of OSI’s capital stock, the capital stock of substantially all of OSI’s domestic subsidiaries and 65% of the capital stock of foreign subsidiaries that are directly owned by OSI, OSI HoldCo, or a Guarantor. OSI is also required to provide additional guarantees of the Credit Facilities in the future from other domestic wholly-owned restricted subsidiaries if the Consolidated EBITDA attributable to OSI’s non-guarantor domestic wholly-owned restricted subsidiaries as a group exceeds 10% of the Consolidated EBITDA of OSI and its restricted subsidiaries. If this occurs, guarantees would be required from additional domestic wholly-owned restricted subsidiaries in such number that would be sufficient to lower the aggregate Consolidated EBITDA of the non-guarantor domestic wholly-owned restricted subsidiaries as a group to an amount not in excess of 10% of the Consolidated EBITDA of OSI and its restricted subsidiaries.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

Effective March 27, 2012, New PRP entered into the 2012 CMBS Loan which totaled $500.0 million at origination and comprised a first mortgage loan in the amount of $324.8 million, collateralized by 261 of our properties, and two mezzanine loans totaling $175.2 million. The 2012 CMBS Loan requires annual amortization payments ranging from approximately $9.4 million to $10.9 million, payable in scheduled monthly installments through March 2017, with the remaining balance due upon maturity in April 2017. The first mortgage loan has five fixed rate components and a floating rate component. The fixed rate components bear interest at rates ranging from 2.37% to 6.81% per annum. The floating rate component bears interest at a rate per annum equal to the 30-day London Interbank Offered Rate (“30-day LIBOR”) (with a floor of 1%) plus 2.37%. The first mezzanine loan bears interest at a rate of 9.00% per annum, and the second mezzanine loan bears interest at a rate of 11.25% per annum. At December 31, 2013 and 2012, the outstanding balance, excluding the debt discount, on the 2012 CMBS Loan was $484.5 million and $493.9 million, respectively.

The proceeds from the 2012 CMBS Loan, together with the proceeds from a sale-leaseback transaction and excess cash held in PRP, were used to repay PRP’s CMBS Loan. We recorded a $2.9 million loss related to the extinguishment in Loss on extinguishment and modification of debt in our Consolidated Statement of Operations and Comprehensive Income during the first quarter of 2012.

During 2012, OSI retired the aggregate outstanding principal amount of its 10% senior notes through a combination of a tender offer and early redemption call. As a result of these transactions, we recorded a loss from the extinguishment of debt of $9.0 million in Loss on extinguishment and modification of debt in our Consolidated Statement of Operations and Comprehensive Income during the third quarter of 2012.

As of December 31, 2013 and 2012, OSI had approximately $6.2 million and $9.8 million, respectively, of notes payable at interest rates ranging from 0.58% to 7.00% and from 0.63% to 7.00%, respectively. These notes have been primarily issued for buyouts of managing and area operating partner interests in the cash flows of their restaurants and generally are payable over a period of two through five years.

GOODWILL AND INDEFINITE-LIVED INTANGIBLE ASSETS

We performed our annual goodwill and other indefinite-lived intangible assets impairment test during the second quarters of 2013 and 2012. The impairment test performed in the second quarter of 2013 utilized a qualitative assessment. This qualitative assessment is referred to as a “step zero” approach and allows us the option to assess qualitative factors to determine whether the existence of events or circumstances leads to the determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, based on the review of the qualitative factors, an entity determines there is sufficient evidence to support a more likely than not (greater than 50%) probability that the fair value of a reporting unit is greater than its carrying value, the entity may skip the two-step impairment test.

In considering the step zero approach in 2013, we evaluated factors including, but not limited to, macro-economic conditions, market and industry conditions, commodity cost fluctuations, competitive environment, share price performance, results of prior impairment tests, operational stability and the overall financial performance of the reporting units. As a result of our step zero assessment, no impairment conditions were identified and no further testing was deemed necessary.

During 2012, we elected to forgo step zero and proceeded to the first step of the impairment test for goodwill and other indefinite-lived intangible assets. Our review of the recoverability of goodwill was based primarily upon an analysis of the discounted cash flows of the related reporting units as compared to the carrying values. We also used the relief from royalty method to determine the fair value of our indefinite-lived intangible assets.
 
We did not record any goodwill or indefinite-lived intangible asset impairment charges as a result of these assessments and determined that none of our reporting units are at risk for material goodwill impairment.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

FAIR VALUE MEASUREMENTS

Fair value is the price that would be received upon sale of an asset or paid upon transfer of a liability in an orderly transaction between market participants at the measurement date (exit price) and is a market-based measurement, not an entity-specific measurement. To measure fair value, we incorporate assumptions that market participants would use in pricing the asset or liability, and utilize market data to the maximum extent possible. Measurement of fair value incorporates nonperformance risk (i.e., the risk that an obligation will not be fulfilled). In measuring fair value, we reflect the impact of our own credit risk on our liabilities, as well as any collateral. We also consider the credit standing of our counterparties in measuring the fair value of our assets.

We invested $11.9 million of our excess cash in fixed income and money market funds classified as Cash and cash equivalents or restricted cash in our Consolidated Balance Sheet as of December 31, 2013, at a net value of 1:1 for each dollar invested. The fair value of the investments in the these funds is determined by using quoted prices for identical assets in an active market.  As a result, we have determined that the inputs used to value these investments fall within Level 1 of the fair value hierarchy. The amount of excess cash invested in money market funds at December 31, 2012 was immaterial to our consolidated financial statements. We did not invest excess cash in any fixed income funds at December 31, 2012.

In connection with the 2012 CMBS Loan, we entered into a rate cap with a notional amount of $48.7 million as a method to limit the volatility of the floating rate component of the first mortgage loan. The interest rate cap had nominal fair market value at December 31, 2013 and 2012, respectively.

We recently completed an assessment of our restaurant base in advance of capital and development planning for the 2014 fiscal year. As a result of this assessment, we decided to close 22 underperforming locations primarily within the Outback Steakhouse concept. We expect to substantially complete the store closings by the end of the first quarter of 2014. In connection with this initiative, we incurred pre-tax asset impairment charges of approximately $18.7 million in the fourth quarter of 2013 and expect to incur approximately $5.0 million for non-cancelable operating lease liabilities and store closing costs in 2014. The lease liabilities will be recorded at the time that the location is closed.

We recorded $19.8 million, $10.6 million and $11.6 million of impairment charges as a result of the fair value measurement on a nonrecurring basis of our long-lived assets held and used during the years ended December 31, 2013, 2012 and 2011, respectively, primarily related to certain specifically identified restaurant locations that have, or are scheduled to be, closed, relocated or renovated or were underperforming. As discussed above, $18.7 million of the impairment charges incurred for the year ended December 31, 2013 were related to the management decision to close 22 underperforming locations.  The impaired long-lived assets had $10.0 million, $6.2 million and $30.8 million of remaining fair value at December 31, 2013, 2012  and  2011, respectively. Restaurant closure and related expenses of $3.0 million, $2.4 million and $2.4 million were recognized for the years ended December 31, 2013, 2012 and 2011, respectively. Impairment losses for long-lived assets held and used and restaurant closure and related expenses were recognized in Provision for impaired assets and restaurant closings in the Consolidated Statement of Operations and Comprehensive Income.

We used quoted prices from brokers (Level 1), third-party market appraisals (Level 2) and discounted cash flow models (Level 3) to estimate the fair value of the long-lived assets. Discount rate and growth rate assumptions are derived from current economic conditions, expectations of management and projected trends of current operating results. 

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

The following table presents quantitative information related to the unobservable inputs used in our Level 3 fair value measurements for the impairment loss incurred for the periods ending as indicated:

 	 	 	 	 	
 	 	YEARS ENDED DECEMBER 31,	
UNOBSERVABLE INPUT	 	2013	 	2012	
Weighted-average cost of capital (1)	 	9.5% -10.2%	 	9.5% - 11.2%	
Long-term growth rates	 	2.0%	 	3.0%	
Annual revenue growth rates (2)	 	2.2% - 3.0%	 	(8.7)% - 4.3%	
____________________
 	 	
(1)	Weighted average of the costs of capital unobservable input range was 10.1% and 10.8% for the years ended December 31, 2013 and 2012, respectively.	
 	 	
(2)	Weighted average of the annual revenue growth rates unobservable input range was 2.5% and 2.6% for the years ended December 31, 2013 and 2012, respectively.	

Sales declines at our restaurants, unplanned increases in health insurance, commodity or labor costs, deterioration in overall economic conditions and challenges in the restaurant industry may result in future impairment charges.  It is possible that changes in circumstances or changes in our judgments, assumptions and estimates, could result in a future impairment charge of a portion or all of our goodwill, other intangible assets or long-lived assets held and used.

DEFERRED COMPENSATION PLANS

Managing and Chef Partners

The managing partner of each Company-owned domestic restaurant and the chef partner of each Fleming’s Prime Steakhouse and Wine Bar and Roy’s restaurant are required, as a condition of employment, to sign five-year employment agreements. Under these agreements, managing and chef partners have the right to receive monthly distributions based on a percentage of their restaurant’s monthly cash flows for the duration of the agreement, which vary by concept from 6% to 10% for managing partners and 2% to 5% for chef partners.

The employment agreements also provide for an annual bonus, known as the President’s Club, which is paid in addition to the monthly distributions of cash flow and is designed to reward increases in a restaurant’s annual sales above the concept sales plan with a required flow-through percentage of the incremental sales to cash flow. Managing and chef partners whose restaurants achieve certain annual sales targets above the concept’s sales plan (and the required flow-through percentage) receive a bonus equal to a percentage of the incremental sales. Such percentage is determined by the sales target achieved.

Managing partners and chef partners are eligible to receive deferred compensation payments under the POAP, upon completion of their five-year employment agreement. All managing and chef partners who executed new employment agreements after May 1, 2011 were required to participate in the current partner program, including the POAP.

The POAP requires managing and chef partners to make an initial deposit of up to $10,000 into their “Partner Investment Account.” We make a bookkeeping contribution to each partner’s “Company Contributions Account” no later than the end of February of each year following the completion of each year (or partial year where applicable) under the partner’s employment agreement. The value of each of our contributions is equal to a percentage of cash flow of the partner’s restaurant plus, if the restaurant has been open at least 18 calendar months, a percentage of the year-over-year increase in the restaurant’s cash flow.

Amounts credited to each partner’s account under the POAP may be allocated by the partner among benchmark funds offered under the POAP, and the account balances of the partner will increase or decrease based on the performance of the benchmark funds. Upon termination of employment, all remaining balances in the Company Contributions Account in the POAP are forfeited unless the partner has been with us for twenty years or more. Unless previously

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

forfeited under the terms of the POAP, 50% of the partner’s total account balances generally will be distributed in the March following the completion of the initial five-year contract term with subsequent distributions varying based on the length of continued employment as a partner. The deferred compensation obligations under the POAP are unsecured obligations. As of December 31, 2013 and 2012, our POAP liability was $21.2 million and $15.3 million, respectively, which primarily was recorded in Partner deposits and accrued partner obligations in our Consolidated Balance Sheets.

Our managing and chef partners who executed employment agreements prior to May 1, 2011 were eligible to participate in our prior partner program. Under that program, they were required to sign five-year employment agreements and received monthly distributions of the same percentage of their restaurant’s cash flow as under the current program. Upon completion of their five-year employment agreement, they were eligible to participate in the Partner Equity Plan (“PEP”), a deferred compensation program. Managing and chef partners were also required to purchase a non-transferable ownership interest in a partnership (“Management Partnership”) that provided management and supervisory services to his or her restaurant. The purchase price for a managing partner’s ownership interest was fixed at $25,000, and the purchase price for a chef partner’s ownership interest ranged from $10,000 to $15,000. Amounts credited to partners’ PEP accounts are fully vested at all times and participants have no discretion with respect to the form of benefit payments under the PEP. Approximately, 15% of our managing and chef partners participate in the PEP as of December 31, 2013.

Upon the closing of the Merger, certain stock options that had been granted to managing and chef partners under a pre-merger managing partner stock plan upon completion of a previous employment contract were converted into the right to receive cash in the form of a “Supplemental PEP” contribution.

As of December 31, 2013, our total vested liability with respect to obligations primarily under the PEP and Supplemental PEP was approximately $132.2 million, of which $17.8 million and $114.4 million was included in Accrued and other current liabilities and Other long-term liabilities, net, respectively, in our Consolidated Balance Sheet. As of December 31, 2012, our total vested liability with respect to obligations primarily under the PEP and Supplemental PEP was approximately $122.6 million, of which $17.8 million and $104.8 million was included in Accrued and other current liabilities and Other long-term liabilities, net, respectively, in our Consolidated Balance Sheet. Partners may allocate the contributions into benchmark investment funds, and these amounts due to participants will fluctuate according to the performance of their allocated investments and may differ materially from the initial contribution and current obligation.

As of December 31, 2013 and 2012, we had approximately $76.8 million and $67.8 million, respectively, in various corporate-owned life insurance policies which are held within an irrevocable grantor or “rabbi” trust account for settlement of our obligations primarily under the PEP, Supplemental PEP and POAP. We are the sole owner of any assets within the rabbi trust and participants are considered our general creditors with respect to assets within the rabbi trust.

As of December 31, 2013 and 2012, there were $71.8 million and $65.1 million, respectively, of unfunded obligations primarily related to the PEP, Supplemental PEP and POAP, excluding amounts not yet contributed to the partners’ investment funds, which may require the use of cash resources in the future.

We use capital to fund the PEP as distributions are made to each managing and chef partner and generally to fund the POAP as each managing and chef partner earns a contribution and currently estimate expected cash funding ranging from $28.0 million to $38.0 million for PEP and POAP in each of the next two years through December 31, 2015. Actual funding of the current PEP and POAP obligations and future funding requirements may vary significantly depending on timing of partner contracts, forfeiture rates, numbers of partner participants and our funding strategy and may differ materially from estimates.

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BLOOMIN’ BRANDS, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

Area Operating Partners

An area operating partner is required, as a condition of employment, to make a deposit of $10,000 within 30 days of the opening of each new restaurant that he or she oversees, up to a maximum deposit of $50,000 (taking into account investments under prior programs). This deposit gives the area operating partner the right to monthly payments based on a percentage of his or her restaurants’ monthly cash flows for the time period that the area operating partner oversee the restaurant, typically ranging from 4.0% to 4.5%. After the restaurant has been open for a five-year period, the area operating partner will receive a bonus equal to a multiple of the area operating partner’s average monthly payments for the 24 months immediately preceding the bonus date. The bonus will be paid within 90 days or over a two-year period, depending on the bonus amount.

In 2011, we also began a version of the President’s Club annual bonus described above under “—Managing and Chef Partners” for area operating partners to provide additional rewards for achieving sales targets with a required flow-through of the incremental sales to cash flow as defined in the President’s Club bonus program.

Area operating partners for restaurants opened on or before December 31, 2011 were eligible to participate in our prior program. Under the prior program, an area operating partner was required, as a condition of employment and within 30 days of the opening of his or her first restaurant, to make an initial investment of $50,000 in a Management Partnership that provides supervisory services to the restaurants that the area operating partner was overseeing. This interest gave the area operating partner the right to distributions from the Management Partnership based on a percentage of his or her restaurants’ monthly cash flows for the duration of the agreement, typically may range from 4.0% to 9.0%. We have the option to purchase an area operating partner’s interest in the Management Partnership after the restaurant has been open for a five-year period on the terms specified in the agreement. For restaurants opened between January 1, 2007 and December 31, 2011, the area operating partner’s percentage of cash distributions and buyout percentage is calculated based on the associated restaurant’s return on investment compared to our targeted return on investment and ranges from 3.0% to 12.0% depending on the concept. This percentage was determined after the first five full calendar quarters from the date of the associated restaurant’s opening and was adjusted each quarter thereafter based on a trailing 12-month restaurant return on investment. The buyout percentage was the area operating partner’s average distribution percentage for the 24 months immediately preceding the buyout. Buyouts were paid in cash within 90 days or paid over a two-year period. Restaurants opened after December 31, 2011 are governed by our current operating partner compensation program discussed above.

Highly Compensated Employees

We provide a deferred compensation plan for our highly compensated employees who are not eligible to participate in the OSI Restaurant Partners, LLC Salaried Employees 401(k) Plan and Trust. The deferred compensation plan allows these employees to contribute from 5% to 90% of their base salary and up to 100% of their cash bonus on a pre-tax basis to an investment account consisting of various investment fund options. We do not currently intend to provide any matching or profit-sharing contributions, and participants are fully vested in their deferrals and their related returns. Participants are considered unsecured general creditors in the event of our bankruptcy or insolvency.

INCOME TAXES

Deferred income 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. Deferred income 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 income tax assets and liabilities of a change in the tax rate is recognized in income in the period that includes the enactment date of the rate change. We recorded a valuation allowance to reduce our deferred income tax assets to the amount that is more likely than not to be realized. We have considered future taxable income and ongoing feasible tax planning

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

strategies in assessing the need for the valuation allowance. Our conclusion that it is more likely than not that such deferred income tax assets will be realized is strongly influenced by our forecast of future taxable income.

At December 31, 2012, we had a valuation allowance against net deferred income tax assets recorded of $72.5 million, of which $67.7 million was for U.S. net deferred income tax assets. We established the domestic portion of the valuation allowance in 2009 with increases through 2012 against our then existing U.S. net deferred income tax assets because we determined that the deferred income tax assets were not likely to be realized in future periods based on the negative evidence that outweighed the positive evidence.

As of June 30, 2013, we conducted an assessment of the recoverability of our domestic net deferred income tax assets and determined it was more likely than not that our existing net deferred income tax assets for general business tax credit carryforwards would be realized. Our assessment included consideration of all available positive and negative evidence including, among other evidence, historical cumulative operating income, projected future taxable income and recent utilization of U.S. net operating loss carryforwards and tax credit carryforwards. Accordingly, we recorded a $67.7 million reduction of the valuation allowance against the U.S. net deferred income tax assets of which $52.0 million was recorded as income tax benefit and $15.7 million was recorded as an increase to Additional paid-in capital. As the general business tax credits are expected to be realized due to current year and future year’s income, the portion attributable to future year’s income, or $44.8 million, was released as a discrete event during the second quarter of 2013. The remainder was attributable to current year activity as income was realized and impacted the 2013 annual effective income tax rate. We did not release the valuation allowance against foreign net operating loss carryforwards.

Although the release of the valuation allowance had a positive effect on our results of operations in 2013, the release will most likely have the effect of reducing our earnings in periods subsequent to 2013 as a result of an increase in the provision for income taxes in such future periods. This negative effect on earnings in subsequent periods occurs because the release of the valuation allowance reflects the recognition of previously generated, but not recognized, income tax benefits in 2013. Absent the release of the valuation allowance, any such income tax benefits would be recognized in the future periods in which their realization were to occur upon the generation of taxable income. We expect to continue to generate significant U.S. income tax credits, which combined with the mix of U.S. and foreign earnings, including a higher tax rate in the newly consolidation Brazilian operations, in periods subsequent to 2013 will result in an effective income tax rate that is higher than those in the current and prior periods but continues to be lower than the blended federal and state statutory rate (expected to be in the range of 27.0% to 29.0% in 2014). In addition, until such time as our tax credit carryforwards are exhausted or expire, income tax expense is expected to substantially exceed the amount of cash income taxes payable by us.

As of December 31, 2013 and 2012, we had $209.9 million and $261.7 million, respectively, in cash and cash equivalents (excluding restricted cash of $28.4 million and $20.1 million, respectively), of which approximately $107.5 million and $92.9 million, respectively, was held by foreign affiliates, a portion of which would be subject to additional taxes if repatriated to the United States. Based on cash and working capital projections within domestic tax jurisdictions, we believe we will generate sufficient cash flows from our United States operations to meet our future debt repayment requirements, anticipated working capital needs and planned capital expenditures, as well as all of our other business needs in the United States.

A provision for income taxes has not been recorded for United States or additional foreign taxes on undistributed earnings related to our foreign affiliates as these earnings were and are expected to continue to be permanently reinvested. The aggregate undistributed earnings of our foreign subsidiaries for which no deferred tax liability has been recorded is approximately $151.3 million as of December 31, 2013. If we identify an exception to our general reinvestment policy of undistributed earnings, additional tax liabilities will be recorded. It is not practical to determine the amount of unrecognized deferred income tax liabilities on the undistributed earnings. The international jurisdictions in which we operate do not have any known restrictions that would prohibit the repatriation of cash and cash equivalents.

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BLOOMIN’ BRANDS, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

We are currently under examination by the IRS for the years ended December 31, 2010 through 2012. In September 2013, the IRS informed us that it proposes to issue an audit adjustment for the employer’s share of FICA taxes related to cash tips allegedly received and unreported by our tipped employees during calendar year 2010, for which we recorded a liability in the third quarter of 2013 for $5.0 million. The cash tips allegedly unreported by the tipped employees are based on an IRS estimate of the aggregate amount of tips directly received by tipped employees from our customers. Subsequently, we have had additional communications with the IRS representatives, which indicate that the scope of the proposed adjustment will be expanded to include the 2011 and 2012 periods. As a result, we have reassessed the established liability balance and recorded an additional $12.0 million in the fourth quarter of 2013. As of December 31, 2013, we had $5.0 million and $12.0 million recorded in Accrued and other current liabilities and Other long-term liabilities, net, respectively, in our Consolidated Balance Sheet at December 31, 2013. The associated expense is included in Labor and other related expenses for the year ended December 31, 2013. In addition, a deferred income tax benefit has been recorded for the allowable income tax credits for the employer’s share of FICA taxes expected to be paid as result of the assessment. This income tax benefit is included in (Benefit) provision for income taxes and offsets the additional Labor and other related expenses in 2013. As a result of the associated income tax benefit, recording of the liability has no impact on Net income.

We expect to settle these obligations with cash payments over the next two years. The amount and timing of payments may vary based on receipt of formal IRS assessments for the open examination periods.

In addition, we are under examination by tax authorities in South Korea for the 2008 to 2012 tax years. Approximately $7.9 million of additional tax obligations were assessed as a result of this examination and we are currently in the appeals process. In order to enter into the appeal, we were required to deposit with the Korea tax authorities the amount of the assessment.

We believe that adequate amounts have been reserved for any adjustments that may ultimately result from these or other examinations.

DIVIDENDS

We did not declare or pay any dividends on our common stock during 2012 or 2013. Our Board of Directors does not intend to pay regular dividends on our common stock. However, we expect to reevaluate our dividend policy on a regular basis and may, subject to compliance with the covenants contained in the Credit Facilities and other considerations, determine to pay dividends in the future.

Our ability to pay dividends is dependent on our ability to obtain funds from our subsidiaries. Payment of dividends by OSI to Bloomin’ Brands is restricted under the Credit Facilities to dividends for the purpose of paying Bloomin’ Brands’ franchise and income taxes and ordinary course operating expenses; dividends for certain other limited purposes; and other dividends subject to an aggregate cap over the term of the agreement.

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BLOOMIN’ BRANDS, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

OTHER MATERIAL COMMITMENTS

Our contractual obligations, debt obligations and commitments as of December 31, 2013 are summarized in the table below (in thousands):

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	PAYMENTS DUE BY PERIOD	
 	 	 	 	LESS THAN	 	1-3	 	3-5	 	MORE THAN	
 	 	TOTAL	 	1 YEAR	 	YEARS	 	YEARS	 	5 YEARS	
Contractual Obligations	 	 	 	 	 	 	 	 	 	 	
Long-term debt (including current portion) (1)	 	$	1,429,295	
 	 	$	14,509	
 	 	$	24,081	
 	 	$	453,330	
 	 	$	937,375	
 	
Interest (2)	 	297,315	
 	 	65,024	
 	 	129,194	
 	 	75,826	
 	 	27,271	
 	
Operating leases (3)	 	966,243	
 	 	142,309	
 	 	234,860	
 	 	162,239	
 	 	426,835	
 	
Purchase obligations (4)	 	439,812	
 	 	391,810	
 	 	38,395	
 	 	6,515	
 	 	3,092	
 	
Partner deposits and accrued partner obligations (5)	 	90,664	
 	 	12,548	
 	 	40,010	
 	 	14,064	
 	 	24,042	
 	
Other long-term liabilities (6)	 	179,401	
 	 	—	
 	 	88,769	
 	 	41,660	
 	 	48,972	
 	
Other current liabilities (7)	 	35,006	
 	 	35,006	
 	 	—	
 	 	—	
 	 	—	
 	
Total contractual obligations	 	$	3,437,736	
 	 	$	661,206	
 	 	$	555,309	
 	 	$	753,634	
 	 	$	1,467,587	
 	
____________________
 	 	
(1)	Long-term debt obligations consist primarily of borrowings under OSI’s Credit Facilities and New PRP’s 2012 CMBS Loan and exclude debt discount and interest.	
 	 	
(2)	Includes interest estimated on OSI’s Credit Facilities and New PRP’s 2012 CMBS Loan with gross outstanding balances of $935.0 million and $484.5 million, respectively, at December 31, 2013. Projected future interest payments for OSI’s Credit Facilities and the variable-rate tranche of New PRP’s 2012 CMBS Loan are based on interest rates in effect at December 31, 2013 and assumes only scheduled principal payments. During 2013, we made voluntary prepayments of $65.0 million on the Amended Term Loan B and, as a result, will not be required to make additional amortization payments until the loan reaches maturity in October 2019. Interest obligations also include letter of credit and commitment fees for the used and unused portions of OSI’s revolving credit facility and interest related to OSI’s capital lease obligations. Interest on OSI’s notes payable issued for the return of capital to managing and area operating partners and the buyouts of area operating partner interests has been excluded from the table. In addition, interest expense associated with deferred financing fees was excluded from the table as the expense is non-cash in nature.	
 	 	
(3)	Total minimum lease payments have not been reduced by minimum sublease rentals of $1.8 million due in future periods under non-cancelable subleases.	
 	 	
(4)	We have minimum purchase commitments with various vendors through January 2020. Outstanding minimum purchase commitments consist primarily of beef, pork, seafood and other food and beverage products, as well as, commitments for advertising, technology sports sponsorships and store level service contracts.	
 	 	
(5)	Timing of payments of partner deposits and accrued partner obligations are estimates only and may vary significantly in amount and timing of settlement based on employee turnover, return of deposits to us in accordance with employee agreements and changes to buyout values of employee partners.	
 	 	
(6)	Other long-term liabilities include but are not limited to: long-term portion of amounts owed to managing and chef partners for various deferred compensation programs and long-term insurance accruals. The long-term portion of the liability for unrecognized tax benefits and the related accrued interest and penalties was $6.5 million and $0.6 million, respectively, at December 31, 2013. These amounts were excluded from the table since it is not possible to estimate when these future payments will occur. In addition, net unfavorable leases, the long-term portion of deferred gain on a sale-leaseback transaction and other miscellaneous items of approximately $98.2 million at December 31, 2013 were excluded from the table as payments are not associated with these liabilities.	
 	 	
(7)	Other current liabilities include the current portion of amounts owed to managing and chef partners for various compensation programs, the current portion of insurance accruals and the current portion of operating leases for closed restaurants.	

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BLOOMIN’ BRANDS, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these accompanying consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities during the reporting period. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. We consider an accounting estimate to be critical if it requires assumptions to be made and changes in these assumptions could have a material impact on our consolidated financial condition or results of operations.

Property, Fixtures and Equipment

Property, fixtures and equipment are stated at cost, net of accumulated depreciation. Depreciation is computed on the straight-line method over the estimated useful lives of the assets. Improvements to leased properties are depreciated over the shorter of their useful life or the lease term, which includes renewal periods that are reasonably assured. The useful lives of the assets are based upon our expectations for the period of time that the asset will be used to generate revenues. We periodically review the assets for changes in circumstances, which may impact their useful lives.

 	 	
Buildings and building improvements	20 to 30 years	
Furniture and fixtures	5 to 7 years	
Equipment	2 to 7 years	
Leasehold improvements	5 to 20 years	
Capitalized software	3 to 5 years	

We capitalize direct and indirect internal costs clearly associated with the acquisition, development, design and construction of Company-owned restaurant locations as these costs will provide us a future benefit. Internal costs of $9.1 million and $2.4 million were capitalized during the years ended December 31, 2013 and 2012, respectively. Internal costs incurred for the year ended December 31, 2011 were not material to our consolidated financial statements.

Our accounting policies regarding property, fixtures and equipment include certain management judgments and projections regarding the estimated useful lives of these assets, the residual values to which the assets are depreciated or amortized, the determination of expected lease terms and the determination of what constitutes increasing the value and useful life of existing assets. These estimates, judgments and projections may produce materially different amounts of depreciation and amortization expense than would be reported if different assumptions were used.

Operating Leases
Rent expense for our operating leases, which generally have escalating rentals over the term of the lease and may include potential rent holidays, is recorded on a straight-line basis over the initial lease term and those renewal periods that are reasonably assured. The initial lease term includes the “build-out” period of our leases, which is typically before rent payments are due under the terms of the lease. The difference between rent expense and rent paid is recorded as deferred rent and is included in the Consolidated Balance Sheets. Payments received from landlords as incentives for leasehold improvements are recorded as deferred rent and are amortized on a straight-line basis over the term of the lease as a reduction of rent expense. Lease termination fees, if any, and future obligated lease payments for closed locations are recorded as an expense in the period they are incurred.  Assets and liabilities relating to favorable and unfavorable lease amounts are amortized on a straight-line basis to rent expense over the remaining lease term.

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BLOOMIN’ BRANDS, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

Impairment or Disposal of Long-Lived Assets

We assess the potential impairment of definite lived intangibles, including trademarks, franchise agreements, reacquired franchise rights and net favorable leases, and other long-lived assets whenever events or changes in circumstances indicate that the carrying value may not be recoverable. In evaluating long-lived restaurant assets for impairment, we consider a number of factors relevant to the assets’ current market value and future ability to generate cash flows.

If these factors indicate that we should review the carrying value of the restaurant’s long-lived assets, we perform a two-step impairment analysis. Each of our restaurants is evaluated individually for impairment since that is the lowest level at which identifiable cash flows can be measured independently from cash flows of other asset groups. If the total future undiscounted cash flows expected to be generated by the assets are less than the carrying amount, as prescribed by step one testing, recoverability is measured in step two by comparing fair value of the asset to its carrying amount. Should the carrying amount exceed the asset’s estimated fair value, an impairment loss is charged to earnings. Restaurant fair value is determined based on estimates of discounted future cash flows; and impairment charges primarily occur as a result of the carrying value of a restaurant’s assets exceeding its estimated fair market value, primarily due to anticipated closures or declining future cash flows from lower projected future sales at existing locations.

We incurred total long-lived asset impairment charges and restaurant closing expense of $22.8 million, $13.0 million and $14.0 million for the years ended December 31, 2013, 2012 and 2011, respectively (see “—Results of Operations—Costs and Expenses—Provision for Impaired Assets and Restaurant Closings”). All impairment charges are recorded in Provision for impaired assets and restaurant closings in our Consolidated Statements of Operations and Comprehensive Income.

Our judgments and estimates related to the expected useful lives of long-lived assets are affected by factors such as changes in economic conditions, operating performance and expected use. As we assess the ongoing expected cash flows and carrying amounts of our long-lived assets, these factors could cause us to realize a material impairment charge.

Generally, restaurant closure costs are expensed as incurred. When it is probable that we will cease using the property rights under a non-cancelable operating lease, we record a liability for the net present value of any remaining lease obligations net of estimated sublease income that can reasonably be obtained for the property. The associated expense is recorded in Provision for impaired assets and restaurant closings. Any subsequent adjustments to the liability from changes in estimates are recorded in the period incurred.

Goodwill and Indefinite-Lived Intangible Assets

Our indefinite-lived intangible assets consist of goodwill and trade names. Goodwill represents the residual after allocation of the purchase price to the individual fair values and carryover basis of assets acquired. On an annual basis (during the second quarter of the fiscal year) or whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable, we review the recoverability of goodwill and indefinite-lived intangible assets.

Prior to performing a quantitative test comparing the fair value of the reporting units to their carrying amounts, we may elect to perform a qualitative assessment. This qualitative assessment is referred to as a “step zero” approach and allows us the option to assess qualitative factors to determine whether the existence of events or circumstances leads to the determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. In considering the step zero approach, we evaluate factors including, but not limited to, macro-economic conditions, market and industry conditions, commodity cost fluctuations, competitive environment, share price performance, results of prior impairment tests, operational stability and the overall financial performance of the reporting units. If, based on the review of the qualitative factors, we determine there is sufficient evidence to support a more likely than not (greater than 50%) probability that the fair value of a reporting unit is greater than its carrying value, we may skip the two-step impairment test.

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BLOOMIN’ BRANDS, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

We may elect to forgo step zero and proceed to the first step of the impairment test for goodwill and other indefinite-lived intangible assets. The impairment test for goodwill involves comparing the fair value of the reporting units to their carrying amounts. If the carrying amount of a reporting unit exceeds its fair value, a second step is required to measure a goodwill impairment loss, if any. This step revalues all assets and liabilities of the reporting unit to their current fair values and then compares the implied fair value of the reporting unit’s goodwill to the carrying amount of that goodwill. If the carrying amount of the reporting unit’s goodwill exceeds the implied fair value of the goodwill, an impairment loss is recognized in an amount equal to the excess. The impairment test for trade names involves comparing the fair value of the trade name, as determined through a relief from royalty method, to its carrying value.

We test both our goodwill and our trade names for impairment primarily by utilizing discounted cash flow models to estimate their fair values. These cash flow models involve several assumptions. Changes in our assumptions could materially impact our fair value estimates. Assumptions critical to our fair value estimates are: (i) weighted-average cost of capital rates used to derive the present value factors used in determining the fair value of the reporting units and trade names; (ii) projected annual revenue growth rates used in the reporting unit and trade name models; and (iii) projected long-term growth rates used in the derivation of terminal year values. Other assumptions include estimates of projected capital expenditures and working capital requirements. These and other assumptions are impacted by economic conditions and expectations of management and will change in the future based on period-specific facts and circumstances.

We performed our annual impairment test in the second quarter of 2013 utilizing the step zero approach described above and determined at that time that none of our five reporting units with remaining goodwill were at risk for material goodwill impairment. We did not record any goodwill or indefinite-lived intangible asset impairment charges during the years ended December 31, 2013, 2012 and 2011.
 
Sales declines at our restaurants, unplanned increases in health insurance, commodity or labor costs, deterioration in overall economic conditions and challenges in the restaurant industry may result in future impairment charges. It is possible that changes in circumstances or changes in our judgments, assumptions and estimates could result in an impairment charge of a portion or all of our goodwill or other intangible assets.

Revenue Recognition

We record food and beverage revenues upon sale. Initial and developmental franchise fees are recognized as income once we have substantially performed all of our material obligations under the franchise agreement, which is generally upon the opening of the franchised restaurant. Continuing royalties, which are a percentage of net sales of the franchisee, are recognized as income when earned. Franchise-related revenues are included in Other revenues in our Consolidated Statements of Operations and Comprehensive Income.

We defer revenue for gift cards, which do not have expiration dates, until redemption by the customer. We also recognize gift card “breakage” revenue for gift cards when the likelihood of redemption by the customer is remote, which we determined are those gift cards issued on or before three years prior to the balance sheet date. We recorded breakage revenue of $16.3 million, $13.3 million and $11.1 million for the years ended December 31, 2013, 2012 and 2011, respectively. Breakage revenue is recorded as a component of Restaurant sales in our Consolidated Statements of Operations and Comprehensive Income.

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BLOOMIN’ BRANDS, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

Gift cards sold at a discount are recorded as revenue upon redemption of the associated gift cards at an amount net of the related discount. Gift card sales commissions paid to third-party providers are initially capitalized and subsequently recognized as Other restaurant operating expenses in our Consolidated Statements of Operations and Comprehensive Income upon redemption of the associated gift card. Deferred expenses are $12.0 million and $10.9 million as of December 31, 2013 and 2012, respectively, and are reflected in Other current assets, net in our Consolidated Balance Sheets. Gift card sales that are accompanied by a bonus gift card to be used by the customer at a future visit result in a separate deferral of a portion of the original gift card sale. Revenue is recorded when the bonus card is redeemed at a value based on the estimated fair market value of the bonus card.

We collect and remit sales, food and beverage, alcoholic beverage and hospitality taxes on transactions with customers and report such amounts under the net method in our Consolidated Statements of Operations and Comprehensive Income. Accordingly, these taxes are not included in gross revenue.

Insurance Reserves

We self-insure or maintain a deductible for a significant portion of expected losses under our workers’ compensation, general liability/liquor liability, health, property and management liability insurance programs. We purchase insurance for individual claims that exceed the amounts listed in the following table:

 	 	 	 	 	 	 	 	 	
 	 	2014	 	2013	
Workers’ compensation	 	$	1,000,000	
 	 	$	1,000,000	
 	
General liability / Liquor liability	 	1,500,000 / 2,500,000	
 	 	1,500,000 / 2,500,000	
 	
Health (1)	 	400,000	
 	 	400,000	
 	
Property coverage (2)	 	500,000 / 2,500,000	
 	 	500,000 / 2,500,000	
 	
Employment practices liability	 	2,000,000	
 	 	2,000,000	
 	
Directors’ and officers’ liability	 	1,000,000	
 	 	1,000,000	
 	
Fiduciary liability	 	25,000	
 	 	25,000	
 	
____________________
 	 	
(1)	We are self-insured for all covered health benefits claims, limited to $0.4 million per covered individual per year. We are responsible for the first $0.6 million of payable losses under the plan as an additional aggregating specific deductible to apply after the individual specific deductible is met.	
 	 	
(2)	We have a $0.5 million deductible per occurrence for those properties that collateralize New PRP’s 2012 CMBS Loan and a $2.5 million deductible per occurrence for all other locations. The deductibles for named storms and earthquakes are 5.0% of the total insurable value at the time of the loss per unit of insurance at each location involved in the loss, subject to a minimum of $0.5 million for those properties that collateralize New PRP’s 2012 CMBS Loan and $2.5 million for all other locations. Property limits are $60.0 million each occurrence, and we do not quota share in any loss above either deductible level.	

We record a liability for all unresolved claims and for an estimate of incurred but not reported claims at the anticipated cost to us. In establishing our reserves, we consider certain actuarial assumptions and judgments regarding economic conditions, the frequency and severity of claims and claim development history and settlement practices. Unanticipated changes in these factors or future adjustments to these estimates may produce materially different amounts of expense that would be reported under these programs. Reserves recorded for workers’ compensation and general liability/liquor liability claims are discounted using the average of the one-year and five-year risk free rate of monetary assets that have comparable maturities. When recovery for an insurance policy is considered probable, a receivable is recorded.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

Employee Partner Payments and Buyouts

The managing partner of each Company-owned domestic restaurant and the chef partner of each Fleming’s Prime Steakhouse and Wine Bar and Roy’s Company-owned domestic restaurant, as well as area operating partners, generally receive distributions or payments for providing management and supervisory services to their restaurants based on a percentage of their associated restaurants’ monthly cash flows. The expense associated with the monthly payments for managing and chef partners is included in Labor and other related expenses, and the expense associated with the monthly payments for area operating partners is included in General and administrative expenses in our Consolidated Statements of Operations and Comprehensive Income.

We estimate future area operating partner bonuses and purchases of area operating partners’ interests, as well as deferred compensation obligations to managing and chef partners, using current and historical information on restaurant performance and record the partner obligations in Partner deposits and accrued partner obligations in our Consolidated Balance Sheets. In the period we pay an area operating partner bonus or purchase the area operating partner’s interests, an adjustment is recorded to recognize any remaining expense associated with the bonus or purchase and reduce the related accrued buyout liability. Deferred compensation expenses for managing and chef partners are included in Labor and other related expenses and bonus and buyout expenses for area operating partners are included in General and administrative expenses in our Consolidated Statements of Operations and Comprehensive Income.

Stock-Based Compensation

Upon completion of our IPO, we adopted the 2012 Equity Plan, and no further awards were or will be made under our 2007 Equity Plan. The 2012 Equity Plan permits the grant of stock options, stock appreciation rights, restricted stock, restricted stock units, performance awards and other stock-based awards to our management and other key employees. We account for our stock-based employee compensation using a fair value-based method of accounting.

Under the 2007 Equity Plan, stock options generally vest and become exercisable in 20% increments over a period of five years contingent on continued employee service. Under the 2012 Equity Plan, stock options generally vest and become exercisable in 25% increments over a period of four years on the grant anniversary date contingent on continued employee service. Under both plans, stock options have an exercisable life of no more than ten years from the date of grant.

We use the Black-Scholes option pricing model to estimate the weighted-average grant date fair value of stock options granted. Expected volatilities are based on historical volatilities of our stock and the stock of comparable peer companies. The expected term of options granted represents the period of time that options granted are expected to be outstanding. The simplified method of estimating expected term is used since we do not have significant historical exercise experience for our stock options. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the grant date. Results may vary depending on the assumptions applied within the model. 

We recorded compensation expense of $11.2 million for the year ended December 31, 2013 for stock options. As of December 31, 2013, there was $22.9 million of total unrecognized compensation expense related to non-vested stock options, which is expected to be recognized over a weighted-average period of approximately 2.8 years.

Restricted stock and restricted stock units generally vest on the grant anniversary date ratably over a period of three years for those issued to directors and 25% per year for all other issuances. Restricted stock and restricted stock unit vesting is dependent upon continued service with forfeiture of all unvested restricted stock and/or restricted stock units upon termination, unless in the case of death or disability, in which case all restricted stock is immediately vested. Restricted stock and restricted stock unit awards are issued and measured at market value on the date of grant.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

Compensation expense related to restricted stock and restricted stock unit awards for the year ended December 31, 2013 was $2.0 million, and unrecognized compensation expense related to non-vested restricted stock and restricted stock unit awards was approximately $8.7 million at December 31, 2013 and will be recognized over a weighted-average period of 3.0 years.

Performance-based share units (“PSUs”) vest over a period of four years following the date of grant, and 25% of the grant is earned or forfeited on each grant anniversary date, subject to certification of the performance criteria by the Board of Directors. The number of units that actually vest will be determined for each year based on the achievement of certain Company performance criteria set forth in the award agreement and may range from zero to 200% of the annual target grant. PSUs that do not vest based on failure to satisfy the stated performance criteria for any annual period are forfeited. In addition to the satisfaction of the performance criteria for the PSUs, vesting is dependent upon continued service with forfeiture of all unvested PSUs upon termination, unless in the case of death or disability, in which case a pro rata portion of the target number of PSUs are eligible to immediately vest based on actual performance during the performance period. The PSUs are settled in shares of common stock, with holders receiving one share of common stock for each performance-based share unit that vests. The fair value of PSUs is based on market value of our common stock on the grant date. Compensation expense for PSUs is recognized over the vesting period when it is probable the performance criteria will be achieved.

Compensation expense recognized in Net income for the year ended December 31, 2013 was $0.7 million for PSUs. None of our outstanding PSUs vested during the year ended December 31, 2013. Unrecognized compensation expense related to non-vested PSUs was immaterial at December 31, 2013.

The benefits of tax deductions in excess of recognized compensation cost, if any, are reported as an increase or decrease in operating cash flows, with the offsetting increase or decrease reported within financing cash flows.

Income Taxes

In determining net income for financial statement purposes, we make certain estimates and judgments in the calculation of tax expense and the resulting tax liabilities as well as in the recoverability of deferred tax assets that arise from temporary differences between the tax and financial statement recognition of revenue and expense.

Deferred income 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 basis. Deferred income 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 income tax assets and liabilities of a change in the tax rate is recognized in income in the period that includes the enactment date of the rate change. We record valuation allowance to reduce our deferred income tax assets to the amount that is more likely than not to be realized. We consider future taxable income and ongoing feasible tax planning strategies in assessing the need for the valuation allowance.

Judgments made regarding future taxable income may change due to changes in market conditions, changes in tax laws or other factors. If the assumptions and estimates change in the future, the valuation allowance established may be increased or decreased, resulting in a respective increase or decrease in income tax expense.

We use an estimate of our annual effective tax rate at each interim period based on the facts and circumstances available at that time while the actual effective tax rate is calculated at year-end.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued

Recently Issued Financial Accounting Standards
 
In March 2013, the FASB issued ASU No. 2013-05, “Foreign Currency Matters (Topic 830): Parent’s Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity (a consensus of the FASB Emerging Issues Task Force)” (“ASU No. 2013-05”). Under ASU No. 2013-05, which clarifies existing U.S. GAAP guidance, an entity would recognize cumulative translation adjustments in earnings when it ceases to have a controlling financial interest in a subsidiary or group of assets within a consolidated foreign entity and the sale or transfer results in the complete or substantially complete liquidation of the foreign entity in which the subsidiary or group of assets resided. However, when an entity sells either a part or all of its investment in a consolidated foreign entity, an entity would recognize cumulative translation adjustments in earnings only if the parent no longer has a controlling financial interest in the foreign entity as a result of the sale. In the case of sales of an equity method investment that is a foreign entity, a pro rata portion of cumulative translation adjustments attributable to the equity method investment would be recognized in earnings upon sale of the equity method investment. In addition, cumulative translation adjustments would be recognized in earnings upon a business combination achieved in stages such as a step acquisition. ASU No. 2013-05 is effective for public companies for fiscal years beginning on or after December 15, 2013 and interim periods within those fiscal years, with early adoption permitted. We adopted ASU No. 2013-05 effective January 1, 2014 with prospective application to the derecognition of any foreign entity subsidiaries, groups of assets or investments in foreign entities completed on or after January 1, 2014. The impact of ASU No. 2013-05 on our financial position, results of operations and cash flows is dependent on future transactions resulting in derecognition of our foreign assets, subsidiaries or investments in foreign entities completed on or after adoption.
 
In July 2013, the FASB issued ASU No. 2013-11, “Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists (a consensus of the FASB Emerging Issues Task Force)” (“ASU No. 2013-11”). Under ASU No. 2013-11, an entity is required to present its unrecognized tax benefits net of its deferred tax assets when settlement in this manner is available under the tax law, which would be based on facts and circumstances as of the balance sheet reporting date and would not consider future events. Gross presentation in the notes to the financial statements will still be required. ASU No. 2013-11 is effective for public companies for fiscal years beginning on or after December 15, 2013 and interim periods within those fiscal years, with early adoption permitted. ASU No. 2013-11 will apply on a prospective basis to all unrecognized tax benefits that exist at the effective date, with the option to apply it retrospectively. This guidance did not have an impact upon adoption at January 1, 2014 on our financial position, results of operations or cash flows as we currently present unrecognized tax benefits net of deferred tax assets where applicable.

Impact of Inflation

In the last three years, we have not operated in a period of high general inflation; however, we have experienced material increases in specific commodity costs. Our restaurant operations are subject to federal and state minimum wage laws governing such matters as working conditions, overtime and tip credits. Significant numbers of our food service and preparation personnel are paid at rates related to the federal and/or state minimum wage and, accordingly, increases in the minimum wage have increased our labor costs in the last three years. To the extent permitted by competition and the economy, we have mitigated increased costs by increasing menu prices and may continue to do so if deemed necessary in future years.

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Item 7A. Quantitative and Qualitative Disclosures about Market Risk

We are exposed to market risk from changes in interest rates on debt, changes in foreign currency exchange rates and changes in commodity prices.

Interest Rate Risk

At December 31, 2013 and 2012, our total debt was approximately $1.4 billion and $1.5 billion, respectively. For fixed-rate debt, interest rate changes affect the fair value of debt. However, for variable-rate debt, interest rate changes generally impact our earnings and cash flows, assuming other factors are held constant. Our current exposure to interest rate fluctuations includes OSI’s borrowings under its Credit Facilities and the floating rate component of the first mortgage loan in New PRP’s 2012 CMBS Loan that bear interest at floating rates based on the Eurocurrency Rate or the Base Rate and the 30-day LIBOR rate, respectively, plus an applicable borrowing margin. We manage our interest rate risk by offsetting some of our variable-rate debt with fixed-rate debt, through normal operating and financing activities and, when deemed appropriate, through the use of derivative financial instruments. We use an interest rate cap to limit the volatility of the floating rate component of the first mortgage loan in New PRP’s 2012 CMBS Loan.

We had $435.8 million and $445.2 million of fixed-rate debt outstanding, excluding the debt discount, on New PRP’s 2012 CMBS Loan at December 31, 2013 and 2012, respectively. At December 31, 2013 and 2012, we had $983.7 million and $1.0 billion, respectively, of aggregate variable-rate debt outstanding on OSI’s senior secured credit facilities and New PRP’s 2012 CMBS Loan. At December 31, 2013 and 2012, we also had $193.4 million and $183.8 million, respectively, in available unused borrowing capacity under OSI’s revolving credit facility (after giving effect to undrawn letters of credit of approximately $31.6 million and $41.2 million respectively).  Based on $983.7 million of outstanding variable-rate debt at December 31, 2013, an increase of one percentage point on January 1, 2014, would cause an increase to cash interest expense of approximately $9.8 million per year.

If a one percentage point increase in interest rates were to occur over the next four quarters, such an increase would result in the following additional interest expense, assuming the current borrowing level remains constant (in thousands):

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	PRINCIPAL
OUTSTANDING AT
DECEMBER 31, 2013	 	ADDITIONAL INTEREST EXPENSE	 	
 	 	 	 	 	 	
 	 	 	 	Q1	 	Q2	 	Q3	 	Q4	 	 	 	 	 	
VARIABLE-RATE DEBT	 	 	 	2014	 	2014	 	2014	 	2014	 	 	 	 	 	 	 	
Senior secured term loan B facility, interest rates of 3.50% at December 31, 2013 (1) (2)	 	$	935,000	
 	 	$	2,338	
 	 	$	2,338	
 	 	$	2,338	
 	 	$	2,338	
 	 	 	 	 	 	 	 	
Floating rate component of mortgage loan, interest rate of 3.37% at December 31, 2013 (2) (3)	 	48,697	
 	 	122	
 	 	122	
 	 	122	
 	 	122	
 	 	 	 	 	 	 	 	
Total	 	$	983,697	
 	 	$	2,460	
 	 	$	2,460	
 	 	$	2,460	
 	 	$	2,460	
 	 	 	 	 	 	 	 	
____________________
 	 	
(1)	Represents an obligation of OSI.	
 	 	
(2)	The senior secured term loan B facility contains interest rate floors of 2.00% for the Base Rate and 1.00% for the Eurocurrency Rate, and the floating rate component of the first mortgage loan contains an interest rate floor of 1% for the 30-day LIBOR. The interest rate floors have not been considered in the table above; however, there would be no increase in interest expense until the respective variable interest rates exceed the stated floor amounts.	
 	 	
(3)	Represents an obligation of New PRP.	

A change in interest rates generally does not have an impact upon our future earnings and cash flow for fixed-rate debt instruments. As fixed-rate debt matures, however, and if additional debt is acquired to fund the debt repayment, future earnings and cash flow may be affected by changes in interest rates. This effect would be realized in the periods subsequent to the periods when the debt matures.

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Foreign Currency Exchange Rate Risk

We are subject to foreign currency exchange risk for our restaurants operating in foreign countries. Our exposures to foreign currency exchange risk are primarily related to fluctuations in the South Korean Yen and the Brazilian Real relative to the U.S. dollar. Our operations in other markets consist of Company-owned restaurants on a smaller scale than the markets identified above and franchised locations, from which we collect royalties in local currency. If foreign currency exchange rates depreciate in the countries in which we operate, we may experience declines in our operating results. Historically, we have chosen not to hedge foreign currency risks related to our foreign currency denominated earnings through the use of financial instruments. A 10% change in average foreign currency rates against the U.S. dollar during the year ended December 31, 2013 would have increased or decreased our Total revenues and Net income for our consolidated foreign entities by approximately $38.2 million and $1.2 million, respectively. We expect the impact of average foreign currency rates against the U.S. dollar will result in a larger effect on Total revenues and Net income in future periods due to the acquisition of a controlling interest in our Brazilian operations.

Commodity Pricing Risk

Many of the ingredients used in the products sold in our restaurants are commodities that are subject to unpredictable price volatility. Although we attempt to minimize the effect of price volatility by negotiating fixed price contracts for the supply of key ingredients, there are no established fixed price markets for certain commodities such as produce and wild fish, and we are subject to prevailing market conditions when purchasing those types of commodities. Other commodities are purchased based upon negotiated price ranges established with vendors with reference to the fluctuating market prices. The related agreements may contain contractual features that limit the price paid by establishing certain price floors and caps. Extreme changes in commodity prices or long-term changes could affect our financial results adversely. We expect that in most cases increased commodity prices could be passed through to our consumers through increases in menu prices. However, if there is a time lag between the increasing commodity prices and our ability to increase menu prices, or if we believe the commodity price increase to be short in duration and we choose not to pass on the cost increases, our short-term financial results could be negatively affected. Additionally, from time to time, competitive circumstances could limit menu price flexibility, and in those cases margins would be negatively impacted by increased commodity prices.

Our restaurants are dependent upon energy to operate and are impacted by changes in energy prices, including natural gas. We utilize derivative instruments to mitigate some of our overall exposure to material increases in natural gas prices. We record mark-to-market changes in the fair value of derivative instruments in earnings in the period of change. The effects of these derivative instruments were immaterial to our financial statements for all periods presented.

In addition to the market risks identified above, we are subject to business risk as our U.S. beef supply is highly dependent upon a limited number of vendors. In 2013, we purchased more than 90% of our beef raw materials from four beef suppliers that represent approximately 90% of the total beef marketplace in the U.S. Due to the nature of our industry, we expect to continue to purchase a substantial amount of our beef from a small number of suppliers. If these vendors were unable to fulfill their obligations under their contracts, we could encounter supply shortages and incur higher costs to secure adequate supplies.

This market risk discussion contains forward-looking statements. Actual results may differ materially from the discussion based upon general market conditions and changes in domestic and global financial markets.

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Item 8. Financial Statements and Supplementary Data

INDEX TO FINANCIAL INFORMATION

 	 	
 	PAGE NO.	
 	 	
Report of Independent Registered Certified Public Accounting Firm	98	
 	 	
Consolidated Balance Sheets — December 31, 2013 and 2012	100	
 	 	
Consolidated Statements of Operations and Comprehensive Income (Loss)  —
For the Years Ended December 31, 2013, 2012 and 2011	102	
 	 	
Consolidated Statements of Changes in Stockholders’ Equity (Deficit) —
For the Years Ended December 31, 2013, 2012 and 2011	103	
 	 	
Consolidated Statements of Cash Flows  —
For the Years Ended December 31, 2013, 2012 and 2011	105	
 	 	
Notes to Consolidated Financial Statements	107	

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Report of Independent Registered Certified Public Accounting Firm

To Board of Directors and Stockholders of
Bloomin’ Brands, Inc.

In our opinion, the consolidated financial statements listed in the index appearing under Item 15(a)(1) present fairly, in all material respects, the financial position of Bloomin’ Brands, Inc. and its subsidiaries at December 31, 2013 and 2012, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2013 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the index appearing under Item 15(a)(2) presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2013, based on criteria established in  Internal Control - Integrated Framework  (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for these financial statements and financial statement schedule, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Annual Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on these financial statements, on the financial statement schedule, and on the Company’s internal control over financial reporting based on our audits (which was an integrated audit in 2013). We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

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As described in Management’s Annual Report on Internal Control over Financial Reporting, management has excluded Outback Steakhouse Restaurantes Brasil S.A. from its assessment of internal control over financial reporting as of December 31, 2013 because it was acquired by the Company in a purchase business combination during 2013. We have also excluded Outback Steakhouse Restaurantes Brasil S.A. from our audit of internal control over financial reporting. Outback Steakhouse Restaurantes Brasil S.A. is a majority-owned subsidiary of the Company whose total assets and total revenues excluded from management’s assessment and our audit of internal control over financial reporting represented 6.3% and less than 0.6%, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2013.
 
/s/    PricewaterhouseCoopers LLP
 
PricewaterhouseCoopers LLP
Tampa, FL
March 3, 2014 

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CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)	
 	 	 	 	 	 	 	 	
 	DECEMBER 31,	
 	2013	 	2012	
ASSETS	 	 	 	
Current Assets	 	 	 	
Cash and cash equivalents	$	209,871	
 	 	$	261,690	
 	
Current portion of restricted cash	3,364	
 	 	4,846	
 	
Inventories	80,613	
 	 	78,181	
 	
Deferred income tax assets	70,802	
 	 	39,774	
 	
Other current assets, net	119,381	
 	 	103,321	
 	
Total current assets	484,031	
 	 	487,812	
 	
Restricted cash	25,055	
 	 	15,243	
 	
Property, fixtures and equipment, net	1,634,130	
 	 	1,506,035	
 	
Investments in and advances to unconsolidated affiliates, net	—	
 	 	36,748	
 	
Goodwill	346,253	
 	 	270,972	
 	
Intangible assets, net	617,133	
 	 	551,779	
 	
Deferred income tax assets	2,392	
 	 	2,532	
 	
Other assets, net	165,180	
 	 	145,432	
 	
Total assets	$	3,274,174	
 	 	$	3,016,553	

 	(CONTINUED...)	 	

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CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)	
 	 	 	 	 	 	 	 	
 	DECEMBER 31,	
 	2013	 	2012	
LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS’ EQUITY	 	 	 	
Current Liabilities	 	 	 	
Accounts payable	$	164,619	
 	 	$	131,814	
 	
Accrued and other current liabilities	194,346	
 	 	192,284	
 	
Current portion of partner deposits and accrued partner obligations	12,548	
 	 	14,771	
 	
Unearned revenue	359,443	
 	 	329,518	
 	
Current portion of long-term debt	13,546	
 	 	22,991	
 	
Total current liabilities	744,502	
 	 	691,378	
 	
Partner deposits and accrued partner obligations	78,116	
 	 	85,762	
 	
Deferred rent	105,963	
 	 	87,641	
 	
Deferred income tax liabilities	150,582	
 	 	195,874	
 	
Long-term debt, net	1,405,597	
 	 	1,471,449	
 	
Other long-term liabilities, net	284,721	
 	 	264,244	
 	
Total liabilities	2,769,481	
 	 	2,796,348	
 	
Commitments and contingencies (see Note 19)	

Mezzanine Equity	 	 	 	
Redeemable noncontrolling interests	21,984	
 	 	—	
 	
Stockholders’ Equity	 	 	 	
Bloomin’ Brands Stockholders’ Equity	 	 	 	
Preferred stock, $0.01 par value, 25,000,000 shares authorized; no shares issued and outstanding at December 31, 2013 and 2012	—	
 	 	—	
 	
Common stock, $0.01 par value, 475,000,000 shares authorized; 124,784,124 and 121,148,451 shares issued and outstanding at December 31, 2013 and 2012, respectively	1,248	
 	 	1,211	
 	
Additional paid-in capital	1,068,705	
 	 	1,000,963	
 	
Accumulated deficit	(565,154	)	 	(773,085	)	
Accumulated other comprehensive loss	(26,418	)	 	(14,801	)	
Total Bloomin’ Brands stockholders’ equity	478,381	
 	 	214,288	
 	
Noncontrolling interests	4,328	
 	 	5,917	
 	
Total stockholders’ equity	482,709	
 	 	220,205	
 	
Total liabilities, mezzanine equity and stockholders’ equity	$	3,274,174	
 	 	$	3,016,553	

The accompanying notes are an integral part of these consolidated financial statements.	

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CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)

 	 	 	 	 	 	 	 	 	 	 	 	
 	YEARS ENDED DECEMBER 31,	
 	2013	 	2012	 	2011	
Revenues	 	 	 	 	 	
Restaurant sales	$	4,089,128	
 	 	$	3,946,116	
 	 	$	3,803,252	
 	
Other revenues	40,102	
 	 	41,679	
 	 	38,012	
 	
Total revenues	4,129,230	
 	 	3,987,795	
 	 	3,841,264	
 	
Costs and expenses	 	 	 	 	 	
Cost of sales	1,333,842	
 	 	1,281,002	
 	 	1,226,098	
 	
Labor and other related	1,157,622	
 	 	1,117,624	
 	 	1,094,117	
 	
Other restaurant operating	964,279	
 	 	918,522	
 	 	890,004	
 	
Depreciation and amortization	164,094	
 	 	155,482	
 	 	153,689	
 	
General and administrative	268,928	
 	 	326,473	
 	 	291,124	
 	
Recovery of note receivable from affiliated entity	—	
 	 	—	
 	 	(33,150	)	
Provision for impaired assets and restaurant closings	22,838	
 	 	13,005	
 	 	14,039	
 	
Income from operations of unconsolidated affiliates	(7,730	)	 	(5,450	)	 	(8,109	)	
Total costs and expenses	3,903,873	
 	 	3,806,658	
 	 	3,627,812	
 	
Income from operations	225,357	
 	 	181,137	
 	 	213,452	
 	
Loss on extinguishment and modification of debt	(14,586	)	 	(20,957	)	 	—	
 	
Gain on remeasurement of equity method investment	36,608	
 	 	—	
 	 	—	
 	
Other (expense) income, net	(246	)	 	(128	)	 	830	
 	
Interest expense, net	(74,773	)	 	(86,642	)	 	(83,387	)	
Income before (benefit) provision for income taxes	172,360	
 	 	73,410	
 	 	130,895	
 	
(Benefit) provision for income taxes	(42,208	)	 	12,106	
 	 	21,716	
 	
Net income	214,568	
 	 	61,304	
 	 	109,179	
 	
Less: net income attributable to noncontrolling interests	6,201	
 	 	11,333	
 	 	9,174	
 	
Net income attributable to Bloomin’ Brands	$	208,367	
 	 	$	49,971	
 	 	$	100,005	

Net income	$	214,568	
 	 	$	61,304	
 	 	$	109,179	
 	
Other comprehensive income:	 	 	 	 	 	
Foreign currency translation adjustment	(17,597	)	 	7,543	
 	 	(2,711	)	
Reclassification of accumulated foreign currency translation adjustment for previously held equity investment	5,980	
 	 	—	
 	 	—	
 	
Comprehensive income	202,951	
 	 	68,847	
 	 	106,468	
 	
Less: comprehensive income attributable to noncontrolling interests	6,201	
 	 	11,333	
 	 	9,174	
 	
Comprehensive income attributable to Bloomin’ Brands	$	196,750	
 	 	$	57,514	
 	 	$	97,294	

Earnings per share:	 	 	 	 	 	
Basic	$	1.69	
 	 	$	0.45	
 	 	$	0.94	
 	
Diluted	$	1.63	
 	 	$	0.44	
 	 	$	0.94	
 	
Weighted average common shares outstanding:	 	 	 	 	 	
Basic	122,972	
 	 	111,999	
 	 	106,224	
 	
Diluted	128,074	
 	 	114,821	
 	 	106,689	

The accompanying notes are an integral part of these consolidated financial statements.

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BLOOMIN’ BRANDS, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)
(IN THOUSANDS)

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	BLOOMIN’ BRANDS	 	 	 	 	 	
 	COMMON STOCK	 	ADDITIONAL
PAID-IN
CAPITAL	 	ACCUM- ULATED
DEFICIT	 	ACCUMULATED
OTHER
COMPREHENSIVE
LOSS	 	NON-
CONTROLLING
INTERESTS (1)	 	TOTAL	 	
 	SHARES	 	AMOUNT	 	 	 	 	 	 	 	 	 	 	 	 	 	
Balance, December 31, 2010	106,573	
 	 	$	1,066	
 	 	$	871,963	
 	 	$	(922,630	)	 	$	(19,633	)	 	$	13,323	
 	 	$	(55,911	)	 	 	 	
Net income	—	
 	 	—	
 	 	—	
 	 	100,005	
 	 	—	
 	 	9,174	
 	 	109,179	
 	 	 	 	
Foreign currency translation adjustment	—	
 	 	—	
 	 	—	
 	 	—	
 	 	(2,711	)	 	—	
 	 	(2,711	)	 	 	 	
Stock-based compensation	—	
 	 	—	
 	 	3,907	
 	 	—	
 	 	—	
 	 	—	
 	 	3,907	
 	 	 	 	
Issuance of notes receivable due from stockholders	—	
 	 	—	
 	 	(1,082	)	 	—	
 	 	—	
 	 	—	
 	 	(1,082	)	 	 	 	
Repayments of notes receivable due from stockholders	—	
 	 	—	
 	 	3	
 	 	—	
 	 	—	
 	 	—	
 	 	3	
 	 	 	 	
Distributions to noncontrolling interests	—	
 	 	—	
 	 	(38	)	 	—	
 	 	—	
 	 	(13,050	)	 	(13,088	)	 	 	 	
Balance, December 31, 2011	106,573	
 	 	$	1,066	
 	 	$	874,753	
 	 	$	(822,625	)	 	$	(22,344	)	 	$	9,447	
 	 	$	40,297	
 	 	 	 	
Net income	—	
 	 	—	
 	 	—	
 	 	49,971	
 	 	—	
 	 	11,333	
 	 	61,304	
 	 	 	 	
Foreign currency translation adjustment	—	
 	 	—	
 	 	—	
 	 	—	
 	 	7,543	
 	 	—	
 	 	7,543	
 	 	 	 	
Issuance of common stock in connection with initial public offering	14,197	
 	 	142	
 	 	142,100	
 	 	—	
 	 	—	
 	 	—	
 	 	142,242	
 	 	 	 	
Exercises of stock options	136	
 	 	1	
 	 	883	
 	 	—	
 	 	—	
 	 	—	
 	 	884	
 	 	 	 	
Stock-based compensation	—	
 	 	—	
 	 	21,671	
 	 	—	
 	 	—	
 	 	—	
 	 	21,671	
 	 	 	 	
Repurchase of common stock	(36	)	 	(1	)	 	316	
 	 	(431	)	 	—	
 	 	—	
 	 	(116	)	 	 	 	
Issuance of restricted stock	314	
 	 	3	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	3	
 	 	 	 	
Forfeiture of restricted stock	(36	)	 	—	
 	 	(138	)	 	—	
 	 	—	
 	 	—	
 	 	(138	)	 	 	 	
Issuance of notes receivable due from stockholders	—	
 	 	—	
 	 	(587	)	 	—	
 	 	—	
 	 	—	
 	 	(587	)	 	 	 	
Repayments of notes receivable due from stockholders	—	
 	 	—	
 	 	1,661	
 	 	—	
 	 	—	
 	 	—	
 	 	1,661	
 	 	 	 	
Purchase of limited partnership and joint venture interests	—	
 	 	—	
 	 	(39,696	)	 	—	
 	 	—	
 	 	(886	)	 	(40,582	)	 	 	 	
Distributions to noncontrolling interests	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	(13,977	)	 	(13,977	)	 	 	 	
Balance, December 31, 2012	121,148	
 	 	$	1,211	
 	 	$	1,000,963	
 	 	$	(773,085	)	 	$	(14,801	)	 	$	5,917	
 	 	$	220,205	

 	 	 	 	 	 	 	 	 	 	 	(CONTINUED...)	 	 	 	 	

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BLOOMIN’ BRANDS, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)
(IN THOUSANDS)

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	BLOOMIN’ BRANDS	 	 	 	 	 	
 	COMMON STOCK	 	ADDITIONAL
PAID-IN
CAPITAL	 	ACCUM- ULATED
DEFICIT	 	ACCUMULATED
OTHER
COMPREHENSIVE
LOSS	 	NON-
CONTROLLING
INTERESTS (1)	 	TOTAL	 	
 	SHARES	 	AMOUNT	 	 	 	 	 	 	 	 	 	 	 	 	 	
Balance, December 31, 2012	121,148	
 	 	$	1,211	
 	 	$	1,000,963	
 	 	$	(773,085	)	 	$	(14,801	)	 	$	5,917	
 	 	$	220,205	
 	 	 	 	
Net income	—	
 	 	—	
 	 	—	
 	 	208,367	
 	 	—	
 	 	6,470	
 	 	214,837	
 	 	 	 	
Foreign currency translation adjustment	—	
 	 	—	
 	 	—	
 	 	—	
 	 	(17,597	)	 	—	
 	 	(17,597	)	 	 	 	
Reclassification of accumulated foreign currency translation adjustment for previously held equity investment	—	
 	 	—	
 	 	—	
 	 	—	
 	 	5,980	
 	 	—	
 	 	5,980	
 	 	 	 	
Release of valuation allowance related to purchases of limited partnerships and joint venture interests	—	
 	 	—	
 	 	15,669	
 	 	—	
 	 	—	
 	 	—	
 	 	15,669	
 	 	 	 	
Exercises of stock options	3,381	
 	 	34	
 	 	27,752	
 	 	—	
 	 	—	
 	 	—	
 	 	27,786	
 	 	 	 	
Stock-based compensation	—	
 	 	—	
 	 	14,185	
 	 	—	
 	 	—	
 	 	—	
 	 	14,185	
 	 	 	 	
Repurchase of common stock	(21	)	 	—	
 	 	—	
 	 	(436	)	 	—	
 	 	—	
 	 	(436	)	 	 	 	
Excess tax benefit on stock-based compensation	—	
 	 	—	
 	 	4,363	
 	 	—	
 	 	—	
 	 	—	
 	 	4,363	
 	 	 	 	
Issuance of restricted stock	312	
 	 	3	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	3	
 	 	 	 	
Forfeiture of restricted stock	(36	)	 	—	
 	 	(56	)	 	—	
 	 	—	
 	 	—	
 	 	(56	)	 	 	 	
Repayments of notes receivable due from stockholders	—	
 	 	—	
 	 	5,829	
 	 	—	
 	 	—	
 	 	—	
 	 	5,829	
 	 	 	 	
Distributions to noncontrolling interests	—	
 	 	—	
 	 	—	
 	 	—	
 	 	—	
 	 	(8,059	)	 	(8,059	)	 	 	 	
Balance, December 31, 2013	124,784	
 	 	$	1,248	
 	 	$	1,068,705	
 	 	$	(565,154	)	 	$	(26,418	)	 	$	4,328	
 	 	$	482,709	
 	 	 	 	
____________________
 	 	
(1)	Net income attributable to noncontrolling interests for the year ended December 31, 2013 excludes $0.3 million due to the Redeemable noncontrolling interests related to the Company’s subsidiaries in Brazil and China, which are reported in the Mezzanine equity section in the Consolidated Balance Sheet at  December 31, 2013 .	

The accompanying notes are an integral part of these consolidated financial statements.

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BLOOMIN’ BRANDS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

 	 	 	 	 	 	 	 	 	 	 	 	
 	YEARS ENDED DECEMBER 31,	
 	2013	 	2012	 	2011	
Cash flows provided by operating activities:	 	 	 	 	 	
Net income	$	214,568	
 	 	$	61,304	
 	 	$	109,179	
 	
Adjustments to reconcile net income to cash provided by operating activities:	 	 	 	 	 	
Depreciation and amortization	164,094	
 	 	155,482	
 	 	153,689	
 	
Amortization of deferred financing fees	3,574	
 	 	8,222	
 	 	12,297	
 	
Amortization of capitalized gift card sales commissions	23,826	
 	 	21,136	
 	 	18,058	
 	
Provision for impaired assets and restaurant closings	22,838	
 	 	13,005	
 	 	14,039	
 	
Accretion on debt discounts	2,451	
 	 	880	
 	 	663	
 	
Stock-based and other non-cash compensation expense	21,589	
 	 	44,778	
 	 	39,228	
 	
Income from operations of unconsolidated affiliates	(7,730	)	 	(5,450	)	 	(8,109	)	
Deferred income tax benefit	(83,603	)	 	(7,442	)	 	(175	)	
Loss on disposal of property, fixtures and equipment	1,441	
 	 	2,141	
 	 	1,987	
 	
Gain on life insurance and restricted cash investments	(5,284	)	 	(5,150	)	 	(126	)	
Loss on extinguishment and modification of debt	14,586	
 	 	20,957	
 	 	—	
 	
Gain on remeasurement of equity method investment	(36,608	)	 	—	
 	 	—	
 	
(Gain) loss on disposal of business	—	
 	 	(3,500	)	 	4,331	
 	
Recovery of note receivable from affiliated entity	—	
 	 	—	
 	 	(33,150	)	
Recognition of deferred gain on sale-leaseback transaction	(2,135	)	 	(1,610	)	 	—	
 	
Excess tax benefits from stock-based compensation	(4,363	)	 	—	
 	 	—	
 	
Change in assets and liabilities:	 	 	 	 	 	
Decrease (increase) in inventories	3,768	
 	 	(8,577	)	 	(10,525	)	
Increase in other current assets	(28,336	)	 	(13,746	)	 	(60,858	)	
(Increase) decrease in other assets	(259	)	 	4,034	
 	 	8,209	
 	
Increase in accounts payable and accrued and other current liabilities	10,192	
 	 	4,687	
 	 	32,875	
 	
Increase in deferred rent	20,618	
 	 	17,064	
 	 	12,510	
 	
Increase in unearned revenue	29,634	
 	 	29,621	
 	 	30,623	
 	
Increase (decrease) in other long-term liabilities	12,403	
 	 	2,255	
 	 	(2,295	)	
Net cash provided by operating activities	377,264	
 	 	340,091	
 	 	322,450	
 	
Cash flows (used in) provided by investing activities:	 	 	 	 	 	
Purchases of life insurance policies	(4,159	)	 	(6,451	)	 	(2,027	)	
Proceeds from sale of life insurance policies	1,239	
 	 	—	
 	 	2,638	
 	
Proceeds from disposal of property, fixtures and equipment	3,223	
 	 	4,529	
 	 	2,150	
 	
Proceeds from sale-leaseback transaction	—	
 	 	192,886	
 	 	—	
 	
Acquisition of business, net of cash acquired	(100,319	)	 	—	
 	 	—	
 	
Proceeds from sale of a business	—	
 	 	3,500	
 	 	10,119	
 	
Capital expenditures	(237,214	)	 	(178,720	)	 	(120,906	)	
Decrease in restricted cash	29,210	
 	 	84,270	
 	 	86,579	
 	
Increase in restricted cash	(38,117	)	 	(80,070	)	 	(83,148	)	
Royalty termination fee	—	
 	 	—	
 	 	(8,547	)	
Net cash (used in) provided by investing activities	$	(346,137	)	 	$	19,944	
 	 	$	(113,142	)	
 	 	 	 	 	 	
 	 	 	(CONTINUED...)	 	

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BLOOMIN’ BRANDS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

 	 	 	 	 	 	 	 	 	 	 	 	
 	YEARS ENDED DECEMBER 31,	
 	2013	 	2012	 	2011	
Cash flows used in financing activities:	 	 	 	 	 	
Proceeds from issuance of senior secured term loan B	$	—	
 	 	$	990,000	
 	 	$	—	
 	
Extinguishment and modification of senior secured term loan	—	
 	 	(1,004,575	)	 	—	
 	
Proceeds from issuance of 2012 CMBS Loan	—	
 	 	495,186	
 	 	—	
 	
Repayments of long-term debt	(80,805	)	 	(46,868	)	 	(25,189	)	
Extinguishment of CMBS loan	—	
 	 	(777,563	)	 	—	
 	
Extinguishment of senior notes	—	
 	 	(254,660	)	 	—	
 	
Proceeds from borrowings on revolving credit facilities	100,000	
 	 	111,000	
 	 	33,000	
 	
Repayments of borrowings on revolving credit facilities	(100,000	)	 	(144,000	)	 	(78,072	)	
Collection of note receivable from affiliated entity	—	
 	 	—	
 	 	33,300	
 	
Financing fees	(12,519	)	 	(18,983	)	 	(2,222	)	
Proceeds from the issuance of common stock in connection with initial public offering	—	
 	 	142,242	
 	 	—	
 	
Proceeds from the exercise of stock options	27,786	
 	 	884	
 	 	—	
 	
Distributions to noncontrolling interests	(8,059	)	 	(13,977	)	 	(13,088	)	
Purchase of limited partnership and joint venture interests	—	
 	 	(40,582	)	 	—	
 	
Repayments of partner deposits and accrued partner obligations	(23,286	)	 	(25,397	)	 	(35,950	)	
Issuance of notes receivable due from stockholders	—	
 	 	(587	)	 	(1,082	)	
Repayments of notes receivable due from stockholders	5,829	
 	 	1,661	
 	 	3	
 	
Repurchase of common stock	(436	)	 	—	
 	 	—	
 	
Excess tax benefits from stock-based compensation	4,363	
 	 	—	
 	 	—	
 	
Net cash used in financing activities	(87,127	)	 	(586,219	)	 	(89,300	)	
Effect of exchange rate changes on cash and cash equivalents	4,181	
 	 	5,790	
 	 	(3,460	)	
Net (decrease) increase in cash and cash equivalents	(51,819	)	 	(220,394	)	 	116,548	
 	
Cash and cash equivalents at the beginning of the period	261,690	
 	 	482,084	
 	 	365,536	
 	
Cash and cash equivalents at the end of the period	$	209,871	
 	 	$	261,690	
 	 	$	482,084	
 	
Supplemental disclosures of cash flow information:	 	 	 	 	 	
Cash paid for interest	$	71,397	
 	 	$	78,216	
 	 	$	72,099	
 	
Cash paid for income taxes, net of refunds	33,673	
 	 	24,276	
 	 	27,699	
 	
Supplemental disclosures of non-cash investing and financing activities:	 	 	 	 	 	
Conversion of partner deposits and accrued partner obligations to notes payable	$	1,875	
 	 	$	6,434	
 	 	$	5,764	
 	
Acquisition of property, fixtures and equipment through accounts payable or capital lease liabilities	3,050	
 	 	8,006	
 	 	8,683	
 	
Release of valuation allowance through additional paid-in capital related to purchases of limited partnerships and joint venture interests	15,669	
 	 	—	
 	 	—	

 The accompanying notes are an integral part of these consolidated financial statements.

