EX-99.1 2 fourcornersform10amend5exh.htm INFORMATION STATEMENT Exhibit
Exhibit 99.1
Preliminary and Subject to Completion, dated October 21, 2015
October 21, 2015
Dear Shareholder of Darden Restaurants, Inc.:
We are pleased to inform you that the board of directors of Darden Restaurants, Inc. (together with its consolidated subsidiaries, “Darden”) has approved a plan to transfer certain restaurant property real estate assets into Four Corners Property Trust, Inc. (together with its consolidated subsidiaries, “Four Corners”) and spin off Four Corners into an independent, publicly traded, self-administered company. Four Corners intends to elect and qualify to be subject to tax as a real estate investment trust effective January 1, 2016. Darden will not retain any interest in Four Corners at the completion of the spin-off.
Four Corners will lease substantially all of these restaurant properties to Darden through a series of triple-net leases with an average initial term of approximately fifteen years. Darden will continue to operate and manage both the properties that it leases from Four Corners and the properties that it retains ownership of (or a leasehold interest in) in order to provide high-quality in-restaurant dining experiences to consumers. We believe that Four Corners will be positioned to provide an attractive dividend to shareholders and grow through acquisitions, diversification, capital investments and rent escalation.
The spin-off will be completed by way of a pro rata distribution of all of the outstanding shares of Four Corners common stock to Darden shareholders of record as of the close of business on November 2, 2015, the record date for the spin-off. Each Darden shareholder will receive one share of Four Corners common stock for every three shares of Darden common stock held on the record date. The number of Darden shares you own will not change as a result of the spin-off. Four Corners has applied to list its common stock on the New York Stock Exchange under the symbol “FCPT.” Darden common stock will continue to be listed and traded on the New York Stock Exchange under the symbol “DRI.”
Following the close of the transaction, Darden initially expects to pay an annual dividend of at least $1.75 per share and Four Corners initially expects to pay an annual dividend of $1.35 per share (which, as a result of the ratio of one share of Four Corners common stock for every three shares of Darden common stock, would be at least equivalent to a $2.20 per share Darden dividend per annum).
No vote of Darden’s shareholders is required in connection with the spin-off. You do not need to make any payment, surrender or exchange your shares of Darden common stock or take any other action to receive your shares of Four Corners common stock.
The enclosed information statement, which is being made available to all Darden shareholders, describes the spin-off in detail and contains important information about Four Corners and its business. We urge you to read the information statement carefully and in its entirety.
We want to thank you for your continued support of Darden, and we look forward to your support of Four Corners in the future.
Sincerely,

Eugene I. Lee, Jr.
Chief Executive Officer




October 21, 2015
Dear Future Shareholder of Four Corners Property Trust, Inc.:
It is our pleasure to welcome you as a shareholder of our company, Four Corners Property Trust, Inc. (together with its consolidated subsidiaries, “Four Corners”). Following the distribution of all of the outstanding shares of Four Corners common stock by Darden Restaurants, Inc. (together with its consolidated subsidiaries, “Darden”) to its shareholders, Four Corners will be an independent, publicly traded, self-administered company that will own, acquire and lease, on a triple-net basis, restaurant and other retail properties. Four Corners intends to elect and qualify to be subject to tax as a real estate investment trust effective January 1, 2016.
Our initial properties will include, among other things, 424 restaurant properties across 44 states representing five of Darden’s brands. Of these 424 properties, 418 will be leased to Darden and/or one or more of Darden’s operating subsidiaries on a triple-net basis on terms comparable to similar leases negotiated on an arm’s-length basis. Of the remaining six properties, three will be owned by us and leased to our indirect wholly-owned subsidiary, Kerrow Holdings, LLC and/or one or more of its subsidiaries and three will be owned by Kerrow Holdings, LLC or one or more of its subsidiaries, subject to ground leases. Although initially Darden will be our only tenant, we expect to diversify our tenant base and expand into different geographic markets in the future by acquiring additional properties and leasing them, on a triple-net basis, to other local, regional and national restaurant operators. Over time, we may further diversify our portfolio to include properties outside the restaurant industry.
Our goal at Four Corners is to create value for our shareholders, and we plan to accomplish this by growing our dividend distributions over time. Four Corners initially expects to pay an annual dividend of $1.35 per share.
We invite you to learn more about Four Corners and its business by reviewing the enclosed information statement. We urge you to read the information statement carefully and in its entirety. We are excited by our future prospects, and look forward to your support as a holder of our common stock.
Sincerely,
William H. Lenehan
President and Chief Executive Officer




Information contained herein is subject to completion or amendment. A registration statement on Form 10 relating to these securities has been filed with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended.
Preliminary and Subject to Completion, dated October 21, 2015
INFORMATION STATEMENT
Four Corners Property Trust, Inc.
Common Stock
(Par Value $0.0001 Per Share)

This information statement is being furnished in connection with the pro rata distribution (the “Spin-Off”) by Darden Restaurants, Inc. (“Darden”) to its shareholders of all of the outstanding shares of common stock of Four Corners Property Trust, Inc. (“Four Corners”). At the completion of the Spin-Off, Four Corners and its subsidiaries will own 424 restaurant properties across 44 states representing restaurants from five of Darden’s brands. Four Corners will not receive any proceeds from the distribution of the shares of its common stock in the Spin-Off.
To implement the Spin-Off, Darden will effect a series of restructuring transactions following which Darden will distribute all outstanding shares of Four Corners common stock to the holders of Darden common stock. From and after the Spin-Off, Four Corners will lease 418 of the 424 restaurant properties to Darden and/or one or more of Darden’s operating subsidiaries (such 418 properties, the “Four Corners Properties”) on a triple-net basis with terms comparable to similar leases negotiated on an arm’s-length basis (the “Leases”). The remaining six restaurant properties in our portfolio will comprise our restaurant business, which consists of six LongHorn Steakhouse restaurants located in the San Antonio, Texas area (the “LongHorn San Antonio Business”). We will own three of these restaurant properties, which we will lease to our taxable REIT subsidiary and/or one or more of its subsidiaries, and the remaining three restaurant properties will be owned by our taxable REIT subsidiary and/or one or more of its subsidiaries, subject to ground leases. The Spin-Off is intended to be tax-free to Darden shareholders for U.S. federal income tax purposes, except for cash paid in lieu of fractional shares.
You will receive one share of Four Corners common stock for every three shares of Darden common stock held of record by you as of the close of business on November 2, 2015 (the “record date”). You will receive cash in lieu of any fractional shares of Four Corners common stock which you would have otherwise received. The date on which the shares of Four Corners common stock will be distributed to you (the “distribution date”) is expected to be November 9, 2015. After the Spin-Off is completed, Four Corners will be an independent, publicly traded, self-administered company. Four Corners intends to elect and qualify to be subject to tax as a real estate investment trust (“REIT”) for U.S. federal income tax purposes, commencing with Four Corners’ taxable year beginning January 1, 2016.
No vote of Darden’s shareholders is required in connection with the Spin-Off. Therefore, you are not being asked for a proxy, and you are requested not to send us a proxy. You will not be required to make any payment, surrender or exchange your shares of Darden common stock or take any other action to receive your shares of Four Corners common stock.
There is no current trading market for Four Corners common stock. We anticipate that a limited market, commonly known as a “when-distributed” trading market, will develop shortly before the record date, and prior to the distribution date, and that “regular-way” trading in shares of Four Corners common stock will begin on the first trading day following the distribution date. If trading begins on a “when-distributed” basis, you may purchase or sell Four Corners common stock up to and including the distribution date, but your transaction will not settle until after the distribution date. We have applied to list Four Corners’ common stock on the New York Stock Exchange (“NYSE”) under the symbol “FCPT.” As discussed under the caption “The Spin-Off—Listing and Trading of Our Shares,” if you sell your Darden common stock in the “due-bills” market after the record date and before the distribution date, you also will be selling your right to receive shares of Four Corners common stock in connection with



the Spin-Off. However, if you sell your Darden common stock in the “ex-distribution” market before the distribution date, you will still receive shares of Four Corners common stock in the Spin-Off.
To assist Four Corners in qualifying as a REIT, Four Corners’ charter will contain certain restrictions relating to the ownership and transfer of its stock, including a provision generally restricting shareholders from owning more than 9.8% in value or in number, whichever is more restrictive, of the outstanding shares of Four Corners’ common stock or more than 9.8% in value of the aggregate of the outstanding shares of all classes and series of Four Corners stock, without the prior consent of Four Corners’ board of directors. See “Description of Our Capital Stock—Restrictions on Transfer and Ownership of Four Corners Stock.”
Four Corners is an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and, as such, is allowed to provide in this information statement more limited disclosures than an issuer that would not so qualify. In addition, for so long as we remain an emerging growth company, we may also take advantage of certain limited exceptions from investor protection laws such as Sarbanes-Oxley Act of 2002, as amended (the “Sarbanes-Oxley Act”), and the Investor Protection and Securities Reform Act of 2010 for limited periods. See “Summary—Emerging Growth Company Status” and “Description of Financing and Material Indebtedness”.

In reviewing this information statement, you should carefully consider the matters described under the caption “Risk Factors” beginning on page 19.
Neither the Securities and Exchange Commission (the “SEC”) nor any state securities commission has approved or disapproved these securities or determined if this information statement is truthful or complete. Any representation to the contrary is a criminal offense.
This information statement does not constitute an offer to sell or the solicitation of an offer to buy any securities.
Darden Restaurants, Inc. expects to first mail this information statement to its shareholders on or about October 23, 2015.

The date of this information statement is October 21, 2015.




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SUMMARY
The following is a summary of material information included in this information statement. This summary may not contain all of the details concerning the Spin-Off or other information that may be important to you. To better understand the Spin-Off and our business, you should carefully review this entire information statement.
Unless the context otherwise requires, any references in this information statement to “we,” “our,” and “us” refers to Four Corners and/or its consolidated subsidiaries. References in this information statement to “Darden” generally refer to Darden Restaurants, Inc. and its consolidated subsidiaries (other than Four Corners and its consolidated subsidiaries after the Spin-Off), unless the context requires otherwise. Darden Restaurants, Inc. is a holding company with no direct operating assets, employees or revenues. All of its operations are conducted by its direct and indirect wholly-owned subsidiaries.
This information statement has been prepared on a prospective basis on the assumption that, among other things, the Spin-Off and the related transactions contemplated to occur prior to or contemporaneously with the Spin-Off will be consummated as contemplated by this information statement. There can be no assurance, however, that any or all of such transactions will occur or will occur as so contemplated.
Restaurant industry data cited are for the component chains’ fiscal years ended closest to Dec. 31, 2014, which may cover ending dates from July 1, 2014 through June 30, 2015.
You should not assume that the information contained in this information statement is accurate as of any date other than the date set forth on the cover. Changes to the information contained in this information statement may occur after that date, and we undertake no obligation to update the information, except as required by law in the normal course of our public disclosure obligations. In particular, a number of matters contained in this information statement relate to agreements or arrangements that have not yet been finalized and expectations of what may occur. Prior to the Spin-Off, it is possible that these agreements, arrangements and expectations may change.
Our Company
Following the Spin-Off, we will be an independent, publicly traded, self-administered company, which intends to elect and qualify as a real estate investment trust (“REIT”) for U.S. federal income tax purposes primarily engaged in the ownership, acquisition and leasing of restaurant properties. Initially, we expect to generate revenues primarily by leasing the Four Corners Properties to Darden through triple-net lease arrangements. Triple-net lease arrangements, under which the tenant is primarily responsible for ongoing costs relating to the properties (including property taxes, insurance, common area maintenance charges and maintenance and repair costs), are used by a number of publicly traded REITs across numerous industries. Initially, our real estate portfolio will include 300 Olive Garden® restaurants, 104 LongHorn Steakhouse® restaurants, 11 Bahama Breeze® restaurants, two Seasons 52® restaurants, one Wildfish Seafood Grille® restaurant as well as the six properties that comprise the LongHorn San Antonio Business. The Four Corners Properties will be leased to Darden and/or one or more of Darden’s operating subsidiaries. Over time, it is expected that we will expand and diversify our tenant base to include other restaurant operators. We expect to grow our portfolio beyond the 424 restaurant properties acquired from Darden by pursuing opportunities to acquire additional properties to lease to restaurant operators on a triple-net basis through both sale-leaseback transactions and acquisitions of triple-net leased properties from other landlords. Over time, we also may further diversify our portfolio to include properties outside the restaurant industry, which we will lease to third parties. In addition to leasing the Four Corners Properties to Darden, we will also generate revenue by operating a restaurant business consisting of six LongHorn Steakhouse restaurants located in the San Antonio, Texas area (the “LongHorn San Antonio Business”) pursuant to franchise agreements with Darden. Of the six restaurant properties that make up the LongHorn San Antonio Business, three will be properties that we will own and lease to Kerrow Holdings, LLC (together with its subsidiaries, “Kerrow”), our “taxable REIT subsidiary” (“TRS”), which will operate the LongHorn San Antonio Business, and three will be owned by Kerrow, subject to ground leases.
We expect to have approximately 350 employees following the Spin-Off. Many of these employees will be employed by Kerrow.

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At the completion of the Spin-Off, certain of our subsidiaries will own, among other things, the Four Corners Properties, which will be located across 44 states, and the LongHorn San Antonio Business.
We intend to elect and qualify to be treated as a REIT on our U.S. federal income tax return for our taxable year beginning on January 1, 2016.
To maintain REIT status, we must meet a number of organizational and operational requirements, including a requirement that we annually distribute to our shareholders at least 90% of our REIT taxable income, determined without regard to the dividends paid deduction and excluding any net capital gains. See “U.S. Federal Income Tax Considerations.”
Our Strategy
Our primary goal is to create long-term shareholder value through the payment of consistent cash dividends and the growth of our cash flow and asset base. To achieve this goal, we intend to pursue a business strategy focused on opportunistic acquisitions and asset and tenant diversification. We do not currently have a fixed schedule of the number of acquisitions we intend to make over a particular time period; rather, we intend to pursue those acquisitions that meet our investing and financing objectives where we can earn a return above our weighted-average cost of capital adjusted to account for counterparty risk.
The key components of our business strategy, beyond our triple-net leases with Darden, include:
acquire additional restaurant and restaurant-related properties;
develop new tenant relationships;
acquire complementary real property assets;
maintain balance sheet strength and liquidity; and
operate the LongHorn San Antonio Business.
Overview of the Spin-Off
On June 23, 2015, Darden announced its plan to separate its business into two separate and independent, publicly traded companies:
Darden, which will continue to operate a wide range of restaurant and dining options at various price points through its existing operations; and
Four Corners, which will own, acquire and lease properties, on a triple-net basis, for use in the restaurant industry and potentially other industries, as well as operate the LongHorn San Antonio Business.
Darden will accomplish the separation by effecting an internal restructuring resulting in the contribution to Four Corners of the equity of entities that hold the Four Corners Properties, the LongHorn San Antonio Business and $36.1 million in cash in exchange for all of our common stock, and then distributing all of the outstanding shares of Four Corners common stock to its shareholders in a pro rata distribution. In connection with the separation, $351.1 million in cash funded from the proceeds of our term loan borrowings will be transferred to Darden. Darden will use the cash it receives from us and the proceeds from other, unrelated sale-leaseback transactions that have occurred prior to the Spin-Off, to retire approximately $1 billion of its outstanding debt.
Effective immediately upon the Spin-Off, we and Darden will enter into the Leases, under which Darden and/or one or more of Darden’s operating subsidiaries will lease the Four Corners Properties from us on a triple-net basis. We will also enter into a number of other agreements with Darden to govern the relationship between us and Darden. Other than the Leases and the franchise agreements relating to the restaurants included in the LongHorn San Antonio Business (the “Franchise Agreements”), we do not anticipate having any substantive continuing business relationship with Darden following the Spin-Off, although we do expect to enter into certain other transitional agreements with Darden. See “Our Relationship with Darden Following the Spin-Off.”

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Darden will effect the Spin-Off by distributing to its shareholders one share of Four Corners common stock for every three shares of Darden common stock held at the close of business on November 2, 2015, the record date for the Spin-Off. Darden’s shareholders will receive cash in lieu of any fractional shares of our common stock which they would have otherwise received. We expect the shares of our common stock to be distributed by Darden on or about November 9, 2015.
Darden will allocate its accumulated earnings and profits (as determined for U.S. federal income tax purposes) for periods prior to the Spin-Off between Darden and Four Corners in a manner that, in its best judgment, is in accordance with the provisions of the Internal Revenue Code of 1986, as amended (the “Code”). As a result of our election to be treated as a REIT for U.S. federal income tax purposes, in order to comply with certain REIT qualification requirements, we intend to declare a dividend to our shareholders to distribute our accumulated earnings and profits attributable to non-REIT years (the “Purging Distribution”), including any earnings and profits allocated to us in connection with the Spin-Off and the earnings and profits generated by us in our taxable year ending December 31, 2015. The Purging Distribution will be paid to our shareholders in a combination of cash and Four Corners stock, with the cash portion constituting at least 20% of the total amount of the Purging Distribution. We expect to pay the majority of the Purging Distribution in Four Corners stock. Additionally, we expect to declare the Purging Distribution in 2016 and to make the Purging Distribution no later than January 31, 2017. We currently expect that the aggregate amount of the Purging Distribution will be between approximately $300 million and $400 million. See “The Spin-Off—The Purging Distribution.”
The Spin-Off is subject to the satisfaction or waiver of a number of conditions. See “The Spin-Off—Conditions to the Spin-Off.” In addition, Darden’s board of directors has reserved the right, in its sole discretion, to amend, modify, abandon or otherwise terminate the Spin-Off or any related transaction at any time prior to the distribution date.
Reasons for the Spin-Off
It is expected that the Spin-Off will:
position both Darden and Four Corners to more efficiently dedicate financial resources, access capital markets, pursue appropriate growth opportunities and execute strategic plans best suited for their respective businesses;
enable the separate management teams of Darden and Four Corners to devote their time and attention to the development and implementation of corporate strategies that are specifically tailored towards each entity’s respective core business;
allow for valuation of the Four Corners Properties, separate from Darden, within a publicly traded REIT structure. Based on historical market valuation multiples, this is expected to increase the value attributed by the market to the Four Corners Properties and the value of Four Corners such that the aggregate value of the equity of Darden and Four Corners following the Spin-Off would be greater than the equity value of Darden absent the Spin-Off; and
enhance our ability to attract and retain qualified management in furtherance of our strategic growth objectives.
Our Relationship with Darden
After the Spin-Off, we will be an independent publicly traded, self-administered company and intend to elect and qualify to be treated as a REIT effective January 1, 2016 primarily engaged in the ownership, acquisition and leasing of restaurant properties. Darden will be a separate and independent publicly traded company, which will continue to offer a wide range of restaurant and dining options to consumers through its existing operations.
Darden determined which restaurant properties to transfer to us over the course of an extensive asset selection process. Based on its numerous asset selection criteria, which included, among others, the geographic location, rent potential and Darden’s ownership interest in the restaurant properties, Darden determined that 424 of its restaurant properties met the requisite criteria for transfer to us, and ultimately elected to transfer those restaurant properties to us. Darden will continue to operate and manage the Four Corners Properties pursuant to the Leases, as well as operate and manage the properties it retains ownership of and those that it leases from parties other than us. Darden has selected assets for inclusion in the Spin-Off which it

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believes will provide us with sufficient scale and geographic diversity to achieve the business purposes for the Spin-Off described above under “Reasons for the Spin-Off.”
To govern our relationship from and after the Spin-Off, we and Darden will enter into, among other arrangements: (1) a separation and distribution agreement setting forth the mechanics of the Spin-Off and certain organizational matters (the “Separation and Distribution Agreement”), (2) the Leases, (3) an agreement relating to tax matters (the “Tax Matters Agreement”), (4) an agreement pursuant to which Darden will provide certain administrative and support services to us on a transitional basis (the “Transition Services Agreement”), (5) the Franchise Agreements; and (6) an agreement relating to employee matters (the “Employee Matters Agreement” and, together with the Separation and Distribution Agreement, the Leases, the Tax Matters Agreement, the Transition Services Agreements and the Franchise Agreements, the “Agreements”). See “Our Relationship with Darden Following the Spin-Off.” The Agreements will be negotiated in the context of the Spin-Off while we are still a wholly-owned subsidiary of Darden. Accordingly, during the period in which the terms of the Agreements will be negotiated, we will not have a board of directors or a management team that is independent of Darden. As a result, although the Agreements are generally intended to reflect arm’s-length terms, the terms of the Agreements may not reflect terms as favorable as would have resulted from arm’s-length negotiations between unaffiliated third parties. Accordingly, there can be no assurance that the terms of these agreements will be as favorable for us as would have resulted from negotiations with one or more unrelated third parties.
Financing
We expect to put in place a capital structure that provides us with the flexibility and capacity for growth and a cost of debt capital that allows us to compete aggressively for investment opportunities. Such financing arrangements over time may include, in addition to the facilities expected to be provided under the credit agreement referred to below, other bank debt, bonds and long-term mortgage financing. In connection with the Spin-Off, we anticipate that we will enter into a credit agreement, pursuant to which we will incur $400.0 million in a term loan and a revolving credit facility with an available facility amount in an aggregate principal amount of $350.0 million, each of which we expect will be provided by a syndicate of banks and other financial institutions. We anticipate that the term loan facility will be fully drawn at the date that the Spin-Off is consummated and that the revolving credit facility will be undrawn at the date that the Spin-Off is consummated. Based on our review of the current credit markets and through consultation with our advisors, we determined that the incurrence of up to $750.0 million in debt will provide us a leverage profile consistent with our peer companies while affording sufficient liquidity to support the business and operating plan. Darden will accomplish the separation by effecting an internal restructuring resulting in the contribution to Four Corners of the equity of entities that hold the Four Corners Properties, the LongHorn San Antonio Business and $36.1 million in cash in exchange for all of our common stock, and then distributing all of the outstanding shares of Four Corners common stock to its shareholders in a pro rata distribution. We expect that, in connection with the Spin-Off, $351.1 million in cash funded from the proceeds of term loan borrowings will be transferred to Darden, and such transferred proceeds will be used to retire certain Darden debt. The remaining net proceeds of the term loan and any borrowings under the revolving credit facility are expected to be available to us to make all or any of the cash portion of the Purging Distribution, for working capital purposes, to fund acquisitions and for general corporate purposes. We will be able to repay and reborrow loans made under the revolving credit facility from time to time, subject to the satisfaction of certain customary conditions.
The credit agreement is expected to contain customary affirmative and negative covenants, as well as customary events of default. We have not yet entered into any commitments with respect to our financing arrangements, and, accordingly, the terms of such financing arrangements have not yet been determined, remain under discussion and are subject to change, including as a result of market conditions. For additional information concerning this indebtedness, see “Description of Financing and Material Indebtedness.”
Restrictions on Ownership and Transfer of Our Common Stock
To assist us in complying with the limitations on the concentration of ownership of REIT stock imposed by the Code, among other purposes, our charter will provide for restrictions on ownership and transfer of our shares of stock, including, subject to certain exceptions, prohibitions on any person beneficially or constructively owning more than 9.8% in value or in

