DEFM14A 1 y28878dmdefm14a.htm DEFINITIVE PROXY STATEMENT DEFM14A
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
SCHEDULE 14A
 
Proxy Statement Pursuant to Section 14(a) of
The Securities Exchange Act of 1934
Filed by the Registrant þ
Filed by a Party other than the Registrant o
Check the appropriate box:
o  Preliminary Proxy Statement
o  Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
þ  Definitive Proxy Statement
o  Definitive Additional Materials
o  Soliciting Material Pursuant to §240.14a-12
 
OSI RESTAURANT PARTNERS, INC.
(Name of Registrant as Specified In Its Charter)
 
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
o  No fee required.
o   Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
  (1)   Title of each class of securities to which transaction applies:
Common Stock, par value $0.01 per share, of OSI Restaurant Partners, Inc. (“Common Stock”)
 
     (2)   Aggregate number of securities to which transaction applies:
76,417,759  shares of Common Stock (including restricted Common Stock)
11,067,475  options to purchase shares of Common Stock
        37,533   deferred compensation units equivalent to Common Stock credited under the Outback Steakhouse Directors’ Deferred Compensation Plan, as amended (the “Deferred Compensation Plan”)
 
     (3)   Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
As of January 12, 2007, there were (i) 76,417,759 shares of Common Stock (including restricted Common Stock) outstanding and owned by stockholders other than Kangaroo Holdings, Inc. and Kangaroo Acquisition, Inc., (ii) options to purchase 11,067,475 shares of Common Stock with an exercise price less than $40.00 per share outstanding and (iii) 37,533 deferred compensation units equivalent to Common Stock credited under the Deferred Compensation Plan. The filing fee was determined by adding (x) the product of (I) the number of shares of Common Stock that are proposed to be acquired in the merger and (II) the merger consideration of $40.00 in cash per share of Common Stock, plus (y) $118,784,585 expected to be paid to holders of options to purchase Common Stock with an exercise price of less than $40.00 per share in exchange for the cancellation of such options, plus (z) $1,501,320 expected to be paid to holders of deferred compensation units credited under the Deferred Compensation Plan in exchange for the cancellation of such units ((x), (y) and (z) together, the “Total Consideration”). The payment of the filing fee, calculated in accordance with Exchange Act Rule 0-11(c)(1), was calculated by multiplying the Total Consideration by .000107.
 
     (4)   Proposed maximum aggregate value of transaction:
$3,176,996,175
 
     (5)   Total fee paid:
$339,939
 
þ   Fee paid previously with preliminary materials.
o   Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
(1)  Amount Previously Paid:
 
(2)  Form, Schedule or Registration Statement No.:
 
(3)  Filing Party:
 
(4)  Date Filed:
 


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(OSI LOGO)
2202 North West Shore Boulevard, Suite 500, Tampa, Florida 33607
 
March 30, 2007
 
Dear Stockholder:
 
You are cordially invited to attend a special meeting of stockholders of OSI Restaurant Partners, Inc. (“OSI,” “we,” “us” or “our”), to be held at the A La Carte Event Pavilion, 4050-B Dana Shores Drive, Tampa, Florida 33634, on Tuesday, May 8, 2007, at 11:00 a.m., Eastern Daylight Time. At the special meeting, you will be asked to consider and vote upon a proposal to adopt the Agreement and Plan of Merger, dated as of November 5, 2006 (the “Merger Agreement”), among OSI, Kangaroo Holdings, Inc. (“Parent”) and Kangaroo Acquisition, Inc. (“Merger Sub”), pursuant to which Merger Sub will merge with and into OSI and OSI will become a direct or indirect wholly owned subsidiary of Parent. Parent is controlled by an investor group comprised of investment funds associated with Bain Capital Partners, LLC and investment funds affiliated with Catterton Management Company, LLC, which are private equity firms. Our founders and certain members of our management are expected to exchange shares of our common stock for shares of Parent in connection with the merger.
 
Upon completion of the merger, each outstanding share of our common stock not held by Parent, Merger Sub, OSI or any subsidiary of OSI or a stockholder who perfects appraisal rights in accordance with Delaware law, will be converted into the right to receive $40.00 in cash, without interest.
 
On November 5, 2006, our board of directors (other than Chris T. Sullivan, our Chairman of the Board, Robert D. Basham, our Vice Chairman of the Board, and A. William Allen, III, our Chief Executive Officer, each of whom is expected to exchange shares of our common stock for shares of Parent in connection with the merger and therefore abstained from voting), based in part upon the unanimous recommendation of a special committee of our board of directors comprised of all of our independent directors, (i) determined that it was advisable and in the best interests of OSI and its stockholders to enter into the Merger Agreement and (ii) approved and adopted the Merger Agreement and the transactions contemplated by the Merger Agreement. Therefore, our board of directors recommends that you vote “FOR” the adoption of the Merger Agreement.
 
The proxy statement attached to this letter provides you with information about the merger, the Merger Agreement and the special meeting. A copy of the Merger Agreement is attached as Annex A to the proxy statement. We encourage you to read the entire proxy statement and its annexes carefully.
 
Your vote is very important, regardless of the number of shares of our common stock you own. Under Delaware law, the merger cannot be completed unless holders of a majority of the outstanding shares of our common stock entitled to vote at the special meeting vote for the adoption of the Merger Agreement. In addition, the Merger Agreement requires that a majority of the outstanding shares of our common stock entitled to vote at the special meeting vote for the adoption of the Merger Agreement without consideration as to the vote of any shares held by our founders and certain members of our management who are expected to exchange shares of our common stock for shares of Parent in connection with the merger. If you do not vote, it will have the same effect as a vote against the adoption of the Merger Agreement.
 
Whether or not you plan to attend the special meeting in person, please complete, sign, date and return promptly the enclosed proxy card. If you hold shares through a broker or other nominee, you should follow the procedures provided by your broker or nominee. These actions will not limit your right to vote in person if you wish to attend the special meeting and vote in person.
 
Thank you in advance for your cooperation and continued support.
 
Sincerely,
 
         
-SIG- Thomas James
  -SIG- Toby Wilt  
-SIG- Chris Sullivan
  Thomas A. James
  Co-Chairman of the
  Special Committee
  Toby S. Wilt
Co-Chairman of the
Special Committee
  Chris T. Sullivan
Chairman of the
Board
 
 
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
 
THIS PROXY STATEMENT IS DATED MARCH 30, 2007, AND IS FIRST BEING
MAILED TO STOCKHOLDERS ON OR ABOUT APRIL 2, 2007.


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(OSI LOGO)
 
2202 North West Shore Boulevard, Suite 500, Tampa, Florida 33607
 
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 8, 2007
 
TO THE STOCKHOLDERS OF OSI RESTAURANT PARTNERS, INC.:
 
A special meeting of stockholders of OSI Restaurant Partners, Inc., a Delaware corporation (“OSI,” “we,” “us” or “our”), will be held at the A La Carte Event Pavilion, 4050-B Dana Shores Drive, Tampa, Florida 33634, on Tuesday, May 8, 2007, beginning at 11:00 a.m., Eastern Daylight Time, for the following purposes:
 
1. Adoption of the Merger Agreement.  To consider and vote on a proposal to adopt the Agreement and Plan of Merger, dated as of November 5, 2006 (the “Merger Agreement”), among OSI, Kangaroo Holdings, Inc. and Kangaroo Acquisition, Inc., pursuant to which, upon completion of the merger, each outstanding share of OSI common stock, par value $0.01 per share (other than shares held in our treasury, shares owned by our subsidiaries, Kangaroo Holdings, Inc. or Kangaroo Acquisition, Inc. and shares held by stockholders who perfect appraisal rights in accordance with Delaware law), will be converted into the right to receive $40.00 in cash, without interest.
 
2. Adjournment or Postponement of the Special Meeting.  To approve the adjournment or postponement of the special meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the meeting to adopt the Merger Agreement.
 
3. Other Matters.  To transact such other business as may properly come before the special meeting or any adjournment or postponement thereof.
 
Only stockholders of record of our common stock as of the close of business on March 28, 2007, will be entitled to notice of, and to vote at, the special meeting and any adjournment or postponement of the special meeting. All stockholders of record are cordially invited to attend the special meeting in person.
 
Your vote is very important, regardless of the number of shares of our common stock you own.  Under Delaware law, adoption of the Merger Agreement requires holders of a majority of the outstanding shares of our common stock entitled to vote at the special meeting to vote for the adoption of the Merger Agreement. In addition, the Merger Agreement requires that a majority of the outstanding shares of our common stock entitled to vote at the special meeting adopt the Merger Agreement without consideration as to the vote of any shares held by our founders and certain members of our management who are expected to purchase shares of Parent in connection with the merger. Even if you plan to attend the meeting in person, we request that you complete, sign, date and return the enclosed proxy in the envelope provided and thus ensure that your shares will be represented at the meeting if you are unable to attend. If you sign, date and mail your proxy card without indicating how you wish to vote, your vote will be counted as a vote FORthe adoption of the Merger Agreement and FORthe adjournment or postponement of the special meeting, if necessary or appropriate, to solicit additional proxies.
 
If you fail to vote by proxy or in person, the effect will be that your shares will not be counted for purposes of determining whether a quorum is present at the special meeting and, if a quorum is present, will have the same effect as a vote against the adoption of the Merger Agreement.  If you are a stockholder of record and wish to vote in person at the special meeting, you may withdraw your proxy and vote in person.


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Stockholders of OSI who do not vote in favor of the adoption of the Merger Agreement will have the right to seek appraisal of the fair value of their shares if the merger is completed, but only if they comply with all procedural requirements of Delaware law, which are summarized in the accompanying proxy statement under the caption “Appraisal Rights” beginning on page 72.
 
By Order Of The Board Of Directors,
 
(-s- Joseph J. Kadow signature)
Joseph J. Kadow
Secretary
 
March 30, 2007


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SUMMARY TERM SHEET
 
This summary term sheet highlights selected information from this proxy statement and may not contain all of the information that is important to you. To understand the merger fully, and for a more complete description of the legal terms of the merger, you should carefully read this entire proxy statement, the annexes attached to this proxy statement and the documents referred to in this proxy statement. We have included section references to direct you to a more complete description of the topics presented in this summary term sheet. In this proxy statement, the terms “OSI,” “we,” “us,” “our” and the “Company” refer to OSI Restaurant Partners, Inc. In addition, we refer to Kangaroo Holdings, Inc. as “Parent” and to Kangaroo Acquisition, Inc. as “Merger Sub.”
 
  •  The Proposal.  You are being asked to vote on a proposal to adopt the Agreement and Plan of Merger, dated as of November 5, 2006 (the “Merger Agreement”), by and among OSI, Parent and Merger Sub. Pursuant to the Merger Agreement, Merger Sub will be merged with and into OSI, and OSI will be the surviving corporation and a direct or indirect wholly owned subsidiary of Parent. In the event that there are not sufficient votes at the time of the special meeting to adopt the Merger Agreement, stockholders may also be asked to vote on a proposal to adjourn or postpone the special meeting to solicit additional proxies. See “The Special Meeting” beginning on page 79.
 
  •  The Parties to the Merger Agreement.  OSI Restaurant Partners, Inc., a Delaware corporation, is one of the largest casual dining restaurant companies in the world, with a portfolio of eight restaurant concepts, over 1,400 system-wide restaurants and 2006 annual revenues for company-owned stores exceeding $3.9 billion. We operate in all 50 states and in 20 countries internationally, predominantly through company-owned stores, but we also operate under a variety of partnerships and franchises.
 
Kangaroo Holdings, Inc. is a Delaware corporation, formed in anticipation of the merger by Bain Capital Fund IX, L.P., an investment fund sponsored by Bain Capital Partners, LLC (“Bain Capital” and the fund, together with associated collective investment vehicles, including Bain Capital (OSI) IX, L.P. (“Bain AIV”), “Bain Capital Funds”), and Catterton Partners VI, L.P. and Catterton Partners VI, Offshore, L.P. (collectively, “Catterton VI Funds”), investment funds managed by Catterton Management Company, LLC (“Catterton” and together with Catterton VI Funds and affiliated investment vehicles, “Catterton Partners Funds”). The Catterton VI Funds, Bain Capital Fund IX, L.P., and Bain AIV are collectively referred to in this proxy statement as “the Funds.” Upon completion of the merger, OSI will be a direct or indirect wholly owned subsidiary of Parent. Our founders, Chris T. Sullivan, Robert D. Basham and J. Timothy Gannon (our “Founders”), and certain members of our management, including A. William Allen, III, our Chief Executive Officer, Paul E. Avery, our Chief Operating Officer, Joseph J. Kadow, our Executive Vice President, Chief Officer-Legal and Corporate Affairs and Secretary, and Dirk A. Montgomery, our Senior Vice President and Chief Financial Officer, are expected to exchange shares of our common stock for shares of Parent in connection with the merger. We refer to these individuals as the “OSI Investors.” Parent currently has de minimis assets and no operations.
 
Bain Capital is a global private investment firm whose affiliates manage several pools of capital including private equity, venture capital, public equity and leveraged debt assets totaling approximately $50 billion. Since its inception in 1984, Bain Capital has made private equity investments and add-on acquisitions in over 230 companies around the world, including such restaurant and retail concepts as Domino’s Pizza, Dunkin’ Donuts and Burger King, and retailers including Toys “R” Us, AMC Entertainment, Staples and Burlington Coat Factory. Headquartered in Boston, Bain Capital has offices in New York, London, Munich, Tokyo, Hong Kong and Shanghai.
 
Catterton is a leading private equity firm in the United States focused exclusively on the consumer industry with more than $2 billion in assets under management. Founded in 1990, Catterton invests in all major consumer segments, including Food and Beverage, Retail and Restaurants, Consumer Products and Services, and Media and Marketing Services. Catterton has led investments in companies such as Build-A-Bear Workshop, Cheddar’s Restaurant Holdings Inc., P.F. Chang’s China Bistro, Baja Fresh Mexican Grill, First Watch Restaurants, Frederic Fekkai, Kettle Foods, Farley’s and Sathers Candy Co. and Odwalla, Inc.


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  Kangaroo Acquisition, Inc. is a Delaware corporation formed by Parent in anticipation of the merger. Subject to the terms and conditions of the Merger Agreement and in accordance with Delaware law, at the effective time of the merger, Merger Sub will merge with and into OSI and OSI will continue as the surviving corporation. Merger Sub currently has de minimis assets and no operations.
 
  •  Going-Private Transaction.  This is a “going private” transaction. If the merger is completed, your shares will be converted into the right to receive $40.00 per share, without interest and less any applicable withholding tax, and:
 
  •  Parent will directly or indirectly own our entire equity interest;
 
  •  you will no longer have any interest in our future earnings or growth;
 
  •  we will no longer be a public company;
 
  •  our common stock will no longer be traded on the New York Stock Exchange (the “NYSE”); and
 
  •  we may no longer be required to file periodic and other reports with the Securities and Exchange Commission (the “SEC”).
 
See “Special Factors — Certain Effects of the Merger” beginning on page 58.
 
  •  Special Committee.  A special committee of our board of directors, consisting of all of our independent directors, was formed to review, evaluate and make a recommendation to our board of directors with respect to the merger. The members of the special committee are John A. Brabson, Jr., W.R. Carey, Jr., Debbi Fields, Gen. (Ret.) Tommy Franks, Thomas A. James and Toby S. Wilt. Our non-independent directors are Mr. Allen, Mr. Sullivan, Mr. Basham and Lee Roy Selmon. See “Special Factors — Fairness of the Merger; Recommendations of the Special Committee and Our Board of Directors” beginning on page 32.
 
  •  Special Committee and Board Recommendation.  The special committee unanimously determined that the merger is both procedurally and substantively fair to OSI’s unaffiliated stockholders and in the best interests of our stockholders, and unanimously recommended that our board of directors approve and adopt the Merger Agreement. Based in part on the recommendation of the special committee, our board of directors (with Mr. Sullivan, our Chairman of the Board; Mr. Basham, our Vice Chairman of the Board; and Mr. Allen, our Chief Executive Officer, abstaining) unanimously determined that the merger is both procedurally and substantively fair to OSI’s unaffiliated stockholders, and in the best interests of our stockholders, and unanimously approved and adopted the Merger Agreement and the transactions contemplated by the Merger Agreement. ACCORDINGLY, OUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE “FOR” THE ADOPTION OF THE MERGER AGREEMENT. See “Special Factors — Fairness of the Merger; Recommendations of the Special Committee and Our Board of Directors” beginning on page 32.
 
  •  Opinion of Wachovia Capital Markets, LLC.  In connection with the merger, the special committee received a written opinion from Wachovia Capital Markets, LLC, its financial advisor (“Wachovia Securities”), as to the fairness, from a financial point of view and as of the date of such opinion, of the $40.00 per share merger consideration to be received by holders of our common stock (other than the OSI Investors). The opinion also was provided to our board of directors for its information and use in connection with its consideration of the transactions contemplated by the Merger Agreement. The full text of Wachovia Securities’ written opinion, dated November 5, 2006, is attached to this proxy statement as Annex B. You are encouraged to read this opinion carefully in its entirety for a description of the assumptions made, procedures followed, matters considered and limitations on the scope of review undertaken. Wachovia Securities’ opinion addresses only the fairness of the merger consideration to our stockholders (other than the OSI Investors) from a financial point of view as of the date of the opinion and does not address any other aspect of the merger, including the merits of the underlying decision by OSI to engage in the merger. The opinion was addressed to the special committee and was provided to our board of directors for its information and use, but does not constitute a recommendation as to how any stockholder should vote or act on any matter relating to the proposed merger. See “Special Factors — Opinion of Wachovia Capital Markets, LLC” beginning on page 41.


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  •  Opinion of Piper Jaffray & Co.  In connection with the merger, the special committee received a written opinion from Piper Jaffray & Co. (“Piper Jaffray”), as to the fairness, from a financial point of view and as of the date of such opinion, of the $40.00 per share merger consideration to be received by our stockholders (other than the OSI Investors). The opinion also was provided to our board of directors for its information and use in connection with its consideration of the transactions contemplated by the Merger Agreement. The full text of Piper Jaffray’s written opinion, dated November 5, 2006, is attached to this proxy statement as Annex C. You are encouraged to read this opinion carefully in its entirety for a description of the assumptions made, procedures followed, matters considered and limitations on the scope of review undertaken. Piper Jaffray’s opinion addresses only the fairness of the merger consideration to our stockholders (other than the OSI Investors) from a financial point of view as of the date of the opinion. The opinion was addressed to the special committee and was provided to our board of directors for its information and use, but does not constitute a recommendation as to how any stockholder should vote or act on any matter relating to the proposed merger. See “Special Factors — Opinion of Piper Jaffray & Co.” beginning on page 50.
 
  •  Purpose of the Transaction.  The purpose of the transaction is for Bain Capital Funds, Catterton Partners Funds and the OSI Investors to obtain control of OSI and to enable OSI’s stockholders to realize a premium on their shares of OSI common stock based on the closing price of our common stock on November 3, 2006. See “Special Factors — Purposes and Reasons of the OSI Investors” beginning on page 36.
 
  •  Position of the OSI Investors Regarding the Fairness of the Merger.  Each of the OSI Investors believes that the merger is both procedurally and substantively fair to OSI’s unaffiliated stockholders. Their belief is based upon their knowledge and analysis of OSI, as well as the factors discussed in the section entitled “Special Factors — Position of OSI Investors Regarding the Fairness of the Merger” beginning on page 37.
 
  •  Position of Parent, Merger Sub and the Funds Regarding the Fairness of the Merger.  Parent, Merger Sub and the Funds believe that the merger is both procedurally and substantively fair to OSI’s unaffiliated stockholders. Their belief is based upon their knowledge and analysis of OSI, as well as the factors discussed in the section entitled “Special Factors — Position of Parent, Merger Sub and the Funds Regarding the Fairness of the Merger” beginning on page 40.
 
  •  Special Meeting.  The special meeting will be held on Tuesday, May 8, 2007, beginning at 11:00 a.m., Eastern Daylight Time, at the A La Carte Event Pavilion, 4050-B Dana Shores Drive, Tampa, Florida 33634.
 
  •  Record Date and Quorum.  You are entitled to vote at the special meeting if you owned shares of our common stock at the close of business on March 28, 2007, the record date for the special meeting. You will have one vote for each share of OSI common stock that you owned on the record date. As of the record date, there were 75,520,662 shares of our common stock entitled to vote at the special meeting, 66,685,775 of which were held by persons other than the OSI Investors. The holders of a majority of the outstanding shares of our common stock at the close of business on the record date represented in person or by proxy will constitute a quorum for purposes of the special meeting. See “Special Meeting — Record Date and Quorum” beginning on page 79.
 
  •  Required Vote.  Under Delaware law, the adoption of the Merger Agreement requires holders of a majority of the outstanding shares of our common stock entitled to vote at the special meeting to vote for the adoption of the Merger Agreement. In addition, the Merger Agreement requires that a majority of the outstanding shares of our common stock entitled to vote at the special meeting vote for the adoption of the Merger Agreement without consideration as to the vote of any shares held by the OSI Investors. A failure to vote your shares of our common stock or an abstention will have the same effect as voting against the adoption of the Merger Agreement. See “The Special Meeting — Required Vote” beginning on page 79.
 
  •  Regulatory Approvals Required.  The Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “Hart-Scott-Rodino Act”), provides that transactions such as the merger may not be completed until certain information has been submitted to the Federal Trade Commission and the Antitrust Division of the U.S. Department of Justice and certain waiting period requirements have been satisfied. OSI and Parent filed


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  notification reports with the Department of Justice and the Federal Trade Commission under the Hart-Scott-Rodino Act on November 27, 2006. On December 22, 2006, the Federal Trade Commission granted early termination of the waiting period under the Hart-Scott-Rodino Act. OSI and Merger Sub also filed a business combination report and information sheet with the Korean Fair Trade Commission on December 5, 2006 and subsequently filed additional information on December 20, 2006. On December 22, 2006, the Korean Fair Trade Commission approved the merger. Except for the required filings under the Hart-Scott-Rodino Act, the filings with the Korean Fair Trade Commission, and the filing of a certificate of merger in Delaware at the effective time of the merger, we are unaware of any material federal, state or foreign regulatory requirements or approvals required for the execution of the Merger Agreement or completion of the merger. See “Special Factors — Regulatory Approvals” beginning on page 75.
 
  •  Interests of OSI’s Directors and Executive Officers in the Merger.  Our directors and executive officers have interests in the merger that are different from, or in addition to, their interests as OSI stockholders. These interests include:
 
  •  All OSI equity-based awards (other than shares of restricted stock held by the OSI Investors) will vest and be cashed out, which would result in an aggregate cash payment to our directors and executive officers of approximately $19,265,000 based on holdings as of March 28, 2007.
 
  •  Immediately prior to the effective time of the merger, each award of restricted stock held by Mr. Allen, Mr. Kadow and Mr. Montgomery will be exchanged for shares of common stock of Parent and upon closing it is expected that Parent will grant Mr. Avery restricted shares of Parent common stock with an aggregate value of $12,000,000. Mr. Kadow also is expected to purchase shares of Parent common stock with an aggregate value of $200,000. As a result, immediately following the closing, each of Mr. Allen, Mr. Avery, Mr. Kadow and Mr. Montgomery will own approximately 1.5%, 1.0%, 0.3% and 0.3%, respectively, of the fully-diluted outstanding common stock of Parent. The common stock of Parent issued in the exchange is expected to vest in five equal annual installments on each of the first five anniversaries of the closing; provided that vesting will accelerate in the event of a termination of employment as a result of death or disability, by OSI without cause or by the executive with good reason or upon a subsequent change of control. Additional members of management are expected to exchange restricted or unrestricted OSI stock for shares of common stock of Parent or to purchase shares of Parent common stock at the same price per share as the OSI Investors. These members of management are expected to consist of approximately 40 individuals identified by Parent in consultation with the OSI Investors as among those important to the success of OSI (such individuals, the “Additional Management Investors”). The determination of the amount of such exchanges or purchases was made by Parent in its discretion and in consultation with the OSI Investors for the Additional Management Investors. The final capitalization of the Parent, including the price per share to be paid for Parent common stock at closing, has not yet been determined, and will be determined prior to closing. The opportunity to exchange shares of OSI common stock for, or to purchase shares of, Parent common stock is intended to provide an equity-based incentive and retention benefit with respect to future operations of Parent and its subsidiaries. No arrangements reflecting this potential exchange or purchase have been entered into with the Additional Management Investors. In addition, it is expected that options to acquire Parent common stock will be granted at closing as described below.
 
  •  Each of Mr. Allen, Mr. Avery, Mr. Kadow and Mr. Montgomery is party to an employment agreement that provides for change in control severance benefits in the event of certain qualifying terminations (as defined below) of employment in connection with or following the merger. Assuming the merger is completed on April 30, 2007, and qualifying terminations of employment of all four executives were to occur on that date, the aggregate cash severance benefit under these agreements (including any estimated tax gross-up payment) would be approximately $17,050,000. Each executive officer would also receive certain ancillary severance benefits and would be eligible for tax gross-up payments. Each of Mr. Allen, Mr. Avery, Mr. Kadow and Mr. Montgomery and Parent currently expect that the existing employment agreements will be amended and restated to provide compensation and benefits to the executives following the closing. If the parties enter into these amended and restated agreements or the qualifying terminations referred to above do not occur, the aggregate cash severance benefits, ancillary severance benefits and tax gross-up payments described above would not become payable on the date referred to


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  above. A “qualifying termination” is a separation from service (as defined in the Internal Revenue Code) of the employee caused by OSI without cause or by the employee for good reason within two years after the merger.
 
  •  A $5,000,000 cash bonus pool will be allocated by the Chief Executive Officer of OSI, with approval from the post-closing board of directors of OSI, among Mr. Allen, Mr. Avery, Mr. Kadow and Mr. Montgomery and an additional 50 to 60 OSI home office personnel and will be paid immediately following the closing.
 
  •  Options to purchase shares of Parent common stock representing 2.5% of the fully-diluted common stock of Parent immediately following the closing, of which 1.75% will be issued at closing, will be allocated as follows: Mr. Allen (26%); Mr. Avery (24%); Mr. Kadow (16.7%); Mr. Montgomery (8%); and other members of OSI management (25.3%).
 
  •  It is expected that each of Mr. Sullivan, Mr. Basham and Mr. Allen will serve on the board of directors of Parent as of the closing of the merger.
 
  •  Immediately prior to completion of the merger, it is expected that Mr. Sullivan, Mr. Basham and Mr. Gannon (each of whom is a director or director emeritus of OSI) will exchange approximately 1,800,000, 2,500,000 and 300,000 shares of OSI common stock, respectively, for Parent common stock representing approximately 6.0%, 8.3% and 1.0%, respectively, of the fully-diluted outstanding common stock of Parent immediately following the effective time of the Merger. The Founders will receive cash equal to the per share merger consideration to be received by OSI’s stockholders in the merger for the remaining shares of OSI common stock that they own.
 
  •  It is expected that Mr. Sullivan, Mr. Basham and Mr. Gannon will receive an annual management fee of $5,600,000 in the aggregate (which may be paid to them directly or to an entity that they organize) and will enter into employment agreements with OSI providing annual compensation of $800,000 in the aggregate.
 
  •  OSI directors and officers are entitled to continued indemnification and insurance coverage under the Merger Agreement.
 
  •  Gen. (Ret.) Tommy Franks is a director of Bank of America. We have various corporate banking relationships with Bank of America, and it participates as a lender in our $225,000,000 revolving credit facility. In addition, individual restaurant locations have depository relationships with Bank of America in the ordinary course of business. Bank of America and certain of its affiliates have committed to provide Merger Sub a portion of the debt financing necessary to complete the merger.
 
  •  Certain directors and executive officers are also party to transactions with OSI and its affiliates as discussed under “Special Factors — Related Party Transactions” beginning on page 70.
 
  •  The aggregate consideration expected to be received by our directors, director emeritus and executive officers in connection with the merger (including amounts described in the bullets above) is approximately $400,240,112, of which approximately $330,967,880 relates to unrestricted common stock owned by those individuals, and is set forth in more detail under “Special Factors — Interests of Our Directors and Executive Officers in the Merger” beginning on page 65. The consideration to be paid to OSI’s unaffiliated stockholders in the merger is expected to be approximately $3.0 billion.
 
  •  Appraisal Rights.  Pursuant to Delaware law, our stockholders have the right to dissent from the merger and receive a cash payment for the judicially determined fair value of their shares of our common stock. The judicially determined fair value could be greater than, equal to or less than the $40.00 per share that our stockholders are entitled to receive in the merger. To exercise their appraisal rights, stockholders must not vote in favor of the adoption of the Merger Agreement and must strictly comply with specific procedures. A copy of the provisions of Delaware law that grant appraisal rights and govern such procedures is attached as Annex D to this proxy statement.
 
  •  Financing.  The total amount of funds required to complete the merger and the related transactions, including payment of fees and expenses in connection with the merger, is anticipated to be approximately $3.63 billion. This amount is expected to be provided through a combination of (i) equity contributions from Bain Capital Funds, Catterton Partners Funds and the OSI Investors, totaling approximately $1.2 billion, (ii) debt financing totaling approximately $2.43 billion (of which approximately one-quarter is expected to


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  include proceeds from the sale of real estate as part of the real estate financing) and (iii) our available cash. Bain Capital Fund IX, L.P. and Catterton VI Funds may assign to other affiliated and/or non-affiliated investors, with the consent of Parent, a portion of their respective commitments under the equity commitment letter each delivered to Parent. The real estate financing consists of a sale and leaseback of our fee-owned real estate and related assets associated with certain company-owned restaurants operating under the Outback Steakhouse, Carrabba’s and other concept brands. The purchase price of the real estate will be financed in part with the proceeds of first mortgage and mezzanine loans, which will be part of a commercial mortgage-backed securitization. See “Special Factors — Financing” beginning on page 61. The closing of the merger is not conditioned on the receipt of the debt or equity financing by Parent. Parent and Merger Sub, however, are not required to consummate the merger until after the earlier to occur of (x) the completion of a 20 consecutive business day marketing period (during which the purchasing entities will market the debt financing) and (y) April 30, 2007 (if certain financial statements and financial data customarily included in private placements pursuant to Rule 144A of the Securities Act of 1933, as amended (the “Securities Act”), have been furnished by us to Parent and Merger Sub on or prior to April 2, 2007). See “The Merger Agreement — Effective Time; The Marketing Period” beginning on page 82.
 
  •  Guarantees.  Pursuant to limited guarantees, each of Bain Capital Fund IX, L.P. and Catterton VI Funds has agreed to guaranty the obligations of Parent and Merger Sub under the Merger Agreement (i) up to the amount of $33,750,000 and $11,250,000, respectively, with respect to any termination fee payable by Parent and (ii) up to the amount of $161,250,000 and $53,750,000, respectively, with respect to damages arising from failures of Parent or Merger Sub to comply with the Merger Agreement. The limited guarantees are our sole remedies against the guarantors and their related persons. See “Special Factors — Guarantees” beginning on page 65.
 
  •  Material United States Federal Income Tax Consequences of the Merger.  For U.S. federal income tax purposes, the disposition of OSI common stock pursuant to the merger generally will be treated as a sale of the shares of our common stock for cash by each of our stockholders. As a result, in general, each stockholder will recognize gain or loss equal to the difference, if any, between the amount of cash received in the merger and such stockholder’s adjusted tax basis in the shares surrendered. Such gain or loss will be capital gain or loss if the shares of common stock surrendered are held as a capital asset in the hands of the stockholder, and will be long-term capital gain or loss if the shares of common stock have a holding period of more than one year at the effective time of the merger. We recommend that our stockholders consult their own tax advisors as to the particular tax consequences to them of the merger. See “Special Factors — Material United States Federal Income Tax Consequences” beginning on page 73.
 