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BLOOMIN’ BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.           Basis of Presentation

Bloomin’ Brands, Inc. (“Bloomin’ Brands” or the “Company”) was formed by an investor group comprising funds advised by Bain Capital Partners, LLC (“Bain Capital”), Catterton Management Company, LLC (“Catterton”), Chris T. Sullivan, Robert D. Basham and J. Timothy Gannon (the “Founders”) and certain members of management. On June 14, 2007, Bloomin’ Brands acquired OSI Restaurant Partners, Inc. by means of a merger and related transactions (the “Merger”). At the time of the Merger, OSI Restaurant Partners, Inc. was converted into a Delaware limited liability company named OSI Restaurant Partners, LLC (“OSI”). In connection with the Merger, Bloomin’ Brands implemented a new ownership and financing arrangement for some of its restaurant properties, pursuant to which Private Restaurant Properties, LLC (“PRP”), a wholly-owned subsidiary of Bloomin’ Brands, acquired 343 restaurant properties from OSI and leased them back to subsidiaries of OSI. OSI remains the Company’s primary operating entity and New Private Restaurant Properties, LLC, another indirect wholly-owned subsidiary of the Company, continues to lease certain of the Company-owned restaurant properties to OSI’s subsidiaries. On August 13, 2012, the Company completed an initial public offering (the “IPO”) of its common stock (see Note 17).
  
The Company owns and operates casual, polished casual and fine dining restaurants primarily in the United States. The Company’s restaurant portfolio has five concepts: Outback Steakhouse, Carrabba’s Italian Grill, Bonefish Grill, Fleming’s Prime Steakhouse and Wine Bar and Roy’s. Additional Outback Steakhouse, Carrabba’s Italian Grill and Bonefish Grill restaurants in which the Company has no direct investment are operated under franchise agreements.

In the opinion of the Company, all adjustments necessary for the fair presentation of the Company’s results of operations, financial position and cash flows for the periods presented have been included.

2.           Summary of Significant Accounting Policies

Principles of Consolidation

The Company’s consolidated financial statements include the accounts and operations of Bloomin’ Brands and its wholly-owned subsidiaries, including OSI, PRP and New Private Restaurant Properties, LLC. New Private Restaurant Properties, LLC and two of the Company’s other indirect wholly-owned subsidiaries are collectively referred to as New PRP. All intercompany accounts and transactions have been eliminated in consolidation. The Company consolidates variable interest entities in which the Company is deemed to have a controlling financial interest as a result of the Company having: (1) the power to direct the activities that most significantly impact the entity’s economic performance and (2) the obligation to absorb the losses or the right to receive the benefits that could potentially be significant to the variable interest entity. If the Company has a controlling financial interest in a variable interest entity, the assets, liabilities, and results of the operations of the variable interest entity are included in the consolidated financial statements.

The Company is a franchisor of 164 restaurants as of December 31, 2013, but does not possess any ownership interests in its franchisees and generally does not provide financial support to franchisees in its typical franchise relationship. These franchise relationships are not deemed variable interest entities and are not consolidated.

Historically, the equity method of accounting has been used for investments in affiliated companies in which the Company was not in control, the Company’s interest was generally between 20% and 50% and the Company had the ability to exercise significant influence over the entity. The Company’s share of earnings or losses of affiliated companies accounted for under the equity method was recorded in Income from operations of unconsolidated affiliates in its Consolidated Statements of Operations and Comprehensive Income. Prior to November 1, 2013, the Company held a 50% ownership interest in PGS Consultoria e Serviços Ltda. (the “Brazilian Joint Venture”) through a joint venture arrangement with PGS Participaçơes Ltda (“PGS Par”). The Brazilian Joint Venture was formed in 1998 for the purpose of operating Outback Steakhouse restaurants in Brazil. Effective November 1, 2013, the Company acquired a controlling

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BLOOMIN’ BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

interest in the Brazilian Joint Venture resulting in the consolidation of this entity (see Note 3). Prior to the acquisition, the Company accounted for the Brazilian Joint Venture under the equity method of accounting (see Note 8).

To ensure timely reporting, the Company elected to consolidate the results of its Brazilian operations on a one-month lag effective as of the acquisition date. Accordingly, the Brazilian operating results will be consolidated for only a one-month post-acquisition period ended November 30, 2013. There were no intervening events that would materially affect the Company’s consolidated financial position, results of operations or cash flows as of and for the year ended December 31, 2013.

Fiscal Year End

On January 3, 2014, the Board of Directors approved a change in the Company’s fiscal year end from a calendar year ending on December 31 to a 52-53 week year ending on the last Sunday in December, effective beginning with fiscal year 2014. In a 52 week fiscal year, each of the Company’s quarterly periods will comprise 13 weeks. The additional week in a 53 week fiscal year is added to the fourth quarter, making such quarter consist of 14 weeks. The Company’s first 53 week fiscal year will occur in fiscal year 2017. The Company will make the fiscal year change on a prospective basis and will not adjust operating results for prior periods. The change to the Company’s fiscal year does not impact the full year results for fiscal year 2013 ending on December 31, 2013, which are reported on a calendar year. However, the change will impact the prior year comparability of each of the Company’s fiscal quarters and annual period in 2014. The Company believes this change will provide numerous benefits, including aligning the Company’s reporting periods to be more consistent with peer restaurant companies and improving comparability between periods by removing the effect of trading day on Restaurant sales and operating margins.

Use of Estimates

The preparation of the accompanying consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimated.

Cash and Cash Equivalents

Cash equivalents consist of investments that are readily convertible to cash with an original maturity date of three months or less. Cash and cash equivalents include $35.1 million and $56.4 million as of December 31, 2013 and 2012, respectively, for amounts in transit from credit card companies since settlement is reasonably assured.

Concentrations of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk are cash and cash equivalents and restricted cash. The Company attempts to limit its credit risk by utilizing outside investment managers with major financial institutions that, in turn, invest in United States treasury security funds, certificates of deposit, money market funds, noninterest-bearing accounts and other highly rated investments and marketable securities. At times, cash balances may be in excess of FDIC insurance limits.

Financial Instruments

Disclosure of fair value information about financial instruments, whether or not recognized in the Consolidated Balance Sheets, is required for those instruments for which it is practical to estimate that value. Fair value is a market-based measurement.

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The Company’s non-derivative financial instruments at December 31, 2013 and 2012 consist of cash equivalents, restricted cash, accounts receivable, accounts payable and current and long-term debt.  The fair values of cash equivalents, restricted cash, accounts receivable and accounts payable approximate their carrying amounts reported in the Consolidated Balance Sheets due to their short duration.  The fair value of debt is determined based on quoted market prices in inactive markets and discounted cash flows of debt instruments, as well as assumptions derived from current conditions in the real estate and credit environments, changes in the underlying collateral and expectations of management. These inputs represent assumptions impacted by economic conditions and management expectations and may change in the future based on period-specific facts and circumstances (see Note 14).

Derivatives

The Company is highly leveraged and exposed to interest rate risk to the extent of its variable-rate debt. The Company manages its interest rate risk by offsetting some of its variable-rate debt with fixed-rate debt, through normal operating and financing activities and, when deemed appropriate, through the use of derivative financial instruments. 

The Company’s restaurants are dependent upon energy to operate and are impacted by changes in energy prices, including natural gas. The Company uses derivative instruments to mitigate some of its overall exposure to material increases in natural gas prices. The Company records mark-to-market changes in the fair value of derivative instruments
in earnings in the period of change. The Company does not enter into financial instruments for trading or speculative purposes.

Inventories

Inventories consist of food and beverages, and are stated at the lower of cost (first-in, first-out) or market. The Company periodically makes advance purchases of various inventory items to ensure adequate supply or to obtain favorable pricing. At December 31, 2013 and 2012, inventories included advance purchases of approximately $25.1 million and $31.7 million, respectively.

Consideration Received from Vendors

The Company receives consideration for a variety of vendor-sponsored programs, such as volume rebates, promotions and advertising allowances. Advertising allowances are intended to offset the Company’s costs of promoting and selling menu items in its restaurants. Vendor consideration is recorded as a reduction of Cost of sales or Other restaurant operating expenses when recognized in the Company’s Consolidated Statements of Operations and Comprehensive Income.

Restricted Cash

At December 31, 2013 and 2012, the current portion of restricted cash of $3.4 million and $4.8 million, respectively, was restricted for the payment of property taxes and the settlement of obligations in a rabbi trust for deferred compensation plans. The current portion of restricted cash at December 31, 2012 was also restricted for the fulfillment of certain provisions in New PRP’s commercial mortgage-backed securities loans. Long-term restricted cash at December 31, 2013 and 2012 of $25.1 million and $15.2 million, respectively, was restricted for the fulfillment of certain provisions in New PRP’s commercial mortgage-backed securities loans and at December 31, 2013, for a required escrow balance related to customary indemnifications associated with the acquisition of a controlling interest in the Brazilian Joint Venture.

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Property, Fixtures and Equipment

Property, fixtures and equipment are stated at cost, net of accumulated depreciation. At the time property, fixtures and equipment are retired, or otherwise disposed of, the asset and accumulated depreciation are removed from the accounts and any resulting gain or loss is included in earnings. The Company expenses repair and maintenance costs that maintain the appearance and functionality of the restaurant but do not extend the useful life of any restaurant asset. Improvements to leased properties are depreciated over the shorter of their useful life or the lease term, which includes renewal periods that are reasonably assured. Depreciation is computed on the straight-line method over the following estimated useful lives:  

 	 	
Buildings and building improvements	20 to 30 years	
Furniture and fixtures	5 to 7 years	
Equipment	2 to 7 years	
Leasehold improvements	5 to 20 years	
Capitalized software	3 to 5 years	

Operating Leases

Rent expense for the Company’s operating leases, which generally have escalating rentals over the term of the lease and may include rent holidays, is recorded on a straight-line basis over the initial lease term and those renewal periods that are reasonably assured. The initial lease term includes the “build-out” period of the Company’s leases, which is typically before rent payments are due under the terms of the lease. The difference between rent expense and rent paid is recorded as deferred rent and is included in the Consolidated Balance Sheets. Payments received from landlords as incentives for leasehold improvements are recorded as deferred rent and are amortized on a straight-line basis over the term of the lease as a reduction of rent expense. Lease termination fees, if any, and future obligated lease payments for closed locations are recorded as an expense in the period incurred.  Favorable and unfavorable lease assets and liabilities are amortized on a straight-line basis to rent expense over the remaining lease term.

Pre-Opening Expenses

Non-capital expenditures associated with opening new restaurants are expensed as incurred and are included in Other restaurant operating expenses in the Company’s Consolidated Statements of Operations and Comprehensive Income.

Impairment or Disposal of Long-Lived Assets

The Company assesses the potential impairment of amortizable intangibles, including trademarks, franchise agreements, reacquired franchise rights, favorable leases, and other long-lived assets whenever events or changes in circumstances indicate that the carrying value may not be recoverable. In evaluating long-lived restaurant assets for impairment, the Company considers a number of factors such as: 
 	 	
•	A significant change in market price;	

•	A significant adverse change in the manner in which a long-lived asset is being used;	

•	New laws and government regulations or a significant adverse change in business climate that adversely affect the value of a long-lived asset;	

•	A current expectation that, more likely than not, a long-lived asset will be sold or otherwise disposed of significantly before the end of its previously estimated useful life; and	

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•	A current period operating or cash flow loss combined with a history of operating or cash flow losses or a projection that demonstrates continuing losses associated with the use of the underlying long-lived asset.	

If the aforementioned factors indicate that the Company should review the carrying value of the restaurant’s long-lived assets, the Company performs a two-step impairment analysis. Each Company-owned restaurant is evaluated individually for impairment since that is the lowest level at which identifiable cash flows can be measured independently from cash flows of other asset groups. If the total future undiscounted cash flows expected to be generated by the assets are less than its carrying amount, as prescribed by step one testing, recoverability is measured in step two by comparing the fair value of the assets to its carrying amount. Should the carrying amount exceed the asset’s estimated fair value, an impairment loss is charged to earnings. Restaurant fair value is determined based on estimates of discounted future cash flows; and impairment charges primarily occur as a result of the carrying value of a restaurant’s assets exceeding its estimated fair market value, primarily due to anticipated closures or declining future cash flows from lower projected future sales at existing locations.

The Company incurred total long-lived asset impairment charges and restaurant closing expense of $22.8 million, $13.0 million and $14.0 million for the years ended December 31, 2013, 2012 and 2011, respectively (see Note 14). All impairment charges are recorded in Provision for impaired assets and restaurant closings in the Company’s Consolidated Statements of Operations and Comprehensive Income.

The Company’s judgments and estimates related to the expected useful lives of long-lived assets are affected by factors such as changes in economic conditions and changes in operating performance and expected use. As the Company assesses the ongoing expected cash flows and carrying amounts of its long-lived assets, these factors could cause it to realize a material impairment charge. The Company uses the straight-line method to amortize definite-lived intangible assets.

Restaurant sites and certain other assets to be sold are included in assets held for sale when certain criteria are met, including the requirement that the likelihood of selling the assets within one year is probable. For assets that meet the held for sale criteria, the Company separately evaluates whether the assets also meet the requirements to be reported as discontinued operations. If the Company no longer had any significant continuing involvement with respect to the operations of the assets and cash flows were discontinued, it would classify the assets and related results of operations as discontinued. Assets whose sale is not probable within one year remain in Property, fixtures and equipment until their sale is probable within one year.  The Company had $1.0 million and $2.4 million of assets held for sale as of December 31, 2013 and 2012, respectively, recorded in Other current assets, net.

Generally, restaurant closure costs are expensed as incurred. When the Company ceases using the property rights under a non-cancelable operating lease, it records a liability for the net present value of any remaining lease obligations net of estimated sublease income that can reasonably be obtained for the property. The associated expense is recorded in Provision for impaired assets and restaurant closings in the Company’s Consolidated Statements of Operations and Comprehensive Income.  Any subsequent adjustments to the liability from changes in estimates are recorded in the period incurred.

Goodwill and Indefinite-Lived Intangible Assets

The Company’s indefinite-lived intangible assets consist of goodwill and trade names. Goodwill represents the residual after allocation of the purchase price to the individual fair values and carryover basis of assets acquired. On an annual basis (during the second quarter of the fiscal year) or whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable, the Company reviews the recoverability of goodwill and indefinite-lived intangible assets.

Prior to performing a quantitative test comparing the fair value of the reporting units to their carrying amounts, the Company may elect to perform a qualitative assessment. This qualitative assessment is referred to as a “step zero” approach and allows the Company the option to assess qualitative factors to determine whether the existence of events

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or circumstances leads to the determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. In considering the step zero approach, the Company evaluates factors including, but not limited to, macro-economic conditions, market and industry conditions, commodity cost fluctuations, competitive environment, share price performance, results of prior impairment tests, operational stability and the overall financial performance of the reporting units. If, based on the review of the qualitative factors, the Company determines there is sufficient evidence to support a more likely than not (greater than 50%) probability that the fair value of a reporting unit is greater than its carrying value, the Company may skip the two-step impairment test.

The Company may elect to forgo step zero and proceed to the first step of the impairment test for goodwill and other indefinite-lived intangible assets. The impairment test for goodwill involves comparing the fair value of the reporting units to their carrying amounts. If the carrying amount of a reporting unit exceeds its fair value, a second step is required to measure a goodwill impairment loss, if any. This step revalues all assets and liabilities of the reporting unit to their current fair values and then compares the implied fair value of the reporting unit’s goodwill to the carrying amount of that goodwill. If the carrying amount of the reporting unit’s goodwill exceeds the implied fair value of the goodwill, an impairment loss is recognized in an amount equal to the excess. The impairment test for trade names involves comparing the fair value of the trade name, as determined through a relief from royalty method, to its carrying value.

Impairment indicators that may necessitate goodwill impairment testing in between the Company’s annual impairment tests include the following:

•	a significant decline in the Company’s expected future cash flows;	

•	a significant adverse change in legal factors or in the business climate;	

•	unanticipated competition;	

•	the testing for recoverability of a significant asset group within a reporting unit; and	

•	slower growth rates.	

Impairment indicators that may necessitate indefinite-lived intangible asset impairment testing in between the Company’s annual impairment tests are consistent with those of its long-lived assets.

The Company performed its annual impairment test in the second quarter of 2013 and determined at that time that none of its five reporting units with remaining goodwill were at risk for goodwill impairment since the qualitative assessment performed did not identify the existence of events or circumstances that indicated that it was more likely than not that the fair value of a reporting unit was less than its carrying amount. The Company did not record any goodwill or indefinite-lived intangible asset impairment charges during the years ended December 31, 2013, 2012 and 2011.
 
Sales declines at the Company’s restaurants, unplanned increases in health insurance, commodity or labor costs, deterioration in overall economic conditions and challenges in the restaurant industry may result in future impairment charges. It is possible that changes in circumstances or changes in management’s judgments, assumptions and estimates could result in an impairment charge of a portion or all of its goodwill or other intangible assets.

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Construction in Progress

The Company capitalizes direct and indirect internal costs clearly associated with the acquisition, development, design and construction of Company-owned restaurant locations and information technology development projects as these costs have a future benefit to the Company. Upon restaurant opening, these costs are depreciated and charged to expense based upon their classification within Property, fixtures and equipment. Internal costs of $9.1 million and $2.4 million were capitalized during the years ended December 31, 2013 and 2012, respectively. Internal costs incurred for the year ended December 31, 2011 were not material to the Company’s consolidated financial statements. The amount of interest capitalized in connection with restaurant construction was immaterial in all periods.

Deferred Financing Fees

The Company capitalizes deferred financing fees related to the issuance of debt obligations. The Company amortizes deferred financing fees to interest expense over the terms of the respective financing arrangements using the effective interest method or the straight-line method.

Liquor Licenses

The costs of obtaining non-transferable liquor licenses directly issued by local government agencies for nominal fees are expensed as incurred. The costs of purchasing transferable liquor licenses through open markets in jurisdictions with a limited number of authorized liquor licenses are capitalized as indefinite-lived intangible assets and included in Other assets, net.  Annual liquor license renewal fees are expensed over the renewal term.
 
Revenue Recognition

The Company records food and beverage revenues upon sale. Initial and developmental franchise fees are recognized as income once the Company has substantially performed all of its material obligations under the franchise agreement, which is generally upon the opening of the franchised restaurant. Continuing royalties, which are a percentage of net sales of the franchisee, are recognized as income when earned. Franchise-related revenues are included in Other revenues in the Consolidated Statements of Operations and Comprehensive Income.

The Company defers revenue for gift cards, which do not have expiration dates, until redemption by the customer. The Company also recognizes gift card “breakage” revenue for gift cards when the likelihood of redemption by the customer is remote, which the Company determined are those gift cards issued on or before three years prior to the balance sheet date. The Company recorded breakage revenue of $16.3 million, $13.3 million and $11.1 million for the years ended December 31, 2013, 2012 and 2011, respectively. Breakage revenue is recorded as a component of Restaurant sales in the Consolidated Statements of Operations and Comprehensive Income.

Gift cards sold at a discount are recorded as revenue upon redemption of the associated gift cards at an amount net of the related discount. Gift card sales commissions paid to third-party providers are initially capitalized and subsequently recognized as Other restaurant operating expenses upon redemption of the associated gift card. Deferred expenses were $12.0 million and $10.9 million as of December 31, 2013 and 2012, respectively, and were reflected in Other current assets, net in the Company’s Consolidated Balance Sheets. Gift card sales that are accompanied by a bonus gift card to be used by the customer at a future visit result in a separate deferral of a portion of the original gift card sale. Revenue is recorded when the bonus card is redeemed at a value based on the estimated fair market value of the bonus card.

The Company collects and remits sales, food and beverage, alcoholic beverage and hospitality taxes on transactions with customers and reports such amounts under the net method in its Consolidated Statements of Operations and Comprehensive Income. Accordingly, these taxes are not included in revenue.

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Advertising Costs

Advertising production costs are expensed in the period when the advertising first occurs. All other advertising costs are expensed in the period in which the costs are incurred. The total amounts charged to advertising expense were $182.4 million, $170.6 million and $161.4 million, for the years ended December 31, 2013, 2012 and 2011, respectively, and were recorded in Other restaurant operating expenses in the Consolidated Statements of Operations and Comprehensive Income.

Research and Development Expenses

Research and development expenses are expensed as incurred in General and administrative expense in the Consolidated Statements of Operations and Comprehensive Income.  The Company recorded research and development expenses of $6.4 million, $7.3 million and $6.6 million for the years ended December 31, 2013, 2012 and 2011, respectively. These costs consist primarily of payroll and payroll related tax and benefit costs that are incurred in connection with the development of restaurant designs and menu offerings.

Foreign Currency Translation and Transactions

For all significant non-U.S. operations, the functional currency is the local currency. Assets and liabilities of those operations are translated into U.S. dollars using the exchange rates in effect at the balance sheet date. Results of operations are translated using the average exchange rates for the reporting period. The effect of gains and (losses) from translation adjustments of approximately ($17.6) million, $7.5 million and ($2.7) million are included as a separate component of Accumulated other comprehensive loss in the Consolidated Statements of Changes in Stockholders’ Equity (Deficit) for the years ended December 31, 2013, 2012 and 2011, respectively. Accumulated other comprehensive loss contained only foreign currency translation adjustments as of December 31, 2013 and 2012.

Foreign currency transactions may produce receivables or payables that are fixed in terms of the amount of foreign currency that will be received or paid. A change in exchange rates between the U.S dollar and the currency in which a transaction is denominated increases or decreases the expected amount of cash flows in U.S. dollars upon settlement of the transaction. This increase or decrease is a foreign currency transaction gain or loss that generally will be included in determining net income for the period in which the exchange rate changes. Similarly, a transaction gain or loss, measured from the transaction date or the most recent intervening balance sheet date, whichever is later, realized upon settlement of a foreign currency transaction generally will be included in determining net income for the period in which the transaction is settled.

Foreign currency transaction losses and gains are recorded in Other (expense) income, net in the Company’s Consolidated Statements of Operations and Comprehensive Income and were a net (loss) gain of ($0.2) million, ($0.1) million and $0.8 million for the years ended December 31, 2013, 2012 and 2011, respectively.

Income Taxes

Deferred income 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 basis. Deferred income 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 income tax assets and liabilities of a change in the tax rate is recognized in income in the period that includes the enactment date of the rate change.

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A valuation allowance may reduce deferred income tax assets to the amount that is more likely than not to be realized. The Company considers future taxable income and ongoing feasible tax planning strategies in assessing the need for a valuation allowance. Judgments made regarding future taxable income may change due to changes in market conditions, changes in tax laws or other factors. If the assumptions and estimates change in the future, a valuation allowance may increase or decrease, resulting in a respective increase or decrease in income tax expense.

The Noncontrolling interests include or exclude a provision or liability for income taxes for affiliated entities that are subject to domestic or foreign tax jurisdictions based on the entity’s corporate structure. For noncontrolling interests that exclude a provision or liability for income taxes, any tax liability related thereto is the responsibility of the holder of the noncontrolling interest.

Employee Partner Payments and Buyouts

The managing partner of each Company-owned domestic restaurant and the chef partner of each Fleming’s Prime Steakhouse and Wine Bar and Roy’s Company-owned domestic restaurant, as well as area operating partners, generally receive distributions or payments for providing management and supervisory services to their restaurants based on a percentage of their associated restaurants’ monthly cash flows. The expense associated with the monthly payments for managing and chef partners is included in Labor and other related expenses, and the expense associated with the monthly payments for area operating partners is included in General and administrative expenses in the Consolidated Statements of Operations and Comprehensive Income.

Managing and chef partners that are eligible to participate in a deferred compensation program receive an unsecured promise of a cash contribution (see Note 5). An area operating partner’s interest in the partnership (the “Management Partnership”) that provides management and supervisory services to his or her restaurant may be purchased, at the Company’s option, after the restaurant has been open for a five-year period based on the terms specified in the agreement. For those area operating partners with restaurants that opened on or after January 1, 2012, a bonus will be paid after the restaurant has been open for a five-year period based on the terms specified in the agreement.  The Company estimates future bonuses and purchases of area operating partners’ interests, as well as deferred compensation obligations to managing and chef partners, using current and historical information on restaurant performance and records the partner obligations in Partner deposits and accrued partner obligations in its Consolidated Balance Sheets. Deferred compensation expenses for managing and chef partners are included in Labor and other related expenses and bonus and buyout expenses for area operating partners are included in General and administrative expenses in the Consolidated Statements of Operations and Comprehensive Income.

Stock-based Compensation

Upon completion of the Company’s IPO, the Bloomin’ Brands, Inc. 2012 Incentive Award Plan (the “2012 Equity Plan”) was adopted, and no further awards were or will be made under the Company’s 2007 Equity Incentive Plan (the “2007 Equity Plan”). The 2012 Equity Plan permits the grant of stock options, stock appreciation rights, restricted stock, restricted stock units, performance awards and other stock-based awards to Company management and other key employees. The Company accounts for its stock-based employee compensation using a fair value-based method of accounting.

The Company uses the Black-Scholes option pricing model to estimate the weighted-average grant date fair value of stock options granted. Expected volatilities are based on the historical volatilities of the Company’s stock and the stock of comparable peer companies. The expected term of options granted represents the period of time that they are expected to be outstanding. The simplified method of estimating expected term is used since the Company does not have significant historical exercise experience for its stock options. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the grant date. Results may vary depending on the assumptions applied within the model. Restricted stock, restricted stock units and performance-based stock units are issued and measured at market value on the grant date. The benefits of tax deductions in excess of recognized

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compensation cost, if any, are reported as an increase or decrease in operating cash flows, with the offsetting increase or decrease reported within financing cash flows.

Redeemable Noncontrolling Interests

The Company consolidates subsidiaries in Brazil and China, each of which have noncontrolling interests that are permitted to deliver subsidiary shares in exchange for cash at a future date. The Company believes that it is probable that the noncontrolling interests will become redeemable.

The Redeemable noncontrolling interests are reported at their estimated redemption value measured as the greater of estimated fair value at the end of each reporting period or the historical cost basis of the redeemable noncontrolling interest adjusted for cumulative earnings or loss allocations. The resulting increases or decreases to fair value, if applicable, are recognized as adjustments to Retained earnings, or in the absence of Retained earnings, Additional paid-in capital. The estimated fair value of Redeemable noncontrolling interests are measured quarterly using the income approach, based on a discounted cash flow methodology, with projected cash flows as the significant input.

As of December 31, 2013, the Company allocated Net income attributable to noncontrolling interests and performed a subsequent measurement of the redemption amount for Redeemable noncontrolling interests. During the year ended December 31, 2013, the difference between the recorded Redeemable noncontrolling interests and the redemption value was nominal and, therefore, no fair value adjustment was recorded. The Redeemable noncontrolling interests are classified in Mezzanine equity in the Company’s Consolidated Balance Sheet.

Earnings Per Share

Basic earnings per share is computed on the basis of the weighted average number of common shares that were outstanding during the period. Diluted earnings per share includes the dilutive effect of common stock equivalents consisting of restricted stock, restricted stock units, performance-based share units and stock options, using the treasury stock method. Performance-based share units are considered dilutive when the related performance criterion has been met.

Segment Reporting

The Company operates restaurants under five brands that have similar economic characteristics, nature of products and services, class of customer and distribution methods, and the Company believes it meets the criteria for aggregating its six operating segments, which are the five brands and the Company’s international Outback Steakhouse operations, into a single reporting segment in accordance with the applicable accounting guidance. Approximately 9%, 8% and 9% of the Company’s total revenues for the years ended December 31, 2013, 2012 and 2011, respectively, were attributable to operations in foreign countries and Guam. Approximately 7%, 3% and 2% of the Company’s total long-lived assets, excluding goodwill and intangible assets, were located in foreign countries where the Company holds assets as of December 31, 2013, 2012 and 2011, respectively.

Reclassifications

The Company has reclassified certain items in the accompanying consolidated financial statements for prior periods to be comparable with the classification for the fiscal year ended December 31, 2013. These reclassifications had no effect on previously reported net income.

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Recently Adopted Financial Accounting Standards

In December 2011, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2011-11, “Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities” (“ASU No. 2011-11”), which enhances current disclosures about financial instruments and derivative instruments that are either offset on the statement of financial position or subject to an enforceable master netting arrangement or similar agreement, irrespective of whether they are offset on the statement of financial position. The guidance requires the Company to provide both net and gross information for these assets and liabilities. In January 2013, the FASB issued ASU No. 2013-01, “Balance Sheet (Topic 210): Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities” (“ASU No. 2013-01”), to limit the scope of the new balance sheet offsetting disclosure requirements to derivatives (including bifurcated embedded derivatives), repurchase agreements and reverse repurchase agreements, and securities borrowing and lending transactions. Both ASU No. 2011-11 and ASU No. 2013-01 were effective for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods with retrospective application required. The adoption of ASU No. 2011-11 and ASU No. 2013-01 on January 1, 2013 did not have an impact on the Company’s financial position, results of operations or cash flows.

In July 2012, the FASB issued ASU No. 2012-02, “Intangibles-Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment” (“ASU No. 2012-02”), which permits an entity to make a qualitative assessment of whether it is more likely than not that an indefinite-lived intangible asset’s fair value is less than its carrying value before applying the two-step quantitative impairment test. If it is determined through the qualitative assessment that an indefinite-lived intangible asset’s fair value is more likely than not greater than its carrying value, the remaining impairment steps would be unnecessary. The qualitative assessment is optional, allowing entities to go directly to the quantitative assessment. ASU No. 2012-02 was effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. The adoption of ASU No. 2012-02 on January 1, 2013 did not have an impact on the Company’s financial position, results of operations or cash flows.

In February 2013, the FASB issued ASU No. 2013-02, “Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income” (“ASU No. 2013-02”), which requires an entity to provide information about the amounts reclassified out of accumulated other comprehensive income by component. The guidance requires an entity to present, either on the face of the statement where net income is presented or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income but only if the amount reclassified is required to be reclassified to net income in its entirety in the same reporting period. For amounts that are not required to be reclassified in their entirety to net income, an entity is required to cross-reference to other required disclosures that provide additional detail about those amounts. ASU No. 2013-02 was effective for the Company prospectively for reporting periods beginning after December 15, 2012. The adoption of ASU No. 2013-02 on January 1, 2013 did not have an impact on the Company’s financial position, results of operations or cash flows.

3.     Acquisitions

Acquisition of Controlling Interest in the Company’s Brazilian Operations

On October 31, 2013, the Company entered into a Quota Purchase and Sale Agreement (the “Purchase Agreement”), by and between the Company, Outback Steakhouse Restaurantes Brasil S.A. (“OB Brasil”) (formerly known as Bloom Holdco Participaçơes Ltda.), PGS Par, the equity holders of PGS Par (the “Sellers”), the Brazilian Joint Venture, and Bloom Participaçơes Ltda., parent company of OB Brasil. Pursuant to the Purchase Agreement, effective November 1, 2013, the Company, through its wholly-owned subsidiary, OB Brasil, completed the acquisition of a controlling interest in the Brazilian Joint Venture by purchasing 80% of the issued and outstanding capital stock of PGS Par, the Company’s joint venture partner which previously held a 50% interest in the Brazilian Joint Venture (the “Acquisition”). Prior to the Acquisition, the Company held the other 50% interest in the Brazilian Joint Venture. As a result of the Acquisition, the Company now holds a 90% interest in the Brazilian Joint Venture, which was subsequently merged with OB Brasil. OB Brasil operates Outback Steakhouse restaurants in Brazil (the “Business”). The acquisition of a controlling interest

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in the Company’s Brazilian operations allows it to participate in what it believes are the ongoing and significant growth opportunities in Brazil and supports the Company’s international development growth strategy.

The Company completed the Acquisition for total consideration of R$240.8 million (BRL) (or approximately $110.4 million) in cash. The Company financed the Acquisition primarily with borrowings of $100.0 million on its existing revolving credit facility and available cash. The revolving credit facility borrowings were subsequently repaid in full prior to December 31, 2013. Approximately $1.8 million of acquisition-related costs have been reported in General and administrative expenses in the Consolidated Statement of Operations and Comprehensive Income for the year ended December 31, 2013.

The Company accounted for the Acquisition as a business combination utilizing the step acquisition method. As such, the previously held equity interest was remeasured at fair value and the difference between the fair value and the carrying value of the equity interest held and the resulting gain on remeasurement to fair value of the previously held equity investment in the Brazilian Joint Venture in the amount of $36.6 million has been included in Gain on remeasurement of equity method investment in the Company’s Consolidated Statement of Operations and Comprehensive Income for the year ended December 31, 2013. Approximately $6.0 million of the gain related to an accumulated foreign currency translation adjustment associated with the previously held equity investment that has been included as a separate component of Accumulated other comprehensive loss in the Consolidated Statement of Changes in Stockholders’ Equity for the year ended December 31, 2013.

The Acquisition resulted in a noncontrolling interest of 10% being retained by the Sellers. The Purchase Agreement provides the Sellers with options to sell their remaining interests in the Business to OB Brasil (the “put options”) and provides OB Brasil with options to purchase such remaining interests (the “call options” and together with the put options, the “Options”), in various amounts and at various times from 2015 through 2018, subject to acceleration in certain circumstances. The purchase price under each of the Options is based on a multiple of the earnings before interest, taxes, depreciation and amortization of the Business, subject to a fair market value adjustment, as determined at the time of exercise pursuant to the Purchase Agreement. Under the accounting guidance, these Options are embedded features within the noncontrolling interest that require the noncontrolling interest to be classified within the balance sheet as redeemable equity interest. Therefore, at the acquisition date, the fair value of the redeemable portion of the noncontrolling interest was reclassified as temporary, or mezzanine equity, presented in the Company’s Consolidated Balance Sheet between Total liabilities and Stockholders’ Equity. The fair value of the redeemable noncontrolling interest in OB Brasil on the date of the Acquisition was $22.4 million and was determined based on 10% of the enterprise value discounted for lack of control and marketability. At December 31, 2013, Redeemable noncontrolling interest for OB Brasil is $22.5 million in the Company’s Consolidated Balance Sheet.

The Purchase Agreement also contains customary indemnification obligations of each party with respect to breaches of their respective representations, warranties, covenants and obligations, and certain other designated matters.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

The following table summarizes the fair values of the assets acquired and liabilities assumed as of the date of the Acquisition (in thousands):

 	 	 	 	
Cash and cash equivalents	$	10,124	
 	
Inventories	6,607	
 	
Other current assets, net	14,984	
 	
Property, fixtures and equipment	81,038	
 	
Goodwill	135,701	
 	
Intangible assets	86,623	
 	
Other assets, net	4,535	
 	
Accounts payable	(7,782	)	
Accrued and other current liabilities	(17,486	)	
Current portion of partner deposits and accrued partner obligations	(729	)	
Long-term portion of partner deposits and accrued partner obligations	(4,482	)	
Deferred income taxes	(26,881	)	
Other long-term liabilities, net	(11,390	)	
 	270,862	
 	
Fair value of previously held equity investment	(138,054	)	
Remaining redeemable noncontrolling interests	(22,365	)	
     Total purchase price	$	110,443	

The goodwill recognized of $135.7 million is attributable primarily to the potential for strategic future growth. The carrying value of historical goodwill associated with the Company’s former equity investment in this entity in the amount of $52.6 million was disposed in connection with the Acquisition. Approximately $80.1 million of the goodwill recognized is expected to be deductible for tax purposes.

The fair value of net intangible assets of $84.8 million has been allocated to the following two categories: (i) reacquired franchise rights and (ii) favorable and unfavorable leases. The reacquired franchise rights are amortized on a straight-line basis over the remaining life of each restaurants’ franchise agreement, without consideration of renewal. The favorable and unfavorable leases are amortized on a straight-line basis over the remaining lease term. The following table presents details of the purchased intangible assets and their remaining weighted-average amortization periods (in thousands, or as otherwise indicated):

 	 	 	 	 	 	
 	FAIR VALUE AMOUNT	 	WEIGHTED-AVERAGE AMORTIZATION PERIOD (IN YEARS)	
Reacquired franchise rights	$	82,389	
 	 	14	
Favorable leases	4,234	
 	 	9	
Unfavorable leases (1)	(1,798	)	 	10	
Total identified intangible assets, net	$	84,825	
 	 	14	
____________________
 	 	
(1)	Unfavorable leases are included in Other long-term liabilities, net in the table shown above summarizing the fair values of the assets acquired and liabilities assumed as of the date of the Acquisition.	

To ensure timely reporting, the Company will consolidate the results of its Brazilian operations on a one-month lag effective as of the acquisition date.  Accordingly, the Company’s operating results for 2013 will include the operating  results of the Brazilian operations for only a one-month post-acquisition period ended November 30, 2013. Revenues and net income of OB Brasil for the one-month period included in the Company’s operating results for the year ended

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

December 31, 2013 were $23.7 million and $0.8 million, respectively. Prior to the Acquisition, the Company accounted for the unconsolidated joint venture under the equity method of accounting. Income and loss derived from the unconsolidated joint venture for periods prior to the acquisition are presented in Income from operations of unconsolidated affiliates in the Company’s Consolidated Statements of Operations and Comprehensive Income (see Note 8).

The following comparative unaudited pro forma results of operations information for the years ended December 31, 2013 and 2012 assumes the Acquisition occurred on January 1, 2012, and reflects the full results of operations for the years presented. The pro forma results have been prepared for comparative purposes only and do not indicate the results of operations which would actually have occurred had the combination been in effect on the dates indicated, or which may occur in the future. These amounts have been calculated after applying the Company’s accounting policies and adjusting for the following items: (i) fair value and depreciable lives adjustments to property and equipment, (ii)elimination of royalty revenue and expense, (iii) reversal of equity method income in the Company’s operating results, (iv) reversal of professional fees associated with the Acquisition and (v) the related tax effects of these adjustments.  The following unaudited pro forma  results of operations information  does not reflect the one-month reporting lag (in thousands, except per share data):

 	 	 	 	 	 	 	 	
 	PRO FORMA	
 	 YEARS ENDED DECEMBER 31,	
 	2013	 	2012	
 	(unaudited)	 	(unaudited)	
Total revenues	$	4,360,571	
 	 	$	4,223,393	
 	
Net income attributable to Bloomin’ Brands	174,769	
 	 	49,623	
 	
Earnings per share:	 	 	 	
Basic	$	1.42	
 	 	$	0.44	
 	
Diluted	1.36	
 	 	0.43	

Acquisition of Roy’s Joint Venture

Effective October 1, 2012, the Company purchased the remaining interests in the Roy’s joint venture from its joint venture partner, RY-8, Inc. (“RY-8”), for $27.4 million. This purchase price consisted of the assumption of RY-8’s $24.5 million line of credit guaranteed by OSI, forgiveness of $1.8 million in loans due from RY-8 to OSI and a $1.1 million cash payment. This transaction resulted in a $0.7 million reduction in Additional paid-in capital in the Company’s Consolidated Balance Sheet at December 31, 2012. In December 2012, the Company paid the $24.5 million outstanding balance on the line of credit assumed from RY-8 and the line of credit was terminated.

Acquisition of Limited Partnership Interests

During 2012, the Company purchased the remaining partnership interests in certain of the Company’s limited partnerships that either owned or had a contractual right to varying percentages of cash flows in 44 Bonefish Grill restaurants and 17 Carrabba’s Italian Grill restaurants for an aggregate purchase price of $39.5 million. The purchase price for each of the transactions was paid in cash by December 31, 2012. These transactions resulted in a $39.0 million reduction in Additional paid-in capital in the Company’s Consolidated Balance Sheet at December 31, 2012.

Effective January 1, 2014, the Company purchased the remaining partnership interests in certain of the Company’s limited partnerships that either owned or had a contractual right to varying percentages of cash flows in 37 Bonefish Grill restaurants for an aggregate purchase price of $17.2 million. These transactions are expected to result in a reduction of approximately $18.4 million in Additional paid-in capital in the first quarter of 2014.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

The following table sets forth the effect of the limited partnership interests and Roy’s joint venture acquisition transactions on stockholders’ equity attributable to Bloomin’ Brands (in thousands):

 	 	 	 	 	 	 	 	 	 	 	 	 	
 	NET INCOME ATTRIBUTABLE TO BLOOMIN’ BRANDS AND TRANSFERS TO NONCONTROLLING INTERESTS	 	
 	 	 	
 	YEARS ENDED DECEMBER 31,	 	
 	2013	 	2012	 	2011	 	
Net income attributable to Bloomin’ Brands	$	208,367	
 	 	$	49,971	
 	 	$	100,005	
 	 	
Transfers to noncontrolling interests:	 	 	 	 	 	 	
Decrease in Bloomin’ Brands additional paid-in capital for purchase of	 	 	 	 	 	 	
joint venture and limited partnership interests	—	
 	 	(39,696	)	 	—	
 	 	
Change from net income attributable to Bloomin’ Brands and transfers	$	208,367	
 	 	$	10,275	
 	 	$	100,005	
 	 	
to noncontrolling interests	 	 	 	 	 	 	 	 	 	 	 	 	 	

4.         Earnings Per Share

The computation of basic and diluted earnings per share is as follows (in thousands, except per share amounts):

 	 	 	 	 	 	 	 	 	 	 	 	
 	YEARS ENDED DECEMBER 31,	
 	2013	 	2012	 	2011	
Net income attributable to Bloomin’ Brands	$	208,367	
 	 	$	49,971	
 	 	$	100,005	

Basic weighted average common shares outstanding	122,972	
 	 	111,999	
 	 	106,224	

Effect of diluted securities:	 	 	 	 	 	
  Stock options	4,902	
 	 	2,738	
 	 	399	
 	
  Unvested restricted stock and restricted stock units	191	
 	 	84	
 	 	66	
 	
  Unvested performance-based share units	9	
 	 	—	
 	 	—	
 	
Diluted weighted average common shares outstanding	128,074	
 	 	114,821	
 	 	106,689	

Basic earnings per share	$	1.69	
 	 	$	0.45	
 	 	$	0.94	
 	
Diluted earnings per share	$	1.63	
 	 	$	0.44	
 	 	$	0.94	

Dilutive securities outstanding not included in the computation of earnings per share because their effect was antidilutive were as follows (in thousands):

 	 	 	 	 	 	 	 	 	 	
 	 	YEARS ENDED DECEMBER 31,	
 	 	2013	 	2012	 	2011	
Stock options	 	1,348	
 	 	1,092	
 	 	550	
 	
Unvested restricted stock and restricted stock units	 	12	
 	 	—	
 	 	—	

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

5.            Stock-based and Deferred Compensation Plans
 
Stock-based Compensation Plans

Equity Compensation Plans

The Company has stock-based compensation awards outstanding under both the 2007 Equity Plan and the 2012 Equity Plan. A total of 13,200,000 shares were approved for stock options and restricted stock grants under the 2007 Equity Plan by the Board of Directors as of December 31, 2012. The maximum term of stock options granted under the 2007 Equity Plan is ten years. Upon completion of the Company’s IPO, the Company adopted the 2012 Equity Plan, and no further awards were or will be made under the 2007 Equity Plan.

The 2012 Equity Plan provides for grants of stock options, stock appreciation rights, restricted stock and restricted stock units, performance awards and other stock-based awards determined by the Compensation Committee of the Board of Directors. The maximum number of shares of common stock available for issuance pursuant to the 2012 Equity Plan was initially 3,000,000 shares. As of the first business day of each fiscal year, the aggregate number of shares that may be issued pursuant to the 2012 Equity Plan automatically increases by a number equal to 2% of the total number of shares then issued and outstanding. In 2013, the maximum number of shares of common stock available for issuance increased to 5,422,969 shares. The 2012 Equity Plan provides that grants of performance awards will be made based upon, and subject to achieving, one or more performance measures over a performance period of not less than one year as established by the Compensation Committee of the Board of Directors. Unless terminated earlier, the 2012 Equity Plan will terminate ten years from its effective date.

Stock Options

Under the 2007 Equity Plan, stock options generally vest and become exercisable in 20% increments over a period of five years contingent on continued employee service. Shares acquired upon the exercise of stock options under the 2007 Equity Plan were generally subject to a stockholder’s agreement that contained a management call option that allowed the Company to repurchase all shares purchased through exercise of stock options upon termination of employment at any time prior to the earlier of an initial public offering or a change of control. If an employee’s termination of employment was a result of death or disability, by the Company other than for cause or by the employee for good reason, the Company was able to repurchase exercised stock under this call option at fair market value. If an employee’s termination of employment was by the Company for cause or by the employee without good reason, the Company was able to repurchase the stock under this call provision for the lesser of the exercise price or fair market value. Additionally, the holder of shares acquired upon the exercise of stock options was prohibited from transferring the shares to any person, subject to narrow exceptions, and if a permitted transfer occurred, the transferred shares remained subject to the management call option. As a result of the transfer restrictions and call option, the Company did not record compensation expense for stock options that contained the call option since employees were not able to realize monetary benefit from the options or any shares acquired upon the exercise of the options unless the employee was employed at the time of an initial public offering or change of control. Prior to the Company’s IPO in August 2012, there had not been any exercises of stock options by any employee, and generally all stock options of terminated employees with a call provision either expired or were forfeited.

Upon completion of the Company’s IPO, the Company recorded approximately $16.0 million of aggregate non-cash compensation expense with respect to (i) certain stock options held by its Chief Executive Officer (“CEO”) that become exercisable (to the extent then vested) if following the offering, the volume-weighted average trading price of the Company’s common stock is equal to or greater than specified performance targets over a six-month period and (ii) the time vested portion of outstanding stock options containing the management call option due to the automatic termination of the call option upon completion of the offering.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

On July 1, 2011, the CEO was granted an option to purchase 550,000 shares of common stock under the 2007 Equity Plan in accordance with the terms of her employment agreement. This option has an exercise price of $10.03 per share and was subject to a modified form of the management call option that did not preclude the Company from recording compensation expense during the service period. This modified form of the management call option terminated upon completion of the Company’s IPO. These options vest and compensation expense is recorded equally over a five-year period on each anniversary of the grant date, contingent upon her continued employment with the Company.

Under the 2012 Equity Plan, stock options generally vest and become exercisable in 25% increments over a period of four years on the grant anniversary date contingent on continued employee service. Stock options have an exercisable life of no more than ten years from the date of grant.

The following table presents a summary of the Company’s stock option activity for the year ended December 31, 2013 (in thousands, except exercise price and contractual life):

 	 	 	 	 	 	 	 	 	 	 	 	 	
 	OPTIONS	 	WEIGHTED-
AVERAGE
EXERCISE
PRICE	 	WEIGHTED-
AVERAGE
REMAINING
CONTRACTUAL
LIFE (YEARS)	 	AGGREGATE
INTRINSIC
VALUE	
Outstanding at December 31, 2012	12,379	
 	 	$	7.99	
 	 	6.7	 	$	94,710	
 	
Granted	1,620	
 	 	19.14	
 	 	 	 	 	
Exercised	(3,381	)	 	8.24	
 	 	 	 	 	
Forfeited or expired	(608	)	 	10.72	
 	 	 	 	 	
Outstanding at December 31, 2013	10,010	
 	 	$	9.54	
 	 	6.6	 	$	144,813	
 	
Vested and expected to vest at December 31, 2013	9,931	
 	 	$	9.50	
 	 	6.5	 	$	94,383	
 	
Exercisable at December 31, 2013	5,828	
 	 	$	7.03	
 	 	5.6	 	$	98,941	

The total intrinsic value of stock options exercised during the years ended December 31, 2013 and 2012 was $42.7 million and $0.5 million, respectively. The Company received $27.8 million and $0.9 million in cash from the exercise of stock options during the years ended December 31, 2013 and 2012, respectively. The Company realized $4.3 million of excess tax benefits for tax deductions related to the exercise of stock options during the year ended December 31, 2013 and did not realize any such excess tax benefits during the year ended December 31, 2012 due to a valuation allowance and other tax credits available. The Company did not have any stock options exercised during the year ended December 31, 2011. The Company settles stock option exercises with authorized but unissued shares of the Company’s common stock.

The weighted-average grant date fair value of stock options granted during the years ended December 31, 2013, 2012 and 2011 was $9.14, $6.93, and $6.02, respectively, and was estimated using the Black-Scholes option pricing model. The following assumptions were used to calculate the fair value of options granted for the periods indicated:

 	 	 	 	 	 	 	 	 	 	
 	 	YEARS ENDED DECEMBER 31,	
 	 	2013	 	2012	 	2011	
Weighted-average risk-free interest rate	 	1.22	%	 	1.11	%	 	2.09	%	
Dividend yield	 	—	%	 	—	%	 	—	%	
Expected term	 	6.3 years	
 	 	6.5 years	
 	 	6.5 years	
 	
Weighted-average volatility	 	48.6	%	 	48.6	%	 	54.8	%	

The Company recorded compensation expense of $11.2 million, $20.1 million and $2.2 million during the years ended December 31, 2013, 2012 and 2011, respectively, for stock options. The Company recognized $4.4 million in tax benefits for stock option compensation expense for the year ended December 31, 2013 and did not recognize any such tax benefits for the years ended December 31, 2012 and 2011 due to a valuation allowance and other tax credits available.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

The total fair value of stock options that vested during the years ended December 31, 2013, 2012 and 2011 was $47.5 million, $66.5 million (of which $39.3 million related to stock options that would have vested in prior years without the management call option) and $3.7 million, respectively. As of December 31, 2013, there was $22.9 million of total unrecognized compensation expense related to non-vested stock options, which is expected to be recognized over a weighted-average period of approximately 2.8 years.

Capitalized stock-based compensation costs for all award types were immaterial for the year ended December 31, 2013 and the Company did not capitalize any stock-based compensation costs during the years ended December 31, 2012 and 2011.

Restricted Stock and Restricted Stock Units

Restricted stock issued in 2007 to certain of the Company’s current and former executive officers and other members of management under the 2007 Equity Plan vested each June 14 through 2012.  As of December 31, 2012, a total of $5.8 million of loans and associated interest obligations to current and former executive officers and other members of management was outstanding and was recorded in Additional paid-in capital in the Company’s Consolidated Balance Sheet. All loans have been repaid in full as of May 31, 2013.

Restricted stock and restricted stock units generally vest on the grant anniversary date ratably over a period of three years for those issued to directors and 25% per year for all other issuances. Restricted stock and restricted stock unit vesting is dependent upon continued service with forfeiture of all unvested shares of restricted stock and restricted stock units upon termination, unless in the case of death or disability, in which case all shares of restricted stock and restricted stock units are immediately vested.

The following table presents a summary of the Company’s restricted stock and restricted stock unit activity for the year ended December 31, 2013 (in thousands, except grant date fair value):

 	 	 	 	 	 	 	
 	NUMBER OF RESTRICTED STOCK & RESTRICTED STOCK UNIT AWARDS	 	WEIGHTED-AVERAGE
GRANT DATE
FAIR VALUE PER AWARD	
Outstanding at December 31, 2012	299	
 	 	$	14.69	
 	
Granted	394	
 	 	20.34	
 	
Vested	(76	)	 	14.79	
 	
Forfeited	(36	)	 	15.95	
 	
Outstanding at December 31, 2013	581	
 	 	$	18.43	

Compensation expense recognized in Net income for the years ended December 31, 2013, 2012 and 2011 was $2.0 million, $1.4 million and $1.7 million, respectively, for restricted stock and restricted stock units. The Company recognized tax benefits of $0.8 million related to the compensation expense recorded for restricted stock and restricted stock units and immaterial excess tax benefits related to the vesting of restricted stock for the year ended December 31, 2013. The Company did not recognize any such tax benefits or excess tax benefits for the years ended December 31, 2012 and 2011, due to a valuation allowance and other tax credits available. As measured on the vesting date, the total fair value of restricted stock that vested during the years ended December 31, 2013, 2012 and 2011 was $1.6 million, $2.8 million and $2.3 million, respectively. Unrecognized compensation expense related to non-vested restricted stock and restricted stock units was approximately $8.7 million at December 31, 2013 and will be recognized over a weighted-average period of 3.0 years.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Performance-based Share Units

In 2013, the Company granted performance-based share units (“PSUs”) to executives and key members of management. There were no PSUs awarded in periods prior to 2013. The PSUs vest over a period of four years following the date of grant, and 25% of the grant is earned or forfeited on each grant anniversary date, subject to certification of the performance criteria by the Board of Directors. The first PSUs, which were granted in February 2013, are not eligible for settlement until February 2014. The number of units that actually vest will be determined for each year based on the achievement of certain Company performance criteria set forth in the award agreement and may range from zero to 200% of the annual target grant. PSUs that do not vest based on failure to satisfy the stated performance criteria for any annual period are forfeited. In addition to the satisfaction of the performance criteria for the PSUs, vesting is dependent upon continued service with forfeiture of all unvested PSUs upon termination, unless in the case of death or disability, in which case a pro rata portion of the target number of PSUs are eligible to immediately vest based on actual performance during the performance period. The PSUs are settled in shares of common stock, with holders receiving one share of common stock for each performance-based share unit that vests. The fair value of PSUs is based on the closing price of the Company’s common stock on the grant date. Compensation expense for PSUs is recognized over the vesting period when it is probable the performance criteria will be achieved.

The following table presents a summary of the Company’s performance-based share unit activity for the year ended December 31, 2013 (in thousands, except grant date fair value):

 	 	 	 	 	 	 	
 	PERFORMANCE-BASED SHARE UNITS (1)	 	WEIGHTED-AVERAGE
GRANT DATE
FAIR VALUE PER AWARD	
Outstanding at December 31, 2012	—	
 	 	$	—	
 	
Granted	58	
 	 	17.78	
 	
Vested	—	
 	 	—	
 	
Forfeited	(9	)	 	17.40	
 	
Outstanding at December 31, 2013	49	
 	 	$	17.85	
 	
________________
 	 	
(1)	Share unit amounts represent the target number of PSUs considered granted for accounting recognition based on the establishment of performance targets for future years. The actual number of shares that will be earned upon vesting is dependent upon actual performance and may range from zero to 200% of the target number of shares.	
  
Compensation expense recognized in Net income for the year ended December 31, 2013 was $0.7 million for PSUs. The Company recognized immaterial tax benefits related to the compensation expense recorded for PSUs for the year ended December 31, 2013. None of the Company’s outstanding PSUs vested during the year ended December 31, 2013. Unrecognized compensation expense related to non-vested PSUs was immaterial at December 31, 2013.

Deferred Compensation Plans

Managing and Chef Partners

The managing partner of each Company-owned domestic restaurant and the chef partner of each Fleming’s Prime Steakhouse and Wine Bar and Roy’s restaurant are required, as a condition of employment, to sign five-year employment agreements. Under these agreements, managing and chef partners have the right to receive monthly distributions based on a percentage of their restaurant’s monthly cash flows for the duration of the agreement, which vary by concept from 6% to 10% for managing partners and 2% to 5% for chef partners. 

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

The employment agreements also provide for an annual bonus, known as the President’s Club, which is paid in addition to the monthly distributions of cash flow and is designed to reward increases in a restaurant’s annual sales above the concept sales plan with a required flow-through percentage of the incremental sales to cash flow. Managing and chef partners whose restaurants achieve certain annual sales targets above the concept’s sales plan (and the required flow-through percentage) receive a bonus equal to a percentage of the incremental sales, such percentage determined by the sales target achieved.

Managing partners and chef partners are eligible to receive deferred compensation payments under the Company’s Partner Ownership Account Plan (the “POAP”), upon completion of their five-year employment agreement. All managing and chef partners who executed new employment agreements after May 1, 2011 were required to participate in the current partner program, including the POAP.

The POAP requires managing and chef partners to make an initial deposit of up to $10,000 into their “Partner Investment Account.” The Company makes a bookkeeping contribution to each partner’s “Company Contributions Account” no later than the end of February of each year following the completion of each year (or partial year where applicable) under the partner’s employment agreement. The value of each the Company’s contributions is equal to a percentage of cash flow of the partner’s restaurant plus, if the restaurant has been open at least 18 calendar months, a percentage of the year-over-year increase in the restaurant’s cash flow.

Amounts credited to each partner’s account under the POAP may be allocated by the partner among benchmark funds offered under the POAP, and the account balances of the partner will increase or decrease based on the performance of the benchmark funds. Upon termination of employment, all remaining balances in the Company Contributions Account in the POAP are forfeited unless the partner has been with the Company for 20 years or more. Unless previously forfeited under the terms of the POAP, 50% of the partner’s total account balances generally will be distributed in the March following the completion of the initial five-year contract term with subsequent distributions varying based on the length of continued employment as a partner. The deferred compensation obligations under the POAP are unsecured obligations of the Company. As of December 31, 2013 and 2012, the Company’s POAP liability was $21.2 million and $15.3 million, respectively, which was recorded in Partner deposits and accrued partner obligations in its Consolidated Balance Sheets.

The Company’s managing and chef partners who executed employment agreements prior to May 1, 2011 were eligible to participate in the Company’s prior partner program. Under that program, they were required to sign five-year employment agreements and received monthly distributions of the same percentage of their restaurant’s cash flow as under the current program. Upon completion of their five-year employment agreement they were eligible to participate in the Partner Equity Plan (“PEP”), a deferred compensation program. Managing and chef partners were also required to purchase a non-transferable ownership interest in a Management Partnership that provided management and supervisory services to his or her restaurant. The purchase price for a managing partner’s ownership interest was fixed at $25,000, and the purchase price for a chef partner’s ownership interest ranged from $10,000 to $15,000. Amounts credited to partners’ PEP accounts are fully vested at all times and participants have no discretion with respect to the form of benefit payments under the PEP. Approximately, 15% of the Company’s managing and chef partners participate in the PEP as of December 31, 2013.

Upon the closing of the Merger, certain stock options that had been granted to managing and chef partners under a pre-merger managing partner stock plan upon completion of a previous employment contract were converted into the right to receive cash in the form of a “Supplemental PEP” contribution.

As of December 31, 2013, the Company’s total vested liability with respect to obligations primarily under the PEP and Supplemental PEP was approximately $132.2 million, of which $17.8 million and $114.4 million was included in Accrued and other current liabilities and Other long-term liabilities, net, respectively, in its Consolidated Balance Sheet. As of December 31, 2012, the Company’s total vested liability with respect to obligations primarily under the PEP and Supplemental PEP was approximately $122.6 million, of which $17.8 million and $104.8 million was included in Accrued and other current liabilities and Other long-term liabilities, net, respectively, in its Consolidated Balance Sheet.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Partners may allocate the contributions into benchmark investment funds, and these amounts due to participants will fluctuate according to the performance of their allocated investments and may differ materially from the initial contribution and current obligation.

As of December 31, 2013 and 2012, the Company had approximately $76.8 million and $67.8 million, respectively, in various corporate-owned life insurance policies which are held within an irrevocable grantor or “rabbi” trust account for settlement of the Company’s obligations primarily under the PEP, Supplemental PEP and POAP. The Company is the sole owner of any assets within the rabbi trust and participants are considered general creditors of the Company with respect to assets within the rabbi trust.

As of December 31, 2013 and 2012, there were $71.8 million and $65.1 million, respectively, of unfunded obligations primarily related to the PEP, Supplemental PEP and POAP, excluding amounts not yet contributed to the partners’ investment funds, which may require the use of cash resources in the future.

Area Operating Partners

An area operating partner is required, as a condition of employment, to make a deposit of $10,000 within 30 days of the opening of each new restaurant that he or she oversees, up to a maximum deposit of $50,000 (taking into account investments under prior programs). This deposit gives the area operating partner the right to monthly payments based on a percentage of his or her restaurants’ monthly cash flows for the time period that the area operating partner oversees the restaurant, typically ranging from 4.0% to 4.5%. After the restaurant has been open for a five-year period, the area operating partner will receive a bonus equal to a multiple of the area operating partner’s average monthly payments for the 24 months immediately preceding the bonus date. The bonus will be paid within 90 days or over a two-year period, depending on the bonus amount.

In 2011, the Company also began a version of the President’s Club annual bonus described above under “Managing and Chef Partners” for area operating partners to provide additional rewards for achieving sales targets with a required flow-through of the incremental sales to cash flow as defined in the President Club bonus program.

Area operating partners for restaurants opened on or before December 31, 2011 were eligible to participate in the Company’s prior program. Under the prior program, an area operating partner was required, as a condition of employment and within 30 days of the opening of his or her first restaurant, to make an initial investment of $50,000 in a Management Partnership that provides supervisory services to the restaurants that the area operating partner was overseeing.  This interest gave the area operating partner the right to distributions from the Management Partnership based on a percentage of his or her restaurants’ monthly cash flows for the duration of the agreement, typically ranging from 4.0% to 9.0%. The Company has the option to purchase an area operating partner’s interest in the Management Partnership after the restaurant has been open for a five-year period on the terms specified in the agreement. For restaurants opened on or between January 1, 2007 and December 31, 2011, the area operating partner’s percentage of cash distributions and buyout percentage is calculated based on the associated restaurant’s return on investment compared to the Company’s targeted return on investment and may range from 3.0% to 12.0% depending on the concept. This percentage was determined after the first five full calendar quarters from the date of the associated restaurant’s opening and was adjusted each quarter thereafter based on a trailing 12-month restaurant return on investment. The buyout percentage was the area operating partner’s average distribution percentage for the 24 months immediately preceding the buyout. Buyouts were paid in cash within 90 days or paid over a two-year period. Restaurants opened after December 31, 2011 are governed by the Company’s current operating partner compensation program discussed above.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Other Benefit Plans

The Company has a qualified defined contribution 401(k) plan (the OSI Restaurant Partners, LLC Salaried Employees 401(k) Plan and Trust, or the “401(k) Plan”) covering employees eligible for salaried benefits, except officers and certain highly compensated employees. Assets of the 401(k) Plan are held in trust for the sole benefit of the employees. Participants in the 401(k) Plan may make pre-tax elective deferrals to the 401(k) Plan of between 1% and 20% of their compensation, subject to Internal Revenue Service (“IRS”) limitations. The Company also may make matching and/or profit-sharing contributions to the 401(k) Plan. The Company contributed $2.0 million to the 401(k) Plan for the plan years ended December 31, 2013, 2012 and 2011, respectively.

The Company provides a deferred compensation plan for its highly compensated employees who are not eligible to participate in the 401(k) Plan. The deferred compensation plan allows these employees to contribute from 5% to 90%  of their base salary and 5% to 100% of their cash bonus on a pre-tax basis to an investment account consisting of various investment fund options. The Company does not currently intend to provide any matching or profit-sharing contributions, and participants are fully vested in their deferrals and their related returns. Participants are considered unsecured general creditors in the event of Company bankruptcy or insolvency.

6.           Other Current Assets, Net

Other current assets, net, consisted of the following (in thousands):

 	 	 	 	 	 	 	 	
 	DECEMBER 31,	
 	2013	 	2012	
Prepaid expenses	$	28,287	
 	 	$	23,186	
 	
Accounts receivable - vendors, net	47,411	
 	 	38,459	
 	
Accounts receivable - franchisees, net	1,394	
 	 	2,019	
 	
Accounts receivable - other, net	8,893	
 	 	7,498	
 	
Other current assets, net	33,396	
 	 	32,159	
 	
 	$	119,381	
 	 	$	103,321	

7.     Property, Fixtures and Equipment, Net

Property, fixtures and equipment, net, consisted of the following (in thousands):

 	DECEMBER 31,	
 	2013	 	2012	
Land	$	263,989	
 	 	$	262,378	
 	
Buildings and building improvements	959,102	
 	 	917,243	
 	
Furniture and fixtures	345,040	
 	 	303,304	
 	
Equipment	487,276	
 	 	422,069	
 	
Leasehold improvements	443,376	
 	 	396,101	
 	
Construction in progress	80,393	
 	 	32,646	
 	
Less: accumulated depreciation	(945,046	)	 	(827,706	)	
 	$	1,634,130	
 	 	$	1,506,035	

Effective November 1, 2013, the Company acquired a controlling interest in the Brazilian Joint Venture resulting in the consolidation of $81.0 million in Property, fixtures and equipment (see Note 3).

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

As of December 31, 2013, the Company had certain land and buildings with historical cost amounts of $11.4 million and $14.6 million, respectively, that have been leased to third parties under operating leases. Accumulated depreciation related to the leased building assets of $3.2 million is included in Property, fixtures and equipment at December 31, 2013.

The Company expensed repair and maintenance costs of approximately $103.6 million, $98.0 million and $97.3 million for the years ended December 31, 2013, 2012 and 2011, respectively. Depreciation expense for the years ended December 31, 2013, 2012 and 2011 was $156.0 million, $147.8 million and $147.4 million, respectively.

During the years ended December 31, 2013, 2012 and 2011, the Company recorded property, fixtures and equipment impairment charges of $19.8 million, $10.6 million and $11.6 million, respectively, for certain of the Company’s restaurants in Provision for impaired assets and restaurant closings in its Consolidated Statements of Operations and Comprehensive Income (see Note 14).

The fixed asset impairment charges described above primarily occurred as a result of the carrying value of a restaurant’s assets exceeding its estimated fair market value, primarily due to anticipated closures or declining future cash flows from lower projected future sales at existing locations.

Effective March 14, 2012, the Company entered into a sale-leaseback transaction with two third-party real estate institutional investors in which the Company sold 67 restaurant properties at fair market value for net proceeds of $192.9 million.  The Company then simultaneously leased these properties under nine master leases (collectively, the “REIT Master Leases”).  The initial terms of the REIT Master Leases are 20 years with four five-year renewal options.  One renewal period is at a fixed rental amount and the last three renewal periods are generally based on then-current fair market values.  The sale at fair market value and subsequent leaseback qualified for sale-leaseback accounting treatment, and the REIT Master Leases are classified as operating leases. The Company recorded a deferred gain on the sale of certain of the properties of $42.9 million primarily in Other long-term liabilities, net in its Consolidated Balance Sheet at the time of the transaction, which is amortized over the initial term of the lease.

8.           Investment in Equity Method Investee

Prior to November 1, 2013, the Company held a 50% ownership interest in the Brazilian Joint Venture through a joint venture arrangement with PGS Par, which operated Outback Steakhouse restaurants in Brazil. Effective November 1, 2013, the Company completed the Acquisition of a controlling interest in the Brazilian Joint Venture resulting in the consolidation of this entity (see Note 3).

Prior to the Acquisition, the Company accounted for the Brazilian Joint Venture under the equity method of accounting.  At December 31, 2012, the Company’s net investment of $36.0 million was recorded in Investments in and advances to unconsolidated affiliates, net, and a foreign currency translation adjustment of ($3.1) million was recorded in Accumulated other comprehensive loss in the Company’s Consolidated Balance Sheet during the year ended December 31, 2012. The Company’s share of earnings of $7.7 million, $5.1 million  and $6.8 million for the years ended December 31, 2013, 2012 and 2011, respectively, was recorded in Income from operations of unconsolidated affiliates in the Company’s Consolidated Statements of Operations and Comprehensive Income.

The following tables present summarized financial information for 100% of the Brazilian Joint Venture for the periods ending as indicated (in thousands):

 	 	DECEMBER 31, 2012	
Current assets	 	$	33,269	
 	
Noncurrent assets	 	72,214	
 	
Current liabilities	 	24,546	
 	
Noncurrent liabilities	 	16,997	

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

 	
 	 	 	 	 	 	 	 	 	 	 	 	
 	YEARS ENDED DECEMBER 31,	
 	2013(1)	 	2012	 	2011	
Net revenue from sales	$	215,050	
 	 	$	246,819	
 	 	$	225,720	
 	
Gross profit	148,229	
 	 	172,011	
 	 	153,377	
 	
Income from continuing operations	26,945	
 	 	24,268	
 	 	24,507	
 	
Net income	15,382	
 	 	11,151	
 	 	13,547	
 	
____________________
 	 	
(1)	Summarized financial information for the year ended December 31, 2013 includes results for the period from January 1, 2013 to October 31, 2013, which reflects the period prior to the Acquisition that the Brazilian Joint Venture was accounted for as an equity method investment.	

9.     Goodwill and Intangible Assets, Net

The change in goodwill for the years ended December 31, 2013 and 2012 is as follows (in thousands):

 	 	 	 	 	 	 	 	
 	2013	 	2012	
Balance as of January 1:	 	 	 	
Goodwill	$	1,055,608	
 	 	$	1,053,408	
 	
Accumulated impairment losses	(784,636	)	 	(784,636	)	
 	270,972	
 	 	268,772	

Purchase accounting adjustments	135,701	
 	 	—	
 	
Translation adjustments	(7,789	)	 	2,200	
 	
Disposal adjustments	(52,631	)	 	—	

Balance as of December 31:	 	 	 	
Goodwill	1,130,889	
 	 	1,055,608	
 	
Accumulated impairment losses	(784,636	)	 	(784,636	)	
 	$	346,253	
 	 	$	270,972	

Effective November 1, 2013, the Company acquired a controlling interest in the Brazilian Joint Venture and, as a result, recorded $135.7 million of Goodwill in the Consolidated Balance Sheet at December 31, 2013. The carrying value of historical goodwill associated with the Company’s former equity investment in this entity in the amount of $52.6 million was disposed in connection with the Acquisition (see Note 3).

The Company performs its annual assessment for impairment of goodwill and other indefinite-lived intangible assets each year during the second quarter. In 2013, the Company elected the “step zero” approach to evaluate goodwill and other indefinite-lived intangible assets which includes an assessment of qualitative factors to determine whether the existence of events or circumstances leads to the determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. In 2012, the Company’s review of the recoverability of goodwill and other indefinite-lived intangible assets was based primarily upon an analysis of the discounted cash flows of the related reporting units as compared to their carrying values (see Note 14). The Company used the discounted cash flow method to determine the fair value of its definite-lived intangible assets in 2013 and 2012, respectively.

The Company did not record any goodwill or indefinite-lived intangible asset impairment charges or any material definite-lived intangible asset impairment charges during 2013, 2012 or 2011.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

Intangible assets, net, consisted of the following (in thousands): 

 	 	 	 	 	 	 	 	 	 	 	
 	WEIGHTED
AVERAGE AMORTIZATION PERIOD (YEARS)	 	DECEMBER 31,	 	
 	 	 	2013	 	2012	 	 	
Trade names (gross)	Indefinite	 	$	413,000	
 	 	$	413,000	
 	 	 	
Trademarks (gross)	15	 	88,581	
 	 	87,831	
 	 	 	
Less: accumulated amortization	 	 	(26,619	)	 	(22,529	)	 	 	
Net trademarks	 	 	61,962	
 	 	65,302	
 	 	 	
Favorable leases (gross, lives ranging from 0.2 to 23 years)	10	 	92,511	
 	 	95,514	
 	 	 	
Less: accumulated amortization	 	 	(39,759	)	 	(38,934	)	 	 	
Net favorable leases	 	 	52,752	
 	 	56,580	
 	 	 	
Franchise agreements (gross)	7	 	14,881	
 	 	17,385	
 	 	 	
Less: accumulated amortization	 	 	(7,488	)	 	(7,410	)	 	 	
Net franchise agreements	 	 	7,393	
 	 	9,975	
 	 	 	
Reacquired franchise rights (gross)	14	 	77,418	
 	 	—	
 	 	 	
Less: accumulated amortization	 	 	(516	)	 	—	
 	 	 	
Net reacquired franchise rights	 	 	76,902	
 	 	—	
 	 	 	
Other intangibles (gross)	3	 	9,099	
 	 	9,099	
 	 	 	
Less: accumulated amortization	 	 	(3,975	)	 	(2,177	)	 	 	
Net other intangibles	 	 	5,124	
 	 	6,922	
 	 	 	
Intangible assets, less total accumulated amortization of $78,357 and	 	 	 	

$71,051 at December 31, 2013 and 2012, respectively	13	 	$	617,133	
 	 	$	551,779	

During the year ended December 31, 2013, the Company recorded $86.6 million of Intangible assets primarily related to reacquired franchise rights in connection with the aforementioned Acquisition (see Note 3).

Definite-lived intangible assets are amortized on a straight-line basis. The aggregate expense related to the amortization of the Company’s trademarks, favorable leases, franchise agreements, reacquired franchise rights and other intangibles was $14.4 million, $14.6 million and $13.9 million for the years ended December 31, 2013, 2012 and 2011, respectively. Annual expense related to the amortization of intangible assets is anticipated to be approximately $20.0 million in 2014, $19.3 million in 2015, $18.7 million in 2016, $17.6 million in 2017 and $15.9 million in 2018.

In accordance with the terms of an asset purchase agreement that was amended in December 2004, the Company was obligated to pay a royalty to its Bonefish Grill founder and joint venture partner during his employment term with the Company. The Company had the option to terminate this royalty within 45 days of his termination of employment by making an aggregate payment equal to five times the amount of the royalty payable during the 12 full calendar months immediately preceding the month of his termination. As his employment terminated on October 1, 2011, the Company paid the approximately $8.5 million royalty termination fee in October 2011 and recorded this payment as an intangible asset in its Consolidated Balance Sheet in the fourth quarter of 2011. The intangible asset is amortized over a five-year useful life.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

10.           Other Assets, Net

Other assets, net, consisted of the following (in thousands):

 	 	 	 	 	 	 	 	
 	DECEMBER 31,	
 	2013	 	2012	
Company-owned life insurance	$	66,749	
 	 	$	59,787	
 	
Deferred financing fees, net of accumulated amortization of $11,412 and $8,890	 	 	 	
 	
at December 31, 2013 and 2012, respectively	12,354	
 	 	15,097	
 	
Liquor licenses	27,793	
 	 	26,002	
 	
Other assets	58,284	
 	 	44,546	
 	
 	$	165,180	
 	 	$	145,432	

The Company amortized deferred financing fees to interest expense of $3.6 million, $8.2 million and $12.3 million for the years ended December 31, 2013, 2012 and 2011, respectively.

11.           Accrued and Other Current Liabilities

Accrued and other current liabilities consisted of the following (in thousands):

 	 	 	 	 	 	 	 	
 	DECEMBER 31,	
 	2013	 	2012	
Accrued payroll and other compensation	$	100,955	
 	 	$	108,612	
 	
Accrued insurance	20,710	
 	 	22,235	
 	
Other current liabilities	72,681	
 	 	61,437	
 	
 	$	194,346	
 	 	$	192,284	

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

12.           Long-term Debt, Net

Long-term debt, net consisted of the following (in thousands):

 	DECEMBER 31,	
 	2013	 	2012	
Senior secured term loan B facility, interest rates of 3.50% and 4.75% at December 31, 2013 and 2012, respectively (1) (2)	$	935,000	
 	 	$	1,000,000	
 	
Mortgage loan, weighted average interest rates of 4.02% and 3.98% at December 31, 2013 and 2012, respectively (3)	311,644	
 	 	319,574	
 	
First mezzanine loan, interest rate of 9.00% at December 31, 2013 and 2012 (3)	86,131	
 	 	87,048	
 	
Second mezzanine loan, interest rate of 11.25% at December 31, 2013 and 2012 (3)	86,704	
 	 	87,273	
 	
Other notes payable, uncollateralized, interest rates ranging from 0.58% to 7.00% and from 0.63% to 7.00% at December 31, 2013 and 2012, respectively (1)	6,186	
 	 	9,848	
 	
Sale-leaseback obligations (1)	2,375	
 	 	2,375	
 	
Capital lease obligations (1)	1,255	
 	 	2,112	
 	
 	1,429,295	
 	 	1,508,230	
 	
Less: current portion of long-term debt	(13,546	)	 	(22,991	)	
Less: unamortized debt discount	(10,152	)	 	(13,790	)	
Long-term debt, net	$	1,405,597	
 	 	$	1,471,449	
 	
____________________
 	 	
(1)	Represents obligations of OSI.	
 	 	
(2)	At December 31, 2013 and 2012, $20.0 million and $50.0 million, respectively, of OSI’s outstanding senior secured term loan B facility was at 4.75% and 5.75%, respectively.	
 	 	