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number, whichever is more restrictive, of the outstanding shares of our common stock, or more than 9.8% in value of the aggregate of the outstanding shares of all classes and series of our stock. A person holding less than 9.8% of our outstanding stock may become subject to our charter restrictions if repurchases by us cause such person’s holdings to exceed 9.8% of our outstanding stock. Under certain circumstances, our board of directors may waive these ownership limits. Our charter will provide that shares of our capital stock acquired or held in excess of the ownership limit will be transferred to a trust for the benefit of a designated charitable beneficiary, and that any person who acquires shares of our capital stock in violation of the ownership limit will not be entitled to any dividends on such shares or be entitled to vote such shares or receive any proceeds from the subsequent sale of such shares in excess of the lesser of the price paid for such shares or the amount realized from the sale (net of any commissions and other expenses of sale). A transfer of shares of our capital stock in violation of the ownership limit will be void ab initio under certain circumstances. Our 9.8% ownership limitation may have the effect of delaying, deferring or preventing a change in control of us, including an extraordinary transaction (such as a merger, tender offer or sale of all or substantially all of our assets) that might provide a premium price for our shareholders. See “Description of Our Capital Stock— Restrictions on Transfer and Ownership of Four Corners Stock.”
Our Tax Status
We will be taxed as a “C corporation” and expect to pay U.S. federal corporate income taxes for our taxable year ending December 31, 2015. We intend to elect and qualify to be subject to tax as a REIT for U.S. federal income tax purposes commencing with our taxable year beginning on January 1, 2016. Our qualification as a REIT will depend upon our ability to meet, on a continuing basis, through actual investment and operating results, various complex requirements under the Code, relating to, among other things, the sources of our gross income, the composition and value of our assets, our distribution levels and the diversity of ownership of our shares. We believe that, commencing with our taxable year beginning January 1, 2016, we will be organized in conformity with the requirements for qualification and taxation as a REIT under the Code, and that our intended manner of operation will enable us to satisfy the requirements for qualification and taxation as a REIT. In connection with the Spin-Off, we expect to receive an opinion of Skadden, Arps, Slate, Meagher & Flom LLP (“Skadden, Arps”), counsel to Darden, to the effect that we have been organized in conformity with the requirements for qualification and taxation as a REIT under the Code, and that our proposed method of operation will enable us to satisfy the requirements for qualification and taxation as a REIT (the “REIT Tax Opinion”).
So long as we qualify to be subject to tax as a REIT, we generally will not be subject to U.S. federal income tax on our net REIT taxable income that we distribute currently to our shareholders. If we fail to qualify as a REIT in any taxable year and do not qualify for certain statutory relief provisions, we would be subject to U.S. federal income tax at regular corporate rates and would be precluded from reelecting to be subject to tax as a REIT for the four taxable years following the year in which we failed to qualify as a REIT. Even if we qualify as a REIT, we may be subject to certain U.S. federal, state and local taxes on our income or property, and the income of our TRS will be subject to taxation at regular corporate rates. See “U.S. Federal Income Tax Considerations.”
Emerging Growth Company Status
As a company with less than $1.0 billion in revenue during our last fiscal year, we currently qualify as an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act (the “JOBS Act”). Section 107 of the JOBS Act provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended (the “Securities Act”) for complying with new or revised accounting standards. Thus, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. However, we are choosing to “opt out” of such extended transition period, and, as a result, we will comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. Section 107 of the JOBS Act provides that our decision to opt out of the extended transition period for complying with new or revised accounting standards is irrevocable.
For as long as we remain an emerging growth company, we may also take advantage of certain limited exemptions from various reporting requirements that are applicable to other public companies. These provisions include, but are not limited to:

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not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act for up to five years;
reduced disclosure obligations regarding executive compensation in our periodic reports, proxy statements and registration statements; and
exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.
We have elected not to take advantage of any of the reduced disclosure obligations afforded to emerging growth companies by the JOBS Act, other than the reduced disclosure obligations regarding executive compensation, in this information statement.
Subsequent to the effective date of the registration statement, we expect to remain an emerging growth company until the earliest of (1) the last day of the first fiscal year in which our total annual gross revenues exceed $1 billion, (2) the date on which we are deemed to be a “large accelerated filer,” as defined in Rule 12b-2 under the Exchange Act or any successor statute, which would occur if the market value of our common stock that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter, (3) the date on which we have issued more than $1 billion in non-convertible debt during the preceding three-year period, and (4) the end of the fiscal year following the fifth anniversary of the date of the first sale of our common stock pursuant to an effective registration statement filed under the Securities Act.
Risks Associated with Our Business and the Spin-Off
The Spin-Off and the related transactions pose a number of risks, including:
We may be unable to achieve some or all of the benefits that we expect to achieve from the Spin-Off;
If the Spin-Off were to fail to qualify as a tax-free transaction for U.S. federal income tax purposes, Darden and Darden’s shareholders could be subject to significant tax liabilities and, in certain circumstances, we could be required to indemnify Darden for material taxes pursuant to indemnification obligations under the Tax Matters Agreement that we will enter into with Darden;
Our agreements with Darden may not reflect terms that would have resulted from arm’s-length negotiations with unaffiliated third parties;
The historical and pro forma financial information included in this information statement may not be a reliable indicator of future results;
The Spin-Off could give rise to disputes or other unfavorable effects, which could materially and adversely affect our business, financial position or results of operation;
If we do not qualify as a REIT, or fail to remain qualified as a REIT, we will be subject to U.S. federal income tax as a regular corporation and could face a substantial tax liability, which would reduce the amount of cash available for distribution to our shareholders;
Complying with the REIT requirements may cause us to forego otherwise attractive acquisition and business opportunities or liquidate otherwise attractive investments;
We will initially be dependent on Darden as our sole lessee to make payments to us under the Leases as well as to provide services to us under the Transition Services Agreement, the Employee Matters Agreement and the Franchise Agreements, and an event that materially and adversely affects Darden’s business, financial position or results of operations could materially and adversely affect our business, financial position or results of operations;
Our level of indebtedness could materially and adversely affect our financial position, including reducing funds available for other business purposes and reducing operational flexibility, and we may have future capital needs and may not be able to obtain additional financing on acceptable terms;

7


Covenants in our debt agreements may limit our operational flexibility, and a covenant breach or default could materially and adversely affect our business, financial position or results of operations;
Our active management and operation of a restaurant business may expose us to potential liabilities beyond those traditionally associated with REITs; and
Our business is subject to government regulations and changes in current or future laws or regulations could restrict our ability to operate our business in the manner currently contemplated.
These and other risks related to the Spin-Off and our business are discussed in greater detail under the heading “Risk Factors” in this information statement. You should read and consider all of these risks carefully.
Our Corporate Information
We are a Maryland corporation and indirect wholly-owned subsidiary of Darden. Prior to the Spin-Off, we will not have commenced any operations nor have any assets or liabilities. We will own all of our properties and conduct all of our operations through our operating limited partnership, Four Corners Operating Partnership, LP (“Four Corners OP”), a Delaware limited partnership of which we will be the initial limited partner, and the general partner of which will be Four Corners GP, LLC (“Four Corners GP”), a Delaware limited liability company wholly-owned by us. Our principal executive offices are located at 1000 Darden Center Drive, Orlando, Florida 32837 and our telephone number is 407‑245-4000. We will maintain a website at www.fourcornerspropertytrust.com, which will be operational no later than the date that the Spin-Off is consummated. Information contained on or connected to our website or Darden’s website does not and will not constitute part of this information statement or the registration statement on Form 10 of which this information statement is a part.

8


Questions and Answers about Four Corners and the Separation
What is Four Corners and how will the separation of the Four Corners Properties and the LongHorn San Antonio Business from Darden benefit the two companies and their shareholders?
We are currently a newly-formed indirect wholly-owned subsidiary of Darden, with no assets or liabilities. Prior to the Spin-Off, Darden will transfer to us the equity of entities that hold the Four Corners Properties, the LongHorn San Antonio Business and cash of $36.1 million in exchange for all of Four Corners’ common stock. In connection with the separation, $351.1 million in cash funded from the proceeds of our term loan borrowings will be transferred to Darden. The separation of Four Corners from Darden and the distribution of our common stock to Darden’s stockholders are intended to provide you with equity investments in two separate companies. Following the Spin-Off, Darden will continue to operate a broad group of restaurant businesses through its existing operations and pursuant to the Leases, and we will operate the LongHorn San Antonio Business and own, acquire and lease properties, on a triple-net basis, for restaurant use. Over time, we may further diversify our portfolio to include properties outside the restaurant industry, which we will lease to third parties.
Darden plans to retire approximately $1 billion of debt at the completion of the Spin-Off using, in part, the cash it receives from us in connection with the Spin-Off and the cash from sale-leaseback transactions unrelated to the Spin-Off.

What are the reasons for the Spin-Off?
It is expected that the Spin-Off will:
•    position both Darden and Four Corners to more efficiently dedicate financial resources, access capital markets, pursue appropriate growth opportunities and execute strategic plans best suited for their respective businesses;
•    enable the separate management teams of Darden and Four Corners to devote their time and attention to the development and implementation of corporate strategies that are specifically tailored towards each entity’s respective core business;
•    allow for valuation of the distributed restaurant properties, separate from Darden, within a publicly traded REIT structure. Based on historical market valuation multiples, this may increase the value attributed by the market to the Four Corners Properties and the value of Four Corners such that the aggregate value of the equity of Darden and Four Corners following the Spin-Off would be greater than the equity value of Darden absent the Spin-Off; and
•    enhance our ability to attract and retain qualified management in furtherance of its strategic growth objectives.

What will Four Corners’ initial portfolio consist of?
At the completion of the Spin-Off, we will hold certain properties currently held by Darden, including six owned properties that are part of the LongHorn San Antonio Business (three of which are subject to ground leases) and the Four Corners Properties, which span across 44 states and represent five of Darden’s brands. The majority of the initial portfolio will consist of Olive Garden restaurants. Over time, we expect to diversify its portfolio through a combination of acquisitions and divestitures, which may include Olive Garden properties.


9


Why aren’t all of Darden’s real estate assets included in Four Corners?
Darden undertook a comprehensive six month assessment of its real estate portfolio, in conjunction with its advisors, to identify properties for inclusion in our initial portfolio. In general, properties were excluded from Four Corners if they were:
•    already subject to a ground and/or building lease;
•    operating below a specific historical EBITDAR margin threshold;
•    unable individually to support a minimum threshold rent level;
•    identified as locations that may benefit from restaurant relocation;
•    relatively new restaurants, where long-term performance uncertainty exists due to lack of seasoning; and/or
•    identified by Darden management as being inappropriate for the REIT for other reasons.
The aforementioned screening measures were designed to identify the set of properties that is most likely to provide predictable, stable cash flows from which an attractive and sustainable dividend could be set.

Why is Four Corners referred to as a REIT, and what is a REIT?
Following the Spin-Off, we intend to elect and qualify to be subject to tax as a REIT for U.S. federal income tax purposes commencing with our taxable year beginning January 1, 2016.

A REIT is a company that derives most of its income from real property or real estate mortgages and has elected to be subject to tax as a REIT. If a corporation elects to be subject to tax as a REIT and qualifies as a REIT, it will generally not be subject to U.S. federal corporate income taxes on income that it currently distributes to its shareholders. A company’s qualification as a REIT depends on its ability to meet, on a continuing basis, various complex requirements under the Code relating to, among other things, the sources of its gross income, the composition and values of its assets, its distribution levels to its shareholders and the concentration of ownership of its shares.

Why is the separation of Four Corners structured as a distribution?
Darden believes that a spin-off, or distribution, of Four Corners common stock to its shareholders is an efficient way to separate ownership of the Four Corners Properties and the LongHorn San Antonio Business from Darden’s core business of operating restaurants.

How will the separation of Four Corners work?
Prior to the Spin-Off, Darden will transfer to us the equity of entities that hold the Four Corners Properties, the LongHorn San Antonio Business and $36.1 million in cash in exchange for all of our common stock. In connection with the separation, $351.1 million in cash funded from the proceeds of our term loan borrowings will be transferred to Darden. Darden will then distribute all such common stock to Darden’s shareholders on a pro rata basis. Holders of Darden common stock will receive cash in lieu of any fractional shares of our common stock which they would have otherwise received.

What is the record date for the Spin-Off?
The record date for determining the holders of Darden common stock who will receive shares of our common stock in the Spin-Off is the close of business on November 2, 2015.


10


When will the Spin-Off occur?
The Spin-Off is expected to occur on or about November 9, 2015, subject to certain conditions described under “The Spin-Off—Conditions to the Spin-Off.”

What do shareholders need to do to participate in the Spin-Off?
No action is required on the part of shareholders. Shareholders who hold Darden common stock as of the record date will not be required to take any action in order to receive shares of our common stock in the Spin-Off. No shareholder approval of the Spin-Off is required or sought. We are not asking you for a proxy, and you are requested not to send us a proxy.

If I sell my shares of Darden common stock prior to the Spin-Off, will I still be entitled to receive shares of Four Corners in the Spin-Off?
If you hold shares of Darden common stock as of the record date and decide to sell the shares prior to the distribution date, you may choose to sell such shares with or without your entitlement to receive shares of our common stock. If you sell your Darden common stock in the “due-bills” market prior to the distribution date, you also will be selling your right to receive shares of Four Corners common stock in connection with the Spin-Off. However, if you sell your Darden common stock in the “ex-distribution” market prior to the distribution date, you will still receive shares of Four Corners common stock in the Spin-Off.
If you sell your Darden common stock prior to the distribution date, you should make sure your bank or broker understands whether you want to sell your Darden common stock with shares of Four Corners common stock you will receive in the Spin-Off or without such Four Corners shares. You should consult your financial advisors, such as your bank, broker or tax advisor, to discuss your options and alternatives. See “The Spin-Off—Listing and Trading of Our Shares” for additional details.

How will fractional shares be treated in the Spin-Off?
No fractional shares will be distributed in connection with the Spin-Off. Instead, holders of Darden common stock will receive a cash payment equal to the value of such shares in lieu of fractional shares. See “The Spin-Off—Treatment of Fractional Shares.”

What are the U.S. federal income tax consequences of the Spin-Off?
Darden has requested a private letter ruling (the “IRS Ruling”) from the Internal Revenue Service (the “IRS”) on certain specific issues relevant to the qualification of the Spin-Off as tax-free under Sections 368(a)(1)(D) and 355 of the Code, based on certain facts and representations set forth in such request. No assurance can be given that Darden will receive the IRS Ruling and it is not a condition of the Spin-Off. An IRS Ruling, even if received, would not address all of the requirements for tax-free treatment of the Spin-Off, and Darden expects to receive an opinion from Skadden, Arps (the “Spin-Off Tax Opinion”) with respect to such treatment in its entirety. The Spin-Off Tax Opinion is also expected to address any issues on which the IRS may decline to rule.

The tax consequences to you of the Spin-Off depend on your individual situation. You are urged to consult with your tax advisor as to the particular tax consequences of the Spin-Off to you, including the applicability of any U.S. federal, state, local and non-U.S. tax laws. For additional details, see “The Spin-Off—U.S. Federal Income Tax Consequences of the Spin-Off” and “U.S. Federal Income Tax Considerations.”

Can Darden decide to cancel the Spin-Off even if all the conditions have been satisfied?
Yes. The Spin-Off is subject to the satisfaction or waiver of certain conditions. Until the Spin-Off has occurred, Darden has the right to amend, modify, abandon or otherwise terminate the transaction, even if all of the conditions have been satisfied, if the board of directors of Darden determines, in its sole and absolute discretion, that the Spin-Off is not in the best interests of Darden and its shareholders or that legal, market or regulatory conditions or other circumstances are such that the Spin-Off is no longer advisable at that time.


11


What are the conditions to the Spin-Off?
The Spin-Off is subject to the satisfaction or waiver of a number of conditions, including, among others:
•    each of the Separation and Distribution Agreement, the Leases, the Tax Matters Agreement, the Transition Services Agreement, the Employee Matters Agreement, and the Franchise Agreements shall have been duly executed and delivered by the parties thereto;
•    certain reorganization steps shall have been completed in accordance with the plan of reorganization contemplated in the Separation and Distribution Agreement (the “Reorganization”);
•    Darden shall have received the Spin-Off Tax Opinion in form and substance satisfactory to Darden;
•    the boards of Darden and Four Corners shall have received such solvency and surplus opinions from an independent financial advisory firm in connection with the Spin-Off, each in such form and substance as they shall deem necessary, appropriate or advisable;
•    the SEC shall have declared effective our registration statement on Form 10, of which this information statement is a part, under the Exchange Act, and no stop order relating to the registration statement shall be in effect, and no proceedings for such purpose shall be pending before, or threatened by, the SEC, and this information statement shall have been mailed to holders of Darden common stock as of the record date or shall have been posted online with a notice the availability thereof having been mailed to the holders of Darden common stock as of the record date;
•    such registration statements on Form S-8 as are necessary and appropriate to register the equity awards contemplated in this information statement to be advisable for granting to our directors and employees and Darden shall have been filed with the SEC and shall have become effective;
•    all actions and filings necessary or appropriate under applicable federal, state or foreign securities or “blue sky” laws and the rules and regulations thereunder shall have been taken and, where applicable, become effective or been accepted;
•    the common stock to be delivered in the Spin-Off shall have been accepted for listing on the NYSE, subject to compliance with applicable listing requirements;
 
•    no order, injunction or decree issued by any court of competent jurisdiction or other legal restraint or prohibition preventing consummation of the Spin-Off or the Reorganization, shall be threatened, pending or in effect;
•    all required governmental and third-party approvals shall have been obtained and be in full force and effect:

12


 
•    we shall have entered into the financing transactions substantially as described in this information statement and contemplated to occur on or prior to the Spin-Off, and any required consents or amendments under  any instrument to which Darden is a party shall have become effective and shall be in full force and effect;
•    we shall have transferred to Darden, all of our common stock;
•    Darden and Four Corners shall each have taken all necessary actions that may be required to provide for the adoption by Four Corners of its Articles of Amendment and Restatement and Amended and Restated Bylaws, and Four Corners shall have filed its Articles of Amendment and Restatement with the Maryland State Department of Assessments and Taxation;
•    Darden and Four Corners shall have taken all actions as may be necessary to approve the stock-based employee benefit plans of Four Corners in order to satisfy the applicable rules and regulations of the NYSE; and
•    no event or development shall have occurred or exist that, in the judgment of the board of directors of Darden, in its sole discretion, makes it inadvisable to effect the Spin-Off.
We cannot assure you that all of the conditions will be satisfied or waived. See “The Spin-Off—Conditions to the Spin-Off” for additional details.

Does Four Corners intend to pay dividends?
Following the Spin-Off and our election and qualification to be treated as a REIT for U.S. federal income tax purposes effective January 1, 2016, we intend to make regular quarterly dividend payments of at least 90% of our REIT taxable income to holders of our common stock out of assets legally available for this purpose. Dividends will be authorized by our board of directors and declared by us based on a number of factors including actual results of operations, dividend restrictions under Maryland law or applicable debt covenants, our liquidity and financial condition, our taxable income, the annual distribution requirements under the REIT provisions of the Code, our operating expenses and other factors our directors deem relevant. It is expected that our initial dividend will be $1.35 per share per annum. Based on a distribution ratio in the Spin-Off of one share of Four Corners common stock for every three shares of Darden common stock, following the Spin-Off, the initial combined dividend level on the Four Corners common stock and the Darden common stock is expected to be at least equal to the dividend level on the Darden common stock prior to the Spin-Off. We may pay a portion of our dividends in common stock. For more information, see “Dividend Policy.”

What will be the relationship between Darden and Four Corners following the Spin-Off?
We and Darden will enter into the Separation and Distribution Agreement, the Leases, the Tax Matters Agreement, the Transition Services Agreement, the Employee Matters Agreement and the Franchise Agreements, among others. Such agreements will govern our relationship with Darden from and after the Spin-Off, including certain transition services, allocations of assets and liabilities and obligations attributable to periods prior to the Spin-Off, and our rights and obligations, including indemnification arrangements for certain liabilities, after the Spin-Off. See “Our Relationship with Darden Following the Spin-Off.”


13


Will I receive physical certificates representing shares of Four Corners common stock following the Spin-Off?
No. Following the Spin-Off, neither Darden nor Four Corners will be issuing physical certificates representing shares of Four Corners common stock. Instead, Darden, with the assistance of Wells Fargo Bank, N.A., the distribution agent, will electronically issue shares of Four Corners common stock to you or to your bank or brokerage firm on your behalf by way of direct registration in book-entry form. The distribution agent will mail you a book-entry account statement that reflects your shares of our common stock, or your bank or brokerage firm will credit your account for the shares. A benefit of issuing stock electronically in book-entry form is that there will be none of the physical handling and safekeeping responsibilities that are inherent in owning physical stock certificates. See “The Spin-Off—Manner of Effecting the Spin-Off.”

What will the price be for my shares of Four Corners common stock and when will I be able to trade such shares?
There is no current trading market for our common stock. We have applied to have our common stock approved for listing on the NYSE under the symbol “FCPT” subject to official notice of issuance. We anticipate that a limited market, commonly known as a “when-distributed” trading market, will develop shortly before the record date, and that “regular-way” trading in shares of our common stock will begin on the first trading day following the distribution date. If trading begins on a “when-distributed” basis, you may purchase or sell our common stock up to and including the distribution date, but your transaction will not settle until after the distribution date. We cannot predict the trading prices of our common stock before, on or after the distribution date.

Will the number of shares of Darden common stock that I own change as a result of the Spin-Off?
No. The number of shares of Darden common stock you own will not change as a result of the Spin-Off.

Will my shares of Darden common stock continue to trade after the Spin-Off?
Yes. Darden common stock will continue to be listed and traded on the NYSE under the symbol “DRI.” See “The Spin-Off—Listing and Trading of Our Shares” for additional details.

Are there risks associated with owning Four Corners common stock?
Yes. Our business is subject to both general and specific risks and uncertainties relating to our business, including risks specific to our ownership of real estate and the industry and operations of lessees of such real estate, our leverage, our relationship with Darden and our status as an independent, publicly traded, self-administered company. Our business is also subject to risks relating to the Spin-Off. These risks are described in the “Summary—Risks Associated with Our Business and the Spin-Off” section in this information statement beginning on page 7, and are described in more detail in the “Risk Factors” section of this information statement beginning on page 19.

Do I have appraisal rights in connection with the Spin-Off?
No. Darden shareholders will not have any appraisal rights in connection with the Spin-Off.