  •  Litigation.  Two stockholder complaints have been filed as purported class actions on behalf of the public stockholders of OSI. The first, against OSI, each of OSI’s directors, Bain Capital and Catterton, was filed in the Circuit Court of the 13th Judicial Circuit in and for Hillsborough County, Florida. The second, against OSI, each of OSI’s directors, J. Timothy Gannon, Paul E. Avery, Joseph J. Kadow and Dirk A. Montgomery, was filed in the Court of Chancery of the State of Delaware in and for New Castle County. The complaints each allege, among other things, that the directors of OSI breached their fiduciary duties in connection with the proposed transaction by failing to maximize stockholder value and by approving a transaction that purportedly benefits the OSI Investors at the expense of OSI’s public stockholders. The Delaware complaint also alleges that the OSI officers named as defendants breached their fiduciary duties in connection with the merger. Among other things, the complaints seek to enjoin OSI, its directors and the other defendants from proceeding with or consummating the merger. Bain Capital, Catterton and OSI (and, in the Delaware complaint, Gannon) are alleged to have aided and abetted the individual defendants in breaching their fiduciary duties. Counsel for the parties to these two suits have reached an agreement in principle, expressed in a memorandum of understanding, providing for the settlement of the suits subject to Florida court approval and on terms and conditions that include, among other things, certain supplemental disclosure in this proxy statement and, in the event that any termination fee becomes due and payable by OSI, an agreement by Bain Capital and Catterton to waive a portion of such termination fee. Defendants have vigorously denied, and continue to vigorously deny, any wrongdoing or liability with respect to all claims asserted in these suits. If the Florida court approves the settlement contemplated in the memorandum of understanding, both suits will be dismissed with prejudice. The absence of an injunction arising from these


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  matters prohibiting the consummation of the merger is a condition to the closing of the merger. The settlement contemplated by the parties is expressly conditioned upon the affirmative vote of a majority of the outstanding shares of our common stock entitled to vote at the special meeting (or any adjournment thereof) for the adoption of the Merger Agreement with, and without, consideration as to the vote of any shares held by the OSI Investors, and on the closing of the merger and transactions contemplated thereby. The defendants considered it desirable that the actions be settled to avoid the burden, expense, risk, inconvenience and distraction of continued litigation and to resolve all of the claims that were or could have been brought in the actions being settled. See “Special Factors — Litigation” beginning on page 74.
 
  •  Treatment of Stock Options and Other Stock-Based Awards.  Except as we otherwise agree to in writing with Parent, Merger Sub and certain members of our management (including the OSI Investors):
 
  •  each outstanding option to purchase shares of our common stock, whether vested or unvested, will be canceled and converted into the right to receive a cash payment equal to the excess (if any) of the $40.00 per share cash merger consideration over the exercise price per share of the option, multiplied by the number of shares subject to the option, without interest and less any applicable withholding taxes;
 
  •  each holder under our Directors’ Deferred Compensation Plan, as amended, will be entitled to $40.00 per each notional share held under such holder’s account;
 
  •  each award of restricted stock will be converted into the right to receive $40.00 per share in cash plus certain earnings thereon, less any applicable withholding taxes, payable on a deferred basis at the time the underlying restricted stock would have vested under its terms as in effect immediately prior to the effective time and subject to the satisfaction by the holder of all terms and conditions to which such vesting was subject; provided, however, that the holder’s deferred cash account will become immediately vested and payable upon termination of such holder’s employment by us without cause or upon such holder’s death or disability; and
 
  •  all amounts held in the accounts denominated in shares of our common stock under the Partner Equity Deferred Compensation Stock Plan component of the OSI Restaurant Partners, Inc. Partner Equity Plan (the “PEP”) will be converted into an obligation to pay cash with a value equal to the product of (i) the $40.00 per share merger consideration and (ii) the number of notional shares of our common stock credited to such deferred unit account, in accordance with the payment schedule and consistent with the terms of the PEP as in effect from time to time.
 
See “The Merger Agreement — Treatment of Stock, Stock Options and Other Stock-Based Awards” beginning on page 83.
 
  •  Anticipated Closing of Merger.  We are working to complete the merger as soon as possible. We anticipate completing the merger shortly after the special meeting, subject to the adoption of the Merger Agreement by our stockholders and the satisfaction of the other closing conditions. See “The Merger Agreement — Effective Time; The Marketing Period” beginning on page 82. We will issue a press release when the merger has been completed.
 
  •  Procedure for Receiving Merger Consideration.  As soon as reasonably practicable after the effective time of the merger and in any event not later than the second business day following the effective time, a paying agent will mail a letter of transmittal and instructions to you and the other OSI stockholders. The letter of transmittal and instructions will tell you how to surrender your stock certificates in exchange for the merger consideration. You should not return your stock certificates with the enclosed proxy card, and you should not forward your stock certificates to the paying agent without a letter of transmittal.
 
  •  Solicitation of Transactions; Recommendation to Stockholders.  The Merger Agreement permitted us to solicit or encourage alternative acquisition offers under the direction of the special committee until 11:59 p.m. (New York time) on December 26, 2006, the date that was 50 days after the date of the public announcement of the Merger Agreement. As the solicitation period has now expired, the Merger Agreement now restricts our ability to solicit or encourage alternative acquisition offers. Notwithstanding these restrictions, under certain limited circumstances required for our board of directors to comply with its


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  fiduciary duties, our board of directors or the special committee may respond to an unsolicited bona fide written proposal received after the expiration of the solicitation period. If our board of directors or the special committee determines that such unsolicited bona fide written proposal is a superior proposal and concludes that, in light of the superior proposal, it would be inconsistent with our directors’ fiduciary obligations under applicable law to make or not withdraw its recommendation with respect to the merger or fail to change its recommendation, we may terminate the Merger Agreement after paying a specified termination fee and, in certain circumstances, reimbursing Parent for its out-of-pocket fees and expenses. See “The Merger Agreement — Solicitation of Transactions; Recommendation to Stockholders” beginning on page 90.
 
  •  Conditions to Closing.  Before we can complete the merger, a number of conditions must be satisfied or waived by all parties. These include:
 
  •  the approval of the Merger Agreement by a majority of the outstanding shares of our common stock entitled to vote at the special meeting without consideration as to the vote of any shares held by the OSI Investors;
 
  •  the absence of laws or governmental judgments or orders that prohibit the completion of the merger;
 
  •  the performance by each of the parties of its obligations prior to the effective time of the merger under the Merger Agreement in all material respects; and
 
  •  the accuracy of the representations and warranties of each of the parties to the Merger Agreement, subject to the materiality and other standards set forth in the Merger Agreement.
 
See “The Merger Agreement — Conditions to the Merger” beginning on page 96.
 
  •  Termination of the Merger Agreement.  The Merger Agreement may be terminated at any time prior to the effective time of the merger, whether before or after stockholder approval has been obtained, as follows:
 
  •  by mutual written consent of Parent and OSI;
 
  •  by either Parent or OSI, if:
 
  •  the merger has not been consummated on or before April 30, 2007;
 
  •  a final, non-appealable injunction, order, decree or ruling prohibits the merger;
 
  •  our stockholders do not adopt the Merger Agreement at the special meeting or any adjournment thereof; or
 
  •  the non-terminating party breaches or fails to perform in any material respect any of its representations, warranties or agreements in the Merger Agreement such that the closing conditions would not be satisfied and cannot be cured prior to April 30, 2007, but only after the terminating party provides 30 days’ notice to the non-terminating party; or
 
  •  by OSI, if:
 
  •  the special committee or our board of directors concludes in good faith that, in light of a superior acquisition proposal, it would be inconsistent with the directors’ exercise of their fiduciary obligations to make or not withdraw its recommendation that the stockholders adopt the Merger Agreement or fail to change that recommendation in a manner adverse to Parent; or
 
  •  Parent does not (i) deposit sufficient cash to satisfy its obligations pursuant to the Merger Agreement within five business days after notice by OSI that the mutual conditions to closing and the conditions to Parent’s obligations to close have been satisfied and (ii) proceed immediately thereafter to give effect to closing; provided that OSI will not have a termination right based upon a notice which is delivered prior to the final day of the marketing period or if certain financial information has not been furnished to Parent on or prior to April 2, 2007.
 
See “The Merger Agreement — Termination” beginning on page 97.


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  •  Termination Fees and Expenses.  Under certain circumstances, in connection with the termination of the Merger Agreement by us, we will be required to pay to Parent or its designee a termination fee and reimburse certain fees and expenses of Parent relating to the Merger Agreement in an aggregate amount that, under specified circumstances, may be as much as $45,000,000. Parent has agreed to pay us a termination fee of $45,000,000 if we terminate the Merger Agreement in certain circumstances related to the failure of Parent to promptly close the transaction. See “The Merger Agreement — Termination Fees and Expenses” beginning on page 98.
 
  •  Additional Information.  You can find more information about OSI in the periodic reports and other information we file with the SEC. The information is available at the SEC’s public reference facilities and at the website maintained by the SEC at http://www.sec.gov. For a more detailed description of the additional information available, please see “Where You Can Find More Information” beginning on page 191.


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QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING AND THE MERGER
 
The following questions and answers are intended to address some commonly asked questions regarding the special meeting and the merger. These questions and answers may not address all questions that may be important to you as our stockholder. Please refer to the more detailed information contained elsewhere in this proxy statement, the annexes to this proxy statement and the documents referred to in this proxy statement.
 
Q: What is the proposed transaction?
 
A: The proposed transaction is the merger of Merger Sub with and into OSI pursuant to the Merger Agreement. Once the Merger Agreement has been adopted by the OSI stockholders and the other closing conditions under the Merger Agreement have been satisfied or waived, Merger Sub will merge with and into OSI. OSI will be the surviving corporation in the merger and will become a direct or indirect wholly owned subsidiary of Parent. Parent is controlled by an investor group comprised of Bain Capital Funds and Catterton VI Funds. The OSI Investors are expected to exchange shares of OSI common stock for shares of Parent in connection with the merger. In the event that there are not sufficient votes at the time of the special meeting to adopt the Merger Agreement, stockholders may also be asked to vote upon a proposal to adjourn or postpone the special meeting to solicit additional proxies.
 
Q: What will I receive in the merger?
 
A: Upon completion of the merger, you will receive $40.00 in cash, without interest and less any required withholding taxes, for each share of our common stock that you own. For example, if you own 100 shares of our common stock, you will receive $4,000.00 in cash in exchange for your shares of our common stock, less any required withholding taxes. You will not own shares in the surviving corporation.
 
Q: Where and when is the special meeting?
 
A: The special meeting will take place at the A La Carte Pavilion, 4050-B Dana Shores Drive, Tampa, Florida 33634, on May 8, 2007, at 11:00 a.m., Eastern Daylight Time.
 
Q: May I attend the special meeting?
 
A: All stockholders of record as of the close of business on March 28, 2007, the record date for the special meeting, may attend the special meeting. In order to be admitted to the special meeting, a form of personal identification will be required, as well as either an admission ticket or proof of ownership of OSI common stock. If you are a stockholder of record, your admission ticket is attached to your proxy card.
 
If your shares are held in the name of a bank, broker or other holder of record, and you plan to attend the special meeting, you must present proof of your ownership of OSI common stock, such as a bank or brokerage account statement, to be admitted to the meeting, or you may request an admission ticket in advance. If you would rather have an admission ticket, you can obtain one in advance by mailing a written request, along with proof of your ownership of OSI common stock, to:
 
OSI Restaurant Partners, Inc.
2202 North West Shore Boulevard, Suite 500
Tampa, Florida 33607
Attention: Investor Relations
 
Please note that if you hold your shares in the name of a bank, broker or other holder of record and plan to vote at the meeting, you must also present at the meeting a proxy issued to you by the holder of record of your shares.
 
No cameras, recording equipment, electronic devices, large bags, briefcases or packages will be permitted in the special meeting.


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Q: Who can vote at the special meeting?
 
A: You can vote at the special meeting if you owned shares of OSI common stock at the close of business on March 28, 2007, the record date for the special meeting. As of the close of business on that day, 75,520,662 shares of OSI common stock were outstanding. See “The Special Meeting” beginning on page 79.
 
Q: How are votes counted?
 
A: Votes will be counted by the inspector of election appointed for the special meeting, who will separately count “For” and “Against” votes, abstentions and broker non-votes. A “broker non-vote” occurs when a nominee holding shares for a beneficial owner does not receive instructions with respect to the proposal from the beneficial owner. Because the adoption of the Merger Agreement under Delaware law requires the affirmative vote of holders of a majority of the shares of our common stock entitled to vote at the special meeting (and the Merger Agreement requires the vote of shares held by the OSI Investors not be taken into account), the failure to vote, broker non-votes and abstentions will have the same effect as voting “Against” the adoption of the Merger Agreement. Because approval of the proposal to adjourn or postpone the special meeting, if necessary or appropriate, to solicit additional proxies requires the affirmative vote of holders representing a majority of the shares present in person or by proxy at the special meeting, broker non-votes and abstentions will have the same effect as voting “Against” that proposal. A failure to vote will have no effect with respect to the adjournment proposal.
 
Q: What vote of our stockholders is required to adopt the proposals?
 
A: Under Delaware law, the adoption of the Merger Agreement requires holders of a majority of the outstanding shares of our common stock entitled to vote at the special meeting to vote for the adoption of the Merger Agreement. In addition, the Merger Agreement requires that a majority of the outstanding shares of our common stock entitled to vote at the special meeting vote for the adoption of the Merger Agreement without consideration as to the vote of any shares held by the OSI Investors. Accordingly, failure to vote or an abstention will have the same effect as a vote against the adoption of the Merger Agreement. Approval of the proposal to adjourn or postpone the special meeting, if necessary or appropriate, to solicit additional proxies if there are not sufficient votes to adopt the Merger Agreement requires the affirmative vote of holders representing a majority of the shares present in person or by proxy at the special meeting. The transaction is not structured so that approval of at least a majority of unaffiliated OSI stockholders is required because, although the votes of the OSI Investors are excluded, the votes of our directors who are not OSI Investors are included.
 
Q: How does our board of directors recommend that I vote on the proposals?
 
A: Our board of directors recommends that our stockholders vote FORthe adoption of the Merger Agreement. You should read “Special Factors — Fairness of the Merger; Recommendations of the Special Committee and Our Board of Directors” beginning on page 32 for a discussion of the factors that the special committee and our board of directors considered in deciding to recommend adoption of the Merger Agreement. Our board of directors recommends that our stockholders vote FORthe proposal to adjourn or postpone the special meeting, if necessary or appropriate, to solicit additional proxies.
 
Q: What do I need to do now?
 
A: We urge you to read this proxy statement carefully in its entirety, including its annexes, and to consider how the merger affects you. If you are a stockholder of record, then you can ensure that your shares are voted at the special meeting by completing, signing and dating the enclosed proxy card and returning it in the envelope provided. If you hold your shares in “street name,” you can ensure that your shares are voted at the special meeting by instructing your broker on how to vote, as discussed below.
 
Q: Who will bear the cost of this solicitation?
 
A: The expenses of preparing, printing and mailing this proxy statement and the proxies solicited hereby will be borne by OSI. Additional solicitation may be made by telephone, facsimile or other contact by certain directors, officers, employees or agents of OSI, none of whom will receive additional compensation therefor. Bain Capital Funds and Catterton VI Funds, directly or through one or more affiliates or representatives, may,


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at their own cost, also make additional solicitation by mail, telephone, facsimile or other contact in connection with the merger.
 
Q: Will a proxy solicitor be used?
 
A: Yes. OSI has retained MacKenzie Partners, Inc. to assist in the solicitation of proxies for the special meeting. OSI has paid MacKenzie Partners, Inc. a retainer of $15,000 toward a final fee to be agreed upon based on customary fees for the services provided, which fee will include the reimbursement of out-of-pocket fees and expenses. Bain Capital has engaged Georgeson Inc. and Innisfree M&A Incorporated to assist in any solicitation efforts Bain Capital Funds may decide to make in connection with the merger and has agreed to pay each of Georgeson Inc. and Innisfree M&A Incorporated a fee of up to $50,000 plus reimbursement of out-of-pocket fees and expenses.
 
Q: If my shares are held in “street name” by my broker, will my broker vote my shares for me?
 
A: Yes, but only if you provide instructions to your broker on how to vote. You should follow the directions provided by your broker regarding how to instruct your broker to vote your shares. Without those instructions, your shares will not be voted. Broker non-votes will be counted for the purpose of determining the presence or absence of a quorum, but will not be deemed votes cast and will have the same effect as voting against adoption of the Merger Agreement and adjournment or postponement of the special meeting to solicit additional proxies.
 
Q: Can I change my vote?
 
A: Yes. You can change your vote at any time before your proxy is voted at the special meeting. If you are a registered stockholder, you may revoke your proxy by notifying the Corporate Secretary of OSI in writing or by submitting by mail a new proxy dated after the date of the proxy being revoked. In addition, your proxy may be revoked by attending the special meeting and voting in person (you must vote in person, as simply attending the special meeting will not cause your proxy to be revoked).
 
Please note that if you hold your shares in “street name” and you have instructed your broker to vote your shares, the above-described options for changing your vote do not apply, and instead you must follow the directions received from your broker to change your vote.
 
Q: How do I vote my Outback Steakhouse, Inc. Salaried Employees 401(k) Plan shares?
 
A: If you participate in the OSI Restaurant Partners, Inc. Stock Fund under the Outback Steakhouse, Inc. Salaried Employees 401(k) Plan (the “401(k) Plan”), you may give voting instructions to Merrill Lynch Trust Company, FSB, as trustee of the 401(k) Plan, by completing and returning the 401(k) Plan instruction card accompanying this proxy statement. Your instructions will tell the trustee how to vote the number of shares of our common stock representing your proportionate interest in the OSI Restaurant Partners, Inc. Stock Fund which you are entitled to vote under the 401(k) Plan, and any such instruction will be kept confidential. The trustee will vote your shares in accordance with your duly executed 401(k) Plan instruction card so long as it is received by May 4, 2007. If you do not give the trustee voting instructions, the trustee will vote your shares of common stock in the same proportion as the shares for which the trustee receives voting instructions from other 401(k) Plan participants, unless doing so would not be consistent with certain federal employee benefit laws.
 
You may also revoke previously given voting instructions prior to May 4, 2007, by filing with the trustee either a written notice of revocation or a properly completed and signed 401(k) Plan instruction card bearing a later date. Your voting instructions will be kept confidential by the trustee.
 
Q: What does it mean if I get more than one proxy card or vote instruction card?
 
A: If your shares are registered differently or are in more than one account, you will receive more than one proxy card or, if you hold your shares in “street name,” more than one vote instruction card. Please complete and return all of the proxy cards or vote instruction cards you receive to ensure that all of your shares are voted.


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Q: Should I send in my stock certificates now?
 
A: No. Shortly after the merger is completed, you will receive a letter of transmittal with instructions informing you how to send in your stock certificates to the paying agent in order to receive the merger consideration. You should use the letter of transmittal to exchange stock certificates for the merger consideration to which you are entitled as a result of the merger. DO NOT SEND ANY STOCK CERTIFICATES WITH YOUR PROXY.
 
Q: When can I expect to receive the merger consideration for my shares?
 
A: Once the merger is completed, you will be sent a letter of transmittal with instructions informing you how to send in your stock certificates in order to receive the merger consideration. Once you have submitted your properly completed letter of transmittal, OSI stock certificates and other required documents to the paying agent, the paying agent will send you the merger consideration payable with respect to your shares.
 
Q: I do not know where my stock certificate is — how will I get my cash?
 
A: The materials the paying agent will send you after completion of the merger will include the procedures that you must follow if you cannot locate your stock certificate. This will include an affidavit that you will need to sign attesting to the loss of your certificate. You may also be required to provide a bond to OSI in order to cover any potential loss.
 
Q: What happens if I sell my shares before the special meeting?
 
A: The record date of the special meeting is earlier than the special meeting and the date that the merger is expected to be completed. If you transfer your shares of our common stock after the record date but before the special meeting, you will retain your right to vote at the special meeting, but will have transferred the right to receive the $40.00 per share in cash to be received by our stockholders in the merger. In order to receive the $40.00 per share, you must hold your shares through completion of the merger.
 
Q: Am I entitled to exercise appraisal rights instead of receiving the merger consideration for my shares?
 
A: Yes. As a holder of our common stock, you are entitled to appraisal rights under Delaware law in connection with the merger if you meet certain conditions, which conditions are described in this proxy statement under the caption “Appraisal Rights” beginning on page 100.
 
Q: What are the consequences of the merger to members of OSI’s management and board of directors?
 
A: Following the merger, it is expected that the members of our management will continue as management of the surviving corporation. Our current board of directors, however, will be replaced by a new board of directors to be nominated by Parent, although we understand that Mr. Sullivan, Mr. Basham and Mr. Allen will continue to serve as directors. Like all other OSI stockholders, members of our management and board of directors will be entitled to receive $40.00 per share in cash for each of their shares of our common stock. In addition, the OSI Investors (other than Mr. Avery) and certain additional members of management are expected to exchange certain of their shares of restricted or unrestricted stock for shares of Parent common stock and to purchase shares of Parent common stock. Upon closing, it is expected that Parent will grant Mr. Avery restricted shares of Parent common stock with an aggregate value of $12,000,000. All options (whether or not vested) to acquire our common stock will be canceled at the effective time of the merger and holders of these options will be entitled to receive a cash payment equal to the amount, if any, by which $40.00 exceeds the exercise price of the option, multiplied by the number of shares of our common stock underlying the options.
 
Q: Will members of OSI’s management or board of directors hold any equity interests in the surviving corporation following the consummation of the merger?
 
A: The OSI Investors are expected to contribute restricted or unrestricted OSI stock to Parent in exchange for common stock of Parent. The OSI Investors other than the Founders also have been given the opportunity to purchase shares of Parent common stock at the same price per share as the Bain Capital Funds and the Catterton Partners Funds, which opportunity is in addition to the options expected to be granted under the management equity incentive plan described under “Special Factors — Interests of Our Directors and Executive Officers in the Merger — Management Equity Incentive Plan,” and Mr. Kadow is expected to


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purchase shares of Parent common stock with an aggregate value of $200,000. In addition, the Additional Management Investors are expected to exchange restricted or unrestricted stock for shares of common stock of Parent or to purchase shares of Parent common stock at the same price per share as the OSI Investors. It is currently expected that Mr. Sullivan, Mr. Basham, Mr. Gannon, Mr. Allen, Mr. Avery, Mr. Kadow and Mr. Montgomery will each own approximately 6.0%, 8.3%, 1.0%, 1.5%, 1.0%, 0.3% and 0.3%, respectively, of the fully-diluted outstanding common stock of Parent immediately after the merger. Mr. Sullivan, Mr. Basham, Mr. Gannon, Mr. Allen, Mr. Avery, Mr. Kadow and Mr. Montgomery currently beneficially own approximately 3.3%, 5.7%, 1.6%, 0.9%, 1.0%, 0.3% and 0.1%, respectively, of our outstanding shares of common stock. Each holder of Parent common stock will be entitled to one vote per share. Accordingly, each of Mr. Sullivan, Mr. Basham, Mr. Gannon, Mr. Allen, Mr. Avery, Mr. Kadow and Mr. Montgomery will have a voting interest that corresponds with his respective common stock ownership. See “Special Factors — Certain Effects of the Merger” beginning on page 58.
 
Q: Who can help answer my other questions?
 
A: If you have more questions about the merger, you should contact our proxy solicitation agent, MacKenzie Partners, Inc., at (800) 322-2885 (toll-free) or (212) 929-5500 (collect) or via email at proxy@mackenziepartners.com. If your broker holds your shares, you may call your broker for additional information.


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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
 
This proxy statement, and the documents to which we refer you in this proxy statement, contain not only historical information, but also forward-looking statements. Forward-looking statements represent OSI’s expectations or beliefs concerning future events, including the following: any projections or forecasts, including the financial forecast included under “Financial Forecast” beginning on page 182, any statements regarding future sales, costs and expenses and gross profit percentages, any statements regarding the continuation of historical trends, any statements regarding the expected number of future restaurant openings and expected capital expenditures, any statements regarding the sufficiency of our cash balances and cash generated from operating and financing activities for future liquidity and capital resource needs and any statement regarding the expected completion and timing of the merger and other information relating to the merger. Without limiting the foregoing, the words “believes,” “anticipates,” “plans,” “expects,” “should,” “estimates” and similar expressions are intended to identify forward-looking statements. You should read statements that contain these words carefully. They discuss our future expectations or state other forward-looking information and may involve known and unknown risks over which we have no control. Those risks include, without limitation:
 
  •  the satisfaction of the conditions to consummation of the merger, including the adoption of the Merger Agreement by our stockholders (without taking into account the vote of shares held by the OSI Investors);
 
  •  the actual terms of the financing that will be obtained for the merger;
 
  •  the occurrence of any event, change or other circumstance that could give rise to the termination of the Merger Agreement, including a termination under circumstances that could require us to pay a termination fee of up to $45,000,000 to Parent or its designee;
 
  •  the amount of the costs, fees, expenses and charges related to the merger;
 
  •  the effect of the announcement of the merger on our business relationships, operating results and business generally, including our ability to retain key employees;
 
  •  the risk that the merger may not be completed in a timely manner or at all, which may adversely affect our business and the price of our common stock;
 
  •  the potential adverse effect on our business, properties and operations because of certain covenants we agreed to in the Merger Agreement;
 
  •  the outcome of the legal proceedings instituted against us and others in connection with the merger;
 
  •  risks related to diverting management’s attention from our ongoing business operations;
 
  •  the restaurant industry is a highly competitive industry with many well-established competitors;
 
  •  our results can be impacted by changes in consumer tastes and the level of consumer acceptance of our restaurant concepts (including consumer tolerance of price increases); local, regional, national and international economic conditions; the seasonality of our business; demographic trends; traffic patterns; change in consumer dietary habits; employee availability; the cost of advertising and media; government actions and policies; inflation; and increases in various costs, including construction and real estate costs;
 
  •  our results can be affected by consumer perception of food safety;
 
  •  our ability to expand is dependent upon various factors such as the availability of attractive sites for new restaurants; ability to obtain appropriate real estate sites at acceptable prices; ability to obtain all required governmental permits including zoning approvals and liquor licenses on a timely basis; impact of government moratoriums or approval processes, which could result in significant delays; ability to obtain all necessary contractors and subcontractors; union activities such as picketing and hand billing that could delay construction; the ability to generate or borrow funds; the ability to negotiate suitable lease terms; and the ability to recruit and train skilled management and restaurant employees;


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  •  price and availability of commodities, including but not limited to such items as beef, chicken, shrimp, pork, seafood, dairy, potatoes, onions and energy supplies, are subject to fluctuation and could increase or decrease more than we expect;
 
  •  weather and natural disasters could result in construction delays and also adversely affect the results of one or more restaurants for an indeterminate amount of time; and
 
  •  other risks detailed in our filings with the SEC, including “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2006. See “Where You Can Find More Information” on page 191.
 
We believe that the assumptions on which our forward-looking statements are based are reasonable. However, we cannot assure you that the actual results or developments we anticipate will be realized or, if realized, that they will have the expected effects on our business or operations. All subsequent written and oral forward-looking statements concerning the merger or other matters addressed in this proxy statement and attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. Forward-looking statements speak only as of the date of this proxy statement or the date of any document incorporated by reference in this document. Except as required by applicable law or regulation, we do not undertake to release the results of any revisions of these forward-looking statements to reflect future events or circumstances.


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INTRODUCTION
 
This proxy statement and the accompanying form of proxy are being furnished to OSI’s stockholders in connection with the solicitation of proxies by our board of directors for use at a special meeting of our stockholders to be held at the A La Carte Pavilion, 4050-B Dana Shores Drive, Tampa, Florida 33634, on Tuesday, May 8, 2007, at 11:00 a.m., Eastern Daylight Time. In light of the meeting date, the parties have agreed not to exercise the termination right under Section 7.1(b) of the Merger Agreement prior to close of business May 10, 2007.
 
We are asking our stockholders to vote on the adoption of the Merger Agreement. If the merger is completed, OSI will become a direct or indirect wholly owned subsidiary of Parent, and our stockholders will have the right to receive $40.00 in cash, without interest, for each share of our common stock.
 
SPECIAL FACTORS
 
Background of the Merger
 
On July 25, 2005, OSI’s board of directors held a regular meeting with most of the directors attending in person. At the meeting, Mr. Allen, OSI’s Chief Executive Officer, discussed management’s reassessment of OSI’s portfolio of restaurant concepts, the goal of which was to evaluate the strategic importance of each concept as well as determine the proper allocation of resources to the various concepts. Mr. Allen also informed the board of directors that he would work with OSI’s management team to develop formal three- and five-year business plans. The board of directors informed Mr. Allen that they would actively be involved in the development of such plans, and Mr. Allen agreed to arrange subsequent meetings with the board to discuss development of the plans.
 
On October 4, 2005, after having seen Mr. Allen at an industry trade show, a representative from Catterton initiated a telephone call to Mr. Allen to discuss the possibility of Catterton making a proposal to acquire all of the outstanding common stock of OSI. At the trade show, the Catterton representative had asked Mr. Allen whether OSI had considered a going-private transaction, and Mr. Allen responded that he had not thought of OSI going private at that time. On subsequent telephone calls, the representatives from Catterton discussed the possibility of Catterton and the Blackstone Group (collectively “Blackstone/Catterton”) jointly making a proposal to acquire all of the outstanding common stock of OSI. Thereafter, representatives from Blackstone/Catterton proposed that OSI and Blackstone/Catterton enter into a non-disclosure and standstill agreement to facilitate Blackstone/Catterton’s due diligence investigation of OSI.
 
A regular meeting of OSI’s board of directors was held in person on October 26, 2005. At the meeting, Mr. Allen and the board discussed his business priorities and strategies for OSI. Mr. Allen also informed the board of directors that the business plans discussed at the July board of directors meeting were in process and would be presented to the board of directors at its January 2006 meeting. Mr. Allen also discussed with the board of directors his discussions with Blackstone/Catterton.
 
A special meeting of OSI’s board of directors was held by telephone on November 14, 2005. At the meeting, Mr. Allen reviewed with the board of directors his discussions with Blackstone/Catterton. After discussion, the board of directors approved the execution of a non-disclosure and standstill agreement with Blackstone/Catterton and approved Mr. Sullivan and OSI’s management providing information to, and meeting with, Blackstone/Catterton, provided that neither Mr. Sullivan nor any member of OSI’s management engage in any negotiations or discussions regarding the value of OSI or their participation in (or compensation in connection with) any transaction involving OSI.
 
On November 18, 2005, Mr. Allen met with representatives of Blackstone/Catterton at Blackstone’s office in New York to discuss OSI’s business strategy and financial condition as well as the possibility of Blackstone/Catterton jointly making a proposal to acquire all of the outstanding common stock of OSI.
 
On November 29, 2005, OSI entered into a non-disclosure and standstill agreement with Blackstone/Catterton to facilitate Blackstone/Catterton’s due diligence of OSI, with a view toward Blackstone/Catterton making a proposal to acquire all of the outstanding common stock of OSI. Thereafter, OSI began sharing confidential information with Blackstone/Catterton.


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On December 2, 2005, OSI’s independent directors held a meeting by telephone to consider the possibility of Blackstone/Catterton making a proposal to acquire all of the outstanding common stock of OSI. The independent directors discussed, among other issues, the formation of a special committee and the hiring of independent outside counsel and financial advisors.
 
At a regular meeting of the board of directors on January 24, 2006, held in person, Mr. Allen discussed with the board the continuing reassessment of OSI’s portfolio of restaurant concepts and a three-year growth plan developed by OSI’s management and distributed to the board members. Mr. Allen also reviewed with the board of directors the due diligence materials that had been provided to, and discussions that had taken place with, Blackstone/Catterton. Mr. Montgomery then discussed OSI’s capital structure, including its leverage as compared to its peers and its capacity for additional indebtedness. The directors discussed in detail the presentations of Mr. Allen and Mr. Montgomery, including the possibility of increasing OSI’s leverage and the potential uses of the funding that would come from such an increase, including the repurchase of shares of OSI common stock.
 
A special meeting of the OSI board of directors was held on February 13, 2006, with most of the directors participating in person. At the meeting, the board continued the discussion of OSI’s capital structure begun at its January 24, 2006 meeting. The board considered whether OSI should increase its existing indebtedness and the potential uses of the funding that would come from such an increase, including stock repurchases, purchases of interests in minority-owned and franchisee restaurants and restaurant enhancements.
 
Following further due diligence by Blackstone/Catterton, OSI’s management was informed on February 15, 2006, that Blackstone/Catterton was declining to submit a proposal to OSI’s board in light of the determination by Blackstone/Catterton that it would not be able to offer a value in excess of the then-current public market share price of $40.78. As a result, Blackstone/Catterton terminated its due diligence. The board of directors was subsequently informed by OSI’s management that Blackstone/Catterton had terminated its discussions with OSI.
 
At an analyst meeting on February 17, 2006, Mr. Allen announced that OSI’s management was developing a strategy to increase stockholder value (the “Stockholder Value Initiative”), and that OSI’s management was considering, among other things, the further leveraging of OSI and the monetization of OSI’s assets.
 