(3)	Represents obligations of New PRP.	

Bloomin’ Brands, Inc. is a holding company and conducts its operations through its subsidiaries, certain of which have incurred their own indebtedness as described below.

On October 26, 2012, OSI completed a refinancing of its outstanding senior secured credit facilities from 2007 (the “2007 Credit Facilities”) and entered into a credit agreement (“Credit Agreement”) with a syndicate of institutional lenders and financial institutions. The new senior secured credit facilities provide for senior secured financing of up to $1.225 billion, consisting of a $1.0 billion term loan B and a $225.0 million revolving credit facility, including letter of credit and swing-line loan sub-facilities (the “Credit Facilities”) and mature on October 26, 2019. The term loan B was issued with an original issue discount of $10.0 million. The Company recorded a $9.1 million loss related to the modification and extinguishment of the 2007 Credit Facilities in Loss on extinguishment and modification of debt in the Company’s Consolidated Statement of Operations and Comprehensive Income during the fourth quarter of 2012.

On April 10, 2013, OSI completed a repricing of its senior secured term loan B facility pursuant to the First Amendment to Credit Agreement, Guaranty and Security Agreement, among OSI, OSI HoldCo, Inc., OSI’s direct owner and the Company’s indirect, wholly-owned subsidiary (“OSI HoldCo”), the subsidiary guarantors named therein, Deutsche Bank Trust Company Americas, as administrative agent and collateral agent, and a syndicate of institutional lenders and financial institutions (the “Amended Credit Agreement”). The Amended Credit Agreement replaced OSI’s existing senior secured term loan B facility with a new senior secured term loan B facility (the “Amended Term Loan B”). The Amended Term Loan B had the same principal amount outstanding (as of the repricing date) of $975.0 million, maturity date, amortization schedule and financial covenants but a lower applicable interest rate than the existing senior secured term loan B facility. Voluntary prepayments made on the principal amount outstanding since the inception of the Credit Agreement will continue to be treated as prepayments for purposes of determining amortization payment and mandatory prepayment requirements under the Amended Term Loan B.

As a result of the repricing transaction, the Company recorded a Loss on extinguishment and modification of debt of $14.6 million in the Company’s Consolidated Statement of Operations and Comprehensive Income during the second quarter of 2013. The loss comprised a prepayment penalty of $9.8 million, third-party financing costs of $2.4 million 

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

and the write-off of $1.2 million each of deferred financing fees and unamortized debt discount. The third-party financing costs included in the loss related to debt held by lenders that participated in both the original, and repriced debt and therefore, the debt was treated as modified rather than extinguished. The deferred financing fees and unamortized debt discount amounts included in the loss were related to the extinguished portion of the debt.

The Amended Credit Agreement decreased the interest rate applicable to the Amended Term Loan B to 150 basis points over the Base Rate or 250 basis points over the Eurocurrency Rate and reduced the interest rate floors applicable to the Amended Term Loan B to 2.00% for the Base Rate and 1.00% for the Eurocurrency Rate. The Base Rate option is the highest of (i) the prime rate of Deutsche Bank Trust Company Americas, (ii) the federal funds effective rate plus 0.5 of 1.0% or (iii) the Eurocurrency Rate with a one-month interest period plus 1.0% (“Base Rate”) (3.25% at December 31, 2013 and 2012).  The Eurocurrency Rate option is the 30, 60, 90 or 180-day Eurocurrency Rate (“Eurocurrency Rate”) (ranging from 0.17% to 0.35% and 0.21% to 0.51%  at December 31, 2013 and 2012, respectively).  The Eurocurrency Rate may have a nine- or twelve-month interest period if agreed upon by the applicable lenders.

Prior to the repricing of the senior secured term loan B facility, borrowings under this facility bore interest at rates ranging from 225 to 250 basis points over the Base Rate or 325 to 350 basis points over the Eurocurrency Rate. The Base Rate was subject to an interest rate floor of 2.25%, and the Eurocurrency Rate was subject to an interest rate floor of 1.25%.
 
OSI is required to prepay outstanding term loans, subject to certain exceptions, with:
 	 	
•	50% of its “annual excess cash flow” (with step-downs to 25% and 0% based upon its consolidated first lien net leverage ratio), as defined in the Credit Agreement, subject to certain exceptions;	
 	 	
•	100% of the net proceeds of certain assets sales and insurance and condemnation events, subject to reinvestment rights and certain other exceptions; and	
 	 	
•	100% of the net proceeds of any debt incurred, excluding permitted debt issuances.	

The Amended Term Loan B requires amortization payments of approximately $10.0 million per calendar year, payable in scheduled equal quarterly installments through September 2019, which payments are reduced by the application of any prepayments. Any remaining balance is due at maturity. During 2013, OSI made voluntary prepayments of $65.0 million and, as a result, will not be required to make any further required amortization payments until the remaining balance of the loan reaches maturity in October 2019. The outstanding balance on the Amended Term Loan B and term loan B, excluding the unamortized debt discount, was $935.0 million and $1.0 billion at December 31, 2013 and 2012, respectively. The remaining unamortized debt discount on the Amended Term Loan B and term loan B was $7.0 million and $9.7 million at December 31, 2013 and 2012, respectively. At December 31, 2013, none of the outstanding balance on the Amended Term Loan B was classified as current due to voluntary prepayments made by OSI during 2013 and the results of its projected covenant calculations, which indicate the additional term loan prepayments, as described above, will not be required in the next 12 months. The amount of outstanding term loans required to be prepaid in accordance with OSI’s debt covenants may vary based on actual operating results. At December 31, 2012, $10.0 million of the outstanding balance on the term loan B was classified as current due to OSI’s required quarterly amortization payments.

The revolving credit facility matures October 26, 2017 and provides for swing-line loans and letters of credit of up to $225.0 million for working capital and general corporate purposes. The revolving credit facility bears interest at rates ranging from 200 to 250 basis points over the Base Rate or 300 to 350 basis points over the Eurocurrency Rate, with step-downs based upon OSI’s consolidated first lien net leverage ratio. There were no loans outstanding under the revolving credit facility at December 31, 2013 and 2012, respectively, however, $31.6 million and $41.2 million, respectively, of the credit facility was not available for borrowing as $31.3 million of the credit facility was committed for the issuance of letters of credit as required by insurance companies that underwrite the Company’s workers’ compensation insurance and $0.3 million was committed for the issuance of other letters of credit. Total outstanding

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

letters of credit issued under OSI’s revolving credit facility may not exceed $100.0 million. Fees for the letters of credit were 3.63% and the commitment fees for unused revolving credit commitments were 0.50%.

The Credit Facilities require OSI to comply with certain covenants, including, in the case of the revolving credit facility, a covenant to maintain a specified quarterly Total Net Leverage Ratio (“TNLR”) test. The TNLR is the ratio of Consolidated Total Debt to Consolidated EBITDA (earnings before interest, taxes, depreciation and amortization and certain other adjustments as defined in the Credit Agreement) and may not exceed 6.00 to 1.00, with step-downs over a four-year period to a maximum level of 5.00 to 1.00 in 2017. The other negative covenants limit, but provide exceptions for, OSI’s ability and the ability of its restricted subsidiaries to take various actions relating to indebtedness, significant payments, mergers and similar transactions. The Credit Agreement also contains customary representations and warranties, affirmative covenants and events of default. At December 31, 2013 and 2012, the Company was in compliance with its debt covenants.

The Credit Facilities are guaranteed by each of OSI’s current and future domestic 100% owned restricted subsidiaries in the Outback Steakhouse and Carrabba’s Italian Grill concepts and certain other subsidiaries (the “Guarantors”) and by OSI HoldCo.

OSI’s obligations are secured by substantially all of its assets and assets of the Guarantors and OSI HoldCo, in each case, now owned or later acquired, including a pledge of all of OSI’s capital stock, the capital stock of substantially all of OSI’s domestic subsidiaries and 65% of the capital stock of foreign subsidiaries that are directly owned by OSI, OSI HoldCo, or a Guarantor. OSI is also required to provide additional guarantees of the Credit Facilities in the future from other domestic wholly-owned restricted subsidiaries if the Consolidated EBITDA attributable to OSI’s non-guarantor domestic wholly-owned restricted subsidiaries as a group exceeds 10% of the Consolidated EBITDA of OSI and its restricted subsidiaries. If this occurs, guarantees would be required from additional domestic wholly-owned restricted subsidiaries in such number that would be sufficient to lower the aggregate Consolidated EBITDA of the non-guarantor domestic wholly-owned restricted subsidiaries as a group to an amount not in excess of 10% of the Consolidated EBITDA of OSI and its restricted subsidiaries.

Effective March 27, 2012, New PRP entered into a new commercial mortgage-backed securities loan (the “2012 CMBS Loan”) with German American Capital Corporation and Bank of America, N.A. The 2012 CMBS Loan totaled $500.0 million at origination and comprised a first mortgage loan in the amount of $324.8 million, collateralized by 261 of the Company’s properties, and two mezzanine loans totaling $175.2 million. The 2012 CMBS Loan requires annual amortization payments ranging from approximately $9.4 million to $10.9 million, payable in scheduled monthly installments through March 2017, with the remaining balance due upon maturity in April 2017. The first mortgage loan has five fixed rate components and a floating rate component. The fixed rate components bear interest at rates ranging from 2.37% to 6.81% per annum. The floating rate component bears interest at a rate per annum equal to the 30-day London Interbank Offered Rate (“30-day LIBOR”) (with a floor of 1%) plus 2.37%. The first mezzanine loan bears interest at a rate of 9.00% per annum, and the second mezzanine loan bears interest at a rate of 11.25% per annum. In connection with the 2012 CMBS Loan, New PRP entered into an interest rate cap as a method to limit the volatility of the floating rate component of the first mortgage loan (see Note 15). At December 31, 2013 and 2012, the outstanding balance, excluding the debt discount, on the 2012 CMBS Loan was $484.5 million and $493.9 million, respectively.

The proceeds from the 2012 CMBS Loan, together with the proceeds from a sale-leaseback transaction and excess cash held in PRP, were used to repay PRP’s original first mortgage and mezzanine notes (together, the commercial mortgage-backed securities loan) (“CMBS Loan”). The Company recorded a $2.9 million loss related to the extinguishment in Loss on extinguishment and modification of debt in its Consolidated Statement of Operations and Comprehensive Income during the first quarter of 2012.

During 2012, OSI retired the aggregate outstanding principal amount of its 10% senior notes through a combination of a tender offer and early redemption call. As a result of these transactions, the Company recorded a loss from the extinguishment of debt of $9.0 million in Loss on extinguishment and modification of debt in its Consolidated Statement of Operations and Comprehensive Income during the third quarter of 2012.

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BLOOMIN’ BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

As of December 31, 2013 and 2012, OSI had approximately $6.2 million and $9.8 million, respectively, of notes payable at interest rates ranging from 0.58% to 7.00% and from 0.63% to 7.00%, respectively. These notes have been primarily issued for buyouts of managing and area operating partner interests in the cash flows of their restaurants and generally are payable over a period of two through five years.

The aggregate mandatory principal payments of total consolidated debt outstanding at December 31, 2013, for the next five years, are summarized as follows (in thousands):

 	 	 	 	
2014	$	14,509	
 	
2015	12,350	
 	
2016	11,731	
 	
2017	453,330	
 	
2018	—	
 	
Thereafter	937,375	
 	
Total	$	1,429,295	

13.     Other Long-term Liabilities, Net

Other long-term liabilities, net, consisted of the following (in thousands):

 	DECEMBER 31,	 	
 	2013	 	2012	 	
Accrued insurance liability	$	43,635	
 	 	$	42,401	
 	 	
Unfavorable leases, net of accumulated amortization of $24,095 and $21,625 at December 31, 2013	54,843	
 	 	57,359	
 	 	
and 2012, respectively	 	 	 	 	 	 	 	
PEP and Supplemental PEP obligations	109,529	
 	 	102,206	
 	 	 	
Deferred gain on sale-leaseback transaction, net of accumulated amortization of $3,745 and $1,610	36,910	
 	 	39,149	
 	 	 	
at December 31, 2013 and 2012, respectively	 	 	 	 	 	 	 	
Other long-term liabilities	39,804	
 	 	23,129	
 	 	 	
 	$	284,721	
 	 	$	264,244	

The Company maintains endorsement split-dollar insurance policies with a death benefit ranging from $5.0 million to $10.0 million for certain of its current and former executive officers.  The Company is the beneficiary of the policies to the extent of premiums paid or the cash value, whichever is greater, with the remaining death benefit being paid to personal beneficiaries designated by the executive officers.  During the year ended December 31, 2013, the Company terminated the split-dollar agreements with five of its former executive officers in exchange for $5.2 million in cash. Upon termination, the release of the death benefit and related liabilities and net of the associated cash termination payment resulted in net gains of $4.7 million during the year ended December 31, 2013, which were recorded in General and administrative expenses in the Consolidated Statement of Operations and Comprehensive Income. As a result of the terminations, the Company became the sole and exclusive owner of the related split-dollar insurance policies and elected to cancel them.

As of December 31, 2013 and 2012, the Company had $5.0 million and $14.3 million, respectively, recorded in Other long-term liabilities, net in its Consolidated Balance Sheets for the outstanding obligations under th e  endorsement split-dollar insurance policies.

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BLOOMIN’ BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

14.           Fair Value Measurements

Fair value is the price that would be received upon sale of an asset or paid upon transfer of a liability in an orderly transaction between market participants at the measurement date (exit price) and is a market-based measurement, not an entity-specific measurement. To measure fair value, the Company incorporates assumptions that market participants would use in pricing the asset or liability, and utilizes market data to the maximum extent possible. Measurement of fair value incorporates nonperformance risk (i.e., the risk that an obligation will not be fulfilled). In measuring fair value, the Company reflects the impact of its own credit risk on its liabilities, as well as any collateral. The Company also considers the credit standing of its counterparties in measuring the fair value of its assets.

As a basis for considering market participant assumptions in fair value measurements, a three-tier fair value hierarchy prioritizes the inputs used in measuring fair value as follows:
 	 	
•	Level 1—Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access;	
 	 	
•	Level 2—Inputs, other than the quoted market prices included in Level 1, which are observable for the asset or liability, either directly or indirectly; and	
 	 	
•	Level 3—Unobservable inputs for the asset or liability, which are typically based on an entity’s own assumptions, as there is little, if any, related market data available.	

In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.

Fair Value Measurements on a Recurring Basis

The Company invested $11.9 million of its excess cash in fixed income and money market funds classified as Cash and cash equivalents or restricted cash in its Consolidated Balance Sheet as of December 31, 2013, at a net value of 1:1 for each dollar invested. The fair value of the investments in the these funds is determined by using quoted prices for identical assets in an active market. As a result, the Company has determined that the inputs used to value these investments fall within Level 1 of the fair value hierarchy. The amount of excess cash invested in money market funds at December 31, 2012 was immaterial to the Company’s consolidated financial statements and the Company did not invest excess cash in any fixed income funds at December 31, 2012.

In connection with the 2012 CMBS Loan, New PRP entered into an interest rate cap with a notional amount of $48.7 million as a method to limit the volatility of the floating rate component of the first mortgage loan. The interest rate cap had nominal fair market value at December 31, 2013 and 2012, respectively, and therefore was excluded from the applicable tables within this footnote (see Note 15).

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BLOOMIN’ BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

The following table presents the Company’s fixed income and money market funds measured at fair value on a recurring basis as of December 31, 2013, aggregated by the level in the fair value hierarchy within which those measurements fall (in thousands):

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	TOTAL
DECEMBER 31, 2013	 	LEVEL 1	 	LEVEL 2	 	LEVEL 3	
Assets:	 	 	 	 	 	 	 	
Fixed income funds - cash equivalents	$	9,849	
 	 	$	9,849	
 	 	$	—	
 	 	$	—	
 	
Money market funds - cash equivalents	1,988	
 	 	1,988	
 	 	—	
 	 	—	
 	
Money market funds - restricted cash	68	
 	 	68	
 	 	—	
 	 	—	
 	
Total recurring fair value measurements	$	11,905	
 	 	$	11,905	
 	 	$	—	
 	 	$	—	

Fair Value Measurements on a Nonrecurring Basis

The Company periodically evaluates long-lived assets held for use whenever events or changes in circumstances indicate that the carrying amount of those assets may not be recoverable. The Company analyzes historical and expected future cash flows of operating locations as well as lease terms, condition of the assets and the related need for repairs and maintenance. Impairment loss is recognized to the extent that the fair value of the assets is less than the carrying value.

In 2013, the Company completed an assessment of its restaurant base. As a result of this assessment, the Company decided to close 22 underperforming locations primarily within the Outback Steakhouse concept. The Company expects to substantially complete these store closings by the end of the first quarter of 2014. In connection with this initiative, the Company incurred pre-tax asset impairment charges of approximately $18.7 million in the fourth quarter of 2013.

The following tables present losses related to the Company’s assets and liabilities that were measured at fair value on a nonrecurring basis during the years ended December 31, 2013, 2012 and 2011 aggregated by the level in the fair value hierarchy within which those measurements fall (in thousands):

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	DECEMBER 31, 2013	 	 	
 	 	 	REMAINING FAIR VALUE	 	YEAR ENDED
DECEMBER 31, 2013	
 	CARRYING VALUE	 	LEVEL 1	 	LEVEL 2	 	LEVEL 3	 	TOTAL
LOSSES	
Long-lived assets held and used	$	9,990	
 	 	$	—	
 	 	$	8,341	
 	 	$	1,649	
 	 	$	19,761	

 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	DECEMBER 31, 2012	 	 	
 	 	 	REMAINING FAIR VALUE	 	YEAR ENDED
DECEMBER 31, 2012	
 	CARRYING VALUE	 	LEVEL 1	 	LEVEL 2	 	LEVEL 3	 	TOTAL
LOSSES	
Long-lived assets held and used	$	6,178	
 	 	$	—	
 	 	$	3,585	
 	 	$	2,593	
 	 	$	10,584	

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BLOOMIN’ BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	DECEMBER 31, 2011	 	 	
 	 	 	REMAINING FAIR VALUE	 	YEAR ENDED
DECEMBER 31, 2011	
 	CARRYING VALUE	 	LEVEL 1	 	LEVEL 2	 	LEVEL 3	 	TOTAL
LOSSES	
Long-lived assets held and used	$	30,840	
 	 	$	29,455	
 	 	$	—	
 	 	$	1,385	
 	 	$	11,593	

The Company recorded $19.8 million, $10.6 million and $11.6 million of impairment charges as a result of the fair value measurement on a nonrecurring basis of its long-lived assets held and used during the years ended December 31, 2013, 2012 and 2011, respectively, primarily related to certain specifically identified restaurant locations that have, or are scheduled to be, closed, relocated or renovated or were underperforming. As discussed above, $18.7 million of the impairment charges incurred for the year ended December 31, 2013 were related to the management decision to close 22 underperforming locations.  The impaired long-lived assets had $10.0 million, $6.2 million and $30.8 million of remaining fair value at December 31, 2013, 2012 and 2011, respectively. Restaurant closure and related expenses of $3.0 million, $2.4 million and $2.4 million were recognized for the years ended December 31, 2013, 2012 and 2011, respectively. Impairment losses for long-lived assets held and used and restaurant closure and related expenses were recognized in Provision for impaired assets and restaurant closings in the Consolidated Statement of Operations and Comprehensive Income.

The Company used quoted prices from brokers (Level 1), third-party market appraisals (Level 2) and discounted cash flow models (Level 3) to estimate the fair value of the long-lived assets included in the tables above.  Projected future cash flows, including discount rate and growth rate assumptions, are derived from current economic conditions, expectations of management and projected trends of current operating results.  

The following table presents quantitative information related to the unobservable inputs used in the Company’s Level 3 fair value measurements for the impairment loss incurred for the periods ending as indicated:

 	 	YEARS ENDED DECEMBER 31,	
UNOBSERVABLE INPUT	 	2013	 	2012	
Weighted-average cost of capital (1)	 	9.5% -10.2%	 	9.5% - 11.2%	
Long-term growth rates	 	2.0%	 	3.0%	
Annual revenue growth rates (2)	 	2.2% - 3.0%	 	(8.7)% - 4.3%	
____________________
 	 	
(1)	Weighted average of the costs of capital unobservable input range was 10.1% and 10.8% for the year ended December 31, 2013 and 2012, respectively.	
 	 	
(2)	Weighted average of the annual revenue growth rates unobservable input range was 2.5% and 2.6% for the years ended December 31, 2013 and 2012, respectively.	

The Company performed its annual goodwill and other indefinite-lived intangible assets impairment test during the second quarters of 2013 and 2012. The impairment test performed in the second quarter of 2013 utilized a qualitative assessment. This qualitative assessment is referred to as a “step zero” approach and allows the Company the option to assess qualitative factors to determine whether the existence of events or circumstances leads to the determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, based on the review of the qualitative factors, an entity determines there is sufficient evidence to support a more likely than not (greater than 50%) probability that the fair value of a reporting unit is greater than its carrying value, the entity may skip the two-step impairment test. During 2012, the Company elected to forgo step zero and proceeded to the first step of the impairment test for goodwill and other indefinite-lived intangible assets.

In considering the step zero approach in 2013, the Company evaluated factors including, but not limited to, macro-economic conditions, market and industry conditions, commodity cost fluctuations, competitive environment, share price performance, results of prior impairment tests, operational stability and the overall financial performance of the reporting units. As a result of the Company’s step zero assessment, no impairment conditions were identified and no further testing was deemed necessary.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

During the years ended December 31, 2013, 2012 and 2011 the Company did not incur any goodwill and other indefinite-lived intangible asset impairment charges as a result of fair value measurements on a nonrecurring basis.

Fair Value of Financial Instruments

Disclosure of fair value information about financial instruments, whether or not recognized in the Consolidated Balance Sheets, is required for those instruments for which it is practical to estimate that value. Fair value is a market-based measurement.

The Company’s non-derivative financial instruments at December 31, 2013 and 2012 consist of cash equivalents, restricted cash, accounts receivable, accounts payable and current and long-term debt.  The fair values of cash equivalents, restricted cash, accounts receivable and accounts payable approximate their carrying amounts reported in the Consolidated Balance Sheets due to their short duration.

The fair value of OSI’s senior secured term loan B facility is determined based on quoted market prices in inactive markets. The fair value of New PRP’s commercial mortgage-backed securities is based on assumptions derived from current conditions in the real estate and credit markets, changes in the underlying collateral and expectations of management.  Fair value estimates for other notes payable are derived using a discounted cash flow approach. Discounted cash flow inputs primarily include cost of debt rates which are used to derive the present value factors for the determination of fair value. These inputs represent assumptions impacted by economic conditions and management expectations and may change in the future based on period-specific facts and circumstances.

The following table includes the carrying value and fair value of the Company’s financial instruments at December 31, 2013 and 2012 aggregated by the level in the fair value hierarchy in which those measurements fall (in thousands):

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	DECEMBER 31, 2013	
 	 	 	 	FAIR VALUE	
 	 	CARRYING VALUE	 	LEVEL 1	 	LEVEL 2	 	LEVEL 3	
Senior secured term loan B facility (1)	 	$	935,000	
 	 	$	—	
 	 	$	936,169	
 	 	$	—	
 	
Mortgage loan (2)	 	311,644	
 	 	—	
 	 	—	
 	 	318,787	
 	
First mezzanine loan (2)	 	86,131	
 	 	—	
 	 	—	
 	 	86,131	
 	
Second mezzanine loan (2)	 	86,704	
 	 	—	
 	 	—	
 	 	87,571	
 	
Other notes payable (1)	 	6,186	
 	 	—	
 	 	—	
 	 	5,912	

 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	DECEMBER 31, 2012	
 	 	 	 	FAIR VALUE	
 	 	CARRYING VALUE	 	LEVEL 1	 	LEVEL 2	 	LEVEL 3	
Senior secured term loan B facility (1)	 	$	1,000,000	
 	 	$	—	
 	 	$	1,010,000	
 	 	$	—	
 	
Mortgage loan (2)	 	319,574	
 	 	—	
 	 	—	
 	 	334,678	
 	
First mezzanine loan (2)	 	87,048	
 	 	—	
 	 	—	
 	 	90,371	
 	
Second mezzanine loan (2)	 	87,273	
 	 	—	
 	 	—	
 	 	91,423	
 	
Other notes payable (1)	 	9,848	
 	 	—	
 	 	—	
 	 	9,230	
 	
____________________
 	 	
(1)	Represents obligations of OSI.	
 	 	
(2)	Represents obligations of New PRP.	

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BLOOMIN’ BRANDS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

15.           Derivative Instruments and Hedging Activities

The Company is exposed to market risk from changes in interest rates on debt, changes in commodity prices and changes in foreign currency exchange rates.

Interest rate changes associated with the Company’s variable-rate debt generally impact its earnings and cash flows, assuming other factors are held constant. The Company’s current exposure to interest rate fluctuations includes OSI’s borrowings under its Credit Facilities and the floating rate component of the first mortgage loan in New PRP’s 2012 CMBS Loan that bear interest at floating rates based on the Eurocurrency Rate or the Base Rate and the 30-day LIBOR rate, respectively, plus an applicable borrowing margin (see Note 12). The Company manages its interest rate risk by offsetting some of its variable-rate debt with fixed-rate debt, through normal operating and financing activities and, when deemed appropriate, through the use of derivative financial instruments.

In connection with the 2012 CMBS Loan, New PRP entered into an interest rate cap (the “Rate Cap”) with a notional amount of $48.7 million as a method to limit the volatility of the floating rate component of the first mortgage loan. Under the Rate Cap, if the 30-day LIBOR market rate exceeds 7.00% per annum, the counterparty must pay to New PRP such excess on the notional amount of the floating rate component. If necessary, the Company would record mark-to-market changes in the fair value of this derivative instrument in earnings in the period of change. The Rate Cap has a term of approximately two years from the closing of the 2012 CMBS Loan. Upon the expiration or termination of the Rate Cap or the downgrade of the credit ratings of the counterparty under the Rate Cap’s specified thresholds, New PRP is required to replace the Rate Cap with a replacement interest rate cap in a notional amount equal to the outstanding principal balance (if any) of the floating rate component. The Rate Cap had nominal fair market value at December 31, 2013 and 2012, respectively. The effect of the Rate Cap was immaterial to the Company’s consolidated financial statements for all periods presented.

Many of the ingredients used in the products sold in the Company’s restaurants are commodities that are subject to unpredictable price volatility. Although the Company attempts to minimize the effect of price volatility by negotiating fixed price contracts for the supply of key ingredients, there are no established fixed price markets for certain commodities such as produce and wild fish, and the Company is subject to prevailing market conditions when purchasing those types of commodities. Other commodities are purchased based upon negotiated price ranges established with vendors with reference to the fluctuating market prices. The Company attempts to offset the impact of fluctuating commodity prices with other strategic purchasing initiatives. The Company does not use derivative financial instruments to manage its commodity price risk, except for natural gas as described below.

The Company’s restaurants are dependent upon energy to operate and are impacted by changes in energy prices, including natural gas. The Company utilizes derivative instruments to mitigate some of its overall exposure to material increases in natural gas prices. The Company records mark-to-market changes in the fair value of these derivative instruments in earnings in the period of change. The effects of these natural gas swaps were immaterial to the Company’s consolidated financial statements for all periods presented.

The Company’s exposure to foreign currency exchange fluctuations relates primarily to its direct investment in restaurants in South Korea, Brazil and Hong Kong and to its royalties from international franchisees. The Company has not used financial instruments to hedge foreign currency exchange rate changes.

In addition to the market risks identified above, the Company is subject to business risk as its U.S. beef supply is highly dependent upon a limited number of vendors. In 2013, the Company purchased more than 90% of its beef raw materials from four beef suppliers that represent approximately 90% of the total beef marketplace in the U.S.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

16.           Income Taxes

The following table presents the domestic and foreign components of Income before provision for income taxes (in thousands):

 	 	 	 	 	 	 	 	 	 	 	 	
 	YEARS ENDED DECEMBER 31,	
 	2013	 	2012	 	2011	
Domestic	$	112,674	
 	 	$	43,744	
 	 	$	105,620	
 	
Foreign	59,686	
 	 	29,666	
 	 	25,275	
 	
 	$	172,360	
 	 	$	73,410	
 	 	$	130,895	

(Benefit) provision for income taxes consisted of the following (in thousands):

 	 	 	 	 	 	 	 	 	 	 	 	
 	YEARS ENDED DECEMBER 31,	
 	2013	 	2012	 	2011	
Current provision:	 	 	 	 	 	
Federal	$	21,518	
 	 	$	15	
 	 	$	382	
 	
State	10,196	
 	 	10,896	
 	 	10,556	
 	
Foreign	9,681	
 	 	8,637	
 	 	10,953	
 	
 	41,395	
 	 	19,548	
 	 	21,891	
 	
Deferred (benefit) provision:	 	 	 	 	 	
Federal	(83,437	)	 	397	
 	 	(127	)	
State	(347	)	 	(8,118	)	 	(179	)	
Foreign	181	
 	 	279	
 	 	131	
 	
 	(83,603	)	 	(7,442	)	 	(175	)	
(Benefit) provision for income taxes	$	(42,208	)	 	$	12,106	
 	 	$	21,716	

The reconciliation of income taxes calculated at the United States federal tax statutory rate to the Company’s effective income tax rate is as follows:

 	YEARS ENDED DECEMBER 31,	
 	2013	 	2012	 	2011	
Income taxes at federal statutory rate	35.0	 %	 	35.0	 %	 	35.0	 %	
State and local income taxes, net of federal benefit	3.6	
 	 	2.2	
 	 	4.1	
 	
Valuation allowance on deferred income tax assets	(30.6	)	 	24.2	
 	 	7.6	
 	
Employment-related credits, net	(22.3	)	 	(31.0	)	 	(19.1	)	
Net officers’ life insurance expense	(1.6	)	 	(1.3	)	 	0.9	
 	
Noncontrolling interests	(2.8	)	 	(7.8	)	 	(4.3	)	
Tax settlements and related adjustments	0.7	
 	 	(1.0	)	 	1.3	
 	
Loss on investments	—	
 	 	—	
 	 	(5.6	)	
Gain on remeasurement of equity method investment	(6.8	)	 	—	
 	 	—	
 	
Foreign rate differential	(1.4	)	 	(4.5	)	 	(2.4	)	
Other, net	1.7	
 	 	0.7	
 	 	(0.9	)	
Total	(24.5	)%	 	16.5	 %	 	16.6	 %	

The effective income tax rate for the year ended December 31, 2013 was (24.5)% compared to 16.5% for the year ended December 31, 2012. The net decrease in the effective income tax rates was primarily due to the benefit of the release of valuation allowance in the second quarter of 2013 and the exclusion of gain on remeasurement of equity method investment, which was partially offset by the benefit of the employment-related credits and the elimination of

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

noncontrolling interests together being a smaller percentage of pretax income. The effective income tax rate for the year ended December 31, 2012 was consistent with the prior year.

The effective income tax rate for the year ended December 31, 2013 was lower than the blended federal and state statutory rate of 38.8% primarily due to the benefit of the release of valuation allowance, tax credit for excess FICA tax on employee-reported tips, exclusion of gain on remeasurement of equity method investment, elimination of noncontrolling interests and foreign rate differential together being such a large percentage of pretax income. The effective income tax rate for the year ended December 31, 2012 was lower than the blended federal and state statutory rate of 38.6% primarily due to the benefit of the tax credit for excess FICA tax on employee-reported tips, elimination of noncontrolling interests and foreign rate differential together being such a large percentage of pretax income, which was partially offset by the valuation allowance. The effective income tax rate for the year ended December 31, 2011 was lower than the blended federal and state statutory rate of 38.7% primarily due to the benefit of the tax credit for excess FICA tax on employee-reported tips and loss on investments as a result of the sale of assets in Japan together being such a large percentage of pretax income.

The income tax effects of temporary differences that give rise to significant portions of deferred income tax assets and liabilities are as follows (in thousands):

 	DECEMBER 31,	
 	2013	 	2012	
Deferred income tax assets:	 	 	 	
Deferred rent	$	40,555	
 	 	$	33,050	
 	
Insurance reserves	23,226	
 	 	23,714	
 	
Unearned revenue	13,494	
 	 	11,155	
 	
Deferred compensation	66,607	
 	 	60,977	
 	
Net operating loss carryforwards	5,612	
 	 	6,716	
 	
Federal tax credit carryforwards	155,321	
 	 	133,122	
 	
Partner deposits and accrued partner obligations	22,586	
 	 	29,376	
 	
Other, net	2,063	
 	 	686	
 	
Gross deferred income tax assets	329,464	
 	 	298,796	
 	
Less: valuation allowance	(4,526	)	 	(72,515	)	
Net deferred income tax assets	324,938	
 	 	226,281	
 	
Deferred income tax liabilities:	 	 	 	
Less: property, fixtures and equipment basis differences	(184,984	)	 	(189,289	)	
Less: intangible asset basis differences	(160,111	)	 	(133,496	)	
Less: deferred gain on extinguishment of debt	(57,231	)	 	(57,064	)	
Net deferred income tax liabilities	$	(77,388	)	 	$	(153,568	)	

The changes in the valuation allowance account for the deferred income tax assets are as follows (in thousands):

 	 	 	 	
Balance at January 1, 2011	$	25,886	
 	
Change in assessments about the realization of deferred income tax assets	9,951	
 	
Balance at December 31, 2011	35,837	
 	
Change in assessments about the realization of deferred income tax assets	36,678	
 	
Balance at December 31, 2012	72,515	
 	
 Change in assessments about the realization of deferred income tax assets	(67,989	)	
Balance at December 31, 2013	$	4,526	

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A valuation allowance reduces the deferred income tax assets reported if, based on the weight of the evidence, it is more likely than not that some portion or all of the deferred income tax assets will not be realized. After consideration of all of the evidence, the Company has recorded a valuation allowance of $4.5 million and $72.5 million at December 31, 2013 and 2012, respectively.

The valuation allowance against net deferred income tax assets recorded at December 31, 2012 of $72.5 million  consisted of $67.7 million for U.S. net deferred income tax assets. The Company established the domestic portion of the valuation allowance in 2009 with increases through 2012 against its then existing U.S. net deferred income tax assets as it was deemed the negative evidence outweighed the positive evidence and therefore the deferred income tax assets were not likely to be realized in future periods.

As of June 30, 2013, the Company conducted an assessment of the recoverability of its domestic net deferred income tax assets and determined it was more likely than not that its existing net deferred income tax assets for general business tax credit carryforwards would be realized. The Company’s assessment included consideration of all available positive and negative evidence including, among other evidence, historical cumulative operating income, projected future taxable income and recent utilization of U.S. net operating loss carryforwards and tax credit carryforwards. Accordingly, the Company recorded a $67.7 million reduction of the valuation allowance against the U.S. net deferred income tax assets of which $52.0 million was recorded as income tax benefit and $15.7 million was recorded as an increase to Additional paid-in capital. As the general business tax credits are expected to be realized due to current year and future year’s income, the portion attributable to future year’s income, or $44.8 million, was released as a discrete event during the second quarter of 2013. The remainder was attributable to current year activity as income was realized and impacted the 2013 effective income tax rate. The Company did not release the valuation allowance against foreign net operating loss carryforwards.

The Company expects to continue to generate significant U.S. income tax credits, which combined with the mix of U.S. and foreign earnings, including a higher tax rate in the newly consolidation Brazilian operations, in periods subsequent to 2013 will result in an effective income tax rate that is higher than the rates in the current and prior periods but continues to be lower than the blended federal and state statutory rate.

A provision for income taxes has not been recorded for United States or additional foreign taxes on undistributed earnings related to the Company’s foreign affiliates as these earnings were and are expected to continue to be permanently reinvested. The aggregate undistributed earnings of the Company’s foreign subsidiaries for which no deferred tax liability has been recorded is approximately $151.3 million as of December 31, 2013. If the Company identifies an exception to its general reinvestment policy of undistributed earnings, additional tax liabilities will be recorded. It is not practical to determine the amount of unrecognized deferred income tax liabilities on the undistributed earnings.

The Company utilized all of its available federal net operating loss and foreign tax credit carryforwards for tax purposes in 2012.  The Company has state net operating loss carryforwards of approximately $21.1 million. These state net operating loss carryforwards will expire between 2014 and 2031. The Company has foreign net operating loss carryforwards of approximately $13.3 million. These foreign net operating loss carryforwards will expire between 2015 and 2023. The Company has general business tax credits of approximately $147.7 million. These credits can be carried forward for 20 years and will expire between 2027 and 2033. 

Deferred income tax assets relating to tax benefits of stock-based compensation have been reduced by approximately $3.5 million to reflect exercises of stock options and vesting of restricted stock during the year ended December 31, 2013. Certain stock option exercises and restricted stock resulted in tax deductions in excess of previously recorded tax benefits based on the value of such stock-based compensation at the time of grant (“windfalls”). Although the additional tax benefit for the windfalls is reflected in the general business tax credits and state net operating loss carryforwards, the additional tax benefit associated with the windfalls is not recognized for financial statement purposes until the deduction reduces income taxes payable. For the year ended December 31, 2013, windfall tax benefits of

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$4.4 million were realized and recognized directly to Additional paid-in capital. Windfall tax benefits of $13.6 million are not reflected in deferred tax assets.

As of December 31, 2013 and 2012, respectively, the Company had $17.1 million and $13.6 million, respectively, of unrecognized tax benefits ($6.5 million and $1.0 million, respectively, in Other long-term liabilities, net, $1.2 million and $0.9 million, respectively, in Accrued and other current liabilities and $9.4 million and $11.7 million, respectively, in Deferred income tax liabilities). Additionally, the Company accrued $2.1 million and $2.4 million of interest and penalties related to uncertain tax positions as of December 31, 2013 and 2012, respectively. Of the total amount of unrecognized tax benefits, including accrued interest and penalties, $17.2 million and $13.8 million, respectively, if recognized, would impact the Company’s effective tax rate. The difference between the total amount of unrecognized tax benefits and the amount that would impact the effective tax rate consists of items that are offset by deferred income tax assets and the federal tax benefit of state income tax items.

The following table summarizes the activity related to the Company’s unrecognized tax benefits (in thousands):

 	 	 	 	
Balance at January 1, 2011	$	16,387	
 	
Increases for tax positions taken during a prior period	472	
 	
Decreases for tax positions taken during a prior period	(708	)	
Increases for tax positions taken during the current period	2,136	
 	
Settlements with taxing authorities	(4,190	)	
Lapses in the applicable statutes of limitations	(58	)	
Balance at December 31, 2011	$	14,039	
 	
Increases for tax positions taken during a prior period	416	
 	
Decreases for tax positions taken during a prior period	(291	)	
Increases for tax positions taken during the current period	2,153	
 	
Settlements with taxing authorities	(1,788	)	
Lapses in the applicable statutes of limitations	(938	)	
Balance at December 31, 2012	$	13,591	
 	
Increases for tax positions taken during a prior period	73	
 	
Decreases for tax positions taken during a prior period	(26	)	
Increases for tax positions taken during the current period	1,960	
 	
Increases for tax positions on Acquisition	2,799	
 	
Settlements with taxing authorities	(488	)	
Lapses in the applicable statutes of limitations	(841	)	
Balance at December 31, 2013	$	17,068	

In many cases, the Company’s uncertain tax positions are related to tax years that remain subject to examination by relevant taxable authorities. Based on the outcome of these examinations, or as a result of the expiration of the statute of limitations for specific jurisdictions, it is reasonably possible that the related recorded unrecognized tax benefits for tax positions taken on previously filed tax returns will decrease by approximately $5.0 million to $6.0 million within the next 12 months after December 31, 2013.

The Company is currently open to audit under the statute of limitations by the Internal Revenue Service for the years ended December 31, 2007 through 2012. The Company and its subsidiaries’ state and foreign income tax returns are also open to audit under the statute of limitations for the years ended December 31, 2000 through 2012.

The Company is currently under examination by the IRS for the years ended December 31, 2010 through 2012. In September 2013, the IRS informed the Company that it proposes to issue an audit adjustment for the employer’s share of FICA taxes related to cash tips allegedly received and unreported by the Company’s tipped employees during calendar year 2010, for which the Company recorded a liability in the third quarter of 2013 for $5.0 million. The cash tips

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allegedly unreported by the tipped employees are based on an IRS estimate of the aggregate amount of tips directly received by tipped employees from the Company’s customers. Subsequently, the Company has had additional communications with the IRS representatives, which indicate that the scope of the proposed adjustment will be expanded to include the 2011 and 2012 periods. As a result, the Company has reassessed the established liability balance and recorded an additional $12.0 million in the fourth quarter of 2013. As of December 31, 2013, the Company had $5.0 million and $12.0 million recorded in Accrued and other current liabilities and Other long-term liabilities, net, respectively, in the Company’s Consolidated Balance Sheet at December 31, 2013. The associated expense is included in Labor and other related expenses for the year ended December 31, 2013. In addition, a deferred income tax benefit has been recorded for the allowable income tax credits for the employer’s share of FICA taxes expected to be paid as result of the assessment. This income tax benefit is included in (Benefit) provision for income taxes and offsets the additional Labor and other related expenses in 2013. As a result of the associated income tax benefit, recording of the liability has no impact on Net income.

In addition, the Company is under examination by tax authorities in South Korea for the 2008 to 2012 tax years. Approximately $7.9 million of additional tax obligations were assessed to the Company as a result of this examination and the Company is currently in the appeals process. In order to enter into the appeal, the Company was required to deposit with the South Korea tax authorities the amount of the assessment.

The Company believes that adequate amounts have been reserved for any adjustments that may ultimately result from these or other examinations.

The Company accounts for interest and penalties related to uncertain tax positions as part of its (Benefit) provision for income taxes. The Company recognized a benefit of $0.2 million and $0.6 million for the years ended December 31, 2013 and 2012 and an expense of $0.9 million for the year ended December 31, 2011.

17.         Stockholders’ Equity
 
On August 13, 2012, the Company completed an IPO of its common stock. On September 11, 2012, the underwriters in the Company’s IPO completed the exercise of their option to purchase up to 2,400,000 additional shares of common stock from the Company and certain of the selling stockholders. In the offering, (i) the Company issued and sold an aggregate of 14,196,845 shares of common stock (including 1,196,845 shares sold pursuant to the underwriters’ option to purchase additional shares) at a price to the public of $11.00 per share for aggregate gross offering proceeds of $156.2 million and (ii) certain of the Company’s stockholders sold 4,196,845 shares of the Company’s common stock (including 1,196,845 shares pursuant to the underwriters’ option to purchase additional shares) at a price to the public of $11.00 per share for aggregate gross offering proceeds of $46.2 million. The Company did not receive any proceeds from the sale of shares of common stock by the selling stockholders.

The Company received net proceeds in the offering of approximately $142.2 million after deducting underwriting discounts and commissions of approximately $9.4 million and offering related expenses of $4.6 million. All of the net proceeds, together with cash on hand, was applied to retire OSI’s 10% senior notes due 2015.
 
On May 10, 2012, the retention bonus and the incentive bonus agreements with the Company’s CEO were amended. Under the terms of the amendments, the remaining payments under each agreement were accelerated to a single lump sum payment of $22.4 million as a result of the completion of the Company’s IPO, which was paid in the third quarter of 2012. The Company recorded $18.1 million for the accelerated bonus expense in General and administrative in its Consolidated Statement of Operations and Comprehensive Income for the year ended December 31, 2012.

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18.         Recently Issued Financial Accounting Standards

In March 2013, the FASB issued ASU No. 2013-05, “Foreign Currency Matters (Topic 830): Parent’s Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity (a consensus of the FASB Emerging Issues Task Force)” (“ASU No. 2013-05”). Under ASU No. 2013-05, which clarifies existing generally accepted accounting principles in the United States (“U.S. GAAP”) guidance, an entity would recognize cumulative translation adjustments in earnings when it ceases to have a controlling financial interest in a subsidiary or group of assets within a consolidated foreign entity and the sale or transfer results in the complete or substantially complete liquidation of the foreign entity in which the subsidiary or group of assets resided. However, when an entity sells either a part or all of its investment in a consolidated foreign entity, an entity would recognize cumulative translation adjustments in earnings only if the parent no longer has a controlling financial interest in the foreign entity as a result of the sale. In the case of sales of an equity method investment that is a foreign entity, a pro rata portion of cumulative translation adjustments attributable to the equity method investment would be recognized in earnings upon sale of the equity method investment. In addition, cumulative translation adjustments would be recognized in earnings upon a business combination achieved in stages such as a step acquisition. ASU No. 2013-05 is effective for public companies for fiscal years beginning on or after December 15, 2013 and interim periods within those fiscal years, with early adoption permitted. The Company adopted ASU No. 2013-05 effective January 1, 2014 with prospective application to the derecognition of any foreign entity subsidiaries, groups of assets or investments in foreign entities completed on or after January 1, 2014. The impact of ASU No. 2013-05 on the Company’s financial position, results of operations and cash flows is dependent on future transactions resulting in derecognition of the Company’s foreign assets, subsidiaries or investments in foreign entities completed on or after adoption.

In July 2013, the FASB issued ASU No. 2013-11, “Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists (a consensus of the FASB Emerging Issues Task Force)” (“ASU No. 2013-11”). Under ASU No. 2013-11, an entity is required to present its unrecognized tax benefits net of its deferred tax assets when settlement in this manner is available under the tax law, which would be based on facts and circumstances as of the balance sheet reporting date and would not consider future events. Gross presentation in the notes to the financial statements will still be required. ASU No. 2013-11 is effective for public companies for fiscal years beginning on or after December 15, 2013 and interim periods within those fiscal years, with early adoption permitted. ASU No. 2013-11 will apply on a prospective basis to all unrecognized tax benefits that exist at the effective date, with the option to apply it retrospectively. This guidance did not have an impact upon adoption at January 1, 2014 on the Company’s financial position, results of operations or cash flows as the Company currently presents its unrecognized tax benefits net of its deferred tax assets where applicable.

19.           Commitments and Contingencies

Operating Leases

The Company leases restaurant and office facilities and certain equipment under operating leases mainly having initial terms expiring between 2014 and 2032. The restaurant facility leases have renewal clauses primarily from five to 30 years, exercisable at the option of the Company. Rent expense for the Company’s operating leases, which generally have escalating rentals over the term of the lease and may include potential rent holidays, is recorded on a straight-line basis over the initial lease term and those renewal periods that are reasonably assured. Certain of these leases require the payment of contingent rentals leased on a percentage of gross revenues, as defined by the terms of the applicable lease agreement. Total rental expense for the years ended December 31, 2013, 2012 and 2011 was approximately $156.7 million, $140.9 million and $132.9 million, respectively, and included contingent rentals of approximately $6.5 million, $6.1 million and $5.6 million, respectively.

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As of December 31, 2013, future minimum rental payments under non-cancelable operating leases (including executed leases for restaurants scheduled to open in 2014) are as follows (in thousands):

 	 	 	 	
2014	$	142,309	
 	
2015	127,144	
 	
2016	107,716	
 	
2017	88,802	
 	
2018	73,437	
 	
Thereafter	426,835	
 	
Total minimum lease payments (1)	$	966,243	
 	
____________________
 	 	
(1)	Total minimum lease payments have not been reduced by minimum sublease rentals of $1.8 million due in future periods under non-cancelable subleases.	

Purchase Obligations

The Company has minimum purchase commitments with various vendors through January 2020. Outstanding commitments consist primarily of beef, pork, seafood and other food and beverage products related to normal business operations and contracts for advertising, technology, sports sponsorships and store level service contracts. In 2013, the Company purchased more than 90% of its beef raw materials from four beef suppliers that represented approximately 90% of the total beef marketplace in the United States.

Litigation and Other Matters

On October 4, 2013, Brooke Cardoza and Cody Hancock (collectively, the “Nevada Plaintiffs”), two current employees, filed a purported collective action lawsuit against the Company in the U.S. District Court for the District of Nevada. The complaint alleges violations of the Fair Labor Standards Act by requiring employees to work off the clock, complete on-line training without pay, and attend meetings in the restaurant without pay. The suit seeks to certify a nationwide collective action that all hourly employees in all Outback Steakhouse restaurants would be permitted to join. The suit seeks an unspecified amount in back pay for the employees that join the lawsuit, an equal amount in liquidated damages, costs, expenses, and attorney’s fees. The Nevada Plaintiffs also filed a companion lawsuit in Nevada state court alleging that the Company violated the state break time rules. The Company believes these lawsuits are without merit, and is vigorously defending all allegations. However, the Company is unable to predict the outcome.

On November 8, 2013, Holly Gehl, Chris Armenta, and Trent Broadstreet (collectively, the “California Plaintiffs”) filed a purported class action lawsuit against the Company, OSI and OS Restaurant Services, LLC, two of its subsidiaries, and T-Bird, one of its franchisees. The lawsuit is filed in the California Superior Court, County of Alameda. The complaint alleges, among other things, violations of the California Labor Code, failure to pay overtime, failure to provide meal and rest periods and termination compensation, and violations of California’s Business and Professions Code. The complaint seeks, among other relief, class certification of the lawsuit, unspecified damages, costs and expenses, including attorney’s fees, and such other relief as the Court determines to be appropriate. The Company does not believe the California Plaintiffs have any standing to bring claims against the Company or its subsidiaries as all were employed by the Company’s franchisee. The Company intends to request that the court dismiss it and the Company’s subsidiaries from this action. Should the court deny the Company’s request for dismissal it will vigorously defend the lawsuit. However, the Company is unable to predict the outcome of this case.

In addition, the Company is subject to legal proceedings, claims and liabilities, such as liquor liability, sexual harassment and slip and fall cases, which arise in the ordinary course of business and are generally covered by insurance if they exceed specified retention or deductible amounts. In the opinion of management, the amount of ultimate liability with respect to those actions will not have a material adverse impact on the Company’s financial position or results of operations and cash flows. The Company accrues for loss contingencies that are probable and reasonably estimable.

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Legal costs are reported in General and administrative expense in the Consolidated Statements of Operations and Comprehensive Income. The Company generally does not accrue for legal costs expected to be incurred with a loss contingency until those services are provided.

Insurance

The Company purchased insurance for individual claims that exceed the amounts listed in the following table:

 	 	 	 	 	 	 	 	 	 	 	 	
 	2013	 	2012	 	2011	
Workers’ compensation	$	1,000,000	
 	 	$	1,500,000	
 	 	$	1,500,000	
 	
General liability/Liquor liability (1)	1,500,000 / 2,500,000	
 	 	1,500,000	
 	 	1,500,000	
 	
Health (2)	400,000	
 	 	400,000	
 	 	400,000	
 	
Property coverage (3)	500,000 / 2,500,000	
 	 	500,000 / 2,500,000	
 	 	500,000 / 2,500,000	
 	
Employment practices liability	2,000,000	
 	 	2,000,000	
 	 	2,000,000	
 	
Directors’ and officers’ liability (4)	1,000,000	
 	 	1,000,000	
 	 	250,000	
 	
Fiduciary liability	25,000	
 	 	25,000	
 	 	25,000	

____________________
 	 	
(1)	In 2012 and 2011, claims arising from liquor liability had the same self-insured retention as general liability.	
 	 	
(2)	The Company is self-insured for all covered health benefits claims, limited to $0.4 million per covered individual per year. In 2013, the Company was responsible for the first $0.6 million of payable losses under the plan as an additional deductible, and in 2012 and 2011, the Company was responsible for the first $0.3 million of payable losses under the plan as an additional aggregating specific deductible to apply after the individual specific deductible was met.  	
 	 	
(3)	The Company has a $0.5 million deductible per occurrence for those properties that collateralize New PRP’s 2012 CMBS Loan and a $2.5 million deductible per occurrence for all other locations. The deductibles for named storms and earthquakes are 5.0% of the total insurable value at the time of the loss per unit of insurance at each location involved in the loss, subject to a minimum of $0.5 million for those properties that collateralize New PRP’s 2012 CMBS Loan and $2.5 million for all other locations. Property limits are $60.0 million for each occurrence, and the Company does not quota share in any loss above either deductible level.	
 	 	
(4)	Retention increase in 2012 was effective with the Company’s IPO on August 8, 2012.	

The Company records a liability for all unresolved claims and for an estimate of incurred but not reported claims at the anticipated cost to the Company. In establishing reserves, the Company considers certain actuarial assumptions and judgments regarding economic conditions, the frequency and severity of claims and claim development history and settlement practices. Unanticipated changes in these factors or future adjustments to these estimates may produce materially different amounts of expense that would be reported under these programs. Reserves recorded for workers’ compensation and general liability claims are discounted using the average of the one-year and five-year risk free rate of monetary assets that have comparable maturities. When recovery from an insurance policy is considered probable, a receivable is recorded.

The payments the Company expects to make as of December 31, 2013 for each of the five succeeding years and the aggregate amount thereafter are as follows (in thousands):

 	 	 	 	
2014	$	20,710	
 	
2015	13,463	
 	
2016	7,978	
 	
2017	4,841	
 	
2018	2,569	
 	
Thereafter	14,784	
 	
 	$	64,345	

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A reconciliation of the expected aggregate undiscounted amount to the amount recognized in the Consolidated Balance Sheets is as follows (in thousands):

 	 	 	 	 	 	 	 	
 	DECEMBER 31,	
 	2013	 	2012	
Undiscounted liability	$	66,109	
 	 	$	65,594	
 	
Less: discount	(1,764	)	 	(958	)	
Liability balance	$	64,345	
 	 	$	64,636	

Discount rates of 0.78% and 0.40% were used for December 31, 2013 and 2012, respectively. The discounted liabilities are presented in the Company’s Consolidated Balance Sheets as follows (in thousands):

 	 	 	 	 	 	 	 	
 	DECEMBER 31,	
 	2013	 	2012	
Accrued and other current liabilities	$	20,710	
 	 	$	22,235	
 	
Other long-term liabilities, net	43,635	
 	 	42,401	

20.           Related Parties

T-Bird Nevada, LLC

On February 19, 2009, the Company filed an action in Florida against T-Bird Nevada, LLC (“T-Bird”) and certain of its affiliates (collectively, the “T-Bird Parties”). T-Bird is a limited liability company affiliated with the Company’s California franchisees of Outback Steakhouse restaurants. The action sought payment on a promissory note made by T-Bird that the Company purchased from T-Bird’s former lender, among other remedies. The principal balance on the promissory note, plus accrued and unpaid interest, was approximately $33.3 million at the time it was purchased.

On September 26, 2011, the Company entered into a settlement agreement (the “Settlement Agreement”) with the T-Bird Parties. In accordance with the terms of the Settlement Agreement, T-Bird agreed to pay $33.3 million to the Company, which included $33.2 million to satisfy the T-Bird promissory note that the Company purchased from T-Bird’s former lender. This settlement payment was received in November 2011, and $33.2 million was recorded as Recovery of note receivable from affiliated entity in the Company’s Consolidated Statement of Operations and Comprehensive Income for the year ended December 31, 2011.

Pursuant to the Settlement Agreement, the Company (through its indirect subsidiary, Outback Steakhouse of Florida, LLC) granted to California Steakhouse Developer, LLC, a T-Bird affiliate, for a period of 20 years, the right to develop and operate Outback Steakhouse restaurants as a franchisee in the State of California as set forth in a development agreement dated November 23, 2011 (the “Development Agreement”).

Additionally, the Company had granted certain T-Bird affiliates (the “T-Bird Entities”) the non-transferable right (the “Put Right”) to require the Company to acquire all of the equity interests in the T-Bird Entities that own Outback Steakhouse restaurants and the rights under the Development Agreement for cash. The Put Right was exercised by T-Bird on August 5, 2013 (the “Put Notice”). As permitted pursuant to the Put Right, T-Bird revoked the Put Notice on November 16, 2013. As a result, T-Bird’s Put Right terminated as of the date of the revocation, and the Company is no longer obligated to purchase the T-Bird Entities.

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Bain Capital, Catterton, Founders and Board of Directors

Upon completion of the Merger, the Company entered into a management agreement with Kangaroo Management Company I, LLC (the “Management Company”), whose members are the Founders and entities affiliated with Bain Capital and Catterton. In accordance with the terms of the management agreement, the Management Company was to provide management services to the Company until the tenth anniversary of the consummation of the Merger, with one-year extensions thereafter until terminated. The Management Company was to receive an aggregate annual management fee equal to $9.1 million and reimbursement for out-of-pocket and other reimbursable expenses incurred by it, its members, or their respective affiliates in connection with the provision of services pursuant to the agreement. 

On May 10, 2012, the Company entered into a first amendment to its management agreement with the Management Company. In accordance with the terms of this amendment, the management agreement terminated immediately prior to the completion of the Company’s IPO, and a termination fee of $8.0 million was paid to the Management Company in the third quarter of 2012. Management fees of $13.8 million and $9.4 million, including the 2012 termination fee, out-of-pocket and other reimbursable expenses, for the years ended December 31, 2012 and 2011, respectively, were included in General and administrative expenses in the Company’s Consolidated Statements of Operations and Comprehensive Income. 

21.           Selected Quarterly Financial Data (Unaudited)

The following tables present selected unaudited quarterly financial data for the periods ending as indicated (in thousands, except per share data):

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	MARCH 31,
2013	 	JUNE 30,
2013	 	SEPTEMBER 30,
2013	 	DECEMBER 31,
2013	
Total revenues	 	$	1,092,250	
 	 	$	1,018,856	
 	 	$	967,569	
 	 	$	1,050,555	
 	
Income from operations (1)	 	96,860	
 	 	67,886	
 	 	29,510	
 	 	31,101	
 	
Net income (1) (2) (3) (4)	 	65,056	
 	 	76,464	
 	 	12,134	
 	 	60,914	
 	
Net income attributable to Bloomin’ Brands (1) (2) (3) (4)	 	63,223	
 	 	74,868	
 	 	11,294	
 	 	58,982	
 	
Earnings per share:	 	 	 	 	 	 	 	 	
  Basic	 	$	0.52	
 	 	$	0.61	
 	 	$	0.09	
 	 	$	0.48	
 	
  Diluted	 	$	0.50	
 	 	$	0.58	
 	 	$	0.09	
 	 	$	0.46	

 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	MARCH 31,
2012	 	JUNE 30,
2012	 	SEPTEMBER 30,
2012	 	DECEMBER 31,
2012	
Total revenues	 	$	1,055,626	
 	 	$	980,866	
 	 	$	952,916	
 	 	$	998,387	
 	
Income (loss) from operations (5) (6) (7)	 	90,408	
 	 	48,720	
 	 	(11,545	)	 	53,554	
 	
Net income (loss) (5) (6) (7) (8)	 	53,832	
 	 	20,564	
 	 	(33,755	)	 	20,663	
 	
Net income (loss) attributable to Bloomin’ Brands (5) (6) (7) (8)	 	49,999	
 	 	17,440	
 	 	(35,866	)	 	18,398	
 	
Earnings (loss) per share:	 	 	 	 	 	 	 	 	
  Basic	 	$	0.47	
 	 	$	0.16	
 	 	$	(0.31	)	 	$	0.15	
 	
  Diluted	 	$	0.47	
 	 	$	0.16	
 	 	$	(0.31	)	 	$	0.15	

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

____________________
 	 	
(1)	The third and fourth quarters of 2013 include approximately $5.0 million and $12.0 million, respectively, of expenses associated with a payroll tax audit related to an IRS proposed issuance of an audit adjustment for the employer’s share of FICA taxes related to cash tips allegedly received and unreported by the Company’s tipped employees during calendar year 2010 through 2012 (see Note 16). The fourth quarter of 2013 includes impairment charges of approximately $18.7 million associated with the decision to close 22 underperforming locations (see Note 14).	
 	 	
(2)	The second quarter of 2013 includes a $14.6 million loss in connection with a repricing amendment to OSI’s senior secured term loan B facility (see Note 12).	
 	 	
(3)	The second quarter of 2013 includes the income tax effect of a $67.7 million reduction of the valuation allowance against the U.S. net deferred income tax assets of which $52.0 million was recorded as income tax benefit (see Note 16).	
 	 	
(4)	The fourth quarter of 2013 includes a gain of $36.6 million from remeasurement of the previously held equity investment in the Company’s Brazilian Joint Venture resulting from the acquisition of controlling interest in that entity (see Note 3).	
 	 	
(5)	The first quarter of 2012 includes approximately $7.4 million of additional legal and other professional fees mainly resulting from amendment and restatement of a lease between OSI and PRP.	
 	 	
(6)	The third quarter of 2012 includes approximately $42.1 million of transaction-related expenses that relate to costs incurred in association with the completion of the IPO in August 2012. These expenses primarily include $34.1 million of certain executive compensation costs and non-cash stock compensation charges recorded upon completion of the IPO and an $8.0 million management agreement termination fee (see Note 17).	
 	 	
(7)	The fourth quarter of 2012 includes a gain of $3.5 million from the collection of proceeds and other related amounts from the 2009 sale of the Company’s Cheeseburger in Paradise concept.	
 	 	
(8)	During 2012, the Company recorded losses on extinguishment and modification of debt for refinancing transactions of $2.9 million, $9.0 million, and $9.1 million, in the first, third, and fourth quarters, respectively (see Note 12).	

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Item 9.  Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We have established and maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial and Administrative Officer, as appropriate to allow timely decisions regarding required disclosure. We carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial and Administrative Officer, of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial and Administrative Officer concluded that our disclosure controls and procedures were effective as of December 31, 2013.

Management’s Annual Report on Internal Control over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). The Company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.

Internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements prepared for external purposes in accordance with generally accepted accounting principles. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial and Administrative Officer, we carried out an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2013 based on the  Internal Control - Integrated Framework  issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in 1992. Based upon our evaluation, management concluded that our internal control over financial reporting was effective as of December 31, 2013.

In November 2013, the Company acquired a controlling interest in PGS Consultoria e Serviços Ltda (which was subsequently merged with Outback Steakhouse Restaurantes Brasil S.A., formerly known as Bloom Holdco Participaçơes Ltda.), through a purchase business combination of 80% of our joint venture partner, PGS Participaçơes Ltda. Outback Steakhouse Restaurantes Brasil S.A. is a majority-owned subsidiary of the Company whose Total assets and Total revenues excluded from our assessment represented 6.3% and less than 0.6%, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2013. Pursuant to guidelines established by the SEC, management’s assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2013 excluded Outback Steakhouse Restaurantes Brasil S.A.

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The effectiveness of our internal control over financial reporting as of December 31, 2013 has been audited by PricewaterhouseCoopers LLP, an independent registered certified public accounting firm, as stated in their report which is included herein, and which expresses an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting as of December 31, 2013.

Changes in Internal Control over Financial Reporting

In 2013, the Company began a project to transform its technology platforms and enhance its business information and transaction systems with SAP software. The project includes implementation of a new general ledger, consolidations system and reporting tools. The Company implemented SAP in the U.S. during the first quarter of 2014 to support both operating and accounting activities. Internal controls and processes have been designed to address changes in the Company’s key business applications and financial processes as a result of the implementation of SAP. Those changes are being evaluated by management. This implementation presents transitional risks to maintaining adequate internal controls over financial reporting.

There have been no changes in our internal control over financial reporting during our most recent quarter ended December 31, 2013 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Item 9B. Other Information

None.

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PART III
Item 10.  Directors, Executive Officers and Corporate Governance

The information required by this item relating to our directors and nominees will be included under the captions “Proposal No. 1: Election of Directors—Nominees for Election at this Annual Meeting” and “—Directors Continuing in Office” in our definitive Proxy Statement for the 2014 Annual Meeting of Stockholders which will be filed with the SEC no later than 120 days after December 31, 2013 (“Definitive Proxy Statement”) and is incorporated herein by reference.

The information required by this item regarding our Audit Committee will be included under the caption “Proposal No. 1: Election of Directors—Board Committees and Meetings” in our Definitive Proxy Statement and is incorporated herein by reference.

The information required by this item relating to our executive officers is included under the caption “Executive Officers” in Part I of this Annual Report on Form 10-K.

The information required by this item regarding compliance with Section 16(a) of the Securities Act of 1934 will be included under the caption “Ownership of Securities—Section 16(a) Beneficial Ownership Reporting Compliance” in our Definitive Proxy Statement and is incorporated herein by reference.

We have adopted a Business Conduct and Code of Ethics that applies to all employees. A copy of our Business Conduct and Code of Ethics is available on our website, free of charge. The Internet address for our website is www.bloominbrands.com , and the Business Conduct and Code of Ethics may be found from our main webpage by clicking first on “Investors” and then on “Corporate Governance” and next on “Code of Business Conduct and Ethics.”

We intend to satisfy any disclosure requirement under Item 5.05 of Form 8-K regarding an amendment to, or waiver from, a provision of this code of ethics by posting such information on our website, on the webpage found by clicking through to “Code of Business Conduct and Ethics” as specified above.

Item 11. Executive Compensation

The information required by this item will be included under the captions “Proposal No. 1: Election of Directors—Director Compensation” and “Executive Compensation and Related Information” in our Definitive Proxy Statement and is incorporated herein by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information required by this item relating to security ownership of certain beneficial owners and management will be included under the caption “Ownership of Securities” in our Definitive Proxy Statement and is incorporated herein by reference.

The information relating to securities authorized for issuance under equity compensation plans is included under the caption “Securities Authorized for Issuance Under Equity Compensation Plans” in Item 5 of this Annual Report on Form 10-K.

Item 13.  Certain Relationships and Related Transactions, and Director Independence

The information required by this item relating to transactions with related persons will be included under the caption “Certain Relationships and Related Party Transactions,” and the information required by this item relating to director independence will be included under the caption “Proposal No. 1: Election of Directors—Independent Directors,” in each case in our Definitive Proxy Statement, and is incorporated herein by reference.

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Item 14.  Principal Accounting Fees and Services

The information required by this item will be included under the captions “Proposal No. 2: Ratification of Independent Registered Certified Public Accounting Firm—Principal Accountant Fees and Services” and “—Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Registered Certified Public Accounting Firm” in our Definitive Proxy Statement and is incorporated herein by reference.

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PART IV
Item 15. Exhibits and Financial Statement Schedules.
(a)(1) LISTING OF FINANCIAL STATEMENTS

The following consolidated financial statements of the Company and subsidiaries are included in Item 8 of this Report:
 	 	
•	Consolidated Balance Sheets - December 31, 2013 and 2012 	
 	 	
•	Consolidated Statements of Operations and Comprehensive Income – Years ended December 31, 2013, 2012, and 2011 	
 	 	
•	Consolidated Statements of Changes in Stockholders’ Equity (Deficit) – Years ended December 31, 2013, 2012, and 2011 	
 	 	
•	Consolidated Statements of Cash Flows – Years ended December 31, 2013, 2012, and 2011 	
 	 	
•	Notes to consolidated financial statements	

(a)(2) FINANCIAL STATEMENT SCHEDULES

The following financial statement schedule is filed as a part of this Report under Schedule II immediately following the exhibits index: Schedule II — Valuation and Qualifying Accounts for the years ended December 31, 2013, 2012, and 2011. All other schedules called for by Form 10-K are omitted because they are inapplicable or the required information is shown in the consolidated financial statements and notes thereto included in this Report.
(a)(3) EXHIBITS

EXHIBIT
NUMBER	 	DESCRIPTION OF EXHIBITS	 	FILINGS REFERENCED FOR
 INCORPORATION BY REFERENCE	
 	 	 	 	
2.1	 	Quota Purchase and Sale Agreement dated October 31, 2013 and effective November 1, 2013, by and between Bloomin’ Brands, Inc., Outback Steakhouse Restaurantes Brasil S.A. (formerly known as Bloom Holdco Participaçơes Ltda.), PGS Participaçơes Ltda., the equity holders of PGS Participaçơes Ltda., PGS Consultoria e Serviços Ltda., and Bloom Participaçơes Ltda. 1 u	 	Filed herewith	
 	 	 	 	 	
3.1	 	Second Amended and Restated Certificate of Incorporation of Bloomin’ Brands, Inc.	 	Registration Statement on Form S-8, File No. 333-183270, filed on August 13, 2012, Exhibit 4.1	
 	 	 	 	 	
3.2	 	Second Amended and Restated Bylaws of Bloomin’ Brands, Inc.	 	Registration Statement on Form S-8, File No. 333-183270, filed on August 13, 2012, Exhibit 4.2	
 	 	 	 	
4.1	 	Form of Common Stock Certificate	 	Amendment No. 4 to Registration Statement on Form S-1, File No. 333-180615, filed on July 18, 2012, Exhibit 4.1	
 	 	 	 	 	
10.1	 	Credit Agreement dated October 26, 2012 among OSI Restaurant Partners, LLC, OSI HoldCo, Inc., the Lenders and Deutsche Bank Trust Company Americas, as administrative agent for the Lenders 2	 	September 30, 2012 Form 10-Q, Exhibit 10.1	
 	 	 	 	 	
10.2	 	First Amendment to Credit Agreement, Guaranty and Security Agreement dated as of April 10, 2013 among OSI Restaurant Partners, LLC, OSI HoldCo, Inc., the Subsidiary Guarantors, the Lenders and Deutsche Bank Trust Company Americas, as administrative agent for the Lenders	 	March 31, 2013 Form 10-Q, Exhibit 10.1	

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EXHIBIT
NUMBER	 	DESCRIPTION OF EXHIBITS	 	FILINGS REFERENCED FOR
 INCORPORATION BY REFERENCE	
10.3	 	Second Amendment to Credit Agreement dated as of January 3, 2014 among OSI Restaurant Partners, LLC, OSI HoldCo, Inc., the Subsidiary Guarantors and Deutsche Bank Trust Company Americas, as administrative agent	 	Filed herewith	
 	 	 	 	 	
10.4	 	Loan and Security Agreement, dated March 27, 2012, between New Private Restaurant Properties, LLC, as borrower, and German American Capital Corporation and Bank of America, N.A., collectively as lender 2  	 	Amendment No. 1 to Registration Statement on Form S-1, File No. 333-180615, filed on May 17, 2012, Exhibit 10.10	
 	 	 	 	 	
10.5	 	First Amendment to Loan and Security Agreement, dated effective January 1, 2014, by and among New Private Restaurant Properties, LLC, as borrower, OSI HoldCo I, Inc., as guarantor and Wells Fargo Bank, N.A., as trustee for the registered holders of BAMLL-DB 2012-OSI Trust, Commercial Mortgage Pass-Through Certificates, Series 2012-OSI, as lender	 	Filed herewith	
 	 	 	 	 	
10.6	 	Mezzanine Loan and Security Agreement (First Mezzanine), dated March 27, 2012, between New PRP Mezz 1, LLC, as borrower, and German American Capital Corporation and Bank of America, N.A., collectively as lender	 	Registration Statement on Form S-1, File No. 333-180615, filed on April 6, 2012, Exhibit 10.11	
 	 	 	 	 	
10.7	 	First Amendment to Mezzanine Loan and Security Agreement (First Mezzanine), dated as of January 3, 2014, between New PRP Mezz 1, LLC, as borrower, OSI HoldCo I, Inc., as guarantor, and Athene Annuity & Life Assurance Company, Thornburg Strategic Income Fund, Thornburg Investment Income Builder Fund and Newcastle CDO IX, 1 Limited, collectively as lender	 	Filed herewith	
 	 	 	 	 	
10.8	 	Mezzanine Loan and Security Agreement (Second Mezzanine), dated March 27, 2012, between New PRP Mezz 2, LLC, as borrower, and German American Capital Corporation and Bank of America, N.A., collectively, as lender	 	Registration Statement on Form S-1, File No. 333-180615, filed on April 6, 2012, Exhibit 10.12	
 	 	 	 	 	
10.9	 	First Amendment to Mezzanine Loan and Security Agreement (Second Mezzanine), dated as of January 3, 2014, between New PRP Mezz 2, LLC, as borrower, OSI HoldCo I, Inc., as guarantor, and Annaly CRE Holdings LLC, as lender	 	Filed herewith	
 	 	 	 	 	
10.10	 	Environmental Indemnity, dated March 27, 2012, by OSI HoldCo I, Inc. for the benefit of German American Capital Corporation and Bank of America, N.A.	 	Registration Statement on Form S-1, File No. 333-180615, filed on April 6, 2012, Exhibit 10.13	
 	 	 	 	
10.11	 	Environmental Indemnity, dated March 27, 2012, by OSI Restaurant Partners, LLC and Private Restaurant Master Lessee, LLC for the benefit of German American Capital Corporation and Bank of America, N.A.	 	Registration Statement on Form S-1, File No. 333-180615, filed on April 6, 2012, Exhibit 10.14	
 	 	 	 	
10.12	 	Environmental Indemnity, dated March 27, 2012, by PRP Holdings, LLC for the benefit of German American Capital Corporation and Bank of America, N.A.	 	Registration Statement on Form S-1, File No. 333-180615, filed on April 6, 2012, Exhibit 10.15	
 	 	 	 	
10.13	 	Environmental Indemnity (First Mezzanine), dated March 27, 2012, by OSI HoldCo I, Inc. for the benefit of German American Capital Corporation and Bank of America, N.A.	 	Registration Statement on Form S-1, File No. 333-180615, filed on April 6, 2012, Exhibit 10.16	

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EXHIBIT
NUMBER	 	DESCRIPTION OF EXHIBITS	 	FILINGS REFERENCED FOR
 INCORPORATION BY REFERENCE	
10.14	 	Environmental Indemnity (First Mezzanine), dated March 27, 2012, by OSI Restaurant Partners, LLC and Private Restaurant Master Lessee, LLC for the benefit of German American Capital Corporation and Bank of America, N.A.	 	Registration Statement on Form S-1, File No. 333-180615, filed on April 6, 2012, Exhibit 10.17	
 	 	 	 	 	
10.15	 	Environmental Indemnity (First Mezzanine), dated March 27, 2012, by PRP Holdings, LLC for the benefit of German American Capital Corporation and Bank of America, N.A.	 	Registration Statement on Form S-1, File No. 333-180615, filed on April 6, 2012, Exhibit 10.18	
 	 	 	 	
10.16	 	Environmental Indemnity (Second Mezzanine), dated March 27, 2012, by OSI HoldCo I, Inc. for the benefit of German American Capital Corporation and Bank of America, N.A.	 	Registration Statement on Form S-1, File No. 333-180615, filed on April 6, 2012, Exhibit 10.19	
 	 	 	 	
10.17	 	Environmental Indemnity (Second Mezzanine), dated March 27, 2012, by OSI Restaurant Partners, LLC and Private Restaurant Master Lessee, LLC for the benefit of German American Capital Corporation and Bank of America, N.A.	 	Registration Statement on Form S-1, File No. 333-180615, filed on April 6, 2012, Exhibit 10.20	
 	 	 	 	
10.18	 	Environmental Indemnity (Second Mezzanine), dated March 27, 2012, by PRP Holdings, LLC for the benefit of German American Capital Corporation and Bank of America, N.A.	 	Registration Statement on Form S-1, File No. 333-180615, filed on April 6, 2012, Exhibit 10.21	
 	 	 	 	
10.19	 	Guaranty of Recourse Obligations, dated March 27, 2012, by OSI HoldCo I, Inc. to and for the benefit of German American Capital Corporation and Bank of America, N.A.	 	Registration Statement on Form S-1, File No. 333-180615, filed on April 6, 2012, Exhibit 10.22	
 	 	 	 	
10.20	 	Guaranty of Recourse Obligations (First Mezzanine), dated March 27, 2012, by OSI HoldCo I, Inc. to and for the benefit of German American Capital Corporation and Bank of America, N.A.	 	Registration Statement on Form S-1, File No. 333-180615, filed on April 6, 2012, Exhibit 10.23	
 	 	 	 	
10.21	 	Guaranty of Recourse Obligations (Second Mezzanine), dated March 27, 2012, by OSI HoldCo I, Inc. to and for the benefit of German American Capital Corporation and Bank of America, N.A.	 	Registration Statement on Form S-1, File No. 333-180615, filed on April 6, 2012, Exhibit 10.24	
 	 	 	 	
10.22	 	Amended and Restated Guaranty, dated March 27, 2012, by OSI Restaurant Partners, LLC to and for the benefit of New Private Restaurant Properties, LLC	 	Registration Statement on Form S-1, File No. 333-180615, filed on April 6, 2012, Exhibit 10.27	
 	 	 	 	
10.23	 	Subordination, Non-Disturbance and Attornment Agreement (New Private Restaurant Properties, LLC), dated March 27, 2012, by and between Bank of America, N.A., German American Capital Corporation, Private Restaurant Master Lessee, LLC and New Private Restaurant Properties, LLC, with the acknowledgement, consent and limited agreement of OSI Restaurant Partners, LLC	 	Registration Statement on Form S-1, File No. 333-180615, filed on April 6, 2012, Exhibit 10.25	
 	 	 	 	
10.24	 	Royalty Agreement dated April 1995 among Carrabba’s Italian Grill, Inc., Outback Steakhouse, Inc., Mangia Beve, Inc., Carrabba, Inc., Carrabba Woodway, Inc., John C. Carrabba, III, Damian C. Mandola, and John C. Carrabba, Jr., as amended by First Amendment to Royalty Agreement dated January 1997 and Second Amendment to Royalty Agreement made and entered into effective April 7, 2010 by and among Carrabba’s Italian Grill, LLC, OSI Restaurant Partners, LLC, Mangia Beve, Inc., Mangia Beve II, Inc., Original, Inc., Voss, Inc., John C. Carrabba, III, Damian C. Mandola, and John C. Carrabba, Jr.	 	Registration Statement on Form S-1, File No. 333-180615, filed on April 6, 2012, Exhibit 10.6	

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EXHIBIT
NUMBER	 	DESCRIPTION OF EXHIBITS	 	FILINGS REFERENCED FOR
 INCORPORATION BY REFERENCE	
10.25	 	Amended and Restated Operating Agreement for OSI/Fleming’s, LLC made as of June 4, 2010 by and among OS Prime, LLC, a wholly-owned subsidiary of OSI Restaurant Partners, LLC, FPSH Limited Partnership and AWA III Steakhouses, Inc.	 	Registration Statement on Form S-1, File No. 333-180615, filed on April 6, 2012, Exhibit 10.8	
 	 	 	 	 	
10.26	 	Amended and Restated Master Lease Agreement, dated March 27, 2012, between New Private Restaurant Properties, LLC, as landlord, and Private Restaurant Master Lessee, LLC, as tenant 2  	 	Amendment No. 1 to Registration Statement on Form S-1, File No. 333-180615, filed on May 17, 2012, Exhibit 10.26	
 	 	 	 	
10.27	 	Lease, dated June 14, 2007, between OS Southern, LLC and Selmon’s/Florida-I, Limited Partnership (predecessor to MVP LRS, LLC), as amended May 27, 2010	 	Amendment No. 1 to Registration Statement on Form S-1, File No. 333-180615, filed on May 17, 2012, Exhibit 10.52	
 	 	 	 	
10.28	 	Lease, dated January 21, 2014, between OS Southern, LLC and MVP LRS, LLC	 	Filed herewith	
 	 	 	 	
10.29*	 	Employee Rollover Agreement for conversion of OSI Restaurant Partners, Inc. restricted stock to Kangaroo Holdings, Inc. restricted stock entered into by the individuals listed on Schedule 1 thereto	 	Registration Statement on Form S-1, File No. 333-180615, filed on April 6, 2012, Exhibit 10.4	
 	 	 	 	
10.30*	 	OSI Restaurant Partners, LLC HCE Deferred Compensation Plan effective October 1, 2007	 	Registration Statement on Form S-1, File No. 333-180615, filed on April 6, 2012, Exhibit 10.46	
 	 	 	 	
10.31*	 	Kangaroo Holdings, Inc. 2007 Equity Incentive Plan, as amended	 	Registration Statement on Form S-1, File No. 333-180615, filed on April 6, 2012, Exhibit 10.1	
 	 	 	 	
10.32*	 	Form of Option Agreement for Options under the Kangaroo Holdings, Inc. 2007 Equity Incentive Plan	 	Registration Statement on Form S-1, File No. 333-180615, filed on April 6, 2012, Exhibit 10.42	
 	 	 	 	
10.33*	 	Bloomin’ Brands, Inc. 2012 Incentive Award Plan	 	Amendment No. 4 to Registration Statement on Form S-1, File No. 333-180615, filed on July 18, 2012, Exhibit 10.2	
 	 	 	 	
10.34*	 	Form of Nonqualified Stock Option Award Agreement for options granted under the Bloomin’ Brands, Inc. 2012 Incentive Award Plan	 	December 7, 2012 Form 8-K, Exhibit 10.2	
 	 	 	 	
10.35*	 	Form of Restricted Stock Award Agreement for restricted stock granted to directors under the Bloomin’ Brands, Inc. 2012 Incentive Award Plan	 	December 7, 2012 Form 8-K, Exhibit 10.3	
 	 	 	 	
10.36*	 	Form of Restricted Stock Award Agreement for restricted stock granted to employees and consultants under the Bloomin’ Brands, Inc. 2012 Incentive Award Plan	 	December 7, 2012 Form 8-K, Exhibit 10.4	
 	 	 	 	 	
10.37*	 	Form of Restricted Stock Unit Award Agreement for restricted stock granted to directors under the Bloomin’ Brands, Inc. 2012 Incentive Award Plan	 	September 30, 2013 Form 10-Q, Exhibit 10.1	
 	 	 	 	 	
10.38*	 	Form of Restricted Stock Unit Award Agreement for restricted stock granted to employees and consultants under the Bloomin’ Brands, Inc. 2012 Incentive Award Plan	 	September 30, 2013 Form 10-Q, Exhibit 10.2	

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EXHIBIT
NUMBER	 	DESCRIPTION OF EXHIBITS	 	FILINGS REFERENCED FOR
 INCORPORATION BY REFERENCE	
10.39*	 	Form of Performance Unit Award Agreement for performance units granted under the Bloomin’ Brands, Inc. 2012 Incentive Award Plan	 	December 7, 2012 Form 8-K, Exhibit 10.5	
 	 	 	 	 	
10.40*	 	Form of Bloomin’ Brands, Inc. Indemnification Agreement by and between Bloomin’ Brands, Inc. and each member of its Board of Directors and each of its executive officers	 	Amendment No. 4 to Registration Statement on Form S-1, File No. 333-180615, filed on July 18, 2012, Exhibit 10.39	
 	 	 	 	
10.41*	 	Bloomin’ Brands, Inc. Executive Change in Control Plan, effective December 6, 2012	 	December 7, 2012 Form 8-K, Exhibit 10.1	
 	 	 	 	
10.42*	 	Amended and Restated Employment Agreement made and entered into September 4, 2012 by and between Elizabeth A. Smith and Bloomin’ Brands, Inc.	 	June 30, 2012 Form 10-Q, Exhibit 10.1	
 	 	 	 	
10.43*	 	Option Agreement, dated November 16, 2009, by and between Kangaroo Holdings, Inc. and Elizabeth A. Smith, as amended December 31, 2009	 	Registration Statement on Form S-1, File No. 333-180615, filed on April 6, 2012, Exhibit 10.40	
 	 	 	 	 	
10.44*	 	Option Agreement, dated July 1, 2011, by and between Kangaroo Holdings, Inc. and Elizabeth A. Smith	 	Registration Statement on Form S-1, File No. 333-180615, filed on April 6, 2012, Exhibit 10.41	
 	 	 	 	 	
10.45*	 	Officer Employment Agreement, made and entered into effective May 7, 2012, by and among David Deno and OSI Restaurant Partners, LLC	 	Amendment No. 1 to Registration Statement on Form S-1, File No. 333-180615, filed on May 17, 2012, Exhibit 10.53	
 	 	 	 	 	
10.46*	 	Officer Employment Agreement dated January 23, 2008 and effective April 12, 2007 by and among Jeffrey S. Smith and Outback Steakhouse of Florida, LLC, as amended on January 1, 2009 and January 1, 2012	 	Registration Statement on Form S-1, File No. 333-180615, filed on April 6, 2012, Exhibit 10.32	
 	 	 	 	
10.47*	 	Amended and Restated Employment Agreement dated June 14, 2007, between Joseph J. Kadow and OSI Restaurant Partners, LLC, as amended on January 1, 2009, June 12, 2009, December 30, 2010 and December 16, 2011	 	Registration Statement on Form S-1, File No. 333-180615, filed on April 6, 2012, Exhibit 10.29	
 	 	 	 	
10.48*	 	Split-Dollar Agreement dated August 12, 2008 and effective March 30, 2006, by and between OSI Restaurant Partners, LLC (formerly known as Outback Steakhouse, Inc.) and Joseph J. Kadow	 	Registration Statement on Form S-1, File No. 333-180615, filed on April 6, 2012, Exhibit 10.48	
 	 	 	 	
10.49*	 	Officer Employment Agreement made and entered into August 16, 2010 and effective for all purposes as of August 16, 2010 by and among David A. Pace and OSI Restaurant Partners, LLC	 	Registration Statement on Form S-1, File No. 333-180615, filed on April 6, 2012, Exhibit 10.37	
 	 	 	 	
10.50*	 	Employment Offer Letter Agreement, dated as of November 27, 2012, between Bloomin’ Brands, Inc. and Stephen K. Judge	 	December 31, 2012 Form 10-K, Exhibit 10.52	
 	 	 	 	
10.51*	 	Split-Dollar Agreement dated August 19, 2008 and effective August 2005, by and between OSI Restaurant Partners, LLC (formerly known as Outback Steakhouse, Inc.) and Richard Danker, Trustee of Robert D. Basham Irrevocable Trust Agreement of 1999 dated December 20, 1999	 	Registration Statement on Form S-1, File No. 333-180615, filed on April 6, 2012, Exhibit 10.49	

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BLOOMIN’ BRANDS, INC.