14


How will the Spin-Off affect my tax basis and holding period in Darden common stock?
Assuming that the Spin-Off is tax-free to Darden shareholders, your tax basis in Darden common stock held by you immediately prior to the Spin-Off will be allocated between your Darden common stock and our common stock that you receive in the Spin-Off in proportion to the relative fair market values of each immediately following the Spin-Off. Your holding period for such Darden shares will not be affected by the Spin-Off. Your holding period for the shares of our common stock that you receive in the Spin-Off will include the holding period of your shares of Darden common stock, provided that such Darden shares are held as capital assets immediately following the Spin-Off. Darden will provide its shareholders with information to enable them to compute their tax basis in both Darden and Four Corners common stock. This information will be posted on Darden’s website, www.darden.com, promptly following the distribution date. See “The Spin-Off—U.S. Federal Income Tax Consequences of the Spin-Off.” You are urged to consult with your tax advisor as to the particular tax consequences of the Spin-Off to you, including the applicability of any U.S. federal, state, local and non-U.S. tax laws.

Information contained on any website referenced in this information statement is not incorporated by reference in this information statement.

What is the Purging Distribution?
Darden will allocate its accumulated earnings and profits (as determined for U.S. federal income tax purposes) for periods prior to the Spin-Off between Darden and Four Corners in a manner that, in its best judgment, is in accordance with applicable provisions of the Code. As a result of our intended election to be treated as a REIT for U.S. federal income tax purposes, in order to comply with certain REIT qualification requirements, we will declare the Purging Distribution. See “The Spin-Off—The Purging Distribution.”

What will I receive in connection with the Purging Distribution?
The Purging Distribution will be paid to our shareholders in a combination of cash and Four Corners stock, with the cash portion constituting at least 20% of the total amount of the Purging Distribution. We expect to pay the majority of the Purging Distribution in Four Corners stock. Additionally, we expect to declare the Purging Distribution in 2016 and to make the Purging Distribution no later than January 31, 2017. We currently expect that the aggregate amount of the Purging Distribution will be between approximately $300 million and $400 million.
See “The Spin-Off—The Purging Distribution.”


15


What are the U.S. federal income tax consequences of the Purging Distribution?
Darden has requested the IRS Ruling, which, if received, is expected to address, in addition to issues relevant to the tax-free treatment of the Spin-Off, certain issues related to our payment of the Purging Distribution in a combination of cash and our stock. In general, the IRS Ruling with respect to the Purging Distribution, if received, is expected to provide, subject to the terms and conditions contained therein, that (1) any and all of the cash and stock we distribute to our shareholders as part of the Purging Distribution will be treated as a taxable distribution of property with respect to Four Corners stock, and (2) the amount of any distribution of stock received by any of our shareholders as part of the Purging Distribution will be considered to equal the amount of the money that could have been received instead. In the Purging Distribution, a holder of our common stock will be required to report dividend income as a result of the Purging Distribution even if we distribute no cash or only nominal amounts of cash to such shareholder.

You are urged to consult with your tax advisor as to the particular tax consequences of the Purging Distribution to you, including the applicability of any U.S. federal, state and local and non-U.S. tax laws. See “The Spin-Off—The Purging Distribution.”

Who is the transfer agent for Four Corners shares?
The transfer agent for our common stock is Wells Fargo Bank, N.A.
Where can I get more information?
If you have any questions relating to the Spin-Off, the Four Corners common stock or the Darden common stock, you should contact Darden at:

Darden Restaurants, Inc.
Investor Relations
1000 Darden Center Drive
Orlando, Florida 32837

Phone: (407) 245-5870
Email: kkalicak@darden.com


16


Summary Historical Combined and Pro Forma Consolidated Financial Data
The following table sets forth summary historical combined financial data of the LongHorn San Antonio Business and our summary pro forma consolidated financial information as of the dates and for the periods presented. We have not presented historical information for Four Corners because it has not had any operating activity since its formation on July 16, 2015, other than the issuance of 10 shares of its common stock as part of its initial capitalization.
The summary historical combined financial data as of June 30, 2015 and for the six months ended June 30, 2015 and 2014 as set forth below, was derived from the LongHorn San Antonio Business unaudited combined financial statements, which are included elsewhere in this information statement. The summary historical combined financial data as of December 31, 2014 and 2013 and for the three years ended December 31, 2014, 2013 and 2012 as set forth below, was derived from the LongHorn San Antonio Business audited combined financial statements, which are included elsewhere in this information statement. In management’s opinion, the unaudited combined financial statements have been prepared on the same basis as the audited combined financial statements and include all adjustments, consisting only of ordinary recurring adjustments, necessary for a fair presentation of the information for the periods presented.
The summary historical combined financial data may not necessarily reflect the LongHorn San Antonio Business financial position, results of operations or cash flows as if they had operated as a stand-alone public company during all periods presented, including changes that will occur in our operations and capitalization as a result of the Spin-Off and related transactions. Accordingly, the historical results should not be relied upon as an indicator of the LongHorn San Antonio Business’s future performance.
Our unaudited pro forma consolidated balance sheet as of June 30, 2015 assumes the Spin-Off and the related transactions occurred on June 30, 2015. Our unaudited pro forma consolidated statements of income for the six months ended June 30, 2015 and for the year ended December 31, 2014 assumes the Spin-Off and the related transactions occurred on January 1, 2014. The following unaudited pro forma consolidated financial data gives effect to the Spin-Off and the related transactions, including: (i) the rental income associated with the leasing of the Four Corners Properties to Darden and the related depreciation expense on the leased properties, (ii) incremental costs related to the Franchise Agreements, (iii) incremental costs recorded within general and administrative expenses related to employment agreements entered into with our President and Chief Executive Officer, and Chief Financial Officer, and arrangement letters entered into with our audit firm and other third party service providers, (iv) the incurrence of long-term debt by us, the payment of fees to our lenders, and the related interest expense, (v) the associated income tax expense as a “C-corporation” for the above items, (vi) the elimination of the parent company investment account balances attributable to the LongHorn San Antonio Business and the Four Corners Properties, (vii) the net cash distributed to Darden in connection with the Spin-Off and (viii) the distribution of 42,443,994 shares of our common stock by Darden pro rata to Darden shareholders in the Spin-Off.
Our pro forma financial information is not necessarily indicative of what our actual financial position and results of operations would have been if the Spin-Off and related transactions occurred on the date or at the beginning of the period indicated, nor does it purport to represent our future financial position or results of operations. The unaudited pro forma adjustments are based on information and assumptions that we consider reasonable and factually supportable.
Since the information presented below is only a summary and does not provide all of the information contained in the historical combined financial statements of the LongHorn San Antonio Business or our pro forma consolidated financial statements, including the related notes, you should read the following in conjunction with the information contained in the combined financial statements and related notes thereto and unaudited pro forma consolidated financial data appearing elsewhere in this information statement.

17


 
 
As of and For the Six Months Ended June 30,
 
As of and For the Years Ended December 31,
( in millions except per share data)
 
Pro Forma 2015
 
Historical, 2015
 
Historical, 2014
 
Pro Forma 2014
 
Historical 2014
 
Historical 2013
 
Historical 2012
 
 
(unaudited)
 
(unaudited)
 
(unaudited)
 
(unaudited)
 
 
 
 
 
 
Total revenue
 
$
61.9

 
$
9.5

 
$
9.0

 
$
122.4

 
$
17.7

 
$
16.9

 
$
16.5

Total cost and expenses
 
$
41.0

 
$
9.2

 
$
9.0

 
$
81.9

 
$
17.8

 
$
17.0

 
$
16.7

Net income (loss)
 
$
13.0

 
$
0.3

 
$
0.1

 
$
25.2

 
$ 0.0

 
$ 0.0

 
$ (0.0)

Net income (loss) per share:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic and diluted
 
$
0.31

 
 
 
 
 
$
0.59

 
 
 
 
 
 
Balance sheet data
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total assets
 
$
916.6

 
$
11.8

 
 
 
 
 
$
11.9

 
$
12.8

 
 
Total long-term debt1
 
$
392.5

 
$

 
 
 
 
 
$

 
$

 
 
Total long-term liabilities
 
$
472.0

 
$
1.6

 
 
 
 
 
$
1.6

 
$
1.7

 
 
Total liabilities
 
$
473.1

 
$
2.8

 
 
 
 
 
$
3.0

 
$
2.9

 
 
Total equity
 
$
443.5

 
$
9.0

 
 
 
 
 
$
9.0

 
$
9.9

 
 
1 Pro forma long-term debt is presented net of lender fees of $7.5 million.

18


RISK FACTORS
You should carefully consider the following risks and other information in this information statement in evaluating us and our common stock. Any of the following risks, as well as additional risks and uncertainties not currently known to us or that we currently deem immaterial, could materially and adversely affect our business, financial condition or results of operations, and could, in turn, impact the trading price of our common stock.
RISKS RELATED TO OUR SPIN-OFF FROM DARDEN
We may be unable to achieve some or all of the benefits that we expect to achieve from the Spin-Off.
We believe that, as a publicly traded company independent from Darden, we will have the ability to pursue transactions with other restaurant operators that would not pursue transactions with Darden as a current competitor or otherwise, and to fund acquisitions with our equity on significantly more favorable terms than those that would be available to Darden. However, we may not be able to achieve some or all of the benefits that we expect to achieve as a company independent from Darden in the time we expect, if at all, which could have an adverse effect on our financial condition and our ability to make distributions. For instance, it may take longer than anticipated for us to, or we may never, succeed in attracting tenants other than Darden. In addition, because historically Darden has owned and managed its own real estate assets, including the Four Corners Properties and the restaurant properties comprising the LongHorn San Antonio Business, neither we nor Darden have any meaningful experience as lessors of properties to third-party restaurant and other operators in a competitive environment. Our lack of experience, including dealing with parties other than Darden in real estate transactions, and operating in a competitive environment, may materially inhibit our ability to realize the full value of the Four Corners Properties and the LongHorn San Antonio Business, to acquire further properties and achieve our short-term and long-term strategic objectives.
If the Spin-Off were to fail to qualify as a tax-free transaction for U.S. federal income tax purposes, Darden and Darden’s shareholders could be subject to significant tax liabilities and, in certain circumstances, we could be required to indemnify Darden for material taxes pursuant to indemnification obligations under the Tax Matters Agreement that we will enter into with Darden.
Darden has requested the IRS Ruling on certain specific issues relevant to the qualification of the Spin-Off as tax-free under Sections 368(a)(1)(D) and 355 of the Code, based on certain facts and representations set forth in such request. Although a private letter ruling from the IRS generally is binding on the IRS, if the factual representations made in the ruling request are untrue or incomplete in any material respect, then Darden will not be able to rely on the IRS Ruling. No assurance can be given that Darden will receive the IRS Ruling and it is not a condition of the Spin-Off. Following Darden’s requesting the IRS Ruling, the IRS announced that it may reconsider its historic position on certain issues relevant to transactions similar to the Spin-Off. On September 14, 2015, the IRS issued a formal “no-rule” policy for private letter ruling requests submitted after such date with respect to certain transactions similar to the Spin-Off and, in a notice released on the same day, indicated that the IRS and Treasury Department are studying the possibility of promulgating new and potentially adverse guidance with respect to such transactions in the future. The notice states that the “Treasury Department and the Service ... have become concerned that an increasing number of distributions intended to qualify under [Section 355 of the Code] involve a distributing corporation or a controlled corporation that elects to be a REIT,” and such transactions “involve significant concerns” relating to certain of the tax-free spin-off requirements. It is unclear if these IRS announcements will affect Darden’s ability to receive the IRS Ruling, but such announcements do not change the current law applicable to the Spin-Off. In addition, the IRS Ruling, even if received, would not address all of the requirements for tax-free treatment of the Spin-Off under Sections 355 and 368(a)(1)(D) of the Code, and Darden expects to receive the Spin-Off Tax Opinion with respect to such treatment in its entirety. The Spin-Off Tax Opinion is also expected to address any issues on which the IRS may decline to rule. Accordingly, the Spin-Off is conditioned upon the receipt by Darden of the Spin-Off Tax Opinion, as described below, substantially to the effect that the Spin-Off will qualify as tax-free under Sections 368(a)(1)(D) and 355 of the Code. The Spin-Off Tax Opinion will rely on the IRS Ruling (if received) as to matters covered by such ruling. The Spin-Off Tax Opinion will be based on, among other things, current law and certain assumptions and representations as to factual matters made by Darden and Four Corners. Any change in currently applicable law, which may or may not be retroactive, or the failure of any factual representation or assumption to be true, correct and complete in all material respects, could adversely affect the conclusions reached by counsel in the Spin-Off Tax

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Opinion. The Spin-Off Tax Opinion will not be binding on the IRS or the courts, and the IRS or the courts may not agree with the opinion. The Spin-Off Tax Opinion will be expressed as of the date issued and will not cover subsequent periods. As a result, the Spin-Off Tax Opinion is not expected to be issued until after the date of this information statement. An opinion of counsel represents counsel’s best legal judgment based on current law and is not binding on the IRS or any court. We cannot assure you that the IRS will agree with the conclusions expected to be set forth in the Spin-Off Tax Opinion, and it is possible that the IRS or another tax authority could adopt a position contrary to one or all of those conclusions and that a court could sustain that contrary position. If any of the facts, representations, assumptions, or undertakings described or made in connection with the IRS Ruling or the Spin-Off Tax Opinion are not correct, are incomplete or have been violated, the IRS Ruling could be revoked retroactively or modified by the IRS, and our ability to rely on the Spin-Off Tax Opinion could be jeopardized. We are not aware of any facts or circumstances, however, that would cause these facts, representations, or assumptions to be untrue or incomplete, or that would cause any of these undertakings to fail to be complied with, in any material respect. For more information regarding the IRS Ruling and the Spin-Off Tax Opinion, see “The Spin-Off—U.S. Federal Income Tax Consequences of the Spin-Off.”
If the Spin-Off ultimately were determined to be taxable, then a shareholder of Darden that received shares of our common stock in the Spin-Off would be treated as having received a distribution of property in an amount equal to the fair market value of such shares on the distribution date and could incur significant income tax liabilities. Such distribution would be taxable to such shareholder as a dividend to the extent of Darden’s current and accumulated earnings and profits (including earnings and profits resulting from the recognition of gain by Darden in the Spin-Off). Any amount that exceeded Darden’s earnings and profits would be treated first as a non-taxable return of capital to the extent of such shareholder’s tax basis in its shares of Darden stock with any remaining amount being taxed as a capital gain. In addition, if the Spin-Off were determined to be taxable, in general, Darden would be required to recognize a taxable gain as if it had sold the Four Corners common stock in a taxable sale for its fair market value.
Under the terms of the Tax Matters Agreement that we will enter into with Darden, we generally will be responsible for any taxes imposed on Darden that arise from the failure of the Spin-Off to qualify as tax-free for U.S. federal income tax purposes to the extent such failure to qualify is attributable to certain actions, events or transactions relating to our stock, assets or business, or a breach of the relevant representations or any covenants made by us in the Tax Matters Agreement, the materials submitted to the IRS in connection with the request for the IRS Ruling or the representations provided in connection with the Spin-Off Tax Opinion. Our indemnification obligations to Darden will not be limited by any maximum amount. If we are required to indemnify Darden under the circumstances set forth in the Tax Matters Agreement, we may also be subject to substantial tax liabilities. For more information regarding the Tax Matters Agreement, see “Our Relationship with Darden Following the Spin-Off—Tax Matters Agreement.”
We may not be able to engage in desirable strategic transactions and equity issuances following the Spin-Off because of certain restrictions relating to requirements for tax-free distributions for U.S. federal income tax purposes. In addition, we could be liable for adverse tax consequences resulting from engaging in significant strategic or capital-raising transactions.
To preserve the tax-free treatment to Darden of the Spin-Off, for the two-year period following the Spin-Off, we may be prohibited, except in specific circumstances, from taking certain actions, including: (1) entering into any transaction pursuant to which all or a portion of our stock would be acquired, whether by merger or otherwise, (2) issuing equity securities beyond certain thresholds, or (3) repurchasing our common stock. In addition, we will be prohibited from taking or failing to take any other action that prevents the Spin-Off and related transactions from being tax-free.
These restrictions may limit our ability to pursue strategic transactions or engage in new business or other transactions that may maximize the value of our business. For a more detailed description, see “Our Relationship with Darden Following the Spin-Off—Tax Matters Agreement.”

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The Agreements with Darden may not reflect terms that would have resulted from arm’s-length negotiations with unaffiliated third parties.
The Agreements will be negotiated in the context of the Spin-Off, while we are still a wholly-owned subsidiary of Darden. Accordingly, during the period in which the terms of the Agreements will be negotiated, we will not have a board of directors or a management team that was independent of Darden. As a result, although the Agreements are generally intended to reflect arm’s-length terms, there can be no assurance that the terms of the Agreements will reflect terms as favorable for us as would have resulted from arm’s-length negotiations between unaffiliated third parties.
The Darden board of directors has reserved the right, in its sole discretion, to amend, modify, abandon or otherwise terminate the Spin-Off and the related transactions at any time prior to the distribution date.
Until the Spin-Off occurs, Darden’s board of directors will have the sole discretion, to amend, modify, abandon or otherwise terminate the Spin-Off and the related transactions at any time prior to the distribution date, even if all of the conditions to the Spin-Off have been satisfied. This means Darden may amend, modify, abandon or otherwise terminate the planned distribution of common stock of Four Corners if at any time the board of directors of Darden determines, in its sole and absolute discretion, that the distribution of such common stock or the terms thereof are not in the best interests of Darden and its shareholders or that legal, market or regulatory conditions or other circumstances are such that the Spin-Off is no longer advisable at that time. If Darden’s board of directors determines to cancel the Spin-Off, shareholders of Darden will not receive any distribution of Four Corners common stock and Darden will be under no obligation whatsoever to its shareholders to distribute such shares.
The Spin-Off and related transactions are subject to the satisfaction or waiver of a number of conditions and there can be no assurance that any or all of these conditions will be met.
The Spin-Off and related transactions are subject to the satisfaction or waiver (by Darden’s board of directors in its sole discretion) of a number of conditions. Four Corners and Darden cannot provide assurance that any or all of these conditions will be met. The fulfillment of the conditions to the Spin-Off will not create any obligation on Darden’s part to effect any part of the Reorganization or the Spin-Off. See “The Spin-Off—Conditions to the Spin-Off.”
The historical and pro forma financial information included in this information statement may not be a reliable indicator of future results.
The combined historical financial data of the LongHorn San Antonio Business and our pro forma consolidated financial data included in this information statement may not reflect our business, financial position or results of operations had we been an independent, publicly traded company during the periods presented, or what our business, financial position or results of operations will be in the future when we are an independent, publicly traded company. Prior to the Spin-Off, our businesses have been operated by Darden as part of one corporate organization and not operated as a stand-alone company. Because we will not acquire the Four Corners Properties or the LongHorn San Antonio Business until the Spin-Off, there are no historical financial statements for us as we will exist following the Spin-Off. Significant changes will occur in our cost structure, financing and business operations as a result of our operation as a stand-alone company and the entry into transactions with Darden that have not existed historically, including the Leases.
The unaudited pro forma financial data included in this information statement includes adjustments based upon available information that our management believes to be reasonable to reflect these factors. However, the assumptions may change or may be incorrect, and actual results may differ, perhaps significantly. In addition, the pro forma financial data does not include adjustments for estimated general and administrative expenses. For these reasons, our cost structure may be higher and our future financial costs and performance may be worse than the performance implied by the pro forma financial data presented in this information statement. For additional information about the basis of presentation of our combined historical financial data and our unaudited pro forma consolidated financial data included in this information statement, see “Description of Financing and Material Indebtedness,” “Capitalization,” “Summary—Summary Historical Combined and Pro Forma Consolidated Financial Data,” “Four Corners’ Unaudited Pro Forma Consolidated Financial Data,” “Selected Historical Combined Financial

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Data,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” included elsewhere in this information statement.
The ownership by our executive officers and directors of common stock, options or other equity awards of Darden may create, or may create the appearance of, conflicts of interest.
As a result of his former positions with Darden, Mr. Lenehan owns common stock, including restricted stock, of Darden. Following the distribution of Four Corners common stock to its shareholders, Mr. Lenehan will own common stock and restricted stock in both Darden and Four Corners. In addition, there is no restriction on our executive officers and directors acquiring Darden common stock in the future. Any individual holdings of common stock and restricted stock of Darden and Four Corners may be significant for any such persons compared to their total assets. Equity interests in Darden may create, or appear to create, conflicts of interest when any such director or executive officer is faced with decisions that could benefit or affect the equity holders of Darden in ways that do not benefit or affect us in the same manner.
Darden’s inability to obtain all material authorizations, consents, approvals and clearances of third parties including regulators, lenders and lessors (“Third-Party Approvals”) in connection with the Spin-Off may have a material adverse effect on Darden’s ability to consummate the Spin-Off or operate after the Spin-Off in substantially the same way it presently operates.
Darden is required, or deems it desirable, to obtain certain Third-Party Approvals to consummate the Spin-Off and the restructuring of its business in connection therewith. There is no assurance that Darden will be able to obtain these Third-Party Approvals. Darden may decide not to consummate the Spin-Off if it does not receive some or all of these Third-Party Approvals, unless it believes that the inability to obtain one or more Third-Party Approvals would not reasonably be expected to have a material adverse effect on the business, financial position or results of operations of Darden or us. However, there can be no assurance that such a material adverse effect will not occur. Therefore, if Darden elects to proceed with the Spin-Off without all of the required Third-Party Approvals, such election may adversely affect Darden’s or our ability to operate after the Spin-Off.
The Spin-Off could give rise to disputes or other unfavorable effects, which could materially and adversely affect our business, financial position or results of operations.
The Spin-Off may lead to increased operating and other expenses, of both a nonrecurring and a recurring nature, and to changes to certain operations, which expenses or changes could arise pursuant to arrangements made between Darden and us or could trigger contractual rights of, and obligations to, third parties. Disputes with third parties could also arise out of these transactions, and we could experience unfavorable reactions to the Spin-Off from employees, lenders, ratings agencies, regulators or other interested parties. These increased expenses, changes to operations, disputes with third parties, or other effects could materially and adversely affect our business, financial position or results of operations. In addition, following the completion of the Spin-Off, disputes with Darden could arise in connection with the Leases, the Separation and Distribution Agreement, the Transition Services Agreement, the Employee Matters Agreement, the Tax Matters Agreement, the Franchise Agreements or other agreements.
Potential indemnification liabilities of Four Corners pursuant to the Separation and Distribution Agreement could materially adversely affect Four Corners.
The Separation and Distribution Agreement between Four Corners and Darden will provide for, among other things, the principal corporate transactions required to effect the separation, certain conditions to the separation and provisions governing the relationship between Four Corners and Darden with respect to and resulting from the separation. For a description of the Separation and Distribution Agreement, see “Our Relationship with Darden after the Spin-Off—The Separation and Distribution Agreement.”
Among other things, the Separation and Distribution Agreement will provide for indemnification obligations designed to make Four Corners financially responsible for substantially all liabilities that may exist relating to or arising out of the Four