On March 2, 2006, representatives of the activist hedge fund Pirate Capital LLC (“Pirate”) discussed with Mr. Montgomery its accumulation of a substantial position in OSI common stock. Mr. Allen and Mr. Montgomery met with representatives of Pirate on March 22, 2006 to discuss OSI’s business strategy and financial condition. Mr. Montgomery had subsequent telephone conversations with representatives of Pirate periodically through May 2006.
 
A special meeting of the board of directors was held on March 13, 2006, with most of the directors participating by telephone. At the meeting, Mr. Allen discussed with the board a proposal to engage Wachovia Securities as OSI’s financial investment advisor to provide counsel with respect to the Stockholder Value Initiative. After discussion, the board unanimously approved the engagement of Wachovia Securities as a financial investment advisor to the board on a non-exclusive basis. An engagement letter with Wachovia Securities was subsequently executed on April 17, 2006. Mr. Allen also updated the board of directors regarding his conversations with Pirate and discussed Pirate’s previous activist campaign toward companies in the restaurant industry. The board of directors also determined to engage the law firm Wachtell, Lipton, Rosen & Katz (“Wachtell Lipton”) to serve as its independent counsel with respect to the Stockholder Value Initiative as well as with respect to Pirate’s accumulation of shares and the possibility that Pirate might initiate a proxy contest.
 
On April 20, 2006, during an investor teleconference announcing OSI’s financial results for the quarter ended March 31, 2006, Mr. Allen discussed the Stockholder Value Initiative, clarifying that OSI was considering all strategic alternatives available, including separating or monetizing individual or multiple restaurant concepts, further leveraging OSI and using the proceeds to repurchase shares (a “Leveraged Recapitalization”) and monetizating OSI’s real estate assets. Mr. Allen explained that management was reviewing these as well as other options and that he expected this review to take the balance of 2006.
 
A regular meeting of the board of directors was held in person on April 25, 2006. At the meeting, Mr. Allen updated the board of directors regarding conversations he and Mr. Montgomery had with representatives of Pirate and a recent conversation he had with Catterton regarding their continuing interest in acquiring OSI. The board then


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discussed with Wachovia Securities, its financial advisor, and Wachtell Lipton, its legal advisor, the alternatives it was considering in connection with the Stockholder Value Initiative. These alternatives included separating or monetizing individual or multiple restaurant concepts, a Leveraged Recapitalization and monetizing OSI’s real estate assets through a sale-leaseback or real estate investment trust. After lengthy discussion in which Wachovia Securities, Wachtell Lipton and members of OSI’s management participated, the board reached a consensus that a Leveraged Recapitalization had the potential to deliver the most value to OSI’s stockholders as compared to the other alternatives then being considered. Furthermore, it was believed that a Leveraged Recapitalization could be effected on an expedited basis, potentially delivering value to stockholders significantly earlier than the other alteratives being considered at that time. The board also noted that the other alternatives then being considered had the potential to decrease the operational flexibility of OSI.
 
In May 2006, representatives of Pirate contacted OSI requesting information regarding the Stockholder Value Initiative as well as an additional opportunity to meet with Mr. Sullivan. On May 23, 2006, OSI responded in writing that, since OSI was considering a broad range of strategic options, it was premature to further discuss the details of the Stockholder Value Initiative publicly. OSI invited Pirate to execute a mutually agreeable confidentiality agreement, including a standstill provision, as a prerequisite to receiving any confidential information. Pirate declined to enter into the proposed form of confidentiality agreement.
 
On May 19, 2006, representatives from Catterton again contacted Mr. Allen about the possibility of Catterton resuming its consideration of a transaction with OSI. Catterton also informed Mr. Allen that it had discussed with Bain Capital the possibility of jointly making a proposal to acquire all of the outstanding common stock of OSI and that Bain Capital had expressed interest in the possibility of such a transaction. Catterton requested that Mr. Allen allow Catterton and Bain Capital (collectively, “Bain/Catterton”) to conduct due diligence of OSI with a view toward potentially making a proposal to acquire all of the outstanding common stock of OSI.
 
On June 5, 2006, Pirate disclosed in a filing with the SEC on Schedule 13D that funds controlled by it had acquired 5.3% of the outstanding shares of OSI common stock. The Schedule 13D filing included a letter sent by Pirate to Mr. Sullivan, dated June 5, 2006, encouraging OSI’s board of directors, among other things, to divest assets, halt certain expansion activities and establish a special committee to develop, with the assistance of an investment banking firm, a strategy to increase stockholder value. Pirate intimated that if such action were not taken it would nominate a competing slate of directors for election at OSI’s 2007 annual meeting.
 
At a telephonic board meeting on June 9, 2006, following a discussion of matters related to Pirate, Mr. Allen informed the board of directors that Catterton had contacted him about the possibility of a mutually agreeable transaction involving Bain/Catterton, including, if requested by the board of directors, Bain/Catterton potentially making a proposal to acquire all of the outstanding common stock of OSI. The board of directors approved, subject to the execution of a non-disclosure and standstill agreement, OSI providing financial, accounting and legal information to, and meeting with, Bain/Catterton and their advisors, provided that neither Mr. Sullivan nor any member of OSI’s management engage in any negotiations or discussions regarding the value of OSI or their participation in (or compensation in connection with) any such transaction. The approval of entering into a non-disclosure and standstill agreement and providing information was by a vote of 5-1, with Mr. James voting against providing information based on his concern that news of the discussions could leak. The board further agreed that until Bain/Catterton made a proposal to acquire OSI, OSI should continue to develop the Stockholder Value Initiative. Following the board meeting, OSI, Bain Capital and Catterton entered into a non-disclosure and standstill agreement to facilitate Bain/Catterton’s due diligence investigation.
 
During the months of June and July 2006, Bain/Catterton and their representatives held legal and business due diligence meetings with OSI’s senior management, including a meeting with Mr. Allen in Atlantic City and a meeting on July 19, 2006, in Tampa, during which members of OSI’s senior management, including Mr. Allen, Mr. Sullivan, Mr. Montgomery and Mr. Kadow, provided certain financial information to representatives of Bain/Catterton and discussed OSI’s competitive position and business strategy.
 
On July 17, 2006, OSI announced that Mr. Ben Novello had resigned his position as President of its Outback Steakhouse brand and that Mr. Avery, OSI’s Chief Operating Officer, would assume the additional role of President of the Outback Steakhouse brand on an interim basis.


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On July 24, 2006, Bain/Catterton delivered a letter to OSI explaining that Bain/Catterton expected to finalize their due diligence within two weeks and, if requested by OSI, would be able to submit a firm proposal to acquire OSI at that time.
 
The board of directors held a meeting in person on July 25, 2006. Representatives of Wachtell Lipton and Wachovia Securities joined a portion of the meeting to discuss the Stockholder Value Initiative and the status of discussions with Bain/Catterton. At the meeting, OSI’s management presented a proposed Leveraged Recapitalization, developed with the assistance of Wachovia Securities, that contemplated OSI increasing its level of indebtedness and using the proceeds to fund a substantial stock repurchase program. Representatives of Wachovia Securities explained that based on their assumptions about, among other things, the projected performance of OSI, the proposed Leveraged Recapitalization had the potential to increase OSI’s earnings growth, increase OSI’s return on equity and economic profit and create significant shareholder value. Wachovia Securities estimated that, by the end of 2008, a Leveraged Recapitalization that included $1.2 billion of debt financing could result in an implied stock price of $60.32, $51.69 or $37.26 under an “upside plan,” “base case plan,” and “downside plan,” respectively. Wachovia Securities recommended that to accomplish the proposed Leveraged Recapitalization the board pursue a $1 billion share repurchase through a modified Dutch tender offer. Representatives from Wachovia Securities also informed the board that, among those alternatives being considered for the Stockholder Value Initiative at that time, in their view the proposed Leveraged Recapitalization was the best opportunity available to OSI in the context of remaining a public entity. A representative from Wachtell Lipton then advised the board of directors on disclosure and other legal matters pertaining to the proposed Leveraged Recapitalization. After extensive discussion, the board concluded that, while the proposed Leveraged Recapitalization had the potential to deliver significant value to stockholders, the level of indebtedness proposed by management could unduly restrict the Company’s operational flexibility. The board therefore determined that the levels of debt and other aspects of the Leveraged Recapitalization proposed by OSI’s management should not be pursued by OSI and asked OSI’s management to reformulate the proposed Leveraged Recapitalization with lower levels of debt incurrence.
 
The board then discussed an alternative approach being considered in connection with the Stockholder Value Initiative, the separation or monetization of certain OSI brands. The board reached a consensus, however, that this approach was not, at the time, in the best interests of OSI’s stockholders as compared to the other alternatives the board was considering, including the proposed Leveraged Recapitalization. Mr. Allen then updated the board on the due diligence discussions between OSI and Bain/Catterton and the letter received from Bain/Catterton the previous day. After a discussion in which Wachtell Lipton and Wachovia Securities participated, the board agreed that the discussions with Bain/Catterton were still preliminary and that the board and management should not postpone further development of the Stockholder Value Initiative and a Leveraged Recapitalization while entertaining discussions with Bain/Catterton.
 
On July 27, 2006, in a press release announcing OSI’s financial results for the quarter ended June 30, 2006, OSI announced that it had previously retained Wachovia Securities, that development of the Stockholder Value Initiative had been accelerated and that final recommendations were targeted to be presented to the board of directors by the end of OSI’s third quarter. OSI also announced the board of directors’ conclusion that the separation or monetization of certain brands (including Carrabba’s Italian Grill, Fleming’s Prime Steakhouse & Wine Bar and Bonefish Grill) was not in the best interest of OSI’s stockholders compared to the other alternatives being considered.
 
On August 3, 2006, Mr. Allen and Mr. Montgomery met with Bain/Catterton’s financing sources in New York to provide due diligence regarding OSI’s business and operations.
 
On August 8, 2006, Bain/Catterton delivered a letter to OSI that expressed a willingness, if requested by OSI, to submit a firm proposal to acquire all of the outstanding common stock of OSI at a price of $37.50 per share in cash (representing a premium of 33% to the closing price of OSI’s common stock on such date), subject to certain terms and conditions. Bain/Catterton advised that such offer would be subject to certain terms and conditions, including the receipt of financing commitments with terms acceptable to them. Bain/Catterton expressed confidence that they would be able to finalize the needed financing commitments within 48 hours of the date of the letter. Bain/Catterton affirmed that their willingness to proceed with a firm proposal was not conditioned on the participation of either management or the Founders in the proposed transaction.


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On August 11, 2006, Bain/Catterton delivered a revised letter to the board of directors reiterating their willingness, if requested by the board of directors, to submit a firm proposal to acquire all of the outstanding common stock of OSI at a price of $37.50 per share in cash, subject to certain terms and conditions, and reporting that all areas of their due diligence evaluation were complete. The letter included as attachments debt financing letters from Bank of America, N.A. and Deutsche Bank outlining their commitment to provide debt financing for the proposed transaction and form equity commitment letters committing to provide equity financing for the proposed transaction that Bain Capital Fund IX, L.P., a private equity fund sponsored by Bain Capital, and Catterton Partners VI, L.P., a private equity fund sponsored by Catterton, would be willing to execute in connection with such a transaction.
 
The board of directors met on August 14, 2006, in an in-person meeting, to consider the Stockholder Value Initiative and the August 8 and August 11 letters from Bain/Catterton. At the meeting, Mr. Montgomery discussed management’s five-year business plan and a revised Leveraged Recapitalization proposal, developed with the assistance of Wachovia Securities. Representatives from Wachovia Securities offered their view on the revised Leveraged Recapitalization proposal and representatives from Wachtell Lipton advised the board of directors on legal matters pertaining to the Leveraged Recapitalization. The board then excused Wachovia Securities from the meeting and discussed the proposed Leveraged Recapitalization. During these discussions, some directors expressed concern regarding the assumptions on which Wachovia Securities had premised its conclusions regarding the Leveraged Recapitalization, including the Company’s ability to achieve even the Leveraged Recapitalization’s “base case plan,” particularly in light of uncertainty in OSI’s prospects in an increasingly competitive industry and management’s failure over successive quarters to meet its internal financial projections and business plan. The board also discussed the risks associated with purchasing OSI stock at its current market price in the event that the recent decline of OSI’s stock price continued. Thereafter, Wachtell Lipton summarized the August 8 and August 11 letters from Bain/Catterton, and Mr. Allen gave a description of management’s due diligence discussions with Bain/Catterton to date. The directors discussed with Mr. Allen and Mr. Avery their views on the achievability of management’s five-year business plan if the Leveraged Recapitalization were pursued. Mr. Sullivan then informed the board of directors of his concerns regarding the Leveraged Recapitalization as proposed, and particularly his concerns regarding the assumptions on which the proposal was premised. He informed the board that he favored continuing the discussions with Bain/Catterton as being in the best interests of OSI’s stockholders and requested that the board consider the formation of a special committee of independent directors to consider a potential transaction with Bain/Catterton.
 
A director then requested an executive session of the board with Wachtell Lipton, and members of management, the non-independent directors (consisting of Mr. Allen, Mr. Sullivan, Mr. Basham and Mr. Selmon) and Mr. Gannon were excused from the meeting. In the executive session, OSI’s independent directors (consisting of John A. Brabson, Jr., W.R. Carey, Jr., Debbi Fields, Gen. (Ret.) Tommy Franks, Thomas A. James and Toby S. Wilt), with the assistance of Wachtell Lipton, discussed, among other things, management’s potential conflict of interest in the proposed transaction with Bain/Catterton, management’s ability successfully to effectuate the five-year business plan, the potential purchase price indicated by Bain/Catterton and whether in light of the circumstances the proposed going private transaction could be in the best interests of OSI’s stockholders. The directors present in the executive session concluded that Bain/Catterton’s $37.50 proposed purchase price did not provide sufficient value to stockholders as compared to other alternatives, including a Leveraged Recapitalization, and that, unless Bain/Catterton was prepared to propose a higher price, forming a special committee of the board to further consider the proposal was not warranted at that time. The full board then reconvened and, after discussion, agreed that management would inform Bain/Catterton that the proposed purchase price was inadequate. Management was further instructed that after such conversation management should not have any further discussions with Bain/Catterton and should proceed with development of a Leveraged Recapitalization.
 
On August 17, 2006, the board of directors received a revised indication of interest from Bain/Catterton expressing a willingness, if requested by the board of directors, to submit a firm proposal to acquire all of the outstanding common stock of OSI at a price of $38.50 per share in cash, subject to certain terms and conditions. This revised price represented a premium of 32% to the closing price of OSI’s common stock on August 16, 2006. Bain/Catterton also expressed a willingness to discuss other potential transactions with OSI, including participation in an alternative transaction in connection with the Stockholder Value Initiative.


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On August 18, 2006, the board of directors of OSI held a telephonic meeting to consider the revised indication of interest from Bain/Catterton. During the meeting, Wachovia Securities presented a preliminary valuation analysis to an executive session of the board, comprised of all the independent directors of OSI (consisting of Mr. Brabson, Mr. Carey, Ms. Fields, Gen. (Ret.) Franks, Mr. James and Mr. Wilt), as well as representatives of Wachtell Lipton. Such analysis had been prepared by Wachovia Securities solely for the benefit of the independent directors and had not been shared with management or the other directors. The valuation analysis presented was based on management’s projections and included several different methodologies, each of which derived a range of implied enterprise values for OSI as reflected by either a multiple to estimated earnings before interest, taxes, depreciation and amortization for the last 12 months, subject to certain adjustments provided by management (“LTM EBITDA”) or as an implied price per share. The first analysis presented was a “leveraged buyout analysis” which ascertains the price at which an acquisition of a company may be attractive to a potential financial buyer. The leveraged buyout analysis included a valuation range of $34.93 to $43.49 per share. The second analysis presented was a “comparable companies analysis” which attempts to provide an implied value of a company by comparing it to similar publicly traded companies. The comparable companies analysis yielded a median enterprise value to LTM EBITDA multiple of approximately 7.7x as reflected in the share prices and net debt of publicly traded peers as stated at the time of the presentation in public filings. The third analysis presented was a “comparable transactions analysis” which generates an implied value of a company based on publicly available financial terms of selected comparable change of control transactions involving companies that share certain characteristics with the company being valued. The comparable transactions analysis yielded a median enterprise value to LTM EBITDA multiple of approximately 7.2x among recent change of control transactions involving similar companies to OSI. The fourth analysis presented was a “discounted cash flow analysis.” The discounted cash flow analysis attempts to establish the intrinsic value of the operating assets of a company by applying a discount rate derived from the company’s weighted average cost of capital to determine the present value of each of the free cash flows of the business over the projection period and the terminal value of the business beyond the provided projection horizon. The terminal value is derived from either a “terminal multiple,” which represents a multiple of EBITDA at the final year of the projection horizon, or an applied “perpetuity growth rate,” which represents the nominal rate at which the company’s free cash flow is expected to grow annually. The discounted cash flow analysis included a valuation range of approximately $3.7 billion to $4.3 billion, or approximately $46.00 to $53.00 per share, which assumed that management’s projections would be achieved and a weighted average cost of capital ranging from 8-10% (which range was estimated by Wachovia Securities based upon its professional judgment), terminal multiples ranging from 6.5x to 8.5x, and perpetuity growth rates ranging from 1.5% to 3.5%. The final analysis presented was a “transaction premiums paid analysis” which reviewed the control premiums paid or payable in certain change of control transactions involving publicly traded target companies in order to compare the premium paid over the company’s present and historical share prices to that paid in past transactions. The transaction premiums paid analysis yielded median one-day prior, one-week prior and four-weeks prior offer premiums paid or payable of 20.2%, 21.1% and 24.6%, respectively. At no point during this, or any subsequent, presentation did Wachovia Securities recommend or determine a price to be paid for the shares of OSI to be purchased in the transaction.
 
After the representatives from Wachovia Securities presented their analysis, they excused themselves from the meeting. The independent directors, among themselves and with Wachtell Lipton, then discussed whether they should recommend to the board of directors the formation of a special committee to evaluate the revised Bain/Catterton proposal. The independent directors discussed, among other things, the impact of the formation of a special committee on a Leveraged Recapitalization and the business of OSI and whether the proposed transaction could be in the best interests of OSI’s stockholders. Wachtell Lipton read and explained draft resolutions regarding the formation of a special committee. The independent directors then discussed whether it was desirable to form a special committee in light of the revised Bain/Catterton proposal. Following this discussion, the independent directors by a vote of 5-1 (with Ms. Fields voting against) voted to approve the resolutions forming a special committee as presented. Thereafter, the full board was reconvened and, after a discussion of the actions taken by the independent directors, the full board, by a vote of 9-0 (with Ms. Fields abstaining), adopted the resolutions approved by the independent directors. In the meeting of independent directors, Ms. Fields voted against approving the resolutions providing for the formation of the special committee and in the meeting of the board of directors she abstained, based on her preference for the Company to pursue operational matters and a Leveraged Recapitalization, in light of her concern that management might otherwise be distracted from those pursuits. She indicated,


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though, that she wanted to serve on the special committee if it were to be formed. As a result, a special committee was delegated with full power and authority to, among other things, review, evaluate and, if appropriate, negotiate a possible acquisition of OSI by Bain/Catterton and any alternatives thereto and also to reject or recommend to the full board of directors a proposed transaction with Bain/Catterton and/or any alternatives thereto. Management was also instructed that all communications between management and Bain/Catterton would be overseen by the special committee and its legal and financial advisors and that management should not discuss with Bain/Catterton the terms on which they might participate in the proposed transaction until authorized to do so by the special committee.
 
Following adjournment of the board meeting, the newly constituted special committee met and appointed Mr. Wilt and Mr. James as its co-chairmen and selected Wachtell Lipton as its legal counsel. The special committee also discussed the engagement of financial advisors. It was agreed that, because of its familiarity with OSI, Wachovia Securities was in the best position to advise the special committee and opine as to fairness of any transaction, and also that it might be desirable to obtain an additional opinion from a second firm that had not previously done any work for OSI.
 
On September 9, 2006, the special committee, following discussion, concluded that Wachovia Securities should be retained and that a second investment bank should also be retained that should receive a single fee conditioned on the rendering of any opinion on the transaction and that such fee should not be contingent upon future events, including the execution of a merger agreement or the closing of a merger. See “Special Factors — Opinion of Wachovia Capital Markets, LLC — Miscellaneous” on page 50 and “Special Factors — Opinion of Piper Jaffray & Co. — Miscellaneous” beginning on page 56.
 
On September 12, 2006, Pirate amended its previously filed Schedule 13D to disclose that funds controlled by it no longer owned any outstanding shares of OSI. According to Pirate’s Schedule 13D Amendment, Pirate sold its shares in July and August of 2006.
 
On September 15, 2006, the special committee held a telephonic meeting to further consider the August 17, 2006, Bain/Catterton revised indication of interest expressing a willingness, if requested by the board of directors, to submit a firm proposal to acquire all of the outstanding common stock of OSI at a price of $38.50 per share in cash. At the meeting, representatives of Wachovia Securities presented a valuation analysis updated from the August 18 presentation, provided a summary of the Bain/Catterton revised indication of interest and a summary of a Leveraged Recapitalization alternative. Wachovia Securities’ presentation included the same five analyses presented at the August 18 meeting, which were a “leveraged buyout analysis,” a “comparable companies analysis,” a “comparable transactions analysis,” a “discounted cash flow analysis” and a “transaction premiums paid analysis.” The leveraged buyout analysis was updated to reflect revisions to the projections and other financial and operating information provided by management. The revisions to management’s financial projections were provided for the reasons, and reflected the information, discussed under “Financial Forecast” beginning on page 182. The revised leveraged buyout analysis based on management’s revised projections included a valuation range of $36.29 to $44.71 per share. The comparable companies analysis was updated to reflect publicly available information regarding comparable companies. The revised comparable companies analysis yielded a median enterprise value to LTM EBITDA multiple of approximately 8.4x as reflected in the share prices and net debt of publicly traded peers as stated at the time of the presentation in public filings. The comparable transactions analysis was updated to reflect publicly available information regarding comparable transactions. The revised comparable transactions analysis yielded a median enterprise value to LTM EBITDA multiple of approximately 7.0x among recent change of control transactions involving similar companies to OSI. The discounted cash flow analysis was updated to reflect management’s revised projections and other financial and operating information provided by management. The revised discounted cash flow analysis yielded a valuation range of approximately $3.8 billion to $4.3 billion, or approximately $47.00 to $53.00 per share, which assumed that management’s “base case plan” projections would be achieved and a weighted average cost of capital ranging from 8-10% (which range was estimated by Wachovia Securities based upon its professional judgment), terminal multiples ranging from 6.5x to 8.5x, and perpetuity growth rates ranging from 1.5% to 3.5%. The transaction premiums paid analysis was unchanged from the August 18 presentation and yielded median one-day prior, one-week prior and four-weeks prior offer premiums paid or payable of 20.2%, 21.1% and 24.6%, respectively. Thereafter, the special committee discussed the revised Bain/Catterton indication of interest, including, among other things, the benefits and risks of conducting a public auction for OSI. The special committee noted the following risks associated with an auction process: the risk that Bain/


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Catterton might choose not to enter into the auction, the risk that no bidder would come forward in the auction process and the risk that the auction process could significantly disrupt OSI and its operations. The special committee, after discussion with its legal and financial advisors, concluded that the Company could effectively conduct an auction process that minimized these risks by utilizing a post-signing market check. Therefore, the special committee concluded that it would be advisable, in the event the Bain/Catterton indication of interest matured into a definitive agreement, to conduct a post-signing market check, including actively soliciting potential buyers.
 
After further discussion of the Wachovia Securities presentation, it was the consensus of the special committee that the $38.50 proposed purchase price was inadequate. The special committee therefore determined that Mr. James and Mr. Wilt and Wachovia Securities would convey its conclusion to Bain/Catterton as well as inform OSI’s management to proceed with the further development of a Leveraged Recapitalization.
 
Thereafter, representatives of Wachovia Securities and Mr. James contacted Bain/Catterton to indicate that the $38.50 proposed purchase price was inadequate. They indicated that OSI was prepared to move forward with its Stockholder Value Initiative unless a higher value was offered by Bain/Catterton.
 
On September 26, 2006, at the request of Bain/Catterton, Wachtell Lipton and members of OSI’s senior management met with Bain/Catterton in Boston and provided certain information concerning OSI’s cost reductions, marketing plan and comparable sales. On September 27, 2006, Ropes & Gray LLP (“Ropes & Gray”), legal advisors to Bain/Catterton, requested legal diligence from Wachtell Lipton for the period since August 11, 2006. Following that meeting, on October 2, 2006, representatives of Bain/Catterton informed Wachovia Securities that they would be willing, if requested by the special committee, to submit a firm proposal to acquire all of the outstanding common stock of OSI at an increased price of $39.50 per share in cash. After consulting with the co-chairs of the special committee, Wachovia Securities informed Bain/Catterton that they were disappointed with the $39.50 value proposed and requested that Bain/Catterton submit its “best and final” proposal, recognizing that if the value was not sufficient from the special committee’s perspective, discussions between the special committee and Bain/Catterton would likely be terminated.
 
On October 4, 2006, representatives of Bain/Catterton informed Wachovia Securities that they would be willing, if requested by the special committee, to submit a firm proposal to acquire all of the outstanding common stock of OSI at an increased price of $40.00 per share in cash. In response to questions from Wachovia Securities, a representative of Bain/Catterton indicated that $40.00 per share was the highest value Bain/Catterton would be willing to offer.
 
On October 9, 2006, the special committee held a telephonic meeting to consider Bain/Catterton’s increased price of $40.00 per share. At the meeting, Wachtell Lipton described the material terms of Bain/Catterton’s revised indication of interest reflecting a proposed value of $40.00 per share in cash, and Wachovia Securities provided an updated valuation analysis and a summary of a Leveraged Recapitalization alternative. Wachovia Securities’ presentation included the same five analyses presented at the August 18 and September 15 meetings, which were a “leveraged buyout analysis,” a “comparable companies analysis,” a “comparable transactions analysis,” a “discounted cash flow analysis” and a “transaction premiums paid analysis.” The leveraged buyout analysis was updated to reflect revisions to the projections and other financial and operating information provided by management. The revisions to management’s financial projections were provided for the reasons, and reflect the information, discussed under “Financial Forecast” beginning on page 182. The revised leveraged buyout analysis based on management’s revised projections included a valuation range of $37.48 to $42.53 per share. The comparable companies analysis was updated to reflect publicly available information regarding comparable companies. The revised comparable companies analysis yielded a median enterprise value to LTM EBITDA multiple of approximately 8.7x as reflected in the share prices and net debt of publicly traded peers as stated at the time of the presentation in public filings. The comparable transactions analysis was updated to reflect publicly available information regarding comparable transactions. The revised comparable transactions analysis yielded a median enterprise value to LTM EBITDA multiple of approximately 7.2x among recent change of control transactions involving similar companies to OSI. The discounted cash flow analysis was updated to reflect management’s revised projections and other financial and operating information provided by management. The revised discounted cash flow analysis included a valuation range from the analysis of $39.08 to $51.21 per share,


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which assumed that management’s most recently provided base case projections would be achieved, terminal multiples ranging from 6.5x to 7.5x, and perpetuity growth rates ranging from 1.5% to 2.5%. The revised discounted cash flow analysis also included a valuation range from the analysis of $34.19 to $44.87 per share, which assumed downside scenario projections provided by management would be achieved, terminal multiples ranging from 6.0x to 7.0x, and perpetuity growth rates ranging from 1.5% to 2.5%. Both discounted cash flow analyses assumed a weighted average cost of capital of 9-10% (which range was estimated by Wachovia Securities based upon its professional judgment). The transaction premiums paid analysis was unchanged from the August 18 and September 15 presentations and yielded median one-day prior, one-week prior and four-weeks prior offer premiums paid or payable of 20.2%, 21.1% and 24.6%, respectively. Following Wachovia Securities’ presentation, the directors asked the representatives from Wachovia Securities and Wachtell Lipton to leave the meeting so that they could discuss the revised proposal and Wachovia Securities’ presentation in an executive session.
 
On October 10, 2006, the special committee held a telephonic meeting to further consider the revised Bain/Catterton $40.00 indication of interest. The directors discussed in particular whether the merger consideration proposed by Bain/Catterton would result in greater value to OSI’s stockholders than pursuing management’s five-year business plan and undertaking a Leveraged Recapitalization. It was agreed that Mr. Wilt and Mr. James should request that Bain/Catterton increase their proposed purchase price above $40.00 per share.
 
On or about October 11, 2006, Mr. Wilt and Mr. James held a discussion with representatives of Bain/Catterton. Mr. Wilt and Mr. James requested that Bain/Catterton increase their proposed purchase price above $40.00 per share. The representatives of Bain/Catterton expressed their firm view that Bain/Catterton would not increase their proposed purchase price above $40.00 per share.
 
On October 14, 2006, Wachtell Lipton, on behalf of the special committee, delivered an initial draft merger agreement to Ropes & Gray. On October 16, 2006, Ropes & Gray delivered suggested revisions to the draft merger agreement. This draft confirmed that there would not be a financing condition to the proposed merger, as requested, and that many of the other terms presented in the initial draft, including the ability to solicit other buyers after the definitive agreement was executed, would be acceptable. Throughout October 2006, negotiations between Wachtell Lipton and Ropes & Gray regarding the draft merger agreement progressed. Baker & Hostetler LLP, counsel to OSI, began the process of preparing disclosure schedules for the draft merger agreement. Initial drafts of these schedules were furnished to Ropes & Gray on October 21, 2006.
 
On October 16, 2006, Mr. James contacted a representative of Piper Jaffray to determine whether they would be available to render a fairness opinion to the special committee if requested. The special committee chose to retain Piper Jaffray based upon Piper Jaffray’s experience in the valuation of businesses and their securities in connection with mergers and acquisitions and similar transactions, especially with respect to restaurant enterprises. The special committee also considered that Piper Jaffray had no material prior relationship with OSI or its affiliates and would be able to devote the resources required to render a fairness opinion. See “Special Factors — Opinion of Piper Jaffray & Co.” on page 50.
 
On October 19, 2006, at the request of Bain/Catterton, the special committee authorized the OSI Investors to discuss with Bain/Catterton the terms on which they might participate with Bain/Catterton in the proposed transaction so long as (i) the special committee and its advisors were fully apprised as to any discussions or negotiations and were provided with copies of all documents exchanged between the parties and (ii) the OSI Investors did not enter into any arrangements with Bain/Catterton that would restrict them from supporting any other party that was willing to pay more than the amount proposed by Bain/Catterton. Thereafter, Mr. Sullivan, Mr. Basham and Mr. Gannon engaged Kirkland & Ellis LLP (“Kirkland & Ellis”), and Mr. Allen, Mr. Avery, Mr. Kadow and Mr. Montgomery engaged Cleary, Gottlieb, Steen & Hamilton (“Cleary Gottlieb”), to act as their legal advisors in connection with the proposed transaction. Through the remainder of October 2006, Kirkland & Ellis and Cleary Gottlieb separately negotiated with Ropes & Gray term sheets summarizing the terms of the arrangements of the OSI Investors represented by them, including employment terms, investment commitment, incentive equity and representation on the board of directors of Parent. Bain/Catterton did not request that the OSI Investors, or any other stockholders of the Company, enter into voting arrangements that would have required the OSI Investors to vote in favor of a Bain/Catterton transaction, although other public company transactions often


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include such arrangements. Such voting arrangements could have restricted the OSI Investors from supporting any other party that was willing to pay more than the amount proposed by Bain/Catterton.
 
On October 21, 2006, Ropes & Gray delivered to Wachtell Lipton an initial draft of a limited guaranty to be entered into by the funds sponsored by Bain Capital and Catterton Partners that would participate in the proposed transaction.
 
On October 22, 2006, the special committee held a meeting by telephone. The meeting was attended by representatives of Wachtell Lipton, Wachovia Securities and Piper Jaffray. During the meeting, Wachtell Lipton reviewed with the special committee the terms of the draft merger agreement and the issues in the draft merger agreement that remained open, including Bain/Catterton’s proposal with respect to the treatment of OSI’s stock options and stock-based awards, whether a unanimous vote of the special committee would be a condition of the proposed transaction, whether OSI would be permitted to pay dividends through the closing of the proposed transaction and whether it would be a condition to the closing of the proposed transaction that the approval of OSI’s stockholders be obtained without taking into account the vote of shares held by the OSI Investors. Wachtell Lipton also discussed with the special committee the amount and triggers for the termination fees proposed by Bain/Catterton and contrasted them with the amount and triggers proposed initially by the special committee. The special committee also addressed the length of the proposed post-signing “go-shop” period. The special committee discussed the open issues in the draft merger agreement and gave guidance to Wachtell Lipton as to how to respond to such issues.
 