 	 	 	 	 	
EXHIBIT
NUMBER	 	DESCRIPTION OF EXHIBITS	 	FILINGS REFERENCED FOR
 INCORPORATION BY REFERENCE	
10.52*	 	Split-Dollar Agreement dated December 18, 2008 and effective August 18, 2005, by and between OSI Restaurant Partners, LLC (formerly known as Outback Steakhouse, Inc.) and Shamrock PTC, LLC, Trustee of the Chris Sullivan 2008 Insurance Trust dated July 17, 2008 and William T. Sullivan, Trustee of the Chris Sullivan Non-exempt Irrevocable Trust dated January 5, 2000 and the Chris Sullivan Exempt Irrevocable Trust dated January 5, 2000	 	Registration Statement on Form S-1, File No. 333-180615, filed on April 6, 2012, Exhibit 10.50	
 	 	 	 	
10.53*	 	Split-Dollar Termination Agreement made and entered into March 21, 2013 by and between OSI Restaurant Partners, LLC, Shamrock PTC, LLC, in its capacity as sole Trustee of The Chris Sullivan 2008 Insurance Trust dated July 17, 2008, and Chris Sullivan, in his individual capacity	 	March 31, 2013 Form 10-Q, Exhibit 10.3	
 	 	 	 	 	
10.54*	 	Officer Employment Agreement, made and entered into effective August 7, 2013, by and among Amanda L. Shaw and Bloomin’ Brands, Inc. and OS Management, Inc.	 	Filed herewith	
 	 	 	 	 	
10.55*	 	Employment Offer Letter Agreement, dated as of November 1, 2013, between Bloomin’ Brands, Inc. and Patrick Murtha	 	Filed herewith	
 	 	 	 	 	
10.56	 	Amended and Restated Registration Rights Agreement among Bloomin’ Brands, Inc. and certain stockholders of Bloomin’ Brands, Inc.	 	December 31, 2012 Form 10-K, Exhibit 10.58	
 	 	 	 	
10.57	 	Stockholders Agreement among Bloomin’ Brands, Inc. and certain stockholders of Bloomin’ Brands, Inc.	 	December 31, 2012 Form 10-K, Exhibit 10.59	
 	 	 	 	 	
21.1	 	List of Subsidiaries	 	Filed herewith	
 	 	 	 	
23.1	 	Consent of PricewaterhouseCoopers LLP	 	Filed herewith	
 	 	 	 	 	
31.1	 	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	 	Filed herewith	
 	 	 	 	 	
31.2	 	Certification of Chief Financial and Administrative Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	 	Filed herewith	
 	 	 	 	 	
32.1	 	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 3	 	Filed herewith	
 	 	 	 	 	
32.2	 	Certification of Chief Financial and Administrative Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 3	 	Filed herewith	
 	 	 	 	 	
101.INS	 	XBRL Instance Document	 	Filed herewith	
 	 	 	 	 	
101.SCH	 	XBRL Taxonomy Extension Schema Document	 	Filed herewith	
 	 	 	 	 	
101.CAL	 	XBRL Taxonomy Extension Calculation Linkbase Document	 	Filed herewith	
 	 	 	 	 	
101.DEF	 	XBRL Taxonomy Extension Definition Linkbase Document	 	Filed herewith	
 	 	 	 	 	
101.LAB	 	XBRL Taxonomy Extension Label Linkbase Document	 	Filed herewith	
 	 	 	 	 	
101.PRE	 	XBRL Taxonomy Extension Presentation Linkbase Document	 	Filed herewith	

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BLOOMIN’ BRANDS, INC.

* Management contract or compensatory plan or arrangement required to be filed as an exhibit

1Portions of Exhibit 2.1 have been omitted pursuant to a request for confidential treatment and have been filed separately with the Securities and Exchange Commission.

2Confidential treatment has been granted with respect to portions of Exhibits 10.1, 10.4 and 10.26 and such portions have been filed separately with the Securities and Exchange Commission.

3 These certifications are not deemed to be “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section. These certifications will not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that the registrant specifically incorporates them by reference.

t The registrant hereby undertakes to furnish supplementally a copy of any omitted schedule or other attachment to the Securities and Exchange Commission upon request.

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BLOOMIN’ BRANDS, INC.

SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS (in thousands):

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	BALANCE AT
THE BEGINNING
OF THE PERIOD	 	CHARGED TO
COSTS AND EXPENSES	 	DEDUCTIONS (1)	 	BALANCE AT
THE END OF
THE PERIOD	
Year Ended December 31, 2013	 	 	 	 	 	 	 	 	
Allowance for doubtful accounts	 	$	—	
 	 	$	111	
 	 	$	—	
 	 	$	111	
 	
Valuation allowance on deferred income tax assets (2)	 	72,515	
 	 	28,024	
 	 	(96,013	)	 	4,526	
 	
 	 	$	72,515	
 	 	$	28,135	
 	 	$	(96,013	)	 	$	4,637	
 	
Year Ended December 31, 2012	 	 	 	 	 	 	 	 	
Allowance for doubtful accounts (3)	 	$	2,117	
 	 	$	280	
 	 	$	(2,397	)	 	$	—	
 	
Valuation allowance on deferred income tax assets (4)	 	35,837	
 	 	44,260	
 	 	(7,582	)	 	72,515	
 	
 	 	$	37,954	
 	 	$	44,540	
 	 	$	(9,979	)	 	$	72,515	
 	
Year Ended December 31, 2011	 	 	 	 	 	 	 	 	
Allowance for note receivable for affiliated entity (5)	 	$	33,150	
 	 	$	(33,150	)	 	$	—	
 	 	$	—	
 	
Allowance for doubtful accounts	 	2,454	
 	 	117	
 	 	(454	)	 	2,117	
 	
Valuation allowance on deferred income tax assets	 	25,886	
 	 	12,948	
 	 	(2,997	)	 	35,837	
 	
 	 	$	61,490	
 	 	$	(20,085	)	 	$	(3,451	)	 	$	37,954	
 	
____________________
 	 	
(1)	Deductions for Allowance for doubtful accounts represent the write off of uncollectible accounts or reductions to allowances previously provided. Deductions for Valuation allowance on deferred income tax assets represent changes in timing differences between periods.	
 	 	
(2)	During the second quarter of 2013, the Company recorded a reduction of the valuation allowance against the U.S. net deferred income tax assets as it had conducted an assessment of the recoverability of its net deferred income tax assets and determined it was more likely than not that its existing net deferred income tax assets for general business tax credit carryforwards would be realized.	
 	 	
(3)	In 2009, the Company received a promissory note for the full sale price of its Cheeseburger in Paradise concept ($2.0 million), which subsequently became fully reserved in 2010. In the fourth quarter of 2012, the Company collected the outstanding amounts under the terms of the promissory note, which included accrued interest charges, and released the Allowance for doubtful accounts balance in full.	
 	 	
(4)	The charges to the valuation allowance for the year ended December 31, 2012 were primarily due to the tax benefits associated with tax goodwill related to the joint venture and limited partnership interests purchased and the deferred gain recorded for a sale-leaseback transaction. Of the aggregate charges, $15.8 million was recorded in Additional paid-in capital.	
 	 	
(5)	On September 26, 2011, the Company entered into a settlement agreement with the T-Bird Parties to settle all outstanding litigation with T-Bird. In accordance with the terms of the settlement agreement, T-Bird agreed to pay $33.3 million to the Company, which included $33.2 million to satisfy the T-Bird promissory note that the Company purchased from T-Bird’s former lender. The settlement payment was received in November 2011, and $33.2 million was recorded as Recovery of note receivable from affiliated entity in the Company’s Consolidated Statement of Operations and Comprehensive Income for the year ended December 31, 2011.	

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BLOOMIN’ BRANDS, INC.

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.

 	 	 	 	
 	Date:	March 3, 2014	Bloomin’ Brands, Inc.	
 	 	                                           	  	
 	 	 	By: /s/ Elizabeth A. Smith                                                   	
 	 	 	Elizabeth A. Smith
Chief Executive Officer
(Principal Executive Officer)	

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BLOOMIN’ BRANDS, INC.

Pursuant to the requirements of the Securities 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.

 	 	 	 	 	 	
Signature	 	Title	 	Date	 	
 	 	 	 	 	 	
/s/ Elizabeth A. Smith	 	Chief Executive Officer and Director
(Principal Executive Officer)	 	 	 	
Elizabeth A. Smith	 	 	 	March 3, 2014	 	 	
 	 	 	 	 	 	 	
/s/ David J. Deno	 	Executive Vice President and Chief Financial and Administrative Officer (Principal Financial Officer)	 	 	 	 	
David J. Deno	 	 	 	March 3, 2014	 	 	 	
 	 	 	 	 	 	 	 	
/s/ Amanda L. Shaw	 	Senior Vice President, Technology and Chief Accounting Officer (Principal Accounting Officer)	 	 	 	 	 	
Amanda L. Shaw	 	 	 	March 3, 2014	 	 	 	
 	 	 	 	 	 	 	 	
/s/ Andrew B. Balson	 	 	 	 	 	 	 	
Andrew B. Balson	 	Director	 	March 3, 2014	 	 	 	
 	 	 	 	 	 	 	 	
/s/ James R. Craigie	 	 	 	 	 	 	 	
James R. Craigie	 	Director	 	March 3, 2014	 	 	 	
 	 	 	 	 	 	 	 	
/s/ David R. Fitzjohn	 	 	 	 	 	 	 	
David R. Fitzjohn	 	Director	 	March 3, 2014	 	 	 	
 	 	 	 	 	 	 	 	
/s/ Mindy Grossman	 	 	 	 	 	 	 	
Mindy Grossman	 	Director	 	March 3, 2014	 	 	 	
 	 	 	 	 	 	 	 	
/s/ David Humphrey	 	 	 	 	 	 	 	
David Humphrey	 	Director	 	March 3, 2014	 	 	 	
 	 	 	 	 	 	 	 	
/s/ Tara Walpert Levy	 	 	 	 	 	 	 	
Tara Walpert Levy	 	Director	 	March 3, 2014	 	 	 	
 	 	 	 	 	 	 	 	
/s/ John J. Mahoney	 	 	 	 	 	 	 	
John J. Mahoney	 	Director	 	March 3, 2014	 	 	 	
 	 	 	 	 	 	 	 	
/s/ Mark E. Nunnelly	 	 	 	 	 	 	 	
Mark E. Nunnelly	 	Director	 	March 3, 2014	 	 	 	
 	 	 	 	 	 	 	 	
/s/  Chris T. Sullivan	 	 	 	 	 	 	 	
Chris T. Sullivan	 	Director	 	March 3, 2014	 	 	 	

[Remainder of page intentionally left blank]

Exhibit 2.1

Portions of this Exhibit marked by [***] have been omitted pursuant to a Confidential Treatment Request and filed separately with the Securities and Exchange Commission

QUOTA PURCHASE AND SALE AGREEMENT

by and between

PETER BYRD RODENBECK

FRANCHISE CONSULTING CORPORATION

MARCOS FERNANDO DE OLIVEIRA MORAES

SALIM BOULOS MAROUN

GEFCO GENERAL FOOD COMÉRCIO LTDA.

MAURO GUARDABASSI MARTINS

ANTONIO CARLOS PONTES

GORDON LEE SIMMONDS

BERTRAND LETOUZÉ

GILBERTO SOARES DOS SANTOS

CAROLINA ABREU SOUZA CORREIA

SILVIO JOSÉ BANDINI

(“Sellers”)

and

BLOOM HOLDCO PARTICIPAÇƠES LTDA.

(“Buyer”)

and

PGS PARTICIPAÇƠES LTDA.

BLOOM PARTICIPAÇƠES LTDA.

PGS CONSULTORIA E SERVIÇOS LTDA.

BLOOMIN’ BRANDS, INC.

(“Intervening Parties”)
Dated as of October 31, 2013

Portions of this Exhibit marked by [***] have been omitted pursuant to a Confidential Treatment Request and filed separately with the Securities and Exchange Commission

This Quota Purchase and Sale Agreement (the “Agreement”) is made and entered into this October 31, 2013 by and between:

1.    PETER BYRD RODENBECK, Brazilian citizen, [***], businessman, bearer of the Identity Card (RG) No.[***], enrolled with the Individual Taxpayers Register ( CPF/MF ) under No.[***], resident and domiciled[***] (“ Peter ”);

2.    FRANCHISE CONSULTING CORPORATION, a company organized and existing under the laws of the Commonwealth of The Bahamas, with head office at Nassau, Island of New Providence, Commonwealth of The Bahamas, P.O. Box 272, enrolled with the Corporate Taxpayers Register ( CNPJ/MF ) under No. [***], herein represented by its officer, Mr. PETER BYRD RODENBECK, identified above (" FCC ");

3.    MARCOS FERNANDO DE OLIVEIRA MORAES, Brazilian citizen, [***], bearer of the Identity Card (RG) No. [***], enrolled with the Individual Taxpayers Register ( CPF/MF ) under No. [***], resident and domiciled [***] (“ Marcos ”);

4.    SALIM BOULOS MAROUN, Brazilian citizen, [***], bearer of the Identity Card (RG) No. [***], enrolled with the Individual Taxpayers Register ( CPF/MF)  under No. [***], resident and domiciled [***] (“ Salim ”);

5.    GEFCO GENERAL FOOD COMÉRCIO LTDA., a limited liability company organized under the laws of Brazil, with head offices in the city of Rio de Janeiro, State of Rio de Janeiro, Brazil, at Rua Penedia, 70, Itanhangá, Postal Code ( CEP ) 22641-620, enrolled with the Corporate Taxpayers Register ( CNPJ/MF ) under No. [***] with its Articles of Organization registered with JUCERJA under the Corporate Identification Number (NIRE) 33.2.0206269.1, herein represented pursuant to its corporate charter (hereinafter referred to as “ GEFCO ”)

6.    MAURO GUARDABASSI MARTINS, Brazilian citizen, [***], bearer of the Identity Card (RG) [***], enrolled with the Individual Taxpayers Register ( CPF/MF ) under No. [***], resident and domiciled [***] (“ Mauro ”);

7.    ANTONIO CARLOS PONTES, Brazilian citizen, [***], bearer of the Identity Card (RG) nº [***], enrolled with the Individual Taxpayers Register ( CPF/MF ) under No. [***], resident and domiciled [***] (“ Pontes ”);

8.    GORDON LEE SIMMONDS, Brazilian citizen, [***], bearer of the Identity Card (RG) No. [***], enrolled with the Individual Taxpayers Register ( CPF/MF ) under No. [***], resident and domiciled [***] (“ Gordon ”);

9.    BERTRAND LETOUZÉ, Brazilian citizen, [***], bearer of the Identity Card (RG) [***], enrolled with the Individual Taxpayers Register ( CPF/MF ) under No. [***], resident and domiciled [***] (“ Bertrand ”); and

2

Portions of this Exhibit marked by [***] have been omitted pursuant to a Confidential Treatment Request and filed separately with the Securities and Exchange Commission

10.    GILBERTO SOARES DOS SANTOS, Brazilian citizen, [***], bearer of the Identity Card (RG) No. [***], enrolled with the Individual Taxpayers Register ( CPF/MF ) under No. [***], resident and domiciled [***] (“ Gilberto ”);

11.    CAROLINA ABREU SOUZA CORREIA, Brazilian citizen, [***], bearer of the Identity Card (RG) No. [***], enrolled with the Individual Taxpayers Register (CPF/MF) under No. [***], resident and domiciled [***] (“ Carolina ”);

12.    SILVIO JOSÉ BANDINI, Brazilian citizen, [***], bearer of the Identity Card (RG) No. [***], enrolled with the Individual Taxpayers Register (CPF/MF) under No. [***], resident and domiciled [***] (“ Silvio ”);

13.    BLOOM HOLDCO PARTICIPAÇƠES LTDA., a limited liability company organized under the laws of Brazil, with head offices in the city of Săo Paulo, State of Săo Paulo, Brazil at Avenida Doutor Chucri Zaidan, 80, 8 th  floor, suite 8, Vila Cordeiro, Postal Code ( CEP ) 04583-110, enrolled with the Taxpayers Register ( CNPJ/MF ) under No. [***] with its Articles of Organization registered with JUCESP under the Corporate Identification Number (NIRE) 35.227.144.821, herein represented pursuant to its corporate charter (hereinafter referred to as “ Buyer ”),

14.     PGS PARTICIPAÇƠES LTDA., a limited liability company organized under the laws of Brazil, with head offices in the city of Săo Paulo, State of Săo Paulo, Brazil, at Avenida Doutor Chucri Zaidan, 80, 8th floor, part, Vila Cordeiro, Postal Code ( CEP ) 04583-110, enrolled with the Corporate Taxpayers Register ( CNPJ/MF ) under No. [***], herein represented pursuant to its corporate charter (hereinafter referred to as “ Company ” or “ PGSPar ”);

15.     BLOOM PARTICIPAÇƠES LTDA., a limited liability company organized under the laws of Brazil, with head offices in the city of Săo Paulo, State of Săo Paulo, Brazil, at Avenida Doutor Chucri Zaidan, 80, 8th floor, suite 4, Vila Cordeiro, Postal Code ( CEP ) 04583-110, enrolled with the Corporate Taxpayers Register ( CNPJ/MF ) under No. [***], herein represented pursuant to its corporate charter (hereinafter referred to as “ BPar ”);

16.     PGS CONSULTORIA E SERVIÇOS LTDA., a limited liability company organized under the laws of Brazil, with head offices in the City of Săo Paulo, State of Săo Paulo, Brazil, at Avenida Dr. Chucri Zaidan, 80, BlocoBlock C, 8th floor, parte, Vila Cordeiro, Postal Code ( CEP ) 04583-110, enrolled with the Corporate Taxpayers Register ( CNPJ/MF ) under No. [***],
herein represented pursuant to its corporate charter (hereinafter referred to as “PGS");

17.     BLOOMIN’ BRANDS, INC., a company organized and existing under the laws of Delaware, USA, with its principal office located at 2202 N. Westshore Blvd, Tampa, Florida 33607 (USA), herein
represented by its legal representative (hereinafter referred to as “Parent Company”);

(Peter, FCC, Marcos, Salim, GEFCO, Mauro, Pontes, Gordon, Bertrand, Gilberto, Carolina and Silvio hereinafter, referred to individually as “ Seller ” and collectively as “ Sellers ”);

(Sellers and Buyer hereinafter collectively referred to as “Parties” and individually referred to as “ Party ”);

3

(Sellers Peter, Salim, Mauro, Gilberto, Pontes and Silvio collectively are referred to as “Stayers”)

(Mauro, Gilberto, Pontes and Silvio collectively are referred to as “Management Team”),

(PGSPar, BPar, PGS and Parent Company hereinafter referred to collectively as “Intervening Consenting Parties ”)

RECITALS:

WHEREAS, Sellers are the owners, in the aggregate, of one hundred (100%) of the outstanding quotas representing the capital of PGSPar, consisting of 8,892,731 quotas, with the par value of one Real and eight cents (R$1.08) each (the “ Quotas ”);

WHEREAS, PGSPar and Buyer are jointly the lawful owners of one hundred percent (100%) of the outstanding quotas representing the capital of PGS;

WHEREAS, in reliance on the representations, warranties, covenants and agreements and pursuant to the terms and conditions set forth herein, Sellers wish to sell to Buyer Quotas of PGSPar ultimately representing forty percent (40%) of the total and voting capital of PGS, under the condition that, as a consequence of the Post Closing Merger, the Stayers will receive quotas representing capital of Buyer in such a way that Stayers collectively would remain as the indirect owners of quotas representing ten percent (10%) of the capital of PGS; and Buyer wishes to purchase the Quotas of PGSPar ultimately representing such forty percent (40%) of the total and voting capital of PGS quotas from Sellers under said condition;

WHEREAS, the non-compete, non-hire and non-solicitation covenants granted by FCC, GEFCO, Marcos, Gordon, Bertrand and Carolina herein, as well as the confidentiality covenants, are essential to the Transaction set forth in this Agreement.

NOW, THEREFORE, in consideration for the premises and the mutual promises contained herein, the Parties hereto agree as follows:

1.    Definitions and Interpretations

1.1.        For purposes of this Agreement, the terms below shall have the following meaning ascribed to them:

“Accounts Receivable” has the meaning set forth in Section 5.9.

“Affiliate” means, with respect to any person, any other person or legal entity directly or indirectly Controlling, Controlled by, or under common Control with such Person or legal entity.

“Agreement” means this Quota Purchase and Sale Agreement.

“Bank” has the meaning set forth in Section 2.3.1.

“Benefit Plans” has the meaning set forth in Section 5.15.1.

“Best Knowledge” means, with respect to a matter, the actual knowledge of such matter or the knowledge

4

of such matter that would have been obtained by the relevant Party, or any of its officers, employees, directors or representatives, after such a due inquiry as a reasonably prudent person would make in respect of such matter.

“Board” means the Board of Directors of Buyer, a set forth in Section 8.1.

“BPar” shall have the meaning set forth in the Preface.

“Brazilian GAAP” means the generally accepted accounting principles in Brazil.

“Business Day” means any day other than a Saturday, Sunday or a day on which banks in Săo Paulo or Miami, Florida, are authorized or obligated by applicable law or executive order to close or are otherwise generally closed.

“Buyer” shall have the meaning set forth in the Preface.

“Buyer’s Contingencies” has the meaning set forth in Section 9.2.

“Carve Out” has the meaning set forth in Section 8.2.

“CIESP” has the meaning set forth in Section 11.2.

“CIESP Rules” has the meaning set forth in Section 11.2.

“Claim” has the meaning set forth in Section 10.5.

“Closing” has the meaning set forth in Section 4.1.

"Closing Balance Sheets" has the meaning set forth in Section 3.2.1.

“Closing Date” has the meaning set forth in Section 4.1.

“Control” means (i) the ownership, in the case of a corporation, of more than 50% of the voting stock of the corporation, or in the case of any other entity, the ownership of a majority of the beneficial or voting interest, (ii) the power to determine the majority of the board of directors of an entity or, if it does not have a board of directors, of the board of officers of the relevant entity (or other similar bodies), or (iii) the power to direct or cause the direction of the management and policies of the relevant entity, whether through the ownership of voting securities, by contract or otherwise.

“EBITDA” means cash flow from operations before interest, taxes, depreciation and amortization, and adjusted for any material, non-recurring (one-time) charges/credits determined in accordance with Brazilian Generally Accepted Accounting Principles, in effect on the Closing Date. For purposes of clarity, non-recurring charges/credits will also include any items which are charged, paid, expensed, amongst others, not related to the immediately preceding twelve (12) full calendar months.

“Environmental Law” shall mean any Legal Requirement or Permit relating to the environment, natural resources, public health and safety, worker health and safety, preservation or reclamation of natural resources, plant and animal life, or to the management, handling, use, generation, treatment, existence, storage, transportation, disposal, manufacture, distribution, formulation, packaging, labeling, release or threatened release of or exposure to Hazardous Materials.

5

“Environmental Permit” has the meaning set forth in Section 5.20(b).

“Excess NWC” has the meaning set forth in Section 3.2.

"FMV Appraisal Election" has the meaning set forth in Section 7.2.1.

“Final NWC” has the meaning set forth in Section 3.2.

“Financial Statements” has the meaning set forth in Section 5.10.

“GEFCO” shall have the meaning set forth in the Preface.

“Governmental Body” shall mean any (i) Brazilian, international or multinational organization, nation, region, state, country, city, town, village, or district government, or other jurisdiction of any nature; (ii) governmental or quasi-governmental authority of any nature (including any governmental agency, branch, department, official, or entity and any court or other tribunal); or (iii) body exercising, or entitled to exercise, any administrative, executive, judicial, legislative, policy, regulatory, or taxing authority or power of any nature.

“Guarantees” has the meaning set forth in Section 10.9.

"Hazardous Materials" means all dangerous, hazardous or toxic substances as defined in the applicable
Brazilian legislation.

“ICC” has the meaning set forth in Section 11.1.

“Indemnity Escrow Account” has the meaning set forth in Section 9.6.

“Indemnity Escrow Agreement” has the meaning set forth in Section 9.6.

“Indemnity Escrow Amount” has the meaning set forth in Section 9.6.

“Indemnified Party” has the meaning set forth in Section 9.3.

“Indemnifying Party” has the meaning set forth in Section 9.3.

“Intellectual Property” means (i) all inventions, industrial designs and models, all improvements thereto, and all patents, patent applications and patent disclosures, together with all reissuances, continuations, continuations-in-part, revisions, extensions and reexaminations thereof; (ii) all trademarks, service marks, trade dress, logos, trade names and corporate names, together with all translations, adaptations, derivations and combinations thereof and including all goodwill associated therewith (whether registered or unregistered), and all applications, registrations and renewals in connection therewith; (iii) all copyrightable work and all copyrights (registered and unregistered), and all applications, registrations and renewals in connection therewith; (iv) all mask works and all applications, registrations and renewals in connection therewith; (v) all trade secrets and confidential business information (including ideas, research and development, know-how, formulas, compositions, manufacturing and production processes and techniques, technical data, designs, drawings, specifications, customer and supplier lists, pricing and cost information, and business and marketing plans and proposals); (vi) all computer programs and computer software (including firmware and other software embedded in hardware devices), software code (including source code and executable or object code), subroutines, interfaces and algorithms, and all related documentation and source materials (collectively, “Software”); (vii) all rights in Internet websites

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and Internet domain names; (viii) all other intellectual property rights; and (ix) all copies and tangible embodiments thereof (in whatever form or medium), including all letters patent, patent applications, provisional patents, design patents, invention disclosures and other rights to inventions or designs (“Patents”), all registered and unregistered copyrights in both published and unpublished works (“Copyrights”) and all trademarks, service marks and other proprietary indicia (whether or not registered (“Marks”), and all rights to sue for and remedies against past, present and future infringements of any or all of the foregoing.

“INPI” means the Brazilian Patent and Trademark Office.

“Law” or “Laws” has the meaning set forth in Sections 5.13.

"Legal Requirement" means any constitution, law, statute, treaty, rule, regulation, ordinance, binding case law, order, injunction, notice, approval or judgment any Government Body, which applies to any company or any of its assets, businesses, or activities, and any contract with any Government Body relating to compliance with any of the foregoing.

“Liability” or “Liabilities” shall mean any liability, obligation or commitment of any nature whatsoever, whether known or unknown, asserted or unasserted, absolute or contingent, accrued or unaccrued, liquidated or unliquidated, and due or to become due.

“Lien” or “Liens” shall mean any charge, claim, marital property interest, condition, pledge, lien, usufruct, security interest, mortgage, encumbrance, adverse claim, option, right of way, easement, encroachment, hypothecation or other third party right, retention of title, right of first refusal or other restriction on transfer, including preemptive, conversion or put or call rights, or any restriction on use, voting, receipt of income or exercise of any other attribute of ownership, or any contract to give any of the foregoing.

“Losses” has the meaning set forth in Sections 9.1.

“Management Team” has the meaning set forth in the Preface.

“March NWC” means the March 31, 2013 Net Working Capital, which was R$26,899.476.

“Major Matter” shall mean engaging in any business other than that of Outback Steakhouse® restaurants in Brazil or any action that quantifiably and materially impacts the EBITDA of Buyer, PGSPar, PGS and its subsidiaries, including the termination of any of the Stayers and any other factor that may materially, adversely impact the performance of PGSPar, PGS and its subsidiaries or Buyer.

“Notice” has the meaning set forth in Section 9.3.

“Notice of Claim” has the meaning set forth in Section 9.3.2.

“NWC” means Net Working Capital of PGS.

“NWC Payment” has the meaning set forth in Exhibit 3.2.

“Parent Company” shall have the meaning set forth in the Preface.

"Permits" means all of the permits, licenses, franchises and authorizations relative to the conduct of a company's business and the sale of its products.

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“Person” means an individual, corporation, partnership, fund, condominium, association, organization, trust, consortium, Government Body, any other legal entity or unincorporated organization.

“PGS” shall have the meaning set forth in the recitals of this Agreement.

“PGSPar” shall have the meaning set forth in the preamble of this Agreement.

“Pledge” has the meaning set forth in Section 9.5.

“Pledge Agreement” has the meaning set forth in Section 9.5.

“Post Closing Merger” has the meaning in Section 10.7.

“Post-Indemnity Escrow Deduction” has the meaning set forth in Section 9.6.1(b).(ii).(b).

“Purchase Price” has the meaning set forth in Section 3.1.
 
“Quotas” shall mean quotas of PGSPar.

“Remaining Interest” has the meaning set forth in Section 7.1.

“Restriction” has the meaning set forth in Section 5.1.

“Salim Escrow Agreement” has the meaning set forth in Section 2.3.1.

“Seller” or “Sellers” shall have the meaning set forth in the Preface.

“Seller’s Contingencies” has the meaning set forth in Section 9.1.

“Stayers” has the meaning set forth in the Preface.

“Stayers’ Quotas” shall have the meaning set forth in Exhibit 2.4.

“Taxes” has the meaning set forth in Section 5.14.

“Termination With Cause” shall mean the termination of one of the Stayers’ relationships with PGS or an Affiliate of Buyer due to fraud, dishonesty, negligence in the performance of duties, willful misconduct or breach of fiduciary duty.

“Termination Without Cause” shall mean the termination of one of the Stayers’ relationship with PGS or an Affiliate of Buyer for any reason other than death, disability, failure to provide services to PGS and its Affiliates to the same extent provided as of October 31, 2013 (meaning 25% of Peter’s business time and 100% of Salim’s, and other Stayers’ business time), fraud, dishonesty, negligence in the performance of duties, willful misconduct or breach of fiduciary duty.

“Transaction” shall have the meaning set forth in Section 2.3.

1.2.        Unless the context clearly requires otherwise, the interpretation of other terms used throughout this Agreement are according to the rules set forth below.

1.2.1         Unless expressly provided otherwise, all references to clauses, items and exhibits used in

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this Agreement are related to clauses, items and exhibits of this Agreement. The documents attached to this Agreement constitute a part of this Agreement and are incorporated into this Agreement for all purposes and effects.

1.2.2         The masculine gender shall include the feminine and neuter, and the terms defined in the singular have the corresponding meanings in the plural, and vice versa. The term "contain" or "including" shall mean "including, without limitation". The words "of this", "herein", "hereby", "by means of this", "contained herein", "in accordance with the written provisions herein" or "according to this document" and other similar terms when used herein, refers to this Agreement as a whole and not to any particular section or item in which these words appear. The expressions "the date of this Agreement", "on this date" and other similar terms shall be understood as a reference to the date stated in the preamble paragraph of this Agreement.

1.2.3         The titles in this Agreement are for convenience only and should not be construed as a part of or affect the interpretation of any provision of this Agreement.

1.2.4         The term "best efforts" shall refer to the efforts that a prudent Person desirous of achieving a result would use in similar circumstances to ensure that the result is achieved as expeditiously as possible, provided, however, that a Person required to use his/her/its best efforts under this Agreement will not be required to take actions that would result in a materially adverse change in the benefits of this Agreement, the transactions contemplated hereby or the respective operations of such Person.

1.2.5         An act would "contravene" something if, as the context requires, it would conflict with, violate, or result in a breach or violation of, or constitute a default under, the thing, or it would result in the creation of a lien on the equity interests or assets of the PGSPar, PGS or its subsidiaries, or it would give any Government Body or other Person the right to challenge, revoke, withdraw, suspend, cancel, terminate, or modify the thing, or to exercise any remedy or obtain any relief under the thing, or to declare a default or accelerate the maturity of any obligation under the thing.

1.2.6         With respect to any representation or warranty made to the "cognizance" or "knowledge" of a Person, (i) an individual shall be considered to have knowledge of a fact or other matter, if the individual is actually aware of such fact or other matter or a prudent individual could be expected to discover or otherwise become aware of such fact or other matter in the course of conducting a reasonably comprehensive investigation concerning the existence of such fact or other matter, (ii) an entity will be considered to have "knowledge" of a fact or other matter if any individual who is serving, or who has at any time served, as a director, manager or senior executive, officer, partner, executor, or trustee of such entity (or in any similar capacity) has, or at any time had, knowledge of such fact or other matter (as defined in (i)), and (iii) Sellers shall be considered to have knowledge of any fact or matter known to PGSPar, PGS or its subsidiaries (as defined in (ii)).

1.2.7         The phrase "ordinary course of business" shall refer to the normal operation of the PGSPar, PGS or its subsidiaries, consistent with its past practice.

1.2.8         References to statutes or statutory provisions shall be construed as references to those statutes or provisions as respectively amended or re-enacted or as their application is modified from time to time by other provisions (whether before or after the date of this Agreement) and shall include any statutes or provisions of which they are re-enactments (whether with or without modification) and any orders, regulations, instruments or other subordinate legislation under the relevant statute or statutory provision.

1.2.9         References to any document (including this Agreement) are references to that document

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as amended, consolidated, supplemented, novated or replaced from time to time.

1.2.10         References to the Parties include their respective successors and permitted assignees.

1.2.11         Where any word or phrase is given a defined meaning in this Agreement any other part of speech or other grammatical form of that word or phrase shall have a corresponding meaning.

1.2.12         All warranties, representations, indemnities, covenants, agreements, undertakings and obligations given or entered into by more than one Person are given or entered into jointly and severally.

1.2.13         The provisions of this Agreement will prevail in case they are conflicting with any Exhibits.

1.2.14         References to US$ or $ are references to United States Dollars (USD), the currency of the United States of America. References to R$ are references to Reais (BRL), the currency of the Federative Republic of Brazil.

2.    Purchase, Sale and Exchange of Quotas and Structure of the Transaction

2.1        Structure of the Transaction.    On or prior to the Closing Date, the Sellers shall approve their sale and transfer of such number of Quotas in the capital stock of PGSPar that ultimately represent forty percent (40%) of the total capital of PGS to Buyer.

2.2        Absence of Liabilities.    Sellers agree that PGSPar shall have as assets only the quotas of PGS and it shall have no Liabilities, Liens, encumbrances or burdens of any kind or nature whatsoever, except for those liabilities referred to in  Exhibit 2.2 .

2.3        Purchase, Sale and Exchange of Quotas. Subject to the terms and conditions of this Agreement and section 2.3.1 below, on the Closing Date Sellers (except for GEFCO) shall sell, assign and transfer to Buyer the Quotas referred to in Section 2.1 above free and clear of any Liens, in such a way that after such sale, assignment and transfer, and with exception of the Quotas currently held by GEFCO), Buyer will be the lawful holder and beneficial owner of eighty percent (80%) of all PGSPar Quotas, with all rights and obligations related thereto (“ Transaction ”). The number of Quotas each Individual Seller shall sell to Buyer is mentioned in Exhibit 2.3  hereto and made a part hereof.

2.3.1        Recognition of GEFCO’s Role. Salim Escrow Account of Certain Quotas currently held by GEFCO. The Parties recognize and anticipate at the time of Closing that 488,555 Quotas currently held by GEFCO in PGSPar (“ GEFCO Quotas ”) may not be completely free of any potential third-party claims until approximately November 26, 2013, at the earliest due to the capital reduction implemented by GEFCO as per the documents attached hereto as  Exhibit 2.3.1(a) . Buyer and Salim, with the express consent of GEFCO, agree that, at Closing, the portion of the Purchase Price related to 248,689 of these GEFCO Quotas, with the adjustments set forth in Section 3.1.(b) below will be retained in an escrow account with JP Morgan (Brazil) (“ Bank ”) in the name of Salim (as quotaholder of GEFCO and future lawful owner of the GEFCO Quotas) to be held and managed by the Bank as the escrow agent, pursuant to the terms of the attached Escrow Agreement ( Exhibit 2.3.1(b) ) (" Salim Escrow Agreement ") to guarantee the transfer to Buyer of the GEFCO Quotas, free and clear of any Liens of any kind or nature whatsoever. As soon as possible after November 26, 2013 but before the Post Closing Merger, GEFCO will transfer and assign to Salim the totality of the GEFCO Quotas, and will have the respective corporate documents of PGSPar formalizing such transfer and assignment, signed by Buyer and Stayers, filed and registered with the Commercial Register of the State of Săo Paulo (JUCESP), a copy of which shall be delivered to Buyer within three (3) business days as of its registration date. Upon transfer of title to and

10

assignment of 248,689 of the GEFCO Quotas to Buyer, and the execution of an amendment to the articles of organization of PGSPar formalizing such transfer and assignment, Salim and Buyer shall authorize the Bank to release to Salim the deposited funds of Salim Escrow Account pursuant to the Salim Escrow Agreement. After the steps described above, Salim will (i) deliver to Buyer the original of the Term of Receipt and Release within two (2) business days; (ii) remain as clear owner of 239,866 of the GEFCO Quotas and, (iii) on or about November 26, 2013, will exchange them per section 10.7 below as part of the Post-Closing Merger, as set forth in Section 2.4 below. GEFCO hereby agrees to the terms of this Agreement.

2.3.1.1        Olimpia Partners' closing fees. Pursuant to the agreement executed with Olimpia Partners
and mentioned in Exhibit 5.27, the closing fee payable to Olimpia Partner set forth in Section 3.1(e) below shall be deposited in Indemnity Escrow Account on the Closing Date. Salim and Buyer represent and warrant that within five (5) business days as of the Closing Date such amount will be released to Olimpia Partner through a notification to be jointly signed by them and which will be delivered to the Escrow Agent pursuant to the terms and conditions of the Indemnity Escrow Agreement.

2.4        Post Closing Merger and Exchange of Quotas. As part of the Transaction, and as soon as practicable Buyer will merge PGSPar and as a result of said Post Closing Merger transaction Stayers will exchange the twenty percent (20%) remaining part of the Quotas in PGSPar for quotas in Buyer, free and clear of any Liens, that collectively and indirectly represents ten percent (10%) of the business of PGS and its subsidiaries (" Stayers' Quotas "). Stayers' Quotas shall be subject to the terms and conditions of this Agreement, as well as to the Quotaholders' Agreement to be executed at the time. The terms and conditions of such Quotaholders' Agreement, substantially in the form of the draft attached hereto as  Exhibit 2.4,  will be mutually agreed by the Stayers and Buyer between the Closing Date and the Post Closing Merger.

3.    Purchase Price

3.1        Purchase Price.     The total purchase price for the Quotas of PGSPar ultimately representing forty percent (40%) of the total and voting capital of PGS, including  (i)  the NWC Payment set forth and calculated per  Exhibit 3.2 and which is set forth in Section 3.2 below, and  (ii)  the consideration for the non-compete, non-solicitation, non-hire and confidentiality covenants provided herein, will be two hundred forty million, seven hundred sixty-five thousand, six hundred and fifty Reais (R$240,765,650.00) (“ Purchase Price ”), subject to further adjustments after the Closing pursuant to the provisions below in this Section. The Purchase Price shall be paid to Sellers as follows:

(a)    one hundred and ninety seven million eighty nine thousand seven hundred and eighty eight Reais and ninety four cents (R$197,089,788.94) shall be paid to the Sellers on the Closing Date by wire transfer of immediately available funds to each of the Sellers (excluding GEFCO) to the bank accounts indicated in  Exhibit 3.1(a) , in the same proportion of the Quotas sold and transferred by each of them (as stated in  Exhibit 2.3 ) to Buyer;

(b)    seven million five hundred and fifteen thousand three hundred and fifteen Reais and one cent (R$7,515,315.01) corresponding to (i) 248,689 Quotas currently held by GEFCO in PGSPar referred to in Section 2.3.1 above, and (ii) the part of the NWC Payment set forth and calculated per  Exhibit 3.2  proportional to such 248,689 quotas mentioned above, which shall be deposited in Salim Escrow Account on the Closing Date, as per Section 2.3.1 hereto;

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Portions of this Exhibit marked by [***] have been omitted pursuant to a Confidential Treatment Request and filed separately with the Securities and Exchange Commission

(c)    twenty one million nine hundred and sixty thousand Reais (R$21,960,000.00) shall be deposited in the Indemnity Escrow Account on the Closing Date, to guarantee any potential Losses as per Section 9.6 hereto;

(d)    ten million three hundred and eighty three thousand six hundred and sixty two Reais and thirty nine cents (R$10,383,662.39) corresponding to the NWC Payment set forth in  Exhibit 3.2 , which shall be paid to the Sellers (excluding GEFCO as set forth in Section 2.3.1 above) on the Closing Date by wire transfer of immediately available funds to each of the Sellers (excluding GEFCO) to the bank accounts indicated in  Exhibit 3.1(a) , in the same proportion of the Quotas sold and transferred by each of them (as stated in  Exhibit 2.3 ); and

(e)    three million eight hundred and sixteen thousand eight hundred and eighty three Reais and sixty six cents (R$3,816,883.66) corresponding to part of the closing fee payable to Olimpia Partners under the agreement mentioned in  Exhibit 5.27 , which shall be deposited in the Indemnity Escrow Account on the Closing Date. For the sake of clarity the amount referred to in this sub-item “e” refers to amounts paid under sub-items “a” and “b”, and includes any applicable taxes and withholdings levied on such amount..

3.1.1         Exchange Rate for Payment to FCC. The effective exchange rate to convert the portion of the Purchase Price to be paid to FCC into US$ shall be the daily exchange rate (plus 35 pips credit fee) of the Closing Date (provided, that signing of this Agreement occurs prior to 6:00 pm BRST one (1) day prior to the Closing Date), applicable to the purchase of US$ (expressed in R$), published by the Central Bank Information System - SISBACEN (PTAX-800), Option 5 or any other exchange rate index that replaces or succeeds the PTAX-800.

3.1.2         Method of Payment to FCC. The payment of the portion of the Purchase Price due to FCC shall be made in Reais according to Section 3.1 above, net of any applicable taxes including withholding income tax, and which will be converted into US$ at Closing, as provided in Section 3.1.1 above, by wire transfer of immediately available funds to FCC, which is enrolled with RDE-IED under No. [***], to its bank account as follows:

BANK NAME: [***]
LOCATION: [***]
COUNTRY: [***]
SWIFT CODE: [***]
FEDWIRE : [***]

BENEFICIARY:

BANK NAME: [***]
LOCATION: [***]
COUNTRY: [***]
SWIFT: [***]
ACC : [***]
For credit to Franchise Consulting Corporation

3.1.3         Withholding Tax and IOF tax. Promptly following request by the Buyer at any time between execution of this Agreement and the Closing Date, FCC shall provide the Buyer with all information requested by the Buyer that is necessary for it to accurately calculate any possible withholding tax due on the transfer of the quotas held by FCC in PGSPar at Closing. The Buyer will procure that the withholding tax is withheld from the Purchase Price at Closing, and that payment in full of such amount

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will be made to the applicable Brazilian tax authorities at Closing. Buyer will provide Seller with certified copies of the Documentos de Arrecadaçăo de Receitas Federais (“ DARFs ”) evidencing the withholding and payment in full of the withholding tax within ten (10) Business Days as of the Closing. The IOF tax on the exchange referred to in Section 3.1.2 above shall be paid by Buyer.

3.2        Net Working Capital Payment.    As part of the Purchase Price, on the Closing Date the Buyer agrees to pay to Sellers (except to GEFCO, which portion will be deposited in the Salim Escrow Account) ten million, seven hundred and fifty nine thousand, seven hundred ninety Reais (R$ 10,759,790.00) which represents forty percent (40%) of the net working capital of PGS on March 31, 2013, as calculated per the formula in  Exhibit 3.2  (“ NWC Payment ”). This NWC Payment is included in the Purchase Price, as reflected in Section 3.1. Within forty-five (45) days of Closing, Buyer will provide Sellers with the final calculation of the October 31, 2013 NWC of PGS (“ Final NWC ”). To the extent that 40% of the Final NWC is greater than the NWC Payment (“ Excess NWC ”), Buyer agrees to pay to Sellers, proportionately per  Exhibit 2.3 , the Excess NWC within five (5) business days to the accounts provided to Buyer, net of any closing fee payable to Olimpia Partners under the agreement mentioned in  Exhibit 5.27  and the respective applicable taxes and withholdings, which shall be deposited in Indemnity Escrow Account on the Closing Date.

4.    Closing

4.1        Closing. “Closing”, as used herein, shall mean the completion of all the actions defined in Sections 4.2 and 4.3, and shall occur on November 1, 2013, or on any other date the Parties may agree on (“ Closing Date ”), at the offices of Baker & McKenzie, located at Av. Dr. Chucri Zaidan, 920, 13th floor, ZIP Code 04583-904, in the City of Săo Paulo, State of Săo Paulo, Brazil.

4.2        Actions Prior to Closing. Prior to the Closing Date, Sellers shall supply Buyer with any and all documents and information reasonably required by Buyer or its counsels and accountants which may not have been supplied during the due diligence carried out by Buyer in PGS.

4.2.2         Intentionally left blank.

4.2.3         Corporate Reorganization. Sellers shall have completed the corporate reorganization involving PGSPar, PGS and its subsidiaries in preparation for the Closing, so that all the call option agreements have been exercised assuring that the Sellers are only the ones set forth in the Preamble of this Agreement.

4.2.4         Representations and Warranties. The representations and warranties of Sellers and Buyer contained in this Agreement shall be true and correct in all respects as of the date of this Agreement, and as of the Closing Date with the same force and effect as if made as of the Closing Date, or a Party shall have disclosed in writing to other Party, and the latter shall have accepted at its own discretion, such changes to this Agreement (including exhibits) as are necessary to render the representations and warranties of Sellers and Buyer true and correct in all respects as of the Closing Date.

4.2.5         Covenants. All agreements and covenants contained in this Agreement to be performed or complied with by Sellers or Buyer on or before the Closing Date shall have been performed or complied with in all material respects.

4.2.6         No Injunction. No statute, rule, regulation, executive order, decree, injunction, or other order (whether temporary, preliminary or permanent) issued by any court of competent jurisdiction, shall be in effect that restricts or prohibits consummation of the transactions contemplated by this Agreement.

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4.2.7         No Litigation. No claim, action, proceeding or investigation shall be pending which seeks to delay or prevent the consummation of the transactions contemplated hereby, or seeks money damages from Buyer, PGSPar, PGS or its subsidiaries by reason of the consummation of the transactions contemplated by this Agreement, or, if resolved adversely to PGSPar, PGS or its subsidiaries, would have a material adverse effect on PGSPar, PGS or its subsidiaries or restrict or limit Buyer's ability to own or control PGSPar, PGS or its subsidiaries, operate the business, or consummate the transactions contemplated hereby.

4.3        Actions at / After Closing.

4.3.1.        On the Closing Date:

(a)Buyer shall pay to the Sellers, the Purchase Price indicated in Section 3 according to the allocations of Section 3.1 above and convey or deliver to Sellers a copy of the relevant empowerment documents to the representative(s) of Buyer as necessary to authorize the execution of this Agreement and the consummation of the transactions contemplated hereby.

(b)     Sellers shall deliver to Buyer (i) the amendment to chart (contrato social) of PGSPar, evidencing, among other matters, the transfer of the Quotas of PGSPar ultimately representing 40% of the total and voting capital of PGS sold to Buyer, dated as of the Closing Date and duly executed by all Sellers; (ii) a copy of the relevant empowerment documents of the representative(s) of Sellers, as necessary to authorize the execution of this Agreement and the consummation of the transactions contemplated hereby; and (iii) tax clearance certificates in the name of PGSPar, as necessary to allow the transfer of such Quotas.

(c)    All officers of PGSPar and PGS (and such other employees of PGS and PGSPar as Buyer shall reasonably designate) shall provide certifications to Buyer, in form reasonably satisfactory to Buyer, that they have completed training on the United States Foreign Corrupt Practices Act and that they have not, and to their Best Knowledge no other person has, made any improper payment, directly or indirectly, to any government official that would violate any law or regulation of Brazil or that would constitute a violation of the United States Foreign Corrupt Practices Act.

(d)    The Parties shall execute or cause to be executed (i) the Salim Escrow Agreement, and (ii) the Indemnity Escrow Agreement.

4.3.2        After Closing. Sellers agree to cause PGSPar to complete the timely and proper filing of an election under Section 754 of the U.S. Internal Review Code of 1986 (“the Code”). Buyer agrees to assist in such filing, preparing the returns and others documents to be signed and filed for this purpose, as well as reasonable detailed explanation of this subject. Further, upon request by Buyer, Sellers agree: (a) to permit PGS to timely and properly file a IRS Form 8832 Entity Classification Election (permitting PGS to be treated as an association for US federal income tax purposes); and (b) an election under section 754 of the Code. Sellers will not prepare or file statements or returns inconsistent with the elections in this section 4.3.2. Sellers will authorize a representative of PGSPar and PGS to execute documents needed to effectuate the elections.

5.    Representations and Warranties of Sellers and Stayers.

Buyer has agreed to purchase the Quotas referred to in Exhibit 2.3 in reliance upon all the representations, warranties and covenants made by Sellers and Stayers, as the case may be in this

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Agreement concerning the situation and business standing of PGS and its subsidiaries and PGSPar. With full knowledge that such representations and warranties are fundamental to the purpose of this Agreement, Sellers and/or Stayers as the case may be, hereby, jointly and severally represent and warrant that:

5.1        Ownership of the Quotas.    Sellers are all of the lawful owners of the Quotas which are free and clear of any Liens, pledge, encumbrance, option, right of first refusal and any other claim of any kind (“ Restriction ”), except as noted in  Exhibit 5.1(a) . Upon completion of the actions to be taken at Closing, Buyer will be the lawful owner of Quotas referred to in  Exhibit 2.3  free and clear of any Restriction and will have full right and power required by law to sell and transfer the ownership of such Quotas. The sale of such Quotas to Buyer pursuant to this Agreement will transfer to Buyer the full title to the Quotas referred to in  Exhibit 2.3  free and clear of any Restriction.  

PGS is the lawful owner of (i) 44,507,872 quotas of CLS Săo Paulo Ltda. (“CLS Săo Paulo ”), (ii) 17,990,155 quotas of CLS Restaurantes Rio de Janeiro Ltda. (“ CLS Rio de Janeiro ”), (iii) 108,772 quotas of CLS Restaurantes Brasília Ltda. (“ CLS Brasília ”), and (iv) 103,842 quotas of CLS Restaurantes do Sul Ltda. (“ CLS Sul ”), and all such quotas are free and clear of any Restriction.

5.2        Capital of PGS. The total capital of PGS is twenty-one million, eight hundred and sixty-three thousand, five hundred and seventy-one Reais and eighty-four cents (R$ 21,863,571.84), divided into twenty million, two hundred and forty-four thousand and forty-eight (20,244,048) quotas, with a par value of one real and eight cents (R$ 1.08) each; the total capital of CLS Săo Paulo is forty five million, nine hundred and fourteen thousand, four hundred and eighty four Reais (R$ 45.914.484,00), divided into forty five million, nine hundred and fourteen thousand, four hundred and eighty four (45,914,484) quotas, of the par value of one real (R$ 1.00); the total capital of CLS Rio de Janeiro is eighteen million, six hundred and thirty seven thousand and eight hundred Reais (R$ 18.637.800,00), divided into eighteen million, six hundred and thirty seven thousand and eight hundred (18,637,800) quotas, of the par value of one real (R$ 1.00); the total capital of CLS Brasília is eleven million, two hundred and seventy two thousand and one hundred Reais (R$11.272.100,00), divided into one hundred twelve thousand, seven hundred twenty one (112,721) quotas, of the par value of one hundred Reais (R$ 100.00); and the total capital of CLS Sul is ten million, six hundred and thirty seven thousand and eight hundred Reais (R$ 10,637,800.00), divided into one hundred and six thousand, three hundred and seventy eight (106,378) quotas, of the par value of one hundred Reais (R$ 100.00). Except as provided in  Exhibit 5.2.(a) t here will be no pending contracts, options, warrants, or other rights relating to the sale, or transfer of the quotas, the quotas of the subsidiaries of PGS or any other securities. Except as provided in  Exhibit 5.2.(b) , Sellers and PGS are not parties to any agreement or obligation whereby they might have assigned to any third party the right to purchase, hold or acquire any of their rights over the quotas or over the quotas of any of the subsidiaries of PGS.

5.3        Organization and Good Standing.    PGSPar and PGS and its subsidiaries are and will be companies duly organized, validly existing and in good standing under the laws of the Federative Republic of Brazil, and PGSPar, PGS and its subsidiaries are duly qualified to conduct their respective business as currently carried on. A copy of the charters ( contrato social ) of PGSPar, PGS and its subsidiaries currently in force and which are under signing and/or filing process is attached hereto as  Exhibit 5.3.

5.4        Power and Authorization.    Sellers and Stayers have now and on the Closing Date will have full power and authority to enter into this Agreement, to perform their obligations hereunder and to consummate the transactions contemplated herein. No action is necessary to authorize the execution, delivery and performance of this Agreement by Sellers and Stayers.

5.5        Binding Effect.     This Agreement constitutes a legal, valid and binding obligation of

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Sellers and is enforceable in accordance with its terms.

5.6        No Violation. Consents. Approvals.    Neither the execution nor the delivery of this Agreement by Sellers and Stayers, nor the performance of all of their obligations hereunder will:

(a)    violate or conflict with any provision of the charter (contrato social) of PGSPar or PGS or of any of its subsidiaries;

(b)    violate, breach or otherwise constitute or give rise to a default under any contract, commitment or other obligation to or under which Sellers, Stayers, PGSPar or PGS or any of its subsidiaries are parties or are bound;

(c)    violate or conflict with any statute, ordinance, law, rule, regulation, judgment or order of any court or other governmental or regulatory authority to which Sellers, Stayers, or PGSPar or PGS or its subsidiaries are subject to;

(d)    require any consent, approval or authorization of, notice to, or filing or registration with any Person, entity, court or Governmental Body;

(e)     require any consent, approval or authorization of, or notice to, landlords with respect to lease agreements entered into by PGSPar or PGS and its subsidiaries, except those listed in Section 9.1.(v) which will be obtained by Sellers at their own costs and expenses (including any possible payments required by such landlords and/or as set forth in the respective lease agreements and general rules). Sellers agree to hold Buyer, PGSPar and PGS and its subsidiaries, as well as their Affiliates, directors, officers, employees and representatives, harmless and to indemnify Buyer, PGSPar, PGS or its subsidiaries for any costs, expenses and Liabilities related to the obtaining of the consents listed in Exhibit 5.11(b).

5.7        Condition and Sufficiency of the Assets.    All equipment, machines and relevant assets of PGSPar and PGS and of its subsidiaries have been properly recorded in the referred companies’ books and are in reasonable operating condition, and adequate for the conduct of PGSPar or PGS and its subsidiaries’ business as currently conducted. Sellers are not aware if any of such machines or equipment are in need of maintenance other than ordinary, routine maintenance. The machines and equipment of PGSPar or PGS and of its subsidiaries are sufficient for the continued conduct of their business after the transfer of the Quotas. Except as mentioned in  Exhibit 5.7 , all PGSPar and PGS and/or its subsidiaries’ assets are free and clear of any Liens.

5.8        Intellectual Property.    Exhibit 5.8 contains a complete list of the Intellectual Property owned, licensed or used by PGSPar and PGS and/or its subsidiaries, or necessary to the operation of PGSPar or PGS and/or its subsidiaries' business, in addition to the franchise agreements entered into by PGSPar, PGS and its subsidiaries, which are currently in place. All trademarks listed in  Exhibit 5.8  are duly registered under the name of PGSPar or PGS with the Brazilian Patent and Trademark Office (“ INPI ”) and are not subject to any restriction of any kind. PGSPar or PGS and/or its subsidiaries have no patent registered under its name nor utilize any other patent registered by third parties. PGSPar or PGS and/or its subsidiaries own the domain names registered in their names before Fapesp , which are listed in Exhibit 5.8. PGS and/or its subsidiaries do not infringe and have not infringed in the past any Intellectual Property rights registered by third parties.

5.9        Accounts Receivable.    All accounts receivable of PGSPar and PGS and/or its subsidiaries included in the Financial Statements of PGSPar or PGS and/or its subsidiaries (collectively the " Accounts Receivable ") represent valid obligations arising from sales and/or services actually performed in the

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ordinary course of business. Except as set forth in Exhibit 5.9 all of the Accounts Receivables of PGSPar or PGS and its subsidiaries are free and clear of any Liens.

5.10        Financial Statements.    The Balance Sheet and Financial Statements of PGSPar and PGS (as consolidated with all of its subsidiaries) as of September 31, 2013 (hereinafter referred to as " Financial Statements ") are included herein as  Exhibit 5.10 . The Financial Statements were prepared in accordance with the Brazilian GAAP, consistently applied, and they show accurately: (i) the financial position of PGSPar and PGS and each of its subsidiaries on the date they were prepared; and (ii) the results of the operations carried out by PGSPar and PGS and each of its subsidiaries within the period covered by these statements.

5.11        Contracts and Commitments.    Exhibit 5.11(a) contains a list which identifies and briefly
describes all written or verbal contracts, agreements, leases, guarantees or commitments to which PGSPar and PGS and/or its subsidiaries are parties or by which PGSPar and PGS and/or its subsidiaries may be bound, (including but not limited to financing agreements and agreements with clients and suppliers): (a) involving the payment of more than R$ 100,000.00 (one hundred thousand Reais) per year; (b) which may not be terminated by PGSPar and PGS and/or any of its subsidiaries at any time, on less than ninety (90) days upon prior notice; or (c) which are otherwise material to the business of PGSPar and PGS and/or its subsidiaries.  Exhibit 5.11(b)  contains a list which identifies the real estate leases executed by PGSPar and PGS and/or its subsidiaries requiring the previous written consent of the landlord and the ones under which the landlord is required to be served with a notice of the execution of this Agreement. In those cases where the landlord seeks to receive a fee as a consequence of the Transaction, Sellers will use their best efforts to eliminate such a payment, which if paid is for the account of the Sellers as provided in Section 5.6(e) above. Each such contract, agreement, lease, guarantee or commitment was entered into in the ordinary course of the business, is in full force and effect, valid and enforceable in accordance with its terms, constitutes a legal and binding obligation of the respective parties, and is not the subject of any notice of default, termination or partial termination. PGSPar and PGS and/or each of its subsidiaries have complied in all respects with the provisions of each such contract, agreement, guaranty and commitment.

5.12        Litigation. Except as set forth in Exhibit 5.12, there are no pending or threatened complaints, claims, proceedings, procedures or investigations at any court, arbitration court or Governmental Body against PGSPar and PGS and/or its subsidiaries or that might cause any Liability to the Buyer or to PGSPar and PGS or to each of its subsidiaries or that could affect the business of PGSPar and PGS and/or its subsidiaries.

5.13        Permits and Licenses. Compliance.  Except as set forth in Exhibit 5.13, PGSPar and PGS and/or its subsidiaries hold all required Permits from all governmental or regulatory or environmental authorities which are necessary to conduct PGSPar and PGS and/or its subsidiaries' business. On this date, all of such Permits are in full force and effect for each of the restaurants operated by PGSPar and PGS or by its subsidiaries, and Sellers will endeavor their best efforts to maintain such Permits in full force and effect. PGSPar and PGS and/or its subsidiaries are in compliance with applicable statutes, laws, rules, regulations, orders, ordinances, judgments, and decrees of all governmental and regulatory authorities, including zoning laws (collectively, " Law " or " Laws ") and the terms of the Permits used in connection with their business. There are no legal restrictions, of any nature, regarding the preparation and selling of PGSPar and PGS and/or its subsidiaries' products.

5.14        Taxes.    PGSPar and PGS and/or its subsidiaries have filed (on a timely basis since their incorporation) all tax returns that are or were required to be filed by them and all said tax returns are complete, true, and correct at the time they were delivered. PGSPar and PGS and its subsidiaries have paid all Taxes required to be paid by it, and no such amounts are past due or delinquent as of the date hereof. Except as set forth on  Exhibit 5.14 , PGSPar and PGS and/or its subsidiaries are not parties or

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subject to any assessment, collection or pending action, proceeding or claim which in any way may result in any Liability to Buyer, PGSPar and PGS and/or its subsidiaries. For purposes of this Agreement, “ Taxes ” shall mean any federal, state, value-added tax, gross sales tax, import tax, export tax, financial operations tax, service tax, welfare contributions and other real estate taxes and respective interest, penalty or addition thereto.

5.15        Labor Related Matters.     All employees of PGSPar and PGS and its subsidiaries, as applicable, have opted for the Employees' Severance Fund - " FGTS " ( Fundo de Garantia por Tempo de Serviço ) and all of them have settled their rights for years of service prior to such option. No labor or social security indemnities are due by PGSPar and PGS and/or by its subsidiaries to any party who may have rendered services to them. PGSPar and PGS and/or its subsidiaries have no employees with special employment contracts, nor employees or consultants or independent workers rendering services to them under special conditions that may give rise to a Liability not included in the Financial Statements. Each employee of PGSPar and PGS and/or its subsidiaries is regularly registered as such in the proper registry books, together with his/her corresponding salary and benefits, all in compliance with applicable Laws and regulations. PGSPar and PGS and its subsidiaries have obtained, as the case may be, all registrations and filings and have taken all necessary actions required under all applicable social security and labor laws regulations with respect to such employees. Except as set forth in  Exhibit 5.15 (a) , PGSPar and PGS and/or its subsidiaries are not parties to any collective bargaining agreement or agreement of any kind with any union or labor organization relating to PGSPar and PGS and/or its subsidiaries. Other than as set forth in  Exhibit 5.15 (b) , PGSPar and PGS and/or its subsidiaries are not parties to any labor dispute which may create a Liability to Buyer, PGSPar and PGS and/or its subsidiaries. There are no employees of PGSPar or PGS and/or its subsidiaries that work in similar position, receiving different salaries, except in compliance with local labor contracts with unions.

5.15.1.        Employees’ Benefits.    Exhibit 5.15.1 contains a complete and accurate list of all employee benefits extended to the employees of PGSPar and PGS and/or its subsidiaries which are presently in force, as well as a detailed description thereof (the “ Benefit Plans ”). PGSPar and PGS and its subsidiaries have performed all of their obligations under the Benefit Plans and have made the appropriate entries in the Financial Statements for all obligations and liabilities under the Benefit Plans. PGSPar and PGS and its subsidiaries have timely paid all amounts due to the social security and severance authorities (“ INSS ” and “ FGTS ”, respectively).

5.15.2        Pension Plan.    PGSPar and PGS and/or its subsidiaries do not maintain nor have maintained any pension plan in connection with their employees.

5.16        Books and Records.    The accounting books, minute books, and other records of PGSPar and PGS and/or its subsidiaries are complete accurate and correct and have been maintained up-to-date in accordance with customary business practices and with all applicable Laws. The minutes of the meetings of PGSPar and PGS and its subsidiaries reflect accurate and complete records of all meetings held by, and corporate actions taken by the partners of PGSPar and PGS and/or its subsidiaries. The accounting system used by PGSPar and PGS and/or its subsidiaries complies with the requirements of the Brazilian Federal, State and Municipal tax authorities.

5.17        Absence of Undisclosed Liabilities.    PGSPar and PGS and its subsidiaries have no Liabilities or obligations of any nature related to their business, except for liabilities or obligations reflected or reserved against in the Financial Statements or disclosed in other items of Exhibits hereto.

5.18        Absence of Certain Changes and Events.

5.18.1        Except as set forth in Exhibit 5.18.1, since December 31, 2012 there has been no:

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(a)    declaration or payment of any dividend or other distribution or payment in respect of the quotas of PGSPar and PGS or its subsidiaries;

(b)    amendment to the charter (contrato social)of PGSPar or PGS and/or of its subsidiaries, other than those caused by the ordinary course of business;

(c)    payment or increase by PGSPar or PGS and/or its subsidiaries of any bonuses, salaries, or other compensation to any partner or director, officer, or employee or entry into any employment, or similar contract with any director, officer or employee;

(d)    adoption of any Benefit Plan;

(e)    IRS Form 8832 election with respect to PGSPar with an effective date 60 months or less prior to the Closing Date; or

(f)    IRS Form 8832 election with respect to PGS with an effective date 60 months or less prior to the Closing Date.

5.18.2        Since December 31, 2012, PGSPar and PGS and its subsidiaries' business has been conducted only in the ordinary course and there has been no:

(a)    sale, lease or other disposition of any assets of PGSPar or PGS and/or its subsidiaries;

(b)    cancelation or waiver of any claims or rights with a value to PGSPar or PGS and/or its subsidiaries; the execution of any agreement involving amounts which exceed one hundred thousand Reais (R$ 100,000.00) per year;

(c)    material adverse change in the business, operations, properties, assets, or conditions of PGSPar or PGS and/or its subsidiaries' business; and

(d)    event or circumstances that may result in such a material adverse change to PGSPar or PGS and/or its subsidiaries' business.

5.18.3    As of the Closing Date the combined net working capital of both PGSPar and PGS and its subsidiaries will be consistent with past practices and sufficient to operate their business.

5.18.3.1    As of the Closing PGSPar and PGS and its subsidiaries will not have any debt or liabilities other than those reflected in the Financial Statements and trade payables incurred subsequent to the date of the Financial Statements in the ordinary course of business consistent with past practices.

5.19        Securities.    Except as set forth in Exhibit 5.19, PGSPar and PGS and/or its subsidiaries have not undertaken any Liabilities or provided any kind of securities or guarantees on behalf or in favor of any third parties.

5.20        Environmental Matters. Sellers represent that:

(a)    to their Best Knowledge, PGSPar and PGS and its subsidiaries are in compliance with all Environmental Laws in effect as of the date hereof, and no condition exists or event has occurred which would constitute a violation of or give rise to any lien or encumbrance under any Environmental

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Law that could represent significant damages and/or losses to PGSPar and PGS and its subsidiaries' business.

(b)    to their Best Knowledge, PGSPar and PGS and its subsidiaries, including all their branches, are in possession of all permits, licenses, approvals, consents or other authorizations required by or pursuant to any applicable Environmental Law (each an “ Environmental Permit ”) required for the conduct or operation of their business, in the way they are presently conducted, and are in compliance with all of the requirements and limitations included in such Environmental Permits. All Environmental Permits are in full force and effect.

(c)    PGSPar and PGS and its subsidiaries have not received any written notice from any Governmental Body or any other Person that any aspect of their operations are in violation of any Environmental Law or Environment Permit, or that they are responsible for the cleanup or remediation of any substance at any location;

(d)    to their Best Knowledge, the areas of land owned by or leased by PGSPar or PGS and its subsidiaries are not polluted or contaminated in such a way that such pollution or contamination could result in any present or future obligation to clean up, or to create any Liability towards Buyer, PGSPar or PGS and its subsidiaries or any third party;

(e)    Except as provided in Exhibit 5.20.(e), PGSPar and PGS and its subsidiaries are not a party in any litigation or proceedings in any court, judicial or administrative, involving a demand for damages, injunctive relief, penalties, or other potential Liability with respect to violations of any Environmental Law in connection with its business and operations; and

(f)    to their Best Knowledge, PGSPar and PGS and its subsidiaries have filed on time all reports and notifications required to be filed with respect to all the properties and facilities where their business are conducted and have generated and maintained all required records and data under all applicable Environmental Laws.

5.21        Real Properties and Constructions.    All real properties owned by PGSPar and PGS and its subsidiaries, including the respective constructions, are duly registered in the enrollment certificates with the applicable Real Estate Registry Offices and are free and clear of any charges and Liens of any kind.

5.22        Business with Related Parties.    Except as provided in Exhibit 5.22, there is no contract, agreement or arrangement currently in effect between, on the one side, PGSPar and PGS and/or its subsidiaries, and, on the other, any of the Sellers, descendants, Affiliates or relatives up to the third degree, its direct or indirect subsidiaries, by any such persons. Except as otherwise agreed by the Parties between this date and the Closing Date, all related party agreements listed in  Exhibit 5.22  will be terminated on or prior to Closing.

5.23        [Intentionally left blank.]