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Corners Properties and the LongHorn San Antonio Business. If Four Corners is required to indemnify Darden under the circumstances set forth in the Separation and Distribution Agreement, Four Corners may be subject to substantial liabilities.
In connection with our separation from Darden, Darden will also indemnify us for certain liabilities. However, there can be no assurance that these indemnities will be sufficient to protect us against the full amount of such liabilities, or that Darden’s ability to satisfy its indemnification obligation will not be impaired in the future.
Pursuant to the Separation and Distribution Agreement, Darden will also agree to indemnify us for certain liabilities. However, third parties could seek to hold us responsible for any of the liabilities that Darden will agree to retain, and there can be no assurance that Darden will be able to fully satisfy its indemnification obligations to us. Moreover, even if we ultimately succeed in recovering from Darden any amounts for which we are held liable, we may be temporarily required to bear these losses while seeking recovery from Darden. Additionally, pursuant to the terms of the Leases, Darden will agree to indemnify us from and against any and all losses caused by, incurred or resulting from Darden’s operations at the Four Corners Properties or by Darden’s use and occupancy of the Four Corners Properties. However, third parties could seek to hold us responsible for any of the liabilities that Darden will agree to retain, and there can be no assurance that Darden will be able to fully satisfy its indemnification obligations to us.
A court could deem the Spin-Off or its related transactions to be a fraudulent conveyance and void the transaction or impose substantial liabilities on us.
A court could deem the Spin-Off of Four Corners common stock or certain internal restructuring transactions undertaken by Darden in connection therewith, or the Purging Distribution by Four Corners, to be a fraudulent conveyance or transfer. Fraudulent conveyances or transfers are defined to include transfers made or obligations incurred with the actual intent to hinder, delay or defraud current or future creditors or transfers made or obligations incurred for less than reasonably equivalent value when the debtor was insolvent, or that rendered the debtor insolvent, inadequately capitalized or unable to pay its debts as they become due.
If a U.S. court were to find that the Spin-Off was a fraudulent transfer or conveyance, a court could void the Spin-Off or impose substantial liabilities upon us, which could adversely affect our financial condition and our results of operations. Among other things, the court could require our shareholders to return to Darden some or all of the shares of our common stock distributed in the Spin-Off, require us to fund liabilities of other companies involved in the restructuring transactions for the benefit of creditors, or require shareholders to pay as money damages an equivalent of the value of the shares of common stock at the time of the Spin-Off. If a U.S. court were to find that the Purging Distribution was a fraudulent transfer or conveyance, a court could void the Purging Distribution, require shareholders to return to us some or all of the Purging Distribution or require shareholders to pay as money damages an equivalent of the value of the Purging Distribution. Moreover, shareholders could be required to return any dividends previously paid by us. With respect to any transfers from Darden to us, if any such transfer was found to be fraudulent transfer, a court could void the transaction or Darden could be awarded monetary damages for the difference between the consideration received by Darden and the fair market value of the transferred property at the time of the Spin-Off. Whether a transaction is a fraudulent conveyance or transfer will vary depending upon the jurisdiction whose law is being applied.
After the Spin-Off, we may be unable to make, on a timely or cost-effective basis, the changes necessary to operate as an independent, publicly traded, self-administered company primarily focused on owning real property used in the restaurant and retail industries and potentially other industries.
We have no historical operations as an independent company and may not, at the completion of the Spin-Off, have the infrastructure and personnel necessary to operate as a separate, publicly traded, self-administered company without relying on Darden to provide certain services on a transitional basis. Upon the completion of the Spin-Off, Darden will be obligated to provide such transition services pursuant to the terms of the Transition Services Agreement that we will enter into with Darden, to allow us the time, if necessary, to build the infrastructure and retain the personnel necessary to operate as a separate publicly traded company without relying on such services. Following the expiration of the Transition Services Agreement, Darden will be under no obligation to provide further assistance to us, other than the services contemplated in the Franchise Agreements. As

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a separate public entity, we will be subject to, and responsible for, regulatory compliance, including, but not limited to, periodic public filings with the SEC and compliance with NYSE continued listing requirements as well as compliance with generally applicable tax and accounting rules. Because our business has not been operated as a separate, publicly traded, self-administered company, we cannot assure you that it will be able to successfully implement the infrastructure or retain the personnel necessary to operate as a separate publicly traded company or that we will not incur costs in excess of anticipated costs to establish such infrastructure and retain such personnel.
RISKS RELATED TO OUR STATUS AS A REIT
If we do not qualify as a REIT, or fail to remain qualified as a REIT, we will be subject to U.S. federal income tax as a regular corporation and could face a substantial tax liability, which would reduce the amount of cash available for distribution to our shareholders.
We intend to operate in a manner that will enable us to qualify as a REIT for U.S. federal income tax purposes commencing with our taxable year beginning January 1, 2016. Our ability to satisfy the asset tests depends upon our analysis of the fair market values of our assets, some of which are not susceptible to a precise determination, and for which we do not obtain independent appraisals. Our compliance with the REIT income and asset requirements also depends upon our ability to successfully manage the composition of our income and assets on an ongoing basis. Moreover, the proper classification of one or more of our investments may be uncertain in some circumstances, which could affect the application of the REIT qualification requirements. Accordingly, there can be no assurance that the IRS will not contend that our investments violate the REIT requirements.
We expect that we will receive an opinion of Skadden, Arps, counsel to Darden, with respect to our qualification to be subject to tax as a REIT in connection with the Spin-Off. Investors should be aware, however, that opinions of counsel are not binding on the IRS or any court. The REIT Tax Opinion represents only the view of Skadden, Arps, based on its review and analysis of existing law and on certain representations as to factual matters and covenants made by Darden and us, including representations relating to the values of our assets and the sources of our income. The opinion will be expressed as of the date issued. Skadden, Arps will have no obligation to advise Darden, us or the holders of our common stock of any subsequent change in the matters stated, represented or assumed or of any subsequent change in applicable law. Furthermore, both the validity of the REIT Tax Opinion and our qualification as a REIT will depend on our satisfaction of various complex requirements under the Code, relating to, among other things, the sources of our gross income, the composition and value of our assets, our distribution levels and the diversity of ownership of our shares on a continuing basis, the results of which will not be monitored by Skadden, Arps. Our ability to satisfy the asset tests depends upon our analysis of the characterization and fair market values of our assets, some of which are not susceptible to a precise determination, and for which we will not obtain independent appraisals.
If we were to fail to qualify as a REIT in any taxable year, we would be subject to U.S. federal income tax, including any applicable alternative minimum tax, on our taxable income at regular corporate rates, and distributions to shareholders would not be deductible by us in computing our taxable income. Any such corporate tax liability could be substantial and would reduce the amount of cash available for distribution to our shareholders, which in turn could have an adverse impact on the value of, and trading prices for, our common stock. Unless entitled to relief under certain provisions of the Code, we also would be disqualified from taxation as a REIT for the four taxable years following the year during which we initially ceased to qualify as a REIT.
The rule against re-electing REIT status following a loss of such status could also apply to us if it were determined that a former subsidiary of Darden failed to qualify as a REIT for certain taxable years and we were treated as a successor to such entity for U.S. federal income tax purposes. Although Darden has represented to us that it has no knowledge of any fact or circumstance that would cause us to fail to qualify as a REIT and covenanted to use its reasonable best efforts to cure any issue with respect to the REIT status of any such predecessor entity, no assurance can be given that such representation and covenant would prevent us from failing to qualify as a REIT. If we fail to qualify as a REIT due to the REIT status of a predecessor, we would be subject to corporate income tax as described in the preceding paragraph.

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Qualifying as a REIT involves highly technical and complex provisions of the Code.
Qualification as a REIT involves the application of highly technical and complex Code provisions for which only limited judicial and administrative authorities exist. Even a technical or inadvertent violation could jeopardize our REIT qualification. Our qualification as a REIT will depend on our satisfaction of certain asset, income, organizational, distribution, shareholder ownership, and other requirements on a continuing basis. In addition, our ability to satisfy the requirements to qualify as a REIT may depend in part on the actions of third parties over which we have no control or only limited influence.
We could fail to qualify as a REIT if income we receive from Darden is not treated as qualifying income.
Under applicable provisions of the Code, we will not be treated as a REIT unless we satisfy various requirements, including requirements relating to the sources of our gross income. Rents received or accrued by us from Darden will not be treated as qualifying rent for purposes of these requirements if the Leases are not respected as true leases for U.S. federal income tax purposes and are instead treated as service contracts, joint ventures or other types of arrangements. If the Leases are not respected as true leases for U.S. federal income tax purposes, we may fail to qualify as a REIT.
In addition, subject to certain exceptions, rents received or accrued by us from Darden will not be treated as qualifying rent for purposes of the REIT gross income requirements if we or a beneficial or constructive owner of 10% or more of our stock beneficially or constructively owns 10% or more of the total combined voting power of all classes of Darden stock entitled to vote or 10% or more of the total value of all classes of Darden stock. Our charter will provide for restrictions on ownership and transfer of our shares of stock, including restrictions on such ownership or transfer that would cause the rents received or accrued by us from Darden to be treated as non-qualifying rent for purposes of the REIT gross income requirements. The provisions of our charter that will restrict the ownership and transfer of our stock are described in “Description of Our Capital Stock—Restrictions on Transfer and Ownership of Four Corners Stock.” Nevertheless, there can be no assurance that such restrictions will be effective in ensuring that rents received or accrued by us from Darden will not be treated as qualifying rent for purposes of REIT qualification requirements.
Dividends payable by REITs do not qualify for the reduced tax rates available for some dividends.
The maximum U.S. federal income tax rate applicable to income from “qualified dividends” payable to U.S. shareholders that are individuals, trusts and estates is currently 20%. Dividends payable by REITs, however, generally are not eligible for the reduced rates. Although these rules do not adversely affect the taxation of REITs, the more favorable rates applicable to regular corporate qualified dividends could cause investors who are individuals, trusts and estates to perceive investments in REITs to be relatively less attractive than investments in the stocks of non-REIT corporations that pay dividends, which could adversely affect the value of the stock of REITs, including our common stock.
REIT distribution requirements could adversely affect our ability to execute our business plan.
We generally must distribute annually at least 90% of our REIT taxable income, determined without regard to the dividends paid deduction and excluding any net capital gains, in order for us to qualify as a REIT (assuming that certain other requirements are also satisfied) so that U.S. federal corporate income tax does not apply to earnings that we distribute. To the extent that we satisfy this distribution requirement and qualify for taxation as a REIT but distribute less than 100% of our REIT taxable income, determined without regard to the dividends paid deduction and including any net capital gains, we will be subject to U.S. federal corporate income tax on our undistributed net taxable income. In addition, we will be subject to a 4% nondeductible excise tax if the actual amount that we distribute to our shareholders in a calendar year is less than a minimum amount specified under U.S. federal tax laws. We intend to make distributions to our shareholders to comply with the REIT requirements of the Code.
Initially our funds from operations will be generated primarily by rents paid under the Leases. From time to time, we may generate taxable income greater than our cash flow as a result of differences in timing between the recognition of taxable income and the actual receipt of cash or the effect of nondeductible capital expenditures, the creation of reserves or required debt or amortization payments. If we do not have other funds available in these situations, we could be required to borrow funds on unfavorable terms, sell assets at disadvantageous prices or distribute amounts that would otherwise be invested in future

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acquisitions to make distributions sufficient to enable us to pay out enough of our taxable income to satisfy the REIT distributions requirement and to avoid corporate income tax and the 4% excise tax in a particular year. These alternatives could increase our costs or reduce our equity or adversely impact our ability to raise short and long-term debt. Furthermore, the REIT distribution requirements may increase the financing need to fund capital expenditures, further growth and expansion initiatives. Thus, compliance with the REIT requirements may hinder our ability to grow, which could adversely affect the value of our common stock.
Even if we qualify as a REIT, we may face other tax liabilities that reduce our cash flow.
Even if we qualify for taxation as a REIT, we may be subject to certain U.S. federal, state, and local taxes on our income and assets, including taxes on any undistributed income and state or local income, property and transfer taxes. For example, we will hold some of our assets and conduct certain of our activities through one or more TRSs or other subsidiary corporations that will be subject to U.S. federal, state, and local corporate-level income taxes as regular C corporations. In addition, we may incur a 100% excise tax on transactions with a TRS if they are not conducted on an arm’s-length basis. Any of these taxes would decrease cash available for distribution to our shareholders.
Complying with the REIT requirements may cause us to forego otherwise attractive acquisition and business opportunities or liquidate otherwise attractive investments.
To qualify as a REIT for U.S. federal income tax purposes, we must ensure that, at the end of each calendar quarter, at least 75% of the value of our assets consists of cash, cash items, government securities and “real estate assets” (as defined in the Code). The remainder of our investments (other than government securities, qualified real estate assets and securities issued by a TRS) generally cannot include more than 10% of the outstanding voting securities of any one issuer or more than 10% of the total value of the outstanding securities of any one issuer. In addition, in general, no more than 5% of the value of our total assets (other than government securities, qualified real estate assets and securities issued by a TRS) can consist of the securities of any one issuer, and no more than 25% of the value of our total assets can be represented by securities of one or more TRSs. If we fail to comply with these requirements at the end of any calendar quarter, we must correct the failure within thirty days after the end of the calendar quarter or qualify for certain statutory relief provisions to avoid losing our REIT qualification and suffering adverse tax consequences. As a result, we may be required to liquidate or forego otherwise attractive investments. These actions could have the effect of reducing our income and amounts available for distribution to our shareholders.
In addition to the asset tests set forth above, to qualify as a REIT we must continually satisfy tests concerning, among other things, the sources of our income, the amounts we distribute to our shareholders and the ownership of our stock. We may be unable to pursue investments that would be otherwise advantageous to us in order to satisfy the source-of-income or asset-diversification requirements for qualifying as a REIT. Thus, compliance with the REIT requirements may hinder our ability to make certain attractive investments.
REIT ownership limitations may restrict or prevent you from engaging in certain transfers of our common stock.
In order to satisfy the requirements for REIT qualification, no more than 50% in value of all classes or series of our outstanding shares of stock may be owned, actually or constructively, by five or fewer individuals (as defined in the Code to include certain entities) at any time during the last half of each taxable year commencing with our taxable year beginning January 1, 2016. As described above, subject to certain exceptions, rents received or accrued by us from Darden will not be treated as qualifying rent for purposes of the REIT gross income requirements if we or a beneficial or constructive owner of 10% or more of our stock beneficially or constructively owns 10% or more of the total combined voting power of all classes of Darden stock entitled to vote or 10% or more of the total value of all classes of Darden stock. To assist us in satisfying the REIT requirements, our charter will contain certain ownership and transfer restrictions on our stock. More specifically, our charter will provide that shares of our capital stock acquired or held in excess of the ownership limit will be transferred to a trust for the benefit of a designated charitable beneficiary, and that any person who acquires shares of our capital stock in violation of the ownership limit will not be entitled to any dividends on such shares or be entitled to vote such shares or receive any proceeds from the subsequent sale of such shares in excess of the lesser of the price paid for such shares or the amount realized from the sale (net of any commissions and other expenses of sale). A transfer of shares of our capital stock in violation of the ownership

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limit will be void ab initio under certain circumstances. Under applicable constructive ownership rules, any shares of stock owned by certain affiliated owners generally would be added together for purposes of the common stock ownership limits, and any shares of a given class or series of preferred stock owned by certain affiliated owners generally would be added together for purposes of the ownership limit on such class or series. Our 9.8% ownership limitation may have the effect of delaying, deferring or preventing a change in control of us, including an extraordinary transaction (such as a merger, tender offer or sale of all or substantially all of our assets) that might provide a premium price for our shareholders. See “Our charter will restrict the ownership and transfer of our outstanding stock, which may have the effect of delaying, deferring or preventing a transaction or change of control of our company” below.
There are uncertainties relating to the Purging Distribution.
Darden will allocate its accumulated earnings and profits (as determined for U.S. federal income tax purposes) for periods prior to the Spin-Off between Darden and Four Corners in a manner that, in its best judgment, is in accordance with the provisions of the Code. As a result of its intended election to be treated as a REIT for U.S. federal income tax purposes, in order to comply with certain REIT qualification requirements, we will declare a dividend to our shareholders to distribute its accumulated earnings and profits attributable to non-REIT years, including the earnings and profits allocated to us in connection with the Spin-Off and the earnings and profits generated by us in our taxable year ending December 31, 2015. Failure to declare the Purging Distribution before December 31, 2016 and pay it before January 31, 2017 could result in our disqualification as a REIT. The amount of earnings and profits to be distributed is a complex factual and legal determination. We currently believe and intend that our Purging Distribution will satisfy the requirements relating to the distribution of our pre-REIT accumulated earnings and profits. No assurance can be given, however, that the IRS will agree with our calculation or Darden’s allocation of earnings and profits to Four Corners. If the IRS finds additional amounts of pre-REIT earnings and profits, there are procedures generally available to cure any failure to distribute all of our pre-REIT earnings and profits, but there can be no assurance that we will be able to successfully implement such procedures.
We will pay the Purging Distribution in a combination of common stock and cash and may pay other dividends on our common stock in a combination of common stock and cash. Our shareholders may sell shares of our common stock to pay tax on such dividends, placing downward pressure on the market price of our common stock.
We will pay the Purging Distribution in a combination of cash and common stock. Each shareholder will be permitted to elect to receive the shareholder’s entire entitlement under the Purging Distribution in either cash or Four Corners common stock, subject to the limitation on the amount of cash to be distributed in the aggregate to all of our shareholders (the “Cash Limitation”). The Cash Limitation will in no event be less than 20% of the Purging Distribution declaration (without regard to any cash that may be paid in lieu of fractional shares). If our shareholders elect to receive an amount of cash in excess of the Cash Limitation, each such electing shareholder will receive a pro rata amount of cash corresponding to the shareholder’s respective entitlement under the Purging Distribution declaration. Darden has requested the IRS Ruling, which, if received, is expected to address, in addition to issues relevant to the tax-free treatment of the Spin-Off, certain issues related to our payment of the Purging Distribution and dividends during our first two taxable years as a REIT that are made in a combination of cash and our stock. In general, the IRS Ruling with respect to the Purging Distribution, if received, is expected to provide, subject to the terms and conditions contained therein, that (1) the Purging Distribution and cash and stock distributions during our first two taxable years as a REIT will be treated as taxable distributions of property with respect to our stock; and (2) the amount of any distribution of our stock received by any shareholder as part of such distributions will be considered to equal the amount of money that could have been received instead. In the Purging Distribution and any other distribution paid in a combination of cash and common stock, shareholders will be required to report dividend income as a result of such distribution even though we distributed no cash or only nominal amounts of cash to such shareholder.
If we make any taxable dividend payable in cash and common stock, taxable shareholders receiving such dividends will be required to include the full amount of the dividend as ordinary income to the extent of our current and accumulated earnings and profits, as determined for U.S. federal income tax purposes. As a result, shareholders may be required to pay income tax with respect to such dividends in excess of the cash dividends received. If a U.S. shareholder sells shares of our stock that it receives as a dividend in order to pay this tax, the sales proceeds may be less than the amount included in income with respect to the dividend, depending on the market price of the stock at the time of the sale. Furthermore, with respect to certain non-U.S.

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shareholders, we may be required to withhold federal income tax with respect to such dividends, including in respect of all or a portion of such dividend that is payable in our stock. If, in any taxable dividend payable in cash and stock, a significant number of our shareholders determine to sell shares of our stock in order to pay taxes owed on dividends, it may be viewed as economically equivalent to a dividend reduction and put downward pressure on the market price of our stock.
If the total cash payable to shareholders in the Purging Distribution is limited, the amount of cash received by each shareholder is dependent on the election of other shareholders.
The total amount of cash payable in the Purging Distribution will be limited to no less than 20% of the total value of the Purging Distribution (without regard to any cash that may be paid in lieu of fractional shares). The balance of the Purging Distribution will be in the form of shares of our common stock. Each shareholder will be permitted to elect to receive the shareholder’s entire entitlement under the Purging Distribution in either cash or our common stock, subject to the Cash Limitation. If our shareholders elect to receive an amount of cash in excess of the Cash Limitation, each such electing shareholder will receive a pro rata amount of cash corresponding to the shareholder’s respective entitlement under the Purging Distribution declaration. Therefore, shareholders may not receive exactly the dividend that they elect and may receive a pro rata amount of the Cash Limitation and shares of our common stock.
Complying with the REIT requirements may limit our ability to hedge effectively and may cause us to incur tax liabilities.
The REIT provisions of the Code substantially limit our ability to hedge our assets and liabilities. Income from certain hedging transactions that we may enter into to manage risk of interest rate changes with respect to borrowings made or to be made to acquire or carry real estate assets does not constitute “gross income” for purposes of the 75% or 95% gross income tests that apply to REITs, provided that certain identification requirements are met. To the extent that we enter into other types of hedging transactions or fail to properly identify such transaction as a hedge, the income is likely to be treated as non-qualifying income for purposes of both of the gross income tests. As a result of these rules, we may be required to limit our use of advantageous hedging techniques or implement those hedges through a TRS. This could increase the cost of our hedging activities because the TRS may be subject to tax on gains or expose us to greater risks associated with changes in interest rates that we would otherwise want to bear. In addition, losses in the TRS will generally not provide any tax benefit, except that such losses could theoretically be carried back or forward against past or future taxable income in the TRS.
Even if we qualify to be subject to tax as a REIT, we could be subject to tax on any unrealized net built-in gains in our assets held before electing to be treated as a REIT.
Following our REIT election, we will own appreciated assets that were held by a C corporation and will be acquired by us in a transaction in which the adjusted tax basis of the assets in our hands will be determined by reference to the adjusted basis of the assets in the hands of the C corporation. If we dispose of any such appreciated assets during the ten-year period following our intended qualification as a REIT, we will be subject to tax at the highest corporate tax rates on any gain from such assets to the extent of the excess of the fair market value of the assets on the date that we became a REIT over the adjusted tax basis of such assets on such date, which are referred to as built-in gains. We would be subject to this tax liability even if we qualify and maintain our status as a REIT. Any recognized built-in gain will retain its character as ordinary income or capital gain and will be taken into account in determining REIT taxable income and our distribution requirement. Any tax on the recognized built-in gain will reduce REIT taxable income. We may choose not to sell in a taxable transaction appreciated assets we might otherwise sell during the ten-year period in which the built-in gain tax applies in order to avoid the built-in gain tax. However, there can be no assurances that such a taxable transaction will not occur. If we sell such assets in a taxable transaction, the amount of corporate tax that we will pay will vary depending on the actual amount of net built-in gain or loss present in those assets as of the time we became a REIT. The amount of tax could be significant.
Legislative or other actions affecting REITs could have a negative effect on us.
The rules dealing with U.S. federal income taxation are constantly under review by persons involved in the legislative process and by the IRS and the U.S. Department of the Treasury (the “Treasury”). Changes to the tax laws or interpretations thereof, with or without retroactive application, could materially and adversely affect our investors or us. We cannot predict