On October 22, 2006, the special committee formally engaged Piper Jaffray to render a fairness opinion to the special committee, should the committee so request. In retaining Piper Jaffray to render such opinion, the special committee was aware that Piper Jaffray is a large, global, full-service financial institution that had, in the past, rendered services to Bain Capital and certain of its affiliates and had received fees in respect of such prior services. Prior to entering into the engagement, Piper Jaffray performed a customary conflicts check to ensure that it was not presently rendering any services to Bain Capital, Catterton or any of their respective affiliates, or any other person or entity that might give rise to a conflict of interest in connection with its role as financial advisor to the special committee. To further ensure the independence of Piper Jaffray’s analysis, payment of fees to Piper Jaffray under the engagement letter was not contingent upon the execution of the merger agreement or the closing of the merger.
 
On October 23, 2006, Wachtell Lipton delivered a revised draft of the merger agreement to Ropes & Gray on behalf of the special committee. Wachtell Lipton also delivered comments on the limited guaranty proposed by Bain/Catterton. In connection with providing the revised draft to Ropes & Gray, which proposed the deletion of a representation that the special committee unanimously voted to recommend the transaction, Wachtell Lipton communicated to Bain/Catterton that there might not be a unanimous view of the members of the special committee with respect to the proposed transaction.
 
On October 23, 2006, OSI’s audit committee held a meeting by telephone that was attended by representatives from PricewaterhouseCoopers LLP, OSI’s independent registered certified public accounting firm (“PricewaterhouseCoopers”). At the meeting, Mr. Montgomery and PricewaterhouseCoopers discussed with the committee members, including Mr. Brabson, Mr. Carey and Mr. James, all of whom were also members of the special committee, that OSI’s management had discovered an understatement in OSI’s accounting treatment of unearned revenue for unredeemed gift cards and certificates as of September 30, 2006. Mr. Montgomery explained to the committee that OSI’s management and PricewaterhouseCoopers were investigating the scope of the understatement and were determining whether OSI would need to delay issuing its third-quarter earnings. The audit committee asked Mr. Montgomery and PricewaterhouseCoopers to report back to the audit committee as soon as possible.
 
On October 23, 2006, the members of the special committee had dinner together, without advisors present, to discuss the proposed transaction. At the dinner, among other matters, the special committee also discussed the understatement in OSI’s liability for unearned revenue for unredeemed gift cards and certificates. Following conclusion of the dinner, the co-chairs of the special committee updated Wachtell Lipton as to the various matters discussed at the dinner.
 
On October 24, 2006, an in-person meeting of the board of directors was held. At the meeting Mr. James, chairman of the audit committee, briefed the board of directors on Mr. Montgomery’s and PricewaterhouseCoopers’


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presentation to the audit committee the previous day, explaining that OSI’s management estimated that the apparent understatement was approximately $20,000,000 to $40,000,000. Mr. James also noted the possibility that OSI would need to delay issuing its third-quarter earnings as well as the possibility of a restatement being required. After discussion, the board delegated to the audit committee full authority to investigate the matter as well as make any decisions regarding delaying announcement of OSI’s third-quarter earnings.
 
On October 24, 2006, the special committee held a meeting, with most of the members of the special committee attending in person. The meeting was attended by representatives of Wachtell Lipton, Wachovia Securities and Piper Jaffray. During the meeting, Wachtell Lipton reviewed with the special committee the status of negotiations with Bain/Catterton on the draft merger agreement, including provisions respecting the treatment of OSI’s stock options and stock-based awards and the proposed termination fees. The special committee discussed the open issues in the draft merger agreement and gave guidance to Wachtell Lipton as to how to respond to such issues. The open issues discussed were: (i) the treatment of the Company’s stock options and stock-based awards, (ii) whether a unanimous vote of the committee would be a requirement of the proposed transaction, (iii) whether the Company would be permitted to pay dividends through the closing of the proposed transaction and (iv) whether it would be a condition to the closing of the proposed transaction that the approval of the Company’s stockholders be obtained without taking into account the vote of the shares held by Founders and management participating in the proposed transaction with Bain/Catterton. The special committee also discussed the issues raised at the board meeting earlier in the day regarding the possibility of a restatement being required with respect to its accounting treatment of unearned revenue for unredeemed gift cards and certificates having been understated. The special committee directed Wachovia Securities and Wachtell Lipton to ensure that Bain/Catterton was made fully aware of the issues discussed at the board meeting the previous day, as well as any updates, and that the fact that they had been made so aware was appropriately reflected in the definitive documentation to be considered in connection with the proposed transaction. Wachovia Securities and Wachtell Lipton therefore promptly provided Bain/Catterton and its accounting and legal advisors with information relating to these issues and gave Bain/Catterton full opportunity to conduct due diligence on them, which due diligence included several discussions between Bain/Catterton and its advisors and OSI and PricewaterhouseCoopers.
 
On October 25, 2006, the audit committee held a telephonic meeting to further consider OSI’s liability for unearned revenue for unredeemed gift cards and certificates. After discussion, the audit committee determined that OSI should delay releasing its third-quarter earnings.
 
Later that afternoon, OSI publicly announced that it was delaying its third-quarter earnings release because it had preliminarily determined that its liability for unearned revenue for unredeemed gift cards and certificates as of September 30, 2006, was understated by an estimated $20,000,000 to $40,000,000, based on an accounting method under which OSI would recognize income in proportion to redemptions as they occur for an estimate of the gift cards and certificates that will never be redeemed. See “Information About OSI — Financial Statements” on page 119.
 
On October 25, 2006, Ropes & Gray delivered a revised draft of the merger agreement and limited guaranty, together with drafts of Parent’s disclosure schedules, to Wachtell Lipton.
 
On October 26, 2006, the special committee held a meeting by telephone during which representatives of Wachtell Lipton reviewed with the special committee the terms of the draft merger agreement and the issues in the draft that remained open, including the treatment of OSI’s stock options and stock-based awards, whether a unanimous vote of the special committee would be a requirement of the proposed transaction, whether OSI would be permitted to pay dividends through the closing of the proposed transaction and whether it would be a condition that the approval of OSI’s stockholders be obtained without taking into account the vote of shares held by the OSI Investors. The special committee also further discussed the possibility of a restatement being required with respect to OSI’s accounting treatment of unearned revenue for unredeemed gift cards and certificates.
 
On October 26, 2006, Mr. James on behalf of the special committee executed an engagement letter with Wachovia Securities containing the terms of its service as a financial advisor to the special committee.
 
From October 27, 2006 through October 28, 2006, Wachtell Lipton and Ropes & Gray continued to negotiate the draft merger agreement, and Kirkland & Ellis and Cleary Gottlieb separately negotiated with Ropes & Gray


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summary term sheets with respect to the OSI Investors’ arrangements. During its negotiations with Ropes & Gray, Wachtell Lipton informed Ropes & Gray that no assurance could be given that the proposal would, in the event it was approved, receive the unanimous support of the special committee, and indicated that a higher proposed purchase price from Bain/Catterton could alter this result. In response, Ropes & Gray indicated that Bain/Catterton was only willing to proceed with a transaction that would receive the unanimous support of the members of the special committee.
 
On October 27, 2006, materials regarding the proposed transaction were delivered to the members of the special committee and members of the board of directors in advance of the special committee and board of directors meetings scheduled for October 29, 2006.
 
On October 27 and 28, 2006, various members of the special committee had individual discussions with each other regarding the proposed transaction being negotiated with Bain/Catterton. In addition, the co-chairs of the special committee as well as several special committee members had discussions with Wachtell Lipton regarding the proposed transaction. On October 28, Wachtell Lipton held discussions with Kirkland & Ellis and Ropes & Gray regarding issues surrounding the potential lack of unanimity by the special committee.
 
On October 29, 2006, the special committee met to consider the proposed transaction. Wachtell Lipton confirmed to the special committee that the merger agreement had been fully negotiated and was now in final form, explaining the resolution of all previously open issues in the merger agreement, including that (i) liability under the limited guarantees would be capped at $215,000,000; (ii) OSI would be allowed to pay dividends through closing of the proposed transaction; (iii) OSI’s undisclosed liabilities representation would be subject to a generally accepted accounting principles (“GAAP”) standard; (iv) it would be a condition to the proposed transaction that a majority of the stockholders of OSI voted for the transaction, exclusive of shares held by the OSI Investors; and (v) any liability related to the understatement in liability for unredeemed gift cards and certificates would be a liability of the surviving corporation. The special committee was informed that Bain/Catterton had stated that it was not prepared to proceed with the transaction unless the special committee was able unanimously to approve and recommend the merger agreement. After discussion, the special committee reached a consensus that it would not be able to deliver a unanimous approval as at least three directors, Ms. Fields, Mr. James and General (Ret.) Franks, indicated that they had reservations regarding the transaction as then proposed, expressing or agreeing with the view that a Leveraged Recapitalization could have the potential to provide more value to stockholders than the proposed Bain/Catterton transaction. The special committee then requested that Mr. Sullivan and Mr. Allen join the special committee meeting and they were informed of the special committee’s consensus decision. Following these discussions, Mr. Sullivan and Mr. Allen left the meeting of the special committee. The special committee then requested that Wachtell Lipton contact Ropes & Gray promptly to report the special committee’s conclusion. Prior to adjournment, the special committee ratified the engagement letters entered into with Wachovia Securities and Piper Jaffray. The board of directors meeting that had been called to consider the proposed transaction was then canceled.
 
Immediately following the conclusion of the special committee meeting, Wachtell Lipton contacted Ropes & Gray to indicate that the special committee had reached a consensus that it would not be able to deliver a unanimous approval and recommendation for the proposed merger agreement. Ropes & Gray informed Wachtell Lipton that Bain/Catterton was not at the time prepared to proceed with any transaction that did not receive the unanimous support of the members of the special committee and that Bain/Catterton was not prepared to increase its proposed purchase price of $40.00 per share.
 
On October 31, 2006, the special committee held a meeting by telephone to discuss communications that had taken place between certain members of the special committee and Wachtell Lipton, on the one hand, and certain members of management and the Founders, on the other hand. The special committee was informed that after the October 29, 2006 special committee meeting, Mr. Sullivan had contacted Mr. Wilt to express his disappointment with the special committee’s decision not to approve the Bain/Catterton transaction, as proposed, and to reiterate his view that a Bain/Catterton transaction was in the best interests of OSI’s stockholders. Mr. Sullivan also stated that he believed Mr. Avery would consider resigning from his position at OSI if a transaction with Bain/Catterton were not completed. The special committee was also informed that Mr. Allen had also contacted Mr. Wilt to express Mr. Allen’s view that a Bain/Catterton transaction was in the best interests of OSI’s stockholders. In this conversation, Mr. Allen had also indicated his view that it would be inappropriate to pursue a Leveraged Recapitalization, should the board decide to pursue one, without fully disclosing to the Company’s stockholders


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the terms of the Bain/Catterton proposal, including the $40.00 per share offer price (which was likely to be above the price per share offered in any repurchase of shares undertaken in connection with a Leveraged Recapitalization). Mr. Allen had also explained his belief that the Company was at risk of losing Mr. Avery if a transaction with Bain/Catterton were not pursued due to the Company’s inability, so long as it remained a public company, to compensate Mr. Avery at a level sufficient to cause him to continue his employment, noting that, beginning in 2005, management had requested that the board address the long-term compensation of Mr. Avery but that these requests had not been addressed. Mr. Allen, together with Mr. Kadow, repeated these views in separate conversations with each member of the special committee and in a conversation with Wachtell Lipton. The special committee was also informed that Mr. Allen and Mr. Kadow had mentioned to Wachtell Lipton that if the Bain/Catterton transaction were not pursued it was possible that one or more Founders could resign, which could have an adverse impact on the Company. Following discussion of these matters, the special committee determined that the views expressed by Mr. Sullivan, Mr. Allen and Mr. Kadow should not be considered in connection with the special committee’s consideration of the merits of alternative courses of action for the Company, but rather that the special committee should make its own determination of what was in the best interests of OSI’s stockholders, based on its own views and knowledge of the Company and the analyses provided by the special committee’s advisers. On that basis, the special committee determined not to reconsider the proposed transaction with Bain/Catterton.
 
On November 1, 2006, the special committee held a meeting by telephone to further discuss the communications described above. After a full discussion in which Wachtell Lipton participated, the special committee affirmed its conclusion of October 31 that the special committee would not reconsider the proposed transaction with Bain/Catterton. The special committee decided that representatives of the special committee should meet with members of the Company’s senior management to focus on alternatives to the proposed Bain/Catterton transaction.
 
On November 2, 2006, Mr. Brabson, General (Ret.) Franks, Mr. James and Mr. Wilt discussed with Mr. Allen and Mr. Montgomery the business prospects of OSI and the issues facing OSI, including operational, management and accounting concerns. Mr. James and Mr. Wilt then requested that the Chairman of the Board, Mr. Sullivan, convene a special meeting of the board to discuss the strategic direction of OSI and possible alternatives to be pursued.
 
On November 2, 2006, the members of the special committee had dinner together to discuss the business prospects of OSI and the issues facing OSI. Following the conclusion of the dinner, the co-chairs and Gen. (Ret.) Franks contacted Wachtell Lipton to discuss certain matters raised at the dinner and potential next steps.
 
Also on November 2, 2006, Ropes & Gray contacted Wachtell Lipton to inform them that Bain/Catterton was potentially willing to proceed with the proposed transaction even if the recommendation of the special committee was not unanimous, subject to certain modifications to the proposed merger agreement. These modifications included an additional condition to closing in the event of perfection of dissenters’ rights by a specified percentage of OSI stockholders and a modification to the conditions so that the votes of the OSI Investors would be counted for purposes of determining whether the condition that a majority of the stockholders of OSI voted for the transaction had been satisfied. Finally, Bain/Catterton proposed that they receive reimbursement of their expenses in the situation where the OSI stockholders turned down the proposed merger. Following consultation with the special committee, Wachtell Lipton informed Ropes & Gray that none of the proposed changes to the draft merger agreement would be acceptable to the special committee.
 
On November 2, 2006, Mr. Montgomery also contacted Mr. James in his capacity as Chairman of the audit committee and reported that, in the course of evaluating OSI’s accounting for unredeemed gift cards, OSI’s management had identified additional potentially significant concerns related to OSI’s accounting for leases, minority partner interests, certain other equity accounts and gift card incentive expenses that could result in adjustments to OSI’s financial statements. In addition, Mr. Montgomery explained that OSI’s liability for unearned revenue for unredeemed gift cards and certificates, which was initially estimated to have been understated by approximately $20,000,000 to $40,000,000, could in fact be understated by approximately $50,000,000 to $70,000,000. As a result, Mr. Montgomery explained that, although a final determination had not been made, OSI would most likely need to restate its historical financial statements and was likely to delay filing its Form 10-Q for the fiscal quarter ending September 30, 2006 for an indeterminate period. Mr. Montgomery also reported that PricewaterhouseCoopers agreed with management’s assessment, subject to completion of their audit procedures, which were underway. In light of these matters, the board of directors meeting to discuss the strategic direction of OSI was canceled.


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On November 3, 2006, the special committee held a telephonic meeting with Wachtell Lipton to discuss the additional accounting concerns described above as well as the increased likelihood that OSI would need to restate its historical financial statements, the uncertainty as to when such a restatement could be completed and the potential that additional accounting concerns could be identified in the course of further investigating the Company’s accounting practices. The special committee acknowledged, among other concerns, the likelihood that, following the public announcement of the additional accounting concerns and any restatement, OSI’s stock price would be adversely affected and that OSI would be unable timely to file its Form 10-Q for the fiscal quarter ending September 30, 2006. Following discussion in which Wachtell Lipton participated, it was the consensus of the special committee that the additional accounting concerns and the likelihood of a restatement substantially increased the level of execution risk, and decreased the likelihood of successful completion, of any Leveraged Recapitalization or other similar transaction. The special committee noted in particular that the accounting concerns identified, and any additional accounting concerns that might be identified in the course of further investigating OSI’s accounting practices, could result in the financial statements necessary for raising the financing required for any Leveraged Recapitalization either being delayed or not being available, and that such accounting concerns could adversely impact potential financing sources’ perception of OSI and their willingness to purchase debt or other securities of OSI in connection with the financing for any Leveraged Recapitalization. The special committee also noted that following announcement of any additional accounting concerns, OSI’s stock price was likely further to decline. As a result, the special committee concluded that it was appropriate to reevaluate the proposed Bain/Catterton transaction under the then-current circumstances. The special committee therefore requested that Wachtell Lipton approach Bain/Catterton and its counsel, Ropes & Gray, to inform them of the additional accounting concerns identified and to confirm that the Bain/Catterton proposal, including the $40.00 per share proposed purchase price, was still available in light of those developments. Wachtell Lipton was authorized to inform Ropes & Gray that although no formal vote of the members of the special committee had been taken, the special committee now believed that it might reach a unanimous, favorable consensus with respect to the proposed transaction. Wachovia Securities and Piper Jaffray were also asked to be prepared to render their fairness opinions at a special committee meeting scheduled for November 5. Subsequent to the special committee meeting, the Chairman of the Board of OSI was asked to schedule a meeting of the board of directors should one be necessary following conclusion of the November 5 special committee meeting.
 
From November 3 through November 5, 2006, Wachtell Lipton and Ropes & Gray completed negotiating the remaining details of the merger agreement and, together with Baker & Hostetler LLP, the disclosure schedules, during which time Ropes & Gray confirmed that Bain/Catterton’s proposed purchase price of $40.00 per share would not be reduced. In addition, Kirkland & Ellis and Cleary Gottlieb finalized with Ropes & Gray their respective negotiations regarding the summary term sheets relating to the OSI Investors’ arrangements. Bain/Catterton and its advisors were also provided with the ability to perform additional due diligence with respect to the additional accounting items that had been identified.
 
On November 5, 2006, the special committee held a telephonic meeting to consider the proposed transaction. Representatives of Wachtell Lipton were in attendance and representatives of Wachovia Securities and Piper Jaffray joined the meeting to give their respective fairness opinion presentations. At the meeting, Wachtell Lipton summarized the terms of the proposed merger agreement, discussed considerations relating to Bain/Catterton’s proposed financing commitments for the transaction and discussed various other issues related to the proposed transaction under consideration. The special committee then received separate presentations from Wachovia Securities and Piper Jaffray on the financial aspects of the transaction. The analysis presented by Wachovia Securities was updated from the October 9 presentation to reflect revisions to the projections and other financial and operating information originally provided by management and publicly available information regarding comparable companies and comparable transactions. The revisions to management’s financial projections are discussed under “Financial Forecast” beginning on page 182. Each of Wachovia Securities and Piper Jaffray also delivered to the special committee their respective opinions that, as of November 5, 2006, and based on and subject to the various factors, assumptions and limitations set forth in its opinion, the $40.00 per share merger consideration to be received by holders of shares of OSI common stock was fair from a financial point of view to the holders of such shares, other than the OSI Investors. See “Special Factors — Opinion of Wachovia Capital Markets, LLC” and “Special Factors — Opinion of Piper Jaffray & Co.” After consideration and deliberation in which Wachtell Lipton, Wachovia Securities and Piper Jaffray participated, the special committee voted unanimously to declare it advisable


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and in the best interests of OSI and its stockholders for OSI to enter into the proposed merger agreement, approved and adopted the proposed merger agreement and determined to recommend the approval and adoption of the proposed merger agreement by the board of directors and by the stockholders of OSI.
 
Following the special committee meeting, a meeting of the compensation committee of the board of directors was held. The compensation committee approved amendments to OSI’s equity incentive plans that provided for the treatment of OSI’s stock options and stock-based awards as set forth in the Merger Agreement. The compensation committee also approved amendments to OSI’s employment agreements with Mr. Allen, Mr. Avery, Mr. Kadow and Mr. Montgomery providing for change in control severance benefits in the event of certain qualifying terminations of employment in connection with or following a merger. These amendments were approved in order to provide the executives an incentive to continue to be employed by OSI in the event an alternative proposal arose and was accepted during the solicitation period and in the event they were unable to enter into satisfactory employment arrangements with Bain/Catterton. See “Special Factors — Interests of Our Directors and Executive Officers in the Merger” beginning on page 65. These actions were also approved by the board of directors at the meeting discussed below.
 
Following the compensation committee meeting, a meeting of the entire board of directors was held. At the meeting, Wachtell Lipton explained that the special committee had unanimously declared it advisable and in the best interests of OSI and its stockholders for OSI to enter into the proposed merger agreement, approved and adopted the proposed merger agreement and had determined to recommend the approval and adoption of the proposed merger agreement by the board of directors and the stockholders of OSI. Wachtell Lipton then summarized the terms of the proposed merger agreement and discussed various other issues. At the meeting, the board received presentations from Wachovia Securities and Piper Jaffray on the financial aspects of the transaction. Each of Wachovia Securities and Piper Jaffray also described their respective fairness opinions that had been delivered to the special committee. Wachtell Lipton summarized the two fairness opinions and explained that although the two fairness opinions had been delivered to the special committee, the board was entitled to rely upon such opinions in connection with its evaluation of the proposed merger. After consideration and deliberation in which Wachtell Lipton, Wachovia Securities and Piper Jaffray participated, the board of directors (other than Mr. Sullivan, Mr. Basham, and Mr. Allen, each of whom is an OSI Investor and stands to individually benefit from the consummation of the transaction, and therefore abstained from voting), expressly adopted the unanimous recommendation of the special committee and determined that it was advisable and in the best interests of OSI and its stockholders for OSI to enter into the proposed merger agreement, approved and adopted the proposed merger agreement and the transactions contemplated by the proposed merger agreement, and determined to recommend the proposed merger agreement for adoption by OSI’s stockholders.
 
Following the board meeting, a telephonic meeting of the audit committee of the board of directors was held. At the meeting Mr. Montgomery and representatives from PricewaterhouseCoopers discussed with the audit committee OSI’s contemplated accounting restatement and related issues. The audit committee agreed that OSI would be required to restate its earnings and therefore its historical financial statements could no longer be relied upon. The audit committee also engaged an additional independent accounting firm to assist in the review being undertaken by management.
 
Following the end of the meeting of the audit committee, the proposed merger agreement, the financing commitments and the limited guarantees were executed and delivered and the summary term sheet with respect to their arrangements were entered into by each of the OSI Investors.
 
On the morning of November 6, 2006, OSI released a press release announcing the transaction. Separately, OSI announced that it would need to restate its consolidated financial statements to correct for the previously announced understatement in its liability for unearned revenue for unredeemed gift cards and certificates and for other errors in its financial statements, including deferred rent, minority interests in consolidated entities and additional paid-in capital. OSI further explained that, as part of the restatement, it had determined to recognize income for unredeemed gift cards and certificates that will never be redeemed at the time at which their redemption becomes remote and that, as a result of this correction in accounting methodology, OSI expected an adjustment to its unearned revenue liability of approximately $50,000,000 to $70,000,000 at September 30, 2006.


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Beginning on Monday, November 6, 2006, pursuant to the solicitation provisions set forth in Section 5.3(a) of the Merger Agreement, Wachovia Securities contacted certain potential acquirers that they had identified and discussed with the special committee. These potential acquirers were chosen on the basis of their likelihood of interest in participating in a transaction with the Company, their ability to consummate a transaction with the Company and/or their potential interest in the restaurant industry. During the “go-shop” period, Wachovia Securities contacted a total of 15 parties and three parties contacted Wachovia Securities. Five parties requested draft confidentiality agreements for the purpose of receiving access to confidential due diligence materials and, of those, two parties executed confidentiality agreements with OSI as the other three parties chose not to further pursue a transaction. Each of these two parties received preliminary due diligence materials promptly following the execution of their respective confidentiality agreements. Neither party indicated, prior to the end of the “go-shop” period, that it would be interested in making a proposal to acquire the Company at a price in excess of $40.00 per share. The “go-shop” period under the Merger Agreement ended at 11:59 p.m. (New York time) on December 26, 2006. Since the end of the “go-shop” period, no party has approached the special committee or the Company expressing an interest in pursuing a transaction to acquire the Company at a price in excess of $40.00 per share.
 
Beginning in October 2006, OSI conducted a review of its accounting policies for gift cards and certificates as well as certain other balance sheet accounts. On January 8, 2007, OSI filed an amendment to its Form 10-K for the fiscal year ended December 31, 2005, and filed its Form 10-Q for the fiscal quarter ended September 30, 2006, reflecting the restatement of its consolidated financial statements for certain prior periods based on that review. On January 17, 2007, OSI filed an amendment to its Form 10-Q for the fiscal quarter ended March 31, 2006, and an amendment to its Form 10-Q for the fiscal quarter ended June 30, 2006, reflecting the restatement of its consolidated financial statements for the periods covered by those reports based on that review.
 
Fairness of the Merger; Recommendations of the Special Committee and Our Board of Directors
 
In this section, we refer to our board of directors, other than Chris T. Sullivan, our Chairman of the Board, Robert D. Basham, our Vice Chairman of the Board, and A. William Allen, III, our Chief Executive Officer, each of whom abstained from voting on the merger, as the “Board.” The Board believes that the merger (which is the Rule 13e-3 transaction for which a Schedule 13E-3 Transaction Statement has been filed with the SEC) is both procedurally and substantively fair to OSI’s unaffiliated stockholders and in the best interests of OSI’s stockholders. On November 5, 2006, the special committee and the Board separately approved and adopted the Merger Agreement and authorized the transactions contemplated by the Merger Agreement, including the merger, and recommended that OSI’s stockholders approve and adopt the Merger Agreement. In addition, the special committee believed that sufficient procedural safeguards were and would be present to ensure the fairness of the merger and to permit the special committee to represent effectively the interests of OSI’s unaffiliated stockholders without retaining an unaffiliated representative to act solely on behalf of such stockholders. The special committee considered a number of factors relating to these procedural safeguards, including those discussed below, each of which it believed supported its decision and provided assurance of the fairness of the merger to OSI’s unaffiliated stockholders. In reaching these conclusions, the Board and the special committee considered the following material factors, among others:
 
  •  that the comparative decline in OSI’s financial performance and results of operations as compared to its historical financial performance and results of operations, uncertainty in OSI’s prospects and long-term strategy, a weakening of OSI’s competitive position in its industry, uncertainty in the outlook for the casual dining industry, concerns regarding the ability of management to take the steps necessary to restructure the Outback Steakhouse and other dining concepts that were facing declines in their business, and general economic and stock market conditions made the merger desirable at this time, as compared with other times, in OSI’s operating history;
 
  •  the $40.00 in cash to be received by OSI’s stockholders in the merger represents:
 
  •  a premium of approximately 23.3% over the closing price of shares of OSI common stock on November 3, 2006, the last trading day prior to announcement of the merger;
 
  •  a premium of approximately 19.7% over the average closing price of shares of OSI common stock over a 30-day period; and


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  •  a premium of approximately 26.5% over the average closing price of shares of OSI common stock over a 90-day period;
 
  •  that holders of OSI common stock that do not vote in favor of the adoption of the Merger Agreement or otherwise waive their appraisal rights will have the opportunity to demand appraisal of the fair value of their shares under Delaware law;
 
  •  that the consideration to be paid in the merger is all cash, which provides certainty of value to OSI’s stockholders;
 
  •  the financing commitments received by Parent and Merger Sub with respect to the Merger Agreement, the identity of the institutions providing such commitments and the conditions to the obligations of such institutions to fund such commitments, each as described under the caption “Special Factors — Financing” on page 61;
 
  •  their belief that OSI’s stock price was not likely to trade at or above the $40.00 price offered in the merger in the near future. The Board and the special committee based this belief on a number of factors, including: the directors’ knowledge and understanding of OSI’s prospects in an increasingly competitive industry; management’s failure over successive quarters to meet its internal financial projections and business plan; research analyst target prices; and the various valuation methodologies and analyses, expressly adopted by the special committee and Board, prepared by Wachovia Securities (described below under “— Opinion of Wachovia Capital Markets, LLC” beginning on page 41) and by Piper Jaffray (described below under “— Opinion of Piper Jaffray & Co.” beginning on page 50);
 
  •  the financial analysis reviewed by Wachovia Securities and Piper Jaffray at the special committee meeting, in the case of the special committee, and the board meeting, in the case of the Board, on November 5, 2006, and the separate opinions of Wachovia Securities and Piper Jaffray, each described in detail under “— Opinion of Wachovia Capital Markets, LLC” and “— Opinion of Piper Jaffray & Co.,” respectively, that, as of November 5, 2006, and based on and subject to the various factors, assumptions and limitations set forth in their respective opinions, the $40.00 per share merger consideration to be received by holders of shares of OSI common stock was fair from a financial point of view to the holders of such shares (other than the OSI Investors);
 
  •  their belief, based on, among other things, the data provided by Wachovia Securities and Piper Jaffray, that the $40.00 per share merger consideration compared favorably to the high end of the range of fair values for OSI common stock as set forth in each of the Wachovia Securities and Piper Jaffray analyses. See “— Opinion of Wachovia Capital Markets, LLC” and “— Opinion of Piper Jaffray & Co.”;
 
  •  the impact of the accounting issues identified by OSI’s management on alternatives to the merger, including the increased level of execution risk, and the decreased likelihood of successful completion, of any such alternatives;
 
  •  their belief, based on the factors described above, that the $40.00 per share merger consideration would result in greater value to OSI’s stockholders than either pursuing management’s current business plan or undertaking a Leveraged Recapitalization, assuming one was possible, in which OSI would incur debt and engage in a significant share repurchase program, or other alternatives considered as part of the Shareholder Value Initiative;
 
  •  the terms of the Merger Agreement, including the fact that the Merger Agreement contains provisions that permit OSI to conduct a post-signing market test to ensure that the $40.00 per share price provided in the transaction is the best available to OSI’s stockholders, including (i) a 50-day period during which OSI, under the direction of the special committee, was permitted to actively seek competing proposals for a business combination or acquisition, which period the special committee believed was sufficient time for any potentially interested party to conduct sufficient due diligence to make such a competing proposal, and (ii) the right, even after the end of the 50-day solicitation period, subject to certain conditions, to explore unsolicited proposals and to terminate the Merger Agreement and accept a “Superior Proposal” prior to stockholder approval of the Merger Agreement, subject to payment of a customary break-up fee and, in


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  certain circumstances, to reimbursement of Parent’s out-of-pocket fees and expenses. The special committee believed that these provisions were important in ensuring that the transaction would be substantively fair to OSI’s unaffiliated stockholders and in the best interests of OSI’s stockholders and provided the special committee with adequate flexibility to explore potential transactions with other parties;
 
  •  the fact that all of the members of the special committee, some of whom have significant investments in OSI common stock, were unanimous in their determination to approve the Merger Agreement and that the Merger Agreement was approved by all of the directors of OSI who are not participating in the transaction;
 
  •  the fact that the Merger Agreement is subject to limited conditions, including the fact that Parent delivered financing commitments from reputable and financially sound lenders that, together with the equity commitments received, are sufficient to pay the merger consideration; and
 
  •  the fact that the transaction will be subject to the approval of OSI stockholders without consideration to the vote of any OSI common stock held by the OSI Investors.
 