5.24        Foreign Corrupt Practices Act. The Stayers acknowledge that they have completed training on the United States Foreign Corrupt Practices Act. None of the Sellers, PGSPar, PGS, their subsidiaries, or any other Person or entity acting on behalf of any of PGSPar, PGS or their subsidiaries, has made any improper payment, directly or indirectly, to any government official that would violate any Law or regulation of Brazil or that would constitute a violation of the United States Foreign Corrupt Practices Act.

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5.25        Stayers’ Joint Obligations and Representation. All of the Stayers’ rights and obligations hereunder are jointly and severally undertaken by them and shall be simultaneously enforceable as a whole by them, or against all of them, as the case may be. All of the Stayers, as a condition for the execution of this Agreement, hereby irrevocably appoint Peter as their attorney in fact in order to represent them before the Buyer in every and all acts or transactions necessary to comply with all of the terms, conditions and obligations set forth herein.

5.26        All Information. Sellers represent that (i) in this Agreement and the Exhibits hereof they are offering all information due and relevant in relation to PGSPar and PGS and its subsidiaries and that, to their Best Knowledge, no relevant data or information have been omitted that a buyer of shares and quotas in good faith might expect to receive; (ii) no representation or warranty in this Agreement omits to state a material fact necessary to make the statements herein not misleading; and (iii) there is no fact known to Sellers or Stayers that adversely affects the assets, business, financial condition, or results of operations of PGSPar and PGS and its subsidiaries that have not been disclosed in this Agreement.

5.27         Brokers and Finders. Except as provided in Exhibit 5.27, no broker, finder, financial advisor or other Person acting in a similar capacity has participated on behalf of any of the Sellers, Stayers, PGSPar, PGS or its subsidiaries in bringing about the Transaction herein contemplated, rendered any services with respect thereto or been in any way involved therewith. Any broker, finder or financial advisor fee that a third party might claim to have a right to against Buyer, PGSPar, PGS or its subsidiaries, except for the fees related to the Olimpia Partners agreement mentioned in  Exhibit 5.27 , which will be paid with funds deposited on the Closing Date in the Indemnity Escrow Account as set forth in Sections 2.3.1.1; 3.1(e) and 7.10 of this Agreement, will be solely borne by Sellers and in no event by Buyer, PGSPar, PGS or its subsidiaries. Sellers agree to hold Buyer, PGSPar and PGS and its subsidiaries, as well as their Affiliates, directors, officers, employees and representatives, harmless and to indemnify Buyer, PGSPar, PGS or its subsidiaries for any Liabilities other than those related to the agreement(s) listed in  Exhibit 5.27 .

5.28        Government Approvals. No action, consent or approval of, registration or filing with, or any other action by, any governmental authority will be required prior to the Closing in connection with the performance by the Sellers or Stayers of this Agreement or in connection with the transactions contemplated hereby. Sellers or Stayers are not a party to nor has interest in any economic group of companies which had gross revenues in Brazil exceeding seven hundred and fifty million Reais (R$750,000,000.00) in the year 2012.

Sellers and Stayers represent that all representations, warranties and covenants contained in this Agreement and in particular in this Section 5 are valid and correct on this date and will be valid and correct on the Closing Date.

6.    Representations and Warranties of Buyer

Buyer hereby represents and warrants as follows:

6.1        Organization, Good Standing and Parent Company Undertaking. The Buyer is a limited liability company duly incorporated, validly existing and in good standing under the Law of Brazil. Buyer is an Affiliate of Parent Company, and Buyer acknowledges that this affiliation was critical to Sellers’ decision to enter into this Agreement. Parent Company executes this Agreement for the purpose of irrevocably guaranteeing, severally and/or jointly, Buyer’s and BPar’ obligations under this Agreement.

6.2        Quotas to be Issued.    Buyer and Parent Company represent that the Buyer’s quotas to

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be issued upon the Post Closing Merger of PGSPar by Buyer and to be delivered to the Stayers in exchange for the remaining Stayers’ Quotas in PGSPar will be free and clear of any Restriction, subject only to the terms and conditions expressly set forth in this Agreement and in the Buyer’s corporate charter ( contrato social ). Upon the Post Closing Merger, Stayers shall receive Buyer’s quotas as set forth in  Exhibit 2.4  and will be the lawful owner of said quotas free and clear of any Restriction, subject to the terms and conditions of this Agreement, as well as to the Quotaholders' Agreement per Section 2.4. The delivery of said quotas to the Stayers pursuant to this Agreement will transfer to the Stayers the full title to all quotas listed in  Exhibit 2.4 .  

6.3        Power and Authorization.    Buyer has full corporate power and authority to enter into this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement by Buyer and Buyer’s performance of its obligations hereunder have been duly authorized by all necessary corporate action of the Buyer. No other action is necessary to authorize the execution, delivery and performance of this Agreement by Buyer.

6.4.        Binding Effect.     This Agreement constitutes the legal, valid and binding obligations of Buyer enforceable in accordance with its terms.

6.5        No Violation. Approvals.    The execution, delivery and performance, by Buyer of all obligations undertaken herein do not:

(a)    violate or conflict with any provision of Buyer’s charter (contrato social);

(b)    violate, breach, or otherwise constitute or give rise to a default of any material contract, commitment or any other obligation to or under which Buyer is a party or is bound;

(c)    violate or conflict with any statute, order, Law, rule, judgment or decision of any court or other governmental or regulatory authority to which Buyer is subject to; or

(d)    require any consent, approval or authorization of, notice to, or registration with any person, entity, court or Governmental Body.

All representations, warranties and covenants contained in this Agreement and in particular in this Section 6 will be valid and correct on the Closing Date.

6.6        Business of Buyer. Buyer agrees that for so long as Stayers own quotas in Buyer, Buyer will limit the scope of its operations to owning and operating Outback Steakhouse® Restaurants, unless Buyer obtains written consent from all remaining Stayers.

6.7        Government Approvals. No action, consent or approval of, registration or filing with, or any other action by, any governmental authority will be required prior to the Closing in connection with the performance by the Buyer of this Agreement or in connection with the transactions contemplated hereby. Buyer is not a party to nor has interest in any economic group of companies which had gross revenues in Brazil exceeding seven hundred and fifty million Reais (R$750,000,000.00) in the year 2012.

Buyer represents that all representations, warranties and covenants contained in this Agreement and in particular in this Section 6 are valid and correct on this date and will be valid and correct on the Closing Date.

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7.    Acquisition of the Remaining Quotas

7.1        Parties Acknowledgment. The Parties acknowledge that upon the completion of the Transaction described in this Agreement and the Post-Closing Merger, Stayers will effectively hold ten percent (10%) free and clear interest in Buyer (including indirectly all of Buyer’s subsidiaries) and that the Buyer will own a ninety percent (90%) interest in PGS and indirectly its subsidiaries (the Stayers’ 10% interest in Buyer referred to as “ Remaining Interest ”).

7.1.1        Stayers, Buyer and BPar hereby expressly authorize Peter to sell part of his Remaining Interest to the minority quotaholders of CLS Săo Paulo, CLS Rio de Janeiro, CLS Brasília and CLS Sul at the time they are admitted to the corporate capital of Buyer as part of the Post Closing Merger, which structure will be mutually agreed by Stayers and BPar between Closing and Post Closing Merger.

7.2        Peter’s & Salim’s Puts. Peter and Salim shall individually and independently have the right, by giving previous written notice to BPar, during the exercise period starting January 1, 2017 and ending on March 31, 2017, to require BPar to purchase the totality and no less than the totality of their share of the Remaining Interest at a price equal to seven point two (7.2) multiplied by the EBITDA of Buyer and PGS and its subsidiaries for the four (4) full calendar quarters immediately preceding the date of the relevant notice multiplied by the percentage of equity interest then held by them in the Buyer. In addition to and consistent with the above rights in this section 7.2, Salim may exercise up to twelve and one-half percent (12.5%) of his Put quota rights each calendar year beginning next year by giving previous written notice to BPar during the notice period provided for Management Team Puts in Section 7.6 below; such right is cumulative to the extent it was not exercised in one year it accumulates for subsequent years..

7.2.1        Fair Market Valuation Appraisal Election. BPar, Peter or Salim may challenge whether the valuation formula in Article 7 represents a fair market value for the quotas being sold/purchased, provided that such challenge is included in the notice to exercise their option provided in this Section 7 or by separate notice by the other Party within five (5) days after receipt of an Put/Call notice. Within thirty (30) days of a BPar, Peter or Salim's exercise of this right to challenge (" FMV Appraisal Election ") BPar and the respective Seller shall each nominate a Brazilian licensed business appraiser. Within twenty (20) days thereafter, these two nominated appraisers shall then agree upon a third, independent qualified Brazilian licensed business appraiser. This third appraiser shall conduct an appraisal of the arms-length fair market value (based on similar ownership interests and structures in nationally franchised restaurants in Brazil) of the quotas requesting to be sold to BPar. The person requesting the FMV Appraisal Election shall pay the cost of the appraisal. Absent fraud, undue influence or a clearly unreasonable conclusion as to the valuation, said third party valuation shall prevail, with disputes resolved pursuant to dispute provisions in Section 11.

7.2.2        For the purpose of calculating the Remaining Interest, no effect shall be given to any quota issuance of Buyer used for a Major Matter for which Peter and Salim have elected to Carve Out pursuant to Section 8.2.(ii). The put option exercised by Peter and/or Salim, as the case may be, shall take place as soon as practicable, but no later than ninety (90) days from the receipt by BPar of the relevant notice, and the payment shall be made in cash, in immediately available funds, without any deduction or retention of whatsoever nature, except as provided in Section 7.10, and subject to the Post-Indemnity Escrow Deduction, defined in Section 9.6.1, simultaneously with the transfer of their equity interest in the Remaining Interest.

7.3        BPar’s Peter & Salim Call.    BPar shall have the right, by giving written notice to Peter and/or Salim, during the exercise period starting on January 1, 2017 and ending on June 30, 2017, to require Peter and Salim to sell the totality and no less than the totality of their quotas of the Remaining Interest at a price equal to seven point two (7.2) multiplied by the EBITDA of Buyer and PGS and its

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subsidiaries for the four (4) full calendar quarters immediately preceding the date of the relevant notice multiplied by the percentage of equity interest then held by each of them in Buyer. The call option exercised by BPar with respect to Peter and/or Salim’s share of the Remaining Interest, as the case may be, shall take place as soon as practicable, and no later than ninety (90) days from the issuance by BPar of relevant notice, and the payment shall be made in cash, in immediately available funds, without any deduction or retention of whatsoever nature, except as provided in Section 7.10, and subject to the Post-Indemnity Escrow Deduction, defined in Section 9.6.1, simultaneously with the transfer of their equity interest in the Remaining Interest.

7.4        Acceleration for Failure to Perform Services.    Notwithstanding the foregoing, if at any time prior to December 31, 2015 either Peter or Salim fails to provide services to Buyer, PGS and its subsidiaries to the same extent as provided as of the date hereof for any reason other than death or disability or Termination Without Cause, then the exercise period of BPar’s Peter & Salim Call shall be accelerated to an exercise period starting on the date of said failure and ending six (6) months thereafter; and the purchase price shall be seven point two (7.2) multiplied by the EBITDA of Buyer and PGS and its subsidiaries for the four (4) full calendar quarters immediately preceding the date of the accelerated notice multiplied by the percentage of equity interest then held by each one of them in Buyer. The accelerated call option exercised by BPar with respect to Peter and/or Salim's share of the Remaining Interest, as the case may be, shall take place as soon as practicable, but no later than ninety (90) days from the issuance by BPar of relevant acceleration notice, and the payment shall be made in cash, in immediately available funds, without any deduction or retention of whatsoever nature, except as provided in Section 7.10, and subject to the Post-Indemnity Escrow Deduction, defined in Section 9.6.1, simultaneously with the transfer of their equity interest in the Remaining Interest. For the avoidance of doubt the provision of this Section shall apply in case Peter or Salim fail to provide services for Buyer, PGS and its subsidiaries to the same extent as provided on the date hereof (twenty five percent (25%) of business time for Peter and one hundred percent (100%) of business time for Salim) other than by reason of death, disability or Termination Without Cause.

7.5        BPar’s Management Team Call. BPar shall have the right, by giving written notice to the Management Team, individually or collectively, during the exercise period starting January 1, 2018 and ending June 30, 2018, to purchase from the Management Team, individually or collectively, their respective share in the Remaining Interest at a purchase price equal to seven point two (7.2) multiplied by the EBITDA of Buyer and PGS and its subsidiaries for the four (4) full calendar quarters immediately preceding the date of the relevant notice multiplied by the percentage of their ownership in the Remaining Interest. The closing shall take place as soon as practicable, and no later than ninety (90) days from the issuance by BPar of relevant the notice, and the payment shall be made in cash, in immediately available funds, without any deduction or retention of whatsoever nature, except as provided in Section 7.10, and subject to the Post-Indemnity Escrow Deduction, defined in Section 9.6.1, simultaneously with the transfer of title to the Remaining Interest.

7.6        Management Team Put. Beginning in 2015, the Management Team, individually and independently, shall have the right, by giving written notice to BPar during Buyer’s declared trading window for section 16 Officers and Designated Employees following the Parent Company’s SEC (annual) 10-K filing release, to require BPar to purchase up to twenty-five percent (25%) of the respective Management Team member’s Remaining Interest quotas on the Closing Date at a price equal to seven point two (7.2) multiplied by the EBITDA of Buyer (including PGS and its subsidiaries) for the four (4) quarters immediately preceding the notice. The closing shall take place within thirty (30) days after the notice, and the payment shall be made in cash, in immediately available funds, except as provided in Section 7.10, and subject to deduction or retention provided for in the Post-Indemnity Escrow Deduction, defined in Section 9.6.1. This Management Team Put right shall arise each year during the period noted in

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this Section 7.6 in the following percentages of the Remaining Interest quotas on the Closing Date: 2015 – up to 25%; 2016 - up to 50%; 2017 - up to 75% ; and 2018 & thereafter - up to 100%. Any member of the Management Team may elect a FMV Appraisal Election and challenge, consistent with Section 7.2.1, provided such election is included in the notice of exercise of the put/call right provided in this Section 7.6.

7.7        Acceleration Due to Death, Disability, Termination With and Without Cause, and Voluntary Resignation .    Notwithstanding the foregoing, (a) in the event of death, disability or Termination Without Cause of any of the Stayers, then the exercise period of Peter's Put and Salim’s Put and BPar's Peter’s Call and BPar's Salim’s Call and the BPar's Management Team Call and the Management Team Put, for the stake held by the dead, incapacitated or terminated, shall be accelerated to an exercise period starting on the date of death, determination of disability or Termination Without Cause and ending six (6) months thereafter, and the purchase price shall be seven point two (7.2) multiplied by the EBITDA of Buyer and PGS and its subsidiaries for the four (4) full calendar quarters immediately preceding the date of the accelerated notice multiplied by the percentage of ownership held by the dead, incapacitated or terminated, as the case may be, in the Remaining Interest; (b) in the event of Termination With Cause or voluntary resignation of one or more than one of the Stayers, the exercise period of applicable BPar’s call option for the percentage of ownership held by the terminated With Cause or the voluntary resignor, in the Remaining Interest, shall be accelerated to an exercise period starting on the date of Termination With Cause or voluntary resignation and ending six (6) months thereafter; and the purchase price shall be six (6) multiplied by the EBITDA of Buyer and PGS and its subsidiaries for the four (4) full calendar quarters immediately preceding the date of the date of notice multiplied by the percentage of ownership held by the terminated With Cause or the voluntary resignor in the Remaining Interest. The Stayers and BPar hereby understand and agree this multiple of six (6) incorporates by agreement an agreed to penalty of one point two (1.2) less than the otherwise applicable seven point two (7.2) multiple provided for purchase/sale of quotas under the terms of this Agreement. The closing of the transactions contemplated in this Section 7.7 shall take place as soon as practicable, and no later than ninety (90) days from the issuance of the relevant notice, and the payment shall be made in cash, in immediately available funds, without any deduction or retention of whatsoever nature, except as provided in Section 7.10, and subject to the Post-Indemnity Escrow Deduction, defined in Section 9.6.1, simultaneously with the transfer of title to the Remaining Interest.

7.8        The delay in the payments referred to in all of the sub items of this Section 7 shall automatically subject BPar to pay to the Stayers, on top of the outstanding amount and without any further notice or formality, a penalty equivalent to two percent (2%) of the outstanding amount plus interests equal to the Brazilian SELIC interest rate on a “pro rata dia” basis during the period of the delay; provided, that a grace period of ten (10) business days have been granted to BPar to cure such delay in the payments. BPar acknowledges that such delay penalty and interests are a reasonable estimate of the loss that would be suffered by the Stayers as a result of such a delay. The above-mentioned delay penalty and interests shall not impair or limit the right of the Stayers to seek any other available remedy, including specific performance, injunctions, or any other precautionary relief or indemnification for the losses and damages caused by the delay and that exceed such penalty and interests.

7.8.1.        Such penalty and interests will not apply, in any situation whatsoever, if there is a material disagreement between BPar and the Stayers in regards to the amounts of the payments related to the put and call options, and in which case such dispute shall be resolved per the provisions in Article 11.

7.9.        [Intentionally left blank.]

7.10.        All amounts referred to in this Section 7 shall be paid by BPar net of the amounts due to Olimpia Partners under the agreement mentioned in  Exhibit 5.27 , as well as net of the respective

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applicable taxes and withholding income tax related to the payment of the Olimpia’s fee.

8.    Governance

8.1        Governance Prior to the Payment of the purchase price for the Remaining Interest. Until such time as the purchase price for the Remaining Interest is paid to Peter and Salim or June 30, 2017, whatever occurs later, Buyer shall be governed by a Board of Directors (“ Board ”) that shall consist of six (6) members, of which two (2) shall be Peter and Salim for as long as each one of them remain a quotaholder of Buyer, and four (4) shall be appointed by BPar. The Board shall meet no less than four (4) times in every calendar year and shall be responsible to approve the Annual Operating Plan of Buyer, which will govern the performance of management and executive compensation.

8.2        Majority decision and Carve Out. In the event the Board or the quotaholders of Buyer vote to approve a Major Matter and Peter and Salim vote in opposition to approval of such Major Matter, then each of them shall have the right to alternatively (i) accelerate the exercise of the Peter’s & Salim’s Puts in the terms provided in Section 7.2 above, or (ii) request that the economic effect of said Major Matter is excluded from Buyer’s EBITDA for all of the purposes of this Agreement (calculating the purchase price for the Remaining Interest) (“ Carve Out ”). Such right to be exercised within thirty (30) days of such Board action and if not exercised within this thirty (30) day period such right shall expire and terminate. If each Annual Operating Plan of Buyer approved by the Board cannot be met or exceeded due to insufficient cash ascribed for the approval of a Major Matter by the quotaholders of Buyer without Peter’s and Salim’s approval, and Peter and Salim have elected to Carve Out and not elected to accelerate the Peter’s & Salim’s Puts under Section 7.2 above, the Buyer shall arrange for an intercompany loan from one of its parent or Affiliate companies or to enter into a suitable third party financing, in an amount equal to the lesser of (i) the amount of the shortfall to meet or exceed the Annual Operating Plan of Buyer approved by the Board, or (ii) the amount ascribed to the Major Matter.

8.2.1    In the event Peter and Salim elect a Carve Out, the independent auditors of BPar shall be engaged to determine a method for implementing the Carve Out and calculating the EBITDA for purposes of determining the purchase price for the Remaining Interest. If either Peter and Salim, on one hand, or BPar, on the other, disagree with the method proposed by the indicated independent auditor, such Person shall have the right, at their expense, to engage another independent auditor. If such auditor and the BPar’s independent auditor do not reach an agreement on the method to implement the Carve Out, and if the opinions of the independent auditors contains a difference lower than 10% the average shall be adopted; if the difference is greater than 10%, the second auditor and BPar’s auditor shall agree on the appointment of a neutral third independent auditor to issue its opinion.

8.2.1.1    Once the third independent auditor issues its opinion, Peter, Salim and BPar undertake to accept as final and binding the average of the two closest opinions among the three opinions issued by the independent auditors.

8.2.2    Carve Out Applicable in all Circumstances under Sections 7 and 8 of this Agreement.The Parties hereby agree that the Carve Out shall apply to all circumstances in which the calculation of a payment to the Stayers shall be made under the terms of Sections 7 and 8 of this Agreement. In this sense, the Carve Out shall be used to calculate the amount of the purchase price for the Remaining Interest in the exercise of the put/call options set forth herein, either at maturity or accelerated, if it is the case.

8.3    The Parties agree to mention in the written minutes of the quotaholders’ meetings and of the Board’s meetings all approvals of Major Matters as set forth in Section 8.2 above as well as the decisions referred to in Section 8.2 above.

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8.4        Amendment to the charters to change Governance Rules.    The charter (contrato social) of Buyer shall provide that the approval of quotaholders holding ninety five percent (95%) of the quotas of Buyer shall be required to amend their provisions regarding (i) governance structure provided for under Section 8.1; and (ii) reorganizations, including mergers and reverse mergers. The Board shall decide the way Buyer should vote at all meetings of quotaholders of Buyer’s subsidiaries.

8.5        Business of Buyer.    Until such time as the purchase price for the Remaining Interest is paid to Peter and Salim, whatever occurs later, Buyer undertakes to engage by itself and its wholly owned subsidiaries the operation and development of the Outback Steakhouse® business in Brazil. If any Affiliates of Buyer, that are not wholly owned subsidiaries of Buyer, are used to carry out the Outback Steakhouse® business in Brazil, Stayers shall receive ownership to the same extent as if Buyer were the sole vehicle.

8.6        Quarterly Accounting for QPA Adjusted EBITDA. The Board shall review and approve each calendar quarter, until all Stayers’ Remaining Interests are purchased by BPar, recalculation of the Buyer’s EBITDA, for purposes of post-Closing quota price purchase EBITDA calculations under Section 7 of this Agreement, and shall take into account all non-recurring items during the quarter. For purposes of clarity, non-recurring charges/credits will also include any items which are charged, paid, expensed, amongst others, not related to the immediately preceding quarter.

9.    Indemnification

9.1        Indemnification by Sellers.    Sellers, jointly and severally, herein, assume an obligation to indemnify and promptly defend and/or hold harmless Buyer, PGSPar, PGS and its subsidiaries, as well as their respective Affiliates, predecessors, successors and assigns, as the case may be, for any costs, (including costs of litigation and reasonable fees and expenses of attorneys, accountants and other experts), losses, expenses, damages, reimbursements, fees or other types of obligations, including reasonable attorney expenses and fees (collectively " Losses ") incurred by the Buyer, PGSPar, PGS or its subsidiaries, as well as their respective Affiliates, predecessors, successors and assigns, as in consequence or relative to:

(i)    inaccuracy, infringement, mistake or breach of, any representation or warranty made by Sellers, herein or in any Exhibit, document or agreement executed by Sellers and delivered to Buyer pursuant hereto;

(ii)    any breach of any covenant or agreement of Sellers contained herein or in any Exhibit, document or agreement executed by Sellers and delivered to Buyer under the terms of this Agreement;

(iii)    any debt, Liabilities, penalties, fines, Taxes, judgment or other obligations of any kind or nature of PGSPar and Sellers relating to actions or inactions taken place prior to the Closing Date, as well as any tax Liability (including penalty, interests and other costs) of Sellers and/or any of the companies Affiliated to Sellers resulting from the consummation of the Transaction hereunder or from mergers, spin offs, capital reductions and corporate reorganizations, among others, involving Sellers or PGSPar, or any company in which Sellers hold or held direct or indirect equity interest;

(iv)    (a) any debts, Liabilities, penalties, fines, Taxes, judgments or other obligations of any kind or nature of PGS or its subsidiaries arising from acts, facts, activities, omissions or business of PGS or its subsidiaries, prior to the Closing Date, and  (b)  any tax Liability (including penalty, interests

 

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and other costs) of PGSPar, PGS or its subsidiaries resulting from the consummation of the merger of PGS’ subsidiaries, except for those potential Liabilities related to the use, as tax deductible expense, of the goodwill generated by the Transaction hereunder; and

(v)    all consents or approvals from, or notices to, third parties eventually necessary for completion of the transactions contemplated under this Agreement, or to be sent, as applicable, in accordance with the following agreements: (a) consents to be obtained with respect to lease agreements for restaurants BZ14, BZ19, BZ22, BZ25, BZ28, BZ47, BZ49 and BZ50; and (b) notifications to be delivered to third parties prior to Closing in connection with lease agreements for restaurants BZ05, BZ10, BZ16, BZ24, BZ30, BZ31, BZ33, BZ35, BZ39, BZ40, BZ41, BZ42, BZ45, BZ46, BZ48 and BZ60 (Castelo Premium Outlet).

Sections 9.1.(i) to (v) referred hereinafter as “Sellers' Contingencies”.

9.1.1    Limitation of Sellers’ Obligation to indemnify.    The obligation of Sellers to indemnify the Buyer for Sellers’ Contingencies is limited to one hundred percent (100%) of Sellers’ Contingencies referred to in 9.1.(i), (ii), (iii) and (v) above, and to fifty percent (50%) of Sellers’ Contingencies referred to in 9.1.(iv) above.

9.2        Indemnification by the Buyer.    The Buyer, herein, assumes an obligation to indemnify and promptly defend and/or hold harmless Sellers, PGS or its subsidiaries, as the case may be, for Losses incurred by them in consequence or relative to:

(i)    inaccuracy, infringement, mistake or breach of any representation or warranty made by Buyer herein or in any exhibit, document or agreement executed by Buyer and delivered to Sellers pursuant hereto; and/or

(ii)    any breach of any covenant or agreement of Buyer contained herein or in any exhibit, document or agreement executed by Buyer and delivered to Sellers under the terms of this Agreement;

(iii)     any act, fact or omission occurring prior to the Closing by Buyer and/or any company belonging to Buyer’s economic group and/or company deemed to be a predecessor of Buyer for which successor liability may be ascribed to Sellers or to PGS or its subsidiaries, or by any company in which Buyer and/or any of the companies belonging to Buyer’s economic group hold or held direct or indirect equity participation, for which liability may be ascribed to Sellers or PGS or its subsidiaries, whether by reason of unpaid Taxes, claims arising out of employment or commercial representation, customer warranty claims, product liability, corporate reorganizations, including mergers and spin offs, environmental matters or any other reason. For the sake of clarity, Sellers will not undertake, directly or indirectly, any Losses suffered or incurred as a result of any act, fact or omission occurring prior to the Closing by Buyer and/or any of the companies belonging to Buyer’s economic group, even if the Losses result from Liabilities or obligations incurred in the ordinary course of business; and/or

(iv)     any tax Liability (including penalty, interests and other costs) related to the use, as tax deductible expense, of the goodwill generated by the Transaction hereunder, of Buyer and/or any of its parent companies resulting from the consummation of the Transaction hereunder or from mergers involving Buyer, PGSPar, PGS or its subsidiaries, or any company in which Buyer and/or any of the companies belonging to Buyer’s economic group hold or held direct or indirect equity interest.

Clauses 9.2.(i) to (iv) shall be hereinafter referred to as "Buyer's Contingencies".

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9.2.1    Buyer shall be liable for Losses as set forth in Section 9.2.(iii) and (iv) above whether or not Sellers and/or its advisors knew or had reason to know of the corresponding Liabilities, as a result of the disclosure by Buyer in this Agreement or otherwise.

9.3        Administration of the Claims

9.3.1    If at any time one of the Parties ("Indemnified Party") intends to obtain a compensation for any of the reasons specified in Sections 9.1(i), or (ii), or 9.2(i) or 9.2 (ii), above, this Indemnified Party should send a prior notice, in writing, to the other party (" Indemnifying Party "), containing the details regarding the nature of the demand and the possible amount involved (" Notice "). The Indemnifying Party should respond, in writing within ten (10) days after the date of receipt of the notice, whether it will (i) make the payment of the amount involved or take the appropriate corrective measures in relation to such event, if it is the case, or (ii) refuse to accept the obligation, explaining its reasons. In case the Indemnifying Party does not submit a response within the term of ten (10) days, such omission shall be considered as accepting the obligation. If the Parties do not achieve an agreement as for the solution of the demand, the subject shall be decided through the mechanism for resolution of disputes set forth in Clause 11 of this Agreement.

9.3.2    In case of claim for an indemnity based in Sections 9.1.(iii) or (v), or 9.2.(iii) or (iv), the Indemnified Party will notify the Indemnifying Party in writing, in the form of Section 12.1, detailing the nature of the claim and possible amount involved. Such notice shall be made within the shorter of the following terms: 1/3 (one third) of the period legally stipulated to presenting the defense or 5 (five) business days as from the acknowledgement of the law suit (“ Notice of Claim ”).

9.3.2.1        If a Sellers' Contingency (subject to the limitations of Sellers' obligation to indemnify set forth in Section 9.1.1 above) or a Buyer’s Contingency results or come to result in the filing of a claim or administrative procedure against Sellers and/or Buyer and/or PGSPar and/or PGS and/or its subsidiaries, the Sellers and/or Buyer, as the case may be, at their own expense and in their own name or in the name of PGSPar, as the case may be, will have the right to (i) assume the control of the defense and answer to the referred claim, hiring lawyers at their expenses, for this purpose, upon prior approval of their names by the Sellers or Buyer, as the case may be, and providing, when this is the case, the corresponding court deposit or providing the corresponding guarantee in order to allow PGSPar, PGS and its subsidiaries to continue their business and allowing them to obtain their clearance certificates eventually necessary for their regular operations, (ii) negotiate an agreement or settlement regarding that claim or otherwise resolve the claim or administrative procedure, including by amnesty; (iii) immediately pay the amount involved in the claim. It is understood that Buyer and Sellers shall be able to use the funds deposited in Indemnity Escrow Account to make the payments referred to in “i”, “ii” and “iii” of this subsection 9.3.2.1, as set forth in the Indemnity Escrow Agreement. In cases where the Sellers or the Buyer, as the case may be, are not interested in exercising any of such rights, they shall notify the other party, PGSPar, PGS and its subsidiaries (as the case may be) in this sense, within a term not shorter than 1/3 (one third) of the period legally granted to the defendant for filling the lawsuit defense, so that the Sellers, Buyer, PGS and/or its subsidiaries (as the case may be) can assume the defense of the referred lawsuit or administrative procedure, also with powers to negotiate agreements and pay the amounts involved in the claim. Absence of notices by the Sellers or Buyer, as the case may be, within the terms referred above will be considered as a waiver to their rights of assuming the control of the defense related to such claim.

9.3.2.2    In case of filling a defense, execution of agreement or settlement, or payment of a claim as foreseen in Clause 9.3.2.1 above, the obliged party shall keep the other involved parties informed about this fact.

9.4        Duration of Representations and Warranties and of the Obligation to Indemnify. Except

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as otherwise provided for herein, the representations and warranties provided for by the Parties in Sections 5 and 6 above, as well as the obligation to indemnify assumed by the Parties under this Section 9 shall survive the execution of this Agreement, the transfer of quotas, the payment of the Purchase Price and the Post Closing Merger, and shall remain in force and valid for a period of 5 (five) years from the Closing Date. The above-mentioned obligation to indemnify which arises within such five (5) years period, will survive beyond such five (5) years period until said specific event subject to indemnification is duly resolved and satisfied under applicable law. To the extent that:

a)     PGS or its subsidiaries, are entitled to refunds related to tax claims by PGS or its subsidiaries recorded prior to Closing; or

b)     Buyer’s parent company(ies) reduces its tax liability on its U.S. tax return for Brazilian
withheld income taxes on royalty payments made prior to Closing (defined as the difference in the U.S. tax liability as reduced for the withholding taxes and the tax liability calculated without such reduction for such withholding taxes) ;

then fifty percent (50%) of such amounts will be deducted from any Sellers’ Contingencies pursuant to this Section 9, for any obligation to indemnify which arises within the five (5) year period mentioned above (" Offset Amounts "), before using the Indemnity Escrow Amount.

9.5        [Intentionally left blank.]

9.6        Indemnity Escrow Accounts.    Sellers agree and authorize that on the Closing Date, the amount of twenty-one million nine hundred sixty thousand Reais (R$21,960,000.00) from the Purchase Price, as set forth in Section 3.1(c) above (“ Indemnity Escrow Amount ”) will be retained in three (3) escrow accounts (" Indemnity Escrow Account ") which first account shall be held in the name of Peter, the second account in the name of Salim and the third account in the name of Buyer, to guarantee the payment of any potential Losses incurred by Buyer and its Affiliates, predecessors, successors and assigns, as per Section 9 above. The Buyer also agrees to deposit the same amount of twenty-one million nine hundred sixty thousand Reais (R$ 21,960.000,00) at Closing with the Bank in the Indemnity Escrow Account opened in its own name under the Indemnity Escrow Agreement. The Parties agree that on Closing Date the aggregate amounts mentioned above will be solely retained in the name of Peter, Salim and Buyer to allow the post-Closing opening of escrow accounts in the name of each Seller (except FCC, which will be a beneficiary party in the escrow account to be held by Peter) by the Bank, and such escrow accounts shall be held by Buyer and Sellers (individually, except for FCC) in accordance with the Indemnity Escrow Agreement defined below. Upon opening of the remaining escrow accounts in the name of each Seller (except FCC), an amendment to the Indemnity Escrow Agreement will be executed by the Parties and the aggregate amounts deposited in the Indemnity Escrow Accounts opened in the names of Peter and Salim at the Closing Date will be proportionally allocated by the Bank to each escrow account according to  Exhibit 2.3 . From the Closing Date until the execution of the amendment to the Indemnity Escrow Agreement formalizing the effective opening of all escrow accounts, the Parties agree that all the Indemnity Escrow Amount will not be invested. Upon the opening of all escrow accounts, an instruction to the Bank will be jointly sent regarding the proper investment. The rules related to the investment, withdrawing and release of the funds from each Indemnity Escrow Account are established in the attached form of the Indemnity Escrow Agreement ( Exhibit 9.6 ) (" Indemnity Escrow Agreement ") to be entered into between the Bank and the Parties on the Closing Date, the terms and conditions of which shall obey, among others, the following premises:

(a)    The purpose of the Indemnity Escrow Account is to guarantee any Losses related to Sellers' Contingencies, excluding those listed in Sections 9.1(i) and (ii).

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(b)    Except if required to satisfy any of the indemnity events set forth in Section 9 above, or as otherwise provided in the Indemnity Escrow Agreement, any withdrawal or retention of funds from each Indemnity Escrow Account will demand the signature/approval of both Buyer and the respective holder of each Indemnity Escrow Account.

(c)    Should an indemnity event occur – as foreseen in Section 9 – provided that the Buyer certifies to the Bank that the proceedings established in this Section 9 were duly followed by Buyer, Buyer shall have the right, to demand the Bank to release either to Buyer or to PGSPar or to PGS or any of its subsidiaries or to any third party, as applicable, the portion of the Indemnity Escrow Amount necessary for the liquidation of the respective indemnity event.

(d)    Any remaining Offset Amounts shall be used to offset Losses within the Indemnity Escrow Agreements.

9.6.1    Termination of Indemnity Escrow Account.

(a)    The Indemnity Escrow Agreement shall be in effect until the later of (i) Peter’s Put, provided in Section 7.2; (ii) Salim’s Put, provided in Section 7.2; or (iii) if neither (i) or (ii) occurs before three (3) years from Closing. Then at such time, Peter or Salim sells and BPar purchases the quotas of Buyer held by Peter or Salim, the proportional balance for the respective Sellers plus the totality of the proportional accumulated interest paid over the then total existing outstanding balance of the Indemnity Escrow Amount, less any amounts necessary to secure any indemnity events theretofore claimed, in the period, shall be released from each Indemnity Escrow Account and made available to the benefit of Sellers, in the same proportion of their contribution to each Indemnity Escrow Account. Upon both Peter and Salim selling their quotas held in the corporate capital of Buyer pursuant to Section 7.2, the final balance of the Indemnity Escrow Amount shall be distributed to the Sellers and Buyer in the original proportion of their contribution into the Indemnity Escrow Agreement.

(b)    Upon the termination of the Indemnity Escrow Accounts, the follow shall occur:

(i)    Balance. Should any of the Indemnity Escrow Accounts contain a balance beyond the paid or retained for accrued Liabilities, the balance shall be paid proportionately to the Parties based on the original proportion of their contribution into the Indemnity Escrow Agreement, net of any closing fee payable to Olimpia Partners under the agreement mentioned in  Exhibit 5.27  and the respective applicable taxes and withholdings;

(ii)    No Balance and unfunded Liabilities. Should the Indemnity Escrow Account contain no balance and include unfunded Losses, then
 	 	
a)	Any remaining Offset Amounts shall first be applied toward the Losses first be used ;	

b)	Should the Losses exceed the amount in the preceding paragraph (9.6.1(b)(ii)(a)), said Losses shall be deducted proportionately from any amounts paid to pursuant to section 7.2, 7.3 or 7.4 (“ Post Indemnity Escrow Deduction ”).	

9.6.2    Management of the Balance of the Indemnity Escrow Accounts and Offset Amounts. The Parties agree that, as of the Closing Date, Buyer will keep the records and registrations of all amounts retained or released from each of the Indemnity Escrow Accounts or deducted, paid or offset with the Offset Amounts, in the form of a journal entry to be prepared and quarterly updated by the Board, according to

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the terms and conditions to be set forth in the Quotaholders' Agreement.

10.    Other Covenants of the Parties.

10.1.        Expenses.    Each Party hereto shall pay its own fees and expenses incurred in connection with this Agreement, including the fees and expenses of its attorneys, accountants, financial advisors and other professionals.

10.2        Best Efforts.    Subject to the terms and conditions contained herein, each of the Parties hereto agrees to use its best efforts to take, or cause to be taken, all actions reasonably necessary or advisable under applicable Laws to consummate and make effective the Transaction contemplated by this
Agreement.

10.3        Non-Competition.    As long as they are, directly or indirectly quotaholders of Buyer or of any of its subsidiaries or successors, and for a period of two (2) years as of the date they cease to hold any interest in Buyer, PGSPar or PGS or in any of its subsidiaries or successors, Sellers (excluding Bertrand) undertake not to participate, within the territory of Brazil, as partners, shareholders, advisors, employees or in any other capacity, directly or indirectly, in any casual dining restaurant business or any other commercial activity or in rendering of services serving competitors in the casual dining restaurant business.

10.3.1        As long as they are, directly or indirectly, quotaholders of Buyer or of any of its subsidiaries or successors, Stayers undertake not to participate, within the territory of Brazil, as partners, shareholders, advisors, employees or in any other capacity, directly or indirectly, in any restaurant business or any other commercial activity or in rendering of services serving competitors in the restaurant business. For a period of two (2) years as of the date they cease to hold any interest in Buyer, PGSPar, PGS and in any of its subsidiaries or successors, the Stayers undertake not to participate, within the territory of Brazil, as partners, shareholders, advisors, employees or in any other capacity, directly or indirectly, in any casual dining restaurant business or any other commercial activity or in rendering of services serving competitors in the casual dining restaurant business.

10.4        Confidentiality. Each Party shall hold confidential all information obtained in connection with this Agreement with respect to the other Party which is not otherwise public knowledge, not independently known or developed, not received from a third party who is not subject to an obligation of confidentiality or not in the public domain through no fault of the receiving Party. In the event of termination of this Agreement, all documents (including copies thereof) obtained hereunder by one Party from any other Party shall be returned to such Party. Each Party shall refrain from disclosing and shall hold confidential the terms and conditions of this Agreement, including without limitation, the consideration to be paid hereunder, except to the extent that disclosure of such information is necessary or desirable for consummation of the transactions contemplated hereby, demanded by any governmental authority, required by applicable law or stock exchange regulations to which a Party is subject, or with the consent of all other parties hereto.

10.5         Non-Solicitation/Non-Hire. Each Seller hereby covenants, effective as of the Closing Date and for a period of two (2) years, that it will not, directly or indirectly, solicit or cause to be solicited, or hire contract or employ or cause to be hired, contracted or employed any of the directors, officers or employees of Buyer, PGSPar, PGS and/or its subsidiaries or successors for the purpose of employing or otherwise retaining the services of such directors, officers or employees. A violation of the non-compete or non-solicitation/non-hire provisions shall subject the violator(s) to pay to Buyer a penalty of one thousand Reais (R$ 1,000) per day of violation, without impairing or limiting the right of Buyer to seek

32

any other available remedy including specific performance, injunctions or any other precautionary relief. Buyer may set-off such penalty against any other amount payable by Buyer to Sellers under this Agreement. Sellers acknowledge that such penalty is a reasonable estimate of the loss that would be suffered by Buyer as a result of such a violation.

10.6        Public Announcements. Except as otherwise required by applicable law or regulation (including the rules of any stock exchange or over-the-counter market on which the relevant Party’s or its Affiliates’ shares are listed or registered for trading), all press releases, public announcements and other similar publicity by a Party concerning the transactions contemplated by this Agreement shall be approved in writing by Buyer and Peter prior to their release or publication. Buyer and Peter will consult with each other concerning the means by which any employees, customers and suppliers of PGSPar, PGS and/or its subsidiaries and others having dealings with PGSPar, PGS and/or its subsidiaries will be informed of the
transactions contemplated hereby.

10.7        Post-Closing Merger. The Parties understand that it is Buyer’s intent to merge PGSPar, PGS and its subsidiaries into Buyer, as set forth in  Exhibit 10.7 . The Parties agree that the rights and obligations of PGSPar and PGS hereunder may be assigned to Buyer or any of its Affiliates, at Buyer's request. The Parties agree not to object to any such merger and hereby waive any rights to Buyer’s right to merge said entities.

10.8        Replacement of Guarantees. As of Closing, Buyer and Peter will endeavor their best efforts to secure a release from any personal guarantee (fiança/aval) listed in  Exhibit 10.8  to guarantee PGS’ and its subsidiaries’ obligations before third parties in its ordinary course of business (the " Guarantees ") and replace them for a personal guarantee from Buyer (or any of its Affiliates) for each of such Guarantee as may be required. In the event Buyer and Peter are unable to obtain any such release mentioned herein, Buyer and PGS and its subsidiaries will be responsible for holding Peter harmless from any claims brought against him by any landlord, bank and/or other creditor under a Guarantee, from which Peter was not released, by directly paying the amount of any such claim.

10.9         Antitrust Approval. The Parties represent that the annual gross revenues of their economic groups in Brazil for the year preceding the execution of this Agreement have not exceeded the minimum thresholds set forth in the applicable Law that would trigger the mandatory submission of the Transaction contemplated hereunder to the Brazilian Antitrust Authority – CADE.

11.    Dispute Resolution

11.1         The Parties undertake to negotiate in good faith and endeavor their best efforts for an amicable settlement as definite resolution of any claim, controversy or dispute arising from or in connection with this Agreement. Any party may request, during such negotiations, that a mediator be appointed by the International Chamber of Commerce (“ ICC ”) to mediate the claim, controversy or dispute.

11.1.1         Considering the specific circumstances of the case, any of the parties may cease to find an amicable settlement, or stop, at any time, the negotiations or mediation in course, so as to immediately request the commencement of the arbitration, through a notice sent to the other parties.

11.1.2         Any written material or verbal statement produced in the context of previous negotiations prior to the proceeding and/or in mediations and/or in settlement discussions during the arbitration shall be deemed to be confidential and cannot be disclosed to the arbitrators and/or to the Judiciary.

11.2         The arbitration proceeding shall be governed by the Brazilian law and shall have site in

33

the city and State of Săo Paulo. The parties agree that procedural acts, including the performance of hearings and/or the execution of procedural orders and awards, may occur in places different from the site. The parties elect the Câmara de Conciliaçăo, Mediaçăo e Arbitragem da CIESP/FIESP (“ CIESP ”) and undertake to accept its rules, effective as of the date of the request for arbitration, with amendments that might be jointly agreed upon by the parties (“ CIESP Rules ”).

11.3         The panel shall be composed by three arbitrators. The indication of the arbitrators shall be in accordance with the CIESP Rules. Any appointment of arbitrators by the party-appointed arbitrators or by CIESP shall be preceded by previous consultation of the parties on potential names.

11.4         The final arbitral award shall be rendered in writing, within 180 days as from the institution of the arbitration, as per article 19 of Brazilian Arbitration Law, but CIESP and/or the arbitrators may extend its term at its sole discretion. The arbitral award shall be binding upon all parties and shall be enforceable as per the applicable legislation. The parties hereby authorize the issuance of partial awards.

11.5         The arbitral award shall determine, proportionally to the outcome of the arbitration, in which terms the expenses incurred during the arbitration proceeding shall be borne by the losing party.

11.6         The proceeding shall be conducted in the English language. The parties may produce in Portuguese documents originally in that language and depositions of Portuguese native speakers.

11.7         The existence and the content of the arbitral proceeding, as well as any decision and award shall be confidential, except (i) for purposes of judicial enforcement of a decision issued in the course of the arbitration; (ii) to judicially recognize, execute, challenge or annul an arbitral award, (iii) due to the order of a competent public authority, and (iv) if such information constitutes public knowledge without breach of confidentiality. In cases (i), (ii) e (iii), the disclosing party shall ask for confidentiality to the competent authority, to the extent possible.

11.8         The submission by the parties to arbitration shall not prevent any party to file for an injunctive or urgent relief before the judicial courts prior to the institution of the arbitration. In this case, courts of the City of Săo Paulo, State of Săo Paulo shall be exclusively competent to decide upon the request. After the arbitration is instituted, the arbitration panel shall be competent to decide on any injunctive or urgent relief as well as to review decisions previously issued by the judicial court.

11.8.1         In case of injunctive relieves issued prior to the commencement of the arbitration, the request for arbitration shall be equivalent to the filing of the main lawsuit set forth in applicable law.

11.9         The fees and expenses with the arbitrators, experts appointed by the arbitrators and the administrative expenses that may be incurred in the course of the arbitration proceeding shall be paid in accordance with CIESP Rules. The final arbitration award shall provide for the obligation of the defeated party(ies) to reimburse the wining party(ies) of such fees and expenses, as well as the wining parties’ reasonable costs and expenses with attorneys and experts.

11.10         The Parties (including the Intervening Consenting Party) accept and convene that, for the purposes and effects of article 806 of the Brazilian Civil Procedure Code, the request for the initiation of an arbitration proceeding shall be equivalent to the filing of a lawsuit with the same object.

12.    Miscellaneous Provisions

12.1    Notices.

34

(a)    All notices, consents, requests and other communications herein shall be in writing and shall be sent by hand delivery, by certified or registered mail (return-receipt requested), or by recognized national overnight courier service as set forth below:

If to Buyer:

Bloomin’ Brands, Inc.
2202 N. West Shore Boulevard, suite 500
Tampa, Florida - USA
Attn.: Mr. Joseph J. Kadow, Executive Vice President
fax: + 1(813) 387-8800
legal1@bloominbrands.com

with copy, for control purposes and not for receipt acknowledgement, to:
Trench, Rossi e Watanabe Advogados
Av. Dr. Chucri Zaidan, 920 - 13th floor
Săo Paulo - SP - Brazil
ZIP Code 04583-904
Attn.: Mr. Nazir Takieddine
fax: +55 11 5506-3455
nazir.takieddine@bakermckenzie.com

If to Sellers:

Peter Byrd Rodenbeck
Rua General Guedes da Fontoura, 211, apt. 301
Rio de Janeiro, RJ, 22620-030
fax: +55 11 4949-9121

with copy, for control purposes and not for receipt acknowledgement, to:

Lima Gonçalves, Jambor, Rotenberg e Silveira Bueno - Advogados
Av. Brig. Faria Lima, 1713, 11o. floor
Săo Paulo, SP – 01452-915
Attn.: Mr. José Artur Lima Gonçalves
fax: +55 11 3812-2665
ja@limalaw.com.br

(b)    Notices delivered pursuant to this Section shall be deemed given: (i) at the time delivered, if personally delivered; (ii) at the time received, if mailed; and (iii) two (2) business days after timely delivery to the courier, if by overnight courier service.

(c)    Any Party hereto may change the address to which notice is to be sent by written notice to the other party.

12.2        Entire Agreement.    This Agreement, including all Exhibits hereto (all of which are incorporated herein by this reference), contains the entire Agreement and understanding concerning the subject matter hereof between the Parties hereto.

12.3        Waiver. Amendment.    No waiver, termination or discharge of this Agreement, or any of

35

the terms or provisions hereof, shall be binding upon either Party hereto unless confirmed in writing. No waiver by either Party hereto of any term or provision of this Agreement or of any default thereunder shall affect such Party's rights thereafter to enforce such term or provision or to exercise any right or remedy in the event of any other default, whether or not similar. This Agreement may not be modified or amended except by a writing executed by both Parties hereto.

12.4        Severability.    If any provision of this Agreement shall be held void, voidable, invalid or inoperative, by any competent judge, no other provision of this Agreement shall be affected as a result thereof, and, accordingly, the remaining provisions of this Agreement shall remain in full force and effect as though such void, and violable, invalid or inoperative provision had not been contained herein.

12.5        Governing Law.    This Agreement is governed by and construed in accordance with the Laws of the Federative Republic of Brazil.

12.6        Assignment.    Neither party may assign this Agreement or any rights and obligations arising out of this Agreement, in whole or in part, without the prior written consent of the other party. The foregoing notwithstanding, Buyer shall have the right to assign its rights and obligations under this Agreement to any of its Affiliates without the prior authorization of Sellers, provided that Buyer and the Parent Company remain severally and jointly fully liable for all of their obligations as set forth in this Agreement.

12.7        Binding Effect.    This Agreement shall be binding upon and shall inure to the benefit of the Parties hereto and their respective successors and permitted assigns.

12.8        Language.    This Agreement shall be executed in 4 (four) counterparts in English, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument and shall have the same force and effect.

12.9        Initials.  
 
12.9.1        The Sellers hereby grant to Maria Helena Maroum the right to, individually, initialize this Agreement, as well as any and all of its Exhibits on behalf of the Sellers:

 	
 	 	
/s/ MHM	 	
Initial of Maria Helena Maroum

12.9.2        Buyer hereby grant to Mariana Pinheiro the right to, individually, initialize this Agreement, as well as any and all of its Exhibits on behalf of the Buyer:

 	 	
/s/ MP	 	
Initial of Mariana Pinheiro

IN WITNESS WHEREOF, the undersigned have caused their respective duly authorized representatives to execute this Agreement as of the day and year written below.

Săo Paulo, October 31, 2013.

36

 	
 	 	 	 	
 	/s/ Peter Byrd Rodenbeck	 	/s/ Peter Byrd Rodenbeck	
 	Peter Byrd Rodenbeck	 	Franchise Consulting Corp.	
 	 	 	Peter Byrd Rodenbeck	
 	 	 	 	
 	/s/ Peter Byrd Rodenbeck	 	/s/ Salim Boulos Maroun	
 	Marcos Fernando de Oliveira Moraes	 	Salim Boulos Maroun	
 	 	 	 	
 	/s/ Salim Boulos Maroun	 	/s/ Mauro Guardabassi Martins	
 	GEFCO General Food Comércio Ltda	 	Mauro Guardabassi Martins	
 	Salim Boulos Maroun	 	 	
 	 	 	 	
 	/s/ Antonio Carlos Pontes	 	/s/ Gordon Lee Simmonds	
 	Antonio Carlos Pontes	 	Gordon Lee Simmonds	
 	 	 	 	
 	/s/ Bertrand Letouzé	 	/s/ Gilberto Soares dos Santos	
 	Bertrand Letouzé	 	Gilberto Soares dos Santos	
 	 	 	 	
 	/s/ Carolina Abreu Souza Correia	 	/s/ Silvio José Bandini	
 	Carolina Abreu Souza Correia	 	Silvio José Bandini	
 	 	 	 	
 	/s/ Silvio José Bandini	 	/s/ Elizabeth A. Smith	
 	Bloom Holdco Participaçơes Ltda.	 	Bloomin’ Brands, Inc.	
 	 	 	 	
 	/s/ Peter Byrd Rodenbeck	 	 	
 	/s/ Mauro Guardabassi Martins	 	/s/ Silvio José Bandini	
 	PGS Participaçơes Ltda.	 	Bloom Participaçơes Ltda.	
 	 	 	 	
 	/s/ Peter Byrd Rodenbeck	 	 	
 	PGS Consultoria e Serviços Ltda.	 	 	

 	
 	 	 	 	 	 	 	
WITNESSES:	 	 	 	 	
1.	/s/ Isaura does Anjos M. Pereira	 	2.	/s/ Mariana Regis Stangl Pinheiro	 	
Name:	Isaura does Anjos M.Pereira	 	Name:	Mariana Regis Stangl Pinheiro	 	
ID:	RG: 34.427.449-4	 	ID:	RG: 09706580-36	 	
 	CPF: 321.357.738-32	 	 	CPF: 940 405 818-05	 	

37

Exhibit 10.3
            
EXECUTION VERSION

SECOND AMENDMENT TO CREDIT AGREEMENT

SECOND AMENDMENT TO CREDIT AGREEMENT (this “Second Amendment ”), dated as of January 3, 2014, among OSI RESTAURANT PARTNERS, LLC, a Delaware limited liability company (the “ Borrower ”), OSI HOLDCO, INC., a Delaware corporation (“ Holdings ”), the Subsidiary Guarantors (as defined in the Credit Agreement referred to below) party hereto and DEUTSCHE BANK TRUST COMPANY AMERICAS (“ DBTCA ”), as administrative agent (in such capacity, the “ Administrative Agent ”). Unless otherwise indicated, all capitalized terms used herein and not otherwise defined herein shall have the respective meanings provided such terms in the Credit Agreement referred to below (as amended by this Second Amendment).

WITNESSETH:

WHEREAS, the Borrower, Holdings, the Administrative Agent, the lenders party thereto and the other parties thereto have entered into a Credit Agreement, dated as of October 26, 2012 (the “ Original Credit Agreement ”) ;

WHEREAS, the Borrower, Holdings, the Administrative Agent, the lenders party thereto and the other parties thereto entered into a First Amendment to Credit Agreement, Guaranty and Security Agreement, dated as of April 10, 2013 (the “ First Amendment ”) (the Original Credit Agreement, as amended by the First Amendment, the “ Credit Agreement ”);
WHEREAS, Section 7.12 of the Credit Agreement permits the Borrower, upon written notice to the Administrative Agent, to change its fiscal quarter or fiscal year to any other fiscal quarter or fiscal year reasonably acceptable to the Administrative Agent, and authorizes the Borrower and the Administrative Agent to make any adjustments to the Credit Agreement that are necessary to reflect such change in fiscal quarter or fiscal year; and
WHEREAS, the Borrower and the Administrative Agent wish to amend the Credit Agreement to reflect the changes in the fiscal quarter and fiscal year of the Borrower more fully described herein, on the terms and subject to the conditions set forth herein;
NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, it is agreed as follows:
SECTION 1. Amendments to Credit Agreement.
(a)Section 1.01 of the Credit Agreement is hereby amended by inserting the following defined term in the appropriate alphabetical order:
“Fiscal Year Conversion Date” has the meaning specified in Section 7.12.
(b)     Section 7.11 of the Credit Agreement is hereby amended by deleting the text “in respect of the last day of such Test Period set forth below” appearing therein and inserting the

text “in respect of the date set forth below that is on or closest to the last day of such Test Period” in lieu thereof.
(c) Section 7.12 of the Credit Agreement is hereby amended and restated in its entirety as follows:
“Make any change in fiscal quarter or fiscal year; provided, however, that as of any date (the “ Fiscal Year Conversion Date ”) on or after January 1, 2014, the Borrower may, upon written notice to the Administrative Agent specifying the Fiscal Year Conversion Date selected by the Borrower (which notice may be delivered up to ten (10) days following such Fiscal Year Conversion Date and shall be distributed by the Administrative Agent to the Lenders), change (i) its fiscal year to a fifty-two (52) week year commencing on the calendar day immediately following the last day of the prior fiscal year and ending on the last Sunday in December and (ii) its fiscal quarter to a thirteen (13) week period ending on a Sunday and consisting of two four (4) week periods followed by one five (5) week period (with the first fiscal quarter in each fiscal year beginning on the first day of such fiscal year);  provided ,  further , that in the case of any such change in the Borrower’s fiscal year and fiscal quarter, (x) in the event such change occurs during the 2014 fiscal year, the 2014 fiscal year shall commence on January 1, 2014, (y) the first fiscal quarter of the Borrower occurring after the Fiscal Year Conversion Date shall commence on the Fiscal Year Conversion Date and may consist of less than thirteen (13) full weeks and (z) the fiscal year and fiscal quarter ending December 31, 2017 shall consist, respectively, of fifty-three (53) weeks and a fourteen (14) week period consisting of two four (4) week periods followed by one six (6) week period.”
SECTION 2. Acknowledgement and Confirmation. Each of the Loan Parties party hereto hereby agrees that, with respect to each Loan Document to which it is a party, after giving effect to the Second Amendment:
(a)all of its obligations, liabilities and indebtedness under such Loan Document, including guarantee obligations, shall remain in full force and effect on a continuous basis; and
(b)all of the Liens and security interests created and arising under such Loan Document remain in full force and effect on a continuous basis, and the perfected status and priority to the extent provided for in  Section 5.19  of the Credit Agreement of each such Lien and security interest continues in full force and effect on a continuous basis, unimpaired, uninterrupted and undischarged as collateral security for the Obligations, to the extent provided in such Loan Documents.
SECTION 3. Conditions of Effectiveness of this Second Amendment. This Second Amendment shall become effective on the date when the following conditions shall have been satisfied (such date, the “ Second Amendment Effective Date ”):

(a)    Holdings, the Borrower, the Administrative Agent and the Subsidiary Guarantors existing as of the Second Amendment Effective Date shall have signed a

2

counterpart hereof (whether the same or different counterparts) and shall have delivered (including by way of facsimile or other electronic transmission) the same to White & Case LLP, 1155 Avenue of the Americas, New York, NY 10036, Attention: Jordan Padover (jpadover@whitecase.com; facsimile number 212-354-8113), counsel to the Administrative Agent;
(b)    the Borrower shall have paid, by wire transfer of immediately available funds, any reasonable and documented out-of-pocket costs and expenses of the Administrative Agent required to be paid or reimbursed pursuant to  Section 10.04  of the Credit Agreement, including Attorney Costs; and
(c)    there shall have been delivered to the Administrative Agent copies of resolutions of the board of directors (or similar governing body) of the Borrower and Holdings approving and authorizing the execution, delivery and performance of this Second Amendment, certified as of the Second Amendment Effective Date by a Responsible Officer of the Borrower and Holdings as being in full force and effect without modification or amendment.
SECTION 4. Costs and Expenses. The Borrower hereby reconfirms its obligations pursuant to Section 10.04  of the Credit Agreement to pay and reimburse the Administrative Agent in accordance with the terms thereof.
SECTION 5. Remedies. This Second Amendment shall constitute a “Loan Document” for all purposes of the Credit Agreement and the other Loan Documents.
SECTION 6. Representations and Warranties. To induce the Administrative Agent to enter into this Second Amendment, each Loan Party represents and warrants to the Administrative Agent on and as of the Second Amendment Effective Date that, in each case:
(a)    this Second Amendment has been duly authorized, executed and delivered by such Loan Party and each of this Second Amendment, the Credit Agreement (as amended by this Second Amendment) and the other Loan Documents to which such Loan Party is a party constitute such Loan Party’s legal, valid and binding obligation, enforceable against it in accordance with its terms, subject to Debtor Relief Laws, general principles of equity (whether considered in a proceeding in equity or law) and an implied covenant of good faith and fair dealing; and
(b)    no Default or Event of Default exists and is continuing.
SECTION 7. Reference to and Effect on the Credit Agreement and the Other Loan Documents .
(a)    On and after the Second Amendment Effective Date, each reference in the Credit Agreement to “this Agreement,” “herein,” “hereto”, “hereof” and “hereunder” or words of like import referring to the Credit Agreement shall mean and be a reference to the Credit Agreement as amended by this Second Amendment.

3

(b)    The Credit Agreement, as specifically amended by this Second Amendment, is and shall continue to be in full force and effect and is hereby in all respects ratified and confirmed. Without limiting the generality of the foregoing, the Collateral Documents and all of the Collateral described therein do and shall continue to secure the payment of all Obligations of the Loan Parties under the Credit Agreement, as amended by this Second Amendment, and the other Loan Documents.
(c)    The execution, delivery and effectiveness of this Second Amendment shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy of any Lender or the Administrative Agent under any of the Loan Documents, nor constitute a waiver of any provision of any of the Loan Documents.
SECTION 8. Governing Law. THIS SECOND AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
SECTION 9. Counterparts. This Second Amendment may be executed in any number of counterparts and by the different parties hereto on separate counterparts, each of which counterparts when executed and delivered shall be an original, but all of which shall together constitute one and the same instrument. Delivery by facsimile or electronic transmission of an executed counterpart of a signature page to this Second Amendment shall be effective as delivery of an original executed counterpart of this Second Amendment.
[The remainder of this page is intentionally left blank.]

4

IN WITNESS WHEREOF, the parties hereto have caused their duly authorized officers to execute and deliver this Second Amendment as of the date first above written.

 	OSI RESTAURANT PARTNERS, LLC	

 	By:	/s/ Joseph J. Kadow	 	
 	 	Name: Joseph J. Kadow	 	
 	 	Title: Chief Legal Officer, Executive Vice	
 	 	President and Secretary	 	

 	 	 	 	 	
 	OSI HOLDCO, INC.	

 	By:	/s/ Joseph J. Kadow	 	
 	 	Name: Joseph J. Kadow	 	
 	 	Title: Chief Legal Officer, Executive Vice	
 	 	President and Secretary	

[Signature Page to Second Amendment to OSI Credit Agreement]

 	
 	 	 	 	 	
 	FREDERICK OUTBACK, INC.	
 	OUTBACK OF ASPEN HILL, INC.	
 	OUTBACK OF GERMANTOWN, INC.	

 	By:	/s/ Stephen S. Newton	 	
 	 	Name: Stephen S. Newton	 	
 	 	Title: President, Secretary and Treasurer	

[Signature Page to Second Amendment to OSI Credit Agreement]

 	
 	 	 	 	 	
 	OBTEX HOLDINGS, LLC	
 	OUTBACK BEVERAGES OF TEXAS, LLC	

 	By:	/s/ Jeffrey Smith	 	
 	 	Name: Jeffrey Smith	 	
 	 	Title: President	 	

[Signature Page to Second Amendment to OSI Credit Agreement]

 	 	

 	CARRABBA’S ITALIAN GRILL OF
HOWARD COUNTY, INC.	 	 	

 	 	 	 	 	 	
 	By:	/s/ Richard Landman	 	 	
 	 	Name: Richard Landman	 	 	
 	 	Title: President and Assistant Secretary	 	

[Signature Page to Second Amendment to OSI Credit Agreement]

    

 	CARRABBA’s OF GERMANTOWN, INC.	
 	CARRABBA’S OF WALDORF, INC.	

 	By:	/s/ Kenneth R. Russo	 	
 	 	Name: Kenneth R. Russo	 	
 	 	Title: President, Secretary and Treasurer	

[Signature Page to Second Amendment to OSI Credit Agreement]

 	
 	 	 	 	 	
 	CIGI BEVERAGES OF TEXAS, LLC	
 	CIGI HOLDINGS, LLC	

 	By:	/s/ Steven T. Shlemon	 	
 	 	Name: Steven T. Shlemon	 	
 	 	Title: President	

[Signature Page to Second Amendment to OSI Credit Agreement]

 	
 	 	 	 	 	
 	BLOOMIN’ BRANDS GIFT CARD SERVICES,
LLC    	
 	 	
 	CARRABBA’S DESIGNATED PARTNER,     
LLC    	
 	 	
 	CARRABBA’S ITALIAN GRILL, LLC    	
 	CARRABBA’S KANSAS DESIGNATED
PARTNER, LLC	
 	 	
 	OS ASSET, INC.     	
 	OS MANAGEMENT, INC.        	
 	OS MORTGAGE HOLDINGS, INC.	
 	OS REALTY, LLC    	
 	OS RESTAURANT SERVICES, LLC	
 	OSI INTERNATIONAL, LLC    	
 	OUTBACK CATERING DESIGNATED
PARTNER, LLC	
 	 	
 	OUTBACK CATERING, INC.    	
 	OUTBACK DESIGNATED PARTNER, LLC	
 	OUTBACK INTERNATIONAL DESIGNATED
PARTNER, LLC	
 	 	
 	OUTBACK KANSAS DESIGNATED
PARTNER, LLC	
 	 	
 	OUTBACK STEAKHOUSE	
 	INTERNATIONAL, LLC     	
 	OUTBACK STEAKHOUSE OF FLORIDA,	
 	LLC	 	 	 	
 	PRIVATE RESTAURANT MASTER LESSEE,
LLC    	

 	By:	/s/ Joseph J. Kadow	 	
 	 	Name: Joseph J. Kadow	 	
 	 	Title: Chief Officer - Legal and Corporate	
 	 	Affairs, Executive Vice President and	
 	 	Secretary	 	 	

 	 	 	 	 	
 	BOOMERANG AIR, INC.	
 	OSI CO-ISSUER, INC.	
 	OUTBACK STEAKHOUSE	
 	INTERNATIONAL SERVICES, LLC	
 	 	 	 	 	
 	By:	/s/ Joseph J. Kadow	 	
 	 	Name: Joseph J. Kadow	 	
 	 	Title: Chief Legal Officer, Executive Vice	
 	 	President and Secretary	

[Signature Page to Second Amendment to OSI Credit Agreement]

    

 	CARRABBA’S KANSAS LLC    	
 	OS NIAGARA FALLS, LLC	
 	OUTBACK & CARRABBA’S OF NEW	
 	MEXICO, INC.	
 	OUTBACK ALABAMA, INC.	
 	OUTBACK KANSAS LLC    	

 	By:	/s/ Joseph J. Kadow	 	
 	 	Name: Joseph J. Kadow	 	
 	 	Title: Vice President and Secretary	

 	 	 	 	 	
 	CARRABBA’S OF BOWIE, LLC	 	

 	By: CARRABBA’S ITALIAN GRILL, LLC as	
 	managing member	 	 	

 	By:	/s/ Joseph J. Kadow	 	
 	 	Name: Joseph J. Kadow	 	
 	 	Title: Chief Officer - Legal and Corporate	
 	 	Affairs, Executive Vice President and	
 	 	Secretary	

[Signature Page to Second Amendment to OSI Credit Agreement]

 	
 	 	 	 	 	
 	CARRABBA’S/BIRMINGHAM 280, LIMITED
PARTNERSHIP	
 	 	
 	CARRABBA’S/COOL SPRINGS, LIMITED
PARTNERSHIP	
 	 	
 	CARRABBA’S/DC-I, LIMITED	
 	PARTNERSHIP	
 	CARRABBA’S/DEERFIELD TOWNSHIP,
LIMITED PARTNERSHIP	
 	 	
 	CARRABBA’S/GREEN HILLS, LIMITED
PARTNERSHIP	
 	 	
 	CARRABBA’S/LEXINGTON, LIMITED
PARTNERSHIP	
 	 	
 	CARRABBA’S/LOUISVILLE, LIMITED
PARTNERSHIP	
 	 	
 	CARRABBA’S/METRO, LIMITED
PARTNERSHIP	
 	 	
 	CARRABBA’S/MICHIGAN, LIMITED
PARTNERSHIP	
 	 	
 	CARRABBA’S/MID ATLANTIC-I, LIMITED
PARTNERSHIP	
 	 	
 	CARRABBA’S/MONTGOMERY, LIMITED
PARTNERSHIP	
 	 	
 	CARRABBA’S/ROCKY TOP, LIMITED
PARTNERSHIP	

 	 	 	 	 	

 	By: CARRABBA’S ITALIAN GRILL, LLC as	
        	general partner	 	

 	By:	/s/ Joseph J. Kadow	 	
 	 	Name: Joseph J. Kadow	
 	 	Title: Chief Officer - Legal and Corporate	
 	 	Affairs, Executive Vice President and	
 	 	Secretary	 	 	
 	 	 	 	 	
 	By: CARRABBA’S DESIGNATED PARTNER,	
      	LLC, as general partner	 	

 	By:	/s/ Joseph J. Kadow	 	
 	 	Name: Joseph J. Kadow	
 	 	Title: Chief Officer - Legal and Corporate	
 	 	Affairs, Executive Vice President and	
 	 	Secretary	 	 	

[Signature Page to Second Amendment to OSI Credit Agreement]

            

 	CIGI NEBRASKA, INC.	
 	CIGI OKLAHOMA, INC.	
 	OSF NEBRASKA, INC.	
 	OSF OKLAHOMA, INC.    	

 	By:	/s/ Joseph J. Kadow	 	
 	 	Name: Joseph J. Kadow	 	
 	 	Title: President and Secretary	

 	 	 	 	 	
 	OSF/CIGI OF EVESHAM PARTNERSHIP	
 	OUTBACK STEAKHOUSE-NYC, LTD.	
 	OUTBACK/CARRABBA’S PARTNERSHIP	
 	OUTBACK/DC, LIMITED PARTNERSHIP	
 	OUTBACK/MID ATLANTIC-I, LIMITED	
 	PARTNERSHIP	
 	OUTBACK/STONE-II, LIMITED	
 	PARTNERSHIP    	

      	By: OUTBACK STEAKHOUSE OF FLORIDA,	
      	LLC, as general partner	 	

 	By:	/s/ Joseph J. Kadow	 	
 	 	Name: Joseph J. Kadow	 	
 	 	Title: Chief Officer - Legal and Corporate	
 	 	Affairs, Executive Vice President and	
 	 	Secretary	 	 	

        	By: CARRABBA’S ITALIAN GRILL, LLC as	
        	general partner	 	 	

 	By:	/s/ Joseph J. Kadow	 	
 	 	Name: Joseph J. Kadow	 	
 	 	Title: Chief Officer - Legal and Corporate	
 	 	Affairs, Executive Vice President and	
 	 	Secretary	 	 	

[Signature Page to Second Amendment to OSI Credit Agreement]

    

 	 	 	 	 	
 	OUTBACK STEAKHOUSE	 	
 	INTERNATIONAL L.P.	 	

       	By: OSI INTERNATIONAL, LLC as general	
        	partner	 	 	

 	By:	/s/ Joseph J. Kadow	 	
 	 	Name: Joseph J. Kadow	 	
 	 	Title: Chief Legal Officer, Executive Vice President and Secretary	

 	 	
 	 	 	 	 	 	
 	OUTBACK STEAKHOUSE WEST VIRGINIA,	 	
 	INC.	 	 	 	 	

 	By:	/s/ Joseph J. Kadow	 	 	
 	 	Name: Joseph J. Kadow	 	 	
 	 	Title: Vice President, Secretary and Treasurer	 	 	

[Signature Page to Second Amendment to OSI Credit Agreement]

 	
 	 	 	 	 	 	
 	DEUTSCHE BANK TRUST COMPANY	
 	AMERICAS, as Administrative Agent	

 	By:	/s/ Dusan Lazarov	 	
 	 	Name: Dusan Lazarov	 	
 	 	Title: Director	
 	 	 	 	 	 	
 	By:	/s/ Michael Getz	 	
 	 	Name: Michael Getz	 	
 	 	Title: Vice President	 	

[Signature Page to Second Amendment to OSI Credit Agreement]

Exhibit 10.5

     Final, Execution Version

FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT

THIS FIRST AMENDMENT TO LOAN AND SECURITY AGREEMENT (this “ Amendment ”), dated effective as of January 1, 2014 (the “ Effective Date ”), is made by and among  NEW PRIVATE RESTAURANT PROPERTIES, LLC,  a Delaware limited liability company (“ Borrower ”),  OSI HOLDCO I, INC. , a Delaware corporation ( “ Guaranto r ” ),  WELLS FARGO BANK, N.A., AS TRUSTEE FOR THE REGISTERED HOLDERS OF BAMLL-DB 2012-OSI TRUST, COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2012-OSI , its successors and assigns, as secured party (“ Lender ”). Capitalized terms used herein and not otherwise defined shall have the meanings assigned to them in the Loan Agreement (defined below).
RECITALS
A.    Bank of America, N.A.(“Bank of America”) and German American Capital Corporation, a Maryland corporation (“ GACC ,” together with Bank of America, “ Original Lender ”), made a loan (the “ Mortgage Loan ”) to Borrower in the original principal amount of $324,800,000.00 evidenced by that certain Note dated as of March 27, 2012 (the “ Note ”) and that certain Loan and Security Agreement dated as of March 27, 2012 (the “ Loan Agreement ”) by and between Borrower and Original Lender.
B.    To secure the repayment of the Note, Borrower, among other things, executed and delivered to Original Lender certain Mortgages, Deeds to Secure Debt and/or Deeds of Trust, with Security Agreement, Financing Statement, Fixture Filing and Assignment of Master Lease, Subleases, Rents, and Security Deposits, all dated as of March 27, 2012 (collectively, the “ Security Instruments ”), encumbering certain real property and improvements more particularly set forth therein (collectively, the “ Property ”). The Mortgage Loan is further evidenced or secured by various other documents executed by Borrower and others in favor of Original Lender, including, but not limited to, that certain Guaranty of Recourse Obligations dated as of March 27, 2012 (the “ Guaranty ”), executed by Guarantor (such other Loan Documents, including the Guaranty, together with the Note, the Loan Agreement, and the Security Instruments, the “ Mortgage Loan Documents ”).
C.    Lender is the current holder of the Note and the owner of the Mortgage Loan and the Mortgage Loan Documents in connection with the issuance of BAMLL-DB 2012-OSI Trust, Commercial Mortgage Pass-Through Certificates, Series 2012-OSI.
D.    Berkadia Commercial Mortgage LLC, as subservicer acting on behalf of KeyBank National Association, as master servicer acting on behalf of Lender (“ Servicer ”) is the current Servicer of the Mortgage Loan pursuant to the terms of that certain Trust and Servicing Agreement dated as of March 27, 2012 by and among Bank of America Merrill Lynch Large Loan, Inc., as Depositor, Bank of America, N.A., as Servicer, Midland Loan Services, as Special Servicer, Wells Fargo Bank, N.A., as Trustee and Certificate Administrator, and Park Bridge Lender Services LLC, as Trust Advisor (the “ Trust and Servicing Agreement ”).

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First Amendment to Loan and Security Agreement

E.    Borrower has requested that the definition of Fiscal Year and Fiscal Quarter in the Loan Agreement be amended to accommodate a 52/53 week financial reporting structure and other amendments related thereto (such amendments, as more expressly set forth Section 1.1 below, the “ Fiscal Year Modifications ”), and Lender has agreed to consent to such Fiscal Year Modifications, subject to the terms and conditions provided herein.
F.    Borrower has requested that certain reporting obligations of Borrower under the Mortgage Loan Documents be amended to permit certain financial statements to be provided to Lender on a consolidated basis and other amendments related thereto (such amendments, as more expressly set forth in Section 1.2 below, the “ Reporting Modifications ” and collectively with the Fiscal Year Modifications, the “ Modifications ”).
NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
1.    Modifications.
1.1    Fiscal Year Modifications. Borrower and Lender hereby agree that on and after the Conversion Date (as defined below), the Mortgage Loan Documents shall be modified as follows:
(a)     The following definitions are added to Section 1.1 of the Loan Agreement:
“Conversion Date” shall mean January 1, 2014.
“Fiscal Month” shall mean a length of time equal to either four (4) or five (5) weeks, each week being Monday through Sunday.
(b)     The definition of “Fiscal Quarter” in Section 1.1 of the Loan Agreement is hereby deleted in its entirety and the following is hereby substituted in lieu thereof:

“Fiscal Quarter” shall mean each thirteen (13) week period ending on a Sunday during each Fiscal Year, with the first Fiscal Quarter of each calendar year commencing on the first calendar day of the Fiscal Year; provided that the first Fiscal Quarter of the 2014 Fiscal Year shall commence on the Conversion Date. Each Fiscal Quarter will consist of thirteen (13) weeks, with two four (4) week periods followed by one five (5) week period, except for the period in which the Conversion Date falls.”
(c)     The definition of “Fiscal Year” in Section 1.1 of the Loan Agreement is hereby deleted in its entirety and the following is hereby substituted in lieu thereof:

“Fiscal Year” shall mean a fifty-two (52) or fifty-three (53) week year commencing on the calendar day immediately following the last day of the prior Fiscal Year and ending on the last Sunday in December; provided that the 2014 Fiscal Year shall be the year commencing on January 1, 2014 and ending on December 28, 2014.