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how changes in the tax laws might affect our investors or us. New legislation, Treasury regulations, administrative interpretations or court decisions could significantly and negatively affect our ability to qualify as a REIT or the U.S. federal income tax consequences to our investors and us of such qualification.
On February 26, 2014, House Ways and Means Committee Chairman David Camp released a proposal that was later formally introduced as proposed legislation, H.R.1, the Tax Reform Act of 2014 (the “Camp Proposal”), for comprehensive tax reform. The Camp Proposal includes a number of provisions that, if enacted, would have an adverse effect on corporations seeking to make an election to be subject to tax as a REIT. These include the following: (i) if the stock of a corporation is distributed in a tax-free spin-off under Section 355 of the Code, such corporation will not be eligible to make an election to be subject to tax as a REIT for the ten-year period following the taxable year in which the spin-off occurs, (ii) if a corporation elects to be subject to tax as a REIT, such corporation will be required to recognize certain built-in gains inherent in its property as if all its assets were sold at their fair market value immediately before the close of the taxable year immediately before the corporation became subject to tax as a REIT, and (iii) dividends made to satisfy the REIT requirement that a REIT must not have any earnings and profits accumulated during non-REIT years by the end of its first tax year as a REIT must be made in cash instead of a combination of cash and common stock. Provisions (i) and (ii), if enacted in their current form, would apply to REIT elections and tax-free spin-off distributions made on or after February 26, 2014. If enacted in its current form, the Camp Proposal would materially and adversely affect our ability to make a REIT election. See the risk factor captioned “If we do not qualify as a REIT, or fail to remain qualified as a REIT, we will be subject to U.S. federal income tax as a regular corporation and could face a substantial tax liability, which would reduce the amount of cash available for distribution to our shareholders.” It is uncertain whether the Camp Proposal, in its current form as it relates to us, or any other legislation affecting REITs and entities desiring to elect REIT status, will be enacted and whether any such legislation will apply to us because of its proposed effective date or otherwise.
RISKS RELATED TO OUR BUSINESS
We will be dependent on Darden to make payments to us under the Leases as well as to provide services to us under the Transition Services Agreement and the Franchise Agreements and an event that materially and adversely affects Darden’s business, financial position or results of operations could materially and adversely affect our business, financial position or results of operations.
Immediately following the Spin-Off, Darden will be the only lessee under the Leases and, therefore, will be the source of substantially all of our revenues. Additionally, because the Leases are triple-net leases, we will depend on Darden to pay all insurance, taxes, utilities, common area maintenance charges, maintenance and repair expenses and to indemnify, defend and hold us harmless from and against various claims, litigation and liabilities arising in connection with its business. There can be no assurance that Darden will have sufficient assets, income and access to financing to enable them to satisfy their payment obligations to us under the Leases. The inability or unwillingness of Darden to meet its rent obligations to us under any of the Leases could materially adversely affect our business, financial position or results of operations, including our ability to pay dividends to our shareholders as required to maintain our status as a REIT. The inability of Darden to satisfy its other obligations under the Leases, such as the payment of insurance, taxes and utilities could materially and adversely affect the condition of the Four Corners Properties as well as the business, financial position and results of operations of Darden. Since Darden Restaurants, Inc. is a holding company, it will be dependent to an extent on distributions from its direct and indirect subsidiaries in order to satisfy the payment obligations under the Leases, and the ability of Darden to make such distributions may be adversely impacted in the event of the insolvency or bankruptcy of such entities or by covenants in its debt agreements or otherwise that restrict the amount of the distributions that may be made by such entities. For these reasons, if a tenant were to experience a material and adverse effect on its business, financial position or results of operations, our business, financial position or results of operations could also be materially and adversely affected.
Due to our dependence on rental payments from Darden as our primary source of revenues, we may be limited in our ability to enforce our rights under, or to terminate, the Leases. Failure by Darden to comply with the terms of the Leases could require us to find other lessees for some or all of the properties and there could be a decrease or cessation of rental payments by Darden.

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There is no assurance that we would be able to lease any of the Four Corners Properties to other lessees on substantially equivalent or better terms than any of the Leases, or at all, successfully reposition the Four Corners Properties for other uses or sell the Four Corners Properties on terms that are favorable to us. It may be more difficult to find a replacement tenant for a restaurant or retail property than it would be to find a replacement tenant for a general commercial property due to the specialized nature of the business.
Also, due to our status as a new publicly traded company, we will depend on certain transition services to be provided by Darden under the Transition Services Agreement in order to successfully operate our business as we become accustomed to operating as an independent, stand-alone entity. If for any of the reasons stated above Darden becomes unable or unwilling to provide these transition services, our business, financial position or results of operations could be materially and adversely affected.
In addition, our operation of the LongHorn San Antonio Business depends on the provision of services to us by Darden pursuant to the Franchise Agreements. The Franchise Agreements will provide that Darden will agree to provide certain franchising services to our subsidiary, Kerrow. The franchising services will include licensing the right to use and display certain trademarks in connection with the operation of the LongHorn San Antonio Business, marketing services, training and access to certain LongHorn operating procedures. The Franchise Agreements will also contain provisions under which Darden may provide certain technical support for the LongHorn San Antonio Business.
The risk factor immediately below describes certain risks that may impact the performance of Darden. Additional risks relating to Darden’s business can be found in Darden’s public filings with the SEC. To find out where you can get copies of these public filings, see “Where You Can Find More Information.”
We will be dependent on Darden successfully operating its business, and a failure do so could have a material adverse effect on our business, financial position or results of operations. We will therefore be subject to factors which affect the performance of Darden.
As discussed above, we are dependent on Darden successfully operating its business and fulfilling the obligations that it owes to us. The ability of Darden to fulfil the obligations that it owes to us will depend, in part, on the overall performance and profitability of Darden. Factors which may impact the business, financial position or results of operations of Darden include the following:
food safety and food-borne illness concerns throughout the supply chain; health concerns arising from food-related pandemics, outbreaks of flu viruses or other diseases;
litigation, including allegations of illegal, unfair or inconsistent employment practices;
unfavorable publicity, or a failure to respond effectively to adverse publicity;
labor and insurance costs;
insufficient guest or employee facing technology, or a failure to maintain a continuous and secure cyber network, free from material failure, interruption or security breach;
Darden’s inability or failure to execute a comprehensive business continuity plan following a major natural disaster such as a hurricane or manmade disaster, including terrorism;
Darden’s failure to drive both short-term and long-term profitable sales growth through brand relevance, operating excellence, opening new restaurants of existing brands and developing or acquiring new dining brands;
a lack of suitable new restaurant locations or a decline in the quality of the locations of Darden’s current restaurants;
a failure to identify and execute innovative marketing and guest relationship tactics and ineffective or improper use of social media or other marketing initiatives; an inability or failure to recognize, respond to and effectively manage the accelerated impact of social media;

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a failure to address cost pressures, including rising costs for commodities, health care and utilities used by Darden’s restaurants, and a failure to effectively deliver cost management activities and achieve economies of scale in purchasing;
the impact of shortages or interruptions in the delivery of food and other products from third-party vendors and suppliers;
disruptions in the financial markets that may impact consumer spending patterns, affect the availability and cost of credit and increase pension plan expenses;
economic and business factors specific to the restaurant industry and other general macroeconomic factors including energy prices and interest rates that are largely out of Darden’s control; and
a failure of Darden’s internal controls over financial reporting and future changes in accounting standards.
We are subject to restaurant risks including, but not limited to, those described under the captions “Initially, Darden will be our only tenant and a significant majority of our restaurant properties will be Olive Garden properties. Therefore, we are subject to risks associated with having highly concentrated tenant and property brand bases” and “We will be dependent on the restaurant industry, at least initially, and may be susceptible to the risks associated with it, which could materially adversely affect our business, financial position or results of operations.”
We intend to pursue acquisitions of additional properties and seek other strategic opportunities, which may result in the use of a significant amount of management resources or significant costs, and we may not fully realize the potential benefits of such transactions.
We intend to pursue acquisitions of additional properties and seek acquisitions and other strategic opportunities, including, but not limited to, expanding our tenant base to third parties other than Darden. Accordingly, we may often be engaged in evaluating potential transactions, potential new tenants and other strategic alternatives. In addition, from time to time, we may engage in discussions that may result in one or more transactions. Although there is uncertainty that any of these discussions will result in definitive agreements or the completion of any transaction, we may devote a significant amount of our management resources to such a transaction, which could negatively impact our operations. We may incur significant costs in connection with seeking acquisitions or other strategic opportunities regardless of whether the transaction is completed and in combining our operations if such a transaction is completed. In the event that we consummate an acquisition or strategic alternative in the future, there is no assurance that we would fully realize the potential benefits of such a transaction.
We will operate in a highly competitive market and face competition from other REITs, investment companies, private equity and hedge fund investors, sovereign funds, restaurant and retail operators, lenders and other investors, some of whom are significantly larger and have greater resources and lower costs of capital. Increased competition will make it more challenging to identify and successfully capitalize on acquisition opportunities that meet our investment objectives. Our board of directors may change our investment objectives at any time without shareholder approval. If we cannot identify and purchase a sufficient quantity of suitable properties at favorable prices or if we are unable to finance acquisitions on commercially favorable terms, our business, financial position or results of operations could be materially and adversely affected. Additionally, the fact that we must distribute 90% of our net taxable income in order to maintain our qualification as a REIT may limit our ability to rely upon rental payments from our leased properties or subsequently acquired properties in order to finance acquisitions and other strategic opportunities. As a result, if debt or equity financing is not available on acceptable terms, our ability to pursue further acquisitions might be limited or curtailed.
Acquisitions of properties we might seek to acquire entail risks associated with real estate investments generally, including that the investment’s performance will fail to meet expectations or that the tenant, operator or manager will underperform.

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Our level of indebtedness could materially and adversely affect our financial position, including reducing funds available for other business purposes and reducing our operational flexibility, and we may have future capital needs and may not be able to obtain additional financing on acceptable terms.
In connection with the Spin-Off, we anticipate that we will enter into a credit agreement providing for $400.0 million in a term loan and a revolving credit facility with an available facility amount in an aggregate principal amount of $350.0 million, each of which we expect will be provided by a syndicate of banks and other financial institutions. We anticipate that the term loan facility will be fully drawn at the date that the Spin-Off is consummated and that the revolving credit facility will be undrawn at the date that the Spin-Off is consummated. We may incur additional indebtedness in the future to refinance our existing indebtedness, to finance newly-acquired assets or for other purposes. Our governing documents do not contain any limitations on the amount of debt we may incur and we do not have a formal policy limiting the amount of debt we may incur in the future. Subject to the restrictions, if any, set forth in our debt agreements, our board of directors may establish and change our leverage policy at any time without shareholder approval. Any significant additional indebtedness could require a substantial portion of our cash flow to make interest and principal payments due on our indebtedness. Greater demands on our cash resources may reduce funds available to us to pay dividends, make capital expenditures and acquisitions, or carry out other aspects of our business strategy. Increased indebtedness can also limit our ability to adjust rapidly to changing market conditions, make us more vulnerable to general adverse economic and industry conditions and create competitive disadvantages for us compared to other companies with relatively lower debt levels. Increased future debt service obligations may limit our operational flexibility, including our ability to acquire assets, finance or refinance our assets, contribute assets to joint ventures or sell assets as needed.
Moreover, our ability to obtain additional financing and satisfy our financial obligations under our indebtedness outstanding from time to time will depend upon our future operating performance, which is subject to then prevailing general economic and credit market conditions, including interest rate levels and the availability of credit generally, and financial, business and other factors, many of which are beyond our control. A worsening of credit market conditions could materially and adversely affect our ability to obtain financing on favorable terms, if at all.
We may be unable to obtain additional financing or financing on favorable terms or our operating cash flow may be insufficient to satisfy our financial obligations under our indebtedness outstanding from time to time (if any). Among other things, the absence of an investment grade credit rating or any credit rating downgrade could increase our financing costs and could limit our access to financing sources. If financing is not available when needed, or is available on unfavorable terms, we may be unable to complete acquisitions or otherwise take advantage of business opportunities or respond to competitive pressures, any of which could materially and adversely affect our business, financial condition and results of operations.
Covenants in our debt agreements may limit our operational flexibility, and a covenant breach or default could materially and adversely affect our business, financial position or results of operations.
The agreements governing our indebtedness are expected to contain customary covenants, which may limit our operational flexibility. The credit agreement is expected to contain customary affirmative and negative covenants that, among other things, restrict, subject to certain exceptions, the incurrence of debt, the incurrence of secured debt, the ability of Four Corners OP and the guarantors to enter into mergers, consolidations, sales of assets and similar transactions, limitations on distributions and other restricted payments, and limitations on transactions with affiliates and customary reporting obligations.
In addition, we anticipate that we will be required to comply with the following financial covenants: (1) maximum consolidated total leverage ratio, (2) maximum consolidated secured leverage ratio, (3) maximum consolidated secured recourse debt, (4) minimum fixed charge coverage ratio, (5) minimum consolidated tangible net worth, (6) maximum unhedged floating rate debt, (7) maximum unencumbered leverage ratio and (8) minimum unencumbered debt service coverage ratio.
We also anticipate that the credit agreement will contain customary events of default including, without limitation, payment defaults, violation of covenants and other performance defaults, defaults on payment of indebtedness and monetary obligations, bankruptcy-related defaults, judgment defaults, REIT status default and the occurrence of certain change of control events.

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Breaches of certain covenants may result in defaults and cross-defaults under certain of our other indebtedness, even if we satisfy our payment obligations to the respective obligee.
Covenants that limit our operational flexibility, as well as covenant breaches or defaults under our debt instruments, could materially and adversely affect our business, financial position or results of operations, or our ability to incur additional indebtedness or refinance existing indebtedness.
An increase in market interest rates could increase our interest costs on existing and future debt and could adversely affect our stock price.
If interest rates increase, so could our interest costs for any new debt and our variable rate debt obligations pursuant to the credit agreement. This increased cost could make the financing of any acquisition more costly, as well as lower our current period earnings. Rising interest rates could limit our ability to refinance existing debt when it matures or cause us to pay higher interest rates upon refinancing. In addition, an increase in interest rates could decrease the access third parties have to credit, thereby decreasing the amount they are willing to pay to lease our assets and consequently limiting our ability to reposition our portfolio promptly in response to changes in economic or other conditions. Furthermore, the dividend yield on our common stock, as a percentage of the price of such common stock, will influence the price of such common stock. Thus, an increase in market interest rates may lead prospective purchasers of our common stock to expect a higher dividend yield, which could adversely affect the market price of our common stock.
Our pursuit of investments in, and acquisitions or development of, additional properties may be unsuccessful or fail to meet our expectations.
Investments in and acquisitions of restaurant and retail properties and other properties we might seek to acquire entail risks associated with real estate investments generally, including that the investment’s performance will fail to meet expectations, that the cost estimates for necessary property improvements will prove inaccurate or that the tenant, operator or manager will underperform. Real estate development projects present other risks, including construction delays or cost overruns that increase expenses, the inability to obtain required zoning, occupancy and other governmental approvals and permits on a timely basis, and the incurrence of significant development costs prior to completion of the project.
Our charter will restrict the ownership and transfer of our outstanding stock, which may have the effect of delaying, deferring or preventing a transaction or change of control of our company.
In order for us to qualify as a REIT, not more than 50% in value of our outstanding shares of stock may be owned, beneficially or constructively, by five or fewer individuals at any time during the last half of each taxable year after the first year for which we elect to be subject to tax and qualify as a REIT. Additionally, at least 100 persons must beneficially own our stock during at least 335 days of a taxable year (other than the first taxable year for which we elect to be subject to tax and qualify as a REIT). Our charter, with certain exceptions, will authorize our board of directors to take such actions as are necessary or advisable to preserve our qualification as a REIT. Our charter will also provide that, unless exempted by the board of directors, no person may own more than 9.8% in value or in number, whichever is more restrictive, of the outstanding shares of our common stock or more than 9.8% in value of the aggregate of the outstanding shares of all classes and series of our stock. See “Description of Our Capital Stock—Restrictions on Transfer and Ownership of Four Corners Stock” and “U.S. Federal Income Tax Considerations.” The constructive ownership rules are complex and may cause shares of stock owned directly or constructively by a group of related individuals or entities to be constructively owned by one individual or entity. These ownership limits could delay or prevent a transaction or a change in control of us that might involve a premium price for shares of our stock or otherwise be in the best interests of our shareholders. The acquisition of less than 9.8% of our outstanding stock by an individual or entity could cause that individual or entity to own constructively in excess of 9.8% in value of our outstanding stock, and thus violate our charter’s ownership limit. Our charter will also prohibit any person from owning shares of our stock that would result in our being “closely held” under Section 856(h) of the Code or otherwise cause us to fail to qualify as a REIT. In addition, our charter will provide that (i) no person shall beneficially own shares of stock to the extent such beneficial ownership of stock would result in us failing to qualify as a “domestically controlled qualified investment entity” within the meaning of Section 897(h) of the Code, and (ii) no person shall beneficially or constructively own shares of

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stock to the extent such beneficial or constructive ownership would cause us to own, beneficially or constructively, more than a 9.9% interest (as set forth in Section 856(d)(2)(B) of the Code) in a tenant of our real property. Any attempt to own or transfer shares of our stock in violation of these restrictions may result in the transfer being automatically void. Our charter will also provide that shares of our capital stock acquired or held in excess of the ownership limit will be transferred to a trust for the benefit of a charitable beneficiary that we designate, and that any person who acquires shares of our capital stock in violation of the ownership limit will not be entitled to any dividends on the shares or be entitled to vote the shares or receive any proceeds from the subsequent sale of the shares in excess of the lesser of the market price on the day the shares were transferred to the trust or the amount realized from the sale. We or our designee will have the right to purchase the shares from the trustee at this calculated price as well. A transfer of shares of our capital stock in violation of the limit may be void under certain circumstances. Our 9.8% ownership limitation may have the effect of delaying, deferring or preventing a change in control, including an extraordinary transaction (such as a merger, tender offer or sale of all or substantially all of our assets) that might provide a premium price for our shareholders.
Maryland law and provisions in our charter and bylaws may delay or prevent takeover attempts by third parties and therefore inhibit our shareholders from realizing a premium on their stock.
Our charter and bylaws will contain, and Maryland law contains, provisions that are intended to deter coercive takeover practices and inadequate takeover bids and to encourage prospective acquirors to negotiate with our board of directors, rather than to attempt a hostile takeover. Our charter and bylaws will, among other things (1) contain transfer and ownership restrictions on the percentage by number and value of outstanding shares of our stock that may be owned or acquired by any shareholder; (2) permit the board of directors, without further action of the shareholders, to increase or decrease the authorized number of shares, issue additional shares, classify or reclassify unissued shares, and issue and fix the terms of one or more classes or series of preferred stock, which may have rights senior to those of the common stock; (3) establish certain advance notice procedures for shareholder proposals and director nominations; and (4) provide that special meetings of shareholders may only be called by the company or upon written request of ten percent in voting power of our outstanding common stock.
Under Maryland law, any written consent of our shareholders must be unanimous. In addition, Maryland law allows a Maryland corporation with a class of equity securities registered under the Exchange Act to amend its charter without stockholder approval to effect a reverse stock split at a ratio of not more than ten shares of stock into one share of stock in any twelve-month period.
If we are not able to hire, or if we lose, key management personnel, we may not be able to successfully manage our business and achieve our objectives.
Our success depends in large part upon the leadership and performance of our executive management team, including William H. Lenehan, and other key employees and attract other key personnel to our business. If we are unable to hire, or if we lose the services of, our executive management team, including William H. Lenehan, or we are not able to hire or lose other key employees, we may not be able to successfully manage our business or achieve our business objectives.
We or our tenants may experience uninsured or underinsured losses, which could result in a significant loss of the capital we have invested in a property, decrease anticipated future revenues or cause us to incur unanticipated expense.
The Leases will require, and new lease agreements that we enter into are expected to require, that the tenant maintain comprehensive insurance and hazard insurance or self-insure its insurance obligations. However, there are certain types of losses, generally of a catastrophic nature, such as earthquakes, hurricanes and floods, that may be uninsurable or not economically insurable. Insurance coverage may not be sufficient to pay the full current market value or current replacement cost of a loss. Inflation, changes in building codes and ordinances, environmental considerations and other factors might also make it unfeasible to use insurance proceeds to replace the property after such property has been damaged or destroyed. Under such circumstances, the insurance proceeds received might not be adequate to restore the economic position with respect to such property.

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The Four Corners Properties and the LongHorn San Antonio Business are located in 44 states, and if one of our properties experiences a loss that is uninsured or that exceeds policy coverage limits, we could lose the capital invested in the damaged property as well as the anticipated future cash flows from the property. If the damaged property is subject to recourse indebtedness, we could continue to be liable for the indebtedness even if the property is irreparably damaged.
In addition, even if damage to our properties is covered by insurance, a disruption of business caused by a casualty event may result in loss of revenue for our tenants or us. Any business interruption insurance may not fully compensate them or us for such loss of revenue. If one of our tenants experiences such a loss, it may be unable to satisfy its payment obligations to us under its lease with us.
Our relationship with Darden may adversely affect our ability to do business with third- party restaurant operators and other tenants.
After the Spin-Off, Darden will be our only tenant on the Leases, and our revenue will consist almost entirely of rental payments from Darden. Although we will operate as a completely independent business after the Spin-Off, because of our origins from Darden and our short-term dependence on Darden as our only tenant, we may be viewed by third-party restaurant operators and other potential tenants or parties to sale-leaseback transactions as being closely affiliated with Darden. As these third-party restaurant operators and other potential transaction parties may compete with Darden within the restaurant industry, our perceived affiliation with Darden could make it difficult for us to attract tenants and other transaction partners beyond Darden, particularly in the restaurant industry. If we are unable to diversify our tenant and transaction partner base beyond Darden, it may have a materially adverse effect on our ability to operate and grow our business and our ability to achieve our strategic objectives.
Initially, Darden will be our only tenant and a significant majority of our restaurant properties will be Olive Garden properties. Therefore, we are subject to risks associated with having highly concentrated tenant and property brand bases.
Upon completion of the Spin-Off, Darden will initially constitute our entire tenant base. Similarly, our initial restaurant properties will include 300 Olive Garden restaurants. As a result, our success, at least in the short-term, is dependent on the continued success of Darden and the Olive Garden brand and, to a lesser extent, its other restaurant brands. We believe that building brand value is critical to increase demand and build customer loyalty. Consequently, if market recognition or the positive perception of Darden is reduced or compromised, the value associated with the Darden-branded properties in our portfolio may be adversely affected. Furthermore, if our relationship with Darden were to deteriorate as a result of disputes regarding the management of the Four Corners Properties or for other reasons, we may not be able to replace Darden with one or more other tenants on terms equivalent or comparable to those set forth in the Leases.
We will be dependent on the restaurant industry, at least initially, and may be susceptible to the risks associated with it, which could materially adversely affect our business, financial position or results of operations.
As the owner of properties serving the restaurant industry, we will be impacted by the risks associated with the restaurant industry. Therefore, our success is to some degree dependent on the restaurant industry, which could be adversely affected by economic conditions in general, changes in consumer trends and preferences and other factors over which we and Darden, and any of our other tenants in the restaurant industry have no control. As we are subject to risks inherent in substantial investments in a single industry, a decrease in the restaurant business would likely have a greater adverse effect on our revenues than if we owned a more diversified real estate portfolio.
The restaurant industry is characterized by a high degree of competition among a large number of participants. Competition is intense between national and regional restaurant chains and locally-owned restaurants in most of the markets where our properties are located. As competing properties are constructed, the lease rates we assess for our properties may be negatively impacted upon renewal or new tenant pricing events.