The special committee and the Board also believe the process by which OSI entered into the Merger Agreement with Parent and Merger Sub was fair, and in reaching that determination the special committee and the Board took into account, in addition to the factors above, the following:
 
  •  the consideration and negotiation of the Bain/Catterton transaction was conducted entirely under the oversight of the members of the special committee, consisting of all the independent directors of OSI, and that no limitations were placed on the authority of the special committee. Accordingly, the special committee was free to explore a transaction with any other bidder it determined was more favorable or likely to be more favorable than Bain/Catterton. The purpose of establishing the special committee and granting it the exclusive authority to review, evaluate and negotiate the terms of the transaction on behalf of OSI was to ensure that OSI’s unaffiliated stockholders were adequately represented by disinterested persons. None of the members of the special committee has any financial interest in the merger that is different from OSI’s unaffiliated stockholders generally;
 
  •  the special committee was advised by independent legal counsel and an internationally recognized financial advisor selected by them. The special committee engaged Wachtell Lipton as legal counsel, Wachovia Securities as financial advisor and Piper Jaffray for the purpose of delivering a fairness opinion to advise the special committee in its efforts to represent OSI’s stockholders (other than the OSI Investors). Wachovia Securities and Piper Jaffray each rendered separate fairness opinions to the special committee as to the fairness from a financial point of view of the merger consideration to be received by holders of our common stock (other than the OSI Investors). In determining to retain Wachovia Securities to act as the special committee’s financial advisor, the special committee was aware that Wachovia Securities was advising OSI in connection with a Leveraged Recapitalization and had, in the past, rendered additional services to OSI. Wachovia Securities and its affiliates provide a full range of financial advisory, securities banking, insurance and lending services in the ordinary course of business for which they receive customary fees which are summarized in “Opinion of Wachovia Capital Markets, LLC — Miscellaneous” on page 50. As of November 2006, Wachovia Securities and its affiliates had $199.5 million in total credit exposure to the Company and its subsidiaries, of which $164.5 million was currently funded (inclusive of a $24.5 million off-balance sheet guarantee of the Company). Affiliates of Wachovia Securities served as Lead Arranger and Administrative Agent on the Company’s renewed $225.0 million revolver closed on March 10, 2006. Affiliates of Wachovia Securities also acted as the sole lender on a $50.0 million line of credit closed on October 12, 2006. As of October 2006, affiliates of Wachovia Securities also had approximately $30.6 million in committed loans to the executives, board members and certain investment projects partially owned by executives or board members, of which approximately $25.6 million was outstanding. The loans are comprised of the following arrangements: (1) secured and unsecured loans were made to Mr. Sullivan in the aggregate amount of approximately $6.25 million, between May 2003 and July 2005 for business and personal use with interest rates of LIBOR + 1.35% and prime; (2) secured and unsecured loans were made to Mr. Steven Shlemon in the aggregate amount of approximately $4.5 million between December 2002 and October 2005 for business and personal use with interest rates of LIBOR + 2.35% and Prime; (3) secured and unsecured loans were made to Mr. Carey in the aggregate amount of approximately $0.7 million between October 2005 and August 2006 for business and personal use with interest rates of LIBOR + 2.35% and


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  prime — 0.50%; and (4) Mssrs. Sullivan, Basham, Avery and Kadow have guaranteed a total of approximately $19 million of loans issued by affiliates of Wachovia Securities in connection with various real estate and other investment projects. These loans were made between December 1998 and September 2005 and carry interest rates of LIBOR + 0.90%, LIBOR + 5.00%, and prime. The special committee was also aware that in October and November 2005, Piper Jaffray had preliminary discussions with a senior member of OSI’s management team regarding the possibility of representing OSI in connection with OSI’s evaluation of strategic alternatives for one of OSI’s restaurant concepts. However, in November 2005, OSI told Piper Jaffray that OSI was no longer interested in evaluating strategic alternatives regarding this concept, and discussions between Piper Jaffray and OSI regarding this concept ended. In December 2006, OSI and Piper Jaffray restarted discussions regarding strategic alternatives for this concept which are ongoing. The special committee was also aware that Piper Jaffray is a large, global, full-service financial institution that had, in the past, rendered services to Bain Capital and certain of Bain Capital’s portfolio companies and had received fees in respect of such prior services;
 
  •  the special committee had extensive, arm’s-length negotiations with Bain/Catterton over several months, which, among other things, resulted in an increase in the merger consideration from $37.50 to $40.00 per share, a 6.6% increase; and
 
  •  accounting issues might prevent OSI from timely filing financial statements, the absence of which might significantly restrict OSI’s ability to achieve increased stockholder value by means of a recapitalization.
 
The special committee and the Board were aware of and also considered the following adverse factors associated with the merger, among others:
 
  •  at various times over the past several years, OSI common stock has traded in excess of the $40.00 merger consideration, although the special committee and the Board believed it was unlikely that OSI stock would trade in excess of $40.00 in the near term;
 
  •  that the stockholders of OSI (other than the OSI Investors and additional members of management who may be given the opportunity to exchange restricted or unrestricted stock for shares of Parent common stock or to purchase shares of Parent common stock) will have no ongoing equity participation in the surviving corporation following the merger, meaning that such stockholders will cease to participate in OSI’s future earnings or growth, or to benefit from any increases in the value of OSI common stock;
 
  •  that the proposed merger will be a taxable transaction for OSI stockholders whose shares are converted into cash in the merger;
 
  •  that if the merger is not completed, OSI will be required to pay its fees associated with the transaction as well as, under certain circumstances, reimburse Bain/Catterton for its out-of-pocket fees and expenses associated with the transaction;
 
  •  that OSI did not undertake an affirmative auction prior to entering into the Merger Agreement, although the special committee and the Board were satisfied that the Merger Agreement provided the special committee and the Board with an adequate opportunity to conduct an affirmative post-signing market test to ensure that the $40.00 per share merger consideration is the best available to OSI’s unaffiliated stockholders;
 
  •  that OSI will be required to pay to or as directed by Parent a termination fee and, in certain circumstances, to reimburse Parent for its out-of-pocket fees and expenses if the Merger Agreement is terminated under certain circumstances; and
 
  •  that if the merger is not completed, OSI may be adversely affected due to potential disruptions in its operations.
 
In addition, the Board was aware that the OSI Investors would be entering into arrangements with Parent simultaneous with the execution of the Merger Agreement providing that such persons anticipate reinvesting a portion of their proceeds from the merger into Parent in connection with the completion of the transaction and that such persons would remain employed in substantially their respective current capacities following the completion of the transaction. The Board was also aware of the additional employee benefits that Parent has committed to provide pursuant to the Merger Agreement. Although the special committee and the Board were generally aware of these interests (and had reviewed letters of intent and term sheets setting forth material terms of these


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arrangements), the special committee’s and the Board’s primary concern was to ensure that the per share merger consideration and other terms of the Merger Agreement were both procedurally and substantively fair to OSI’s unaffiliated stockholders and in the best interests of OSI’s stockholders. See “Special Factors — Interests of Our Directors and Executive Officers in the Merger” beginning on page 65 and “The Merger Agreement — Employee Benefits” beginning on page 92.
 
In analyzing the transaction relative to the going concern value of OSI, the special committee and the Board each took into account the 30-day and 90-day average stock prices, which the special committee and the Board considered a meaningful reflection of OSI’s going concern value, and expressly adopted the analyses and methodologies used by Wachovia Securities and Piper Jaffray as a whole to evaluate the going concern value of OSI, including the historical stock price analysis, the comparable companies analysis and the range of present values of both the current five-year plan of OSI’s management and the potential recapitalization of OSI through a share repurchase. See below under “— Opinion of Wachovia Capital Markets, LLC” beginning on page 41 and “— Opinion of Piper Jaffray & Co.” beginning on page 50. Further, the special committee and the Board considered the analyses and conclusions of Wachovia Securities and Piper Jaffray. The special committee and the board acknowledge that while they have unanimously determined that the merger is fair to OSI’s unaffiliated stockholders, Wachovia Securities’ and Piper Jaffray’s respective opinions address the fairness of the merger to OSI’s stockholders (other than the OSI Investors). The special committee and the board note, however, that Wachovia Securities’ and Piper Jaffray’s respective opinions support the conclusion that the merger is fair to OSI’s unaffiliated stockholders, as all of OSI’s unaffiliated stockholders are included in the group delineated by the phrase “OSI’s stockholders (other than the OSI Investors).” Wachovia Securities’ and Piper Jaffray’s analyses were based upon certain management-provided scenarios and assumptions, but did not include an independent analysis of the liquidation value or book value of OSI. The special committee and the Board did not consider liquidation value as a factor because OSI is a viable going concern business and the trading history of OSI common stock is an indication of its value as such. The special committee and Board did not view the prices paid for Company stock by the Company over the prior two years as relevant beyond indicating the trading price of the common stock during that period. The Company’s stock repurchases over the last two years were effected primarily to offset the dilutive effect of stock option exercises. In addition, due to the fact that OSI is being sold as a going concern, the special committee and the Board did not consider the liquidation value of OSI relevant to a determination as to whether the merger is procedurally and substantively fair to OSI’s unaffiliated stockholders and in the best interests of OSI’s stockholders. Further, the special committee and the Board did not consider net book value a material indicator of the value of OSI because it understates its value as a going concern, but is instead indicative of historical costs.
 
In view of the large number of factors considered by the special committee and the Board in connection with the evaluation of the Merger Agreement and the merger and the complexity of these matters, except as expressly noted above, the special committee and the Board did not consider it practicable to, nor did it attempt to, quantify, rank or otherwise assign relative weights to the specific factors it considered in reaching its decision, nor did it evaluate whether these factors were of equal importance. In addition, individual directors may have given different weight to the various factors. The special committee held discussions with Wachovia Securities and Piper Jaffray with respect to the quantitative and qualitative analyses of the financial terms of the merger. The special committee and the Board conducted a discussion of, among other things, the factors described above, including asking questions of OSI’s management and its financial and legal advisors, and reached the conclusion that the merger is both procedurally and substantively fair to OSI’s unaffiliated stockholders and in the best interests of OSI’s stockholders. Therefore, the Board recommends that you vote FOR the adoption of the Merger Agreement. Other than as described in this proxy statement, OSI is not aware of any firm offers by any other person during the prior two years for a merger or consolidation of OSI with another company, the sale or transfer of all or substantially all of OSI’s assets or a purchase of OSI’s securities that would enable such person to exercise control of OSI.
 
Purposes and Reasons of the OSI Investors
 
The purposes of the OSI Investors for engaging in the merger are to enable our stockholders to realize a premium on their shares of OSI based on the closing price of shares of our common stock on November 3, 2006 and to enable the OSI Investors to continue to own minority equity interests in OSI after shares of OSI Common Stock cease to be publicly traded.


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Purposes and Reasons of Parent, Merger Sub and the Funds
 
For Parent and Merger Sub, the purpose of the merger is to effectuate the transactions contemplated by the Merger Agreement. For the Funds, the purpose of the merger is to allow them to own controlling equity interests in OSI and to bear the rewards and risks of such ownership after shares of OSI common stock cease to be publicly traded. Parent, Merger Sub and the Funds did not consider any alternatives for achieving these purposes, although they did express a willingness to discuss other potential transactions with OSI, including participation in an alternative transaction in connection with the Stockholder Value Initiative. The transaction was structured in the manner described in this proxy statement in order to provide Parent, Merger Sub and the Funds the best opportunity to achieve the purposes described above and will have the effect of OSI becoming a private company and an indirect subsidiary of Parent. Parent, Merger Sub and the Funds have undertaken to pursue the transaction at this time in light of the opportunities they perceive to strengthen OSI’s competitive position, strategy and financial performance under a new form of ownership.
 
Position of the OSI Investors Regarding the Fairness of the Merger
 
Under the rules governing “going private” transactions, the OSI Investors are required to express their beliefs as to the substantive and procedural fairness of the merger to OSI’s unaffiliated stockholders. The OSI Investors are making the statements included in this subsection solely for the purposes of complying with the requirements of Rule 13e-3 and related rules under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
 
Mr. Sullivan, Mr. Basham and Mr. Allen, each in his capacity as a member of our board of directors, participated in the deliberations of the resolutions of the board of directors on November 5, 2006 approving the Merger Agreement and the transactions contemplated by the Merger Agreement. In such capacity, they received advice from the special committee’s legal and financial advisors, including advice from the special committee’s financial advisors as to the substantive and procedural fairness of the transaction to OSI’s unaffiliated stockholders, from a financial point of view. See “Special Factors — Opinion of Wachovia Capital Markets, LLC” on page 41 and “Special Factors — Opinion of Piper Jaffray & Co.” on page 50. Mr. Sullivan, Mr. Basham and Mr. Allen were not members of, and did not participate in the deliberations of, the special committee.
 
Mr. Avery, Mr. Kadow, Mr. Montgomery and Mr. Gannon are not members of our board of directors. Mr. Avery, Mr. Gannon and Mr. Montgomery did not participate in the deliberations of our board of directors regarding the substantive and procedural fairness of the merger to OSI’s unaffiliated stockholders, or any other aspect of the transaction. Mr. Kadow was present for such deliberations in his capacity as Secretary of OSI. Mr. Avery, Mr. Kadow, Mr. Montgomery and Mr. Gannon did not receive any advice from the special committee’s legal or financial advisors as to the substantive and procedural fairness of the merger or any other aspect of the transaction.
 
The OSI Investors believe the merger is substantively and procedurally fair to OSI’s unaffiliated stockholders on the basis of the factors described below. However, the OSI Investors have not performed, or engaged a financial advisor to perform, any valuation or other analysis for the purposes of assessing the substantive and procedural fairness of the merger to OSI’s unaffiliated stockholders. Mr. Sullivan, Mr. Basham and Mr. Allen, each in his capacity as a member of our board of directors, received advice from the special committee’s financial advisors, and the OSI Investors have expressly adopted the analyses and methodologies used by Wachovia Securities and Piper Jaffray in their determination of the substantive and procedural fairness of the transaction to OSI’s stockholders (other than the OSI Investors), from a financial point of view. The OSI Investors acknowledge that, while they have determined that the merger is fair to OSI’s unaffiliated stockholders, Wachovia Securities’ and Piper Jaffray’s respective opinions address the fairness of the merger to OSI’s stockholders (other than the OSI Investors). The OSI Investors note, however, that Wachovia Securities’ and Piper Jaffray’s respective opinions implicitly support the conclusion that the merger is fair to OSI’s unaffiliated stockholders, as all of OSI’s unaffiliated stockholders are included in the group delineated by the phrase “OSI’s stockholders (other than the OSI Investors).”
 
In making their determination that the merger is substantively fair to OSI’s unaffiliated stockholders, the OSI Investors expressly adopted the unanimous recommendation of the special committee and considered the following material positive factors, among others:
 
  •  that the comparative decline in OSI’s financial performance and results of operations as compared to its historical financial performance and results of operations, uncertainty in OSI’s prospects and long-term


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  strategy, a weakening of OSI’s competitive position in its industry, uncertainty in the outlook for the casual dining industry, concerns regarding the ability of management to take the steps necessary to restructure the Outback Steakhouse and other dining concepts that were facing declines in their business, and general economic and stock market conditions made the merger desirable at this time, as compared with other times, in the Company’s operating history;
 
  •  $40.00 in cash to be received by OSI’s stockholders in the merger represents:
 
  •  a premium of approximately 23.3% over the closing price of a share of OSI common stock on November 3, 2006, the last trading day prior to announcement of the merger;
 
  •  a premium of approximately 19.7% over the average closing price of a share of OSI common stock over a 30-day period leading up to announcement of the merger; and
 
  •  a premium of approximately 26.5% over the average closing price of a share of OSI common stock over a 90-day period leading up to announcement of the merger;
 
  •  their belief that OSI’s stock price was not likely to trade at or above the $40.00 per share price offered in the merger in the near future based on a number of factors, including a comparative decline in OSI’s financial performance and results of operations as compared to its historical financial performance and results of operations, their knowledge and understanding of OSI’s prospects in an increasingly competitive industry, a weakening of OSI’s competitive position in the industry, uncertainty in the outlook for the casual dining industry, the need to restructure the Outback Steakhouse and other dining concepts that were facing declines in their business, research analyst target prices and general economic and stock market conditions;
 
  •  the impact of the accounting issues identified by OSI’s management on alternatives to the merger, including the increased level of execution risk, and the decreased likelihood of successful completion, of any such alternatives;
 
  •  their belief, based on the factors described in the preceding bullet points, that the $40.00 per share merger consideration would result in greater value to OSI’s stockholders than remaining a public entity and either pursuing management’s current business plan or undertaking a Leveraged Recapitalization, assuming one was possible in which OSI would incur debt and engage in a significant share repurchase program, or other alternatives considered as part of the Shareholder Value Initiative;
 
  •  holders of OSI common stock that do not vote in favor of the adoption of the Merger Agreement or otherwise waive their appraisal rights will have the opportunity to demand appraisal of the fair value of their shares under Delaware law;
 
  •  the merger will provide consideration to OSI’s stockholders entirely in cash;
 
  •  the financing commitments received by Parent and Merger Sub with respect to the Merger Agreement, the identity of the institutions providing such commitments and the conditions to the obligations of such institutions to fund such commitments, each as described under the caption “Special Factors — Financing” on page 61;
 
  •  the special committee unanimously determined, and our board of directors determined by the unanimous vote of all directors (other than Mr. Sullivan, Mr. Basham and Mr. Allen, who abstained), that the Merger Agreement and the transactions contemplated by the Merger Agreement, including the merger, are both procedurally and substantively fair to OSI’s unaffiliated stockholders and in the best interests of OSI’s stockholders;
 
  •  the terms of the Merger Agreement provided a 50-day period during which OSI, under the direction of the special committee, was permitted to actively seek competing proposals for a business combination or acquisition;
 
  •  the special committee received and our board of directors is entitled to rely on the opinion of Wachovia Securities, dated November 5, 2006, to the effect that, as of that date and based upon and subject to the factors and assumptions set forth in its opinion, the $40.00 per share in cash to be received by the holders of the outstanding shares of OSI common stock pursuant to the Merger Agreement was fair from a financial point of view to those holders (other than the OSI Investors); and


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  •  the special committee received and our board of directors was provided for its use in connection with its consideration of the transactions contemplated by the Merger Agreement the opinion of Piper Jaffray, dated November 5, 2006, to the effect that, as of that date and based upon and subject to the factors and assumptions set forth in its opinion, the $40.00 per share in cash to be received by the holders of the outstanding shares of OSI common stock pursuant to the Merger Agreement was fair from a financial point of view to those holders (other than the OSI Investors).
 
The OSI Investors also considered the following material negative factors, among others:
 
  •  OSI’s stockholders, with the exception of the OSI Investors and certain other members of OSI management who may acquire equity interests in Parent in connection with the closing of the merger, will have no ongoing equity participation in OSI following the merger; such stockholders will cease to participate in OSI’s future earnings or growth, if any, or to benefit from increases, if any, in the value of OSI common stock and will not participate in any future sale of OSI to a third party;
 
  •  prior to execution of the Merger Agreement there was no attempt made to contact other possible purchasers of OSI or to conduct a public auction of OSI;
 
  •  the cash consideration to be received by the holders of OSI common stock will be taxable to them; and
 
  •  OSI common stock has traded at a price significantly greater than $40.00 per share during the past twelve months.
 
The OSI Investors believe that the merger is procedurally fair to OSI’s unaffiliated stockholders based upon the following material factors, among others:
 
  •  the special committee consisted entirely of directors who are independent directors and included all of the independent directors on our board of directors;
 
  •  the members of the special committee will not personally benefit from the consummation of the merger in a manner different from OSI’s unaffiliated stockholders;
 
  •  the special committee retained and was advised by independent legal counsel experienced in advising on similar transactions;
 
  •  the special committee retained and was advised by Wachovia Securities, which assisted the committee in its evaluation of the fairness from a financial point of view, to the holders of OSI common stock (other than the OSI Investors) of the $40.00 per share cash merger consideration;
 
  •  the special committee retained and was advised by Piper Jaffray, which assisted the committee in its evaluation of the fairness from a financial point of view, to the holders of OSI common stock (other than the OSI Investors) of the $40.00 per share cash merger consideration;
 
  •  the merger was unanimously approved by the members of the special committee and by all members of our board of directors (other than Mr. Sullivan, Mr. Basham and Mr. Allen, who abstained);
 
  •  the Merger Agreement requires the affirmative vote of the holders of a majority of the outstanding shares of our common stock entitled to vote at the special meeting (without consideration as to the vote of any shares held by the OSI Investors); and
 
  •  the terms of the Merger Agreement provide for a post-signing “go-shop” period that permitted the special committee to solicit competing acquisition proposals for the 50-day period beginning on the date of the public announcement of the Merger Agreement.
 
The OSI Investors believe that the merger is procedurally fair despite the fact that our board of directors did not retain an unaffiliated representative, other than the special committee, to act solely on behalf of OSI’s stockholders for purposes of negotiating the terms of the Merger Agreement. In this regard, the OSI Investors note that the use of a special committee of independent directors is a mechanism recognized to ensure the procedural fairness of transactions of this type. The OSI Investors also believe that the merger is procedurally fair despite the fact that Mr. Sullivan, Mr. Basham and Mr. Allen, each in his capacity as a member of our board of directors, participated in the deliberation of the resolutions of our board of directors on November 5, 2006, approving the Merger Agreement and the transactions contemplated by the Merger Agreement (although each abstained from voting to approve such


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resolutions) and Mr. Kadow was present during such deliberations; in this regard, the OSI Investors note that all of the other members of the OSI board who voted on the transaction approved the merger.
 
The OSI Investors did not consider the net book value of OSI common stock in determining the substantive fairness of the merger to OSI’s unaffiliated stockholders because they believe that net book value, which is an accounting concept, does not reflect, or have any meaningful impact on, the market trading price of OSI common stock. They note, however, that the merger consideration of $40.00 per share of OSI common stock is higher than the net book value of the OSI common stock. The OSI Investors did not view the prices OSI paid for its stock over the prior two years as relevant beyond indicating the trading price of the common stock during that period. OSI’s stock repurchases over the last two years were effected primarily to offset the dilutive effect of stock option exercises. The OSI Investors did not consider liquidation value in determining the substantive fairness of the merger to OSI’s unaffiliated stockholders because of their belief that liquidation value did not present a meaningful valuation for OSI and its business; rather, it was the belief of the OSI Investors that OSI’s value is derived from the cash flows generated from its continuing operations, rather than from the value of its assets that might be realized in a liquidation. Further, because OSI’s assets include a significant amount of intangible assets, intellectual property, leased properties and other assets that are not readily transferable or are subject to restrictions on their transfer in a liquidation scenario, the OSI Investors concluded that OSI is not susceptible to a meaningful liquidation valuation. Moreover, it was the belief of the OSI Investors that a large part of OSI’s success is attributable to its market share and market presence created by owning chains of numerous individual restaurants unified by a recognizable brand name and reputation for quality, and any liquidation of its assets or break-up or piecemeal sale of its parts would not maximize stockholder value because it would not likely compensate OSI’s stockholders for the value inherent in each concept’s market position or brand identity. Therefore, the OSI Investors believed that the liquidation methodology would result in a lower valuation for OSI than had been proposed in the merger negotiations.
 
The foregoing discussion of the information and factors considered and given weight by the OSI Investors in connection with their evaluation of the substantive and procedural fairness to OSI’s unaffiliated stockholders of the Merger Agreement and the transactions contemplated by the Merger Agreement is not intended to be exhaustive but is believed to include all material factors considered by them. The OSI Investors did not find it practicable to and did not quantify or otherwise attach relative weights to the foregoing factors in reaching their position as to the substantive and procedural fairness to OSI’s unaffiliated stockholders of the Merger Agreement and the transactions contemplated by the Merger Agreement. The OSI Investors believe that these factors provide a reasonable basis for their belief that the merger is substantively and procedurally fair to OSI’s unaffiliated stockholders. This belief should not, however, be construed as a recommendation to any OSI stockholder to vote to adopt the Merger Agreement. However, Mr. Sullivan, Mr. Basham and Mr. Allen, each in his capacity as a member of our board of directors, concur with the recommendation of our board of directors that our stockholders adopt the Merger Agreement. See “Special Factors — Fairness of the Merger; Recommendations of the Special Committee and Our Board of Directors” beginning on page 32.
 
Position of Parent, Merger Sub and the Funds Regarding the Fairness of the Merger
 
Parent, Merger Sub and the Funds are making the statements included in this section solely for the purposes of complying with the applicable requirements of Rule 13e-3 and related rules under the Exchange Act. The views of Parent, Merger Sub and the Funds should not be construed as a recommendation to any stockholder as to how that stockholder should vote on the proposal to adopt the Merger Agreement.
 
Parent, Merger Sub and the Funds attempted to negotiate the terms of a transaction that would be most favorable to them, and not to the stockholders of OSI, and, accordingly, did not negotiate the Merger Agreement with a goal of obtaining terms that were fair to such stockholders. None of Parent, Merger Sub or the Funds believe that it has or had any fiduciary duty to OSI or its stockholders, including with respect to the merger and its terms. The stockholders of OSI were, as described elsewhere in this proxy statement, represented by the special committee that negotiated with Parent, Merger Sub and the Funds on their behalf, with the assistance of independent legal and financial advisors.
 
None of Parent, Merger Sub or the Funds participated in the deliberations of the special committee and none of them participated in the conclusions of the special committee or the board of directors of OSI that the merger was


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fair to OSI’s unaffiliated stockholders, nor did they undertake any independent evaluation of the fairness of the merger or engage any financial advisor for such purposes.
 
While Parent, Merger Sub and the Funds found persuasive the conclusions of the special committee and the board of directors with respect to the substantive and procedural fairness of the merger to OSI’s unaffiliated stockholders as set forth in the proxy statement under “Fairness of the Merger — Recommendations of the Special Committee and Our Board of Directors,” they did not base their determination expressed below on the special committee’s analyses of factors. In addition, Parent, Merger Sub and the Funds believe the proposed merger is substantively and procedurally fair to OSI’s unaffiliated stockholders based on the following other factors:
 
  •  $40.00 in cash to be received by OSI’s stockholders in the merger represents:
 
  •  a premium of approximately 23.3% over the closing price of a share of OSI common stock on November 3, 2006, the last trading day prior to announcement of the merger;
 
  •  a premium of approximately 19.7% over the average closing price of a share of OSI common stock over a 30-day period leading up to announcement of the merger; and
 
  •  a premium of approximately 26.5% over the average closing price of a share of OSI common stock over a 90-day period leading up to announcement of the merger;
 
  •  the $40 per share merger consideration and other terms and conditions of the Merger Agreement resulted from extensive negotiations between the special committee and its advisors and Parent and Merger Sub and their respective advisors;
 
  •  holders of OSI common stock that do not vote in favor of the adoption of the Merger Agreement or otherwise waive their appraisal rights will have the opportunity to demand appraisal of the fair value of their shares under Delaware law;
 
  •  the Merger Agreement requires the affirmative vote of the holders of a majority of the outstanding shares of our common stock entitled to vote at the special meeting (without consideration as to the vote of any shares held by the OSI Investors); and
 
  •  the terms of the Merger Agreement provide for a post-signing “go-shop” period that permitted the special committee to solicit competing acquisition proposals for the 50-day period beginning on the date of the public announcement of the Merger Agreement.
 
Parent, Merger Sub and the Funds did not consider the liquidation value of OSI because they considered OSI to be a viable, going concern and therefore did not consider liquidation value to be a relevant methodology. Further, Parent, Merger Sub and the Funds did not consider net book value, which is an accounting concept, as a factor because they believed that net book value is not a material indicator of the value of OSI as a going concern but rather is indicative of historical costs. Parent, Merger Sub and the Funds note that net book value per share of OSI stock was lower than the $40.00 per share cash merger consideration. Parent, Merger Sub and the Funds did not establish a going concern value for the OSI common stock as a public company to determine the fairness of the merger consideration to the unaffiliated stockholders as they believe there is no single method for determining going concern value and did not base their valuation on a concept subject to various interpretations.
 
The foregoing discussion of the information and factors considered and given weight by Parent, Merger Sub and the Funds in connection with the fairness of the Merger Agreement and the merger is not intended to be exhaustive but is believed to include all material factors considered by Parent, Merger Sub and the Funds. Parent, Merger Sub and the Funds did not find it practicable to, and did not, quantify or otherwise attach relative weights to the foregoing factors in reaching their position as to the fairness of the Merger Agreement and the merger. Parent, Merger Sub and the Funds believe that these factors provide a reasonable basis for their position that the merger is fair to OSI’s unaffiliated stockholders.
 
Opinion of Wachovia Capital Markets, LLC
 
On April 17, 2006, our board of directors engaged Wachovia Securities to act as its financial advisor in connection with its analysis and consideration of the various strategic alternatives available to OSI. As the board’s financial advisor, Wachovia Securities was engaged to perform such financial advisory and investment banking services as set forth in the engagement letter between Wachovia Securities and OSI. Under the terms of its


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engagement, such services included assisting OSI in analyzing the feasibility of transactions such as divestitures and recapitalizations.
 
Following the formation of the special committee, Wachovia Securities was retained as the special committee’s financial advisor in connection with its analysis and consideration of the merger. As its financial advisor, Wachovia Securities was engaged to perform such financial advisory and investment banking services for the special committee as was requested by the special committee and set forth in the engagement letter between Wachovia Securities and OSI. Under the terms of its engagement, such services include assisting the special committee in analyzing, structuring, negotiating and effecting the proposed transaction, and rendering an opinion in accordance with Wachovia Securities’ customary practice as to whether the consideration to be paid in the transaction is fair from a financial point of view to OSI’s stockholders, other than the OSI Investors. Wachovia Securities was not retained to act solely on behalf of unaffiliated stockholders of the Company. The special committee did not impose any limitation on Wachovia Securities in preparing its analysis or opinion. At the meeting of the special committee, on November 5, 2006, Wachovia Securities rendered its oral opinion, which opinion was later confirmed in writing, as of November 5, 2006 and based on and subject to the various factors, assumptions and limitations set forth in its opinion, that the $40.00 per share merger consideration to be received by holders of shares of OSI common stock was fair from a financial point of view to the holders of such shares (other than the OSI Investors). The opinion also was summarized at a subsequent meeting of the board of directors that same day.
 
The full text of the written opinion of Wachovia Securities, dated November 5, 2006, which sets forth, among other things, the assumptions made, procedures followed, matters considered and limitations on the review undertaken by Wachovia Securities, is attached as Annex B to this proxy statement and is incorporated herein by reference. You should read the written opinion carefully and in its entirety. The Wachovia Securities’ opinion is for the use and benefit of the special committee and our board of directors and addressed only the fairness, as of the date of the opinion, from a financial point of view, of the merger consideration to the holders of shares of OSI common stock, other than the OSI Investors.
 
The opinion of Wachovia Securities does not address any other aspect of the merger, including the merits of the underlying decision by OSI to engage in the merger, and does not constitute a recommendation to any stockholder as to how such stockholder should vote on the proposed merger or any matter related thereto. In addition, OSI did not ask Wachovia Securities to address, and the opinion does not address, the fairness to, or any other consideration of, the holders of any class of securities, creditors or other constituencies of OSI, other than the holders of OSI common stock (excluding the OSI Investors). In arriving at its opinion, Wachovia Securities, among other things:
 
  •  reviewed the Merger Agreement;
 
  •  reviewed certain publicly available business, financial and other information regarding OSI;
 
  •  reviewed certain business, financial and other information regarding OSI and its prospects that was furnished to Wachovia Securities by OSI’s management, and discussed with OSI’s management this information as well as the business, past and current operations, financial condition and future prospects of OSI, including internal financial forecasts of OSI prepared by OSI’s management, and the risks and uncertainties of OSI continuing to pursue an independent strategy (see “Financial Forecast” beginning on page 182);
 
  •  reviewed the current and historical market prices and trading activity of OSI common stock;
 
  •  compared certain business, financial and other information regarding OSI with similar information regarding certain other publicly traded companies that Wachovia Securities deemed to be relevant;
 
  •  compared the proposed financial terms of the Merger Agreement with the financial terms of certain other business combinations and transactions that Wachovia Securities deemed to be relevant;
 
  •  participated in discussions and negotiations among representatives of OSI and Parent, and their respective financial and legal advisors; and
 
  •  considered other information such as financial studies, analyses and investigations, as well as financial and economic and market criteria that Wachovia Securities deemed to be relevant.
 
In connection with the review, Wachovia Securities has relied upon the accuracy and completeness of financial and other information obtained and reviewed for the purpose of the opinion and has not assumed any responsibility


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for any independent verification of such information. Wachovia Securities has relied upon assurances of OSI’s management that it is not aware of any facts or circumstances that would make such information about OSI inaccurate or misleading. With respect to OSI’s financial forecasts, Wachovia Securities has assumed that they have been reasonably prepared on bases reflecting the best currently available estimates and judgments of management as to the expected future financial performance of OSI. Wachovia Securities has discussed such forecasts and estimates, as well as the assumptions upon which they are based, with OSI’s management, but assumes no responsibility for and expresses no view as to OSI’s financial forecasts or the assumptions upon which they are based. Wachovia Securities has relied on advice of counsel to the special committee as to all legal matters with respect to OSI and the transactions contemplated by the Merger Agreement.
 
In rendering the opinion, Wachovia Securities assumed that the transactions contemplated by the Merger Agreement will be consummated on the terms described in the Merger Agreement, without waiver of any material terms or conditions. The opinion is necessarily based on economic, market, financial and other conditions as they existed on and could be evaluated as of November 5, 2006. Although subsequent developments may affect this opinion, Wachovia Securities does not have any obligation to update, revise or reaffirm the opinion.
 