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(d)     The second full sentence of Section 7.1 of the Loan Agreement is hereby deleted in its entirety and the following is hereby substituted in lieu thereof:

Borrower shall deliver to Lender annually, no later than fifteen (15) Business Days after the first day of each calendar year, and shall update as new information is received, a schedule describing all Real Estate Impositions, payable or estimated to be payable during such calendar year attributable to or affecting the Property or Borrower.
(e)    The words “fiscal year” in the first full sentence of Section 11.1 of the Loan Agreement are hereby deleted and replaced with the words “Fiscal Year”.
    
(f)    The lead-in paragraph to Section 11.2.1 is hereby deleted in its entirety and the following is hereby substituted in lieu thereof:

Commencing with the first Fiscal Month after the Conversion Date, not later than thirty (30) days following the end of such Fiscal Month and each Fiscal Month thereafter, Borrower shall, or shall cause Master Lessee or Asset Manager to, deliver to Lender the following with respect to such month and each subsequent Fiscal Month.
(g)    The words “fiscal quarter” in clause (b) of Section 14.3 of the Loan Agreement are hereby deleted and replaced with the words “Fiscal Quarter”.

(h)    The words “fiscal year” in clause (c) of Section 14.3 of the Loan Agreement are hereby deleted and replaced with the words “Fiscal Year”.

(i)    Clause (i) of Section 9(b) of the Guaranty is hereby deleted in its entirety and the following is hereby substituted in lieu thereof:

(i)    within 120 days after the end of each Fiscal Year of Guarantor, a complete copy of Guarantor’s audited annual financial statements certified by an Independent Accountant, prepared in accordance with GAAP and the requirements of Regulation AB, including statements of income and expense and cash flow and a balance sheet for Guarantor, together with a certificate of the chief financial officer of Guarantor (A) during any period for which the Guarantor Net Worth Requirements are applicable to Guarantor, setting forth in reasonable detail Guarantor’s Net Worth as of the end of such prior Fiscal Year and based on such annual financial statements, and (B) certifying to the best of such chief financial officer’s knowledge, that such annual financial statements fairly present the financial condition and results of the operations of Guarantor;
(j)    Clause (ii) of Section 9(b) of the Guaranty is hereby deleted in its entirety and the following is hereby substituted in lieu thereof:

(ii)     within 60 days after the end of each Fiscal Quarter of Guarantor other than the last Fiscal Quarter of each Fiscal Year, financial statements (including a balance sheet as of the end of such Fiscal Quarter and a statement of income and

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expense for such Fiscal Quarter) certified by the chief financial officer of Guarantor and in form, content, level of detail and scope reasonably satisfactory to Lender, together with a certificate of the chief financial officer of Guarantor (A) during any period for which the Guarantor Net Worth Requirements are applicable to Guarantor, setting forth in reasonable detail Guarantor’s Net Worth as of the end of such prior Fiscal Quarter and based on the foregoing quarterly financial statements, and (B) certifying to the best of such chief financial officer’s knowledge, that such quarterly financial statements fairly present the financial condition and results of the operations of Guarantor in a manner consistent with GAAP and the requirements of Regulation AB; and
(k)    All references to “Fiscal Quarter” or “fiscal quarter” in any Mortgage Loan Documents (other than the Guaranty and the Loan Agreement) shall be references to “Fiscal Quarter” as defined in Section 1.1(b) above.

(l)    All references to “Fiscal Year” or “fiscal year” in any Mortgage Loan Documents (other than the Guaranty and the Loan Agreement) shall be references to “Fiscal Year” as defined in Section 1.1(c) above.

1.2    Reporting Modifications. Borrower and Lender hereby agree that on and after the Effective Date, the Mortgage Loan Documents shall be modified as follows:      
(a)    Clause (B) of Section 11.2.1 of the Loan Agreement is hereby deleted in its entirety and the following is hereby substituted in lieu thereof:

(B)    internally prepared, unaudited financial statements of Second Mezzanine Borrower, on a consolidated basis, for such month and, to the extent available, the Fiscal Year to date, which financial statements shall (x) be accompanied by consolidating statements that present in reasonable detail the difference between the information relating to Second Mezzanine Borrower, on the one hand, and the information relating to each of First Mezzanine Borrower and Borrower separately, on the other hand and (y) include, to the extent available, a comparison with the results of for the corresponding month of the prior Fiscal Year and for the corresponding month of the prior Fiscal Year; and
(b)    Clause (A) of the last full paragraph of Section 11.2.1 of the Loan Agreement is hereby deleted in its entirety and the following is hereby substituted in lieu thereof:

(A)    such statements fairly represent the financial condition and results of operations of Second Mezzanine Borrower or the Property, as applicable, provided that with respect to financial statements of Second Mezzanine Borrower, the consolidating information provided therein for Borrower fairly represents the financial condition and results of operations of Borrower,
(c)    Clause (B) of Section 11.2.2 of the Loan Agreement is hereby deleted in its entirety and the following is hereby substituted in lieu thereof:

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(B)    internally prepared, unaudited financial statements of Second Mezzanine Borrower, on a consolidated basis, for such quarter and, to the extent available, the Fiscal Year to date, which financial statements shall (x) be accompanied by consolidating statements that present in reasonable detail the difference between the information relating to Second Mezzanine Borrower, on the one hand, and the information relating to each of First Mezzanine Borrower and Borrower separately, on the other hand and (y) include, to the extent available, a comparison with the results of for the corresponding quarter of the prior Fiscal Year and for the corresponding quarter of the prior Fiscal Year; and
(d)    Clause (A) of the last full paragraph of Section 11.2.2 of the Loan Agreement is hereby deleted in its entirety and the following is hereby substituted in lieu thereof:

(A)    such statements fairly represent the financial condition and results of operations of Second Mezzanine Borrower or the Property, as applicable, provided that with respect to financial statements of Second Mezzanine Borrower, the consolidating information provided therein for Borrower fairly represents the financial condition and results of operations of Borrower,
(e)    The words “Borrower” in clause (B) of Section 11.2.3 of the Loan Agreement is hereby deleted and replaced with the words “Second Mezzanine Borrower, on a consolidated basis,”.

(f)    The last full paragraph of Section 11.2.3 of the Loan Agreement is hereby deleted in its entirety and the following is hereby substituted in lieu thereof:

Notwithstanding the foregoing, (x) the obligations in Section 11.2.2(C) and 11.2.3(B) with respect to delivery of Master Lease Guarantor financial statements may be satisfied by furnishing (A) the applicable financial statements of Guarantor (or any direct or indirect parent of Guarantor) or (B) Master Lease Guarantor’s or Guarantor’s (or any direct or indirect parent thereof), as applicable, Form 10-K or 10-Q, as applicable, filed with the SEC; provided that, with respect to each of the preceding  clauses (A)  and  (B) , (i) to the extent such information relates to Guarantor (or a parent thereof), such information is accompanied by consolidating statements that present in reasonable detail the differences between the information relating to Guarantor (or such parent), on the one hand, and the information relating to Master Lease Guarantor on a stand-alone basis, on the other hand, and (ii) to the extent such information is in lieu of information required to be provided under  Section 11.2.3(B) , such materials shall be accompanied by a report and opinion of such Person’s auditors, which report and opinion shall be prepared in accordance with generally accepted auditing standards; and (y) the financial statements of Second Mezzanine Borrower required to be delivered pursuant to Section 11.2.3(B) shall be accompanied by consolidating statements that present in reasonable detail the difference between the information relating to Second Mezzanine Borrower, on the one hand, and the information relating to each of First Mezzanine Borrower and Borrower separately, on the other hand, provided that such consolidating

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information shall not be audited but shall be accompanied by a report of Second Mezzanine Borrower’s auditors prepared in accordance with generally accepted auditing standards which shall confirm that the consolidating information was fairly stated, in all material respects, in relation to the consolidated financial statements of Second Mezzanine Borrower taken as a whole.
2.    Ratification; Release of Lender. Except for the specific modification set forth above, nothing herein shall be deemed to be a consent to or waiver or amendment of any covenant or agreement contained in the Loan Agreement or any Mortgage Loan Document, and all covenants and agreements contained in the Loan Agreement and the other Mortgage Loan Documents, as modified hereby, are hereby confirmed and ratified in all respects and shall remain in full force and effect in accordance with their respective terms. Borrower hereby expressly ratifies and confirms all of its representations, warranties, covenants and obligations under the Mortgage Loan Documents and hereby acknowledges and agrees that neither this Amendment nor the Modifications shall release or otherwise affect any liability of Borrower under the Mortgage Loan Documents, as modified hereby. Borrower hereby ratifies and confirms that the Mortgage Loan Documents, as modified hereby, represent the valid obligations of Borrower, enforceable and collectible against Borrower in accordance with their terms, subject to bankruptcy, creditor’s rights and principles of equity and the implied covenants of good faith and fair dealing. Borrower does hereby release any and all claims, counterclaims, defenses, affirmative defenses, and other rights of setoff of which it has actual knowledge against Lender, its officers, directors, employees and agents (the “ Released Parties ”) relating to acts, events, conduct, or other matters occurring at or prior to the date hereof, that Borrower might otherwise have been entitled to assert or allege against the Released Parties for any reason under or in connection with the Loan or the Mortgage Loan Documents .
3.    Representations and Warranties of Borrower. Borrower hereby represents and warrants to the Lender as of the Effective Date as follows:
(a)    All reports, documents, instruments and information with respect to Borrower, any Mezzanine Borrower or the Property delivered to Lender by Borrower in connection with the Modifications are correct in all material respects and sufficiently complete to give Lender accurate knowledge of the subject matter thereof, and do not, to Borrower’s knowledge, contain any misrepresentation of a material fact or omission of a material fact which omission make the provided information misleading as of the date made in light of the circumstances in which such report, document, instrument or information was delivered to Lender.

(b)    No Event of Default exists or is continuing.

(c)    Each financial statement with respect to Borrower delivered to Lender under the Loan Agreement (i) has been delivered with respect to Second Mezzanine Borrower on a consolidated basis with Borrower and Mezzanine Borrower, (ii) is materially complete and correct as of the date made for the reporting period covered by such statement, (iii) presents fairly the financial condition of Second Mezzanine Borrower on such consolidated basis, and (iv) has been prepared in accordance with GAAP or other accounting standards acceptable to Lender. Since the date of the quarterly report for the fourth quarter, 2013, there has been no material adverse change in the financial condition of Borrower.

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(d)    Borrower is not currently the subject of any completed or pending bankruptcy, reorganization or insolvency proceeding.

(e)    Borrower has no set-offs, counterclaims, defenses or other causes of action against Lender arising out of the Loan or the Mortgage Loan Documents.

(f)    The person executing this Amendment on behalf of Borrower is authorized to do so and, when signed, this Amendment constitutes the valid and binding obligation of Borrower enforceable in accordance with its terms, subject to bankruptcy, creditor’s rights and principles of equity and the implied covenants of good faith and fair dealing.

Borrower understands and intends that Lender will rely on the representations and warranties contained herein.

4.    Counterparts. This Amendment may be executed in counterparts, each of which shall constitute an original but all of which when taken together shall constitute one agreement. Delivery of an executed counterpart of a signature page to this Amendment by facsimile or other electronic format shall be effective as delivery of a manually executed signature page hereto.
5.    Governing Law. This Amendment and the rights and obligations of the parties hereto and their successors and assigns shall in all respects be governed by, and construed and enforced in accordance with, the laws of the State of New York.
6.    No Impairment of Lien. Nothing set forth herein shall affect the priority or extent of the lien created by the Security Instruments or any of the other Mortgage Loan Documents, nor, except as expressly set forth herein, release or change the liability of any party who may now be or after the date of this Amendment may become liable, primarily or secondarily, under the Mortgage Loan Documents. Except as expressly modified hereby, the Note, the Loan Agreement, the Security Instruments, the Guaranty and the other Mortgage Loan Documents remain unchanged, are hereby ratified and reaffirmed in all respects and shall remain in full force and effect. Nothing herein shall be construed to constitute a novation of the Loan or of any of the Mortgage Loan Documents. The execution and delivery hereof and the Modifications provided for herein shall in no way extinguish, release, modify, reduce, impair or terminate any of the obligations or liabilities of Guarantor under the terms of the Guaranty.
7.    Miscellaneous.
(a)    If any provision of this Amendment is adjudicated to be invalid, illegal or unenforceable, in whole or in part, it will be deemed omitted to that extent and all other provisions of this Amendment will remain in full force and effect.
(b)    No change or modification of this Amendment shall be valid unless the same is in writing and signed by all parties hereto.
(c)    The captions contained in this Amendment are for convenience of reference only and in no event define, describe or limit the scope or intent of this Amendment or any of the provisions or terms hereof.

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(d)    This Amendment shall be binding upon and inure to the benefit of the parties and their respective heirs, legal representatives, successors and permitted assigns.
(e)    THIS AMENDMENT AND THE MORTGAGE LOAN DOCUMENTS, AS AMENDED HEREBY, REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
8.    Expenses/Modification Fee. Borrower shall reimburse Lender for all of Lender’s reasonable out-of-pocket costs and expenses incurred in connection with the preparation, negotiation, execution and delivery of this Amendment, including, but not limited to, Rating Agency fees and reasonable attorneys’ fees and costs. Borrower shall be solely responsible for its own costs and expenses, including attorneys’ fees, in connection with this Amendment, the Modifications and the transactions contemplated hereby. Additionally, in connection with the execution and delivery of this Amendment by Lender, Borrower shall pay Lender a modification fee in the amount of $10,000.00.
9.    Financial Reporting. Lender acknowledges and agrees that (a) all financial reports delivered to Lender under the Loan Agreement, the Master Lease or the Guaranty for periods preceding the Conversion Date (as defined in Section 1.1(a) above) have been or shall be provided utilizing the calendar month and the definition for “Fiscal Year” and “Fiscal Quarter” set forth in the Loan Agreement prior to giving effect to this Amendment, (b) all financial reports to be delivered to Lender under the Loan Agreement, the Master Lease or the Guaranty for periods after the Conversion Date shall be provided utilizing the Fiscal Month and the definition for “Fiscal Year” and “Fiscal Quarter” as set forth in  Section 1  of this Amendment, and (c) any comparisons to be delivered to Lender under the Loan Agreement, the Master Lease or the Guaranty between a period preceding the Conversion Date and a period after the Conversion Date shall not be required to compare periods of the same length.
10.    Master Lease Amendment. Lender hereby consents to Borrower and Master Lessee entering into an amendment to the Master Lease modifying the terms of the Master Lease consistent with the Modifications.
11.    Ratification of Guarantor. Guarantor hereby consents to the Modifications and expressly ratifies and confirms all of its representations, warranties, covenants and obligations under the Mortgage Loan Documents and hereby acknowledges and agrees that neither this Amendment nor the Modifications shall release or otherwise affect any liability of Guarantor under the Mortgage Loan Documents, as modified hereby. Guarantor hereby ratifies and confirms that the Mortgage Loan Documents, as modified hereby, represent the valid obligations of Guarantor, enforceable and collectible against Guarantor in accordance with their terms, subject to bankruptcy, creditor’s rights and principles of equity and the implied covenants of good faith and fair dealing. Guarantor does hereby release any and all claims, counterclaims, defenses, affirmative defenses, and other rights of setoff of which it has actual knowledge against Lender, its officers, directors, employees and agents (the “ Released Parties ”) relating to acts, events, conduct, or other matters occurring at or prior to the date hereof, that Guarantor might

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otherwise have been entitled to assert or allege against the Released Parties for any reason under or in connection with the Loan or the Mortgage Loan Documents .

SIGNATURES CONTINUE ON FOLLOWING PAGE

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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered as of the day and year first above written.

 	 	 	 	 	
 	BORROWER:	     NEW PRIVATE RESTAURANT PROPERTIES, LLC ,	
 	 	     a Delaware limited liability company	

 	 	     By:	/s/ Joseph J. Kadow	 	
 	 	     Name:	Joseph J. Kadow	 	
 	 	     Title:	Executive Vice President	 	

 	 	 	 	 	
 	GUARANTOR:	     OSI HOLDCO I, INC., a Delaware corporation	
 	 	 	 	 	
 	 	     By:	/s/ Joseph J. Kadow	 	
 	 	     Name:	Joseph J. Kadow	 	
 	 	     Title:	Executive Vice President	 	

 	
 	 	 	 	 	 	 	
 	LENDER:	 	WELLS FARGO BANK, N.A., AS TRUSTEE FOR THE	 	
 	 	 	REGISTERED HOLDERS OF BAMLL-DB 2012-OSI	 	
 	 	 	TRUST, COMMERCIAL MORTGAGE PASS-THROUGH	 	
 	 	 	CERTIFICATES, SERIES 2012-OSI	 	 	
 	 	 	 	 	 	 	
 	 	 	By: KeyCorp Real Estate Capital Markets, Inc.,	 	 	
 	 	 	       an Ohio corporation, as Servicer	 	 	

 	 	 	 	 	
 	 	 	By: Berkadia Commercial Mortgage LLC, a	
 	 	 	        Delaware limited liability company,	
 	 	 	        as Subservicer	 	

 	
 	 	 	 	 	
 	 	By:	/s/ Gary A. Routzahn	 	
 	 	Name:	Gary A. Routzahn	 	
 	 	Title:	Authorized Representative	 	

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EXHIBIT 10.7

EXECUTION VERSION

FIRST AMENDMENT TO MEZZANINE LOAN AND SECURITY AGREEMENT (FIRST MEZZANINE)

THIS FIRST AMENDMENT TO MEZZANINE LOAN AND SECURITY AGREEMENT (FIRST MEZZANINE) (this “ Amendment ”), dated as of January 3, 2014 (the “ Effective Date ”), is made by and between  NEW PRP MEZZ 1, LLC,  a Delaware limited liability company (“ Borrower ”),  OSI HOLDCO I, INC. , a Delaware corporation ( “ Guaranto r ” ), ATHENE ANNUITY & LIFE ASSURANCE COMPANY , a Delaware corporation (together with its successors and assigns, “ Athene ”),  THORNBURG STRATEGIC INCOME FUND , one in a series of Thornburg Investment Trust, a Massachusetts business trust organized as a diversified, open-end management investment company under a Declaration of Trust (together with its successors and assigns, “ Thornburg Strategic ”),  THORNBURG INVESTMENT INCOME BUILDER FUND , one in a series of Thornburg Investment Trust, a Massachusetts business trust organized as a diversified, open-end management investment company under a Declaration of Trust (together with its successors and assigns, “ Thornburg Investment ”) and  NEWCASTLE CDO IX, 1 LIMITED , a Cayman Islands limited liability company (together with its successors and assigns, “ Newcastle ”, and Newcastle, together with Athene, GACC and Thornburg, “ Lender ”), as secured parties. Capitalized terms used herein and not otherwise defined shall have the meanings assigned to them in the Loan Agreement (defined below).
RECITALS
A.    Bank of America, N.A.(“Bank of America”) and GACC (GACC, together with Bank of America, “ Original Lender ”), made a loan (the “ First Mezzanine Loan ”) to Borrower in the original aggregate principal amount of $87,600,000.00, evidenced by that certain Mezzanine Note A-1 (First Mezzanine) (the “ A-1 Note ”), that certain Mezzanine Note A-2 (First Mezzanine) (the “ A-2 Note ”), that certain Mezzanine Note A-3 (First Mezzanine) (the “ A-3 Note ”), that certain Mezzanine Note A-4 (First Mezzanine) (the “ A-4 Note ”), that certain Mezzanine Note A-5 (First Mezzanine) (the “ A-5 Note ”) and that certain Mezzanine Note A-6 (the “ A-6 Note ”), that certain Mezzanine Note A-7 (First Mezzanine) (the “ A-7 Note ”, and together with the A-1 Note, the A-2 Note, the A-3 Note, the A-4 Note, the A-5 Note and the A-6 Note, the “ Notes ”), each dated as of March 27, 2012, and that certain Mezzanine Loan and Security Agreement (First Mezzanine), dated as of March 27, 2012 (the “ Loan Agreement ”) by and between Borrower and Original Lender.
B.    To secure the repayment of the Notes, Borrower, among other things, executed and delivered to Original Lender that certain Pledge and Security Agreement (First Mezzanine), dated as of March 27, 2012 (the “ Pledge ”), encumbering 100% of the direct issued and outstanding limited liability company interests in New Private Restaurant Properties, LLC, a Delaware limited liability company (the “ Mortgage Borrower ”). The First Mezzanine Loan is further evidenced or secured by various other documents executed by Borrower and others in favor of Original Lender, including, but not limited to, that certain Guaranty of Recourse Obligations (First Mezzanine) dated as of March 27, 2012 (the “ Guaranty ”), executed by

Guarantor (such other loan documents, including the Guaranty, together with the Notes, the Loan Agreement, and the Pledge, the “ First Mezzanine Loan Documents ”).
C.    Athene is the holder of the A-1 Note, the A-2 Note, the A-3 Note and the A-4 Note pursuant to that Assignment and Assumption Agreement (First Mezzanine Loan: Notes A-1 through A-4), dated March 30, 2012, between Original Lender and Athene (the “ Athene Assignment ”), Thornburg Strategic is the holder of the A-5 Note pursuant to that Assignment and Assumption Agreement (First Mezzanine Loan: Note A-5), dated March 27, 2012, between Original Lender and Thornburg (the “ Thornburg Strategic Assignment ”), Thornburg Investment is the holder of the A-6 Note pursuant to that Assignment and Assumption Agreement (First Mezzanine Loan: Note A-6), dated March 27, 2012, between Original Lender and Thornburg (the “ Thornburg Investment Assignment ”) and Newcastle is the holder of the A-7 Note pursuant to that Assignment and Assumption Agreement (First Mezzanine Loan: Note A-7), dated March 27, 2012, between Original Lender and Newcastle (the “ Newcastle Assignment ”).
D.    Situs Asset Management LLC (“Servicer”) is the current Servicer of the First Mezzanine Loan pursuant to the terms of that certain Servicing Agreement, dated as of February 28, 2011 between Apollo Global Real Estate Management, L.P., as “Owner” thereunder and Servicer (together with its permitted successors and assigns), as modified by the Letter Agreement, dated as of March 27, 2012, by and among Original Lender, Thornburg Strategic, Thornburg Investment, Newcastle and Servicer (as so modified, the “ Trust and Servicing Agreement ”).
E.    Borrower has requested that the definition of Fiscal Year and Fiscal Quarter in the Loan Agreement be amended to accommodate a 52/53 week financial reporting structure and other amendments related thereto (such amendments, as more expressly set forth Section 1.1 below, the “ Fiscal Year Modifications ”), and Lender has agreed to consent to such Fiscal Year Modifications, subject to the terms and conditions provided herein.
F.    Borrower has requested that certain reporting obligations of Borrower under the First Mezzanine Loan Documents be amended to permit certain financial statements to be provided to Lender on a consolidated basis and other amendments related thereto (such amendments, as more expressly set forth in Section 1.2 below, the “ Reporting Modifications ” and collectively with the Fiscal Year Modifications, the “ Modifications ”).
NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
1.    Modifications.
1.1    Fiscal Year Modifications. Borrower and Lender hereby agree that on and after the Conversion Date (as defined below), the First Mezzanine Loan Documents shall be modified as follows:     
(a)The following definitions are added to Section 1.1 of the Loan Agreement:

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“Conversion Date” shall mean January 1, 2014 or such later date for Borrower’s conversion to a fifty-two (52) / fifty-three (53) week financial reporting structure as may be specified in writing delivered by Borrower to Lender prior to January 1, 2014.
“Fiscal Month” shall mean a length of time equal to either four (4) or five (5) weeks, each week being Monday through Sunday.
(b)The definition of “Fiscal Quarter” in Section 1.1 of the Loan Agreement is hereby deleted in its entirety and the following is hereby substituted in lieu thereof:
“Fiscal Quarter” shall mean each thirteen (13) week period ending on a Sunday during each Fiscal Year, with the first Fiscal Quarter of each calendar year commencing on the first calendar day of the Fiscal Year; provided that the first Fiscal Quarter of the 2014 Fiscal Year shall commence on the Conversion Date. Each Fiscal Quarter will consist of thirteen (13) weeks, with two four (4) week periods followed by one five (5) week period, except for the period in which the Conversion Date falls.”
(c)The definition of “Fiscal Year” in Section 1.1 of the Loan Agreement is hereby deleted in its entirety and the following is hereby substituted in lieu thereof:
“Fiscal Year” shall mean a fifty-two (52) or fifty-three (53) week year commencing on the calendar day immediately following the last day of the prior Fiscal Year and ending on the last Sunday in December; provided that the 2014 Fiscal Year shall be the year commencing on January 1, 2014 and ending on December 28, 2014.
(d)The words “fiscal year” in the first full sentence of Section 11.1 of the Loan Agreement are hereby deleted and replaced with the words “Fiscal Year”.
(e)The lead-in paragraph to Section 11.2.1 is hereby deleted in its entirety and the following is hereby substituted in lieu thereof:
Commencing with the first Fiscal Month after the Conversion Date, not later than thirty (30) days following the end of such Fiscal Month and each Fiscal Month thereafter, Borrower shall, or shall cause Mortgage Borrower to, or cause Master Lessee or Asset Manager to, deliver to Lender the following with respect to such month and each subsequent Fiscal Month.
(f)The words “fiscal quarter” in clause (c) of Section 11.2.3 of the Loan Agreement are hereby deleted and replaced with the words “Fiscal Quarter”
(g)The words “fiscal year” in clause (i) of Section 16.1 of the Loan Agreement are hereby deleted and replaced with the words “Fiscal Year”.
(h)Clause (i) of Section 9(b) of the Guaranty is hereby deleted in its entirety and the following is hereby substituted in lieu thereof:

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(i)    within 120 days after the end of each Fiscal Year of Guarantor, a complete copy of Guarantor’s audited annual financial statements certified by an Independent Accountant, prepared in accordance with GAAP and the requirements of Regulation AB, including statements of income and expense and cash flow and a balance sheet for Guarantor, together with a certificate of the chief financial officer of Guarantor (A) during any period for which the Guarantor Net Worth Requirements are applicable to Guarantor, setting forth in reasonable detail Guarantor’s Net Worth as of the end of such prior Fiscal Year and based on such annual financial statements, and (B) certifying to the best of such chief financial officer’s knowledge, that such annual financial statements fairly present the financial condition and results of the operations of Guarantor;
(i)Clause (ii) of Section 9(b) of the Guaranty is hereby deleted in its entirety and the following is hereby substituted in lieu thereof:
(ii)    within 60 days after the end of each Fiscal Quarter of Guarantor other than the last Fiscal Quarter of each Fiscal Year, financial statements (including a balance sheet as of the end of such Fiscal Quarter and a statement of income and expense for such Fiscal Quarter) certified by the chief financial officer of Guarantor and in form, content, level of detail and scope reasonably satisfactory to Lender, together with a certificate of the chief financial officer of Guarantor (A) during any period for which the Guarantor Net Worth Requirements are applicable to Guarantor, setting forth in reasonable detail Guarantor’s Net Worth as of the end of such prior Fiscal Quarter and based on the foregoing quarterly financial statements, and (B) certifying to the best of such chief financial officer’s knowledge, that such quarterly financial statements fairly present the financial condition and results of the operations of Guarantor in a manner consistent with GAAP and the requirements of Regulation AB; and
(j)All references to “Fiscal Quarter” or “fiscal quarter” in any First Mezzanine Loan Documents (other than the Guaranty and the Loan Agreement) shall be references to “Fiscal Quarter” as defined in  Section 1.1(b)  above.
(k)All references to “Fiscal Year” or “fiscal year” in any First Mezzanine Loan Documents (other than the Guaranty and the Loan Agreement) shall be references to “Fiscal Year” as defined in  Section 1.1(c)  above.
1.2    Reporting Modifications. Borrower and Lender hereby agree that on and after the Effective Date, the First Mezzanine Loan Documents shall be modified as follows:     
(a)Clause (B) of Section 11.2.1 of the Loan Agreement is hereby deleted in its entirety and the following is hereby substituted in lieu thereof:
(B)    internally prepared, unaudited financial statements of Second Mezzanine Borrower, on a consolidated basis, for such month and, to the extent available, the Fiscal Year to date, which financial statements shall (x) be accompanied by consolidating statements that present in reasonable detail the difference between

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the information relating to Second Mezzanine Borrower, on the one hand, and the information relating to each of Borrower and Mortgage Borrower separately, on the other hand and (y) include, to the extent available, a comparison with the results of for the corresponding month of the prior Fiscal Year and for the corresponding month of the prior Fiscal Year; and
(b)Clause (A) of the last full paragraph of Section 11.2.1 of the Loan Agreement is hereby deleted in its entirety and the following is hereby substituted in lieu thereof:
(A) such statements fairly represent the financial condition and results of operations of Second Mezzanine Borrower or the Property, as applicable, provided that with respect to financial statements of Second Mezzanine Borrower, the consolidating information provided therein for Borrower fairly represents the financial condition and results of operations of Borrower,
(c)Clause (B) of Section 11.2.2 of the Loan Agreement is hereby deleted in its entirety and the following is hereby substituted in lieu thereof:
(B)    internally prepared, unaudited financial statements of Second Mezzanine Borrower, on a consolidated basis, for such quarter and, to the extent available, the Fiscal Year to date, which financial statements shall (x) be accompanied by consolidating statements that present in reasonable detail the difference between the information relating to Second Mezzanine Borrower, on the one hand, and the information relating to each of Borrower and Mortgage Borrower separately, on the other hand and (y) include, to the extent available, a comparison with the results of for the corresponding quarter of the prior Fiscal Year and for the corresponding quarter of the prior Fiscal Year; and
(d)Clause (A) of the last full paragraph of Section 11.2.2 of the Loan Agreement is hereby deleted in its entirety and the following is hereby substituted in lieu thereof:
(A) such statements fairly represent the financial condition and results of operations of Second Mezzanine Borrower or the Property, as applicable, provided that with respect to financial statements of Second Mezzanine Borrower, the consolidating information provided therein for Borrower fairly represents the financial condition and results of operations of Borrower,
(e)The words “Borrower, Mortgage Borrower” in clause (B) of Section 11.2.3 of the Loan Agreement is hereby deleted and replaced with the words “Second Mezzanine Borrower, on a consolidated basis,”.
(f)The last full paragraph of Section 11.2.3 of the Loan Agreement is hereby deleted in its entirety and the following is hereby substituted in lieu thereof:
Notwithstanding the foregoing, (x) the obligations in Section 11.2.2(C) and 11.2.3(B) with respect to delivery of Master Lease Guarantor financial statements may be satisfied by furnishing (A) the applicable financial statements of Guarantor (or any direct or indirect parent of Guarantor) or (B) Master Lease

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Guarantor’s or Guarantor’s (or any direct or indirect parent thereof), as applicable, Form 10-K or 10-Q, as applicable, filed with the SEC; provided that, with respect to each of the preceding  clauses (A)  and  (B) , (i) to the extent such information relates to Guarantor (or a parent thereof), such information is accompanied by consolidating statements that present in reasonable detail the differences between the information relating to Guarantor (or such parent), on the one hand, and the information relating to Master Lease Guarantor on a stand-alone basis, on the other hand, and (ii) to the extent such information is in lieu of information required to be provided under Section 11.2.3(B) , such materials shall be accompanied by a report and opinion of such Person’s auditors, which report and opinion shall be prepared in accordance with generally accepted auditing standards; and (y) the financial statements of Second Mezzanine Borrower required to be delivered pursuant to Section 11.2.3(B) shall be accompanied by consolidating statements that present in reasonable detail the difference between the information relating to Second Mezzanine Borrower, on the one hand, and the information relating to each of Borrower and Mortgage Borrower separately, on the other hand, provided that such consolidating information shall not be audited but shall be accompanied by a report of Second Mezzanine Borrower’s auditors prepared in accordance with generally accepted auditing standards which shall confirm that the consolidating information was fairly stated, in all material respects, in relation to the consolidated financial statements of Second Mezzanine Borrower taken as a whole.
2.    Ratification; Release of Lender. Except for the specific modification set forth above, nothing herein shall be deemed to be a consent to or waiver or amendment of any covenant or agreement contained in the Loan Agreement or any First Mezzanine Loan Document, and all covenants and agreements contained in the Loan Agreement and the other First Mezzanine Loan Documents, as modified hereby, are hereby confirmed and ratified in all respects and shall remain in full force and effect in accordance with their respective terms. Borrower hereby expressly ratifies and confirms all of its representations, warranties, covenants and obligations under the First Mezzanine Loan Documents and hereby acknowledges and agrees that neither this Amendment nor the Modifications shall release or otherwise affect any liability of Borrower under the First Mezzanine Loan Documents, as modified hereby. Borrower hereby ratifies and confirms that the First Mezzanine Loan Documents, as modified hereby, represent the valid obligations of Borrower, enforceable and collectible against Borrower in accordance with their terms, subject to bankruptcy, creditor’s rights and principles of equity and the implied covenants of good faith and fair dealing. Borrower does hereby release any and all claims, counterclaims, defenses, affirmative defenses, and other rights of setoff of which it has actual knowledge against Lender, its officers, directors, employees and agents (the “ Released Parties ”) relating to acts, events, conduct, or other matters occurring at or prior to the date hereof, that Borrower might otherwise have been entitled to assert or allege against the Released Parties for any reason under or in connection with the First Mezzanine Loan or the First Mezzanine Loan Documents .
3.    Representations and Warranties of Borrower. Borrower hereby represents and warrants to the Lender as of the Effective Date as follows:

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(a)All reports, documents, instruments and information with respect to Borrower, any Second Mezzanine Borrower, Mortgage Borrower or the Property delivered to Lender by Borrower in connection with the Modifications are correct in all material respects and sufficiently complete to give Lender accurate knowledge of the subject matter thereof, and do not, to Borrower’s knowledge, contain any misrepresentation of a material fact or omission of a material fact which omission make the provided information misleading as of the date made in light of the circumstances in which such report, document, instrument or information was delivered to Lender.
(b)No Event of Default exists or is continuing.
(c)Each financial statement with respect to Borrower delivered to Lender under the Loan Agreement (i) has been delivered with respect to Second Mezzanine Borrower on a consolidated basis with Borrower and Mortgage Borrower, (ii) is materially complete and correct as of the date made for the reporting period covered by such statement, (iii) presents fairly the financial condition of Second Mezzanine Borrower on such consolidated basis, and (iv) has been prepared in accordance with GAAP or other accounting standards acceptable to Lender. Since the date of the quarterly report for the 3rd Quarter of 2013, there has been no material adverse change in the financial condition of Borrower.
(d)Borrower is not currently the subject of any completed or pending bankruptcy, reorganization or insolvency proceeding.
(e)Borrower has no set-offs, counterclaims, defenses or other causes of action against Lender arising out of the First Mezzanine Loan or the First Mezzanine Loan Documents.
(f)The person executing this Amendment on behalf of Borrower is authorized to do so and, when signed, this Amendment constitutes the valid and binding obligation of Borrower enforceable in accordance with its terms, subject to bankruptcy, creditor’s rights and principles of equity and the implied covenants of good faith and fair dealing.
Borrower understands and intends that Lender will rely on the representations and warranties contained herein.

4.    Counterparts. This Amendment may be executed in counterparts, each of which shall constitute an original but all of which when taken together shall constitute one agreement. Delivery of an executed counterpart of a signature page to this Amendment by facsimile or other electronic format shall be effective as delivery of a manually executed signature page hereto.
5.    Governing Law. This Amendment and the rights and obligations of the parties hereto and their successors and assigns shall in all respects be governed by, and construed and enforced in accordance with, the laws of the State of New York.
6.    No Impairment of Lien. Nothing set forth herein shall affect the priority or extent of the lien created by the Security Instruments or any of the other First Mezzanine Loan Documents, nor, except as expressly set forth herein, release or change the liability of any party who may now be or after the date of this Amendment may become liable, primarily or secondarily, under the First Mezzanine Loan Documents. Except as expressly modified hereby,

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the Notes, the Loan Agreement, the Pledge, the Guaranty and the other First Mezzanine Loan Documents remain unchanged, are hereby ratified and reaffirmed in all respects and shall remain in full force and effect. Nothing herein shall be construed to constitute a novation of the First Mezzanine Loan or of any of the First Mezzanine Loan Documents. The execution and delivery hereof and the Modifications provided for herein shall in no way extinguish, release, modify, reduce, impair or terminate any of the obligations or liabilities of Guarantor under the terms of the Guaranty.
7.    Miscellaneous.
(a)    If any provision of this Amendment is adjudicated to be invalid, illegal or unenforceable, in whole or in part, it will be deemed omitted to that extent and all other provisions of this Amendment will remain in full force and effect.
(b)    No change or modification of this Amendment shall be valid unless the same is in writing and signed by all parties hereto.
(c)    The captions contained in this Amendment are for convenience of reference only and in no event define, describe or limit the scope or intent of this Amendment or any of the provisions or terms hereof.
(d)    This Amendment shall be binding upon and inure to the benefit of the parties and their respective heirs, legal representatives, successors and permitted assigns.
(e)    THIS AMENDMENT AND THE FIRST MEZZANINE LOAN DOCUMENTS, AS AMENDED HEREBY, REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
8.    Expenses/Modification Fee. Borrower shall reimburse Lender for all of Lender’s reasonable out-of-pocket costs and expenses incurred in connection with the preparation, negotiation, execution and delivery of this Amendment, including, but not limited to, Rating Agency fees and reasonable attorneys’ fees and costs. Borrower shall be solely responsible for its own costs and expenses, including attorneys’ fees, in connection with this Amendment, the Modifications and the transactions contemplated hereby.
9.    Financial Reporting. Lender acknowledges and agrees that (a) all financial reports delivered to Lender under the Loan Agreement, the Master Lease or the Guaranty for periods preceding the Conversion Date (as defined in Section 1.1(a) above) have been or shall be provided utilizing the calendar month and the definition for “Fiscal Year” and “Fiscal Quarter” set forth in the Loan Agreement prior to giving effect to this Amendment, (b) all financial reports to be delivered to Lender under the Loan Agreement, the Master Lease or the Guaranty for periods after the Conversion Date shall be provided utilizing the Fiscal Month and the definition for “Fiscal Year” and “Fiscal Quarter” as set forth in  Section 1  of this Amendment, and (c) any comparisons to be delivered to Lender under the Loan Agreement, the Master Lease or the

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Guaranty between a period preceding the Conversion Date and a period after the Conversion Date shall not be required to compare periods of the same length.
10.    Master Lease Amendment. Lender hereby consents to Mortgage Borrower and Master Lessee entering into an amendment to the Master Lease modifying the terms of the Master Lease consistent with the Modifications.

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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered as of the day and year first above written.

 	 	 	 	 	
BORROWER:	 	NEW PRP MEZZ 1, LLC,	 	
 	 	a Delaware limited liability company	 	
 	 	 	 	 	
 	 	By:	/s/ Joseph J. Kadow	 	
 	 	Name:	Joseph J. Kadow	 	
 	 	Title:	Executive Vice President	 	
 	 	 	 	 	
GUARANTOR:	 	OSI HOLDCO I, INC., a Delaware corporation	
 	 	 	 	 	
 	 	By:	/s/ Joseph J. Kadow	 	
 	 	Name:	Joseph J. Kadow	 	
 	 	Title:	Executive Vice President	 	

 	
 	 	 	 	 	
[Signatures Continue on Next Page]	

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ATHENE:	ATHENE ANNUITY & LIFE ASSURANCE COMPANY ,  	
 	soley with respect to the Long Term Trust Account	
 	 	 	 	
 	By: Athene Asset Management LLC, its investment adviser	
 	with respect to that certain long term annuity trust account	
 	(“Long Term Trust Account”) created pursuant to that certain	
 	Long Term Annuity Trust Agreement between Athene Annuity	
 	& Life Assurance Company, Transamerica Life Insurance	
 	Company and State Street Bank and Trust Company, dated	
 	December 16, 2011	
 	 	 	 	
 	By:	/s/ James R. Belardi	 	
 	Name:	James R. Belardi	 	
 	Title:	Chief Executive Officer	 	
 	 	 	 	
 	ATHENE ANNUITY & LIFE ASSURANCE COMPANY ,  	
 	a company organized under the laws of the State of Delaware	
 	 	 	 	
 	By: Athene Asset Management LLC, its investment adviser	
 	 	 	 	
 	By:	/s/ James R. Belardi	 	
 	Name:	James R. Belardi	 	
 	Title:	Chief Executive Officer	 	
 	 	 	 	
THORNBURG STRATEGIC:	THORNBURG STRATEGIC INCOME FUND , one in a	
 	series of Thornburg Investment Trust, a Massachusetts business	
 	trust organized as a diversified, open-end management	
 	investment company under a Declaration of Trust	
 	 	 	 	
 	By:	/s/ Jason H. Brady	 	
 	Name:	Jason H. Brady	 	
 	Title:	PM/MD/VP	 	
 	 	 	 	
THORNBURG INVESTMENT:	THORNBURG INVESTMENT INCOME BUILDER	
 	FUND, one in a series of Thornburg Investment Trust, a	
 	Massachusetts business trust organized as a diversified, open-	
 	end management investment company under a Declaration of	
 	Trust	 	 	
 	 	 	 	
 	By:	/s/ Jason H. Brady	 	
 	Name:	Jason H. Brady	 	
 	Title:	PM/MD/VP	 	

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NEWCASTLE:	NEWCASTLE CDO IX, 1 LIMITED, a Cayman Islands	
 	exempted limited liability company	
 	 	 	 	
 	By: Newcastle Investment Corp., a Maryland corporation	

 	 	 	 	 	
 	 	By:	/s/ Jonathan Brown	 	
 	 	Name:	Jonathan Brown	 	
 	 	Title:	Interim CFO	 	

 

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Exhibit 10.9

EXECUTION VERSION

FIRST AMENDMENT TO MEZZANINE LOAN AND SECURITY AGREEMENT (SECOND MEZZANINE)

THIS FIRST AMENDMENT TO MEZZANINE LOAN AND SECURITY AGREEMENT (SECOND MEZZANINE) (this “ Amendment ”), dated as of January 3, 2014 (the “ Effective Date ”), is made by and between  NEW PRP MEZZ 2, LLC,  a Delaware limited liability company (“ Borrower ”),  OSI HOLDCO I, INC. , a Delaware corporation ( “ Guaranto r ” ) and  ANNALY CRE HOLDINGS LLC  (formerly known as CreXus S Holdings LLC), a Delaware limited liability company (together with its successors and assigns, “ Lender ”), as secured party. Capitalized terms used herein and not otherwise defined shall have the meanings assigned to them in the Loan Agreement (defined below).
RECITALS
A.    Bank of America, N.A.(“Bank of America”) and German American Capital Corporation, a Maryland corporation (“ GACC ”, and together with Bank of America, “ Original Lender ”), made a loan (the “ Second Mezzanine Loan ”) to Borrower in the original principal amount of $87,600,000.00, evidenced by that certain Mezzanine Note (Second Mezzanine) (the “ Note ”), dated as of March 27, 2012, and that certain Mezzanine Loan and Security Agreement (Second Mezzanine) dated as of March 27, 2012 (the “ Loan Agreement ”) by and between Borrower and Original Lender.
B.    To secure the repayment of the Notes, Borrower, among other things, executed and delivered to Original Lender that certain Pledge and Security Agreement (Second Mezzanine), dated as of March 27, 2012 (the “ Pledge ”), encumbering 100% of the direct issued and outstanding limited liability company interests in New PRP Mezz 1, LLC, a Delaware limited liability company (the “ First Mezzanine Borrower ”). The Second Mezzanine Loan is further evidenced or secured by various other documents executed by Borrower and others in favor of Original Lender, including, but not limited to, that certain Guaranty of Recourse Obligations (Second Mezzanine) dated as of March 27, 2012 (the “ Guaranty ”), executed by Guarantor (such other loan documents, including the Guaranty, together with the Note, the Loan Agreement, and the Pledge, the “ Second Mezzanine Loan Documents ”).
C.    Lender is the holder of the Note pursuant to that Assignment and Assumption Agreement (Second Mezzanine Loan), dated March 27, 2012, between Original Lender and Lender (the “ Assignment ”).
D.    Borrower has requested that the definition of Fiscal Year and Fiscal Quarter in the Loan Agreement be amended to accommodate a 52/53 week financial reporting structure and other amendments related thereto (such amendments, as more expressly set forth Section 1.1 below, the “ Fiscal Year Modifications ”), and Lender has agreed to consent to such Fiscal Year Modifications, subject to the terms and conditions provided herein.
E.    Borrower has requested that certain reporting obligations of Borrower under the Second Mezzanine Loan Documents be amended to permit certain financial statements to be

provided to Lender on a consolidated basis and other amendments related thereto (such amendments, as more expressly set forth in Section 1.2 below, the “ Reporting Modifications ” and collectively with the Fiscal Year Modifications, the “ Modifications ”).
NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
1.    Modifications.
1.1    Fiscal Year Modifications. Borrower and Lender hereby agree that on and after the Conversion Date (as defined below), the Second Mezzanine Loan Documents shall be modified as follows:      
(a)The following definitions are added to Section 1.1 of the Loan Agreement:

“Conversion Date” shall mean January 1, 2014 or such later date for Borrower’s conversion to a fifty-two (52) / fifty-three (53) week financial reporting structure as may be specified in writing delivered by Borrower to Lender prior to January 1, 2014.
“Fiscal Month” shall mean a length of time equal to either four (4) or five (5) weeks, each week being Monday through Sunday.
(b)The definition of “Fiscal Quarter” in Section 1.1 of the Loan Agreement is hereby deleted in its entirety and the following is hereby substituted in lieu thereof:

“Fiscal Quarter” shall mean each thirteen (13) week period ending on a Sunday during each Fiscal Year, with the first Fiscal Quarter of each calendar year commencing on the first calendar day of the Fiscal Year; provided that the first Fiscal Quarter of the 2014 Fiscal Year shall commence on the Conversion Date. Each Fiscal Quarter will consist of thirteen (13) weeks, with two four (4) week periods followed by one five (5) week period, except for the period in which the Conversion Date falls.”
(c)The definition of “Fiscal Year” in Section 1.1 of the Loan Agreement is hereby deleted in its entirety and the following is hereby substituted in lieu thereof:

“Fiscal Year” shall mean a fifty-two (52) or fifty-three (53) week year commencing on the calendar day immediately following the last day of the prior Fiscal Year and ending on the last Sunday in December; provided that the 2014 Fiscal Year shall be the year commencing on January 1, 2014 and ending on December 28, 2014.
(d)The words “fiscal year” in the first full sentence of Section 11.1 of the Loan Agreement are hereby deleted and replaced with the words “Fiscal Year”.

(e)The lead-in paragraph to Section 11.2.1 is hereby deleted in its entirety and the following is hereby substituted in lieu thereof:

First Amendment to Mezzanine Loan and Security Agreement (Second Mezzanine)
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6283627.3

Commencing with the first Fiscal Month after the Conversion Date, not later than thirty (30) days following the end of such Fiscal Month and each Fiscal Month thereafter, Borrower shall, or shall cause First Mezzanine Borrower, or shall cause First Mezzanine Borrower to cause Mortgage Borrower to, or cause Master Lessee or Asset Manager to, deliver to Lender the following with respect to such month and each subsequent Fiscal Month.
(f)The words “fiscal quarter” in clause (c) of Section 11.2.3 of the Loan Agreement are hereby deleted and replaced with the words “Fiscal Quarter”

(g)The words “fiscal year” in clause (i) of Section 16.1 of the Loan Agreement are hereby deleted and replaced with the words “Fiscal Year”.

(h)Clause (i) of Section 9(b) of the Guaranty is hereby deleted in its entirety and the following is hereby substituted in lieu thereof:

(i)within 120 days after the end of each Fiscal Year of Guarantor, a complete copy of Guarantor’s audited annual financial statements certified by an Independent Accountant, prepared in accordance with GAAP and the requirements of Regulation AB, including statements of income and expense and cash flow and a balance sheet for Guarantor, together with a certificate of the chief financial officer of Guarantor (A) during any period for which the Guarantor Net Worth Requirements are applicable to Guarantor, setting forth in reasonable detail Guarantor’s Net Worth as of the end of such prior Fiscal Year and based on such annual financial statements, and (B) certifying to the best of such chief financial officer’s knowledge, that such annual financial statements fairly present the financial condition and results of the operations of Guarantor;
(i)    Clause (ii) of Section 9(b) of the Guaranty is hereby deleted in its entirety and the following is hereby substituted in lieu thereof:

(ii)    within 60 days after the end of each Fiscal Quarter of Guarantor other than the last Fiscal Quarter of each Fiscal Year, financial statements (including a balance sheet as of the end of such Fiscal Quarter and a statement of income and expense for such Fiscal Quarter) certified by the chief financial officer of Guarantor and in form, content, level of detail and scope reasonably satisfactory to Lender, together with a certificate of the chief financial officer of Guarantor (A) during any period for which the Guarantor Net Worth Requirements are applicable to Guarantor, setting forth in reasonable detail Guarantor’s Net Worth as of the end of such prior Fiscal Quarter and based on the foregoing quarterly financial statements, and (B) certifying to the best of such chief financial officer’s knowledge, that such quarterly financial statements fairly present the financial condition and results of the operations of Guarantor in a manner consistent with GAAP and the requirements of Regulation AB; and

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(j)All references to “Fiscal Quarter” or “fiscal quarter” in any Second Mezzanine Loan Documents (other than the Guaranty and the Loan Agreement) shall be references to “Fiscal Quarter” as defined in  Section 1.1(b)  above.

(k)All references to “Fiscal Year” or “fiscal year” in any Second Mezzanine Loan Documents (other than the Guaranty and the Loan Agreement) shall be references to “Fiscal Year” as defined in  Section 1.1(c)  above.

1.2    Reporting Modifications. Borrower and Lender hereby agree that on and after the Effective Date, the Second Mezzanine Loan Documents shall be modified as follows:      
(a)Clause (B) of Section 11.2.1 of the Loan Agreement is hereby deleted in its entirety and the following is hereby substituted in lieu thereof:

(B)    internally prepared, unaudited financial statements of Borrower, on a consolidated basis, for such month and, to the extent available, the Fiscal Year to date, which financial statements shall (x) be accompanied by consolidating statements that present in reasonable detail the difference between the information relating to Borrower, on the one hand, and the information relating to each of First Mezzanine Borrower and Mortgage Borrower separately, on the other hand and (y) include, to the extent available, a comparison with the results of for the corresponding month of the prior Fiscal Year and for the corresponding month of the prior Fiscal Year; and
(b)Clause (B) of Section 11.2.2 of the Loan Agreement is hereby deleted in its entirety and the following is hereby substituted in lieu thereof:

(B)    internally prepared, unaudited financial statements of Borrower, on a consolidated basis, for such quarter and, to the extent available, the Fiscal Year to date, which financial statements shall (x) be accompanied by consolidating statements that present in reasonable detail the difference between the information relating to Borrower, on the one hand, and the information relating to each of First Mezzanine Borrower and Mortgage Borrower separately, on the other hand and (y) include, to the extent available, a comparison with the results of for the corresponding quarter of the prior Fiscal Year and for the corresponding quarter of the prior Fiscal Year; and
(c)The words “Borrower, Mortgage Borrower” in clause (B) of Section 11.2.3 of the Loan Agreement is hereby deleted and replaced with the words “Borrower, on a consolidated basis,”.

(d)The last full paragraph of Section 11.2.3 of the Loan Agreement is hereby deleted in its entirety and the following is hereby substituted in lieu thereof:

Notwithstanding the foregoing, (x) the obligations in Section 11.2.2(C) and 11.2.3(B) with respect to delivery of Master Lease Guarantor financial statements may be satisfied by furnishing (A) the applicable financial statements of Guarantor (or any direct or indirect parent of Guarantor) or (B) Master Lease

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Guarantor’s or Guarantor’s (or any direct or indirect parent thereof), as applicable, Form 10-K or 10-Q, as applicable, filed with the SEC; provided that, with respect to each of the preceding  clauses (A)  and  (B) , (i) to the extent such information relates to Guarantor (or a parent thereof), such information is accompanied by consolidating statements that present in reasonable detail the differences between the information relating to Guarantor (or such parent), on the one hand, and the information relating to Master Lease Guarantor on a stand-alone basis, on the other hand, and (ii) to the extent such information is in lieu of information required to be provided under Section 11.2.3(B) , such materials shall be accompanied by a report and opinion of such Person’s auditors, which report and opinion shall be prepared in accordance with generally accepted auditing standards; and (y) the financial statements of Borrower required to be delivered pursuant to Section 11.2.3(B) shall be accompanied by consolidating statements that present in reasonable detail the difference between the information relating to Borrower, on the one hand, and the information relating to each of First Mezzanine Borrower and Mortgage Borrower separately, on the other hand, provided that such consolidating information shall not be audited but shall be accompanied by a report of Borrower’s auditors prepared in accordance with generally accepted auditing standards which shall confirm that the consolidating information was fairly stated, in all material respects, in relation to the consolidated financial statements of Borrower taken as a whole.
2.    Ratification; Release of Lender. Except for the specific modification set forth above, nothing herein shall be deemed to be a consent to or waiver or amendment of any covenant or agreement contained in the Loan Agreement or any Second Mezzanine Loan Document, and all covenants and agreements contained in the Loan Agreement and the other Second Mezzanine Loan Documents, as modified hereby, are hereby confirmed and ratified in all respects and shall remain in full force and effect in accordance with their respective terms. Borrower hereby expressly ratifies and confirms all of its representations, warranties, covenants and obligations under the Second Mezzanine Loan Documents and hereby acknowledges and agrees that neither this Amendment nor the Modifications shall release or otherwise affect any liability of Borrower under the Second Mezzanine Loan Documents, as modified hereby. Borrower hereby ratifies and confirms that the Second Mezzanine Loan Documents, as modified hereby, represent the valid obligations of Borrower, enforceable and collectible against Borrower in accordance with their terms, subject to bankruptcy, creditor’s rights and principles of equity and the implied covenants of good faith and fair dealing. Borrower does hereby release any and all claims, counterclaims, defenses, affirmative defenses, and other rights of setoff of which it has actual knowledge against Lender, its officers, directors, employees and agents (the “ Released Parties ”) relating to acts, events, conduct, or other matters occurring at or prior to the date hereof, that Borrower might otherwise have been entitled to assert or allege against the Released Parties for any reason under or in connection with the Second Mezzanine Loan or the Second Mezzanine Loan Documents .
3.    Representations and Warranties of Borrower. Borrower hereby represents and warrants to the Lender as of the Effective Date as follows:

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(a)All reports, documents, instruments and information with respect to Borrower, any First Mezzanine Borrower, Mortgage Borrower or the Property delivered to Lender by Borrower in connection with the Modifications are correct in all material respects and sufficiently complete to give Lender accurate knowledge of the subject matter thereof, and do not, to Borrower’s knowledge, contain any misrepresentation of a material fact or omission of a material fact which omission make the provided information misleading as of the date made in light of the circumstances in which such report, document, instrument or information was delivered to Lender.

(b)No Event of Default exists or is continuing.

(c)Each financial statement with respect to Borrower delivered to Lender under the Loan Agreement (i) has been delivered with respect to Borrower on a consolidated basis with First Mezzanine Borrower and Mortgage Borrower, (ii) is materially complete and correct as of the date made for the reporting period covered by such statement, (iii) presents fairly the financial condition of Borrower on such consolidated basis, and (iv) has been prepared in accordance with GAAP or other accounting standards acceptable to Lender. Since the date of the quarterly report for the 3 rd  Quarter of 2013, there has been no material adverse change in the financial condition of Borrower.

(d)Borrower is not currently the subject of any completed or pending bankruptcy, reorganization or insolvency proceeding.

(e)Borrower has no set-offs, counterclaims, defenses or other causes of action against Lender arising out of the Second Mezzanine Loan or the Second Mezzanine Loan Documents.

(f)The person executing this Amendment on behalf of Borrower is authorized to do so and, when signed, this Amendment constitutes the valid and binding obligation of Borrower enforceable in accordance with its terms, subject to bankruptcy, creditor’s rights and principles of equity and the implied covenants of good faith and fair dealing.

Borrower understands and intends that Lender will rely on the representations and warranties contained herein.

4.    Counterparts. This Amendment may be executed in counterparts, each of which shall constitute an original but all of which when taken together shall constitute one agreement. Delivery of an executed counterpart of a signature page to this Amendment by facsimile or other electronic format shall be effective as delivery of a manually executed signature page hereto.
5.    Governing Law. This Amendment and the rights and obligations of the parties hereto and their successors and assigns shall in all respects be governed by, and construed and enforced in accordance with, the laws of the State of New York.
6.    No Impairment of Lien. Nothing set forth herein shall affect the priority or extent of the lien created by the Security Instruments or any of the other Second Mezzanine Loan Documents, nor, except as expressly set forth herein, release or change the liability of any party who may now be or after the date of this Amendment may become liable, primarily or

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secondarily, under the Second Mezzanine Loan Documents. Except as expressly modified hereby, the Notes, the Loan Agreement, the Pledge, the Guaranty and the other Second Mezzanine Loan Documents remain unchanged, are hereby ratified and reaffirmed in all respects and shall remain in full force and effect. Nothing herein shall be construed to constitute a novation of the Second Mezzanine Loan or of any of the Second Mezzanine Loan Documents. The execution and delivery hereof and the Modifications provided for herein shall in no way extinguish, release, modify, reduce, impair or terminate any of the obligations or liabilities of Guarantor under the terms of the Guaranty.
7.    Miscellaneous.
(a)    If any provision of this Amendment is adjudicated to be invalid, illegal or unenforceable, in whole or in part, it will be deemed omitted to that extent and all other provisions of this Amendment will remain in full force and effect.
(b)    No change or modification of this Amendment shall be valid unless the same is in writing and signed by all parties hereto.
(c)    The captions contained in this Amendment are for convenience of reference only and in no event define, describe or limit the scope or intent of this Amendment or any of the provisions or terms hereof.
(d)    This Amendment shall be binding upon and inure to the benefit of the parties and their respective heirs, legal representatives, successors and permitted assigns.
(e)    THIS AMENDMENT AND THE SECOND MEZZANINE LOAN DOCUMENTS, AS AMENDED HEREBY, REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
8.    Expenses/Modification Fee. Borrower shall reimburse Lender for all of Lender’s reasonable out-of-pocket costs and expenses incurred in connection with the preparation, negotiation, execution and delivery of this Amendment, including, but not limited to, Rating Agency fees and reasonable attorneys’ fees and costs. Borrower shall be solely responsible for its own costs and expenses, including attorneys’ fees, in connection with this Amendment, the Modifications and the transactions contemplated hereby.
9.    Financial Reporting. Lender acknowledges and agrees that (a) all financial reports delivered to Lender under the Loan Agreement, the Master Lease or the Guaranty for periods preceding the Conversion Date (as defined in Section 1.1(a) above) have been or shall be provided utilizing the calendar month and the definition for “Fiscal Year” and “Fiscal Quarter” set forth in the Loan Agreement prior to giving effect to this Amendment, (b) all financial reports to be delivered to Lender under the Loan Agreement, the Master Lease or the Guaranty for periods after the Conversion Date shall be provided utilizing the Fiscal Month and the definition for “Fiscal Year” and “Fiscal Quarter” as set forth in  Section 1  of this Amendment, and (c) any comparisons to be delivered to Lender under the Loan Agreement, the Master Lease or the

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Guaranty between a period preceding the ConversionDate and a period after the Conversion Date shall not be required to compare periods of the same length.
10.    Master Lease Amendment. Lender hereby consents to Mortgage Borrower and Master Lessee entering into an amendment to the Master Lease modifying the terms of the Master Lease consistent with the Modifications.

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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered as of the day and year first above written.

 	 	 	 	 	
BORROWER:	 	NEW PRP MEZZ 2, LLC	 	
 	 	a Delaware limited liability company	 	
 	 	 	 	 	
 	 	By:	/s/ Joseph J. Kadow	 	
 	 	Name:	Joseph J. Kadow	 	
 	 	Title:	Executive Vice President	 	
 	 	 	 	 	
GUARANTOR:	 	OSI HOLDCO I, INC., a Delaware corporation	
 	 	 	 	 	
 	 	By:	/s/ Joseph J. Kadow	 	
 	 	Name:	Joseph J. Kadow	 	
 	 	Title:	Executive Vice President	 	
 	 	 	 	 	
LENDER:	 	ANNALY CRE HOLDINGS LLC, a Delaware limited liability company	

 	 	By:	/s/ Kevin J. Riordan	 	
 	 	Name:	Kevin J. Riordan	 	
 	 	Title:	Managing Director	 	

 

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Exhibit 10.28

 	
 	 	 	 	 	
 	 	Sub-Sublease	 	 	

 	 	between	 	 	

 	 	OS Southern, LLC	 	 	
 	 	 	 	 	
 	 	(“Landlord”)	 	 	

 	 	and	 	 	

 	 	MVP LRS, LLC	 	 	
 	 	 	 	 	
 	 	(“Tenant”)	 	 	

THIS SUB-SUBLEASE (this “Lease”) is made and entered into by and between OS Southern, LLC, a Florida limited liability company (“Landlord”) and MVP LRS, LLC, a Florida limited liability company, (“Tenant”), and shall be effective on January 21, 2014 (the “Effective Date”).  The parties further acknowledge that Landlord is the sub-tenant under that certain Amended and Restated Sublease agreement effective March 27, 2012 (the “Sublease”), with Private Restaurant Master Lessee, LLC (“PRML”) as sub-landlord, which Sublease is subordinate to that certain Amended and Restated Master Lease Agreement dated March 27, 2012 (the “Master Lease”) between PRML as tenant and New Private Restaurant Properties, LLC (“NPRP”), as master landlord, and that this Lease is subordinate to both the Sublease and the Master Lease.

 	ARTICLE I ‑ GRANT AND TERM	 	

1.1    GRANT. In consideration of the rents, covenants and agreements set forth herein, Landlord hereby leases and conveys to Tenant and Tenant hereby rents from Landlord the following described leased premises (the “Premises”):

A.    Description of Premises. The Premises contains approximately 73,616 square feet of land together with any building (the “Building”) and other improvements located thereon (the Building and other improvements, collectively, the “Improvements”) which is designated as Lot 4 of the Big Bear Commercial Park (the “Project”) in Tampa, Florida. The Premises is depicted on the site plan (the “Site Plan”) attached to this Lease as  Exhibit “A” . A legal description of the Premises and a survey of the Project are attached to this Lease as  Exhibit “A-1” .

B.    Appurtenant Easements and Use Rights. Landlord hereby grants and conveys to Tenant the following additional use rights, each as a right and easement appurtenant to the Premises (the “Appurtenant Use Rights”):

(a)    Tenant acknowledges that the Project is subject to that certain Declaration of Covenants, Restrictions and Easements recorded October 21, 2002 in Book 12033, at Page 1202, in the Office of the Clerk of Court of Hillsborough County, Florida, (the “Declaration”), to which this Lease is subject and subordinate. Landlord agrees not to amend or consent to an amendment of the Declaration, (or grant any consent under the Declaration), which would place any additional restrictions, requirements or other obligations on Tenant or the Premises or is inconsistent with or adversely affects Tenant’s rights under this Lease, without first obtaining Tenant’s prior written consent, such consent to be deemed granted if not otherwise denied in writing within fifteen (15) business days after request therefore; provided that such request is sent pursuant to the notice provisions of this Lease and states in conspicuous type that a failure by Tenant to respond in fifteen (15) business days shall constitute Tenant’s approval of such amendment.

(b)    Patio Area. Tenant shall have the exclusive right to the use of an area immediately adjacent to the building located on the Premises as may be proposed by Tenant and approved by Landlord (the “Patio Area”) for customer seating and the service of food and beverages customarily served in Tenant’s restaurant operation. Tenant will comply with the following in its use of the Patio Area: (i) Tenant shall be responsible to secure all permits and approvals of all governmental authorities required for the use and operation of the Patio Area; (ii) Tenant’s liability insurance provided for in Section 7.1 will cover occurrences within the Patio Area during Tenant’s use of the Patio Area; and (iii) Tenant shall maintain the Patio Area in a clean and attractive condition and shall repair any damage to the Patio Area caused by its use.
        
1.2    QUIET ENJOYMENT. On and subject to the terms, covenants and conditions of this Lease, Landlord warrants and covenants that Tenant shall peacefully and quietly have, hold and enjoy the Premises for the entire Term of this Lease.

1.3    TERM. The “Initial Term” of this Lease shall commence as of the Effective Date and shall expire on the 10 th  anniversary after the Effective Date. The phrase “Term” shall mean, collectively, Initial Term and any Renewal Term for which an option has been exercised by Tenant.

A.    Renewal Options. Tenant shall have the option (each, a “Renewal Option”) to renew this Lease for one (1) renewal term (each, a “Renewal Term”), commencing on the first day following the expiration

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of the Initial Term or the then current Renewal Term and ending on March 27, 2027. Tenant shall exercise its Renewal Option by notice to Landlord (each, a “Renewal Notice”) given at least one hundred eighty (180) days prior to the expiration of the then current Term. It is the intention of the parties to avoid forfeiture of Tenant’s Renewal Options through inadvertent failure to give a timely Renewal Notice. Accordingly, if Tenant should fail to timely give the Renewal Notice for any Renewal Term, Tenant shall not be deemed to forfeit its Renewal Option until such time as Landlord gives ten (10) days written notice to Tenant that Tenant’s Renewal Notice is past due, and only upon Tenant’s failure to give its Renewal Notice within the additional ten-day period shall Tenant’s Renewal Option expire.

B.    Lease Year. For purposes of this Lease, a “Lease Year” shall mean each successive twelve (12) calendar month period during the Initial Term or any Renewal Term commencing on the Commencement Date; provided, however, that if the Commencement Date is a day other than the first day of a calendar month, then the first Lease Year shall include the partial calendar month during which the Commencement Date falls and the following twelve (12) full calendar months.

1.4    SURRENDER OF PREMISES. Within thirty (30) days after the expiration of the Term or earlier termination of this Lease (the “Surrender Date”), Tenant shall surrender the Premises in a broom clean condition, subject to (i) reasonable wear and tear; (ii) damage as a result of casualty or condemnation; (iii) alterations, additions and improvements made pursuant to the terms of or otherwise permitted under this Lease; and (iv) items which are the responsibility of Landlord or which result from Landlord’s failure to comply with its obligations under this Lease. On or prior to the Surrender Date, Tenant shall remove from the Premises its trade fixtures, furniture, equipment and other personal property, including, but not limited to, all bars, booths, decorative light fixtures, stoves, ovens and other restaurant equipment (“Tenant’s Personal Property”). The base building plumbing, electric and HVAC systems (other than any proprietary, specialty or supplemental fixtures or equipment) are not part of Tenant’s Personal Property and shall remain at the Premises. Tenant agrees to repair any damage to the Premises caused by the removal of Tenant’s Personal Property. Any of Tenant’s Personal Property which Tenant has failed to remove from the Premises on or prior to the Surrender Date shall become the property of Landlord and may be disposed of by Landlord as Landlord deems appropriate.

1.5    HOLDING OVER. This Lease and the tenancy created by this Lease shall expire and terminate at the expiration of the Term, without the necessity of any additional notice from Landlord to Tenant of from Tenant to Landlord. If Tenant remains in possession of the Premises after the expiration of the Term, without the consent of Landlord, the Term will not be extended and Tenant will be occupying the Premises under a tenancy at will, under all the terms, covenants and conditions of this Lease, except that Rent for the holdover period will be calculated on a daily basis, at a rate equal to one hundred fifty percent (150%) of Base Rent due for the last month of the Term divided by thirty (30) and shall be due and payable to Landlord periodically upon demand. If Tenant remains in possession of the Premises after the expiration of the Term with the consent of Landlord, the Term will be extended as a month to month tenancy, under all the terms, covenants and conditions of this Lease, and monthly Base Rent will continue at the monthly Base Rent due for the last month of the Term.

ARTICLE II – RENT

2.1    BASE RENT. Tenant agrees to pay to Landlord in equal monthly installments, the annual Base Rent as set forth in the Base Rent Schedule attached hereto as  Exhibit “B” . Base Rent shall be due and payable each month, in advance, on the first day of each calendar month without demand, setoff, or deduction, except as otherwise set out in this Lease or as provided under applicable law or by court order.

2.2    ADDITIONAL RENT. Tenant shall pay as “Additional Rent” Tenant’s applicable share of certain costs and expenses, as more fully set forth in this Section and its pro-rata share (as set forth in the Declaration) of any expenses payable by Landlord with respect to the Premises pursuant to the terms of the Declaration. Additional Rent shall also include all other sums and charges required to be paid by Tenant to Landlord pursuant to the terms of this Lease.

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A.	Real Estate Taxes .	

(a)    Definition, Payment by Landlord and Calculation. The term “Real Estate Taxes” as used herein means all real property taxes and assessments that are levied or assessed against the Premises by any lawful governmental authority for each calendar year or portion thereof commencing on the Commencement Date. Landlord shall be obligated to pay all Real Estate Taxes and all other taxes and assessments assessed against the Premises (except for taxes on the personal property of individual tenants which are paid by such tenants) to the applicable taxing authority before delinquent. The amount of Real Estate Taxes shall be calculated as if: (i) Landlord elected the longest installment payment plan available from the taxing authority for non-recurring taxes and assessments and only those installments coming due during the Initial Term or any Renewal Term of this Lease shall be included in Real Estate Taxes, and (ii) Landlord had taken advantage of the maximum available discount available for early payment of Real Estate Taxes. Real Estate Taxes are to be prorated for any tax year only a portion of which is included within the Initial Term or any Renewal Term.

(b)    Contest of Real Estate Taxes. Landlord agrees to use reasonable efforts to minimize Real Estate Taxes. “Reasonable efforts” shall include the obligation to seek a reduction in Real Estate Taxes from the taxing authority if the value of the Premises assessed by the taxing authority would be considered excessive as compared to similar property in the county where the Premises is located.

(c)    Exclusions from Real Estate Taxes. The following are specifically excluded from Real Estate Taxes: penalties or interest or other charges for late payments of Real Estate Taxes, any income, personal property, excess profits, gross receipts, margin, estate, single business, inheritance, succession, transfer, franchise, corporate, capital or other tax or assessment levied or assessed against Landlord or the Rent payable under this Lease or any connection, capacity, turn-on, impact or other similar fees, assessments or charges incurred in connection with the initial construction or any subsequent improvements or renovation of or to the Project. All unpaid, unassessed or other Real Estate Taxes, including, but not limited to so called “rollback taxes”, which relate to the period prior to the Commencement Date (collectively, “Pre-Commencement Date Taxes”) shall not be included in Real Estate Taxes payable by Tenant under this Lease. This Sub-Section is not intended as an exclusive list of items excluded from Real Estate Taxes. In the event of a conflict or inconsistency between this Sub-Section and Sub-Section (a) above this Sub-Section controls.

(d)    Pro-rata Share of Real Estate Taxes.   Tenant’s share of Real Estate Taxes is One Hundred percent (100%) of the Real Estate Taxes assessed against the Premises.

B.Taxes on Tenant’s Personal Property. Tenant shall be responsible for and shall pay directly to the taxing authority and before delinquency all municipal, county, state and federal personal property taxes assessed during the Term of this Lease against Tenant’s personal property at or used in connection with the Premises.

C.Monthly Installments. Tenant shall pay, in equal monthly installments, together with its installment of monthly Base Rent, one-twelfth (1/12) of the estimated amount of its pro-rata share of Real Estate Taxes for each calendar year. Landlord may adjust Tenant’s monthly estimated installment of Real Estate Taxes annually. Any sums due by Tenant with respect to the Declaration shall be due and payable within 30 days of Tenant’s receipt of a statement and any applicable documents as to such charges from Landlord.

D.Annual Reconciliation.

(a)    Annual Statement. Within one hundred twenty (120) days following the end of each calendar year (“Accounting Year”), Landlord shall deliver to Tenant an itemized breakdown certified as true and correct by an authorized representative of Landlord showing the actual costs for Real Estate Taxes, together with copies of all bills for Real Estate Taxes for the current year (the “Annual Statement”). Tenant will continue to make monthly payments based upon its estimated installment of Real Estate Taxes for the prior Accounting Year, until the installment due at least thirty (30) days after Tenant receives the Annual Statement with its new estimated installment of Real Estate Taxes.

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(b)    Request for Back-Up Materials. Within ten (10) days following a request from Tenant, Landlord will deliver to Tenant such additional materials and documentation as Tenant may reasonably request to support the Real Estate Taxes as reflected on the Annual Statement (a “Back-up Request”).

(c)    Annual Adjustment. If the actual costs for Real Estate Taxes exceeds the amount paid by Tenant in any Accounting Year (an “Underpayment”), then within thirty (30) days after receipt of the Annual Statement and any additional information that was the subject of a Back-up Request by Tenant, Tenant shall pay to Landlord the amount of the Underpayment. If the actual costs for Real Estate Taxes is less than Tenant’s payments for any Accounting Year (an “Overpayment”), then Landlord shall pay to Tenant the amount of the Overpayment concurrently with the delivery of the Annual Statement.

(d)    Dispute over Annual Statement. Subject to Tenant’s right to request and receive additional information pursuant to a Back-up Request and Tenant’s audit rights provided for below, if Tenant disputes the accuracy of the Annual Statement, Tenant shall still pay the amount shown owing.

E.Audits.

(a)    Right to Audit and Reconciliation. Tenant, its agents and accountants, shall have the right to examine and audit Landlord’s books, records and related supporting materials (“Landlord’s Books and Records”) relating to any Real Estate Taxes paid by Tenant under this Lease, upon not less than twenty (20) days prior written notice to Landlord. If Tenant’s audit of Landlord’s Books and Records confirms that the amounts shown on the Annual Statement or other invoice or bill from Landlord are five percent (5%) or more higher than the actual amount owed by Tenant under this Lease, Landlord shall, within twenty (20) days of Tenant’s demand, reimburse Tenant for all reasonable costs and expenses of the audit, unless the results of the audit are disputed in good faith by Landlord in which case the following sentence shall apply. Any overpayment or underpayment of Real Estate Taxes shall be adjusted by the parties (by payment) within twenty (20) days after the audit is completed, unless the audit results are disputed in good faith by Landlord in which event the adjustment will occur and, if Tenant is entitled under the preceding sentence, Tenant’s costs and expenses for the audit will be reimbursed, within twenty (20) days of the resolution of the dispute.

(b)    Conditions of Audit. Tenant’s right to audit shall be subject to the following restrictions: (i) any audit shall be conducted, during normal business hours, at Landlord’s business offices (in the continental United States) where the books and records are customarily kept; (ii) Tenant’s right to initiate an audit for any Accounting Year shall expire thirty-six (36) months after Tenant’s receipt of Landlord’s Annual Statement for such Accounting Year; provided that if a discrepancy of more than five percent (5%) is found in any audit Tenant may audit the prior Accounting Year, notwithstanding the expiration of such thirty-six (36) month period; and (iii) except as provided for above, the audit shall be at Tenant’s cost.

(c)    Books and Records. Landlord’s Books and Records shall be complete and accurate and kept in accordance with generally accepted accounting principles consistently applied, and shall be made available to Tenant as provided for in this Section.

2.3    SALES AND SIMILAR TAXES ON RENT. Tenant shall pay to Landlord all sales, excise, rental and use taxes imposed by law on the monthly Base Rent and Additional Rent provided for in this Lease, which are customarily paid by tenants in the state in which the Premises are located.

2.4    COMMENCEMENT AND PRORATION OF RENT. Tenant’s obligation to pay Base Rent and Real Estate Taxes (sometimes collectively referred to in this Lease as “Rent”) shall not commence until the Commencement Date. When any Rent due hereunder is calculated based upon a period (e.g., a month, calendar year, or tax year), only a portion of which falls within the Initial Term or any Renewal Term, the amount will be prorated based upon the number of days in such period that fall within the Initial Term or any Renewal Term compared to the total number of days in such period.

2.5    PLACE FOR PAYMENT OF RENT. Base Rent and the Additional Rent provided for in this Lease shall be sent by Tenant to Landlord at the address set out in Section 16.1 or to such other address as Landlord may designate to Tenant by at least twenty (20) days prior written notice to Tenant.

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ARTICLE III - UTILITIES

3.1    UTILITY SERVICE.

A.    Tenant’s Utilities. Tenant shall contract in its own name with the utility provider for electric service, gas service, cable television service, sewer and water service and telephone service for the Premises (collectively the “Tenant Paid Utilities”).

ARTICLE IV ‑ USE AND OPERATION

4.1    USE OF LEASED PREMISES.

A.    Permitted Use. The Premises may be used by Tenant for the purpose of a table service restaurant and all uses ancillary thereto (which may include, at Tenant’s option, all or any number of the following: a bar area, the sale of alcoholic beverages, ancillary merchandise sales, or live entertainment), or with Landlord’s prior written consent, for any other use permitted by law (the “Permitted Use”). For purposes of this Lease, a “table service” restaurant shall mean any restaurant where (i) food or drink orders are taken from customers at the customers’ table; (ii) a check is delivered to customers at the customers’ table; or (iii) food or drinks are delivered to customers at the customers’ table.