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We will be dependent on Darden and our other tenants to maintain the properties that we lease to them.
We will lease the Four Corners Properties to Darden and/or one or more of Darden’s operating subsidiaries on a triple-net basis and we intend to conduct all additional and future leasing activities, with Darden or any other tenant, on a triple-net basis. Under our triple-net arrangements, with certain limited exceptions, the tenant is responsible for all costs associated with maintaining the leased property in proper condition. The failure by Darden or any future tenant to fulfil its maintenance obligations may cause us to incur significant and unexpected expenses to remediate any resulting damage to the property. Furthermore, the failure by Darden or any future tenant to adequately maintain a leased property could adversely affect our ability to timely re-lease the property to a new tenant or otherwise monetize our investment in the property if we are forced to make significant repairs or changes to the property as a result of the tenant’s neglect. If we incur significant additional expenses or are delayed in being able to pursue returns on our real estate investments, it may have a materially adverse effect on our ability to operate and grow our business and our ability to achieve our strategic objectives.
Darden’s business is subject to government regulations and changes in current or future laws or regulations could restrict their ability to operate our business in the manner currently contemplated.
Darden, and to a large extent the restaurant industry as a whole, is subject to extensive federal, state and local and international laws and regulations. The development and operation of restaurants depend to a significant extent on the selection and acquisition of suitable sites, which are subject to building, zoning, land use, environmental, traffic and other regulations and requirements. Darden is subject to licensing and regulation by state and local authorities relating to health, sanitation, safety and fire standards and the sale of alcoholic beverages. Darden is also subject to, among other laws and regulations, laws and regulations relating to the preparation and sale of food, including regulations regarding product safety, nutritional content and menu labeling. The impact of current laws and regulations, the effect of future changes in laws or regulations that impose additional requirements and the consequences of litigation relating to current or future laws and regulations, or an insufficient or ineffective response to significant regulatory or public policy issues, could have an adverse effect on Darden’s results of operations, which could also adversely affect our business, results of operations or financial condition as we depend on Darden, at least initially, for almost the entirety of our revenue.
Environmental compliance costs and liabilities associated with real estate properties owned by us may materially impair the value of those investments.
As an owner of real property, we will be subject to various federal, state and local environmental and health and safety laws and regulations. Although we will not operate or manage most of our property, we may be held primarily or jointly and severally liable for costs relating to the investigation and clean-up of any property from which there has been a release or threatened release of a regulated material as well as other affected properties, regardless of whether we knew of or caused the release.
In addition to these costs, which are typically not limited by law or regulation and could exceed the property’s value, we could be liable for certain other costs, including governmental fines and injuries to persons, property or natural resources. Furthermore, some environmental laws create a lien on the contaminated site in favor of the government for damages and the costs the government incurs in connection with such contamination.
Although the Leases will require Darden to indemnify us for environmental liabilities, and although we intend to require our other operators and tenants to undertake to indemnify us for certain environmental liabilities, including environmental liabilities they cause, the amount of such liabilities could exceed the financial ability of Darden, or such other tenant or operator to indemnify us. The presence of contamination or the failure to remediate contamination may adversely affect our ability to sell or lease the real estate or to borrow using the real estate as collateral.
Real estate investments are relatively illiquid and provisions in the Leases may adversely impact our ability to sell properties and could adversely impact the price at which we can sell the properties.
The Four Corners Properties, the properties leased to the TRS and the properties owned by the LongHorn San Antonio Business subject to ground leases represent a substantial portion of our total consolidated assets, and these investments are

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relatively illiquid. As a result, our ability to sell one or more of our properties or other investments in real estate we may make in response to any changes in economic or other conditions may be limited. If we want to sell a property, we cannot assure you that we will be able to dispose of it in the desired time period, or at all, or that the sale price of a property will exceed the cost of our investment in that property.
In addition, the Four Corners Properties subject to the Leases will provide that Darden will have a right of first offer with respect to our sale of any Four Corners Property and we will be prohibited from selling any Four Corners Properties to (i) any nationally recognized casual or fine dining brand restaurant or entity operating the same or (ii) any other regionally recognized casual or fine dining brand restaurant or entity operating the same, with 25 or more units. The existence of these provisions in the Leases, which survive for the full term of the relevant Lease, could adversely impact our ability to sell Four Corners Properties and could adversely impact our ability to obtain the highest possible price for any Four Corners Properties. If we seek to sell any Four Corners Property, we would not be able to offer the Four Corners Properties to potential purchasers through a competitive bid process or in a similar manner designed to maximize the value obtained without first offering to sell to Darden and we would be restricted in the potential purchasers who could buy the Four Corners Properties, which may adversely impact our ability to sell Four Corners Properties in a timely manner, or at all, or adversely impact the price we can obtain from such sale.
Hedging transactions could have a negative effect on our results of operations.
We may enter into hedging transactions, including with respect to interest rate exposure on one or more of our assets or liabilities. The use of hedging transactions involves certain risks, including: (1) the possibility that the market will move in a manner or direction that would have resulted in a gain for us had a hedging transaction not been used, in which case our performance would have been better had we not engaged in the hedging transaction; (2) the risk of an imperfect correlation between the risk sought to be hedged and the hedging transaction used; (3) the potential illiquidity for the hedging instrument used, which may make it difficult for us to close out or unwind a hedging transaction; (4) the possibility that our counterparty fails to honor its obligations; and (5) the possibility that we may have to post collateral to enter into hedging transactions, which we may lose if we are unable to honor our obligations. Our election to be subject to tax as a REIT will also result in limitations on our income sources, and the hedging strategies available to us will be more limited than those available to companies that are not REITs.
Our active management and operation of a restaurant business may expose us to potential liabilities beyond those traditionally associated with REITs.
In addition to our real estate investment activities, we will also manage and operate the LongHorn San Antonio Business, which consists of six LongHorn Steakhouse restaurants located in the San Antonio, Texas area. Managing and operating the LongHorn San Antonio Business will require us to employ significantly more people than a REIT which did not operate a business of such type and scale. In addition, managing and operating an active restaurant business exposes us to potential liabilities associated with the operation of restaurants. Such potential liabilities are not typically associated with REITs and include potential liabilities for wage and hour violations, guest discrimination, food safety issues including poor food quality, food-borne illness, food tampering, food contamination, workplace injury, and violation of “dram shop” laws (providing an injured party with recourse against an establishment that serves alcoholic beverages to an intoxicated party who then causes injury to himself or a third party). In the event that one or more of the potential liabilities associated with managing and operating an active restaurant business materializes, such liabilities could damage the reputation of the LongHorn San Antonio Business as well as the reputation of Four Corners, and could adversely affect our financial position and results of operations, possibly to a material degree.
If our security measures are breached, we may face liability and public perception of our services could be diminished, which would negatively impact our ability to attract business partners and advertisers.
Although we will implement physical and electronic security measures to protect against the loss, misuse and alteration of our websites, digital assets and proprietary business information, as well as consumer, business partner and advertiser personally identifiable information, no security measures are perfect and impenetrable, and we may be unable to anticipate or

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prevent unauthorized access. A cyber attack or other security breach could occur due to the actions of outside parties, employee error, malfeasance or a combination of these or other actions. If an actual or perceived breach of our security occurs, we could lose competitively sensitive business information or suffer disruptions to our business operations. In addition, the public perception of the effectiveness of our security measures or services could be harmed, we could lose consumers, business partners and advertisers, and we could suffer financial exposure in connection with remediation efforts, investigations and legal proceedings and changes in our security and system protection measures.
RISKS RELATED TO OUR COMMON STOCK
There is no existing market for our common stock and a trading market that will provide you with adequate liquidity may not develop for our common stock. In addition, once our common stock begins trading, the market price and trading volume of our common stock may fluctuate widely.
There is no current trading market for our common stock. Our common stock distributed in the Spin-Off will be trading publicly for the first time. We anticipate that a limited market, commonly known as a “when-distributed” trading market, will develop shortly before the record date and that “regular-way” trading in shares of our common stock will begin on the first trading day following the distribution date. However, there can be no assurance that an active trading market for our common stock will develop as a result of the Spin-Off or be sustained in the future. The lack of an active trading market may make it more difficult for you to sell your shares and could lead to our share price being depressed or more volatile.
For many reasons, including the risks identified in this information statement, the market price of our common stock following the Spin-Off may be more volatile than the market price of Darden common stock before the Spin-Off. These factors may result in short-term or long-term negative pressure on the value of our common stock.
We cannot predict the prices at which our common stock may trade after the Spin-Off. The market price of our common stock may fluctuate significantly, depending upon many factors, some of which may be beyond our control, including, but not limited to:
a shift in our investor base;
our quarterly or annual earnings, or those of comparable companies;
actual or anticipated fluctuations in our operating results;
our ability to obtain financing as needed;
changes in laws and regulations affecting our business;
changes in accounting standards, policies, guidance, interpretations or principles;
announcements by us or our competitors of significant investments, acquisitions or dispositions;
the failure of securities analysts to cover our common stock after the Spin-Off;
changes in earnings estimates by securities analysts or our ability to meet those estimates;
the operating performance and stock price of comparable companies;
overall market fluctuations;
a decline in the real estate markets; and
general economic conditions and other external factors.
Stock markets in general have experienced volatility that has often been unrelated to the operating performance of a particular company. These broad market fluctuations may adversely affect the trading price of our common stock.

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The combined post-Spin-Off value of Darden common stock and our common stock may not equal or exceed the pre-Spin-Off value of Darden common stock.
We cannot assure you that the combined trading prices of Darden common stock and our common stock after the Spin-Off will be equal to or greater than the trading price of Darden common stock prior to the Spin-Off. Until the market has fully evaluated the business of Darden without the Four Corners Properties and the LongHorn San Antonio Business, the price at which Darden common stock trades may fluctuate more significantly than might otherwise be typical. Similarly, until the market has fully evaluated the stand-alone business of our company, the price at which shares of our common stock trades may fluctuate more significantly than might otherwise be typical, including volatility caused by general market conditions.
The market price and trading volume of our common stock may be volatile and may face negative pressure including as a result of future sales or distributions of our common stock.
There is currently no trading market for any of our common stock. Our common stock distributed in the Spin-Off will be trading publicly for the first time. Until, and possibly even after, orderly trading markets develop for the common stock, there may be significant fluctuations in price. It is not possible to accurately predict how investors in our common stock will behave following the Spin-Off. For many reasons, including the risks identified in this document, the market price of our common stock following the Spin-Off may be more volatile than the market price of Darden’s securities, including its common stock, before the Spin-Off. These factors may result in short or long-term negative pressure on the value of our common stock.
Investors may decide to dispose of some or all of our common stock that they receive in the Spin-Off, which may generally be sold immediately in the public market. Although we have no actual knowledge of any plan or intention on the part of any holder of Darden common stock to sell our common stock on or after the record date, it is possible that some Darden shareholders will decide to sell some or all of the shares of our common stock that they receive in the Spin-Off.
In addition, some of the holders of Darden securities, including its common stock, are index funds tied to stock or investment indices, or are institutional investors bound by various investment guidelines. Companies are generally selected for investment indices and, in some cases, selected by institutional investors, based on factors such as market capitalization, industry, trading liquidity and financial condition. As an independent company, we expect to initially have a lower market capitalization than Darden has today, and our business will differ from the business of Darden prior to the Spin-Off. As a result, our common stock may not qualify for those investment indices. In addition, the common stock that is received in the Spin-Off may not meet the investment guidelines of some institutional investors. Consequently, these index funds and institutional investors may have to sell some or all of our common stock they receive in the Spin-Off, and the price of our common stock may fall as a result. Any such decline could impair our ability to raise capital through future sales of securities, including our common stock. Furthermore, our common stock may not qualify for other investment indices, including indices specific to REITs, and any such failure may discourage new investors from investing in our common stock.
Any disposition by a significant shareholder of our common stock, or the perception in the market that such dispositions could occur, may cause the price of our common stock to fall. Any such decline could impair our ability to raise capital through future sales of our common stock. Furthermore, our common stock may not qualify for other investment indices, including indices specific to REITs, and any such failure may discourage new investors from investing in our common stock.
Our ability to engage in significant equity issuances will also be limited or restricted after our Spin-Off from Darden in order to preserve the tax-free nature of the Spin-Off. If and when additional funds are raised through the issuance of equity securities, including our common stock, our shareholders may experience significant dilution.
We cannot assure you of our ability to pay dividends in the future.
It is expected that our initial dividend will be $1.35 per share per annum. Based on a distribution ratio in the Spin-Off of one share of Four Corners common stock for every three shares of Darden common stock, following the Spin-Off, the initial combined dividend level on the Four Corners common stock and the Darden common stock is expected to be at least equal to the dividend level on the Darden common stock prior to the Spin-Off. We may pay a portion of our dividends in common stock. In no event will the annual dividend be less than 90% of our REIT taxable income on an annual basis, determined without

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regard to the dividends paid deduction and excluding any net capital gains. Our ability to pay dividends may be adversely affected by a number of factors, including the risk factors described in this information statement. Dividends will be authorized by our board of directors and declared by us based upon a number of factors, including actual results of operations, restrictions under Maryland law or applicable debt covenants, our financial condition, our taxable income, the annual distribution requirements under the REIT provisions of the Code, our operating expenses and other factors our directors deem relevant. We cannot assure you that we will achieve investment results that will allow us to make a specified level of cash dividends or year-to-year increases in cash dividends in the future.
Furthermore, while we are required to pay dividends in order to maintain our REIT status (as described above under “Risks Related to Our Taxation as a REIT—REIT distribution requirements could adversely affect our ability to execute our business plan”), we may elect not to maintain our REIT status, in which case we would no longer be required to pay such dividends. Moreover, even if we do elect to maintain our REIT status, after completing various procedural steps, we may elect to comply with the applicable distribution requirements by distributing, under certain circumstances, a portion of the required amount in the form of shares of our common stock in lieu of cash. If we elect not to maintain our REIT status or to satisfy any required distributions in shares of common stock in lieu of cash, such action could negatively affect our business and financial condition as well as the market price of our common stock. No assurance can be given that we will pay any dividends on shares of our common stock in the future.
Failure to maintain effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act could materially and adversely affect our business and the market price of our common stock.
Under the Sarbanes-Oxley Act, we must maintain effective disclosure controls and procedures and internal control over financial reporting, which requires significant resources and management oversight. Internal control over financial reporting is complex and may be revised over time to adapt to changes in our business, or changes in applicable accounting rules. We cannot assure you that our internal control over financial reporting will be effective in the future or that a material weakness will not be discovered with respect to a prior period for which we had previously believed that internal controls were effective. Matters impacting our internal controls may cause us to be unable to report our financial data on a timely basis, or may cause us to restate previously issued financial data, and thereby subject us to adverse regulatory consequences, including sanctions or investigations by the SEC, or violations of applicable stock exchange listing rules. There could also be a negative reaction in the financial markets due to a loss of investor confidence in us and the reliability of our financial statements. Confidence in the reliability of our financial statements is also likely to suffer if we or our independent registered public accounting firm reports a material weakness in our internal control over financial reporting. This could materially adversely affect us by, for example, leading to a decline in the market price for our common stock and impairing our ability to raise capital.

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This information statement includes forward-looking statements, including the sections entitled “Summary,” “Risk Factors,” “The Spin-Off,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business and Four Corners Properties.” Forward-looking statements include all statements that are not historical statements of fact and those regarding our intent, belief or expectations, including, but not limited to, statements regarding: the anticipated timing, structure, benefits and tax treatment of the Spin-Off; future financing plans, business strategies, growth prospects and operating and financial performance; expectations regarding the making of distributions and the payment of dividends; and compliance with and changes in governmental regulations.
Words such as “anticipate(s),” “expect(s),” “intend(s),” “plan(s),” “believe(s),” “may,” “will,” “would,” “could,” “should,” “seek(s)” and similar expressions, or the negative of these terms, are intended to identify such forward-looking statements. These statements are based on management’s current expectations and beliefs and are subject to a number of risks and uncertainties that could lead to actual results differing materially from those projected, forecasted or expected. Although we believe that the assumptions underlying the forward-looking statements are reasonable, we can give no assurance that our expectations will be attained. Factors that could have a material adverse effect on our operations and future prospects or that could cause actual results to differ materially from our expectations include, but are not limited to:
the ability to achieve some or all the benefits that we expect to achieve from the Spin-Off;
the ability and willingness of Darden to meet and/or perform its obligations under any contractual arrangements that are entered into with us in connection with the Spin-Off, including the Leases and any of its obligations to indemnify, defend and hold us harmless from and against various claims, litigation and liabilities;
the ability of Darden to comply with laws, rules and regulations in the operation of the Four Corners Properties we will lease to Darden and/or one or more of Darden’s operating subsidiaries following the Spin-Off;
the ability and willingness of our tenants, including Darden, to perform under the Leases and to renew the leases with us upon their expiration, and the ability to reposition our properties on the same or better terms in the event of nonrenewal or in the event we replace an existing tenant, and obligations, including indemnification obligations, we may incur in connection with the replacement of an existing tenant;
the availability of and the ability to identify suitable acquisition opportunities and the ability to diversify by acquiring and leasing the additional properties on favorable terms;
the ability to generate sufficient cash flows to service our outstanding indebtedness;
access to debt and equity capital markets;
fluctuating interest rates;
the ability to retain our key management personnel;
the ability to qualify or maintain our status as a REIT;
changes in the U.S. tax law and other state, federal or local laws, whether or not specific to REITs;
other risks inherent in the Four Corners Properties, including illiquidity of real estate investments and restrictions on how we may sell these investments; and
additional factors discussed in the sections entitled “Business and Four Corners Properties,” “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this information statement.
Forward-looking statements speak only as of the date of this information statement. Except in the normal course of our public disclosure obligations, we expressly disclaim any obligation to publicly release any updates or revisions to any forward-looking statements to reflect any change in our expectations or any change in events, conditions or circumstances on which any statement is based.

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THE SPIN-OFF
Background of the Spin-Off
On June 23, 2015, Darden announced its plan to separate its business into two separate and independent publicly traded companies:
Darden, which will continue to operate a wide range of restaurant and dining options at various price points through its existing operations; and
Four Corners, which will own, acquire and lease properties, on a triple-net basis, for use in the restaurant industry and potentially other industries, as well as operate the LongHorn San Antonio Business.
Darden will accomplish the separation by effecting an internal restructuring resulting in the contribution to Four Corners of the equity of entities that hold the Four Corners Properties, the LongHorn San Antonio Business and $36.1 million in cash in exchange for the issuance to Darden of our common stock to be distributed in the Spin-Off. In connection with the Spin-Off, $351.1 million in cash funded from the proceeds of our term loan borrowings will be transferred to Darden.
These actions are collectively referred to as the Reorganization, as further described below under “Reorganization.” Subsequently, Darden will distribute all of our outstanding shares of common stock pro rata to holders of Darden common stock pursuant to the Spin-Off. Darden will use the cash it receives from us and the proceeds from other, unrelated sale-leaseback transactions that have occurred prior to the Spin-Off, to retire approximately $1 billion of its current outstanding debt.
Effective immediately upon the Spin-Off, we and Darden will enter into the Leases, under which Darden and/or one or more of Darden’s operating subsidiaries will lease the Four Corners Properties from us on a triple-net basis. We and Darden will also enter into a number of other agreements to govern our relationship with Darden following the Spin-Off. See “Our Relationship with Darden Following the Spin-Off.”
Upon the satisfaction or waiver of the conditions to the Spin-Off, which are described in more detail in “—Conditions to the Spin-Off” below, Darden will effect the Spin-Off by distributing to Darden’s shareholders one share of Four Corners common stock for every three shares of Darden common stock held at the close of business on November 2, 2015, the record date for the Spin-Off. We expect the shares of our common stock to be distributed by Darden on or about November 9, 2015.
You will not be required to make any payment, surrender or exchange your shares of Darden common stock or take any other action to receive your shares of our common stock.
Darden will allocate its accumulated earnings and profits (as determined for U.S. federal income tax purposes) for periods prior to the Spin-Off between Darden and Four Corners in a manner that, in its best judgment, is in accordance with the provisions of the Code. As a result of our intended election to be subject to tax as a REIT for U.S. federal income tax purposes, in order to comply with certain REIT qualification requirements, we will make the Purging Distribution by declaring a dividend to our shareholders to distribute our accumulated earnings and profits attributable to our non-REIT years, including the earnings and profits allocated to us in connection with the Spin-Off and the earnings and profits generated by us in our taxable year ending December 31, 2015. The Purging Distribution will be paid to Four Corners shareholders in a combination of cash and Four Corners stock, with the cash portion constituting at least 20% of the total amount of the Purging Distribution. We expect to pay the majority of the Purging Distribution in Four Corners stock. Additionally, we expect to declare the Purging Distribution in 2016 and to make the Purging Distribution no later than January 31, 2017. We currently expect that the aggregate amount of the Purging Distribution will be between approximately $300 million and $400 million. See “—The Purging Distribution.”
The Spin-Off is subject to the satisfaction or waiver of certain conditions. Until the Spin-Off has occurred, Darden has the right to amend, modify, abandon or otherwise terminate the transaction, even if all of the conditions have been satisfied, if the board of directors of Darden determines, in its sole and absolute discretion, that the Spin-Off is not in the best interests of Darden and its shareholders or that legal, market or regulatory conditions or other circumstances are such that the Spin-Off is no longer advisable at that time. We cannot provide any assurances that the Spin-Off will be completed. For a more detailed description of these conditions, see the section entitled “—Conditions to the Spin-Off” below.