Financial Analyses
 
At the November 5, 2006 meeting of the special committee and the subsequent meeting of our board of directors that same day, Wachovia Securities made a presentation of certain financial analyses of the proposed merger. The following is a summary of the material analyses contained in the presentation that was delivered to the special committee and may be relied upon by our board of directors. Some of the summaries of financial analyses include information presented in tabular format. In order to understand fully the financial analyses performed by Wachovia Securities, the table must be read together with the accompanying text of each summary. The table alone does not constitute a complete description of the financial analyses, including the methodologies and assumptions underlying the analyses, and if viewed in isolation could create a misleading or incomplete view of the financial analyses performed by Wachovia Securities. The fact that any specific analysis has been referred to in the summary below and in this proxy statement is not meant to indicate that such analysis was given more weight than any other analysis; in reaching its conclusion, Wachovia Securities arrived at its ultimate opinion based on the results of all analyses undertaken by it and assessed as a whole and believes the totality of the factors considered and performed by Wachovia Securities in connection with its opinion operated collectively to support its determinations as to the fairness of the merger consideration from a financial point of view to the holders of shares of OSI common stock, other than the OSI Investors. Wachovia Securities did not draw, in isolation, conclusions from or with regard to any one factor or method of analysis.
 
In arriving at its opinion, Wachovia Securities made its determination as to the fairness, from a financial point of view, as of the date of the opinion, of the merger consideration to be received by OSI’s stockholders, other than the OSI Investors, on the basis of the multiple, financial and comparative analyses described below. The following summary is not a complete description of all of the analyses performed and factors considered by Wachovia Securities in connection with its opinion, but rather is a summary of the material financial analyses performed and factors considered by Wachovia Securities. The preparation of a fairness opinion is a complex process involving subjective judgments and is not necessarily susceptible to partial analysis. With respect to the analysis of publicly traded companies and the analysis of transactions summarized below, such analyses reflect selected companies and transactions, and not necessarily all companies or transactions, that may be considered relevant in evaluating OSI or the merger. In addition, no company or transaction used as a comparison is either identical or directly comparable to OSI or the merger. These analyses involve complex considerations and judgments concerning financial and operating characteristics and other factors that could affect the public trading or acquisition values of the companies concerned. The estimates of future performance of OSI provided by OSI’s management used in or underlying Wachovia Securities’ analyses are not necessarily indicative of future results or values, which may be significantly more or less favorable than those estimates. In performing its analyses, Wachovia Securities considered industry performance, general business and economic conditions and other matters, many of which are beyond OSI’s control. Estimates of the financial value of companies do not purport to be appraisals or reflect the prices at which such companies actually may be sold. The merger consideration to be paid per share of OSI common stock was determined through negotiation between OSI and Parent, and the decision to enter into the merger was solely that of


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Parent and OSI. The opinion and financial analyses of Wachovia Securities were only one of many factors considered by the special committee and our board of directors in their evaluation of the merger and should not be viewed as determinative of the views of the special committee or our board of directors with respect to the merger or the merger consideration.
 
Summary of Imputed Share Values
 
Wachovia Securities assessed the fairness of the per share merger consideration to the holders of shares of OSI common stock and its affiliates by assessing the value of OSI using several methodologies, a comparable companies analysis using valuation multiples from selected publicly traded companies, a comparable acquisitions analysis, a discounted cash flow analysis, an analysis of the present value of OSI’s management plan, a leveraged buyout analysis, and a premiums paid analysis, each of which is described in more detail in the summaries set forth below. Each of these methodologies was used to generate imputed valuation ranges that were then compared to the per share merger consideration. The following table shows the ranges of imputed valuation per share of OSI common stock derived under each of these methodologies. The table should be read together with the more detailed summary of each of these valuation analyses as set forth below.
 
                 
    Imputed Valuation
 
    Per Common Share  
Valuation Methodology
  Minimum     Maximum  
 
Comparable Companies Analysis
  $ 34.35     $ 40.00  
Discounted Cash Flow Analysis
  $ 29.77     $ 42.30  
Analysis of Present Value of OSI Restaurant Partners, Inc.’s Management Plan
  $ 28.70     $ 42.38  
Leveraged Buyout Analysis
  $ 30.78     $ 40.08  
Comparable Transactions Analysis
  $ 28.10     $ 37.00  
Premiums Paid Analysis
  $ 39.80     $ 41.60  
 
Comparable Companies Analysis
 
Wachovia Securities reviewed certain financial information of publicly traded companies in the casual dining restaurant industry that it deemed comparable to OSI and similar to the Company as determined by reviewing the sales and earnings growth and other financial characteristics detailed in the projections provided by OSI’s management. The Comparable Companies Analysis attempts to provide an implied value of a company by comparing it to similar publicly-traded companies. The comparable companies analyzed are set forth below:
 
                                                                                                                     
Company Name
        Price(1)
  % of 52
    Shares
    Mkt.
    Enterprise
    LTM Financials     Enterprise Value/     P/E Multiples     Growth
    2007 (E)
 
Latest Qtr.-FYE
  Ticker     Low-High   Week High     Out.     Value     Value(2)     Sales     EBITDA     % Margin     LTM EBITDA     LTM EBIT     2006(E)     2007(E)     Rate     PEG Ratio  
    (in millions, except per share values)  
 
Darden Restaurants, Inc.(3)
    DRI     $41.59     93.6 %     146.8     $ 6,106.5     $ 6,784.8     $ 5,767.3     $ 776.6       13.5 %     8.7 x     12.3 x     18.3 x     16.6 x     12.4 %     133.5 %
                                                                                                                     
8/27/06 - May
          $32.00 - $44.43                                                                                                        
                                                                                                                     
Brinker International, Inc. 
    EAT     $45.76     95.3 %     82.7       3,785.1       4,232.2       4,215.3       512.3       12.2 %     8.3 x     13.2 x     18.5 x     16.3 x     13.5 %     120.9 %
                                                                                                                     
9/27/06 - June
          $31.48 - $48.03                                                                                                        
                                                                                                                     
Ruby Tuesday, Inc.(3)(4)
    RI     $27.43     83.2 %     58.6       1,607.6       1,976.8       1,336.7       234.8       17.6 %     8.4 x     12.2 x     16.3 x     15.3 x     15.4 %     99.6 %
                                                                                                                     
9/5/06 - June
          $21.03 - $32.98                                                                                                        
                                                                                                                     
Applebee’s International, Inc.(4)
    APPB     $22.89     86.5 %     74.4       1,703.7       1,887.9       1,296.1       206.0       15.9 %     9.2 x     13.3 x     20.4 x     18.5 x     14.9 %     123.9 %
                                                                                                                     
9/24/06 - December
          $17.29 - $26.47                                                                                                        
                                                                                                                     
Landry’s Restaurants, Inc. 
    LNY     $29.09     80.1 %     22.1       643.8       1,462.0       1,395.4       185.6       13.3 %     7.9 x     12.8 x     20.5 x     14.2 x     12.0 %     118.3 %
                                                                                                                     
6/30/06 - December
          $25.80 - $36.30                                                                                                        
                                                                                                                     
RARE Hospitality, Inc.(3)
    RARE     $31.22     89.6 %     34.0       1,061.7       1,087.1       1,046.6       125.7       12.0 %     8.6 x     13.2 x     20.4 x     17.4 x     18.0 %     96.9 %
                                                                                                                     
10/1/06 - December
          $24.98 - $34.85                                                                                                        
                                                                                                         
Mean:
    88.0 %     69.8     $ 2,484.7     $ 2,905.1     $ 2,509.6     $ 340.1       14.1 %     8.5 x     12.8 x     19.1 x     16.4 x     14.4 %     115.5 %
                                                                                                         
Median:
    88.0 %     66.5     $ 1,655.6     $ 1,932.3     $ 1,366.1     $ 220.4       13.4 %     8.5 x     13.0 x     19.4 x     16.5 x     14.2 %     119.6 %
                                                                                                             
OSI(3)(5)
  $33.19     68.7 %     74.7       2,478.8       2,715.8       3,839.5       366.1       9.5 %     7.4 x     15.2 x     21.6 x     16.8 x     14.0 %     119.7 %
                                                                                                             
9/30/06 - December
  $27.30 - $48.28                                                                                                        
                                                                                                             
Buyer Group Offer
  $40.00                                                             9.2 x                                        


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(1) Prices and earnings estimates obtained from the First Call Network on November 2, 2006.
 
(2) Market value of equity plus net debt. Equity value determined by basic shares outstanding.
 
(3) Denotes a company that holds a large portion of real estate.
 
(4) Denotes a company that has a significant amount of franchised restaurants.
 
(5) Net debt for OSI as of June 30, 2006.
 
Note: Operating results normalized for unusual and non-recurring expenses. Includes non-cash stock based compensation expense.
 
Although certain non-public restaurant companies might be considered comparable, they were not included in the analysis because no valuation information was publicly available for these companies. No company used in the comparable companies analysis possessed characteristics identical to those of OSI. Accordingly, an analysis of the results of the comparable companies necessarily involves complex considerations and judgments concerning differences in financial and operating characteristics of the selected companies, as well as other factors that could affect the public trading value of the selected companies and OSI. Mathematical analysis, such as determining the average or median, is not in itself a meaningful method of using comparable company data. Wachovia Securities performed this analysis to understand the range of estimated price to earnings, or P/E, ratio, estimated price to earnings to growth rate, or PEG ratio, and multiples of estimated earnings before interest, taxes, depreciation and amortization for the last 12 months, subject to certain adjustments, commonly referred to as adjusted LTM EBITDA (“Adjusted EBITDA”), of these comparable companies based upon market prices. In addition, Wachovia Securities reviewed certain operating metrics for these companies, such as operating profit margin and growth rates of earnings per share over a five-year time period to analyze the relative valuation of these companies. Wachovia Securities calculated certain financial ratios of these comparable companies based on the most recent publicly available information, including multiples of:
 
  •  estimated P/E ratio for the fiscal years 2006 and 2007;
 
  •  estimated PEG ratio for the fiscal year 2007; and
 
  •  enterprise value to LTM EBITDA as of September 30, 2006.
 
Based in part on the multiples described above and the multiples calculated for all of the companies mentioned on page 44, Wachovia Securities derived indications of the aggregate value of OSI by applying multiples ranging from 7.9x to 9.2x OSI’s Adjusted EBITDA as of September 30, 2006 of $366,100,000. Wachovia Securities utilized these selected multiples after considering the current market conditions and the size and diversification of operations of the comparable companies, among other things. The resulting indicated range of value was $34.35 to $40.00, as compared to the merger consideration of $40.00 per share. The financial data considered as part of this analysis included, among other things:
 
                                 
                Comparable Transactions  
    OSI (1)     OSI (2)(3)     Mean     Median  
 
Enterprise Value to LTM EBITDA
    9.2x       7.4x       8.5x       8.5x  
Enterprise Value to LTM EBIT
            15.2x       12.8x       13.0x  
Price per Share to Current Year 2006 EPS Estimate
            21.6x       19.1x       19.4x  
Price per Share to Current Year 2007 EPS Estimate
            16.8x       16.4x       16.5x  
Price to 2007 Earnings to Growth Rate Ratio
            119.7 %     115.5 %     119.6 %
 
 
(1) Based on merger consideration of $40.00 per share.
 
(2) Based on OSI current share price of $33.19 as of November 2, 2006.
 
(3) OSI 2006 and 2007 earnings estimates based on estimates provided by management.
 
Note: Operating results normalized for unusual and non-recurring expenses. Includes non-cash stock based compensation expense.
 
Discounted Cash Flow Analysis
 
Wachovia Securities performed a discounted cash flow analysis of OSI as a stand-alone entity. The Discounted Cash Flow Analysis attempts to establish the intrinsic value of the operating assets of the Company by applying a discount rate derived from the Company’s weighted average cost of capital to determine the present value of each of


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the free cash flows of the business over the projection period and the terminal value of the business beyond the provided projection horizon. Wachovia Securities calculated the discounted cash flow values for OSI as the sum of the present values of:
 
  •  the projected future free cash flows that OSI would generate for the fiscal year ending 2006 through the fiscal year ending 2011, the calculation of which, as set forth below, is unlevered net income (equal to operating income, tax-effected at a 31.5% tax rate) plus depreciation and amortization expense, less capital expenditures, less changes in working capital, plus other non-cash expense items and other nonrecurring items; and
 
  •  the terminal value of OSI at the end of that period.
 
The estimated future free cash flows were based on OSI’s management’s estimates for both a base and downside plan for the years 2007 through 2011 (see “Financial Forecast” on page 182) with the referenced EBITDA inclusive of certain non-cash, non-recurring adjustments, which were also provided by management. The terminal value multiples for OSI were calculated based on projected 2011 EBITDA, a range of exit multiples, which represent the estimated trading multiple of a certain financial metric, such as EBITDA, at the final year of the projection horizon, from 6.5x to 7.5x (based on estimated long-term historical range of comparable trading multiples and recognizing that such multiple does not reflect any control premium present at time of valuation), and a range of perpetuity growth rates, which represent a constant nominal rate at which the Company’s free cash flow is expected to grow annually beyond the projection horizon, of 1.5% to 2.5% (based on an estimated range of long-term nominal growth rates consistent with mature companies in the restaurant industry). Wachovia Securities used discount rates ranging from 9.0% to 11.0% for OSI based on Wachovia Securities’ judgment of the estimated weighted average cost of capital of OSI (after performing a detailed analysis on the Company’s weighted average cost of capital). The discounted cash flow analysis is set forth below. Based on this analysis, Wachovia Securities derived a range of implied values per share of OSI common stock of $29.77 to $42.30, as compared to the merger consideration of $40.00 per share. Although discounted cash flow analysis is a widely accepted and practiced valuation methodology, it relies on a number of assumptions, including growth rates, terminal multiples and discount rates. The valuation derived from the discounted cash flow analysis is not necessarily indicative of OSI’s present or future value or results.
 
Management’s Base Plan
 
                                         
    2007     2008     2009     2010     2011  
    ($ in Thousands)  
 
Net Revenue
  $ 4,243,059     $ 4,436,242     $ 4,813,961     $ 5,217,542     $ 5,622,321  
EBITDA(1)
    415,916       481,607       529,046       592,625       637,455  
Operating Income
    250,416       308,286       346,499       395,605       426,359  
Provision for Taxes
    78,881       97,110       109,147       124,616       134,303  
                                         
Unlevered Net Income
    171,535       211,176       237,352       270,990       292,056  
                                         
Plus: Depreciation & Amortization
    165,500       173,321       182,547       197,020       211,096  
Less: Capital Expenditures
    (201,217 )     (215,281 )     (225,123 )     (232,971 )     (212,046 )
Less: Working Capital (Needs) / Inflow
    5,899       (3,924 )     4,793       3,466       722  
Plus: Non-cash expense line items & Other
    14,740       3,290       (4,670 )     (10,649 )     (19,031 )
                                         
Unlevered Free Cash Flow
  $ 156,456     $ 168,581     $ 194,899     $ 227,855     $ 272,798  
                                         


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Management’s Downside Plan
 
                                         
    2007     2008     2009     2010     2011  
 
Net Revenue
  $ 4,184,835     $ 4,335,648     $ 4,667,482     $ 5,016,284     $ 5,373,400  
EBITDA(1)
    382,273       428,642       480,806       534,675       573,595  
Operating Income
    216,773       255,322       299,909       342,605       369,748  
Provision for Taxes
    68,283       80,426       94,471       107,920       116,471  
                                         
Unlevered Net Income
    148,489       174,896       205,438       234,684       253,278  
                                         
Plus: Depreciation & Amortization
    165,500       173,321       180,897       192,070       203,846  
Less: Capital Expenditures
    (201,217 )     (215,281 )     (192,123 )     (199,971 )     (199,046 )
Less: Working Capital (Needs) / Inflow
    2,583       (5,941 )     2,501       1,192       (834 )
Plus: Non-cash expense line items & Other
    14,729       3,287       (4,673 )     (10,654 )     (19,033 )
                                         
Unlevered Free Cash Flow
  $ 130,084     $ 130,281     $ 192,039     $ 217,321     $ 238,211  
                                         
 
 
(1) Adjusted to exclude certain non-cash, non-recurring adjustments.
 
Management’s Base Plan
 
                                                                                                     
          Price Per Share
              Price Per Share
 
          Free Cash Flow Growth After 2011               Multiple of 2011 EBITDA(1)  
          1.50%     1.75%     2.00%     2.25%     2.50%               6.5x     6.8x     7.0x     7.3x     7.5x  
 
WACC     9.0 %   $ 37.47     $ 38.63     $ 39.88     $ 41.22     $ 42.66     WACC     9.00 %   $ 41.28     $ 42.64     $ 43.99     $ 45.35     $ 46.70  
      9.5 %     34.84       35.84       36.91       38.05       39.28           9.50 %     40.49       41.81       43.14       44.46       45.78  
      10.0 %     32.54       33.41       34.33       35.31       36.36           10.00 %     39.71       41.01       42.30       43.59       44.89  
      10.5 %     30.50       31.27       32.07       32.92       33.83           10.50 %     38.96       40.22       41.49       42.75       44.02  
      11.0 %     28.70       29.37       30.08       30.82       31.61           11.00 %     38.22       39.46       40.70       41.93       43.17  
 
Management’s Downside Plan
 
                                                                                                     
          Price Per Share
              Price Per Share
 
          Free Cash Flow Growth After 2011               Multiple of 2011 EBITDA{1}  
          1.50%     1.75%     2.00%     2.25%     2.50%               6.5x     6.8x     7.0x     7.3x     7.5x  
 
WACC
    9.0 %   $ 32.38     $ 33.47     $ 34.63     $ 35.88     $ 37.23     WACC     9.0 %   $ 36.70     $ 37.92     $ 39.14     $ 40.36     $ 41.58  
      9.5 %     30.09       31.03       32.03       33.10       34.25           9.5 %     35.98       37.17       38.36       39.56       40.75  
      10.0 %     28.08       28.90       29.77       30.70       31.68           10.0 %     35.28       36.45       37.61       38.78       39.94  
      10.5 %     26.31       27.03       27.79       28.60       29.45           10.5 %     34.60       35.74       36.88       38.02       39.16  
      11.0 %     24.74       25.37       26.04       26.75       27.50           11.0 %     33.94       35.06       36.17       37.28       38.40  
 
 
(1) Adjusted to exclude certain non-cash, non-recurring adjustments.
 
Note: Price per share calculated using fully diluted shares outstanding, which includes both vested and unvested options and restricted stock. Diluted options are calculated using the treasury stock method at the current trading share price of $33.19 as of November 2, 2006.
 
Analysis of Present Value of Future Share Price
 
Wachovia Securities utilized the Analysis of Present Value of Future Share Price to determine the equivalent share price as of the date of the opinion, assuming that the Company’s shares will trade in the public markets based on the financial projections at that time, according to prevalent forward equity trading multiples. The equivalent price at the time of the opinion is attained by applying a discount rate of the Company’s cost of equity, as estimated today, to the projected share price derived in the previously described analysis. In conducting its analysis of the present value of OSI’s future share price, Wachovia Securities utilized OSI’s management’s earnings per share projections for both a base and downside plan for the years 2007 through 2011. Wachovia Securities extrapolated potential future share prices at the end of each of 2007 and 2008 by applying a one-year forward multiple range of 15.0x to 17.0x based on OSI’s historical P/E range, and by applying a discount rate of 10.6% based on Wachovia Securities’ judgment of the estimated cost of equity. This judgment as to the estimated cost of equity was based in


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part on Wachovia Securities’ analysis of the financial and stock volatility metrics of companies comparable to OSI. The analysis resulted in a range of theoretical values per share of OSI common stock of $28.70 to $42.38, as compared to the merger consideration of $40.00 per share.
 
Leveraged Buyout Analysis
 
Wachovia Securities performed a leveraged buyout analysis to ascertain the price at which an acquisition of OSI may be attractive to a potential financial buyer, assuming certain market-based investment return requirements for financial sponsors as well as the possible exit multiples attainable after an assumed investment horizon. The analysis of the value of OSI in a leveraged buyout scenario was based upon market-based capital structure assumptions used in the industry when performing this analysis and OSI’s management’s estimates for both a base and downside plan for the years 2007 through 2011 and downside plan for the years 2007 through 2011 (see “Financial Forecast” on page 182) with the referenced EBITDA inclusive of certain non-cash, non-recurring adjustments, which were also provided by management. Targeted five-year returns on equity, the effective annual increase over the financial buyer’s original equity investment over the term of its investment period, of 19% to 25% (the estimated range of required returns for financial sponsors within recent and historical transactions) and an exit multiple of 6.0x to 8.0x (estimated range of exit multiples utilized by financial sponsors and which reflects varying financing market conditions over time and the addition of possible control premiums) estimated 2011 EBITDA were assumed. Wachovia Securities used its own estimates of (a) a financial buyer’s expected return on equity and (b) the expected EBITDA multiple at the end of the assumed holding period by a financial buyer, based on its experience in comparable transactions. Wachovia Securities believed that the combination of these assumptions was comparable to those likely to be used by potential competing bidders in a potential leveraged buyout of OSI. Based on these assumptions, the resulting range of implied leveraged acquisition equity values was $30.78 to $40.08 per share, as compared to the merger consideration of $40.00 per share.
 
Comparable Transactions Analysis
 
Using publicly available information, Wachovia Securities reviewed the multiples implied in certain change of control transactions involving companies participating in industries deemed by Wachovia Securities to be comparable to the industry in which OSI participates. A Comparable Transaction Analysis generates an implied value of a company based on publicly available financial terms of selected comparable change of control transactions involving companies that share certain characteristics with the company being valued. However, no company or transaction utilized in the comparable transaction analysis is identical to OSI or the merger. The review focused on selected consummated and proposed transactions between 2002 and the date of Wachovia Securities’ opinion. These comparable transactions included mergers and/or acquisitions in the restaurant industry. The comparable transactions included transactions falling within these criteria in the time frame used that were identified by Wachovia Securities and for which Wachovia Securities was able to identify reliable valuation


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statistics. The proposed transactions may not ultimately be consummated. Below is a list of the transactions reviewed:
 
                                                                                 
            Income Statement Data     Valuation Data  
            Latest Twelve Months     Equity
                         
                              Net
    Market
    Enterprise
    EV/
    EV/
    EV/
 
Target Company
 
Acquiring Company
  Transaction Date   Sales     EBITDA     EBIT     Income     Value     Value(1)     Sales     EBITDA     EBIT  
    ($ in millions)  
 
Joe’s Crab Shack
  JH Whitney Capital Partners   ANNOUNCED     N/A       N/A       N/A       N/A       N/A     $ 192.0       N/A       N/A       N/A  
                                                                                 
Lone Star Steakhouse and Saloon
  Lone Star Funds   ANNOUNCED   $ 677.6     $ 45.9     $ 22.8     $ 17.2     $ 624.3       566.1       0.8 x     12.3 x     24.8x  
                                                                                 
Real Mex Restaurants, Inc
  Sun Capital Partners, Inc.   ANNOUNCED     549.9       57.6       39.7       14.7       359.0       359.0       0.7 x     6.2 x     9.0x  
                                                                                 
Ryan’s Restaurant Group Inc. 
  Buffets Inc   ANNOUNCED     822.5       98.9       63.5       36.5       706.2       832.1       1.0 x     8.4 x     13.1x  
                                                                                 
Main Street Restaurant Group
  Briad Main Street, Inc.   June 29, 2006     243.6       18.2       8.2       2.9       120.7       143.6       0.6 x     7.9 x     17.4x  
                                                                                 
Dave & Buster’s, Inc. 
  Wellspring Capital   March 8, 2006     453.6       63.1       21.3       9.2       271.4       359.9       0.8 x     5.7 x     16.9x  
                                                                                 
Fox & Hound Restaurant Group
  Newcastle Partners and Steel Partners   February 24, 2006     164.7       22.1       12.4       8.5       175.3       182.2       1.1 x     8.2 x     14.7x  
                                                                                 
Worldwide Restaurant Concepts
  Pacific Equity Partners   September 22, 2005     359.5       24.5       12.1       8.1       219.4       201.4       0.6 x     8.2 x     16.6x  
                                                                                 
Whistle Junction / EACO Corp. 
  Banner Buffets LLC   July 1, 2005     N/A       N/A       N/A       N/A       26.0       30.0       N/A       N/A       N/A  
                                                                                 
Quality Dining
  Management   April 13, 2005     239.5       23.0       12.6       3.7       37.2       116.1       0.5 x     5.1 x     9.2x  
                                                                                 
Chevy’s
  Real Mex Restaurants   January 11, 2005     N/A       N/A       N/A       N/A       85.2       86.1       N/M       N/M       N/M  
                                                                                 
Mimi’s Café
  Bob Evans   July 7, 2004     252.6       19.0       10.7       (0.1 )     107.9       182.0       0.7 x     9.6 x     17.0x  
                                                                                 
Garden Fresh Restaurant Corp. 
  Fairmont Capital   March 10, 2004     220.5       24.7       10.3       3.8       103.8       131.6       0.6 x     5.3 x     12.8x  
                                                                                 
Ninety-Nine Restaurants, Inc. 
  O’Charley’s, Inc.   January 27, 2003     196.4       27.2       21.5       17.6       157.3       147.3       0.8 x     5.4 x     6.9x  
                                                                                 
Saltgrass Steak House
  Landry’s Restaurants, Inc.   October 1, 2002     100.0       13.0       N/A       N/A       N/M       75.0       0.8 x     5.8 x     N/M  
                                                                         
Mean:
  $ 356.7     $ 36.4     $ 21.4     $ 11.1     $ 230.3     $ 240.3       0.7 x     7.4 x   $ 14.4  
                                                                         
Median:
    248.1       24.6       12.6       8.5       157.3       182.0       0.7 x     7.1 x     14.7  
 
 
(1) Market value of equity plus net debt.
 
Wachovia Securities performed this analysis to understand the range of multiples of EBITDA paid or proposed to be paid in these comparable transactions and to estimate the comparable value of OSI. Accordingly, an analysis of the resulting multiples of the selected transactions necessarily involves complex considerations and judgments concerning differences in financial and operating characteristics of the companies and the selected transactions and other factors that may have affected the selected transactions and/or affect the merger. The analysis showed that the median multiple of transaction value to EBITDA, based on publicly available information, for the 12 months prior to the announcement of the transaction for the comparable transactions was 7.1x. EBITDA was not available for the three transactions which have an asterisk in the table above. Based in part on the foregoing multiples and qualitative judgments concerning differences between the characteristics of these transactions and the merger, Wachovia Securities derived indicative aggregate values of OSI by applying multiples ranging from 6.5x to 8.5x to OSI’s Adjusted EBITDA as of September 30, 2006 of $366,100,000. The resulting range of per share values based on the analysis of comparable transactions was $28.10 to $37.00 per share, as compared to the merger consideration of $40.00 per share.
 
Analysis of Transaction Premiums Paid
 
Using publicly available information, Wachovia Securities reviewed the control premiums paid or payable in certain change of control transactions involving publicly traded target companies in order to compare the premium paid over the Company’s present and historical share prices to that paid in past transactions. The review focused on consummated and proposed transactions between January 1, 2002 and the date of Wachovia Securities’ opinion. These transactions included mergers and/or proposed acquisitions across all industries with transaction values between $1 billion and $10 billion. The 241 transactions analyzed included transactions falling within these criteria in the time frame used that were identified by Wachovia Securities and for which Wachovia Securities was able to identify reliable valuation statistics. Some of the proposed transactions utilized in this analysis may not ultimately be consummated. Wachovia Securities performed this analysis to understand the one-day prior, one-week prior, and four-weeks prior offer premiums paid or proposed to be paid relative to the target company share price at transaction announcement, and to estimate the comparable value of OSI. The analysis showed median one-day prior, one-week


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prior and four-weeks prior offer premiums paid or payable of 20.0%, 21.1% and 24.8%, respectively. Wachovia Securities applied the median premiums paid or payable to OSI’s current and historical stock prices as of the date of the opinion. The analysis resulted in a range of implied values per share of OSI common stock of $39.80 to $41.60, as compared to the merger consideration of $40.00 per share.
 
Miscellaneous
 
Wachovia Securities is acting as financial advisor to the special committee in connection with the merger. Under the terms of its engagement, OSI has agreed to pay Wachovia Securities a transaction fee, payable upon consummation of any transaction or series of transactions in which a third party acquires directly or indirectly at least 50% of the stock, assets, revenues, income or business of OSI, or otherwise gains control of OSI. Since this transaction fee is contingent upon the consummation of a transaction, and since the consummation of a transaction is unlikely to occur in the absence of a favorable fairness opinion, Wachovia Securities has an incentive for a transaction to be consummated. The transaction fee payable to Wachovia Securities, approximately $12.2 million, is equal to the sum of (x) 0.35% of the purchase price paid in connection with any such sale transaction, up to a purchase price that reflects a price per share of $40.00 or less, and (y) 1.5% of the amount, if any, by which the purchase price paid in the sale transaction exceeds a purchase price implied by a price per share of $40.00. OSI has also agreed to reimburse Wachovia Securities for expenses reasonably incurred in performing its services, including reasonable fees and expenses of its legal counsel, and to indemnify Wachovia Securities and certain related persons for various liabilities related to or arising out of its engagement, including liabilities arising under the federal securities laws.
 
Wachovia Securities has executed advisory and financing transactions on behalf of portfolio companies of Bain Capital as well as, in certain instances, investor groups which included affiliates of Bain Capital, and executed financing transactions on behalf of investor groups including Catterton and its affiliates. For rendering these services (all of which were unrelated to this transaction), these portfolio companies of Bain Capital and such investor groups including affiliates of Bain Capital made payments to Wachovia Securities totaling approximately $2 million in 2005, and $25 million in 2006, and the investor groups including Catterton and its affiliates made payments to Wachovia Securities of less than approximately $50,000 in 2005 and approximately $500,000 in 2006. For the lending and banking services currently being provided by affiliates of Wachovia Securities to the Company such affiliates have received compensation (excluding interest payments) of approximately $700,000 in 2006 and an amount which is not available for 2005. For the loans and guarantees currently outstanding to executives and board members of the Company, affiliates of Wachovia Securities received no material compensation (excluding interest expenses) in 2006 and insufficient information is available for 2005. In addition, Wachovia Insurance Services, an affiliate of Wachovia Securities, provides full outsourced risk management services for the Company. For such services, Wachovia Insurance Services received compensation of approximately $3.6 million in 2006 and approximately $3.4 million in 2005.
 
In addition, in the ordinary course of its business, Wachovia Securities may actively trade securities of OSI for its own account and for the accounts of customers and, accordingly, may at any time hold a long or short position in such securities. The special committee selected Wachovia Securities as its financial advisor in connection with the merger because Wachovia Securities is a nationally recognized investment banking firm with experience in similar transactions and also because of the special committee’s belief that Wachovia Securities’ familiarity with OSI enhanced its ability to advise the special committee. Wachovia Securities is continually engaged in the valuation of businesses and their securities in connection with mergers and acquisitions, strategic alliances, competitive bids and private placements.
 
Opinion of Piper Jaffray & Co.
 
Under an engagement letter dated October 22, 2006, the special committee retained Piper Jaffray to render an opinion as to whether the consideration to be received by our stockholders (other than the OSI Investors) in the merger is fair to such stockholders from a financial point of view. On November 5, 2006, at a meeting of the special committee held to evaluate the merger, Piper Jaffray delivered to the special committee an oral opinion, confirmed by delivery of a written opinion dated November 5, 2006, to the effect that, as of that date and based on and subject to various assumptions, matters considered and limitations described in its opinion, the consideration to be received


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by our stockholders (other than the OSI Investors) in the merger is fair to such stockholders from a financial point of view. Piper Jaffray was not retained to act solely on behalf of unaffiliated stockholders of the Company. Piper Jaffray understood that the opinion would be provided to our board of directors for its information and use in connection with its consideration of the merger.
 
The special committee chose to retain Piper Jaffray based upon Piper Jaffray’s experience in the valuation of businesses and their securities in connection with mergers and acquisitions and similar transactions, especially with respect to restaurant enterprises. The special committee also considered that Piper Jaffray is a large, global, full-service financial institution. Piper Jaffray is a nationally recognized investment banking firm and is regularly engaged as a financial advisor in connection with mergers and acquisitions, underwritings and secondary distributions of securities and private placements. At the time of its hiring, Piper Jaffray had no material prior relationship with OSI or its affiliates.
 
The full text of the opinion, which sets forth, among other things, the assumptions made, procedures followed, matters considered and limitations on the scope of the review undertaken by Piper Jaffray in rendering its opinion, is attached to this proxy statement as Annex C and is incorporated in its entirety herein by reference. You are urged to, and should, carefully read the entire opinion. The opinion addresses only the fairness of the merger consideration to our stockholders (other than the OSI Investors) from a financial point of view as of the date of the opinion. The opinion was addressed to the special committee and could be used by our board in connection with its consideration of the merger, but was not intended to be, and does not constitute, a recommendation as to how any stockholder should vote or act on any matter relating to the proposed merger.
 