B.    Initial Permitted Use. Tenant intends to initially open at the Premises as a “LeeRoy Selmon’s” (the “Intended Use”), but Tenant has the right to change the operating format at the Premises as provided in the following Section.

C.    Change in Operating Concept. Tenant hereby reserves the right to change, from time to time, its restaurant concept (a “Concept Change”) and/or operating format at the Premises.

D.    Concept Change Notice. At least thirty (30) days prior to a Concept Change, Tenant will provide written notice to Landlord (a “Concept Change Notice”) of the Concept Change.

E.    Operation. While in operation, Tenant shall operate its business in an efficient, high class and reputable manner. Subject to the provisions of Section 4.5, Tenant shall have the right to cease operations at the Premises, provided that during any closure Tenant will continue (regardless of whether or not it is operating) to fulfill its obligations under this Lease, including the payment of Rent and the performance of Tenant’s maintenance obligations.

4.2    RULES RELATING TO TENANT’S OPERATION.

A.    Use of the Premises. Tenant agrees (i) to keep the Premises neat, clean, sanitary and reasonably free from dirt, rubbish, insects and pests at all times; (ii) not to operate an incinerator or burn trash or garbage within the Premises; (iii) not to use or maintain the Premises in such a manner as to constitute an actionable legal nuisance against Landlord, or which in a manner that produces noise, vibrations or odors (other than restaurant odors) that violate the quiet enjoyment of other tenants of the Project; (iv) not to commit or permit waste of the Premises; and (v) to maintain the inside of the Premises at a temperature sufficiently high to prevent freezing of water pipes and fixtures inside the Premises.

B.    Use Restrictions. Tenant agrees (i) not to solicit business in the parking area, or distribute handbills or other advertising material upon automobiles parked in the parking area (“Solicitations”); and (ii) to keep the areas as to which Tenant has an exclusive use right pursuant to its Appurtenant Use Rights, in a neat, clean, and sanitary condition, given the applicable use.

C.    Satellite Equipment. Tenant shall have the right to install a satellite dish or antenna and other voice or data transmission and receiving devices and related facilities (collectively, the “Satellite Equipment”) on the exterior wall or the roof of the Premises. In connection with the Satellite Equipment, Tenant agrees as follows: (i) the location of the Satellite Equipment shall be subject to Landlord’s approval; (ii) Landlord may require

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that any installation or maintenance work for the Satellite Equipment that involves the penetration of the roof be done by a contractor selected by Landlord, so long as the contractor is available at a reasonable and competitive price and can meet Tenant’s installation schedule; and (iii) Tenant will operate the Satellite Equipment in compliance with applicable Laws (as defined in Sub-Section 4.2B) and Tenant will be responsible for obtaining any permits and licenses required for the operation of the Satellite Equipment.

D.    Music System. Tenant may install and operate a music and intercom system on the exterior of the Premises (the “Music System”). In connection with the Music System, Tenant agrees that: (i) the Music System will be operated only at reasonable volume levels so as not to unreasonably disturb others and (ii) songs with lyrics generally considered offensive will not be played from the Music System.

4.3    GOVERNMENTAL LAWS AND REGULATIONS.

A.    Compliance by Tenant. Tenant shall comply with all Federal, State and local laws, ordinances, codes, orders and regulations (collectively, “Laws”) relating to (i) Tenant’s business operations within the Premises; (ii) any work performed by Tenant; and (iii) the areas to be maintained or repaired by Tenant under this Lease.

B.    Compliance by Landlord. Landlord shall comply with all Laws relating to (i) Landlord’s ownership or operation of the Premises, (ii) any work performed by Landlord, and (iii) any areas to be maintained or repaired by Landlord under this Lease. Landlord represents and warrants to Tenant that it has not received any notice of any violation of Laws with respect to the Premises and that, to the best of its knowledge, the Premises is in compliance with all Laws.

C.    Fines and Penalties. Each of Landlord and Tenant shall be responsible for and defend the other against any penalties or fines imposed and any related claims asserted as a result of its violation of applicable Laws.

D.    Trespassing. At the request of Tenant and to the extent permitted under applicable Laws, Landlord agrees to take commercially reasonable measures to remove from the Premises any person engaging in picketing, hand billing, solicitation of Tenant’s employees, or other demonstrations.

4.4    LIENS.

A.    Tenant Liens. Tenant shall have no power or authority to subject Landlord’s interest in the Premises to any construction, mechanic’s or materialmen’s liens of any kind (each, a “Construction Lien”). If any Construction Lien is filed against Landlord’s interest in the Premises as a result of work performed by Tenant or materials or services provided to Tenant, Tenant shall, within thirty (30) days of a demand from Landlord discharge the Construction Lien by payment, transferring the lien to a bond or other security, or by such other method as may be available under applicable Laws.

B.    Landlord Liens. Landlord shall have no power or authority to subject Tenant’s interest in the Premises or Tenant’s Personal Property to any Construction Lien. If any Construction Lien is filed against Tenant’s interest in the Premises or Tenant’s Personal Property as a result of work performed by Landlord or materials or services provided to Landlord, Landlord shall, within thirty (30) days of a demand from Tenant discharge the Construction Lien by payment, transferring the lien to a bond or other security, or by such other method as may be available under applicable Laws.

C.    Failure to Discharge. If either Landlord or Tenant fails to comply with its lien discharge obligations under this Section, the other may discharge the subject Constriction Lien(s) and the reasonable costs and expenses incurred in connection therewith shall be due from the other party to the discharging party within ten (10) days of demand for payment accompanied by reasonable evidence of the cost and expenses incurred to accomplish such discharge.

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4.5    RECAPTURE FOR FAILURE TO OPERATE.

A.     Right of Recapture. In the event that Tenant ceases to operate in the Premises for more than thirty (30) consecutive days (a “Closure”), Tenant shall, within ninety (90) days after the Closure, provide written notice to Landlord (a “Closure Notice”) that either (i) the Closure is temporary and Tenant (or an assignee or subtenant to whom this Lease may be assigned or the Premises sublet without Landlord’s consent pursuant to Section 8.3 of this Lease) intends to reopen in the Premises (a “Temporary Closing”); or (ii) Tenant intends to attempt to assign this Lease or to sublet the Premises to an unaffiliated third party (a “Permanent Closing”). If (a) Tenant gives the notice of a Temporary Closing and the Premises has still not reopened by the date which is Three Hundred (300) days from the Closure Notice provided that Tenant shall be granted two (2) thirty (30) day extensions so long as Tenant (or a assignee or subtenant to whom the Premises may have been assigned or sublet) has commenced the renovation or remodeling of the Premises and is diligently pursuing the same to completion (the “Reopening Period”), (b) Tenant gives notice of a Permanent Closing, or (c) Tenant fails to give the Closure Notice, in any such event, Landlord shall have the right (the “Recapture Right”) to terminate Tenant’s interest in the Lease in accordance with the provisions set out below.

B.    Exercise of Recapture Right. Landlord shall exercise the Recapture Right by written notice to Tenant (the “Exercise Notice”) given within thirty (30) days of (i) Landlord’s receipt of the Closure Notice in the event of a Permanent Closing or (ii) the end of the Reopening Period in the event of a Temporary Closing, or (iii) Tenant’s failure to deliver the Closure Notice when required hereunder and such failure continues for ten (10) days following written notice from Landlord to Tenant of such failure, whichever is applicable. This Lease shall terminate on the thirtieth (30 th ) day following receipt of the Exercise Notice (the “Recapture Date”) and Rent shall be prorated as of the Recapture Date. Tenant agrees to remove its proprietary signage and any of its personal property which this Lease requires be removed upon the expiration of the Term of this Lease prior to the Recapture Date. Tenant may also remove all other property of Tenant that this Lease allows Tenant to remove upon the expiration of the Term of this Lease. Following the Recapture Date neither Landlord nor Tenant shall have any further liability under this Lease, except for (i) obligations which accrued prior to the Recapture Date and (ii) Tenant’s obligation to repair any damage to the Premises caused by the removal of its property as provided for above. If Landlord fails to exercise the Recapture Right as set forth herein, this Lease shall continue in full force and effect and Landlord shall have no further rights under this Section 4.5, as to such Closure.

In the event Landlord has not elected to recapture the Premises as set forth herein, and if the Premises have not reopened and no assignment or sublease has occurred on or before the date which is three hundred sixty (360) days from the expiration of such 30-day period, Landlord shall again have a Recapture Right to be exercised by giving an Exercise Notice within the thirty (30) day period following the 360-day period. Thereafter, so long as the Premises have not reopened and no assignment or sublease has occurred, Landlord shall have a Recapture Right after each successive 360-day period to be exercised by giving an Exercise Notice within the thirty (30) days period following each 360-day period. Notwithstanding Landlord’s right to exercise its Recapture Right every 360 days as provided for above, if Landlord provides the Exercise Notice, Tenant shall have the right to nullify the Exercise Note by providing to Landlord evidence that Tenant is in active negotiations to assign this Lease or sublease the Premises (which may be evidenced either by ongoing negotiations or a signed Letter of Intent), in which event the Exercise Notice shall be rendered void and of no effect. Once this Lease is assigned or the Premises subleased to a third party, Landlord shall have the Recapture Right if the assignee or subleasee does not open for business within three hundred sixty (360) days from the effective date of the assignment or sublease, to be exercised by giving an Exercise Notice within the thirty (30) day period following the 360-day period; provided that the foregoing three hundred sixty day period shall be extended by periods that would constitute a Permitted Closure under Section 4.5C.

C.    Permitted Closures. For purposes of this Section, the following shall be “Permitted Closures” and shall not constitute a “Closure” or be counted toward the Reopening Period: (i) any period during which the normal operation of business at the Premises is not practical as a result of damage by fire or other casualty; (ii) any period during which the normal operation of business at the Premises is not practical as a result of a taking by eminent domain or other governmental action; (iii) reasonable periods for remodeling, alterations and repairs, including related permitting time; and (iv) any period during which Landlord is not in compliance with its obligations under this Lease, beyond any applicable notice and cure period.

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D.    Interpretation. Time is of the essence as to all time periods in this Section. A failure to operate is not a default under this Lease and this Section sets out Landlord’s sole remedies for a failure of Tenant to operate at the Premises.

ARTICLE V ‑ IMPROVEMENTS

5.1    LANDLORD’S WORK. The Premises is tendered to Tenant in an “as-is” condition.

5.2    TENANT’S WORK. This Section sets out work to be preformed by Tenant, at Tenant’s sole cost and expense. The term “Tenant’s Work” means all the work to the Premises required to prepare the Premises for Tenant’s use (“Tenant’s Work”).

A.    Tenant’s Approved Plans. Tenant shall prepare and submit to Landlord plans and specifications for Tenant’s Work, to include Tenant’s floor plan and elevation electrical panel schedules, load calculations, HVAC equipment specifications, system diagrams (ductwork diffusers), a reflective ceiling plan or plans for any other work requiring Landlord’s approval (“Tenant’s Preliminary Plans”). Landlord and Tenant will act in a good faith and responsive manner to agree upon plans and specifications for the Tenant’s Work (as agreed upon by Landlord and Tenant, “Tenant’s Approved Plans”).

B.    Third Party Approvals. If Tenant’s plans and specifications or any portion of Tenant’s Work (including, but not limited to, Tenant’s signage) requires the consent or approval of any third party (a “Third Party Approval”), other than the applicable governmental authorities (e.g., another tenant, another owner, an association or an architectural review committee or board), Tenant shall be responsible to obtain each required Third Party Approval.

C.    Performance of Work. All of Tenant’s Work will be performed (i) in a good and workman-like manner using first quality new materials and labor; (ii) in substantial accordance with Tenant’s Approved Plans; and (iii) in accordance with all applicable Laws.

D.    Insurance. Tenant agrees to carry (or cause to be carried) during the performance of Tenant’s Work: (i) liability insurance in an amount of not less than one million dollars ($1,000,000) covering claims for personal injury and property damage arising out of Tenant’s Work and naming Landlord as an additional insured, (ii) and worker’s compensation insurance as required by Law.

E.    Initial Exterior Appearance. Attached to this Lease as Exhibit “C” is a conceptual elevation of the Premises (the “Conceptual Elevations”), which Landlord has approved.

F.    Signage. Tenant is hereby granted, for the entire Term, the right (the “Signage Rights”) to install and maintain the signage (“Tenant’s Signage”) as set out below in this Section.

(a)    Building Signage. Tenant shall have the right to install and maintain upon the exterior of the Premises the maximum signage that Tenant is entitled to under applicable code (with any available variance or other special approvals); provided that if Tenant intends to install building signs other than on the exterior of the Premises itself, Landlord’s approval of the location shall be required.

(b)    Free Standing Sign. Subject to Tenant obtaining all applicable governmental permits and approvals, Tenant shall have the right to install and maintain a free standing sign for its exclusive use on the Premises or such other location as may, from time to time, be proposed by Tenant and approved by Landlord.

(c)    Other Signs. Tenant shall have the right to place its proprietor, credit card, hours of operation, and its other standard informational signage on the front entrance or windows of the Premises.

(d)    Sign Approval and Standards. All of Tenant’s Signage shall be subject to Landlord’s approval. All of Tenant’s Signage shall be in kept in a well maintained and attractive condition and in compliance with all applicable Laws.

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5.3    ALTERATIONS, ADDITIONS AND IMPROVEMENTS. During the Term of this Lease, Tenant shall have the right to make alterations, additions and improvements to the interior or exterior of the Premises; provided that, except as otherwise expressly provided for in this Lease, any alterations, additions or improvements (i) to the exterior of the Premises; (ii) to the structural portions of the Premises; and (iii) which involve the alteration of the base building plumbing, electric or HVAC systems shall not be made by Tenant without the prior written consent of Landlord.

5.4    OWNERSHIP OF IMPROVEMENTS. During the Term of this Lease, Tenant shall be considered for all purposes to be the owner of the improvements constructed at the Premises by Tenant (“Tenant’s Improvements”) and Tenant alone shall be entitled to all available tax deductions on its Federal and State income tax returns for the depreciation and other expenses related to the Tenant’s Improvements. Upon the expiration of the Term or termination of this Lease, the Tenant’s Improvements shall become the property of Landlord. The Improvements do not include Tenant’s Personal Property.

ARTICLE VI ‑ MAINTENANCE OBLIGATIONS

6.1    MAINTENANCE BY TENANT.

A.    General Maintenance Obligation. Tenant shall at Tenant’s sole cost and expense (except as hereinbelow provided) at all times keep and maintain (or cause to be kept and maintained) the Premises, including the Improvements located thereon, in good order, condition and repair (including needed replacements) and in a neat, clean and attractive condition. Tenant’s maintenance obligations shall include any Patio Area, exterior painting and other exterior maintenance of the Building including the roof, all glass and windows, all interior maintenance, including lighting, electrical equipment, plumbing fixtures and equipment, Tenant’s grease trap, and all Common Areas located within the Premises including the utilities and plumbing system up to and including the connections to the Premises, landscaping, sprinkler systems, pavement and striping of parking areas, and adequate lighting in the Common Areas located within the Premises. Landlord shall, whenever possible, extend to Tenant the benefit of any available manufacturer’s or other warranties. Any replacements shall be made using materials and equipment of similar or superior quality as the original.

B.    Service Contracts. Unless Tenant has established its own internal program, Tenant shall obtain service contracts to provide for (i) the regular maintenance of the heating, ventilating and air conditioning system exclusively serving the Premises; and (ii) regular pest inspections and treatment, as needed.

C.    Trash Removal. Tenant shall contract for the pick-up and disposal, at regular intervals, of the trash produced at the Premises, so that there is no accumulation of trash that cannot be accommodated by Tenant’s dumpster or other trash containers.

D.    Access for Maintenance. Tenant shall have the ongoing right of access for the repair, maintenance and replacement of any Support Installations or other items located outside the Premises which Tenant is obligated to maintain under this Lease. Tenant agrees to conduct its access in a manner so as not to unreasonably disturb other tenants of the Project or interfere with their business operations. Except in an emergency situation, if Tenant requires access to another tenant’s premises, Tenant agrees to obtain the prior consent of Landlord or the applicable tenant.

6.2    ADDITIONAL CONSTRUCTION. On and after the Commencement Date Landlord shall not during Tenant’s business hours, except to the extent required for emergency repairs, engage in or allow any construction activities or utilize any area for construction staging that would adversely impact ingress and egress to and from the Premises; disturb customers; create an unsightly condition; or otherwise interfere with the operation of Tenant’s business at the Premises in some material respect. All such work, including emergency repairs, shall be conducted (i) in a manner to minimize any interference with Tenant’s business operations and its customers’ and (ii) to the extent practical, outside Tenant’s business hours.

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ARTICLE VII ‑ INSURANCE AND INDEMNITY

7.1    TENANT’S INSURANCE. Tenant shall, during the Term of this Lease, maintain insurance coverage in accordance with this Section.

A.    Tenant’s Liability Insurance. Tenant will keep in force, throughout the Term of this Lease, commercial general liability insurance (or substantially equivalent liability insurance or another type of comprehensive liability insurance policy then in common use) with respect to the Premises and the business operated by Tenant at the Premises. Tenant’s liability insurance will (i) be in an amount of not less than Two Million Dollars ($2,000,000), which may include primary, excess and umbrella policies, and (ii) name Landlord as an additional insured, as to occurrences in the Premises.

B.     Tenant’s Property Insurance. Tenant will keep in force, commencing on the date Tenant actually takes possession of the Premises and continuing throughout the Term of this Lease, special form (formerly known as “all risk”) property insurance (or substantially equivalent property insurance or another type of broad form property insurance policy then in common use) with respect to the Premises (including the Improvements), Tenant’s Improvements and Tenant’s Personal Property in the Premises. Tenant’s property insurance will be in at least an amount as is required to avoid the application of any co-insurance provision that its property insurance may be subject to. Tenant’s property insurance policies will show Landlord as a loss payee, as its interest may appear.

C.     Tenant’s Employers’ Liability Insurance.  Tenant shall, throughout the Term of this Lease, maintain such workers compensation or employer’s liability insurance as may be required by applicable Laws.

D.    General Insurance Requirements. Tenant’s required liability insurance and property insurance shall (i) be issued by companies licensed to do business in the State in which the Premises are located and rated A -  / VII or better in the then most current issue of  Best’s Insurance Reports , and (ii) provide for at least ten (10) days notice to Landlord before cancellation. Tenant is not required to carry separate insurance polices for the Premises, and all of Tenant’s insurance may be under polices which cover multiple locations.

E.    Certificates of Insurance. Tenant will furnish Landlord with certificates of the insurance Tenant is required to carry within ten (10) days after a written request by Landlord.

F.     Deductibles and Self-Insurance. Tenant’s insurance may include a self-insured retention or deductible (a “Self-Insured Amount”), which will be of a commercially reasonable amount given the size and financial strength of Tenant and the affiliated group of entities of which Tenant is a part that are covered under the same insurance program; provided that if Tenant elects to totally self-insure, Tenant and the affiliated group of entities of which Tenant is a part must have a combined tangible net worth of at least twenty-five (25) times the amount required under this Lease that is self-insured (i.e., $25,000,000 for each $1,000,000 of insurance required under this Lease which is within the Self-Insured Amount).

7.2    TENANT INDEMNITY. Tenant shall indemnify, hold harmless and defend Landlord from and against any and all suits, claims, actions, damages, liabilities and expenses, including reasonable attorneys’ fees (collectively, “Claims and Damages”) arising out of (i) any loss of life, personal injury and/or damage to property occurring within the Premises or resulting from the wrongful or negligent acts or omissions of Tenant, its officers, contractors, agents or employees (acting within the scope of their office, contract, agency or employment), (ii) Tenant’s breach of any representation or warranty of Tenant under Article XIII, or (iii) Tenant’s failure to maintain the Premises in accordance with applicable Laws to the extent within its obligations under this Lease.

ARTICLE VIII ‑ ASSIGNMENT AND SUBLETTING

8.1    ASSIGNMENT.

A.    Consent of Landlord. Except as specifically provided in this Article, Tenant may not assign this Lease without the prior written consent of Landlord. Any transfer of Tenant’s interest in this Lease by

 

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operation of law, regardless of whether the same is characterized as voluntary or involuntary, shall be construed as an “assignment” governed by this Article. Landlord’s consent to any one assignment shall not act as a waiver of the requirements of Landlord’s consent with respect to any subsequent assignment.

B.    Assumption of Lease. In connection with any assignment of this Lease, the assignee shall be entitled to all the rights and shall assume all the obligations of Tenant under this Lease pursuant to an assumption agreement in a form reasonably acceptable to Landlord.

C.    Consent Criteria. Landlord shall not withhold its consent to a proposed assignment by Tenant so long as the proposed assignee (i) agrees in writing to be bound by all of the terms and conditions of this Lease; (ii) intends a use of the Premises which is within the Permitted Use; (iii) demonstrates, to Landlord’s reasonable satisfaction, prior experience in operating the Permitted Use; and (iv) demonstrates, to Landlord’s reasonable satisfaction, adequate financial resources to meet the obligations of Tenant under this Lease.

D.    Assignment Prior to a Closure. In the event that Tenant requests Landlord’s consent to an assignment of this Lease to an unaffiliated third party (excluding any entity described in Section 8.3 below) and, at the time the consent is requested, Tenant is still operating within the Premises (or, if closed, and Tenant has not provided Landlord with a Closure Notice pursuant to Section 4.5), Landlord may require, by notice to Tenant given within twenty (20) days of receipt of Tenant’s request (the “Closure Notice Request”), that Tenant deliver a Closure Notice pursuant to Section 4.5. If Landlord delivers a Closure Notice Request, Tenant shall, within twenty (20) days after receipt thereof, either (a) withdraw its request for an assignment or (b) deliver a Closure Notice pursuant to Section 4.5. If Tenant delivers the Closure Notice, Landlord shall have the right to exercise the Recapture Right for the period and otherwise in accordance with the terms provided for in Section 4.5. If Landlord requests and Tenant provides a Closure Notice pursuant to this Section, no Closure Notice shall be required as to any Closure that may occur between the time Tenant ceases business operations and the assignee opens for business.

8.2    SUBLETTING.

A.    Consent of Landlord. Except as specifically provided in this Article, Tenant may not sublet all or any portion of the Premises, without the prior written consent of Landlord. Any subletting will be subject to all the terms of this Lease and no subletting will release Tenant from the primary responsibility for the performance of the obligations of the Tenant under this Lease. Landlord’s consent to any one subletting shall not act as a waiver of the requirements of Landlord’s consent with respect to any subsequent subletting.

B.    Consent Criteria. Landlord shall not withhold its consent to an proposed assignment by Tenant so long as the proposed assignee (i) agrees in writing to be bound by all of the terms and conditions of this Lease; (ii) intends a use of the Premises which is within the Permitted Use; and (iii) demonstrates, to Landlord’s reasonable satisfaction, prior experience in operating the Permitted Use.

C.    Sublease Rent. All rent and other consideration payable under any sublease shall be solely the property of Tenant.

8.3    PROCEDURE FOR ASSIGNMENT OR SUBLETTING. If Tenant desires to assign this Lease or sublet all or any portion of the Premises to a third party that requires Landlord’s consent under this Lease, Tenant shall provide notice of the proposed assignment or subletting to Landlord (the “Request Notice”). The Request Notice shall include the name of the proposed assignee or subtenant and information based upon which Landlord can evaluate the proposed assignee or subtenant under the applicable consent criteria set out in this Article. Landlord shall have a period of ten (10) days from receipt of the Request Notice to request such additional reasonable information as may be reasonably required to evaluate the proposed assignee or subtenant under the applicable consent criteria set out in this Article (the “Information Request”). Landlord shall, within fifteen (15) days following the later of (i) the Request Notice, and (ii) its receipt of the additional information, if any, requested in a timely Information Request, to consent or deny (which denial shall include Landlord’s basis for such denial) the proposed assignment or subletting. If the proposed assignment or subletting is denied, Tenant may submit a supplemental request for Landlord’s consent, including information responding to Landlord’s basis for the denial and Landlord shall similarly respond to any supplemental request for its consent within fifteen (15) days following

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Landlord’s receipt thereof. If a proposed assignment is approved, Landlord agrees to execute a consent to such assignment within ten (10) days following its receipt of a proposed assignment document.
 	 	
8.4	TRANSFER OF LANDLORD’S INTEREST. Landlord shall be entitled to sell or otherwise	
transfer the Project or portions of the Project without the consent of Tenant. Landlord shall not transfer only a portion of the Project, unless the portion transferred remains subject to the terms, covenants, conditions and restrictions of this Lease, including, but not limited to, Tenant’s Appurtenant Use Rights and the Use Restrictions by a recorded document, subject to no superior liens or interests which could result in its termination, which is directly enforceable by Tenant and which is otherwise in a form acceptable to Tenant.
 	 	
8.5	RELEASE UPON TRANSFER .	

A.    Transfer by Landlord. The term “Landlord” shall mean the owner, for the time being, of the Premises, and in the event of the transfer by such owner of its interest in the Premises and the assumption of Landlord’s obligations hereunder by the transferee, then notwithstanding anything to the contrary contained herein, such transferring Landlord shall thereupon automatically be released and discharged from all covenants and obligations of the Landlord thereafter accruing under this Lease from and after the date of the transfer, but shall not be released from any liability that has accrued prior to the date of the transfer.

B.    Transfer by Tenant. The term “Tenant” shall mean the holder, for the time being, of the leasehold interest created by this Lease, and in the event of the assignment of this Lease permitted by this Article VIII and the assumption of Tenant’s obligations hereunder by the assignee, then notwithstanding anything to the contrary contained herein, such transferring Tenant shall thereupon automatically be released and discharged from all covenants and obligations of the Tenant thereafter accruing under this Lease from and after the date of the transfer, but shall not be released from any liability that has accrued prior to the date of the transfer.

ARTICLE IX – DEFAULT

9.1    DEFAULT OF TENANT. Tenant shall be deemed to be in default under this Lease (a “Tenant Default”) upon the occurrence of any of the following: (i) Tenant’s failure to pay Rent or any other sums due to Landlord under this Lease when due, if the failure continues for more than ten (10) days following written notice from Landlord to Tenant of such failure; (ii) Tenant’s failure to perform any material covenant, promise or obligation contained in this Lease, if the failure continues for more than thirty (30) days following written notice from Landlord to Tenant of such failure, provided that if the failure cannot be cured within the thirty (30) day period, the thirty (30) day period shall be extended for such additional time as is needed to cure the failure using due diligence and all commercially reasonable measures; or (iii) Tenant’s voluntary petition for relief under any bankruptcy or insolvency law, the sale of Tenant’s interest under this Lease to satisfy a debt of Tenant by execution or other legal process, or the filing against Tenant of an involuntarily petition for relief under any bankruptcy or insolvency law which is not discharged within ninety (90) days after filing.

9.2    LANDLORD’S REMEDIES. Upon a Tenant Default Landlord may exercise the rights and remedies set out below.

A.    Termination of Possession. Landlord may terminate Tenant’s right to possession under this Lease and reenter and retake possession of the Premises. Following the taking of possession, Landlord shall use commercially reasonable efforts to re-let the Premises on behalf of Tenant, at such rental and upon such terms and conditions as Landlord may, in the exercise of Landlord’s commercially reasonable discretion, deem best under the circumstances. Taking possession of the Premises by Landlord, as provided for in this Section, shall not be deemed a termination of this Lease or of Tenant’s obligations under this Lease and Tenant shall continue to make the Rent payments as they become due under the Lease. Following any re-letting of the Premises, Tenant shall pay to Landlord on a monthly basis the sum equal to: (i) the Rent payable under this Lease for such month, plus the monthly amortization (over the term of the re-letting) of the cost of any brokerage commissions for the re-letting and the cost of any reasonable alterations made to accommodate the new tenant, less (ii) the rent received from the new tenant; provided that if the new tenant receives a rent abatement or substantially lower rent at the beginning of the re-letting, the rent for the re-letting shall be averaged over the term of the re-letting for purposes of the foregoing

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calculation. Tenant shall not be entitled to any of the excess of the rent from the re-letting over the Rent payable under this Lease, except as a credit against the sums due to Landlord.

B.    Termination of Lease. Landlord may declare this Lease to be terminated, and reenter upon and take possession of the Premises by any lawful means, whereupon the term hereby granted and all right, title, and interest of Tenant in the Premises shall terminate. Following the termination of this Lease, Tenant shall have no further liability under this Lease, except that Landlord shall be entitled to recover from Tenant, as final and liquidated damages, the sum obtained by adding together all of the following: (i) all Rent which is accrued but unpaid under this Lease through the date of termination; (ii) the reasonable cost of making any repairs to the Premises needed on the date of termination, which were Tenant’s responsibility to make under this Lease, but which Tenant failed to make; (iii) attorneys’ fees and costs recoverable under Section 16.12; (iv) any unamortized (determined over the Initial Term) portion of any brokerage commission paid by Landlord in connection with this Lease; and (v) the present value (discounted using an annual rate equal to the annual yield on the United States Treasury Issue with a maturity date most closely matching the expiration date of the then Term of this Lease) at the time of termination, of the difference between the Base Rent for the then remaining Term of this Lease (the “Lease Base Rent”) and the fair market base rental value (assuming an Operating Expense and Real Estate Tax reimbursement equivalent to that provided for in this Lease) of the Premises for the then remaining Term of this Lease (the “Fair Market Base Rent”). The Fair Market Base Rent shall assume that the Premises is leased in its “as is” condition, as of the termination date, but after the repairs provided for in item (ii) above.

C.    Remedies Cumulative and Non-Exclusive. The rights and remedies of Landlord set forth in this Section 9.2 and elsewhere in this Lease are cumulative and not exclusive and, except to the extent inconsistent with the express provisions of this Lease, are in addition to any remedies that Landlord may have under applicable law or in equity, including the right to injunctive relief, except that under no circumstances shall Landlord be entitled to accelerate payment of any Rent due hereunder except as set forth in Sub-Section B above.

9.3    DEFAULT OF LANDLORD. Landlord shall be deemed to be in default under this Lease (a “Landlord Default”) upon the occurrence of any of the following: (i) Landlord’s failure to pay any sums due to Tenant under this Lease when due, if the failure continues for more than ten (10) days following written notice from Tenant to Landlord of such failure; (ii) Landlord’s failure to perform any covenant, promise or obligation contained in this Lease if the failure continues for more than thirty (30) days following written notice from Landlord to Tenant of such failure, provided that if the failure cannot be cured within the thirty (30) day period and the failure does not prevent Tenant’s ordinary business operations at the Premises or cause the Premises not to be in compliance with applicable Laws and is not a violation of Section 1.4, the thirty (30) day period shall be extended for such additional time as is needed to cure the failure using due diligence and all commercially reasonable measures; or (iii) Landlord’s voluntary petition for relief under any bankruptcy or insolvency law, the sale of Landlord’s interest under this Lease to satisfy a debt of Landlord by execution or other legal process, or the filing against Landlord of an involuntary petition for relief under any bankruptcy or insolvency law which is not discharged within ninety (90) days after filing.

9.4    TENANT’S REMEDIES.

A.    General Remedies. Upon a Landlord Default, in addition to the remedies set out below, Tenant may exercise all the rights and remedies provided to Tenant under applicable law or in equity, including the right to injunctive relief.

B.    Offset Against Rent. If the Landlord Default is the result of the failure to pay any sum due to Tenant from Landlord under or in connection with this Lease, Tenant may offset the sum due from the Rent due under this Lease; provided that prior to offsetting any amount against Rent under this Lease, Tenant shall give written notice to Landlord (the “Offset Notice”), which shall include the amount of the offset claimed and the basis for the offset claimed. Landlord shall have the right to dispute, in accordance with this Section, any offset claimed by Tenant, except for an offset of a monetary judgment or an offset otherwise pursuant to a court order or an arbitration award. To contest an offset Landlord must, within ten (10) days of the Offset Notice, provide notice to Tenant that Landlord disputes all or a portion of the offset (the “Offset Dispute Notice”). Landlord may only give the Offset Dispute Notice if Landlord, in good faith, believes that Tenant is not entitled to all or any part of the offset claimed in the Offset Notice. Any Offset Dispute Notice shall outline the specific items of the offset objected

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to by Landlord (the “Disputed Charges”) and the specific reasons for the objection. To be effective, the Offset Dispute Notice must be accompanied by Landlord’s payment of the portion of the offset not disputed or include an authorization for Tenant to offset against Rent the portion of the offset not disputed. As to the Disputed Charges, the parties shall, within the thirty (30) day period following the Offset Dispute Notice, attempt to reach agreement upon the amount owed. During the dispute resolution period, including any arbitration, Tenant shall, subject to the other terms of this Lease, continue to pay the Rent otherwise due under this Lease. If the parties are unable to reach an agreement within the thirty (30) day period, the matter shall be settled by binding arbitration by an arbitrator agreed upon by the parties or, if the parties are unable to agree, by a neutral (i.e. having no prior association with either party) arbitrator appointed by the American Arbitration Association or local arbitration association. Any arbitrator shall be a licensed attorney with substantial experience in commercial leases. Landlord and Tenant agree to use diligent good faith efforts to have the arbitrator appointed within sixty (60) days following the Offset Dispute Notice and to complete the arbitration within one hundred twenty (120) days following the Offset Dispute Notice. All costs of the arbitration (including the fees of the arbitrator, but not attorneys’ fees) shall be paid by the non-prevailing party (as determined by the arbitrator). If the arbitrator does not make a determination that one party, or the other, is a “non-prevailing party”, then the costs of the arbitration shall be paid half by Tenant and half by Landlord. The amount finally agreed upon or found to be due Tenant by arbitration, together with any Late Fee and interest as provided for by Section 9.6, shall be paid within ten (10) business days of such agreement or finding, failing which Tenant may thereafter begin to offset all Rent due under this Lease until the entire amount due has been recovered.

C.    Payment of Rent into Escrow. During the period (i) of any Landlord Default or (ii) following notice from Tenant of a failure of Landlord to comply with this Lease (even if not yet a Landlord Default) until the cure of the failure, if such failure is having any material adverse impact on Tenant’s business at the Premises, Tenant shall have the right to pay the Base Rent and Additional Rent due under this Lease into escrow (the “Default Escrow”) with a national title insurance company (the “Escrow Holder”). The Default Escrow will be a “joint order” escrow with disbursements requiring the consent of both Landlord and Tenant or a Court order or arbitration award. Tenant shall be deemed to have a lien against the sums in the Default Escrow to secure any claim for damages arising out of a Landlord Default and shall be entitled to apply the funds in the Default Escrow against any judgment or arbitration award obtained by Tenant. The payment of any Base Rent or Additional Rent into the Default Escrow shall be the equivalent of the payment of the Base Rent or Additional Rent to the Landlord for purposes of crediting Tenant with the payment under the Lease.

D.    Monetary Judgment. Tenant shall have the right to offset the amount of any final judgment or arbitration award obtained against Landlord against all the Base Rent and Additional Rent due under this Lease until the full amount of such judgment or award has been satisfied.

E.    Remedies Cumulative and Non-Exclusive. The rights and remedies of Tenant set forth in this Section 9.4 and elsewhere in this Lease are cumulative and not exclusive and, except to the extent inconsistent with the express provisions of this Lease, are in addition to any remedies that Landlord may have under applicable law or in equity, including the right to injunctive relief.

9.5    SELF HELP.

A.    Landlord’s Self Help Right. If (i) Tenant is in breach of any of the terms, covenants or conditions of this Lease and the breach is, in any material respect, as reasonably determined by Landlord; (ii) Landlord has served upon Tenant written notice of the breach; and (iii) Tenant has failed to promptly commence or once commenced has failed to diligently pursue to completion, using all commercially reasonable efforts, the cure of the breach, Landlord may, following written notice to Tenant, itself take such action as Landlord deems reasonably necessary to cure or mitigate the impact of the breach. Tenant shall reimburse Landlord for all reasonably documented costs and expenses incurred by Landlord in connection therewith (“Landlord Cure Costs”), within thirty (30) days of a demand from Landlord accompanied by reasonable documentation of the Landlord Cure Costs. Landlord’s exercise of its remedy under this Sub-Section does not require that the failure constitute a Tenant Default, but may only be exercised by Landlord if Tenant is not pursuing the cure of the breach in the manner required by item (iii) above following the notice required by item (ii) above.

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B.    Tenant Self Help Right. If (i) Landlord is in breach of any of the terms, covenants or conditions of this Lease and the breach is, in any material respect, adversely impacting Tenant’s business, business operations, as reasonably determined by Tenant; (ii) Tenant has served upon Landlord written notice of the breach; and (iii) Landlord has failed to promptly commence or once commenced has failed to diligently pursue to completion, using all commercially reasonable efforts, the cure of the breach, Tenant may, following written notice to Landlord, itself take such action as Tenant deems reasonably necessary to cure or mitigate the impact of the breach. Landlord shall reimburse Tenant for all reasonably documented costs and expenses incurred by Tenant in connection therewith (“Tenant Cure Costs”), within thirty (30) days of a demand from Tenant accompanied by reasonable documentation of the Tenant Cure Costs. Tenant’s exercise of its remedy under this Sub-Section does not require that the failure constitute a Landlord Default, but may only be exercised by Tenant if Landlord is not pursuing the cure of the breach in the manner required by item (iii) above following the notice required by item (ii) above.

9.6    LATE FEES AND INTEREST.

A.    Late Fees and Administrative Fees. If any sum due to Landlord or Tenant from the other is not paid within ten (10) days after its due date, a late fee (the “Late Fee”) equal to two and one-half percent (2½%) of the late amount will be added to the amount due. In addition to any Late Fee due, an administrative fee (the “Administrative Fee”) of One Hundred Dollars ($100.00) shall be due from any party which gives to the other a check for the payment of sums due under this Lease which is returned for insufficient funds.

B.    Interest. Interest, at the Default Rate (defined below), shall accrue on any amount due and owing from either Landlord or Tenant to the other under this Lease, that is not paid within ten (10) days after notice from the party entitled to payment to the other that the amount is past due (which notice may be a default notice provided under this Lease). Following such ten (10) day period, interest, at the “Default Rate”, shall accrue, beginning retroactively as of the due date, on any amount remaining unpaid until paid. The Default Rate is an annual interest rate equal to the lesser of (a) the maximum rate permitted by law, or (b) the Prime Rate of interest (or the average thereof, if more than one) as published in the Money Rates section (or successor section) of the Wall Street Journal on the date such payment was due (or, if not a business day, the prior business day) plus five percent (5%). The same rights and remedies shall apply to the collection of any interest which accrues under this Section as apply to the collection of underlying amount due.

9.7    DELAY IN ENFORCEMENT. Any delay in the enforcement of the rights and remedies of Landlord or Tenant under this Lease following a default by the other, for whatever reason, shall not be deemed a waiver of, or otherwise prevent the later exercise of rights and remedies under this Lease at any time while the default is continuing, except to the extent such default was specifically waived in writing.

9.8    LIMITATIONS ON LANDLORD’S LIABILITY. Tenant agrees to look solely to Landlord’s interest in the Premises and the rents, profits and insurance, condemnation and other proceeds from the Premises for the satisfaction of any monetary judgment (or any other monetary obligation of Landlord to Tenant) and no other property or assets of Landlord shall be subject to levy, execution, or other judicial procedures for satisfaction of such monetary obligations. The foregoing limitation of liability shall not apply to claims by Tenant resulting from (i) Landlord’s failure to carry the insurance required under this Lease; (ii) Landlord’s misappropriation or misapplication of insurance or condemnation proceeds; or (iii) Landlord’s fraud or willful breach of this Lease. This Section is not intended to in any way limit Tenant’s right to obtain injunctive or other equitable relief.

ARTICLE X ‑ ACCESS BY LANDLORD

10.1    RIGHT TO ENTER. Landlord or Landlord’s agents shall have the right to enter the Premises upon reasonable notice to Tenant (except to the extent required by emergency circumstances) and during Tenant’s non-business hours, accompanied by Tenant’s representative, to show the Premises to prospective purchasers of the Project and to make such reasonable repairs to the Premises as Landlord may deem necessary and which are Landlord’s responsibility (or Landlord is entitled to perform) under this Lease. During the ninety (90) day period immediately preceding the expiration of the Term, Landlord may show the Premises to prospective tenants during normal business hours, upon reasonable notice to Tenant and accompanied by Tenant’s representative.

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10.2    CONDITIONS OF ENTRY. Any entry by Landlord within the Premises shall be subject to the following additional conditions: (i) Landlord’s entry (and any work within the Premises) shall be performed (except to the extent required by emergency circumstances) during Tenant’s non-business hours, excluding the hour before opening and after closing; (ii) Landlord’s entry (and any work within the Premises) shall be performed (except to the extent required by emergency circumstances) in a manner so as to minimize any adverse impact on Tenant’s business operations; (iii) Landlord shall promptly repair any damage to the Premises caused by its entry or work to Tenant’s reasonable satisfaction; (iv) Landlord shall (except to the extent required by emergency circumstances) complete any work in the Premises and have the area restored to its prior condition, to the extent possible, at least one hour prior to Tenant beginning business operations for the day; (v) any installation within the Premises shall be subject to Tenant’s approval, which may be withheld for (without limitation) aesthetic or operational concerns; (vi) Landlord shall otherwise conduct any entry and perform any work in a manner to minimize any adverse impact to Tenant’s use and enjoyment of the Premises; and (vii) to the extent Tenant is unable to conduct normal business operations as a result of any such entry, Tenant shall be entitled to a day for day abatement of all Rent due under this Lease.

ARTICLE XI – CONDEMNATION

11.1    CONDEMNATION.

A.    Total Taking. If during the Term of this Lease, the whole of the Premises is taken or condemned, this Lease shall terminate on the date of such taking or condemnation and Landlord and Tenant shall be released from liability accruing after the date of termination. As used in this Article, a taking or condemnation includes a deed given or transfer made in lieu thereof.

B.    Partial Taking / Termination by Tenant. If a portion of the Premises is condemned or taken in any manner or degree that, in any material respect, adversely impacts Tenant’s business or business operations (as determined by Tenant in its sole business judgment, not, however, to be arbitrarily exercised), then Tenant may elect to terminate this Lease as of the date of the vesting of title in the condemning authority, by written notice to Landlord given within sixty (60) days of the condemnation or taking.

C.    Partial Taking / Termination by Landlord. If (i) more than thirty-five percent (35%) of the land area of the Premises is condemned or taken, rendering the Premises no longer viable (in Landlord’s reasonable business judgment); and (ii) as a result of such condemnation, Landlord intends to raze the Premises and replace it with a development that would not accommodate a replacement for the Premises, then Landlord may elect to terminate this Lease as of the date of the vesting of title in the condemning authority, by written notice to Tenant given within sixty (60) days of the condemnation or taking.

11.2    AWARD. Landlord shall be entitled to that portion of the condemnation award attributable to Landlord’s fee interest. Tenant shall be entitled to that portion of the condemnation award attributable to Tenant’s leasehold interest, Tenant’s Improvements to the Premises, all business damages, and relocation costs. Landlord and Tenant shall fully cooperate with each other to accomplish the division provided for in the preceding sentence. Landlord and Tenant shall use good faith efforts to obtain separate awards from the condemning authority (or a judicial allocation of a single award) for their respective interests, consistent with this Section.

11.3    RESTORATION. If there is a condemnation or taking and neither Tenant nor Landlord elects to (or neither is entitled to) terminate this Lease, then Tenant shall commence restoring the Premises and Improvements to the same condition as existed prior to such taking as soon as reasonably possible using due diligence and commercially reasonable efforts. Landlord shall make available to Tenant any portion of the award applicable to the Improvements located on the Premises. During the time period of such restoration work, Tenant shall receive an equitable reduction in Base Rent and Additional Rent until the restoration is completed, unless Tenant is unable, as determined in its reasonable discretion, to continue operating its business in the Premises, in which event all Base Rent and Additional Rent shall abate until Tenant reopens for business.

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ARTICLE XII - DESTRUCTION OF PREMISES

12.1    TERMINATION.

A.    Termination by Tenant. If the Premises is totally or partially damaged or destroyed by fire or other casualty (i) in the last twenty-four (24) months of the Term, to an extent that the Premises is required to be closed for more than seven (7) days, or (ii) in the last thirty-six (36) months of the Term, to an extent that the cost of Tenant’s restoration work exceeds fifty percent (50%) of the total original cost of Tenant’s Improvements within the Premises (as reasonably documented to Landlord by Tenant), then Tenant shall have the option of terminating this Lease upon written notice to Landlord within sixty (60) days after such casualty, in which event Rent and all other obligations herein shall cease as of the date of such casualty, and neither Landlord nor Tenant shall have any further obligations or rights hereunder, except for liability for events occurring prior to the termination of this Lease.

B.    Termination by Landlord - Last Twelve Months. If, during the last twelve (12) months of the Term, the Premises is damaged or destroyed by fire or other casualty to an extent that Tenant’s business operations cease, for more than sixty (60) days, then Landlord shall have the option of terminating this Lease upon written notice to Tenant given within thirty (30) days after such casualty and prior to Tenant reopening for business in the Premises, in which event Rent and all other obligations herein shall cease as of the date of such casualty, and neither Landlord nor Tenant shall have any further obligations or rights hereunder, except for liability for events occurring prior to the termination of this Lease; provided, however, that if Tenant has an unexercised Renewal Option remaining, Tenant may, by written notice to Landlord given within thirty (30) days of Tenant’s receipt of Landlord’s termination notice, exercise the Renewal Option and render Landlord’s termination null and void, and, in that event, this Lease shall continue as if Landlord had not elected to terminate as a result of the casualty.

12.2    RESTORATION. If there is a fire or other casualty and neither Tenant nor Landlord elects to (or neither is entitled to) terminate this Lease, then Tenant shall commence restoring the Premises to the same condition as existed prior to such casualty as soon as reasonably possible using due diligence and commercially reasonable efforts. During the time period of such restoration work Tenant shall receive an equitable reduction in Base Rent and Additional Rent until the restoration is completed, unless Tenant is unable, as determined in its reasonable discretion, to continue operating its business in the Premises, in which event all Base Rent and Additional Rent shall abate until Tenant reopens for business.

ARTICLE XIII - REPRESENTATIONS AND WARRANTIES

13.1    AUTHORITY. Tenant hereby represents and warrants to Landlord that (i) Tenant is a duly authorized and validly existing Florida limited partnership qualified to do business in the State in which the Premises are located; (ii) Tenant has the full right and authority to enter into this Lease; (iii) each of the persons executing this Lease on behalf of Tenant is authorized to do so; and (iv) this Lease constitutes a valid and legally binding obligation of Tenant, enforceable in accordance with its terms. Landlord represents and warrants to Tenant that (i) Landlord is a duly authorized and validly existing Florida limited liability company qualified to do business in the State in which the Premises are located; (ii) Landlord has the full right and authority to enter into this Lease; (iii) each of the persons executing this Lease on behalf of Landlord is authorized to do so; and (iv) this Lease constitutes a valid and legally binding obligation of Landlord, enforceable in accordance with its terms.

13.2    PATRIOT ACT. Tenant represents and warrants to Landlord, that Landlord is not restricted from entering into this Lease or otherwise dealing with Tenant under Executive Order No. 13224 on Terrorist Financing (the “ Executive Order ”) or the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (the “ Patriot Act ”) or any other law, regulation or order restricting certain dealings with parties known or suspected to engage in or support terrorism (collectively, “ Terrorism Laws ”). Landlord represents and warrants to Tenant, that Tenant is not restricted from entering into this Lease or otherwise dealing with Landlord under Terrorism Laws. A party shall be in default under this Lease if its acts, omissions or status would cause the other to be in violation of any Terrorism Laws.

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ARTICLE XIV - ESTOPPEL CERTIFICATES AND SUBORDINATION

14.1    ESTOPPEL CERTIFICATE. At any time and from time to time either party, upon request of the other party, will execute, acknowledge and deliver an instrument, stating, if the same be true, that this Lease is a true and exact copy of the Lease between the parties hereto, that there are no amendments hereto (or stating what amendments there may be), that the same is then in full force and effect and that, to the best of its knowledge, there are no offsets, defenses or counterclaims with respect to the payment of Rent hereunder or in the performance of the other terms, covenants and conditions hereof on the part of Tenant or Landlord, as the case may be, to be performed, and that as of such date no default has been declared hereunder by either party or if so, specifying the same. Such instrument will be executed by the other party and delivered to the requesting party within fifteen (15) days of receipt of a request.

14.2    TENANT SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT FOR FUTURE MORTGAGES. Tenant agrees to subordinate its interest in this Lease and attorn to any existing mortgage, deed to secure debt or deed of trust (a “Mortgage”) encumbering the Premises by the execution of an SNDA in a form as may be approved by such lender, which SNDA shall also be executed by such mortgagee.  Without limiting the generality of the foregoing, Tenant agrees to attorn to NPRP’s existing lender as provided in Section 3 of the form of SNDA attached hereto as Exhibit D (which Section 3 is incorporated herein by reference) and to execute and deliver such form of SNDA to NPRP’s existing Lender. Tenant’s interest in this Lease shall not be subordinate to any future Mortgage except as expressly provided in such fully executed SNDA.

14.3    LANDLORD SUBORDINATION. Landlord hereby expressly subordinates any and all claim, right, lien (including, without limitation, any common law or statutory Landlord’s lien), title and security interest in and to all of Tenant’s Improvements or Personal Property to the security interest of Tenant’s lender, if any, either existing as of the Effective Date of this Lease or under any future loan. Landlord further agrees to promptly execute any subordination or waiver agreement reasonably requested of Landlord by Tenant’s lender.

ARTICLE XV - HAZARDOUS SUBSTANCES

15.1    TENANT’S COVENANT. Tenant shall not cause or permit any Hazardous Substance to be used, stored, generated, or disposed of on, in or about the Premises (except those commonly or properly used in connection with the operation of a restaurant and which are used in accordance with all applicable governmental laws and regulations), without obtaining Landlord’s prior written consent. If the Premises become contaminated in any manner as a result of any breach of the foregoing covenant or any act or omission of Tenant or any of its agents, employees or contractors, Tenant shall indemnify, defend and hold harmless Landlord from any and all claims, demands, actions, damages, fines, judgments, penalties, costs (including attorneys’, consultants’, and experts’ fees), liabilities, losses and expenses arising during or after the term of this Lease and arising as a result of such contamination. This indemnification includes any and all costs incurred due to any investigation of the site or any cleanup, removal, or restoration mandated by a federal, state, or local agency or political subdivision. Without limitation of the foregoing, if Tenant causes or permits the presence of any Hazardous Substance on, in, or about the Premises that results in contamination, Tenant, at its sole expense, shall complete all required clean up, removal and remediation. Tenant shall first obtain Landlord’s approval for any such remedial action. Notwithstanding the foregoing, this indemnification shall only apply to contamination by a Hazardous Substance resulting from Tenant’s use and operation of the Premises. Nothing herein contained shall be held to indemnify Landlord from liability or to create any liability on Tenant for Hazardous Substance contamination resulting from Landlord’s ownership, use or operation, or the use or operation by any third party in, on or under the Premises or the Project.

15.2    LANDLORD’S COVENANT. Landlord represents and warrants that to the best of its knowledge, no leak, spill, discharge, emission or disposal of any Hazardous Substance has occurred on the Premises and that the soil, groundwater, soil vapor on or under the Premises is free of Hazardous Substances as of the Effective Date. Landlord agrees to provide to Tenant a copy of all environmental audits and reports with respect to the Premises within its possession or available to it within five (5) days of the Effective Date. Landlord covenants and agrees, at its sole cost and expense, to indemnify, protect, defend and save Tenant harmless against and from any and all damages, losses, liabilities, obligations, penalties, claims, litigation, demands, defenses, judgments, suits, proceedings, costs, disbursements or expenses (including, without limitation, attorneys’ and experts’ reasonable fees and disbursements) of any kind or nature whatsoever which may at any time be imposed upon, incurred by or

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asserted or awarded against Tenant and arising from or out of any Hazardous Substance on, in, under or affecting all or any portion of the Premises, which Hazardous Substance is not the result of Tenant’s use or operation of the Premises.

15.3    DEFINITIONS. As used herein, the term “Hazardous Substance” means any substance which is toxic, ignitable, reactive, or corrosive and which is regulated by any local government, the State in which the Premises are located, or the United States government. “Hazardous Substance” includes any and all materials or substances which are defined as “pollutant”, “contaminant”, “hazardous waste”, “extremely hazardous waste” or a “hazardous substance” pursuant to state, federal or local governmental law. “Hazardous Substance” includes asbestos, polychlorinated biphenyls (PCBs) and petroleum. The provisions under this entire Article shall survive the expiration or earlier termination of this Lease.

ARTICLE XVI – MISCELLANEOUS

16.1    NOTICE. Any notice, demand, request or other instrument which may be or is required to be given under this Lease, whether by a party hereto or on behalf of such party by its legal representative, shall be deemed to be delivered (i) when received (or when receipt is refused) if deposited in the United States mail, postage prepaid, certified or registered mail, return receipt requested, or (ii) when received (or when receipt is refused) if delivered personally or sent by a nationally recognized overnight courier, all charges prepaid, at the addresses of Landlord and Tenant as set forth in this Section. Such address may be changed by written notice to the other party in accordance with this Section. The parties acknowledge that copies of any notice sent by facsimile or e-mail are for convenience only, and shall not be deemed to be proper notice required hereunder.

 	 	 	 	
 	If to Landlord:
OS Southern, LLC
c/o OSI Restaurant Partners, LLC
2202 N. West Shore Blvd., 5th Floor
Tampa, FL 33607
Attention: Chief Development Officer
(813) 282-1225 Phone

And

OSI Restaurant Partners, LLC
2202 N. West Shore Blvd., 5th Floor
Tampa, FL 33607
Attention: Sr. Director of Property Management
(813) 282-1225 Phone
	If to Tenant:
MVP LRS, LLC
3717 West North B Street
Tampa, FL 33609
Attention: Nick Reader
(813) 321-7775

	 	

16.2    WAIVER. The waiver by Landlord or Tenant of any breach or default of any term, covenant or condition shall not be deemed to be a waiver of any subsequent breach or default of the same or any other term, covenant or condition, nor shall the acceptance or payment of Rent or other payment be deemed to be a waiver of any such breach or default. No term, covenant or condition of this Lease shall be deemed to have been waived by Landlord or Tenant, unless such waiver is in writing.

16.3    CAPTIONS AND SECTION NUMBERS. The captions and section numbers appearing in this Lease are inserted only as a matter of convenience and in no way define, limit, construe or describe the scope or intent of such sections.

16.4    ENTIRE AGREEMENT. This Lease and any attachments hereto and forming a part hereof set forth all the covenants, promises, agreements, conditions, and understandings between Landlord and Tenant concerning the Premises and there are no covenants, promises, agreements, conditions or understandings, either oral or written, other than as herein set forth.

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16.5    AMENDMENTS. No subsequent alteration, amendment, change or addition to this Lease shall be binding upon Landlord or Tenant until reduced to writing and signed by Landlord and Tenant. Local and regional managers and partners do not have authority to agree to amend this Lease or waive any of its terms on behalf of Tenant. Landlord should direct any request to amend this Lease or to waive any of its terms to Tenant’s corporate offices at the address set out in Section 16.1 above.

16.6    INTERPRETATION. The words “Tenant” and “Landlord” shall mean each party mentioned as Tenant or Landlord herein, whether one or more, and their respective heirs, executors, administrators, successors, and assigns. If there is more than one party, any notice required or permitted may be given to any one thereof, and such notice to one shall be deemed notice to all, unless multiple notices are required by Section 16.1. The use of the singular pronoun to refer to Tenant or Landlord shall be deemed proper regardless of the number of parties. When the word “including” (or some derivation thereof, such as “includes”) is used in this Lease to refer to something that, in that context, may be part of a larger group of similar items, the reference is without limitation, and it should be interpreted as if followed by “but not limited to”, “without limitation”, or appropriate equivalent language for the context.

16.7    NO PARTNERSHIP. Landlord and Tenant shall have no business relationship as a result of this Lease other than Landlord and Tenant. No provision of this Lease shall be construed as creating any other business relationship between Landlord and Tenant, including the relationships of partners or parties to a joint venture.

16.8    CONFIDENTIALITY. Landlord agrees not to disclose the provisions of or provide a copy of this Lease to any third party, except in the ordinary course of business to agents, attorneys, accountants and employees who need to know of its content in the performance of their services to Landlord, to prospective purchasers and lenders for the Project and in connection with any dispute with Tenant.

16.9    PARTIAL INVALIDITY. If any term, covenant or condition of this Lease, or the application thereof to any person or circumstances shall, to any extent, be invalid or unenforceable, the remainder of this Lease or the application of such term, covenant, or condition to persons or circumstances other than those as to which it was held invalid or unenforceable, shall not be affected thereby and each term, covenant, or condition of this Lease shall be valid and be enforced to the fullest extent permitted by law.

16.10    APPLICABLE LAW. This Lease shall be construed according to the laws of the State in which the Premises are located.

16.11    RECORDING. Within fifteen (15) days written request by Landlord or Tenant to the other, the other party shall execute a Memorandum of this Lease in a form reasonable approved by Landlord and Tenant, to be recorded by Landlord or Tenant in the public records at the recording party’s expense.

16.12    COSTS OF ENFORCEMENT. In the event that Landlord or Tenant shall bring an action to recover any sum due hereunder or for any breach hereunder and shall obtain a judgment in its favor, or in the event that Landlord or Tenant retains an attorney for the purpose of collecting any sum due hereunder or construing or enforcing any of the terms or conditions hereof or protecting their interest in any bankruptcy, receivership, or insolvency proceeding or otherwise against the other, the prevailing party shall be entitled to recover all reasonable costs and expenses incurred, including reasonable attorneys’ and legal assistants’ fees prior to trial, at trial, and on appeal and for post-judgment proceedings.

16.13    SUCCESSORS. The covenants and restriction of this Lease are covenants and restrictions running with the land. The provisions of this Lease shall inure to the benefit of and be binding upon the respective heirs, executors, administrators, successors, and assigns of Landlord and Tenant.

16.14    FORCE MAJEURE. In the event that either party hereto shall be delayed or hindered in or prevented from the performance required hereunder by reason of fire or other casualty, strikes, lockouts, labor troubles or shortages, material shortages, any moratorium or other governmental or court imposed restrictions, riots, criminal acts, food borne illness, insurrection, war, adverse and unusual weather conditions, vandalism, defective materials or work by third party contractors, jobsite accidents, the breach of the other party of its obligations under this Lease, or other reason of like nature beyond the reasonable control of the party delayed in such performance

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(each a “Force Majeure Event”), then (a) the period for performance shall be extended by the period of time equivalent to the delay caused by such Force Majeure Event or (b) performance shall be excused during the period of non-performance caused by such Force Majeure Event, as applicable. Notwithstanding the foregoing, (i) any extension of time for a Force Majeure Event shall be conditioned upon the party seeking an extension of time delivering written notice of such Force Majeure Event to the other party within ten (10) days of the commencement of the delay caused by the Force Majeure Event. This Section shall not apply to any obligation to pay any sums due under this Lease and the lack of the financial ability to perform shall not constitute a Force Majeure Event.

16.15    BROKERS. Tenant and Landlord represent and warrant to each other that they have not consulted or contacted any agent, broker, or finder in connection with this Lease. Landlord and Tenant agree to defend, indemnify and hold the other harmless from any and all claims for compensation or commission in connection with this Lease by any broker, agent, or finder (other than Broker) claiming to have dealt with such party.

16.16    LANDLORD’S RIGHTS. All rights reserved to Landlord under this Lease shall be exercised in a reasonable manner and in a manner so as to minimize any adverse impact to Tenant’s business or Tenant’s use or enjoyment of the Premises.

16.17    CONSENT. Except as expressly set forth in this Lease, whenever Landlord’s consent or approval is requested under or in connection with this Lease, such consent or approval shall not be unreasonably withheld, delayed or conditioned.

16.18    TIME REQUIREMENTS. For purposes of all time requirements and limits hereunder, any time requirement reference to days other than “business days” shall mean actual “calendar days” which shall include each day after the day from which the period commences. All time requirements referenced as “business days” shall include each day after the day from which the period commences excluding any Saturday, Sunday or legal holiday. If the final day of any such time period falls on a Saturday, Sunday or legal holiday in the jurisdiction where the Premises is located or the jurisdiction to which notices to Landlord or Tenant are to be sent, such period shall extend to the first business day thereafter.

16.19    SURVIVAL OF OBLIGATIONS. Notwithstanding any provisions contained in this Lease to the contrary, the monetary obligations of Landlord and Tenant that relate to the period prior to the termination or expiration of this Lease (for example, the payment of accrued Rent or the reconciliation of Operating Expenses or Real Estate Taxes) shall survive the termination or expiration of this Lease.

16.20    RADON GAS. Radon is a naturally occurring radioactive gas that, when it has accumulated in a building in sufficient quantities, may present health risks to persons who are exposed to it over time. Levels of radon that exceed federal and state guidelines have been found in buildings in Florida. Additional information regarding radon and radon testing may be obtained from your county health department.

ARTICLE XVII – REQUIRED LENDER PROVSIONS
 	 	
17.1	REQUIRED ASSIGNMENT AND SUBLETTING PROVISIONS.  The parties agree that:	

(i)	This Lease shall be subject and subordinate to all of the terms and conditions of the Sublease, the Master Lease and the Master Landlord’s (NPRP) loan documents;	
 	 	
(ii)	The use of the Premises shall not conflict with any Legal Requirement, Property Document, Insurance Requirement or any other provision of the Sublease or Master Lease;	
 	 	
(iii)	That except as otherwise provided herein, no further subletting or assignment of this Lease or all or a part of the Premises shall be permitted except insofar as the same would be permitted if it were a sublease by Landlord under the Sublease or Master Lease;	
 	 	
(iv)	That in the event of cancellation or termination of the Sublease for any reason whatsoever or of the surrender of the Sublease, whether voluntary, involuntary or by operation of law) prior to the expiration date of this Lease, including extensions and renewals granted thereunder, then, at the option of PRML, the Tenant shall make full and complete	

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Attornment to PRML for the balance of the term of the Lease, which Attornment shall be evidenced by an agreement in form and substance satisfactory to PRML and which the Tenant shall execute and deliver with five (5) days after request by PRML, and the Tenant shall waive the provisions of any law now or hereafter in effect which may give the Tenant any right of election to terminate the Lease or to surrender possession of the Premises in the event any proceeding is brought to terminate the Sublease, and;
 	 	
(v)	That in the event the Tenant receives a written notice from PRML stating that the Sublease has been cancelled, surrendered or terminated, the Tenant shall thereafter be obligated to pay all rentals accruing under said sublease directly to PRML (or Master Landlord’s lender if PRML shall so direct); all rentals received from the Tenant by PRML shall be credited against the amounts owing by Landlord under the Sublease.	

17.2 REQUIRED USE RESTRICTIONS.  Tenant agrees that the Premises cannot be used for any of the following uses: any pornographic or obscene purposes, any commercial sex establishment, any pornographic, obscene, nude or semi-nude performances, modeling, obscene materials, activities or sexual conduct or any other use that has or could reasonably be expected to have a material adverse effect on the use, operation, or value of the Premises.

(Remainder of page intentionally left blank.)

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IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease effective as of the Effective Date.

 	
 	 	 	 	 	 	 	
WITNESSES:	 	 	“Landlord”	 	 	
 	 	 	 	 	 	 	
/s/ Laureen Sustachek	 	OS Southern, LLC,	 	 	
 	 	 	a Florida limited liability company	 	
 	 	 	 	 	 	
/s/ Astrid Henriques	 	By:	/s/ Mike Nolan	 	
 	 	 	Name:	Mike Nolan	 	
 	 	 	Title:	Authorized Agent - Real Estate	 	

 	 	 	 	 	 	 	
 	 	 	“Tenant”	 	 	
 	 	 	 	 	 	 	
 	 	 	MVP LRS, LLC	 	 	
 	 	a Florida limited liability company	 	
 	 	 	 	 	 	
 	 	By:	/s/ Nicholas Reader	 	
 	 	 	Name:	Nicholas Reader	 	
 	 	Title:	 	 	

O:\PRML\LEASED PROPERTIES\8002 LRS New Tampa, FL (Subleased)\Lease\Drafts\LRS 8002 Lease Draft 9 13 13.docx

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EXHIBIT “A”

SITE PLAN

EXHIBIT “A-1”
LEGAL DESCRIPTION AND PROJECT SURVEY
Page 1 of 2

EXHIBIT “A-1”
LEGAL DESCRIPTION AND PROJECT SURVEY
Page 2 of 2

EXHIBIT “B”

BASE RENT SCHEDULE

 	
 	 	 	 	 	 	
 	 	Lease Year 1	-0-	per annum	 	
 	 	 	 	 	 	
 	 	Lease Years 2-5	$125,000	per annum	 	
 	 	 	 	 	 	
 	 	Lease Years 6-10	$137,500	per annum	 	
 	 	 	 	 	 	
 	 	Lease Years 11-15	$151,250	per annum	 	
 	 	 	 	 	 	
 	 	Lease Years 16-20	$166,375	per annum	 	

EXHIBIT “C”

ELEVATIONS

Exhibit “D”

Form SNDA

SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT

THIS AGREEMENT made as of this _____ day of ___________, ______, between GERMAN AMERICAN CAPITAL CORPORATION, a Maryland corporation, having an address at 60 Wall Street, 10 th  Floor, New York, New York 10005 and BANK OF AMERICA, N.A., a national banking association, having a principal place of business at Hearst Tower, 214 North Tryon Street, Charlotte, North Carolina 28255 (hereinafter referred to together, collectively with their respective successors and assigns, as “Lender”), and MVP LRS, LLC, a Florida limited liability company (successor by merger to Selmon’s/Florida-I, Limited Partnership, a Florida limited partnership), having an address at 3717 West North B Street, Tampa, FL 33609 Attn: Nick Reader (“Tenant”).

RECITALS:

WHEREAS, Lender has made a loan to New Private Restaurant Properties, LLC, a Delaware limited liability company, having an address at 2202 North West Shore Boulevard, Suite 470C (together with its successors or assigns, “Borrower” or “Master Lessor”), which loan is secured by,  inter alia,  that certain deed of trust (which deed of trust, and all amendments, renewals, increases, modifications, replacements, substitutions, extensions, spreaders and consolidations thereof and all re-advances thereunder and addictions thereto, is referred to as the “Security Instrument”) recorded in Book 21039, Page 529, March 30, 2012 of Clerk of the Circuit Court Hillsborough County, Florida, on the property described in Schedule “A” annexed hereto and made a part hereof (the “Property”); and

WHEREAS, Borrower and New Private Restaurant Master Lessee, LLC, a Delaware limited liability company (“Master Lessee”) have entered into that certain Amended and Restated Master Lease Agreement executed as of March 20, 2012, to be effective as of March 27, 2012 (the “Master Lease”), an amended and restated memorandum of which Master Lease was recorded in Book 21040, Page 62, April 2, 1012, Clerk of the Circuit Court Hillsborough County, Florida, pursuant to which Master Lessee leases,  inter alia,  the entire Property from Borrower; and

WHEREAS, the Parties acknowledge that OS Southern, LLC, a Florida limited liability company (“Sub-Tenant” or “Landlord”) is the sub-tenant under that certain Amended and Restated Sublease Agreement effective March 27, 2012 (the “Sublease”), with Private Restaurant Master Lessee, LLC (“PRML”) as sub-landlord, which Sublease is subordinate to the Master Lease; and

WHEREAS, pursuant to that certain Sub‑Sublease Agreement effective ___________, (the “Sub-Sublease”), Landlord has sub-subleased the Property identified in Exhibit A-1 attached hereto (the “Premises”) to Tenant.

WHEREAS, Lender and Tenant desire to confirm their understanding and agreement with respect to the Sub-Sublease and the Security Instrument.

NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, Lender and Tenant hereby agree and covenant as follows:

1.     The Sub-Sublease, and all of the terms, covenants, provisions and conditions thereof (including, without limitation, any right of first refusal, right of first offer, option or any similar right with

respect to the sale or purchase of the Premises, or any portion thereof) is, shall be and shall at all times remain and continue to be subject and subordinate in all respects to the lien, terms, covenants, provisions and conditions of the Master Lease and the Security Instrument and to all advances and re-advances made thereunder and all sums secured thereby. This provision shall be self-operative but Tenant shall execute and deliver any additional instruments which Lender may reasonably require to effect such subordination.

2.     So long as (i) Tenant is not in default (after the giving of any notice required to be given under the Sub-Sublease and beyond any period given in the Sub-Sublease to Tenant to cure such default) in the payment of rent, percentage rent or additional rent or in the performance or observance of any of the other terms, covenants, provisions or conditions of the Sub-Sublease on Tenant's part to be performed or observed, (ii) Tenant is not in default under this Agreement (after the giving of any notice required to be given under this Agreement and beyond any period given in this Agreement to Tenant to cure such default) and (iii) the Sub-Sublease is in full force and effect: (a) Tenant's possession of the Premises and Tenant's Sub-Sublease Leasehold interest, rights and privileges under the Sub-Sublease, including any extensions or renewals thereof which may be effected in accordance with any option therefor which is contained in the Sub-Sublease, shall not be diminished or interfered with by Lender, and Tenant's occupancy of the Premises shall not be disturbed by Lender for any reason whatsoever during the term of the Sub-Sublease or any such extensions or renewals thereof, and (b) Lender will not join Tenant as a party defendant in any action or proceeding to foreclose the Security Instrument or to enforce any rights or remedies of Lender under the Security Instrument which would cut-off, destroy, terminate or extinguish the Sub-Sublease or Tenant's interest and estate under the Sub-Sublease (except to the extent required so that Tenant's right to receive or set-off any monies or obligations owed or to be performed by any of Lender's predecessors-in-interest shall not be enforceable thereafter against Lender or any of Lender's successors-in-interest). Notwithstanding the foregoing provisions of this paragraph, if it would be procedurally disadvantageous for Lender not to name or join Tenant as a party in a foreclosure proceeding with respect to the Security Instrument, Lender may so name or join Tenant without in any way diminishing or otherwise affecting the rights and privileges granted to, or inuring to the benefit of, Tenant under this Agreement.

3.     (A)    After notice is given by Lender that the Security Instrument is in default, and that the rentals under the Sub‑Sublease should be paid to Lender (“Direct Payment Notice”), Tenant will attorn to Lender and pay to Lender, or pay in accordance with the directions of Lender, all rentals and other monies due and to become due to Landlord under the Sub-Sublease or otherwise in respect of the Premises. Such payments shall be made regardless of any right of set-off, counterclaim or other defense which Tenant may have against Landlord, whether as the tenant under the Sub-Sublease or otherwise. Landlord hereby irrevocably directs Tenant to comply with any Direct Payment Notice regardless of any contrary direction, instruction or assertion by Landlord. Tenant shall be entitled to full credit under the Sub-Sublease for any rentals paid to Lender pursuant to a Direct Payment Notice to the same
extent as if such Rent was paid directly to Landlord.

(B)    In addition, if Lender (or its nominee or designee) shall succeed to the rights of Master Lessor under the Master Lease and/or the rights of Landlord under the Sub-Sublease, whether through possession or foreclosure action, delivery of a deed or otherwise (including after a default under the Master Lease), or another person purchases the Property or the portion thereof containing the Premises upon or following foreclosure of the Security Instrument or in connection with any bankruptcy case commenced by or against Landlord or Master Lessor, then at the request of Lender (or its nominee or designee) or such purchaser (Lender, its nominees and designees, and such purchaser, and their respective successors and assigns, each being a "Successor-Landlord"), Tenant shall attorn to and recognize Successor-Landlord as Tenant's landlord under the Sub-Sublease and shall promptly execute and deliver any instrument that Successor-Landlord may reasonably request to evidence such attornment. Upon such attornment, the Sub-Sublease shall continue in full force and effect as, or as if it were, a direct Sub-Sublease between Successor-Landlord and Tenant upon all terms, conditions and covenants as are set forth in the Sub-Sublease. If the Sub-Sublease shall have terminated by operation of law or otherwise as a

result of or in connection with a bankruptcy case commenced by or against Landlord or Master Lessor or a foreclosure action or proceeding or delivery of a deed in lieu or any other event or circumstance resulting in the termination of the Master Lease, upon request of Successor-Landlord, Tenant shall promptly execute and deliver a direct Sub‑Sublease with Successor-Landlord which direct Sub-Sublease shall be on substantially the same terms and conditions as the Sub-Sublease (subject, however, to the provisions of clauses (i)-(v) of this paragraph 3(B)) and shall be effective as of the day the Sub-Sublease shall have terminated as aforesaid. Notwithstanding the continuation of the Sub-Sublease, the attornment of Tenant thereunder or the execution of a direct Sub-Sublease between Successor-Landlord and Tenant as aforesaid, Successor-Landlord shall not:

(i)     be liable for any previous act or omission of Landlord under the Sub‑Sublease;

(ii)     be subject to any off-set, defense or counterclaim which shall have theretofore accrued to Tenant against Landlord;
!

(iii)     be bound by any modification of the Sub-Sublease or by any previous prepayment of rent or additional rent made more than one (1) month prior to the date same was due which Tenant might have paid to Landlord, unless such modification or prepayment shall have been expressly approved in writing by Lender;

(iv)     be liable for any security deposited under the Sub-Sublease unless such security has been physically delivered to Lender or Successor-Landlord;

(v)     be liable or obligated to comply with or fulfill any of the obligations of the Landlord under the Sub-Sublease or any agreement relating thereto with respect to the construction of, or payment for, improvements on or above the Premises (or any portion thereof), Sub-Sublease Leasehold improvements, tenant work letters and/or similar items, and;

(vi)    be liable or bound under the Sub-Sublease to maintain a fitness facility at the Property.

4.     Tenant agrees that without the prior written consent of Lender (to the extent Lender’s consent is required under the terms of the Master Lease), it shall not (a) amend, modify (in any material respects), terminate or cancel the Sub-Sublease or any extensions or renewals thereof, (b) tender a surrender of the Sub-Sublease, (c) make a prepayment of any rent or additional rent more than one (1) month in advance of the due date thereof, or (d) except to the extent required by the terms of the Sub-Sublease, subordinate or permit the subordination of the Sub-Sublease to any lien subordinate to the Security Instrument Any such purported action without such consent shall be void as against the holder of the Security Instrument.

5.     (A)    Tenant shall promptly notify Lender of any default by Landlord under the Sub-Sublease and of any act or omission of Landlord which would give Tenant the right to cancel or terminate the Sub-Sublease or to claim a partial or total eviction.

(B)    In the event of a default by Landlord under the Sub-Sublease which would give Tenant the right, immediately or after the lapse of a period of time, to cancel or terminate the Sub‑Sublease, to claim a partial or total eviction, or entitle Tenant to an off-set against rent under the Sub-Sublease, or in the event of any other act or omission of Landlord which would give Tenant the right to cancel or terminate the Sub-Sublease, Tenant shall not exercise such right (i) until Tenant has given written notice of such default, act or omission to Lender and (ii) unless Lender has failed, within sixty

(60) days after Lender receives such notice, to cure or remedy the default, act or omission or, if such default, act or omission shall be one which is not reasonably capable of being remedied by Lender within such sixty (60) day period, until a reasonable period for remedying such default, act or omission shall have elapsed following the giving of such notice and following the time when Lender shall have become entitled under the Security Instrument to remedy the same (which reasonable period shall in no event be less than the period to which Landlord would be entitled under the Sub‑Sublease or otherwise, after similar notice, to effect such remedy), provided that Lender shall with due diligence give Tenant written notice of its intention to and shall commence and continue to, remedy such default, act or omission. If Lender cannot reasonably remedy a default, act or omission of Landlord until after Lender obtains possession of the Premises, Tenant may not terminate or cancel the Sub-Sublease or claim a partial or total eviction by reason of such default, act or omission until the expiration of a reasonable period necessary for the remedy after Lender secures possession of the Premises. To the extent Lender incurs any expenses or other costs in curing or remedying such default, act or omission, including, without limitation, attorneys’ fees and disbursements, Lender shall be subrogated to Tenant’s rights against Landlord.

(C)    Notwithstanding the foregoing, Lender shall have no obligation hereunder to remedy such default, act or omission.

6.     To the extent that the Sub-Sublease shall entitle Tenant to notice of the existence of any mortgage and the identity of any mortgagee or any ground lessor, this Agreement shall constitute such notice to Tenant with respect to the Security Instrument and Lender.