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Reasons for the Spin-Off
It is expected that the Spin-Off will:
position both Darden and Four Corners to more efficiently dedicate financial resources, access capital markets, pursue appropriate growth opportunities and execute strategic plans best suited for their respective businesses;
enable the separate management teams of Darden and Four Corners to devote their time and attention to the development and implementation of corporate strategies that are specifically tailored towards each entity’s respective core business;
allow for valuation of the Four Corners Properties, separate from Darden, within a publicly traded REIT structure. Based on historical market valuation multiples, this is expected to increase the value attributed by the market to the Four Corners Properties and the value of Four Corners such that the aggregate value of the equity of Darden and Four Corners following the Spin-Off would be greater than the equity value of Darden absent the Spin-Off; and
enhance our ability to attract and retain qualified management in furtherance of our strategic growth objectives.
Improves capital structures and allocation of financial resources
The Spin-Off will allow Darden to achieve a more efficient capital structure with a substantially lower financial debt burden once it retires a substantial portion of its current outstanding debt with, in part, the cash it receives from us in the Spin-Off. Shifting a significant portion of Darden’s fixed costs from interest payments to lease payments is also expected to result in a more favorable credit profile and potentially increase the return on invested capital for Darden. In addition, Darden’s management believes that Darden’s current real estate holdings are an inefficient use of Darden’s capital resources, and that decreasing the percentage of owned properties will be a more efficient use of capital and allow Darden to better compete with its peers that have a lower percentage of owned properties.
Management further believes there is an opportunity to grow and diversify our real estate holdings. Diversification could be accomplished from a combination of acquisitions, property exchanges, divestitures and build to suit new construction. To finance these diversifying, growth investments, we, as a REIT, expect to benefit from a lower cost of capital than is currently available to Darden, which will better position us to access capital markets and to establish an efficient capital structure suited to long-term real estate ownership.
Enables the management team of each business to focus on the performance and success of its relevant business free of constraints from the competing interests of the unrelated business and free of distraction posed by operations of the unrelated business.
The commercial, marketing and management activities required to operate Four Corners are substantially different from those required to operate Darden. We believe Four Corners will be better positioned to grow the real estate business following the Spin-Off, as developing and maximizing the value of Darden’s real estate is not currently a core aspect of its business strategy. Our management expects that, over time, we will expand and diversify our real estate holdings, grow through acquisitions, and add personnel with specific experience in real estate management, operations, acquisitions, and dispositions. Similarly, although Darden will have several responsibilities with regard to the Four Corners Properties under the Leases, the Spin-Off should benefit Darden by allowing Darden management to focus more exclusively on operating Darden’s core restaurant operations business without diverting its attention to growth of the Four Corners Properties.

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Increases the valuation of the real estate assets (in the form of a higher equity market valuation for Four Corners), providing Four Corners with a more effective acquisition currency
Historically, retail oriented triple-net lease REITs have generally traded at higher valuation multiples than Darden and its restaurant operator peers. Therefore, the Spin-Off could result in a higher aggregate equity value of the combination of Darden and Four Corners compared to the equity value ascribed to Darden in the absence of the Spin-Off.
The more favorable valuation that could apply to Four Corners’ equity as a result of the Spin-Off would enable us to raise capital more efficiently to fund growth strategies, including in connection with acquisition and diversification opportunities.
Enhances our ability to attract and retain qualified management through tailored incentive-based compensation plan
Our equity should be more favorably and efficiently valued than it would be in the absence of the Spin-Off. The enhanced valuation of our equity that may occur should attract and ultimately help retain a stronger management team with expertise in real estate acquisitions, divestitures and management, benefitting shareholders. Furthermore, the Spin-Off should incentivize our management by providing compensation that is tied directly and exclusively to the performance of the real estate investments. The ability to offer compensation that is directly and solely tied to the performance of real estate investments should both enhance our ability to attract and retain management and better incentivize management to achieve superior results for shareholders than would occur with respect to real estate investments housed within an operating company.

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Reorganization
Set forth below are diagrams depicting the organizational structure of Darden prior to the Reorganization and the organizational structure of each of Darden and the Company after the Reorganization and the Spin-Off of the Company:
After several internal reorganization steps, Rare Hospitality International, Inc., a wholly-owned indirect subsidiary of Darden, will contribute to us the equity interests in certain subsidiaries holding certain of the Four Corners Properties, the LongHorn San Antonio Business and $36.1 million in cash in exchange for all of the stock of the Company, and we will further contribute such contributed entities holding such Four Corners Properties, the LongHorn San Antonio Business and the cash to our subsidiaries. Rare Hospitality International, Inc. will then distribute all of the stock of the Company to GMRI, Inc., a wholly owned subsidiary of Darden.
GMRI, Inc. will also contribute the equity interests in certain subsidiaries holding certain of the Four Corners Properties to the Company in exchange for all of the stock of the Company, and we will further contribute such contributed Four Corners Properties and the LongHorn San Antonio Business to our subsidiaries. GMRI, Inc. will then distribute all of the stock of the Company to Darden.
Darden will also contribute the equity interests in certain subsidiaries holding certain of the Four Corners Properties to the Company in exchange for all of the stock of the Company, and we will further contribute such contributed Four Corners Properties to our subsidiaries. Darden will then effect the Spin-Off by distributing all of the stock of the Company pro rata to the shareholders of Darden that hold Darden common stock on the record date. In connection with the Spin-Off, $351.1 million in cash funded from the proceeds of our term loan borrowings will be transferred to Darden.

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Manner of Effecting the Spin-Off
The general terms and conditions relating to the Spin-Off will be set forth in the Separation and Distribution Agreement between us and Darden. Under the Separation and Distribution Agreement, the Spin-Off is anticipated to be effective from and after November 9, 2015.
You will receive one share of Four Corners common stock for every three shares of Darden common stock that you owned at the close of business on November 2, 2015, the record date. The actual total number of shares of our common stock to be distributed will depend on the number of shares of Darden common stock outstanding on the record date. The shares of our common stock to be distributed will constitute all of the outstanding shares of our common stock immediately after the Spin-Off.
Darden expects to distribute the shares of Four Corners common stock on November 9, 2015, the distribution date. However, until the Spin-Off has occurred, Darden has the right to amend, modify, abandon or otherwise terminate the transaction even if all of the conditions to the Spin-Off have been satisfied, if the board of directors of Darden determines, in its sole and absolute discretion, that the Spin-Off is not in the best interests of Darden and its shareholders or that legal, market or regulatory conditions or other circumstances are such that the Spin-Off is no longer advisable at the time.
Wells Fargo Bank, N.A. will serve as transfer agent and registrar for our common stock and as distribution agent in connection with the Spin-Off.
We will not be issuing physical certificates representing shares of our common stock. Instead, if you own Darden common stock as of the close of business on the record date, the shares of our common stock that you are entitled to receive in the Spin-Off will be issued electronically, as of the distribution date, to you or to your bank or brokerage firm on your behalf by way of direct registration in book-entry form. A benefit of issuing stock electronically in book-entry form is that there will be none of the physical handling and safekeeping responsibilities that are inherent in owning physical stock certificates.
If you hold physical stock certificates that represent your shares of Darden common stock and you are the registered holder of the Darden shares represented by those certificates, the distribution agent will mail you an account statement that reflects the number of shares of our common stock that have been registered in book-entry form in your name. If you have any questions concerning the mechanics of having shares of common stock registered in book-entry form, you are encouraged to contact Darden Investor Relations by mail at 1000 Darden Center Drive, Orlando, Florida 32837, by phone at (407) 245-5870 or by email at kkalicak@darden.com.
Most Darden shareholders hold their shares of Darden common stock through a bank or brokerage firm. In such cases, the bank or brokerage firm would be said to hold the stock in “street name” and ownership would be recorded on the bank or brokerage firm’s books. If you hold your Darden common stock through a bank or brokerage firm, your bank or brokerage firm will credit your account for the shares of our common stock that you are entitled to receive in the Spin-Off. If you have any questions concerning the mechanics of having shares of our common stock held in “street name,” you are encouraged to contact your bank or brokerage firm.
Results of the Spin-Off
After the Spin-Off, we will be an independent, publicly traded, self-administered company, which intends to elect and qualify as a REIT for U.S. federal income tax purposes primarily engaged in the ownership, acquisition and leasing of restaurant properties. Immediately following the Spin-Off, we expect to have 11,738 registered shareholders, based on the number of registered shareholders of Darden common stock on October 19, 2015. Immediately following the Spin-Off, we expect to have 42,767,200 shares of our common stock outstanding on a fully diluted basis, based on the number of shares of Darden common stock outstanding on a fully diluted basis as of October 19, 2015. The actual number of shares to be distributed will be determined on the record date and will reflect any changes in the number of shares of Darden common stock between October 19, 2015 and the record date. The Spin-Off will not affect the number of outstanding shares of Darden common stock or any rights of Darden shareholders.

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Effective immediately upon the Spin-Off, we and Darden will enter into the Leases, under which Darden and/or one or more of Darden’s operating subsidiaries will lease the Four Corners Properties on a triple-net basis. We and Darden will also enter into a number of other agreements to govern their relationship following the Spin-Off concerning, among other things, the Franchise Agreements, transition services, allocations of assets and liabilities attributable to periods prior to the Spin-Off and the rights and obligations, including certain indemnification obligations, of Darden and us after the Spin-Off. For a more detailed description of these agreements, see the section entitled “Our Relationship With Darden Following the Spin-Off.”
Treatment of Fractional Shares
The transfer agent will not distribute any fractional shares of our common stock in connection with the Spin-Off. Instead, the transfer agent will aggregate all fractional shares of our common stock into whole shares and sell them on the open market at the prevailing market prices on behalf of those registered holders who otherwise would be entitled to receive a fractional share. We anticipate that these sales will occur as soon as practicable after the distribution date. The transfer agent will then distribute to such registered holders the aggregate cash proceeds of such sale, in an amount equal to their pro rata share of the total proceeds of those sales. Any applicable expenses, including brokerage fees, will be paid by us. We do not expect the amount of any such fees to be material to us.
If you hold physical stock certificates that represent your shares of Darden common stock and you are the registered holder of the Darden shares represented by those certificates, your check for any cash that you may be entitled to receive instead of fractional shares of our common stock will be mailed to you separately. If you hold your shares of Darden common stock through a bank or brokerage firm, your bank or brokerage firm will receive, on your behalf, your pro rata share of the aggregate net cash proceeds from the sales and will electronically credit your account for your share of such proceeds.
None of us, Darden or the transfer agent will guarantee any minimum sale price for the fractional shares of our common stock. Neither we nor Darden will pay any interest on the proceeds from the sale of fractional shares. The receipt of cash in lieu of fractional shares will generally be taxable to the recipient shareholders. Each shareholder entitled to receive cash proceeds from these fractional shares should consult his, her or its own tax advisor as to the shareholder’s particular circumstances. See “—U.S. Federal Income Tax Consequences of the Spin-Off.”
Listing and Trading of Our Shares
There is no current trading market for Four Corners common stock. A condition to the Spin-Off is the listing of our common stock on the NYSE. We have applied to list our common stock listed on the NYSE under the symbol “FCPT” subject to official notice of issuance.
At some point following the record date and continuing up to and including the distribution date, we expect that there will be two markets in Darden common stock: a “due-bills” market and an “ex-distribution” market. Shares of Darden common stock that trade on the “due-bills” market will trade with an entitlement to shares of our common stock distributed pursuant to the Spin-Off. Shares of Darden common stock that trade on the “ex-distribution” market will trade without an entitlement to shares of our common stock distributed pursuant to the Spin-Off. Therefore, if you sell shares of Darden common stock in the “due-bills” market after the record date and before the distribution date, you will be selling your right to receive shares of our common stock in connection with the Spin-Off. If you own shares of Darden common stock at the close of business on the record date and sell those shares on the “ex-distribution” market before the distribution date, you will still receive the shares of our common stock that you would be entitled to receive pursuant to your ownership of the shares of Darden common stock on the record date.
Furthermore,shortly prior to the record date and continuing up to and including the distribution date, we expect that a limited market, commonly known as a “when-distributed” trading market, will develop in our common stock. “When-distributed” trading refers to a sale or purchase made conditionally because the security has been authorized but not yet distributed. The “when-distributed” trading market will be a market for shares of our common stock that will be distributed pro rata to Darden shareholders on the distribution date. If you owned shares of Darden common stock at the close of business on the record date, you would be entitled to shares of our common stock distributed pursuant to the Spin-Off. You may trade this

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entitlement to shares of our common stock, without trading the shares of Darden common stock you own, on the “when-distributed” market. On the first trading day following the distribution date, “when-distributed” trading with respect to our common stock will end and “regular-way” trading in our common stock will begin.
Treatment of Darden Equity Awards
Prior to the completion of the Spin-Off, we will adopt an equity-based incentive plan. Under the terms of the Employee Matters Agreement, Darden restricted stock units held by an employee who performs services primarily for Four Corners on the Distribution Date (“Four Corners Employee”) will be converted into Four Corners restricted stock units in the manner set forth in the Employee Matters Agreement. Darden stock options and restricted stock units held by a current or former employee of Darden, other than Mr. Lenehan, on the Distribution Date will remain Darden stock options and restricted stock units, but will be adjusted to reflect the Spin-Off. Shares of Darden restricted stock, regardless of the holder, will be treated the same as shares of Darden common stock, with holders receiving one share of Four Corners restricted stock for every three shares of Darden restricted stock held by each such holder, all of which will continue to be subject to the same vesting conditions as the original shares of Darden restricted stock. However, as we have concluded that the equity awards received by former Darden employees to be employed by Four Corners post-spin are immaterial, we have not included their conversion to Four Corners equity awards in the pro forma financial information included in the information statement.
The Purging Distribution
Darden will allocate its accumulated earnings and profits (as determined for U.S. federal income tax purposes) for periods prior to the Spin-Off between Darden and Four Corners in a manner that, in its best judgment, is in accordance with the provisions of the Code. As a result of our intended election to be subject to tax as a REIT for U.S. federal income tax purposes, in order to comply with certain REIT qualification requirements, we will be required to make the Purging Distribution by declaring a dividend to our shareholders to distribute our accumulated earnings and profits attributable to our non-REIT years, including the earnings and profits allocated to us in connection with the Spin-Off and the earnings and profits generated by us in our taxable year ending December 31, 2015. The Purging Distribution will be paid to our shareholders in a combination of cash and our common stock, with the cash portion constituting at least 20% of the total amount of the Purging Distribution. We expect to pay the majority of the Purging Distribution in our common stock. Additionally, we expect to declare the Purging Distribution in 2016 and to make the Purging Distribution no later than January 31, 2017. We currently expect that the aggregate amount of the Purging Distribution will be between approximately $300 million and $400 million. The expected Purging Distribution range was based upon an assumption of relative valuations and an accumulated earnings and profit analysis, using historic tax returns through the tax year ended 2014 and estimates for the tax year ended 2015. The amount of earnings and profits to be distributed is a complex factual and legal determination. See the risk factor captioned “There are uncertainties relating to the Purging Distribution.”
Each shareholder will be permitted to elect to receive the shareholder’s entire entitlement under the Purging Distribution in either cash or our common stock, subject to the Cash Limitation. The Cash Limitation will in no event be less than 20% of the Purging Distribution declaration (without regard to any cash that may be paid in lieu of fractional shares). If our shareholders elect to receive an amount of cash in excess of the Cash Limitation, each such electing shareholder will receive a pro rata amount of cash corresponding to the shareholder’s respective entitlement under the Purging Distribution declaration. Darden has requested the IRS Ruling, which, if received, is expected to address, in addition to issues relevant to the tax-free treatment of the Spin-Off, certain issues related to our payment of the Purging Distribution in a combination of cash and our stock. In general, the IRS Ruling with respect to the Purging Distribution, if received, is expected to provide, subject to the terms and conditions contained therein, that (1) any and all of the cash and stock distributed by us to our shareholders as part of the Purging Distribution will be treated as a taxable distribution of property with respect to Four Corners stock and (2) the amount of any distribution of stock received by any of our shareholders as part of the Purging Distribution will be considered to equal the amount of the money which could have been received instead. In the Purging Distribution, a holder of our common stock will be required to report dividend income as a result of the Purging Distribution even if we distribute no cash or only nominal amounts of cash to such shareholder.

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You are urged to consult with your tax advisor as to the particular tax consequences of the Purging Distribution to you, including the applicability of any U.S. federal, state and local and non-U.S. tax laws.
U.S. Federal Income Tax Consequences of the Spin-Off
The following is a summary of the U.S. federal income tax consequences to the holders of shares of Darden common stock in connection with the Spin-Off. This summary is based on the Code, the Treasury Regulations promulgated thereunder, and judicial and administrative interpretations thereof, all as in effect as of the date of this information statement and all of which are subject to differing interpretations and may change at any time, possibly with retroactive effect. Any such change could affect the tax consequences described below. This summary assumes that the Spin-Off will be consummated in accordance with the Separation and Distribution Agreement and as described in this information statement.
Except as specifically described below, this summary is limited to holders of shares of Darden common stock that are U.S. Holders, as defined immediately below. For purposes of this summary, a U.S. Holder is a beneficial owner of Darden common stock that is, for U.S. federal income tax purposes:
an individual who is a citizen or a resident of the U.S.;
a corporation, or other entity taxable as a corporation for U.S. federal income tax purposes, created or organized under the laws of the U.S. or any state thereof or the District of Columbia;
an estate, the income of which is subject to U.S. federal income taxation regardless of its source; or
a trust, if (1) a court within the U.S. is able to exercise primary jurisdiction over its administration and one or more U.S. persons have the authority to control all of its substantial decisions, or (2) in the case of a trust that was treated as a domestic trust under the law in effect before 1997, a valid election is in place under applicable Treasury Regulations.
This summary also does not discuss all tax considerations that may be relevant to shareholders in light of their particular circumstances, nor does it address the consequences to shareholders subject to special treatment under the U.S. federal income tax laws, such as:
dealers or traders in securities or currencies;
tax-exempt entities;
cooperatives;
banks, trusts, financial institutions, or insurance companies;
persons who acquired shares of Darden common stock pursuant to the exercise of employee stock options or otherwise as compensation;
shareholders who own, or are deemed to own, at least 10% or more, by voting power or value, of Darden equity;
holders owning Darden common stock as part of a position in a straddle or as part of a hedging, conversion, constructive sale, synthetic security, integrated investment, or other risk reduction transaction for U.S. federal income tax purposes;
certain former citizens or former long-term residents of the U.S.;
holders who are subject to the alternative minimum tax; or
persons that own Darden common stock through partnerships or other pass-through entities.
This summary does not address the U.S. federal income tax consequences to Darden shareholders who do not hold shares of Darden common stock as a capital asset. Moreover, this summary does not address any state, local, or foreign tax consequences or any estate, gift or other non-federal income tax consequences.
If a partnership (or any other entity treated as a partnership for U.S. federal income tax purposes) holds shares of Darden common stock, the tax treatment of a partner in that partnership will generally depend on the status of the partner and the

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activities of the partnership. Such a partner or partnership is urged to consult its tax advisor as to the tax consequences of the Spin-Off.
YOU ARE URGED TO CONSULT WITH YOUR TAX ADVISOR AS TO THE SPECIFIC U.S. FEDERAL, STATE AND LOCAL, AND NON-U.S. TAX CONSEQUENCES OF THE SPIN-OFF IN LIGHT OF YOUR PARTICULAR CIRCUMSTANCES AND THE EFFECT OF POSSIBLE CHANGES IN LAW THAT MIGHT AFFECT THE TAX CONSEQUENCES DESCRIBED IN THIS INFORMATION STATEMENT.
Treatment of the Spin-Off
Darden has requested the IRS Ruling on certain specific issues relevant to the qualification of the Spin-Off as tax-free under Sections 368(a)(1)(D) and 355 of the Code, based on certain facts and representations set forth in such request. No assurance can be given that Darden will receive the IRS Ruling and it is not a condition to the Spin-Off. Following Darden’s requesting the IRS Ruling, the IRS announced that it may reconsider its historic position on certain issues relevant to transactions similar to the Spin-Off. On September 14, 2015, the IRS issued a formal “no-rule” policy for private letter ruling requests submitted after such date with respect to certain transactions similar to the Spin-Off and, in a notice released on the same day, indicated that the IRS and Treasury Department are studying the possibility of promulgating new and potentially adverse guidance with respect to such transactions in the future. The notice states that the “Treasury Department and the Service … have become concerned that an increasing number of distributions intended to qualify under [Section 355 of the Code] involve a distributing corporation or a controlled corporation that elects to be a REIT,” and such transactions “involve significant concerns” relating to certain of the tax-free spin-off requirements. It is unclear if these IRS announcements will affect Darden’s ability to receive the IRS Ruling, but such announcements do not change the current law applicable to the Spin-Off. In addition, the IRS Ruling, even if received, will not address all of the requirements for tax-free treatment of the Spin-Off, and Darden expects to receive the Spin-Off Tax Opinion from Skadden, Arps with respect to such treatment in its entirety. The Spin-Off Tax Opinion is also expected to address any issues on which the IRS may decline to rule.
Assuming the Spin-Off qualifies as tax-free under Sections 368(a)(1)(D) and 355 of the Code, for U.S. federal income tax purposes:
no gain or loss will be recognized by Darden as a result of the Spin-Off;
no gain or loss will be recognized by, or be includible in the income of, a holder of Darden common stock solely as a result of the receipt of our common stock in the Spin-Off;
the aggregate tax basis of the shares of Darden common stock and shares of our common stock, including any fractional share deemed received, in the hands of each Darden shareholder immediately after the Spin-Off will be the same as the aggregate tax basis of the shares of Darden common stock held by such holder immediately before the Spin-Off, allocated between the shares of Darden common stock and shares of our common stock, including any fractional share deemed received, in proportion to their relative fair market values immediately following the Spin-Off;
the holding period with respect to shares of our common stock received by Darden shareholders will include the holding period of their shares of Darden common stock, provided that such shares of Darden common stock are held as capital assets immediately following the Spin-Off;
Darden shareholders that have acquired different blocks of Darden common stock at different times or at different prices are urged to consult their tax advisors regarding the allocation of their aggregate adjusted basis among, and their holding period of, our shares distributed with respect to blocks of Darden common stock; and
a holder of Darden common stock who receives cash in lieu of a fractional share of our common stock in the Spin-Off will recognize capital gain or loss measured by the difference between the tax basis of the fractional share deemed to be received, as determined above, and the amount of cash received.
Although a private letter ruling from the IRS is generally binding on the IRS, the IRS Ruling will be based on certain facts and representations and undertakings, from Darden and us that certain necessary conditions to obtain tax-free treatment under the Code have been satisfied. Furthermore, as a result of the IRS’s general ruling policy with respect to distributions under