In arriving at its opinion, Piper Jaffray, among other things, reviewed:
 
  •  the financial terms of the Merger Agreement;
 
  •  certain publicly available financial, business and operating information concerning us;
 
  •  certain internal financial, operating and other data prepared by our management and furnished to Piper Jaffray;
 
  •  certain internal financial projections that were prepared by our management for financial planning purposes and furnished to Piper Jaffray (see “Financial Forecast” on page 182);
 
  •  certain publicly available market and securities data of OSI;
 
  •  certain financial data and the imputed prices and trading activity of certain other publicly traded companies that Piper Jaffray deemed relevant for purposes of its opinion;
 
  •  the financial terms, to the extent publicly available, of certain merger transactions that Piper Jaffray deemed relevant for purposes of its opinion; and
 
  •  other information, financial studies, analyses and investigations and other factors that Piper Jaffray deemed relevant for purposes of its opinion.
 
In addition, Piper Jaffray performed a discounted cash flow analysis with respect to OSI. Piper Jaffray also conducted discussions with members of our senior management and Wachovia Securities, our financial advisor, concerning our financial condition, historical and current operating results, business and prospects.
 
The following is a summary of the material financial analyses performed by Piper Jaffray in connection with the preparation of its fairness opinion. The preparation of analyses and a fairness opinion is a complex analytic process involving various determinations as to the most appropriate and relevant methods of financial analysis and the application of those methods to the particular circumstances. This summary does not purport to be a complete description of the analyses performed by Piper Jaffray.
 
This summary includes information presented in tabular format. You should read the tables together with the corresponding text, and consider the tables and text as a whole, in order to fully understand the financial analyses presented by Piper Jaffray. The tables alone do not constitute a complete summary of the financial analyses. You should not take the order in which these analyses are presented below, and the results of those analyses, as any indication of the relative importance or weight given to these analyses by Piper Jaffray, the special committee or our


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board of directors. Except as otherwise noted, the following quantitative information, to the extent that it is based on market data, is based on market data as it existed on or before November 5, 2006, and is not necessarily indicative of current market conditions.
 
Piper Jaffray reviewed the financial terms of the proposed merger, including the merger consideration. Based on a price of $40.00 per share in cash for our common stock, the implied fully diluted equity value for OSI was approximately $3.1 billion and the implied enterprise value of OSI (based on financial information as of June 30, 2006) was approximately $3.4 billion. “Enterprise value” is the sum of the fully diluted market value of any common equity plus any short-term debt, long-term debt and minority interests in consolidated entities, minus cash and cash equivalents.
 
Selected Market Information Concerning OSI
 
Piper Jaffray reviewed selected market information concerning our common stock. Among other things, Piper Jaffray noted the following with respect to the trading prices of our common stock:
 
         
Closing market price 1 trading day prior to the announcement of the merger (November 3, 2006)
  $ 32.43  
Closing market price 5 trading days prior to the announcement of the merger
  $ 33.49  
Closing market price 20 trading days prior to the announcement of the merger
  $ 33.32  
Average closing market price for the 6 months prior to the announcement of the merger
  $ 33.53  
Average closing market price for the 12 months prior to the announcement of the merger
  $ 37.73  
52-week low market price
  $ 27.37  
52-week high market price
  $ 46.62  
 
Piper Jaffray’s analysis concerning our common stock was based on market information concerning our common stock available as of November 3, 2006. Piper Jaffray did not and does not express any opinion as to the prices at which our common stock may trade following the announcement of the merger proposal or at any time in the future.
 
Comparable Companies Analysis
 
Piper Jaffray reviewed selected financial data for OSI and compared this to corresponding data for selected publicly traded companies that are in the restaurant industry and which Piper Jaffray believes are comparable to us. Piper Jaffray selected these companies based on information obtained by searching SEC filings, public company disclosures, press releases, industry and popular press reports, databases and other sources. Piper Jaffray identified and analyzed the following group of eleven comparable companies with market capitalizations greater than $200,000,000 that are either full-service steak concepts or other full-service concepts with long-term earnings per share growth rates between 10% and 15%:
 
                                                                                                                 
                                  LT
                                                 
    Price
    Equity
    Company
    Change from 12-Month     Growth
    P/E Multiple(1)     PEG Ratio     CV7/LTM     CV/2007  
Company
  11/02/06     Value     Value     Low     High     Rate(1)     CY’06     CY’07     CY’06     CY’07     Sales     EBITDA     Sales     EBITDA  
    ($ in millions, except per share data)  
 
Selected Full Service Restaurant Companies
                                                                                                               
Darden Restaurants
  $ 41.59       6,548       7,150       35 %     (6 %)     13%       18.2x       16.4x       1.5x       1.3x       1.2x       9.4x       1.1x       8.5x  
Brinker International
    45.76       3,891       4,338       45 %     (5 %)     13%       19.1x       16.8x       1.4x       1.2x       1.0x       8.6x       0.9x       7.3x  
Applebee’s
    22.89       1,790       1,981       32 %     (14 %)     13%       19.5x       17.6x       1.5x       1.3x       1.5x       8.6x       1.4x       8.5x  
CBRL Group
    43.11       1,412       2,242       35 %     (10 %)     12%       15.4x       14.6x       1.3x       1.2x       0.9x       8.0x       0.8x       8.7x  
Bob Evans
    33.11       1,220       1,414       54 %     (5 %)     NA       22.8x       19.5x       NA       NA       0.9x       9.1x       0.8x       NA  
Texas Roadhouse
    14.66       1,145       1,147       60 %     (15 %)     21%       34.7x       27.0x       1.7x       1.3x       2.2x       17.2x       1.6x       11.4x  
RARE Hospitality
    31.22       1,089       1,116       25 %     (10 %)     18%       20.0x       17.1x       1.1x       1.0x       1.1x       9.0x       0.9x       7.6x  
Landry’s Restaurants
    29.09       667       1,485       13 %     (20 %)     11%       17.7x       13.8x       1.6x       1.2x       1.1x       8.0x       1.2x       7.5x  
O’Charley’s, Inc.
    20.09       471       621       58 %     (5 %)     13%       22.5x       19.0x       1.7x       1.4x       0.6x       8.0x       0.6x       6.0x  
Ruth’s Chris Steak House
    18.52       451       476       14 %     (25 %)     18%       21.0x       17.6x       1.1x       1.0x       2.1x       14.1x       1.4x       9.0x  
Morton’s Restaurant Group
    16.17       273       320       20 %     (20 %)     19%       21.2x       15.6x       1.1x       0.8x       1.0x       10.1x       0.9x       7.8x  
Low
                            13 %     (25 %)     11%       15.4x       13.8x       1.1x       0.8x       0.6x       8.0x       0.6x       6.0x  
Average
                            36 %     (12 %)     15%       21.1x       17.7x       1.4x       1.2x       1.2x       10.0x       1.1x       8.3x  
Median
                            35 %     (10 %)     13%       20.0x       17.1x       1.4x       1.2x       1.1x       9.0x       0.9x       8.2x  
High
                            60 %     (5 %)     21%       34.7x       27.0x       1.7x       1.4x       2.2x       17.2x       1.6x       11.4x  
OSI
                                                                                                               
Current Market Price(2)
    33.19       2,535       2,773       22 %     (31 %)     12%       22.7x       17.3x       1.8x       1.4x       0.7x       7.7x       0.7x       6.9x  
Offer Price(2)(3)
    40.00       3,112       3,392       47 %     (17 %)     12%       27.3x       20.8x       2.2x       1.7x       0.9x       9.4x       0.8x       8.3x  


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Notes:
 
(1)  Long-term growth rate and earnings per share estimates provided by First Call and Wall Street research. Long-term growth rates based on expected five-year secular growth trends.
 
(2)  Based on the most recent trading price of $33.19 per share (as of November 2, 2006).
 
(3)  LTM and 2007 projected financial results have been provided by management and adjusted to exclude non-cash charges pertaining to catch-up payments related to the Company’s partnership programs.
 
The financial data analyzed as part of this analysis included, among other things:
 
                                         
          Comparable Company Values  
    OSI(1)(3)     Low     Mean     Median     High  
 
Enterprise Value to LTM Sales
    0.9 x     0.6 x     1.2 x     1.1 x     2.1 x
Enterprise Value to LTM EBITDA(2)
    9.5 x     7.9 x     9.6 x     8.8 x     14.3 x
Price per Share to CY 2006 EPS
    27.0 x     15.3 x     20.7 x     19.6 x     33.5 x
Price to 2006 Earnings to Growth Rate Ratio
    2.2 x     1.1 x     1.4 x     1.4 x     1.7 x
Enterprise Value to CY 2007 Sales
    0.8 x     0.6 x     1.0 x     0.9 x     1.5 x
Enterprise Value to CY 2007 EBITDA(2)
    8.3 x     6.0 x     7.9 x     7.6 x     11.1 x
Price per Share to CY 2007 EPS
    20.8 x     13.6 x     17.4 x     16.8 x     26.2 x
Price to 2007 Earnings to Growth Rate Ratio
    1.7 x     0.8 x     1.2 x     1.2 x     1.4 x
 
 
(1) Based on merger consideration of $40.00 per share.
 
(2) Adjusted to exclude certain non-recurring expenses and non-cash catch-up charges pertaining to OSI’s partnership plans and adjusted for estimated gift card and certificate breakage charges as of November 3, 2006.
 
(3) OSI’s 2006 and 2007 sales and earnings estimates based on management’s estimates.
 
A comparable company analysis attempts to provide an implied value of a company by comparing it to similar publicly-traded companies. No company utilized in the comparable company analysis is identical to OSI. This analysis showed that, based on the estimates and assumptions used in the analysis, the enterprise value and price per share of OSI implied by the merger consideration set forth in the Merger Agreement was within the range of values of the comparable companies. The price to earnings to growth rate ratio for both 2006 and 2007 is higher for OSI than for the comparable companies.
 
Comparable M&A Transactions Analysis
 
Piper Jaffray reviewed selected financial data for OSI and compared this to corresponding data from the following group of 32 selected restaurant industry merger and acquisition transactions. Piper Jaffray selected these transactions by searching SEC filings, public company disclosures, press releases, industry and popular press reports, databases and other sources and by applying the following criteria: (i) transactions in SIC codes 5812 (eating places) or 5813 (drinking places); (ii) transaction targets engaged in the restaurant industry and deemed similar to OSI; and (iii) transactions announced between 2003 and the date of the opinion with enterprise values greater than $50,000,000.
 
                                   
        Enterprise
  Transaction Value/LTM     EBITDA
 
Acquirer   Target   Value   Sales     EBITDA     Margin  
 
J.H. Whitney Capital Partners
  Joe’s Crab Shack (Landry’s Restaurant Inc.)   $ 192.0     NA       5.6 x     NA  
Catterton Partners and Oak Investement Partners
  Cheddar’s     NA     NA       NA       NA  
Sun Capital Partners
  Real Mex Restaurants     NA     NA       NA       NA  
Lone Star Funds
  Lone Star Steakhouse & Saloon     556.3     0.8 x     12.0 x     6.6 %
Buffets Inc
  Ryan’s Restaurant Group     841.9     NA       10.3 x     NA  
Bruckmann, Rosser, Sherrill / Castle Harlan
  Bravo Inc.     NA     NA       NA       NA  
Zensho Co., Ltd. 
  Catalina     NA     NA       NA       NA  
Briad Group
  Main Street Restaurant Group     136.3     0.6 x     8.2 x     6.8 %
Merrill Lynch Global Private Equity
  NPC International Inc.     NA     NA       NA       NA  


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        Enterprise
  Transaction Value/LTM     EBITDA
 
Acquirer   Target   Value   Sales     EBITDA     Margin  
 
Wellspring Capital Management LLC
  Checkers Drive-In Restaurants     195.0     1.0 x     7.2 x     14.0 %
Grotech Capital, Charlesbank Capital, Leonard Green & Partners
  Del Taco, Inc.     600.0     1.0 x     7.5 x     12.9 %
Newcastle Partners and Steel Partners
  Fox & Hound Restaurant Group     179.6     1.1 x     8.2 x     13.3 %
Bain Capital, The Carlyle Group and Thomas H. Lee Partners
  Dunkin’ Brands, Inc. (Dunkin’ Donuts, Baskin-Robbins, Togo’s)     2,425.0     NA       12.9 x     NA  
Wellspring Capital Management LLC
  Dave & Buster’s Inc.     375.0     0.9 x     6.0 x     14.5 %
Leonard Green Partners
  Claim Jumper Restaurants     NA     NA       NA       NA  
Sun Capital Partners
  Garden Fresh Restaurant Corporation     NA     NA       NA       NA  
Bruckmann, Rosser, Sherrill & Co. 
  Corner Bakery Café     64.0     0.5 x     6.0 x     8.3 %
Trimaran Capital Partners
  El Pollo Loco     415.0     NA       9.4 x     NA  
Castle Harlan Inc. 
  Perkins Restaurant & Bakery     245.0     0.7 x     6.6 x     10.7 %
Palladium Equity Partners
  Taco Bueno Restaurants     NA     NA       NA       NA  
Triarc Cos
  RTM Restaurant Group (Arby’s Franchisee)     727.0     0.9 x     NA       NA  
Management /PNC Mezzanine Capital
  Au Bon Pain     120.0     0.7 x     NA       NA  
Pacific Equity Partners
  Worldwide Restaurant Concepts     221.7     0.6 x     7.4 x     8.4 %
Trimaran Capital Partners
  Charlie Brown’s Inc.     140.0     NA       7.5 x     NA  
Centre Partners Management
  Uno Restaurant Holdings Corp.     190.0     0.7 x     5.6 x     12.7 %
Charlesbank Capital Partners / Grotech Capital Group
  Captain D’s     NA     NA       NA       NA  
Crescent Capital Investments
  Church’s Chicken     390.0     1.6 x     7.5 x     20.8 %
Management / Investor Group
  Quality Dining, Inc.     131.3     0.6 x     6.3 x     9.1 %
Bob Evans Farms
  Mimi’s Café     182.0     0.7 x     9.6 x     7.5 %
Brazos Private Equity Partners
  Cheddar’s     NA     NA       NA       NA  
Centre Partners Management / Fairmont Capital
  Garden Fresh Restaurant Corporation     134.3     0.6 x     5.0 x     12.4 %
Wind Point Partners
  VICORP Restaurants Inc     225.0     0.6 x     5.1 x     11.3 %
 
The financial data analyzed as part of this analysis included, among other things:
 
                                         
          Comparable Transactions  
    OSI(1)     Low     Mean     Median     High  
 
Enterprise Value to LTM Revenue
    0.9 x     0.5 x     0.8 x     0.7 x     1.6x  
Enterprise Value to LTM EBITDA
    9.5 x     5.0 x     7.7 x     7.4 x     12.9x  
 
 
(1) Based on the merger consideration of $40.00 per share.
 
A comparable M&A transaction analysis generates an implied value of a company based on publicly available financial terms of selected comparable change of control transactions involving companies that share certain characteristics with the company being valued. However, no company or transaction utilized in the comparable transaction analysis is identical to OSI or the merger. This analysis showed that, based on the estimates and assumptions used in the analysis, the enterprise value of OSI was within the range of values of the comparable transactions.
 
Premiums Paid Analysis
 
Piper Jaffray reviewed publicly available information for selected completed or pending public buyout transactions to determine the premiums paid in the transactions over recent trading prices of the target companies prior to announcement of the transaction. Piper Jaffray selected these transactions by searching SEC filings, public

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company disclosures, press releases, industry and popular press reports, databases and other sources and by applying the following criteria:
 
  •  transactions in which the U.S. publicly traded target company operated in an industry other than technology, finance or healthcare; and
 
  •  transactions announced since January 1, 2000 with enterprise values between $1 billion and $5 billion.
 
Piper Jaffray performed its analysis on over 160 transactions that satisfied these criteria. The table below shows a comparison of premiums paid in these transactions to the premium that would be paid to our stockholders (other than the OSI Investors) based on the per share merger consideration.
 
                                         
          Comparable Transactions  
    OSI(1)     Low     Mean     Median     High  
 
One-day prior to announcement
    23.3 %     (26.3 )%     26.4 %     24.8 %     92.8 %
5-days prior to announcement
    19.4 %     (28.0 )%     29.1 %     27.0 %     103.4 %
20-days prior to announcement
    20.0 %     (28.1 )%     31.0 %     27.1 %     110.5 %
 
 
(1) Based on merger consideration of $40.00 per share.
 
Piper Jaffray also performed an analysis on a subset of 26 of these transactions in which the acquirer is a financial sponsor or a private equity consortium. The table below shows comparison of premiums paid in these transactions to the premium that would be paid to our stockholders (other than the OSI Investors) based on the per share merger consideration.
 
                                         
          Comparable Transactions  
    OSI(1)     Low     Mean     Median     High  
 
One-day prior to announcement
    23.3 %     (21.8 )%     20.9 %     20.9 %     50.0 %
5-days prior to announcement
    19.4 %     (19.6 )%     23.1 %     22.2 %     50.0 %
20-days prior to announcement
    20.0 %     (16.6 )%     24.3 %     20.8 %     77.8 %
 
 
(1) Based on merger consideration of $40.00 per share.
 
By observing premiums paid in other transactions, Piper Jaffray was able to estimate a range of premiums appropriate for evaluating the price to be paid in the merger. This analysis showed that, based on the estimates and assumptions used in the analysis, the premium to be paid for OSI implied by the merger consideration set forth in the Merger Agreement was within the range of values of the comparable transactions.
 
Discounted Cash Flow Analysis
 
Piper Jaffray calculated a range of theoretical enterprise values for OSI based on (i) the net present value of implied projected annual cash flows of OSI from fiscal year 2007 through fiscal year 2011 and (ii) the net present value of a terminal value using the following discounted cash flow analysis:
 
                                         
    Projected Financial Results(1)  
    2007     2008     2009     2010     2011  
    (Dollars in millions, except per share amounts)  
 
Income statement:
                                       
EBITDA(2)
  $ 410     $ 481     $ 534     $ 602     $ 655  
Operating income
    244       308       352       405       444  
Income taxes (31.5%)
    77       97       111       128       140  
                                         
After-tax operating income
    167       211       241       278       304  
Unlevered free cash flow calculation:
                                       
Depreciation & amortization
    166       173       183       197       211  
Changes in working capital
    12       (9 )     (10 )     (17 )     (25 )
Maintenance capex
    (15 )     (33 )     (33 )     (33 )     (13 )
Growth capex
    (186 )     (182 )     (192 )     (200 )     (199 )
                                         
Unlevered free cash flow
    143       159       188       225       278  


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    Projected Financial Results(1)  
    2007     2008     2009     2010     2011  
    (Dollars in millions, except per share amounts)  
 
Discounted free cash flow calculation:
                                       
Unlevered free cash flow
    143       159       188       225       278  
Terminal exit multiple
                                    8.0 x
Terminal value
                                    5,239  
                                         
Total free cash flow
    143       159       188       225       5,517  
                                         
Net present value calculation:
                                       
Discount rate(3) 13.1%
                                       
Net present value of unlevered free cash flows
    127       125       130       137       150  
Net present value of terminal value
    0       0       0       0       2,826  
Enterprise value
    3,495                                  
Less: total debt
    (296 )                                
Less: minority interest
    (43 )                                
Plus: cash
    59                                  
                                         
Equity value
    3,215                                  
Fully diluted shares outstanding
    77.8                                  
Value per share
  $ 41.32                                  
 
                                                 
          Discount Rate(2)  
Sensitivity analysis:
        11.1%     12.1%     13.1%     14.1%     15.1%  
 
Exit multiple of EBITDA in 2011
    7.0x     $ 40.24     $ 38.46     $ 36.78     $ 35.18     $ 33.67  
      7.5x       42.72       40.84       39.05       37.36       35.74  
      8.0x       45.20       43.21       41.32       39.53       37.82  
      8.5x       47.68       45.58       43.59       41.70       39.90  
      9.0x       50.16       47.96       45.86       43.87       41.98  
 
 
Notes:
 
(1)  Financial projections provided by management.
 
(2)  Excludes non-recurring expenses and non-cash catch-up charges pertaining to OSI’s partnership plans.
 
(3)  Discount rate based on the weighted average cost of capital.
 
Terminal value is the theoretical future enterprise value of a company derived by applying a range of EBITDA multiples to the forecasted EBITDA of a company at a future point in time. In the case of OSI, Piper Jaffray calculated terminal value at the end of OSI’s 2011 fiscal year based upon a multiple of OSI’s projected fiscal year 2011 EBITDA. A discounted cash flow analysis is typically used to estimate the present value of available cash flows that a prudent investor would expect a company to generate over its remaining life. Piper Jaffray used forecasts of results for fiscal years 2007 through 2011 prepared by our management using certain assumptions (see “Financial Forecast” on page 182). Piper Jaffray used these forecasts in calculations for which historical financial information was not available. Piper Jaffray calculated the range of net present values based on an assumed tax rate of 31.5%, a range of discount rates between 11.1% and 15.1% and a range of 7.0x to 9.0x EBITDA for OSI’s terminal value, applied to OSI’s projected fiscal year 2011 EBITDA. Piper Jaffray based the assumed tax rate on the assumed tax rate OSI’s management used to create its forecasts (see “Financial Forecast” on page 182). Piper Jaffray based the discount rates of 11.1% to 15.1% on its analysis of OSI’s weighted average cost of capital. Piper Jaffray based the range of terminal value multiples on a review of merger and acquisition transactions that Piper Jaffray deemed relevant to the merger. This analysis resulted in an implied per share value of OSI ranging from a low of $33.75 to a high of $50.29.
 
Miscellaneous
 
The summary set forth above does not contain a complete description of the analyses performed by Piper Jaffray, but does summarize the material analyses performed by Piper Jaffray in rendering its opinion. The preparation of a fairness opinion is a complex process and is not necessarily susceptible to partial analysis or summary description. Piper Jaffray believes that its analyses and the summary set forth above must be considered as

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a whole and that selecting portions of its analyses or of the summary, without considering the analyses as a whole or all of the factors included in its analyses, would create an incomplete view of the processes underlying the analyses set forth in the Piper Jaffray opinion. In arriving at its opinion, Piper Jaffray considered the results of all of its analyses and did not attribute any particular weight to any factor or analysis. Instead, Piper Jaffray made its determination as to fairness on the basis of its experience and financial judgment after considering the results of all of its analyses. The fact that any specific analysis has been referred to in the summary above is not meant to indicate that this analysis was given greater weight than any other analysis. No company or transaction used in the above analyses as a comparison is directly comparable to OSI or the proposed merger.
 
Piper Jaffray performed its analyses solely for purposes of providing its opinion to the special committee. In performing its analyses, Piper Jaffray made numerous assumptions with respect to industry performance, general business and economic conditions and other matters. Certain of the analyses performed by Piper Jaffray are based upon forecasts of future results furnished to Piper Jaffray by our management, which are not necessarily indicative of actual future results and may be significantly more or less favorable than actual future results. These forecasts are inherently subject to uncertainty because, among other things, they are based upon numerous factors or events beyond the control of the parties or their respective advisors. Piper Jaffray does not assume responsibility if future results are materially different from forecasted results.
 
Piper Jaffray’s opinion was one of many factors taken into consideration by the special committee and our board of directors in making the determination to adopt the Merger Agreement and recommend that the stockholders adopt the Merger Agreement. The above summary does not purport to be a complete description of the analyses performed by Piper Jaffray in connection with the opinion and is qualified in its entirety by reference to the written opinion of Piper Jaffray attached to this proxy statement.
 
Piper Jaffray relied upon and assumed the accuracy, completeness and fair presentation of the financial, accounting and other information provided to it by us or otherwise made available to it, and did not independently verify this information. Piper Jaffray also assumed, in reliance upon the assurances of our management, that the information provided to Piper Jaffray by us was prepared on a reasonable basis in accordance with industry practice and, with respect to financial forecasts, projections and other estimates and other business outlook information, reflected the best currently available estimates and judgments of our management, was based on reasonable assumptions, and that there was not, and our management was not aware of, any information or facts that would make the information provided to Piper Jaffray incomplete or misleading. Piper Jaffray expresses no opinion as to such financial forecasts, projections and other estimates and other business outlook information or the assumptions on which they are based. Piper Jaffray relied, with our consent, on the advice of our outside counsel, on our audited and unaudited financial statements (including the notes and accounting policies described therein), and on the assumptions of our management as to all accounting, legal, tax and financial reporting matters with respect to OSI and the Merger Agreement. Without limiting the generality of the foregoing, Piper Jaffray assumed that we were not a party to any material pending transaction, including any external financing, recapitalization, acquisition or merger, divestiture or spinoff, other than the proposed merger.
 
Piper Jaffray assumed that the merger would be completed on the terms set forth in the Merger Agreement reviewed by Piper Jaffray, without amendments and with full satisfaction of all covenants and conditions without any waiver. Piper Jaffray expressed no opinion regarding whether the necessary approvals or other conditions to the consummation of the merger will be obtained or satisfied.
 
Piper Jaffray did not assume responsibility for performing, and did not perform, any appraisals or valuations of specific assets or liabilities of OSI. Piper Jaffray expresses no opinion regarding the liquidation value or solvency of any entity. Piper Jaffray did not undertake any independent analysis of any outstanding, pending or threatened litigation, regulatory action, possible unasserted claims or other contingent liabilities to which we, or any of our respective affiliates, are a party or may be subject. At the direction of the special committee, and with its consent, Piper Jaffray’s opinion made no assumption concerning, and therefore did not consider, the potential effects of litigation, claims, investigations, or possible assertions of claims, or the outcomes or damages arising out of any such matters.
 
Piper Jaffray’s opinion was necessarily based on the information available to it and the facts and circumstances as they existed and were subject to evaluation as of the date of the opinion. Events occurring after the date of the opinion could materially affect the assumptions used by Piper Jaffray in preparing its opinion. Piper Jaffray


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expresses no opinion as to the prices at which shares of our common stock have traded or may trade following announcement of the merger or at any time after the date of the opinion. Piper Jaffray has not undertaken and is not obligated to affirm or revise its opinion or otherwise comment on any events occurring after the date it was rendered.
 
In connection with its engagement, Piper Jaffray was not requested to, and did not, initiate any discussions with, or solicit any indications of interest from, third parties with respect to the merger or any alternative to the merger. Piper Jaffray was not requested to opine as to, and the opinion does not address, the basic business decision to proceed with or effect the merger, or the relative merits of the merger compared to any alternative business strategy or transaction in which we might engage. Piper Jaffray did not express any opinion as to whether any alternative transaction might produce consideration for our stockholders in excess of the merger consideration.
 
Piper Jaffray has performed investment banking services for certain portfolio companies of Bain Capital during the last two years, and Piper Jaffray expects to continue to perform such services from time to time. Piper Jaffray has received approximately $3.1 million in the aggregate for all services provided for such portfolio companies during the last two years.
 
Piper Jaffray received a fee of $1,000,000 from OSI for providing its opinion. No portion of the consideration that we paid Piper Jaffray was contingent upon the conclusions set forth in its opinion or upon the consummation of the merger. We have also agreed to indemnify Piper Jaffray against certain liabilities in connection with its services and to reimburse it for certain expenses in connection with its services. In the ordinary course of its business, Piper Jaffray and its affiliates may actively trade our securities for their own account or the accounts of their customers and, accordingly, Piper Jaffray may at any time hold a long or short position in such securities.
 
Certain Effects of the Merger
 
If the merger is completed, all of the equity interests in OSI will be owned directly or indirectly by Parent, which immediately following the effective time of the merger will be owned by Bain Capital Funds, Catterton Partners Funds, the OSI Investors and certain other members of our management who may acquire equity interests in Parent. Immediately before and contingent upon the completion of the merger, the OSI Investors (other than Mr. Avery) are expected to contribute restricted or unrestricted OSI common stock to Parent in exchange for common stock of Parent. Except for the OSI Investors, Bain Capital Funds, Catterton Partners Funds and the Additional Management Investors, no current stockholder of OSI will have any ownership interest in, nor be a stockholder of, OSI immediately following the completion of the merger. As a result, our stockholders (other than the OSI Investors) will no longer benefit from any increase in OSI’s value, nor will they bear the risk of any decrease in OSI’s value. Following the merger, Parent will benefit from any increase in the value of OSI and also will bear the risk of any decrease in the value of OSI.
 
Upon completion of the merger, each OSI stockholder will be entitled to receive $40.00 in cash for each share of OSI common stock held. Except as otherwise agreed to in writing by OSI, Parent, Merger Sub and certain members of OSI management (including certain of the OSI Investors) (i) each outstanding option to purchase shares of OSI common stock, whether vested or unvested, will be canceled and converted into the right to receive a cash payment equal to the excess (if any) of the $40.00 per share cash merger consideration over the exercise price per share of the option, multiplied by the number of shares subject to the option, without interest and less any applicable withholding taxes; (ii) each holder under OSI’s Directors’ Deferred Compensation Plan, as amended, will be entitled to $40.00 per each notional share held under such holder’s account; (iii) each award of restricted stock will be converted into the right to receive $40.00 per share in cash plus certain earnings thereon, less any applicable withholding taxes, payable on a deferred basis at the time the underlying restricted stock would have vested under its terms as in effect immediately prior to the effective time and subject to the satisfaction by the holder of all terms and conditions to which such vesting was subject; provided, however, that the holder’s deferred cash account will become immediately vested and payable upon termination of such holder’s employment by us without cause or upon such holder’s death or disability; and (iv) all amounts held in the accounts denominated in shares of our common stock under the Partner Equity Deferred Compensation Stock Plan component of the PEP, will be converted into an obligation to pay cash with a value equal to the product of (a) the $40.00 per share merger consideration and (b) the number of notional shares of our common stock credited to such deferred unit account, in accordance with the payment schedule and consistent with the terms of the PEP as in effect from time to time.


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Following the merger, shares of OSI common stock will no longer be traded on the NYSE or any other public market.
 
Our common stock constitutes “margin securities” under the regulations of the Board of Governors of the Federal Reserve System, which has the effect, among other things, of allowing brokers to extend credit on collateral of our common stock. As a result of the merger, our common stock will no longer constitute “margin securities” for purposes of the margin regulations of such Board of Governors and therefore will no longer constitute eligible collateral for credit extended by brokers.
 
Our common stock is currently registered as a class of equity security under the Exchange Act. Registration of our common stock under the Exchange Act may be terminated upon application of OSI to the SEC if our common stock is not listed on the NYSE or another national securities exchange and there are fewer than 300 record holders of the outstanding shares. Termination of registration of our common stock under the Exchange Act will substantially reduce the information required to be furnished by OSI to its stockholders and the SEC, and would make certain provisions of the Exchange Act, such as the short-swing trading provisions of Section 16(b) of the Exchange Act and the requirement of furnishing a proxy statement in connection with any stockholder meeting pursuant to Section 14(a) of the Exchange Act, no longer applicable to OSI. If OSI (as the entity surviving the merger) completed a registered exchange or public offering of debt securities, however, it would be required to file periodic reports with the SEC under the Exchange Act for a period of time following that transaction.
 
Parent and the OSI Investors expect that following completion of the merger, OSI’s operations will be conducted substantially as they are currently being conducted. Parent and the OSI Investors have informed us that they have no current plans or proposals or negotiations which relate to or would result in an extraordinary corporate transaction involving our corporate structure, business or management, such as a merger, reorganization, liquidation, relocation of any operations, or sale or transfer of a material amount of assets except as described in this proxy statement. Parent and the OSI Investors may initiate from time to time reviews of us and our assets, corporate structure, capitalization, operations, properties, management and personnel to determine what changes, if any, would be desirable following the merger. They expressly reserve the right to make any changes that they deem necessary or appropriate in light of their review or in light of future developments.
 
Following consummation of the merger, Parent will own directly or indirectly 100% of our outstanding common stock and will therefore have a corresponding interest in OSI’s net book value and net earnings. It is currently expected that immediately following the closing, Mr. Sullivan, Mr. Basham, Mr. Gannon, Mr. Allen, Mr. Avery, Mr. Kadow and Mr. Montgomery will each own approximately 6.0%, 8.3%, 1.0%, 1.5%, 1.0%, 0.3% and 0.3% of the fully-diluted outstanding common stock of Parent. Mr. Sullivan, Mr. Basham, Mr. Gannon, Mr. Allen, Mr. Avery, Mr. Kadow and Mr. Montgomery currently beneficially own approximately 3.3%, 5.7%, 1.6%, 0.9%, 1.0%, 0.3% and 0.1%, respectively, of our outstanding shares of common stock. Each holder of Parent common stock will be entitled to one vote per share. Accordingly, each holder of Parent common stock will have a voting interest that corresponds with his respective common stock ownership. Each holder of common stock of Parent will have an interest in OSI’s net book value and net earnings in proportion to his ownership interest.
 