7.     Upon and during the continuance of a default under the Master Lease, the Sublease, the Sub-Sublease, and/or the Security Instrument, which is not cured after any applicable notice and/or cure periods, Lender shall be entitled, but not obligated, to exercise the claims, rights, powers, privileges and remedies of Landlord under the Sub-Sublease and shall be further entitled to the benefits of, and to receive and enforce performance of, all of the covenants to be performed by Tenant under the Sub-Sublease as though Lender were named therein as Landlord.

8.     Anything herein or in the Sub-Sublease to the contrary notwithstanding, in the event that a Successor-Landlord shall acquire title to the Property or the portion thereof containing the Premises, Successor-Landlord shall have no obligation, nor incur any liability, beyond Successor-Landlord’s then interest, if any, in the Property, and Tenant shall look exclusively to such interest, if any, of Successor-Landlord in the Property for the payment and discharge of any obligations imposed upon Successor-Landlord hereunder or under the Sub-Sublease, and Successor-Landlord is hereby released or relieved of any other liability hereunder and under the Sub-Sublease. Tenant agrees that, with respect to any money judgment which may be obtained or secured by Tenant against Successor-Landlord, Tenant shall look solely to the estate or interest owned by Successor-Landlord in the Property (including, without limitation, the rents, issues and profits therefrom), and Tenant will not collect or attempt to collect any such judgment out of any other assets of Successor-Landlord.

9.     Intentionally Omitted

10.    If the Sub-Sublease provides that Tenant is entitled to expansion space, Successor-Landlord shall have no obligation nor any liability for failure to provide such expansion space if a prior landlord (including, without limitation, Landlord), by reason of a Sub-Sublease or Sub‑Subleases entered into by such prior landlord with other tenants of the Property, has precluded the availability of such expansion space.

11.    Except as specifically provided in this Agreement, Lender shall not, by virtue of this Agreement, the Security Instrument or any other instrument to which Lender may be a party, be or become subject to any liability or obligation to Tenant under the Sub-Sublease or otherwise.

12.     (A)    Tenant acknowledges and agrees that this Agreement satisfies and complies in all respects with the provisions of Paragraph 14.2 of the Sub-Sublease and that this Agreement supersedes (but only to the extent inconsistent with) the provisions of such Article and any other provision of the Sub-Sublease relating to the priority or subordination of the Sub-Sublease and the interests or estates created hereby to the Security Instrument.

(B)    Tenant agrees to enter into a subordination, non-disturbance and attornment agreement with any lender which shall succeed Lender as lender with respect to the Property, or any portion thereof, provided such agreement is substantially similar to this Agreement.

13.     (A)    Any notice required or permitted to be given by Tenant to Landlord shall be simultaneously given also to Lender, and any right to Tenant dependent upon notice shall take effect only after notice is so given. Performance by Lender shall satisfy any conditions of the Sub-Sublease requiring performance by Landlord, and Lender shall have a reasonable time to complete such performance as provided in Paragraph 5 hereof.

(B)    All notices or other communications required or permitted to be given to Tenant or to Lender pursuant to the provisions of this Agreement shall be in writing and shall be deemed given only if mailed by United States registered mail, postage prepaid, or if sent by nationally recognized overnight delivery service (such as Federal Express or United States Postal Service Express Mail), addressed as follows: to Tenant, at the address first set forth above; to Lender, at the address first set forth above, Attention: General Counsel, with a copy to Skadden, Arps, Slate, Meagher & Flom LLP, Four Times Square, New York, New York 10036, Attention: Harvey R. Uris, Esq.; or to such other address or number as such party may hereafter designate by notice delivered in accordance herewith. All such notices shall be deemed given three (3) business days after delivery to the United States Post office registry clerk if given by registered mail, or on the next business day after delivery to an overnight delivery courier.

14.     This Agreement may be modified only by an agreement in writing signed by the parties hereto, or their respective successors-in-interest. This Agreement shall inure to the benefit of and be binding upon the parties hereto, and their respective successors and assigns. The term “Lender” shall mean the then holder of the Security Instrument. The term “Landlord” shall mean the then holder of the landlord’s interest in the Sub-Sublease. The term “person” shall mean an individual, joint venture, corporation, partnership, trust, limited liability company, unincorporated association or other entity. All references herein to the Sub-Sublease shall mean the Sub-Sublease as modified by this Agreement and to any amendments or modifications to the Sub-Sublease (provided that Lender shall not be bound by any such amendment or modification if Lender’s consent thereto is required under the Master Lease and such consent of Lender has not been obtained). Any inconsistency between the Sub-Sublease and the provisions of this Agreement shall be resolved, to the extent of such inconsistency, in favor of this Agreement.

15.     Tenant hereby represents to Lender as follows:

(A)     The Sub-Sublease is in full force and effect and has not been further amended.

(B)    There has been no assignment of the Sub-Sublease or subletting of any portion
of the premises demised under the Sub-Sublease.

(C)    There are no oral or written agreements or understandings between Landlord and Tenant relating to the premises demised under the Sub-Sublease or the Sub-Sublease transaction except as set forth in the Sub-Sublease.

(D)    The execution of the Sub-Sublease was duly authorized and the Sub-Sublease is in full force and effect and to the best of Tenant’s knowledge there exists no default (beyond any applicable grace period) on the part of either Tenant or Landlord under the Sub-Sublease.

(E)    There has not been filed by or against nor to the best of the knowledge and belief of Tenant is there threatened against Tenant, any petition under the bankruptcy laws of the United States.

(F)    To the best of Tenant’s knowledge, there has not been any assignment, hypothecation or pledge of the Sub-Sublease or rents accruing under the Sub-Sublease by Landlord, other than pursuant to the terms of the Sub-Sublease.

16.    Whenever, from time to time, reasonably requested by Lender (but not more than three (3) times during any calendar year), Tenant shall execute and deliver to or at the direction of Lender, and without charge to Lender, one or more written certifications, in a form acceptable to Tenant, of all of the matters set forth in Paragraph 15 above, and any other information the Lender may reasonably require to confirm the current status of the Sub-Sublease.

17.    BOTH TENANT AND LENDER HEREBY IRREVOCABLY WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT.

This Agreement shall be governed by and construed in accordance with the laws of the State in which the Property is located.

[SIGNATURE PAGE FOLLOWS]

IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written.

 	 	 	 	
 	MVP LRS, LLC, a Florida limited liability company	
 	 	 	 	
 	By:	 	 	

 	Name:	 	 	
 	Title:	 	 	

 	GERMAN AMERICAN CAPITAL	
 	CORPORATION, a Maryland corporation	
 	 	 	 	
 	By:	 	 	

 	Name:	 	 	
 	Title:	 	 	

 	By:	 	 	

 	Name:	 	 	
 	Title:	 	 	

 	BANK OF AMERICA, N.A., a national	
 	banking association	 	
 	 	 	 	
 	By:	 	 	

 	Name:	 	 	
 	Title:	 	 	

 	
 	 	 	 	 	
AGREED AND CONSENTED TO:	 	 	

LANDLORD:	 	 	 	
 	 	 	 	 	
PRIVATE RESTAURANT MASTER LESSEE, LLC	 	
 	 	 	 	 	
By:	 	 	 	 	

Name:	 	 	 	
Title:	 	 	 	

STATE OF FLORIDA    )
)
COUNTY OF HILLSBOROUGH    )

The foregoing instrument was acknowledged before me this ____ day of _____________, 20__, by __________________________________, as __________________________ of MVP LRS, LLC, a Florida limited liability company, on behalf of said entity. He/She  o  is personally known to me or  o  produced ___________________ as identification.

 	 	 	 	 	 	
 	 	 	
 	 	NOTARY PUBLIC	 	
 	 	Printed Name:	 	
(Notary Seal)	 	Commission No.:	 	
 	 	My Commission Expires:	 	

STATE OF _______________    )
)
COUNTY OF________________    )

The foregoing instrument was acknowledged before me this ____ day of _____________, 20__, by _____________________________, as ______________________ for German American Capital Corporation, a Maryland corporation, on behalf of said entity. He/She is personally known to me.

 	 	 	 	 	 	
 	 	 	
 	 	NOTARY PUBLIC	 	
 	 	Printed Name:	 	
(Notary Seal)	 	Commission No.:	 	
 	 	My Commission Expires:	 	

STATE OF _______________    )
)
COUNTY OF________________    )

The foregoing instrument was acknowledged before me this ____ day of _____________, 20__, by _____________________________, as ______________________ for German American Capital Corporation, a Maryland corporation, on behalf of said entity. He/She is personally known to me.

 	 	 	 	 	 	
 	 	 	
 	 	NOTARY PUBLIC	 	
 	 	Printed Name:	 	
(Notary Seal)	 	Commission No.:	 	
 	 	My Commission Expires:	 	

STATE OF ________________    )
) 
COUNTY OF ____________________    )

The foregoing instrument was acknowledged before me this ____ day of _____________, 20__, by __________________________________, as __________________________ of Bank of America, N.A., a national banking association, on behalf of said entity. He/She  o  is personally known to me or  o  produced ___________________ as identification.

 	 	 	 	 	 	
 	 	 	
 	 	NOTARY PUBLIC	 	
 	 	Printed Name:	 	
(Notary Seal)	 	Commission No.:	 	
 	 	My Commission Expires:	 	

[Acknowledgement of Landlord]

STATE OF FLORIDA    )
) 
COUNTY OF HILLSBOROUGH    )

The foregoing instrument was acknowledged before me this ____ day of _____________, 20__, by ________________________, as ________________________________ of Private Restaurant Master Lessee, LLC, a Delaware limited liability company, on behalf of said entity. He/She is personally known to me.

 	 	 	 	 	 	
 	 	 	
 	 	NOTARY PUBLIC	 	
 	 	Printed Name:	 	
(Notary Seal)	 	Commission No.:	 	
 	 	My Commission Expires:	 	

Exhibit 10.54
Confidential Property of OS Management, Inc.
Amanda L. Shaw

BLOOMIN’ BRANDS, INC.
Officer Employment Agreement

THIS EMPLOYMENT AGREEMENT (the “Agreement”) is made and entered into effective August 07, 2013, by and among AMANDA L. SHAW (hereinafter referred to as “Employee”) and BLOOMIN’ BRANDS, INC., a Delaware corporation having its principal office at 2202 N. West Shore Boulevard, 5 th  Floor, Tampa, Florida 33607 (hereinafter referred to as the “Company”) and OS MANAGEMENT, INC., a Florida corporation having its principal office at 2202 N. West Shore Boulevard, 5 th  Floor, Tampa, Florida 33607 (the “Employer”).

W I T N E S S E T H:

This Agreement is made and entered into under the following circumstances:

A.    WHEREAS, the Company is engaged in the business of owning and operating, directly and/or through its subsidiaries and their Affiliates, restaurants utilizing a restaurant operating system and trademarks (“Trademarks”) owned by or licensed to the Company and/or such operating subsidiary or Affiliate; and

B.    WHEREAS, the Employer agreed to hire and lease to the Company management employees necessary for the management of the Company’s business; and

C.    WHEREAS, the Employer desires, on the terms and conditions stated herein, to employ the Employee and lease Employee to the Company as Senior Vice President, Technology and Chief Accounting Officer of the Company; and

D.    WHEREAS, the Employee desires, on the terms and conditions stated herein, to be employed by the Employer and leased to the Company as Senior Vice President, Technology and Chief Accounting Officer of the Company.

NOW, THEREFORE, in consideration of the foregoing recitals, and of the premises, covenants, terms and conditions contained herein, the parties hereto agree as follows:

1.Employment and Term. Subject to earlier termination as provided for in Section 8 hereof, the Employer hereby employs the Employee, and the Employee hereby accepts employment with the Employer to be leased to the Company as Senior Vice President, Technology and Chief Accounting Officer of the Company for a term commencing on August 07, 2013 and expiring five (5) years thereafter (“Term of Employment”). Such Term of Employment shall be automatically renewed for successive renewal terms of one (1) year each unless either party elects not to renew by giving written notice to the other party not less than sixty (60) days prior to the start of any renewal term.

2.Representations and Warranties. The Employee hereby represents and warrants to the Employer and the Company that (a) the Employee (i) is not subject to any written nonsolicitation or noncompetition agreement affecting the Employee’s employment with the Employer or its Affiliates (other than any prior agreement with the Employer or its Affiliates), (ii) is not subject to any written confidentiality or nonuse/nondisclosure agreement affecting the Employee’s employment with the Employer or its Affiliates (other than any prior agreement with the Employer or its Affiliates), and (iii) has brought to the Employer and its Affiliates no trade secrets, confidential business information, documents, or other personal property of a prior employer, and (b) the execution of this Agreement and the performance of the Employee’s obligations hereunder will not breach or be in conflict with any other agreement to which the Employee is a party or is bound or any order, decree, judgment, ruling, determination or injunction of any federal, state, local or foreign governmental, administrative or regulatory court, agency or body or any arbitrator.

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Confidential Property of OS Management, Inc.
Amanda L. Shaw

3.Duties. As Senior Vice President, Technology and Chief Accounting Officer of the Company, the Employee shall:

(a)diligently, competently, and faithfully perform all of the duties and functions as may be assigned to the Employee hereunder commensurate with the position of Senior Vice President, Technology and Chief Accounting Officer of the Company;
(b)devote one hundred percent (100%) of the Employee’s full business time, attention, energies, and effort to the business affairs of the Employer and the Company;
(c)achieve the results and other goals required by the Employer and the Company;
(d)conduct all of Employee’s activities in a manner so as to maintain and promote the business and reputation of the Employer and the Company; and
(e)not create a situation that results in termination for Cause (as that term is defined in Section 8 hereof).
Notwithstanding the foregoing, the Employee shall be permitted to invest the Employee’s personal assets and manage the Employee’s personal investment portfolio in such a form and manner as will not require any business services on the Employee’s part to any third party, and provided it does not conflict with the Employee’s duties and responsibilities to the Employer and the Company or the provisions of  Section 9  or Section 10  hereof, or conflict with any material published policy of the Employer or its Affiliates, including, but not limited to, the insider trading policy of the Employer or its Affiliates.
Notwithstanding the foregoing, the Employee shall also be permitted to participate in customary civic, nonprofit, religious, welfare, social and professional activities that will not materially affect the Employee’s performance of duties hereunder. The Employee may continue to serve on any board of directors and advisory committees of companies on which the Employee currently serves, as long as the business of such companies is not competitive with that of the Employer, the Company or their Affiliates. The Employee shall not serve on the board of directors or advisory committee of any other company without the prior consent of the Employer, which consent shall not be unreasonably withheld.
Notwithstanding anything to the contrary herein, the parties acknowledge and agree that the Employee shall, during the term of this Agreement and at the request of the Employer, also serve as an officer of any Affiliate of the Employer or the Company as the Employer shall reasonably request. In such capacity, the Employee shall be responsible generally for all aspects of such office. All terms, conditions, rights and obligations of this Agreement shall be applicable to the Employee while serving in such office as though the Employee and such Affiliate had separately entered into this Agreement, except that the Employee shall not be entitled to any compensation, vacation, fringe benefits, automobile allowance or other remuneration of any kind whatsoever from such Affiliate.

4.Compensation. During the Term of Employment, subject to the Employee’s performance in accordance with this Agreement, the Employee shall be entitled to the following:

(a)     Base Salary. During the Term of Employment, the Employee shall be entitled to an annual base salary equal to Three Hundred Twenty-five Thousand Dollars ($325,000), payable in equal biweekly installments by the Employer, to be reviewed annually.
(b)    Employer Bonus Program. During the Term of Employment, the Employee shall be entitled to discretionary bonuses pursuant to a bonus plan developed by the Compensation Committee of the Employer (the “Employer Bonus Program”). Employee’s bonus target under the Employer Bonus Program is 70%  of the base salary paid to the Employee in the calendar year for which the bonus is awarded. The Employer Bonus Program and the Employee’s bonus percentage are subject to increase, decrease, change or elimination in the discretion of the Employer.
(c)    OtherBonuses. In addition, as part of the Employee’s compensation during the Term of Employment, the Employee shall be eligible to participate in any bonus program or bonus arrangement which the Employer may establish from time to time for employees with the same title; provided that such

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Confidential Property of OS Management, Inc.
Amanda L. Shaw

program or arrangement applies generally to employees with the same title and with the functional job responsibilities of such title, and that the Employer may modify the terms and conditions of any such bonus or arrangement and may discontinue or otherwise terminate any such program or arrangement from time to time in its sole discretion.

5.Paid Time Off. Employee shall be entitled to vacation time or other paid time off (collectively “PTO”) to be accrued in accordance with the Employer’s PTO Policy as may be in effect from time to time. PTO scheduling is selected by the Employee, but subject to the reasonable business requirements of the Employer and the Company as determined by Employee’s supervisor. Unless required by applicable law which cannot be waived, PTO granted but not used in any calendar year shall be forfeited at the end of such one-year period and may not be carried over to any subsequent year.

6.Fringe Benefits. In addition to any other rights the Employee may have hereunder, the Employee shall also be entitled to participate in those employee benefit plans, programs and arrangements, including, but not limited to life insurance, medical benefits, etc., if any, as may be provided by the Employer to similar employees of the Employer. In each case as such plans, programs and arrangements may be in effect from time to time, all subject to the terms of such plans, programs or arrangements and applicable policies of the Employer. Any taxable welfare benefits provided to the Employee pursuant to this  Section 6  that are not ‘disability pay’ or ‘death benefits’ within the meaning of Treasury Regulations Section 1.409A-1(a)(5) (collectively, the ‘Applicable Benefits’) shall be subject to the following requirements in order to comply with Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”). The amount of any Applicable Benefits provided during one taxable year shall not affect the amount of the Applicable Benefits provided in any other taxable year, except that with respect to any Applicable Benefits that consist of the reimbursement of expenses referred to in Code Section 105(b), a limitation may be imposed on the amount of such reimbursements as described in Treasury Regulations Section 1.409A-3(i)(iv)(B). To the extent that any Applicable Benefits consist of the reimbursement of eligible expenses, such reimbursement must be made on or before the last day of the calendar year following the calendar year in which the expense was incurred, and the Employer shall not be obligated to reimburse any expense for which the Employee fails to submit an invoice or other documented reimbursement request at least thirty (30) business days before the end of the calendar year next following the calendar year in which the expense for any such reimbursement was incurred. Further, no Applicable Benefits may be liquidated or exchanged for another benefit. The Employee shall not be entitled to any compensation, vacation, fringe benefits, automobile allowance or other remuneration of any kind whatsoever from the Company.

7.Expenses. Subject to compliance with the Employer’s policies as in effect from time to time, the Employee may incur and be reimbursed by the Employer for reasonable expenses on behalf of and in furtherance of the business of the Employer and the Company. If any reimbursements under this provision are taxable to the Employee, such reimbursements shall be paid on or before the end of the calendar year following the calendar year in which the reimbursable expense was incurred, and the Employer shall not be obligated to pay any such reimbursement amount for which Employee fails to submit an invoice or other documented reimbursement request at least thirty (30) business days before the end of the calendar year next following the calendar year in which the expense was incurred. Such expenses shall be reimbursable only to the extent they were incurred during the term of the Agreement. In addition, the amount of such reimbursements that the Employer is obligated to pay in any given calendar year shall not affect the amount the Employer is obligated to pay in any other calendar year. Further, Employee may not liquidate or exchange the right to reimbursement of such expenses for any other benefits.

8.Termination. Notwithstanding the provisions of Section 1 hereof, the Term of Employment shall terminate prior to the end of the period of time specified in  Section 1  hereof, immediately upon:

(a)The death of the Employee; or

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Confidential Property of OS Management, Inc.
Amanda L. Shaw

(b)At the election of the Employer in the event of the Employee’s Disability during the Term of Employment. For purposes of this Agreement, the term “Disability” shall mean the inability of the Employee, arising out of any medically determinable physical or mental impairment, to perform the services required of the Employee hereunder for a period of (i) ninety (90) consecutive days or (ii) one hundred and twenty (120) total days during any period of three hundred and sixty-five (365) consecutive calendar days; or

(c)The existence of Cause. For purposes of this Agreement, the term “Cause” shall be defined as:

(i)    Failure of the Employee to perform the duties required of the Employee in this Agreement in a manner satisfactory to the Employer, in its sole discretion; provided, however, that the Term of Employment shall not be terminated pursuant to this subparagraph (i) unless the Employer first gives the Employee a written notice (“Notice of Deficiency”). The Notice of Deficiency shall specify the deficiencies in the Employee’s performance of the Employee’s duties. The Employee shall have a period of thirty (30) days, commencing on receipt of the Notice of Deficiency, in which to cure the deficiencies contained in the Notice of Deficiency. In the event the Employee does not cure the deficiencies to the satisfaction of the Employer, in its sole discretion, within such thirty (30) day period (or if during such thirty (30) day period the Employer determines that the Employee is not making reasonable, good faith efforts to cure the deficiencies to the satisfaction of the Employer), the Employer shall have the right to immediately terminate the Term of Employment. The provisions of this subparagraph (i) may be invoked by the Employer any number of times and cure of deficiencies contained in any Notice of Deficiency shall not be construed as a waiver of this subparagraph (i) nor prevent the Employer from issuing any subsequent Notices of Deficiency; or

(ii)    Any dishonesty by the Employee in the Employee’s dealings with the Employer or its Affiliates, the commission of fraud by the Employee, negligence in the performance of the duties of the Employee, insubordination, willful misconduct, or the conviction (or plea of guilty or nolo contendere) of the Employee of, or indictment or charge with respect to, any felony, or any other crime involving dishonesty or moral turpitude; or

(iii)    Any violation of any covenant or restriction contained in Section 9, Section 10 or Section 12  hereof; or

(iv)    Any violation of any current or future material published policy of the Employer or its Affiliates (material published policies include, but are not limited to, the Employer’s discrimination and harassment policy, management dating policy, responsible alcohol policy, insider trading policy, ethics policy and security policy);

For all purposes of this Agreement, termination for Cause shall be deemed to have occurred in the event of the Employee’s resignation when, because of existing facts and circumstances, subsequent termination for Cause can be reasonably foreseen;

or

(d)The election of the Employer in its sole discretion, for any reason or no reason.

Termination of Employment for all purposes under this Agreement will be determined to have occurred in accordance with the ‘separation from service’ requirements of Code Section 409A and the Treasury Regulations and other guidance issued thereunder, and based on whether the facts and circumstances indicate that Employer and Employee reasonably anticipated that no further services would be performed after a certain date or that the level of bona fide services Employee would perform after such date (as an employee or as an independent

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Confidential Property of OS Management, Inc.
Amanda L. Shaw

contractor) would permanently decrease to no more than 20 percent of the average level of bona fide services performed over the immediately preceding 36-month period (or actual period of service, if less).

For all purposes of this Agreement, termination for Cause shall be deemed to have occurred in the event of the Employee’s resignation when, because of existing facts and circumstances, subsequent termination for Cause can be reasonably foreseen.

In the event of termination of this Agreement pursuant to this Section 8, the Employee or the Employee’s estate, as appropriate, shall be entitled to receive (in addition to any fringe benefits payable upon death in the case of the Employee’s death) the base salary provided for herein up to and including the effective date of termination, prorated on a daily basis.

9.    Noncompetition.

(a)During Term. Except with the prior written consent of the Employer, during the Employee’s employment with the Employer, the Employee shall not, individually or jointly with others, directly or indirectly, whether for the Employee’s own account or for that of any other person or entity, engage in or own or hold any ownership interest in any person or entity engaged in a full service restaurant business, and the Employee shall not act as an officer, director, employee, partner, independent contractor, consultant, principal, agent, proprietor or in any other capacity for, nor lend any assistance (financial or otherwise) or cooperation to, any such person or entity.

(b)Post Term.

i.Restriction. During the Restricted Period, as defined in Section 9(b)(ii) below, Employee shall not individually or jointly with others, directly or indirectly, whether for the Employee’s own account or for that of any other person or entity, engage in or own or hold any ownership interest in, have any interest in or lend any assistance to, any person or entity engaged in a full table service restaurant business and that is located or intended to be located anywhere within a radius of thirty (30) miles of any full table service restaurant owned or operated by the Employer, the Company or their Affiliates or any proposed full table service restaurant to be owned or operated by any of the foregoing, and the Employee shall not act as an officer, director, employee, partner, independent contractor, consultant, principal, agent, proprietor, chef, or in any other capacity for, nor lend any assistance (financial or otherwise) or cooperation to, any such person, or entity. For purposes of this Section 9(b) , restaurants owned or operated by the Company shall include restaurants operated or owned by an affiliate of the Company, any successor entity to the Company or such affiliate, and any entity in which the Company or such affiliate has an interest, including but not limited to, an interest as a franchisor. The term “proposed restaurant” shall include all locations for which the Company, its franchisees or affiliates is conducting active, bona fide negotiations to secure a fee or leasehold interest with the intention of establishing a restaurant thereon.

ii.Restricted Period. The term “Restricted Period” shall mean the period of time commencing on termination or expiration of the Employee’s employment with the Employer and continuing for period equal to:

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Officer EA (BBI-OSI 2 entity) 2013a

Confidential Property of OS Management, Inc.
Amanda L. Shaw

 	 	
1.	One year, if:	
 	 	
a.	Employee voluntarily resigns Employee’s employment with the Employer,	
 	 	
b.	Employee’s Term of Employment is not renewed at the Employee’s election, or	
 	 	
c.	Employee’s Term of Employment is terminated by the Employer for Cause; and	

2.	The Severance Period if Employee’s employment with the Employer is terminated by the Employer other than for Cause or the Employee’s Term of Employment is not renewed at the Employer’s election. The Severance Period shall be equal to the longer of:	
 	 	
a.	the time period during which the Employee receives payments from the Employer or its Affiliates under a Severance Agreement or similar agreement; and	
 	 	
b.	the period of time used as a basis for calculating the amount of any lump sum payments made to the Employee by the Employer or its Affiliates under a Severance Agreement or similar agreement.	

(c)Limitation. Notwithstanding subsections (a) and (b) immediately above, it shall not be a violation of this  Section 9  for Employee to own a one percent (1%) or smaller interest in any corporation required to file periodic reports with the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended, or successor statute.
10.    Nondisclosure; Nonsolicitation; Nonpiracy. Except in the performance of the Employee’s duties hereunder, at no time during the Term of Employment, or at any time thereafter, shall the Employee, individually or jointly with others, for the benefit of the Employee or any third party, publish, disclose, use or authorize anyone else to publish, disclose or use any secret or confidential material or information relating to any aspect of the business or operations of the Employer, the Company or any of their Affiliates, including, without limitation, any secret or confidential information relating to the business, customers, trade or industrial practices, trade secrets, technology, recipes, product specifications, restaurant operating techniques and procedures, marketing techniques and procedures, financial data, processes, vendors and other information or know-how of the Employer, the Company or any of their Affiliates, except (i) to the extent required by law, regulation or valid subpoena, or (ii) to the extent that such information or material becomes publicly known or available through no fault of the Employee. Moreover, during the Employee’s employment with the Employer and for two (2) years thereafter, except as is the result of a broad solicitation that is not targeting employees of the Employer, the Company or any of their franchisees or Affiliates, the Employee shall not offer employment to, or hire, any employee of the Employer, the Company or any of their franchisees or Affiliates, or otherwise directly or indirectly solicit or induce any employee of the Employer, the Company or any of their franchisees or Affiliates to terminate his or her employment with the Employer, the Company or any of their franchisees or Affiliates; nor shall the Employee act as an officer, director, employee, partner, independent contractor, consultant, principal, agent, proprietor, owner or part owner, or in any other capacity, of or for any person or entity that solicits or otherwise induces any employee of the Employer, the Company or any of their franchisees or Affiliates to terminate his or her employment with the Employer, the Company or any of their franchisees or Affiliates.

11.    Company and Employer Property: Employee Duty to Return. All Employer and Company property and assets, including but not limited to products, recipes, product specifications, training materials, employee selection and testing materials, marketing and advertising materials, special event, charitable and community activity materials, customer correspondence, internal memoranda, products and designs, sales information, project files, price lists, customer and vendor lists, prospectus reports, customer or vendor information, sales literature, territory printouts, call books, notebooks, textbooks, and all other like information or

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Confidential Property of OS Management, Inc.
Amanda L. Shaw

products, including but not limited to all copies, duplications, replications, and derivatives of such information or products, now in the possession of Employee or acquired by Employee while in the employ of the Employer shall be the exclusive property of the Employer and shall be returned to the Employer no later than the date of Employee’s last day of work with the Employer.
12.    Inventions, Ideas, Processes, and Designs. All inventions, ideas, recipes, processes, programs, software and designs (including all improvements) related to the business of the Employer or the Company shall be disclosed in writing promptly to the Employer, and shall be the sole and exclusive property of the Employer, if either (i) conceived, made or used by the Employee during the course of the Employee’s employment with the Employer (whether or not actually conceived during regular business hours) or (ii) made or used by the Employee for a period of six (6) months subsequent to the termination or expiration of such employment. Any invention, idea, recipe, process, program, software or design (including an improvement) shall be deemed “related to the business of the Employer or the Company” if (i) it was made with equipment, facilities or confidential information of the Employer or the Company, (ii) results from work performed by the Employee for the Employer or the Company or (iii) pertains to the current business or demonstrably anticipated research or development work of the Employer or the Company. The Employee shall cooperate with the Employer and its attorneys in the preparation of patent and copyright applications for such developments and, upon request, shall promptly assign all such inventions, ideas, recipes, processes and designs to the Employer. The decision to file for patent or copyright protection or to maintain such development as a trade secret shall be in the sole discretion of the Employer, and the Employee shall be bound by such decision. The Employee shall provide, on the back of this Agreement, a complete list of all inventions, ideas, recipes, processes and designs if any, patented or unpatented, copyrighted or non-copyrighted, including a brief description, that the Employee made or conceived prior to the Employee’s employment with the Employer, and that, therefore, are excluded from the scope of this Agreement.

13.    Restrictive Covenants: Consideration; Non-Estoppel; Independent Agreements; and Non-Executory Agreements .  The restrictive covenants of  Section 9, Section 10  and  Section 12  of this Agreement are given and made by Employee to induce the Employer to employ the Employee and to enter into this Agreement with the Employee, and Employee hereby acknowledges that employment with the Employer is sufficient consideration for these restrictive covenants.

The restrictive covenants of Section 9, Section 10 and Section 12 of this Agreement shall be construed as agreements independent of any other provision in this Agreement, and the existence of any claim or cause of action of Employee against the Employer or the Company, whether predicated upon this Agreement or otherwise, shall not constitute a defense to the enforcement of any restrictive covenant.

The refusal or failure of the Employer or the Company to enforce any restrictive covenant of Section 9, Section 10  or  Section 12  of this Agreement (or any similar agreement) against any other employee, agent, or independent contractor, for any reason, shall not constitute a defense to the enforcement by the Employer or the Company of any such restrictive covenant, nor shall it give rise to any claim or cause of action by Employee against the Employer or the Company.

14.    Reasonableness of Restrictions; Reformation; Enforcement. The parties hereto recognize and acknowledge that the geographical and time limitations contained in  Section 9, Section 10  and  Section 12  hereof are reasonable and properly required for the adequate protection of the Employer’s and the Company’s interests. Employee acknowledges that the Company or its Affiliate is the owner or the licensee of the Trademarks, and the owner or the licensee of the restaurant operating systems. It is agreed by the parties hereto that if any portion of the restrictions contained in  Section 9, Section 10  or  Section 12  are held to be unreasonable, arbitrary, or against public policy, then the restrictions shall be considered divisible, both as to the time and to the geographical area, with each month of the specified period being deemed a separate period of time and each radius mile of the restricted territory being deemed a separate geographical area, so that the lesser period of time or geographical area shall remain effective so long as the same is not unreasonable, arbitrary, or against public policy. The parties hereto agree that in the event any court of competent jurisdiction determines the specified period or the specified

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Confidential Property of OS Management, Inc.
Amanda L. Shaw

geographical area of the restricted territory to be unreasonable, arbitrary, or against public policy, a lesser time period or geographical area that is determined to be reasonable, nonarbitrary, and not against public policy may be enforced against Employee. If Employee shall violate any of the covenants contained herein and if any court action is instituted by the Employer or the Company to prevent or enjoin such violation, then the period of time during which the Employee’s business activities shall be restricted, as provided in this Agreement, shall be lengthened by a period of time equal to the period between the date of the Employee’s breach of the terms or covenants contained in this Agreement and the date on which the decree of the court disposing of the issues upon the merits shall become final and not subject to further appeal.

In the event it is necessary for the Employer or the Company to initiate legal proceedings to enforce, interpret or construe any of the covenants contained in  Section 9, Section 10  or  Section 12  hereof, each party shall pay its own legal fees, and the prevailing party in such proceedings shall be entitled to receive from the non-prevailing party, in addition to all other remedies, all costs of such proceedings including appellate proceedings.

15.    Specific Performance. Employee agrees that a breach of any of the covenants contained in Section 9, Section 10  or  Section 12  hereof will cause irreparable injury to the Employer and the Company for which the remedy at law will be inadequate and would be difficult to ascertain and therefore, in the event of the breach or threatened breach of any such covenants, the Employer and the Company shall be entitled, in addition to any other rights and remedies it may have at law or in equity, to obtain an injunction to restrain Employee from any threatened or actual activities in violation of any such covenants. Employee hereby consents and agrees that temporary and permanent injunctive relief may be granted in any proceedings that might be brought to enforce any such covenants without the necessity of proof of actual damages, and in the event the Employer or the Company does apply for such an injunction, Employee shall not raise as a defense thereto that the Employer or the Company has an adequate remedy at law.

16.    Assignability. This Agreement and the rights and duties created hereunder, shall not be assignable or delegable by Employee. The Employer shall have the right, without Employee’s knowledge or consent, to assign this Agreement, in whole or in part and any or all of the rights and duties hereunder, including but not limited to the restrictive covenants of  Section 9, Section 10  and  Section 12  hereof to any person, including but not limited to any Affiliate of the Employer and the Company, or any successor to the Employer and the Company’s interest in the restaurants, and Employee shall be bound by such assignment. Any assignee or successor may enforce any restrictive covenant of this Agreement.

17.    Effect of Termination. For the avoidance of doubt, the termination of this Agreement or expiration of the Term of Employment, for any reason, shall not extinguish those obligations of the Employee specified in Section 9 ,  Section 10 ,  Section 12  and  Section 27 hereof.

18.    Captions; Terms. The captions of this Agreement are for convenience only, and shall not be construed to limit, define, or modify the substantive terms hereof.

19.    Acknowledgments. Employee hereby acknowledges, that the Employee has been provided with a copy of this Agreement for review prior to signing it, that the Employee has been given a full and sufficient opportunity to consider this Agreement and has been given the opportunity to have this Agreement reviewed by Employee’s attorney prior to signing it, that the Employee understands the purposes and effects of this Agreement; and that in agreeing to be bound by this Agreement the Employee has not relied on any promises or representations, express or implied, that are not set forth expressly in this Agreement; and that the Employee has been given a signed copy of this Agreement for Employee’s own records.

20.    Notices. All notices or other communications provided for herein to be given or sent to a party by another party shall be deemed validly given or sent if in writing mailed, postage prepaid, by certified United States mail, return receipt requested, or delivered by hand or consigned to a nationally recognized overnight courier, and addressed to the parties at their addresses hereinabove set forth or at their last known address. Any party may give

8
Officer EA (BBI-OSI 2 entity) 2013a

Confidential Property of OS Management, Inc.
Amanda L. Shaw

notice to the other party at any time, by the method specified above, of a change in the address at which, or the person to whom, notice is to be addressed, which change of address shall be effective if notice thereof is actually received.

21.    Severability. Each section, subsection, and lesser section of this Agreement constitutes a separate and distinct undertaking, covenant, or provision hereof. In the event that any provision of this Agreement shall be determined to be invalid or unenforceable, such provision shall be deemed limited by construction in scope and effect to the minimum extent necessary to render the same valid and enforceable, and, in the event such a limiting construction is impossible, such invalid or unenforceable provision shall be deemed severed from this Agreement, but every other provision of this Agreement shall remain in full force and effect.

22.    Waiver. The failure of a party to enforce any term, provision, or condition of this Agreement or failure to insist on strict performance of a covenant hereunder or any obligation hereunder, at any time or times shall not be deemed a waiver of that term, provision, or condition for the future, nor shall any specific waiver of a term, provision, or condition at one time be deemed a deemed a waiver of such term, provision, or condition for any future time or times.

23.    Parties. This Agreement shall be binding upon, and shall inure to the benefit of, the parties hereto, their legal representatives, executors, administrators, heirs, and proper successors or permitted assigns, as the case may be.

24.    Governing Law. This Agreement takes effect upon its acceptance and execution by the Employer. The validity, interpretation, and performance of this Agreement shall be governed, interpreted, and construed in accordance with the laws of the State of Florida without giving effect to the principles of comity or conflicts of laws thereof.

25.    Consent to Personal Jurisdiction and Venue. Employee hereby consents to personal jurisdiction and venue, for any action brought by the Employer or the Company arising out of a breach or threatened breach of this Agreement or out of the relationship established by this Agreement, exclusively in the United States District Court for the Middle District of Florida, Tampa Division, or in the Circuit Court in and for Hillsborough County, Florida; and, if applicable, the federal and state courts in any jurisdiction where the Employee is employed or resides; the Employee hereby agrees that any action brought by Employee, alone or in combination with others, against the Employer or the Company, whether arising out of this Agreement or otherwise, shall be brought exclusively in the United States District Court for the Middle District of Florida, Tampa Division, or in the Circuit Court in and for Hillsborough County, Florida.

26.    Affiliate. Whenever used in this Agreement, the term “Affiliate” shall mean, with respect to any entity, all persons or entities directly or indirectly controlled by Bloomin’ Brands, Inc., where control may be by management authority, contract or equity interest.

27.    Cooperation. Employee shall cooperate fully with all reasonable requests for information and participation by the Employer and the Company, its agents, or its attorneys, in prosecuting or defending claims, suits, and disputes brought on behalf of or against the Employer and the Company and in which Employee is involved or about which Employee has knowledge.

9
Officer EA (BBI-OSI 2 entity) 2013a

Confidential Property of OS Management, Inc.
Amanda L. Shaw

28    Internal Revenue Code Section 409A Compliance.

a.    Unless otherwise expressly provided, any payment of compensation by Employer to the Employee, whether pursuant to this Agreement or otherwise, shall be made within two and one-half months (2½ months) after the end of the later of the calendar year or the Employer’s fiscal year in which the Employee’s right to such payment vests (i.e., is not subject to a substantial risk of forfeiture for purposes of Internal Revenue Code Section 409A (“Code Section 409A”)). Such amounts shall not be subject to the requirements of subsection (b) below applicable to “nonqualified deferred compensation.”

b.    All payments of “nonqualified deferred compensation” (within the meaning of Code Section 409A are intended to comply with the requirements of Code Section 409A, and shall be interpreted in accordance therewith. No party individually or in combination may accelerate, offset or assign any such deferred payment, except in compliance with Code Section 409A. No amount shall be paid prior to the earliest date on which it is permitted to be paid under Code Section 409A and Employee shall have no discretion with respect to the timing of payments except as permitted under Section 409A. In the event that the Employee is determined to be a “specified employee” (as defined and determined under Code Section 409A) of Employer or any of its Affiliates at a time when its stock is deemed to be publicly traded on an established securities market, payments determined to be “nonqualified deferred compensation” payable by reason of separation from service shall be paid no earlier than (i) the first day of the seventh (7th) calendar month commencing after such termination of employment, or (ii) the Employee’s death, consistent with and to the extent necessary to meet the requirements Code Section 409A without the imposition of excise taxes.  Any payment delayed by reason of the prior sentence shall be paid out in a single lump sum on the earliest date permitted under Code Section 409A in order to catch up to the original payment schedule.  Notwithstanding anything herein to the contrary, no amendment may be made to this Agreement if it would cause the Agreement or any payment hereunder not to be in compliance with Code Section 409A.

c.    The Employee shall be responsible for the payment of all taxes applicable to payments or benefits received from the Employer. It is the intent of the Employer that the provisions of this Agreement and all other plans and programs sponsored by the Employer be interpreted to comply in all respects with Code Section 409A, however, the Employer shall have no liability to the Employee, or any successor or beneficiary thereof, in the event taxes, penalties or excise taxes may ultimately be determined to be applicable to any payment or benefit received by the Employee or any successor or beneficiary thereof.

29.    Amendments. No change, modification, or termination of any of the terms, provisions, or conditions of this Agreement shall be effective unless made in writing and signed or initialed by all signatories to this Agreement.

30.    WAIVER OF JURY TRIAL. ALL PARTIES TO THIS AGREEMENT KNOW AND UNDERSTAND THAT THEY HAVE A CONSTITUTIONAL RIGHT TO A JURY TRIAL. THE PARTIES ACKNOWLEDGE THAT ANY DISPUTE OR CONTROVERSY THAT MAY ARISE OUT OF THIS AGREEMENT WILL INVOLVE COMPLICATED AND DIFFICULT FACTUAL AND LEGAL ISSUES.

THE PARTIES HEREBY WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE CONTEMPLATED TRANSACTIONS, WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE. THE PARTIES AGREE THAT ANY OF THEM MAY FILE A COPY OF THIS PARAGRAPH WITH ANY COURT AS WRITTEN EVIDENCE OF THE KNOWING, VOLUNTARY AND BARGAINED-FOR AGREEMENT AMONG THE PARTIES IRREVOCABLY TO WAIVE TRIAL BY JURY AND THAT ANY PROCEEDING WHATSOEVER BETWEEN THEM RELATING TO THIS AGREEMENT OR ANY OF THE CONTEMPLATED

10
Officer EA (BBI-OSI 2 entity) 2013a

Confidential Property of OS Management, Inc.
Amanda L. Shaw

TRANSACTIONS SHALL INSTEAD BE TRIED IN A COURT OF COMPETENT JURISDICTION BY A JUDGE SITTING WITHOUT A JURY.

THE PARTIES INTEND THAT THIS WAIVER OF THE RIGHT TO A JURY TRIAL BE AS BROAD AS POSSIBLE. BY THEIR SIGNATURES BELOW, THE PARTIES PROMISE, WARRANT AND REPRESENT THAT THEY WILL NOT PLEAD FOR, REQUEST OR OTHERWISE SEEK TO HAVE A JURY TO RESOLVE ANY AND ALL DISPUTES THAT MAY ARISE BY, BETWEEN OR AMONG THEM.

31.    Entire Agreement; Counterparts. This Agreement constitutes the entire agreement between the parties hereto concerning the subject matter hereof, and supersedes all prior memoranda, correspondence, conversations, negotiations and agreements. This Agreement may be executed in several identical counterparts that together shall constitute but one and the same Agreement.

IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first written above.

 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	“EMPLOYEE”	 	 	
/s/ Sherilyn A. Kelly	 	 	/s/ Amanda L. Shaw	 	 	
Witness	 	 	AMANDA L. SHAW	 	 	
 	 	 	 	 	 	 	 	
Sherilyn A. Kelly	 	 	 	 	 	 	 	
Printed name of witness	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	
/s/ Phil Pace	 	 	 	 	 	 	 	
Witness	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	
Phil Pace	 	 	 	 	 	 	 	
Printed name of witness	 	 	 	 	 	 	 	
 	 	 	 	 	“COMPANY”	 	 	 	
 	 	 	 	 	 	 	 	 	 	
Attest:	 	 	 	BLOOMIN’ BRANDS, INC., a Delaware corporation	 	
 	 	 	 	 	 	 	 	 	 	
By:	/s/ Joseph J. Kadow	 	By:	/s/ Elizabeth A. Smith	 	
 	JOSEPH J. KADOW, Secretary	 	 	ELIZABETH A. SMITH, Chief Executive Officer	 	
 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	“EMPLOYER”	 	 	 	
 	 	 	 	 	 	 	 	 	 	
Attest:	 	 	 	OS MANAGEMENT, INC., Florida corporation	 	
 	 	 	 	 	 	 	 	 	 	
By:	/s/ Kelly Lefferts	 	By:	/s/ Joseph J. Kadow	 	
 	KELLY LEFFERTS, Assistant Secretary	 	 	JOSEPH J. KADOW, Chief Legal Officer	 	

11
Officer EA (BBI-OSI 2 entity) 2013a

Exhibit 10.55

November 1, 2013

Patrick Murtha

Dear Pat,

This letter agreement confirms the verbal offer extended to you to join Bloomin’ Brands, Inc. (the “Company”) as Executive Vice President and President, International, reporting directly to me. Your start date will be November, 11 2013. The terms of your employment will be:

You will be employed by a subsidiary of the Company (the “Employer”) and will be paid an annual salary of $450,000.00 payable in equal bi-weekly installments of $17,307.69.

You will be also eligible to participate in the Company’s annual bonus program and your initial target bonus will be 85% of your base salary based on both Company performance against objectives as set forth in the Company bonus program and individual performance. Your bonus payout for the 2013 calendar year will be pro-rated to cover the period from your starting date until December 31, 2013.
 
The Company will issue you a one-time grant of 175,000 stock options. This grant will have standard vesting of four years contingent on continued employment with Bloomin’ Brands. The details of the program will be provided to you separately. All grants are subject to the terms of our 2012 Equity Plan and our standard award agreement. Our standard equity agreement includes a “double trigger” provision to protect you in the event of a change-in-control.

This position is also eligible for a Tier 4 relocation benefit as outlined in the Bloomin’ Brands relocation policy. As part of your relocation benefits you will be entitled to up to 6 months of temporary living. Should you terminate your employment or be terminated for cause within one year of your start date, you will be liable for repayment of all relocation costs and any gross-up payments made by the Company as outlined in the Relocation Repayment Agreement.

You will be eligible to participate in the following benefits as applicable and in accordance with the terms of Company policy:
 	 	
•	Medical Benefits Plan	
 	 	
•	Annual Executive Medical Check-Up	
 	 	
•	Salaried Short-Term Disability Insurance	
 	 	
•	Salaried Long-Term Disability Insurance	
 	 	
•	Company Paid Group Term Life Insurance	
 	 	
•	Company Paid Accidental Death and Dismemberment	

•Dental Benefits Plan
•Vision Benefits Plan
•Non-Qualified Deferred Compensation Plan
•Comp Meal Benefit Program

In the ordinary course of business, pay and benefit plans continue to evolve as business needs and laws change. To the extent the Company determines it to be necessary or desirable to change or eliminate any of the plans or programs in which you participate, such changes will apply to you as they do to other similarly situated employees.

As a condition of your employment, please note the following:

While it is our sincere hope and belief that our relationship will be mutually beneficial, Bloomin’ Brands does not offer employment for a specified term. Any statements made to you in this letter and in meetings should not be construed in any manner as a proposed contract for any such term. Both you and Bloomin’ Brands may terminate employment at any time, with or without prior notice, for any or no reason, and with or without cause.

Restrictive Covenant - Non-competition

1. During Employment. You will devote one hundred percent (100%) of your full business time, attention, energies, and effort to the business affairs of the Employer and the Company. Except with the prior written consent of the Employer, during the your employment with the Company or the Employer, the you shall not, individually or jointly with others, directly or indirectly, whether for the your own account or for that of any other person or entity, engage in or own or hold any ownership interest in any person or entity engaged in a full service restaurant business, and the you shall not act as an officer, director, employee, partner, independent contractor, consultant, principal, agent, proprietor or in any other capacity for, nor lend any assistance (financial or otherwise) or cooperation to, any such person or entity. You shall not serve on the board of directors or advisory committee of any other company without the prior consent of the Employer, which consent shall not be unreasonably withheld.

2. Post Term. Commencing on termination your employment with the Employer, you shall not, individually or jointly with others, directly or indirectly, whether for your own account or for that of any other person or entity, engage in or own or hold any ownership interest in any person or entity engaged in a full table service restaurant business and that is located or intended to be located anywhere within a radius of thirty (30) miles of any full table service restaurant owned or operated by the Employer, its subsidiaries, franchisees or affiliates, or any affiliates of any of the foregoing, or any proposed full table service restaurant to be owned or operated by any of the foregoing, and you shall not act as an officer, employee, partner, independent contractor, consultant, principal, agent, proprietor or in any other capacity for, nor lend any assistance (financial or otherwise) or cooperation to, any such person or entity for the time period specified below:

(a) If your employment with the Employer ends for any other reason other than your voluntary resignation, then for a continuous period equal to the period of time used for calculating the amount of severance paid to you upon termination, if any; or

(b) If your employment with the Employer ends as a result of your voluntary resignation or termination by the Employer for Cause (as defined on Schedule 1), for a continuous period of one (1) year.

The restriction in this paragraph 2, shall not prohibit you from serving, post termination, on the board of directors of any company regardless of the business in which such company is engaged.

For purposes of this Non-competition clause, restaurants owned or operated by the Employer shall include all restaurants owned or operated by the Employer, its subsidiaries, franchisees or affiliates and any successor entity to the Employer, its subsidiaries, franchisees or affiliates, and any entity in which the Employer, its subsidiaries or any of their affiliates has an interest, including but not limited to, an interest as a franchisor. The term “proposed restaurant” shall include all locations for which the Employer, or its franchisees or affiliates is conducting active, bona fide negotiations to secure a fee or leasehold interest with the intention of establishing a restaurant thereon.

3. Limitation. It shall not be a violation of this Non-competition clause for Employee to own a one percent (1%) or smaller interest in any corporation required to file periodic reports with the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended, or successor statute.
Restrictive Covenant - Non-disclosure; Non-solicitation; Non-piracy
Except in the performance of the your duties hereunder, at no time during your employment with the Company or the Employer, or at any time thereafter, shall you, individually or jointly with others, for your benefit of or for the benefit of any third party, publish, disclose, use or authorize anyone else to publish, disclose or use any secret or confidential material or information relating to any aspect of the business or operations of the Employer, the Company or any of their affiliates, including, without limitation, any secret or confidential information relating to the business, customers, trade or industrial practices, trade secrets, technology, recipes, product specifications, restaurant operating techniques and procedures, marketing techniques and procedures, financial data, processes, vendors and other information or know-how of the Employer, the Company or any of their affiliates, except (i) to the extent required by law, regulation or valid subpoena, or (ii) to the extent that such information or material becomes publicly known or available through no fault of your own.
Moreover, during your employment with the Employer and for two (2) years thereafter, except as is the result of a broad solicitation that is not targeting employees of the Employer, the Company or any of their franchisees or affiliates, you shall not offer employment to, or hire, any employee of the Employer, the Company or any of their franchisees or affiliates, or otherwise directly or indirectly solicit or induce any employee of the Employer, the Company or any of their franchisees or affiliates to terminate his or her employment with the Employer, the Company or any of their franchisees or affiliates; nor shall you act as an officer, director, employee, partner, independent contractor, consultant, principal, agent, proprietor, owner or part owner, or in any other capacity, of or for any person or entity that solicits or otherwise induces any employee of the Employer, the Company or any of their franchisees or affiliates to terminate his or her employment with the Employer, the Company or any of their franchisees or affiliates.

Restrictive Covenant - Company and Employer Property: Duty to Return

All Employer and Company property and assets, including but not limited to products, recipes, product specifications, training materials, employee selection and testing materials, marketing and advertising materials, special event, charitable and community activity materials, customer correspondence, internal memoranda, products and designs, sales information, project files, price lists, customer and vendor lists, prospectus reports, customer or vendor information, sales literature, territory printouts, call books, notebooks, textbooks, and all other like information or products, including but not limited to all copies, duplications, replications, and derivatives of such information or products, now in your possession or acquired by you while in the employ of the Employer shall be the exclusive property of the Employer and shall be returned to the Employer no later than the date of your last day of work with the Employer.

Restrictive Covenant - Inventions, Ideas, Processes, and Designs

All inventions, ideas, recipes, processes, programs, software and designs (including all improvements) related to the business of the Employer or the Company shall be disclosed in writing promptly to the Employer, and shall be the sole and exclusive property of the Employer, if either (i) conceived, made or used by you during the course of the your employment with the Employer (whether or not actually conceived during regular business hours) or (ii) made or used by you for a period of six (6) months subsequent to the termination or expiration of such employment. Any invention, idea, recipe, process, program, software or design (including an improvement) shall be deemed “related to the business of the Employer or the Company” if (i) it was made with equipment, facilities or confidential information of the Employer or the Company, (ii) results from work performed by you for the Employer or the Company or (iii) pertains to the current business or demonstrably anticipated research or development work of the Employer or the Company. You shall cooperate with the Employer and its attorneys in the preparation of patent and copyright applications for such developments and, upon request, shall promptly assign all such inventions, ideas, recipes, processes and designs to the Employer. The decision to file for patent or copyright protection or to maintain such development as a trade secret shall be in the sole discretion of the Employer, and you shall be bound by such decision. You shall provide, on the back of this Agreement, a complete list of all inventions, ideas, recipes, processes and designs if any, patented or unpatented, copyrighted or non-copyrighted, including a brief description, that you made or conceived prior to your employment with the Employer, and that, therefore, are excluded from the scope of the employment with the Employer.

The restrictive covenants contained in this agreement are given and made by you to induce the Employer to employ you and to enter into this Agreement with you, and you hereby acknowledge that employment with the Employer is sufficient consideration for these restrictive covenants. The restrictive covenants shall be construed as agreements independent of any other provision in this Agreement, and the existence of any claim or cause of action you may have against the Employer or the Company, whether predicated upon this Agreement or otherwise, shall not constitute a defense to the enforcement of any restrictive covenant. The refusal or failure of the Employer or the Company to enforce any restrictive covenant of this

agreement (or any similar agreement) against any other employee, agent, or independent contractor, for any reason, shall not constitute a defense to the enforcement by the Employer or the Company of any such restrictive covenant, nor shall it give rise to any claim or cause of action by you against the Employer or the Company.

You agree that a breach of any of the restrictive covenants contained in this agreement will cause irreparable injury to the Employer and the Company for which the remedy at law will be inadequate and would be difficult to ascertain and therefore, in the event of the breach or threatened breach of any such covenants, the Employer and the Company shall be entitled, in addition to any other rights and remedies it may have at law or in equity, to obtain an injunction to restrain you from any threatened or actual activities in violation of any such covenants. You hereby consent and agree that temporary and permanent injunctive relief may be granted in any proceedings that might be brought to enforce any such covenants without the necessity of proof of actual damages, and in the event the Employer or the Company does apply for such an injunction, you shall not raise as a defense thereto that the Employer or the Company has an adequate remedy at law.

For the avoidance of doubt, the termination of this agreement for any reason, shall not extinguish your obligations specified in these restrictive covenants.

ALL PARTIES TO THIS AGREEMENT KNOW AND UNDERSTAND THAT THEY HAVE A CONSTITUTIONAL RIGHT TO A JURY TRIAL. THE PARTIES ACKNOWLEDGE THAT ANY DISPUTE OR CONTROVERSY THAT MAY ARISE OUT OF THIS AGREEMENT WILL INVOLVE COMPLICATED AND DIFFICULT FACTUAL AND LEGAL ISSUES.

THE PARTIES HEREBY WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE CONTEMPLATED TRANSACTIONS, WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE. THE PARTIES AGREE THAT ANY OF THEM MAY FILE A COPY OF THIS PARAGRAPH WITH ANY COURT AS WRITTEN EVIDENCE OF THE KNOWING, VOLUNTARY AND BARGAINED-FOR AGREEMENT AMONG THE PARTIES IRREVOCABLY TO WAIVE TRIAL BY JURY AND THAT ANY PROCEEDING WHATSOEVER BETWEEN THEM RELATING TO THIS AGREEMENT OR ANY OF THE CONTEMPLATED TRANSACTIONS SHALL INSTEAD BE TRIED IN A COURT OF COMPETENT JURISDICTION BY A JUDGE SITTING WITHOUT A JURY.

THE PARTIES INTEND THAT THIS WAIVER OF THE RIGHT TO A JURY TRIAL BE AS BROAD AS POSSIBLE. BY THEIR SIGNATURES BELOW, THE PARTIES PROMISE, WARRANT AND REPRESENT THAT THEY WILL NOT PLEAD FOR, REQUEST OR OTHERWISE SEEK TO HAVE A JURY TO RESOLVE ANY AND ALL DISPUTES THAT MAY ARISE BY, BETWEEN OR AMONG THEM.

You shall be responsible for the payment of all taxes applicable to payments or benefits received from the Employer or the Company. It is the intent of the Employer and the Company that the provisions of this agreement and all other plans and programs sponsored by the Employer and the Company be interpreted to comply in all respects with Internal Revenue Code Section 409A,

however, the Employer and the Company shall have no liability to you, or any of your successors or beneficiaries, in the event taxes, penalties or excise taxes may ultimately be determined to be applicable to any payment or benefit received by you or your successors or beneficiaries.

The validity, interpretation, and performance of this agreement shall be governed, interpreted, and construed in accordance with the laws of the State of Florida without giving effect to the principles of comity or conflicts of laws thereof.

This letter constitutes the full commitments which have been extended to you. However, this does not constitute a contract of employment for any period of time. Should you have any questions regarding these commitments or your ability to conform to Bloomin’ Brands policies and procedures, please let me know immediately.

By signing this offer, you indicate your acceptance of our offer. Please keep one original copy of this offer letter for your personal files.

We look forward to having you join us as a member of our executive team. This signed offer
letter and any accompanying documentation must be returned to Pablo Brizi, Group VP -
Human Resources by fax at 813-387-8466 or scanned at pablobrizi@bloominbrands.com.

Sincerely,

/s/ Liz Smith
Liz Smith
Chief Executive Officer and Chairman of the Board, Bloomin’ Brands, Inc

I accept the above offer to be employed by Bloomin’ Brands, Inc and I understand the terms as set forth above.

 	
 	 	 	 	 	
/s/ Patrick Murtha	 	11/4/2013	 	 	
Patrick Murtha	 	Date	 	 	

Schedule 1

“Cause” shall be defined as:

1.Your failure to perform the duties required of you in a manner satisfactory to the Employer, in its sole discretion after the Employer follows the following procedures: (a) the Employer gives you a written notice (“Notice of Deficiency”) which shall specify the deficiencies in your performance of duties; (b) you shall have a period of thirty (30) days, commencing on receipt of the Notice of Deficiency, in which to cure the deficiencies contained in the Notice of Deficiency; and (c) in the event you do not cure the deficiencies to the satisfaction of the Employer, in its sole discretion, within such thirty (30) day period (or if during such thirty (30) day period the Employer determines that you are not making reasonable, good faith efforts to cure the deficiencies to the satisfaction of the Employer), the Employer shall have the right to immediately terminate your employment for Cause. The provisions of this paragraph (1) may be invoked by the Employer any number of times and cure of deficiencies contained in any Notice of Deficiency shall not be construed as a waiver of this paragraph (1) nor prevent the Employer from issuing any subsequent Notices of Deficiency; or

2.Any dishonesty by you in the your dealings with the Company, the Employer or their affiliates; your commission of fraud, negligence in the performance of your duties; insubordination; willful misconduct; or your conviction (or plea of guilty or nolo contendere), indictment or charge with respect to, any felony, or any other crime involving dishonesty or moral turpitude; or

3.Any violation of the restrictive covenants of this agreement or

4.Any violation of any current or future material published policy of the Employer or its Affiliates (material published policies include, but are not limited to, the Employer’s discrimination and harassment policy, management dating policy, responsible alcohol policy, insider trading policy, ethics policy and security policy); or

5.For all purposes of this Agreement, termination for Cause shall be deemed to have occurred in the event of the Employee’s resignation when, because of existing facts and circumstances, subsequent termination for Cause can be reasonably foreseen.

Exhibit 21.1

 	 	
SUBSIDIARY NAME	STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION	
Annapolis Outback, Inc.	MD	
Bel Air Outback, Inc.	MD	
BFG Alabama Services, Ltd	FL	
BFG Arkansas Services, Ltd	FL	
BFG Colorado Services, Ltd	FL	
BFG Florida Services, Ltd	FL	
BFG Georgia Services, Ltd	FL	
BFG Indiana Services, Limited Partnership	FL	
BFG Louisiana Services, Ltd	FL	
BFG Maryland Services, Ltd	FL	
BFG Michigan Services, Ltd	FL	
BFG Mississippi Services, Limited Partnership	FL	
BFG NEBRASKA, INC.	FL	
BFG New Jersey Services, Limited Partnership	FL	
BFG New York Services, Limited Partnership	FL	
BFG North Carolina Services, Ltd	FL	
BFG Oklahoma, Inc.	FL	
BFG Pennsylvania Services, Ltd	FL	
BFG South Carolina Services, Ltd	FL	
BFG Tennessee Services, Ltd	FL	
BFG Virginia Services, Limited Partnership	FL	
BFG/CIP of Iselin Partnership	FL	
BFG/FPS of Marlton Partnership	FL	
Bloom Brands Holdings I C.V.	NL	
Bloom Brands Holdings II C.V.	NL	
Bloom Group Holdings B.V.	NL	
Bloom No.1 Limited	HK	
Bloom No.2 Limited	HK	
Bloom Participaçơes, Ltda.	BR	
Bloomin’ Brands Gift Card Services, LLC	FL	
Bloomin’ Brands, Inc.	DE	
Bloomin Canada Inc.	ON	
Bloomin Hong Kong Limited	HK	
Bloomin Korea Holding	CI	
Bloomin Puerto Rico L.P.	CI	
Bonefish Beverages, LLC	TX	
Bonefish Brandywine, LLC	MD	
Bonefish Designated Partner, LLC	DE	
Bonefish Grill Gulf Coast of Louisiana, LLC	FL	
Bonefish Grill of Baltimore County, LLC	MD	
Bonefish Grill of Florida, LLC	DE	
Bonefish Grill of Florida Designated Partner, LLC	DE	
Bonefish Grill, LLC	FL	
Bonefish Holdings, LLC	TX	
Bonefish Kansas Designated Partner, LLC	DE	
            (CONTINUED…)

 	
 	 	
SUBSIDIARY NAME	STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION	
Bonefish Kansas LLC	KS	
Bonefish Baltimore County, LLC	MD	
Bonefish of Bel Air, LLC	MD	
Bonefish of Gaithersburg, Inc.	MD	
Bonefish/Anne Arundel, Inc.	MD	
Bonefish/Asheville, Limited Partnership	FL	
Bonefish/Carolinas, Limited Partnership	FL	
Bonefish/Centreville, Limited Partnership	FL	
Bonefish/Columbus-I, Limited Partnership	FL	
Bonefish/Crescent Springs, Limited Partnership	FL	
Bonefish/Fredericksburg, Limited Partnership	FL	
Bonefish/Greensboro, Limited Partnership	FL	
Bonefish/Gulf Coast, Limited Partnership	FL	
Bonefish/Hyde Park, Limited Partnership	FL	
Bonefish/Newport News, Limited Partnership	FL	
Bonefish/Richmond, Limited Partnership	FL	
Bonefish/South Florida-I, Limited Partnership	FL	
Bonefish/Southern Virginia, Limited Partnership	FL	
Bonefish/Southern, Limited Partnership	FL	
Bonefish/Tallahassee, Limited Partnership	FL	
Bonefish/Virginia, Limited Partnership	FL	
Boomerang Air, Inc.	FL	
Carrabba’s Designated Partner, LLC	DE	
Carrabba’s Italian Grill of Howard County, Inc.	MD	
Carrabba’s Italian Grill of Overlea, Inc.	MD	
Carrabba’s Italian Grill, LLC	FL	
Carrabba’s Kansas Designated Partner, LLC	DE	
Carrabba’s Kansas LLC	KS	
Carrabba’s of Bowie, LLC	MD	
Carrabba’s of Germantown, Inc.	MD	
Carrabba’s of Ocean City, Inc.	MD	
Carrabba’s of Pasadena, Inc.	MD	
Carrabba’s of Waldorf, Inc.	MD	
Carrabba’s/Birmingham 280, Limited Partnership	FL	
Carrabba’s/Cool Springs, Limited Partnership	FL	
Carrabba’s/DC-I, Limited Partnership	FL	
Carrabba’s/Deerfield Township, Limited Partnership	FL	
Carrabba’s/Green Hills, Limited Partnership	FL	
Carrabba’s/Lexington, Limited Partnership	FL	
Carrabba’s/Louisville, Limited Partnership	FL	
Carrabba’s/Metro, Limited Partnership	FL	
Carrabba’s/Miami Beach, Limited Partnership	FL	
Carrabba’s/Michigan, Limited Partnership	FL	
Carrabba’s/Mid Atlantic-I, Limited Partnership	FL	
Carrabba’s/Montgomery, Limited Partnership	FL	
(CONTINUED…)

 	
 	 	
SUBSIDIARY NAME	STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION	
Carrabba’s/Rocky Top, Limited Partnership	FL	
CIGI Alabama Services, Ltd	FL	
CIGI Arizona Services, Limited Partnership	FL	
CIGI Beverages of Texas, LLC	TX	
CIGI Florida Services, Ltd	FL	
CIGI Georgia Services, Ltd	FL	
CIGI Holdings, LLC	TX	
CIGI Illinois Services, Ltd	FL	
CIGI Kentucky Services, Ltd	FL	
CIGI Louisiana Services, Ltd	FL	
CIGI Maryland Services, Ltd	FL	
CIGI Michigan Services, Ltd	FL	
CIGI Nebraska, Inc.	FL	
CIGI Nevada Services, Limited Partnership	FL	
CIGI New Jersey Services, Limited Partnership	FL	
CIGI New York Services, Limited Partnership	FL	
CIGI North Carolina Services, Ltd	FL	
CIGI Ohio Services, Ltd	FL	
CIGI Oklahoma, Inc.	FL	
CIGI Pennsylvania Services, Ltd	FL	
CIGI South Carolina Services, Ltd	FL	
CIGI Tennessee Services, Ltd	FL	
CIGI Texas Services, Ltd	FL	
CIGI Virginia Services, Limited Partnership	FL	
CIGI/BFG of East Brunswick Partnership	FL	
CLS Restaurantes Brasília Ltda	BZ	
CLS Restaurantes do Sul Ltda	BZ	
CLS Restaurantes Rio de Janeiro Ltda	BZ	
CLS Săo Paulo, Ltda.	BZ	
Dutch Holdings I, LLC	FL	
Fleming’s Beverages, Inc.	TX	
Fleming’s of Baltimore, LLC	MD	
Fleming’s/Northeast-I, Limited Partnership	FL	
Fleming’s/Outback Holdings, Inc.	TX	
FPS Arizona Services, Limited Partnership	FL	
FPS California Services, Limited Partnership	FL	
FPS Connecticut Services, Limited Partnership	FL	
FPS Florida Services, Ltd	FL	
FPS Illinois Services, Ltd	FL	
FPS Indiana Services, Limited Partnership	FL	
FPS NEBRASKA, INC.	FL	
FPS Nevada Services, Limited Partnership	FL	
FPS New Jersey Services, Limited Partnership	FL	
FPS North Carolina Services, Ltd	FL	
FPS Oklahoma, Inc.	FL	
(CONTINUED…)

 	
 	 	
SUBSIDIARY NAME	STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION	
FPS Rhode Island Services, Limited Partnership	FL	
FPS Texas Services, Ltd	FL	
FPS Utah Services, Ltd	FL	
FPS Virginia Services, Limited Partnership	FL	
Frederick Outback, Inc.	MD	
Hagerstown Outback, Inc.	MD	
New Private Restaurant Properties, LLC	DE	
New PRP Mezz 1, LLC	DE	
New PRP Mezz 2, LLC	DE	
OBTex Holdings, LLC	TX	
OCC Florida (A La Catering) Services, Ltd	FL	
Ocean City Outback, Inc.	MD	
OS Asset, Inc.	FL	
OS Kanto Limited	JN	
OS Management, Inc.	FL	
OS Mortgage Holdings, Inc.	DE	
OS Niagara Falls, LLC	FL	
OS Pacific, LLC	FL	
OS Prime, LLC	FL	
OS Realty, LLC	FL	
OS Restaurant Services, LLC	FL	
OS Southern, LLC	FL	
OS Tropical, LLC	FL	
OSF Alabama Services, Ltd	FL	
OSF Arizona Services, Limited Partnership	FL	
OSF Arkansas Services, Ltd	FL	
OSF Colorado Services, Ltd	FL	
OSF Connecticut Services, Limited Partnership	FL	
OSF Delaware Services, Ltd	FL	
OSF Florida Services, Ltd	FL	
OSF Georgia Services, Ltd	FL	
OSF Illinois Services, Ltd	FL	
OSF Indiana Services, Limited Partnership	FL	
OSF Kentucky Services, Ltd	FL	
OSF Louisiana Services, Ltd	FL	
OSF Maryland Services, Ltd	FL	
OSF Massachusetts Services, Ltd	FL	
OSF Michigan Services, Ltd	FL	
OSF Minnesota Services, Limited Partnership	FL	
OSF Missouri Services, Limited Partnership	FL	
OSF Nebraska, Inc.	FL	
OSF Nevada Services, Limited Partnership	FL	
OSF New Jersey Services, Limited Partnership	FL	
OSF New Mexico Services, Limited Partnership	FL	
OSF New York Services, Limited Partnership	FL	
(CONTINUED…)

 	
 	 	
SUBSIDIARY NAME	STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION	
OSF North Carolina Services, Ltd	FL	
OSF Ohio Services, Ltd	FL	
OSF Oklahoma Services, Limited Partnership	FL	
OSF Oklahoma, Inc.	FL	
OSF Pennsylvania Services, Ltd	FL	
OSF South Carolina Services, Ltd	FL	
OSF Tennessee Services, Ltd	FL	
OSF Texas Services, Ltd	FL	
OSF Utah Services, Ltd	FL	
OSF Virginia Services, Limited Partnership	FL	
OSF West Virginia Services, Ltd	FL	
OSF Wisconsin Services, Ltd	FL	
OSF/BFG of Deptford Partnership	FL	
OSF/BFG of Lawrenceville Partnership	FL	
OSF/CIGI of Evesham Partnership	FL	
OSI China Venture	CI	
OSI Co-Issuer, Inc.	DE	
OSI/Fleming’s, LLC	DE	
OSI HoldCo I, Inc.	DE	
OSI HoldCo II, Inc.	DE	
OSI HoldCo, Inc.	DE	
OSI International, LLC	FL	
OSI Restaurant Partners, LLC	DE	
OSIN Hawaii Services, Ltd	FL	
OSIN Puerto Rico Services, Ltd	FL	
OSSIVT, LLC	VT	
Outback & Carrabba’s of New Mexico, Inc.	NM	
Outback Alabama, Inc.	AL	
Outback Beverages of Texas, LLC	TX	
Outback Catering Designated Partner, LLC	DE	
Outback Catering, Inc.	FL	
Outback Designated Partner, LLC	DE	
Outback International Designated Partner, LLC	DE	
Outback Kansas Designated Partner, LLC	DE	
Outback Kansas LLC	KS	
Outback of Aspen Hill, Inc.	MD	
Outback of Calvert County, Inc.	MD	
Outback of Germantown, Inc.	MD	
Outback of La Plata, Inc.	MD	
Outback of Waldorf, Inc.	MD	
Outback Philippines Development Holdings Corporation	PI	
Outback Puerto Rico Designated Partner, LLC	DE	
Outback Steakhouse America S.A. de C.V.	MX	
Outback Steakhouse Brasil Participaçơes Ltda.	BZ	
Outback Steakhouse Empresarial S.A. de C.V.	MX	
(CONTINUED…)

 	
 	 	
SUBSIDIARY NAME	STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION	
Outback Steakhouse International Investments, Co.	CI	
Outback Steakhouse International Services, LLC	FL	
Outback Steakhouse International, L.P.	GA	
Outback Steakhouse International, LLC	FL	
Outback Steakhouse Japan Co., Ltd.	JN	
Outback Steakhouse Korea, Ltd. (f/k/a/ Aussie Chung Ltd.)	KO	
Outback Steakhouse Mexicana S.A. de C.V.	MX	
Outback Steakhouse of Bowie, Inc.	MD	
Outback Steakhouse of Canton, Inc.	MD	
Outback Steakhouse of Florida, LLC	FL	
Outback Steakhouse of Howard County, Inc.	MD	
Outback Steakhouse of St. Mary’s County, Inc.	MD	
Outback Steakhouse Restaurantes Brasil, S.A. (f/k/a Bloom Holdco)	BZ	
Outback Steakhouse West Virginia, Inc.	WV	
Outback Steakhouse-NYC, Ltd.	FL	
Outback/Carrabba’s Partnership	FL	
Outback/DC, Limited Partnership	FL	
Outback/Fleming’s Designated Partner, LLC	DE	
Outback/Hampton, Limited Partnership	FL	
Outback/Maryland-I, Limited Partnership	FL	
Outback/Memphis, Limited Partnership	FL	
Outback/Mid Atlantic-I, Limited Partnership	FL	
Outback/Southfield, Limited Partnership	FL	
Outback/Stone-II, Limited Partnership	FL	
Outback-Carrabba’s of Hunt Valley, Inc.	MD	
Owings Mills Incorporated	MD	
Pacific Designated Partner, LLC	DE	
Perry Hall Outback, Inc.	MD	
PGS Consultario e Serviços, Ltd.	BZ	
Prime Designated Partner, LLC	DE	
Prince George’s County Outback, Inc.	MD	
Private Restaurant Master Lessee, LLC	DE	
Private Restaurant Properties, LLC	DE	
PRP Holdings, LLC	DE	
Roy’s Beverages, LLC	TX	
ROYS California Services, Limited Partnership	FL	
ROYS Florida Services, Ltd	FL	
ROYS Illinois Services, Ltd	FL	
ROYS Maryland Services, Ltd	FL	
Roy’s of Baltimore, LLC	MD	
Roy’s/Calione, Limited Partnership	FL	
Roy’s/East Atlantic-I, Limited Partnership	FL	
Roy’s/Outback Designated Partner, LLC	DE	
Roy’s/Outback Holdings, LLC	TX	
Roy’s/Outback Joint Venture	FL	
                                                                                                                                                                                   (CONTINUED…)

 	
 	 	
SUBSIDIARY NAME	STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION	
Snyderman Restaurant Group Inc	NJ	
Williamsburg Square Joint Venture	PA	
Xuanmei Food and Beverage (Shanghai) Co., Ltd.	CN	

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED CERTIFIED PUBLIC ACCOUNTING FIRM
We hereby consent to the incorporation by reference in the Registration Statement on Form S-8 (No. 333-183270) of Bloomin’ Brands, Inc. of our report dated March 3, 2014 relating to the financial statements, financial statement schedule and the effectiveness of internal control over financial reporting, which appears in this Form 10-K.

/s/ PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP
Tampa, Florida
March 3, 2014 

Exhibit 31.1

CERTIFICATION

I, Elizabeth A. Smith, certify that:
 	 	
1.	I have reviewed this Annual Report on Form 10-K of Bloomin’ Brands, Inc.;	

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;	

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;	

4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:	

(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;	

(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;	

(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and	

(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and	

5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):	

(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and	

(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. 	

 	
 	 	 	
Date:	March 3, 2014	/s/ Elizabeth A. Smith	
 	 	Elizabeth A. Smith	
 	 	Chief Executive Officer	

Exhibit 31.2

CERTIFICATION

I, David J. Deno, certify that:
 	 	
1.	I have reviewed this Annual Report on Form 10-K of Bloomin’ Brands, Inc.;	

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;	

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;	

4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:	

(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;	

(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;	

(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and	

(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and	

5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):	

(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and	

(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. 	

 	
 	 	 	
Date:	March 3, 2014	/s/ David J. Deno	
 	 	David J. Deno	
 	 	Executive Vice President and Chief Financial and Administrative Officer	

Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Bloomin’ Brands, Inc. (the “Company”) on Form 10-K for the year ended December 31, 2013 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Elizabeth A. Smith, Chief Executive Officer of the Company, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge, that:
 	 	
(1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and	

(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company for the dates and periods covered by the Report.	

 	
 	 	 	
Date:	March 3, 2014	/s/ Elizabeth A. Smith	
 	 	Elizabeth A. Smith	
 	 	Chief Executive Officer	

A signed original of this written statement required by Section 906 has been provided to, and will be retained by, Bloomin’ Brands, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

Exhibit 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Bloomin’ Brands, Inc. (the “Company”) on Form 10-K for the year ended December 31, 2013 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, David J. Deno, Executive Vice President and Chief Financial and Administrative Officer of the Company, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge, that:
 	 	
(1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and	

(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company for the dates and periods covered by the Report.	

 	
 	 	 	
Date:	March 3, 2014	/s/ David J. Deno	
 	 	David J. Deno	
 	 	Executive Vice President and Chief Financial and Administrative Officer	

A signed original of this written statement required by Section 906 has been provided to, and will be retained by, Bloomin’ Brands, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.