The table below sets forth the interest in voting shares of OSI and the interest in OSI’s net book value and net earnings for the OSI Investors before and after the merger, based on the historical net book value of OSI as of December 31, 2006 and the historical net earnings of OSI for the year ended December 31, 2006.
 


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          Fully Diluted Expected Ownership of OSI
 
    Ownership of OSI Prior to the Merger(1)     After the Merger  
          Net Earnings
                Net Earnings
       
          for the
                for the
       
          Year
    Net Book
          Year
    Net Book
 
          Ended
    Value as of
          Ended
    Value as of
 
          December 31,
    December 31,
          December 31,
    December 31,
 
    % Ownership     2006     2006     % Ownership     2006     2006  
 
Chris T. Sullivan
    3.3 %   $ 3,305,280     $ 40,300,029       6.0 %   $ 6,009,600     $ 73,272,780  
Robert D. Basham
    5.8 %     5,809,280       70,830,354       8.3 %     8,313,280       101,360,679  
J. Timothy Gannon
    1.6 %     1,602,560       19,539,408       1.0 %     1,001,600       12,212,130  
A. William Allen, III
    0.9 %     901,440       10,990,917       1.5 %     1,502,400       18,318,195  
Paul E. Avery
    1.0 %     1,001,600       12,212,130       1.0 %     1,001,600       12,212,130  
Joseph J. Kadow
    0.3 %     300,480       3,665,639       0.3 %     300,480       3,663,639  
Dirk Montgomery
    0.1 %     100,160       1,221,213       0.3 %     300,480       3,663,639  
                                                 
Total
    13.0 %   $ 13,020,800     $ 158,757,690       18.4 %   $ 18,429,440     $ 224,703,192  
                                                 
 
 
(1)  Based upon beneficial ownership as of December 31, 2006, net income for the year ended December 31, 2006 and net book value as of December 31, 2006.
 
Plans for OSI After the Merger
 
After the effective time of the merger, and excluding the transactions contemplated in connection with the merger as described in this proxy statement, Parent and the OSI Investors anticipate that OSI’s operations will be conducted substantially as they are currently being conducted, except that it will cease to be an independent public company and will instead be a direct or indirect wholly owned subsidiary of Parent. After the effective time of the merger, the directors of Merger Sub immediately prior to the effective time of the merger will become the directors of OSI, and the officers of OSI immediately prior to the effective time of the merger will remain the officers of OSI, in each case until the earlier of their resignation or removal or until their respective successors are duly elected or appointed and qualified, as the case may be.
 
Conduct of OSI’s Business if the Merger is Not Completed
 
In the event that the Merger Agreement is not adopted by OSI’s stockholders or if the merger is not completed for any other reason, OSI stockholders will not receive any payment for their shares of OSI common stock. Instead, OSI will remain an independent public company, its common stock will continue to be listed and traded on the NYSE, and OSI stockholders will continue to be subject to the same risks and opportunities as they currently are with respect to their ownership of OSI common stock. If the merger is not completed, there can be no assurance as to the effect of these risks and opportunities on the future value of your OSI shares, including the risk that the market price of our common stock may decline to the extent that the current market price of our stock reflects a market assumption that the merger will be completed. From time to time, our board of directors will evaluate and review the business operations, properties, dividend policy and capitalization of OSI, and, among other things, make such changes as are deemed appropriate and continue to seek to maximize stockholder value. If the Merger Agreement is not adopted by our stockholders or if the merger is not consummated for any other reason, there can be no assurance that any other transaction acceptable to OSI will be offered or that the business, prospects or results of operations of OSI will not be adversely impacted.
 
However, pursuant to the Merger Agreement, under certain circumstances, OSI is permitted to terminate the Merger Agreement and recommend an alternative transaction. See “The Merger Agreement — Termination” beginning on page 97.
 
Under certain circumstances, if the merger is not completed, OSI may be obligated to pay Parent or its designee a termination fee or to reimburse Parent or its designee for out-of-pocket fees and expenses in connection with the merger. See “The Merger Agreement — Termination Fees and Expenses” beginning on page 98.

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Financing
 
The total amount of funds necessary to complete the merger and the related transactions is anticipated to be approximately $3.63 billion, consisting of (1) approximately $3.17 billion to be paid out to our stockholders and holders of other equity-based interests in OSI, (2) approximately $231,000,000 to refinance our existing indebtedness, (3) approximately $130,000,000 to pay fees and expenses in connection with the transaction and (4) approximately $100,000,000 which will provide a source of funds for capital expenditures by the Company post-closing.
 
These funds are anticipated to come from the following sources:
 
  •  cash equity contributions by Bain Capital Fund IX and Catterton Funds, or the respective assignees (as described below under “— Equity Financing”) of their commitments, of $1 billion in the aggregate, pursuant to equity commitment letters;
 
  •  borrowings by OSI, as the surviving corporation, of $1.1 billion of term loans under a $1.35 billion senior secured credit facility;
 
  •  the issuance by Merger Sub of $800,000,000 in aggregate principal amount of senior unsecured notes and/or senior subordinated unsecured notes (collectively, the “notes”) in a public offering or Rule 144A or other private offering, or if and to the extent Merger Sub does not, or is unable to, issue the notes in at least $800,000,000 in aggregate principal amount on or prior to the closing date, borrowings by OSI, as the surviving corporation, under a new senior unsecured bridge facility in the amount of at least $800,000,000, less the amount of the notes issued on or prior to the closing date;
 
  •  borrowings by one or more special purpose bankruptcy-remote vehicles formed by Parent (the “OSI propco”), the sole assets of which will be certain owned real properties and improvements thereon acquired from OSI and its subsidiaries (which real properties and improvements we refer to herein collectively as the “OSI propco real property” and which acquisition we refer to as the “OSI propco acquisition”) or the equity interests of the special purpose vehicle acquiring the OSI propco real property, of at least $530,000,000 in aggregate principal amount under new real estate financings (collectively, the “real estate financings”), or if and to the extent OSI propco does not, or is unable to, borrow loans under such real estate facilities providing for at least $500,000,000 in borrowings by OSI, as the surviving corporation, or OSI propco under a new senior unsecured bridge facility (the “real estate bridge facility”), or alternatively if the OSI propco real property will not support a financing of at least $500,000,000, an increase to the closing date financings under the senior secured credit facilities and either the senior unsecured bridge facility or notes offering; and
 
  •  cash on the balance sheet of OSI.
 
Equity Financing
 
Bain Capital Fund IX, L.P. delivered an equity commitment letter for $853,000,000 to Parent, and Catterton VI Funds has delivered an equity commitment letter for $150,000,000 to Parent. Each of Bain Capital Fund IX, L.P. and Catterton VI Funds also has agreed to contribute additional amounts as required by the terms of the debt financing, subject to certain limitations. These commitments constitute all of the equity portion of the merger financing, other than shares of OSI common stock exchanged for Parent common stock by the OSI Investors.
 
Each of the equity commitment letters provides that the equity funds will be contributed to fund, and to the extent necessary to fund, the merger and the other transactions contemplated by the Merger Agreement, including the payment of the merger consideration, repayment of our debt, and payment of related fees and expenses and for no other purpose. Each of the equity commitments is generally subject to certain other terms contained therein, including the satisfaction or waiver at the closing of the conditions precedent to the obligations of Parent to consummate the merger. The terms of each of the equity commitment letters will expire automatically upon the earliest to occur of (i) the termination of the Merger Agreement; (ii) the assertion by us or any of our controlled affiliates of a claim in a proceeding against Parent, Merger Sub, the equity investor or any related person that directly or indirectly arises out of or relates to such equity commitment letter, the equity investor’s limited guaranty,


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the Merger Agreement or any of the transactions contemplated by them or the Merger Agreement; or (iii) April 30, 2007.
 
In addition, subject to the consent of Parent, a portion of the commitment of each of Bain Capital Fund IX, L.P. and Catterton VI Funds may be assigned to other affiliated and/or non-affiliated investors. Bain Capital Fund IX, L.P. and Catterton VI Funds have informed Parent and OSI that they may syndicate a portion of their respective equity commitments to other investors, and such syndication efforts may include investments by existing shareholders of OSI, other affiliates of OSI, limited partners of Bain Capital Funds and their co-investors or unaffiliated investors. The terms and conditions of any such investments would be subject to negotiations and discussions among Bain Capital Funds and Catterton VI Funds and the potential investors.
 
Debt Financing
 
Merger Sub has entered into a debt financing commitment letter with Deutsche Bank AG New York Branch, Deutsche Bank AG Cayman Islands Branch, Deutsche Bank Securities Inc., Bank of America, N.A., Banc of America Bridge LLC, and Banc of America Securities LLC providing Merger Sub with committed financing for (i) $1.35 billion in senior secured credit facilities, (ii) $800,000,000 under a new senior unsecured bridge facility and (iii) $530,000,000 under new senior real estate bridge facilities. Merger Sub has additionally engaged Deutsche Bank Securities Inc. and Banc of America Securities LLC to place or underwrite the issuance and sale of $800,000,000 in aggregate principal amount of the notes in a public offering or in a Rule 144A or other private placement and to structure and arrange the real estate financings.
 
The documentation governing the senior secured credit facilities, the real estate financings and each of the bridge facilities has not been finalized and, accordingly, their actual terms may differ from those described in this proxy statement. Except as described herein, there is no current plan or arrangement to finance or repay the debt financing arrangements.
 
Senior Secured Credit Facilities
 
The senior secured credit facilities are expected to be comprised of a $1.1 billion term loan facility and $250,000,000 in revolving credit facilities. As a result of the merger, Merger Sub will be merged with and into OSI, and OSI, as the surviving corporation, will be the borrower under the senior secured credit facilities. All obligations of OSI under the senior secured credit facilities will be guaranteed by Parent and each existing and future direct and indirect wholly owned domestic subsidiary and certain non-wholly owned subsidiaries of OSI, subject to certain exceptions. The obligations of OSI and the guarantors under the senior secured credit facilities will be secured by substantially all of the assets of OSI and the guarantors, including the equity interests in certain subsidiaries.
 
The full amount of the term loans is expected to be used to fund a portion of the merger consideration, to refinance our existing indebtedness and to pay related fees and expenses. The term loans are expected to bear interest based on either the adjusted London inter-bank offered rate (“Adjusted LIBOR”) plus an initial spread, or the alternate base rate (“ABR”) plus an initial spread, at the option of OSI. The term loans will mature seven years after the effective date of the merger and will also require quarterly interim amortization payments, with the balance payable at the final maturity date of the term loans. The borrower may make voluntary prepayments of the term loans at any time. In addition, the term loans are required to be prepaid in certain circumstances, including with the net cash proceeds of debt issuances (other than debt otherwise permitted), the net cash proceeds of certain asset sales (subject to reinvestment rights and other exceptions) and specified percentages of certain cash flows.
 
The revolving credit facilities will be available at closing for working capital, capital expenditures and other general corporate purposes, but may not be used to fund a portion of the merger consideration, to refinance our existing indebtedness and to pay related fees and expenses. The revolving credit facilities will mature six years after the effective date of the merger and are expected to bear interest based on either Adjusted LIBOR plus an initial spread, or ABR plus an initial spread, at the option of OSI.
 
The senior secured credit facilities will contain customary representations and warranties and customary affirmative and negative covenants, including, among other things, restrictions on indebtedness, liens, investments, asset sales, mergers and consolidations, dividends and other distributions, redemptions, prepayments of certain


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indebtedness, and a maximum leverage ratio and minimum interest coverage ratio. The senior secured facilities will also include customary events of default, including upon a change of control.
 
High Yield Notes
 
Banc of America Securities LLC and Deutsche Bank Securities Inc. have been engaged by Merger Sub to place or underwrite the issuance and sale of $800,000,000 in aggregate principal amount of the notes in a public offering or in a Rule 144A or other private placement. Although the interest rate, maturity and other material terms of the notes have not been finalized, we expect that the notes will have terms and conditions customary for senior unsecured note offerings and/or unsecured senior subordinate note offerings of issuers that are affiliates of Parent.
 
High Yield Bridge Facility
 
If and to the extent the offering or placement of the notes is not completed on or prior to the closing of the merger, Banc of America Bridge LLC and Deutsche Bank AG Cayman Islands Branch have committed to provide Merger Sub with $800,000,000 of loans under a senior unsecured bridge facility. The obligations of OSI, as successor to Merger Sub pursuant to the merger, under the senior unsecured bridge facility will be guaranteed on a senior basis by each of its subsidiaries that is a guarantor of the senior secured credit facilities.
 
The loans under the senior unsecured bridge facility will be increasing rate bridge loans. For the initial six-month period under the senior unsecured bridge facility, interest on the bridge loans is expected to accrue at a rate per annum based on three-month Adjusted LIBOR, as determined on the effective date of the merger, plus an initial spread, subject to a maximum overall interest cap. The bridge loans will have an initial maturity of one year after the effective date of the merger, but the maturity of any bridge loans outstanding at that time will automatically be extended to the eighth anniversary of the effective date of the merger. Holders of the extended term loans will have the right to exchange such loans for exchange notes maturing on the eighth anniversary of the effective date of the merger and to require the borrower to register the exchange notes for public resale under a registration statement in compliance with applicable securities laws.
 
The borrower will be required to prepay the bridge loans or to make an offer to prepay or repurchase the extended term loans and the exchange notes under certain circumstances, including upon certain non-ordinary course asset sales or issuance of certain debt, subject to certain exceptions and others to be agreed, and upon a change of control.
 
The senior unsecured bridge facility will contain customary representations and warranties and covenants for similar financings, including high yield type covenants. The senior unsecured bridge facility will also include customary events of default, including a change of control.
 
Real Estate Financings
 
It is expected that OSI propco will obtain at least $500,000,000 in gross proceeds from the real estate financings. Although the interest rate, maturity and other material terms of the real estate financings have not been finalized, we expect that the real estate financings will have terms and conditions customary for real estate financings for affiliates of Parent.
 
Real Estate Bridge Facility
 
If and to the extent the real estate financings are not consummated prior to the closing of the merger, and subject to a minimum determination of the financeable amount as set forth below, Deutsche Bank and Bank of America have committed to provide $530,000,000 of loans to OSI propco under a real estate bridge facility structured as a senior unsecured bridge facility with the terms set forth below. If certain conditions are unable to be met related to the OSI propco acquisition, the loans will be structured as a senior unsecured bridge facility with substantially the same terms, including guarantees, interest rates, covenants, representations and warranties, events of default and maturity, all as set forth above under “— Debt Financing — High Yield Bridge Facility.” OSI propco’s obligations under the real estate bridge facility will be guaranteed on a senior basis by its direct parent and secured by a pledge by the parent of the stock of OSI propco. If the loans under the real estate bridge facility are not


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fully repaid at the end of the initial 90 days, the OSI propco real property and certain additional collateral will be required to secure the loans under the real estate bridge facility.
 
For the initial three-year period of the loans under the real estate bridge facility, interest payable by OSI propco is expected to accrue at a rate per annum based on Adjusted LIBOR plus an initial spread, subject to an adjustment down upon entering into a master lease and provision of security by OSI propco as described above. The spread increases as of the end of the first anniversary of the effective date of the merger and each subsequent anniversary. All loans provided to OSI propco under the real estate bridge facility will mature three years after the effective date of the merger but, subject to certain conditions, the maturity of such loans may be extended for up to two consecutive 12-month periods thereafter.
 
OSI propco will be required to prepay the real estate bridge loans under certain circumstances, including with the proceeds of the real estate financings upon the closing thereof, upon the release of properties from a certain real property pool and upon the occurrence of a change of control.
 
Availability of the real estate bridge facility is dependent upon the OSI propco real property meeting a minimum financeable amount requirement, based in part upon the lesser of 85% of the aggregate appraised as-leased market value of such real properties and 150% of the aggregate appraised dark value of such real properties. If such financeable amount is determined to be less than $500,000,000, the full amount of the real estate financings or the loans to be financed under the real estate bridge facility is expected to be reallocated and financed under the senior secured credit facilities, the senior unsecured bridge facility and/or the notes. If such financeable amount is determined to be greater than $530,000,000 and the amount of the real estate financings or the real estate bridge facility is increased by such excess, the $1.1 billion term loan facility will be reduced to $950,000,000 and the balance will reduce the senior unsecured bridge facility and/or the notes dollar-for-dollar such that the aggregate amount of commitments and financing available on the effective date of the merger is not decreased.
 
The real estate bridge facility will contain customary representations and warranties and covenants for similar financings, including high yield type covenants. The real estate bridge facility will also include customary events of default.
 
Conditions to the Debt Financing
 
The debt financing commitments will expire if not drawn on or prior to April 30, 2007. The facilities contemplated by the debt financing commitments are subject to customary closing conditions, including:
 
  •  there not having occurred, since December 31, 2005, any event, development or state of circumstances that has had, individually or in the aggregate, a “Company Material Adverse Effect” as defined in the Merger Agreement in effect on the date of the debt financing commitment letters;
 
  •  the execution and delivery of definitive credit documents;
 
  •  the merger and all related transactions must have been consummated in accordance with the terms of the Merger Agreement;
 
  •  delivery of certain specified financial statements of OSI;
 
  •  the absence of a material adverse change with respect to OSI, to the extent such change constitutes a “material adverse change” for purposes of the Merger Agreement;
 
  •  receipt of equity contributions in an amount equal to at least 25% of the total sources required to consummate the merger from one or more of Bain Capital, Catterton and co-investors reasonably acceptable to the lead arrangers for the debt financing; and
 
  •  receipt of customary closing documents.
 
Although the debt financing described in this proxy statement is not subject to the lenders’ satisfaction with their due diligence or to a “market out,” such financing might not be funded on the closing date because of failure to meet the closing conditions or for other reasons.


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Since the final terms of the debt financing facilities have not been agreed upon, such terms and amounts may differ from those set forth above and, in certain cases, such differences may be significant. We do not intend to update or otherwise revise any statements concerning the terms of the financing included in this proxy statement to reflect circumstances existing after the date when such statements were made or to reflect the occurrence of future events even in the event that any of the statements regarding the financing arrangements are shown to be in error or otherwise no longer appropriate.
 
As of the date of this proxy statement, no alternative financing arrangements or alternative financing plans have been made in the event the debt financing described herein is not available as anticipated.
 
Guarantees
 
Pursuant to limited guarantees, each of Bain Capital Fund IX, L.P. and Catterton VI Funds has agreed to guaranty the obligations of Parent and Merger Sub under the Merger Agreement (i) up to the amount of $33,750,000 and $11,250,000, respectively, with respect to any termination fee payable by Parent and (ii) up to the amount of $161,250,000 and $53,750,000, respectively, with respect to damages arising from failures of Parent or Merger Sub to comply with the Merger Agreement. Our rights of recourse against the guarantors are limited to such amounts, and the limited guarantees are our sole remedies against the guarantors and their related persons. The guarantees will terminate upon consummation of the merger, except that if we or any of our controlled affiliates assert a claim other than as permitted under the limited guarantee agreement, such limited guarantee will terminate and become null and void.
 
Interests of Our Directors and Executive Officers in the Merger
 
General
 
In considering the recommendation of the special committee and our board of directors with respect to the Merger Agreement, OSI stockholders should be aware that some of the OSI directors and executive officers have interests in the merger and have arrangements that are different from, or in addition to, those of OSI stockholders generally. These interests and arrangements may create potential conflicts of interest. The special committee and our board of directors were aware of these potential conflicts of interest and considered them, among other matters, in reaching their decisions to adopt the Merger Agreement and to recommend that OSI stockholders vote in favor of adoption of the Merger Agreement.
 
Stock Options, Restricted Stock and Other Equity-Based Awards
 
As of the effective time of the merger:
 
  •  each outstanding option to purchase shares of our common stock held by a director or executive officer, whether vested or unvested, will be canceled and converted into the right to receive a cash payment equal to the excess (if any) of the $40.00 per share cash merger consideration over the exercise price per share of the option, multiplied by the number of shares subject to the option, without interest and less any applicable withholding taxes;
 
  •  each holder under our Directors’ Deferred Compensation Plan, as amended, will be entitled to $40.00 per each notional share held under such holder’s account;
 
  •  each award of restricted stock held by Mr. Allen, Mr. Kadow and Mr. Montgomery will be exchanged for shares of common stock of Parent. In addition, it is expected that Parent will grant to Mr. Avery restricted shares of Parent common stock with an aggregate value of $12,000,000 upon closing and that Mr. Kadow will purchase shares of Parent common stock with an aggregate value of $200,000. Immediately following the closing each of Mr. Allen, Mr. Avery, Mr. Kadow and Mr. Montgomery will own approximately 1.5%, 1.0%, 0.3% and 0.3%, respectively, of the fully-diluted outstanding common stock of Parent. The common stock of Parent issued in the exchange is expected to vest in five equal annual installments on each of the first five anniversaries of the closing; provided that vesting will accelerate in the event of a termination of employment as a result of death or disability, by OSI without cause or by the executive with good reason or upon a subsequent change of control; and


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  •  each award of restricted stock held by an executive officer or director that is not exchanged for Parent common stock as described in the immediately preceding bullet point will be converted into the right to receive $40.00 per share in cash, plus certain earnings thereon, less any applicable withholding taxes, payable on a deferred basis at the time the underlying restricted stock would have vested under its terms as in effect immediately prior to the effective time and subject to the satisfaction by the holder of all terms and conditions to which such vesting was subject; provided, however, that the holder’s deferred cash account will become immediately vested and payable upon termination of such holder’s employment by us without cause or upon such holder’s death or disability.
 
We estimate the amounts that will be payable to each OSI named executive officer in settlement of stock options as follows: Mr. Allen, $3,483,000, Mr. Avery, $10,433,000 and Mr. Kadow, $2,125,250. We estimate the aggregate amount that will be payable to all directors and executive officers in settlement of stock options, restricted stock (other than restricted stock held by Mr. Allen, Mr. Kadow and Mr. Montgomery) and other equity-based awards to be approximately $19,265,000. Mr. Allen, Mr. Kadow and Mr. Montgomery will contribute their restricted OSI stock to Parent in exchange for common stock of Parent.
 
Management Employment Agreements
 
Each of Mr. Allen, Mr. Avery, Mr. Kadow, and Mr. Montgomery is party to an employment agreement with OSI that would provide benefits to the executive in the event of specified triggering events in connection with a change of control of OSI such as the proposed merger.
 
Pursuant to the agreements, in the event of a separation of service of the executive by OSI without cause or by the executive for good reason within two years after a change of control of OSI, the executive will receive a lump sum payment equal to two times the sum of:
 
  •  his gross annual base salary at the rate in effect immediately prior to the change of control, and
 
  •  the aggregate cash bonus compensation paid to him for the two fiscal years preceding the year in which the change of control occurs divided by two.
 
However, in the case of Mr. Montgomery, if he has not been employed for the entirety of the two fiscal years preceding the year in which a change of control occurs, the amount used for purposes of the second bullet point above will be equal to his target bonus for the year in which the change of control occurs.
 
In addition, each agreement provides a “conditional gross-up” for excise and related taxes in the event the severance compensation and other payments or distributions to an executive pursuant to an employment agreement, stock option agreement, restricted stock agreement or otherwise would constitute “excess parachute payments,” as defined in Section 280G of the Internal Revenue Code. The tax gross-up will be provided if the aggregate parachute value of all severance and other change in control payments to the executive is greater than 110% of the maximum amount that may be paid under Section 280G of the Internal Revenue Code without imposition of an excise tax. If the parachute value of an executive’s payments does not exceed the 110% threshold, the executive’s payments under the change in control agreement will be reduced to the extent necessary to avoid imposition of the excise tax on “excess parachute payments.”
 
Assuming that the current employment agreements remain in effect, that the merger is completed on April 30, 2007 and that thereafter each executive officer’s employment is terminated on that date by OSI without cause or voluntarily terminated on that date by the executive officer for good reason, the estimated cost of the cash severance benefits described above (including any estimated tax gross-up payment) would be as follows: Mr. Allen, $9,391,000, Mr. Avery, $2,573,000, Mr. Kadow, $834,000, and Mr. Montgomery, $4,246,000.
 
Each of Mr. Allen, Mr. Avery, Mr. Kadow and Mr. Montgomery and Parent currently expects that the existing employment agreements described above will be amended and restated based upon the term sheet described below, in which event the amounts described in the immediately preceding paragraph would not become payable.


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Management Employment Term Sheet
 
Effective as of the closing, each of Mr. Allen, Mr. Avery, Mr. Kadow and Mr. Montgomery is expected to execute an amended and restated employment agreement with Parent. These agreements would amend and restate the employment agreements described above. Principal terms of the new agreements would include the following:
 
Term:  Five-year term, subject to automatic one-year renewals absent notice to the contrary.
 
Base Salary:  Base salary equal to current base salary as in effect immediately prior to the closing, subject to annual increase. The parties may agree to an additional increase to make up for lost dividends on restricted stock.
 
Target Bonus:  Target bonus opportunity equal to current bonus plan.
 
Benefits; Perquisites:  Benefits and perquisites at least as favorable as in effect immediately prior to the closing, including airplane usage and split dollar life insurance.
 
Restricted Stock:  It is expected that Parent will grant Mr. Avery restricted shares of Parent common stock with an aggregate value of $12,000,000 upon the closing of the merger.
 
Severance:  In the event of a termination of employment by Parent without cause or a termination by the executive for good reason, the executive will be entitled to (i) 1 times annual base salary plus average annual bonus paid over the prior three years, payable in 12 equal monthly installments and (ii) full vesting of life insurance benefits and benefit continuation for one year following such termination.
 
Gross-up:  Gross-up for excise and related taxes in the event the severance compensation and other payments or distributions to an executive in connection with the merger constitute “excess parachute payments.” The parties will cooperate to avoid application of the Section 280G excise tax upon the occurrence of any subsequent change in control.
 
Fleming’s Steakhouse and Blue Coral Concepts:  Mr. Allen will retain an equity interest in Fleming’s Steakhouse. The parties will discuss Mr. Allen’s participation in opportunities involving Blue Coral Seafood & Spirits (“Blue Coral”).
 
Restrictive Covenants:  Each of Mr. Allen, Mr. Avery, Mr. Kadow and Mr. Montgomery will be subject to confidentiality obligations, and non-competition and non-solicitation covenants, for one year following termination of employment.
 
Legal Fees:  Parent will pay all reasonable legal fees incurred by Mr. Allen, Mr. Avery, Mr. Kadow and Mr. Montgomery arising out of the negotiation and drafting of the management arrangements.
 
Transaction Bonus:  A $5,000,000 cash bonus pool will be allocated by the Chief Executive Officer of OSI, with approval of the post-closing board of directors of OSI, among Mr. Allen, Mr. Avery, Mr. Kadow and Mr. Montgomery and an additional 50 to 60 OSI home office personnel and will be paid immediately following the closing.
 
Additional Investment Opportunity:  Each of Mr. Allen, Mr. Avery, Mr. Kadow and Mr. Montgomery will have the opportunity to make additional investments in Parent common stock at closing.
 
Management Equity Incentive Plan
 
Options to purchase shares of Parent common stock representing 2.5% of the common stock of Parent as of the closing, on a fully diluted basis, of which 1.75% will be issued at closing, will be allocated as follows:
 
  •  Mr. Allen, 26%; Mr. Avery, 24%; Mr. Kadow, 16.7%; Mr. Montgomery, 8%.
 
  •  Other members of OSI management, 25.3%.


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Arrangements with Mr. Sullivan, Mr. Basham and Mr. Gannon
 
Effective as of the closing, each of Mr. Basham, Mr. Gannon and Mr. Sullivan is expected to enter into agreements with Parent. Principal terms of these agreements would include the following:
 
Equity Roll-Over:  Immediately prior to the effective time of the merger, Mr. Sullivan, Mr. Basham and Mr. Gannon will exchange approximately 1,800,000, 2,500,000 and 300,000 shares of OSI common stock, respectively, for Parent common stock representing approximately 6.0%, 8.3% and 1.0%, respectively, of the fully-diluted outstanding common stock of Parent immediately following the closing.
 
Preemptive Rights:  Subject to customary exceptions, prior to an initial public offering or a change of control of Parent, each of Mr. Sullivan, Mr. Basham and Mr. Gannon will have preemptive rights that will entitle them to purchase a pro rata share of:
 
  •  any additional issuance of equity by Parent or any of its subsidiaries; and
 
  •  any loans to, or debt securities issued by, Parent or any of its subsidiaries, if Bain Capital Funds and/or Catterton Partners Funds are participating in the applicable financing as a lender.
 
Board Representation:  Prior to an initial public offering or a change of control, each of Mr. Sullivan and Mr. Basham will be entitled to appoint a director to Parent’s board of directors (and to the board of directors of each subsidiary of Parent on which a representative of any of the Bain Capital Funds and/or Catterton Partners Funds serves as a director) for so long as such individual (or his permitted transferees) holds at least 50% of the shares of Parent common stock owned on the date of the closing.
 
Management Fee:  Mr. Sullivan, Mr. Basham and Mr. Gannon will receive an annual management fee of $5,600,000 in the aggregate (which may be paid to them directly or to an entity that they organized).
 
Employment Agreements:  Each of Mr. Sullivan, Mr. Basham and Mr. Gannon will enter into an employment agreement with Parent providing annual compensation of $800,000 in the aggregate. Each employment agreement will have an initial term of five years, with automatic one-year renewal periods and will provide a severance benefit in an amount equal to the applicable individual’s annual compensation for a period equal to the greater of the remainder of the initial term of the employment agreement and two years, payable over 24 months in the event employment is terminated as a result of the individual’s death or disability, by Parent without cause or by the individual with good reason.
 
Legal Fees:  Parent will pay the fees and reasonable out-of-pocket fees and expenses of each of Mr. Sullivan, Mr. Basham and Mr. Gannon incurred in connection with the merger and related transactions.
 
Indemnification of Directors and Officers; Directors’ and Officers’ Insurance
 
The OSI directors and officers are entitled under the Merger Agreement to continued indemnification and insurance coverage.


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Consideration to be Received by Directors and Executive Officers
 
The following table reflects the consideration expected to be received by each of our directors, director emeritus and executive officers in connection with the merger:
 
                                                                 
    Cash Merger
                                           
    Consideration
    Parent
                                     
    to be Received
    Common Stock
          Restricted
                         
    from the
    to be Issued
    Cash to be
    Stock
                         
    Conversion of
    in Exchange
    Received
    to be
    Deferred
    Cash
    Annual
       
    OSI
    for OSI
    from OSI
    Received
    Compensation
    Bonus
    Management
    Total
 
    Common Stock
    Common Stock
    Options
    in Parent
    Units
    Pool
    Fee
    Consideration
 
    $     $(1)     $     $     $     $     $     $  
 
Robert D. Basham
  $ 73,128,160     $ 100,000,000     $ 0     $ 0     $ 0     $ 0     $ 3,043,477     $ 176,171,637  
John A. Brabson
  $ 841,240     $ 0     $ 23,705     $ 0     $ 212,408     $ 0     $ 0     $ 1,077,352  
W.R. Carey
  $ 0     $ 0     $ 0     $ 0     $ 409,402     $ 0     $ 0     $ 409,402  
Debbi Fields
  $ 25,000     $ 0     $ 0     $ 0     $ 382,793     $ 0     $ 0     $ 407,793  
General (Ret)
Tommy Franks
  $ 104,120     $ 0     $ 0     $ 0     $ 138,484     $ 0     $ 0     $ 242,604  
Thomas A. James
  $ 340,320     $ 0     $ 423,000     $ 0     $ 0     $ 0     $ 0     $ 763,320  
Lee Roy Selmon
  $ 0     $ 0     $ 0     $ 0     $ 207,995     $ 0     $ 0     $ 207,995  
Chris T. Sullivan
  $ 26,872,920     $ 72,000,000     $ 0     $ 0     $ 0     $ 0     $ 2,191,304     $ 101,064,224  
Toby S. Wilt
  $ 1,200,000     $ 0     $ 1,125,000     $ 0     $ 227,776     $ 0     $ 0     $ 2,552,776  
J. Timothy Gannon
  $ 35,732,120     $ 12,000,000     $ 0     $ 0     $ 0     $ 0     $ 365,219     $ 48,097,339  
A. William Allen III
  $ 8,000,000     $ 18,000,000     $ 3,483,000     $ 0     $ 0     $ 1,387,500     $ 0     $ 30,870,500  
Paul E. Avery
  $ 724,000     $ 0     $ 10,433,000     $ 12,000,000     $