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Section 355 of the Code, the IRS will only rule on significant issues relevant to the tax-free treatment of such a distribution. Accordingly, the Spin-Off is conditioned upon the receipt by Darden of the Spin-Off Tax Opinion, in which Skadden, Arps is expected to conclude that the Spin-Off will qualify as tax-free under Sections 355 and 368(a)(1)(D) of the Code.
The Spin-Off Tax Opinion will rely on the IRS Ruling (if received) as to matters covered by such ruling. The Spin-Off Tax Opinion will be based on, among other things, current law and certain assumptions and representations as to factual matters made by Darden and Four Corners. Any change in currently applicable law, which may or may not be retroactive, or the failure of any factual representation or assumption to be true, correct and complete in all material respects, could adversely affect the conclusions reached by counsel in the Spin-Off Tax Opinion. The Spin-Off Tax Opinion will not be binding on the IRS or the courts, and the IRS or the courts may not agree with the opinion. The Spin-Off Tax Opinion will be expressed as of the date issued and will not cover subsequent periods. As a result, the Spin-Off Tax Opinion is not expected to be issued until after the date of this information statement. An opinion of counsel represents counsel’s best legal judgment based on current law and is not binding on the IRS or any court. We cannot assure you that the IRS will agree with the conclusions expected to be set forth in the Spin-Off Tax Opinion, and it is possible that the IRS or another tax authority could adopt a position contrary to one or all of those conclusions and that a court could sustain that contrary position. If any of the facts, representations, assumptions, or undertakings described or made in connection with the IRS Ruling or the Spin-Off Tax Opinion are not correct, are incomplete or have been violated, the IRS Ruling could be revoked retroactively or modified by the IRS, and our ability to rely on the Spin-Off Tax Opinion could be jeopardized. We are not aware of any facts or circumstances, however, that would cause these facts, representations, or assumptions to be untrue or incomplete, or that would cause any of these undertakings to fail to be complied with, in any material respect.
If, notwithstanding the conclusions that we expect to be included in the IRS Ruling (if received) and the Spin-Off Tax Opinion, it is ultimately determined that the Spin-Off does not qualify as tax-free under Sections 355 and 368(a)(1)(D) of the Code, as applicable, for U.S. federal income tax purposes, then Darden would recognize taxable gain in an amount equal to the excess, if any, of the fair market value of the shares of our common stock held by it over its tax basis in such shares. In addition, each Darden shareholder that receives shares of our common stock in the Spin-Off would be treated as receiving a distribution in an amount equal to the fair market value of our common stock that was distributed to the shareholder, which would generally be taxed as a dividend to the extent of the shareholder’s pro rata share of Darden’s current and accumulated earnings and profits, including Darden’s taxable gain, if any, on the Spin-Off, then treated as a non-taxable return of capital to the extent of the shareholder’s basis in the Darden stock and thereafter treated as capital gain from the sale or exchange of Darden stock.
Even if the Spin-Off otherwise qualifies for tax-free treatment under Sections 368(a)(1)(D) and 355 of the Code, the Spin-Off may result in corporate level taxable gain to Darden under Section 355(e) of the Code if 50% or more, by vote or value, of our stock or Darden’s stock is treated as acquired or issued as part of a plan or series of related transactions that includes the Spin-Off. If an acquisition or issuance of our stock or Darden’s stock triggers the application of Section 355(e) of the Code, Darden would recognize taxable gain as described above, but the distribution would generally be tax-free to each of Darden’s shareholders, as described above.
U.S. Treasury regulations require certain U.S. Holders who are “significant distributees” and who receive common stock in the Spin-Off to attach to their U.S. federal income tax returns for the year in which the Spin-Off occurs a statement setting forth certain information with respect to the transaction. Darden will provide shareholders who receive our common stock in the Spin-Off with the information necessary to comply with such requirement. Holders are urged to consult their tax advisors to determine whether they are significant distributees required to provide the foregoing statement.
Cash in Lieu of Fractional Shares
No fractional shares of our common stock will be distributed to Darden shareholders in connection with the Spin-Off. All such fractional shares resulting from the Spin-Off will be aggregated and sold by the transfer agent, and the proceeds, if any, less any brokerage commissions or other fees, will be distributed to Darden shareholders in accordance with their fractional interest in the aggregate number of shares sold. A holder that receives cash in lieu of a fractional share of our common stock as a part of the Spin-Off will generally recognize capital gain or loss measured by the difference between the cash received for such fractional share and the holder’s tax basis in the fractional share determined as described above. Any such capital gain or

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loss will be long-term capital gain or loss if a Darden shareholder held such stock for more than one year at the completion of the Spin-Off. Long-term capital gains generally are subject to preferential rates of U.S. federal income tax for certain non-corporate U.S. holders (including individuals). The deductibility of capital losses is subject to significant limitations.
Conditions to the Spin-Off
The Darden board of directors has reserved the right to amend, modify, abandon or otherwise terminate the Spin-Off and the related transactions at any time prior to the distribution date even if all of the conditions to the Spin-Off have been satisfied. This means that, even if all the conditions set forth below are met, Darden may amend, modify, abandon or otherwise terminate the planned distribution of common stock of Four Corners if at any time the board of directors of Darden determines, in its sole and absolute discretion, that the distribution of such common stock is not in the best interests of Darden and its shareholders or that legal, market or regulatory conditions or other circumstances are such that the Spin-Off is no longer advisable at the time. If Darden’s board of directors determines to cancel the Spin-Off, shareholders of Darden will not receive any distribution of Four Corners common stock and Darden will be under no obligation whatsoever to its shareholders to distribute such shares.
Absent a determination of Darden’s board of directors to the contrary, we expect that the Spin-Off will be effective on the distribution date, provided that the following conditions, among others, have been satisfied or waived by the board of directors of Darden, in its sole discretion:
each of the Separation and Distribution Agreement, the Leases, the Tax Matters Agreement, the Transition Services Agreement, the Employee Matters Agreement, and the Franchise Agreements shall have been duly executed and delivered by the parties thereto;
certain reorganization steps shall have been completed in accordance with the plan of reorganization contemplated in the Separation and Distribution Agreement;
Darden shall have received the Spin-Off Tax Opinion in form and substance satisfactory to Darden;
the boards of Darden and Four Corners shall have received such solvency and surplus opinions from an independent financial advisory firm in connection with the Spin-Off, each in such form and substance as they shall deem necessary, appropriate or advisable;
the SEC shall have declared effective our registration statement on Form 10, of which this information statement is a part, under the Exchange Act, and no stop order relating to the registration statement shall be in effect, and no proceedings for such purpose shall be pending before, or threatened by, the SEC, and this information statement shall have been mailed to holders of Darden common stock as of the record date or shall have been posted online with a notice the availability thereof having been mailed to the holders of Darden common stock as of the record date;
such registration statements on Form S-8 as are necessary and appropriate to register the equity awards contemplated in this information statement to be advisable for granting to our directors and employees and Darden shall have been filed with the SEC and shall have become effective;
all actions and filings necessary or appropriate under applicable federal, state or foreign securities or “blue sky” laws and the rules and regulations thereunder shall have been taken and, where applicable, become effective or been accepted;
the common stock to be delivered in the Spin-Off shall have been accepted for listing on the NYSE, subject to compliance with applicable listing requirements;
no order, injunction or decree issued by any court of competent jurisdiction or other legal restraint or prohibition preventing consummation of the Spin-Off or the Reorganization, shall be threatened, pending or in effect;
all required governmental and third-party approvals shall have been obtained and be in full force and effect;
we shall have entered into the financing transactions substantially as described in this information statement and contemplated to occur on or prior to the Spin-Off, and any required consents or amendments under  any instrument to which Darden is a party shall have become effective and shall be in full force and effect;

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we shall have transferred to Darden all of our common stock;
Darden and Four Corners shall each have taken all necessary actions that may be required to provide for the adoption by Four Corners of its Articles of Amendment and Restatement and Amended and Restated Bylaws, and Four Corners shall have filed its Articles of Amendment and Restatement with the Maryland State Department of Assessments and Taxation;
Darden and Four Corners shall have taken all actions as may be necessary to approve the stock-based employee benefit plans of Four Corners in order to satisfy the applicable rules and regulations of the NYSE; and
no event or development shall have occurred or exist that, in the judgment of the board of directors of Darden, in its sole discretion, makes it inadvisable to effect the Spin-Off.
Solvency and Surplus Opinion
In furtherance of the related condition referenced above, prior to the Spin-Off the boards of directors of Darden and Four Corners expect to obtain an opinion from an independent financial advisory firm that, after giving effect to the consummation of Reorganization and the Spin-Off, the fair value of the assets of each of Darden and Four Corners will exceed its debts, that each of Darden and Four Corners should each be able to pay its respective debts as they become due in the usual course of business, that neither Darden nor Four Corners will have an unreasonably small amount of assets (or capital) for the operation of the businesses in which each is engaged or in which management has indicated each intends to engage, and that both Darden and Four Corners have legally available funds to effect the distribution contemplated by the Reorganization and the Spin-Off under the applicable state corporate law requirements.
Regulatory Approvals
We must complete the necessary registration under U.S. federal securities laws of our common stock, as well as satisfy the applicable NYSE listing requirements for such shares among other required regulatory approvals in connection with the Spin-Off. See “—Conditions to the Spin-Off.”
No Appraisal Rights
Darden shareholders will not have any appraisal rights in connection with the Spin-Off.
Accounting Treatment
At the completion of the Spin-Off, our balance sheet will include the assets and liabilities associated with the Four Corners Properties and the assets and liabilities of the LongHorn San Antonio Business. Our assets and liabilities will be recorded at their respective historical carrying values at the completion of the Spin-Off in accordance with the provisions of FASB ASC 505-60, “Spinoffs and Reverse Spinoffs.”
Financial Advisors
JPMorgan Securities LLC (“J.P. Morgan”) and Moelis & Company (“Moelis”) are providing financial advice in connection with the Spin-Off. Each was retained in connection with the transaction because of each firm’s familiarity with Darden’s assets and operations, and each firm’s qualifications and reputation.
Reasons for Furnishing this Information Statement
We are furnishing this information statement solely to provide information to Darden shareholders who will receive shares of our common stock in the Spin-Off. You should not construe this information statement as an inducement or encouragement to buy, hold or sell any of our securities or any securities of Darden. We believe that the information contained in this information statement is accurate as of the date set forth on the cover. Changes to the information contained in this information statement may occur after that date, and neither we nor Darden undertake any obligation to update the information except in the normal course of Darden’s business and our public disclosure obligations and practices.

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DIVIDEND POLICY
We intend to elect and qualify to be subject to tax as a REIT for U.S. federal income tax purposes commencing with our taxable year beginning January 1, 2016. Commencing with our taxable year beginning January 1, 2016, we expect to initially pay dividends in an amount equal to $1.35 per share per annum. Based on a distribution ratio in the Spin-Off of one share of Four Corners common stock for every three shares of Darden common stock, following the Spin-Off, the initial combined dividend level on the Four Corners common stock and the Darden common stock is expected to be at least equal to the dividend level on the Darden common stock prior to the Spin-Off. We may pay a portion of our dividends in common stock. In no event will the annual dividend be less than 90% of our REIT taxable income on an annual basis, determined without regard to the dividends paid deduction and excluding any net capital gains. U.S. federal income tax law generally requires that a REIT distribute annually at least 90% of its REIT taxable income, without regard to the deduction for dividends paid and excluding net capital gains, and that it pay regular corporate rates to the extent that it annually distributes less than 100% of its taxable income.
Darden will allocate its accumulated earnings and profits (as determined for U.S. federal income tax purposes) for periods prior to the Spin-Off between Darden and Four Corners in a manner that, in its best judgment, is in accordance with the Code. As a result of our election to be treated as a REIT for U.S. federal income tax purposes, in order to comply with certain REIT qualification requirements, we intend to declare the Purging Distribution. The Purging Distribution will be paid to Four Corners shareholders in a combination of cash and Four Corners stock, with the cash portion constituting at least 20% of the total amount of the Purging Distribution. We expect to pay the majority of the Purging Distribution in Four Corners stock. Additionally, we expect to declare the Purging Distribution in 2016 and to make the Purging Distribution no later than January 31, 2017. We currently expect that the aggregate amount of the Purging Distribution will be between approximately $300 million and $400 million. See “The Spin-Off—The Purging Distribution.”
Initially, cash available for distribution to our shareholders will be derived solely from the rental payments under the Leases and the income from operations of the LongHorn San Antonio Business. All dividends will be made by us at the discretion of our board of directors and will depend on the financial position, results of operations, cash flows, capital requirements, debt covenants (which are expected to include limits on dividends), applicable law and other factors as our board of directors deems relevant. Our board of directors has not yet determined when any dividends will be declared or paid, although we currently expect that dividends will be paid on a quarterly basis. We cannot guarantee, and there can be no assurance, that we will declare or pay any dividends or distributions.

54


The following table describes our pro forma net income for the 12 months ended June 30, 2015, and the adjustments we made to calculate our estimated cash available for distribution for the 12 months ending June 30, 2016:
(Dollars in thousands)
 
 
Pro forma net income for the 12 months ended December 31, 20146
 
$
25,161

Add: incremental income from reduced depreciation expense for the 12 months ended June 30, 2015
 
1,539

Less: incremental interest expense for the 12 months ended June 30, 2015
 
(57
)
Less: incremental income tax expense for the 12 months ended June 30, 2015
 
(564
)
Pro forma net income for the 12 months ended June 30, 2015
 
26,079

Add: incremental cash based rental revenue1
 
2,134

Less: incremental general and administrative expenses2
 
(7,000
)
Estimated cash flow from incremental cash operating activities for the 12 months ended June 30, 2016
 
21,213

Add: real estate depreciation
 
45,825

Add: income tax expense3
 
14,888

Add: non-cash interest for fees paid to lenders and LIBOR interest rate cap4
 
2,028

Less: straight line rental revenue5
 
(10,322
)
Estimated cash available for distribution for the 12 months ended June 30, 2016
 
73,632

Estimated annual dividend ($1.35 per share, 42,444,994 common shares issued and outstanding)
 
(57,301
)
Estimated excess cash available for the 12 months ended June 30, 2016 after estimated dividend distributions
 
$
16,331


Note:
Information presented in the table above includes certain estimates with respect to cash interest and other cash expenses. Actual amounts may vary materially based on market conditions following the time the Spin-Off is consummated.
1 

Adjusts to recognize the additional cash received from rental income as a result of the annual 1.5% rent escalation terms in the Leases.
2 

Adjusts to recognize cash compensation of employees not hired by us as of the date of this information statement, legal fees and board of director fees, stock exchange listing fees and other shareholder-related costs currently not reflected in our pro forma net income for the twelve month period ended June 30, 2015.
3 

Adjusts to remove income tax expense included in our pro forma net income for the twelve month period ended June 30, 2015 that will not be incurred following the effective date of our election and qualification to be subject to tax as a REIT for U.S. federal income tax purposes. The adjustment does not include the income tax benefit of our TRS, which we will continue to incur after our election and qualification to be subject to tax as a REIT.
4 

Adjusts to remove non-cash interest from pro forma net income related to the amortization of the fees paid to the lenders of the term loan we intend to incur in connection with the Spin-Off using the effective interest method and the amortization of the LIBOR interest rate cap.
5 

Adjusts to remove the impact of the annual 1.5% rent escalation term of the Leases which result in recording rental revenue on a straight line basis over the expected term of the Leases and to reflect cash paid for rent.
6 

Consistent with industry standards, we expect to pay distributions in cash that are determined with regard to our Adjusted Funds From Operations (“AFFO”), which will be calculated by starting with the National Association of Real Estate Investment Trusts’ (“NAREIT”) definition of funds from operations (“FFO”), which is the net income (computed in accordance with generally accepted accounting principles (“GAAP”)), excluding gains (or losses) from sales of property, plus real estate depreciation. The NAREIT definition will then be adjusted to eliminate the impact of non-recurring items that are not reflective of ongoing operations and certain non-cash items that reduce or increase net income (loss) in accordance with GAAP, and it is also adjusted for income tax expense (other than income tax expenses of our TRS) recorded for our fiscal year 2015 that will not be incurred following the effective date of our election and qualification to be subject to tax as a REIT for U.S. federal income tax purposes, resulting in AFFO for us. Our computation of AFFO may differ from the methodology for calculating AFFO used by other equity REITs, and, therefore, may not be comparable to such other REITs.

55


 
Our pro forma financial results for the year ended December 31, 2014 anticipate that we will recognize estimated annual rental revenues of $104.7 million and generate annual operating income before taxes of $40.5 million. After adjusting for non-cash depreciation of real estate assets of $47.4 million, and non-cash interest expense of both fees paid to lenders and the LIBOR interest rate cap of $2.0 million associated with debt we intend to incur in connection with the Spin-Off, we anticipate that we would have sufficient funds to support our projected quarterly dividend.
 
FFO and AFFO are performance measures and are not measures of cash available for distribution to our shareholders. The table set forth below presents a reconciliation of pro forma net income to FFO and as further reconciled to AFFO for the twelve-month period ended December 31, 2014.
 
(Dollars in thousands)
 
 
 
 
 
Pro forma net income
 
 
 
$
25,161

 
Depreciation of real estate assets
 
 
 
47,364

 
Pro forma FFO
 
 
 
72,525

 
Income tax expense
 
 
 
15,948

 
Pro forma FFO excluding income tax expense a
 
 
 
88,473

 
Straight line rental revenue b
 
 
 
(10,322
)


Non-cash interest for fees paid to lenders and LIBOR interest rate cap c
 
 
 
2,005

 
Pro forma AFFO d
 
 
 
$
80.156

 
Note: Information presented in the table above includes certain estimates with respect to cash interest and other cash expenses. Such estimates could vary materially based on market conditions following the time the Spin-Off is consummated.
 
a Adjusts to remove income tax expense included in our pro forma net income for our fiscal year 2015 that will not be incurred following the effective date of our election and qualification to be subject to tax as a REIT for U.S. federal income tax purposes. The adjustment does not include the income tax benefit of our TRS, which we will continue to incur after our election and qualification to be subject to tax as a REIT.
 
b Adjusts to remove the impact of the annual 1.5% rent escalation terms of the lease which result in recording rental revenue on a straight line basis over the expected term of the lease and to reflect cash paid for rent.
 
c Adjusts to remove non-cash interest from pro forma net income related to the amortization of the fees paid to the lenders of the term loan using the effective interest method and the amortization of the LIBOR interest rate cap.
 
d Pro forma AFFO does not include approximately $7.0 million of incremental general and administrative costs resulting from Four Corners operating as an independent, publicly traded, self-administered entity, including cash compensation of employees not hired as of the date of this filing, legal and board of director fees, stock exchange listing fees, rent and other shareholder-related cost. Non-cash stock-based compensation, incentive-based cash compensation and acquisition costs are not included in these amounts. Approximately $7.0 million of incremental general and administrative expenses are included in the calculation of cash available for distribution above.
We currently intend to pay quarterly dividends. We anticipate that our dividends will generally be taxable as ordinary income to our shareholders, although a portion of the dividends may be designated by us as qualified dividend income or capital gain or may constitute a return of capital. We will furnish annually to each of our shareholders a statement setting forth dividends paid during the preceding year and their characterization as ordinary income, return of capital, qualified dividend income or capital gain. For a more complete discussion of the U.S. federal income tax treatment of distributions to our shareholders, see “U.S. Federal Income Tax Considerations—Taxation of Shareholders—Taxation of Taxable U.S. Shareholders.”
Our dividend policy enables us to review from time to time alternative funding sources to pay our required distributions. We presently anticipate that any future property acquisitions will be financed through the proceeds of debt we expect to incur in connection with the Spin-Off, other debt financing or the issuance of equity securities. To the extent those funding sources are insufficient to meet our cash needs, or the cost of such financing exceeds the cash flow generated by the acquired properties for any period, cash available for distribution could be reduced. To the extent that our cash available for distribution is less than the amount required to be distributed under the REIT provisions of the Code, we may consider various funding sources to cover

56


any such shortfall, including borrowing under available debt facilities, selling certain of our assets or using a portion of the net proceeds we receive in future offerings. However, the sale of any properties acquired in connection with the Spin-Off within a ten-year period following the effective date of our REIT election may subject us to adverse consequences. See “Risk Factors—Risks Related to Our Taxation as a REIT.”
For purposes of satisfying the minimum distribution requirement to qualify for and maintain REIT status, our taxable income will be calculated without reference to our cash flow. Consequently, under certain circumstances, we may not have available cash to pay our required distributions and a portion of our distributions may consist of our stock or our debt instruments. In either event, a shareholder of ours will be required to report dividend income as a result of such distributions even though we distributed no cash or only nominal amounts of cash to such shareholder. The IRS Ruling, if received, would allow us to make REIT distributions in our first two taxable years as a REIT in a combination of cash and common stock (similar to the Purging Distribution) to satisfy the REIT annual distribution requirement and qualify for the dividends paid deduction for U.S. federal income tax purposes. For more information, see “U.S. Federal Income Tax Considerations—Taxation of REITs in General—Annual Distribution Requirements.” We currently believe that we will have sufficient available cash to pay our required distribution for 2016 in cash, but there can be no assurance that this will be the case.

57


DESCRIPTION OF FINANCING AND MATERIAL INDEBTEDNESS
The following summary sets forth information based on our current expectations about the financing arrangements anticipated to be entered into prior to consummation of the Spin-Off. However, we have not yet entered into any commitments with respect to such financing arrangements, and, accordingly, the terms of such financing arrangements have not yet been determined, remain under discussion and are subject to change, including as a result of market conditions.
Credit Agreement
The following summarizes some of the currently expected terms of our credit agreement, which we expect to enter into prior to consummation of the Spin-Off. However, the following summary does not purport to be complete, and the terms of the credit agreement have not yet been finalized. There may be changes to the terms of the credit agreement.
In connection with the Spin-Off, we anticipate that we will enter into a credit agreement providing for a revolving credit facility in an aggregate principal amount of $350.0 million and a term loan facility in an aggregate principal amount of $400.0 million. The credit facilities provided in the credit agreement (the “credit facilities”) are expected to be provided by a syndicate of banks and other financial institutions, as lenders, JPMorgan Chase Bank, N.A. as administrative agent and J.P. Morgan Securities LLC, Barclays Bank PLC and Merrill Lynch, Pierce, Fenner & Smith, Inc. as joint lead arrangers and joint bookrunners. We anticipate that the credit facilities will have an accordion feature such that the aggregate principal amount of the credit facilities can be increased by an additional amount not to exceed $1.0 billion in aggregate, subject to certain conditions, including one or more new or existing lenders agreeing to provide commitments for such increased amount. We additionally anticipate incurring total lender syndication fees in connection with our financing of approximately 1% (or $7.5 million) of the aggregate principal amount of the term loan and revolving credit facility of up to $750.0 million.
Structure and Term
We anticipate that the obligations of Four Corners OP under the credit facilities will be guaranteed, on a joint and several basis, by substantially all of its subsidiaries.
We anticipate that obligations under the credit facilities will be secured, with effect from the time that the Spin-Off is consummated, by a pledge of all of the ownership interests in Four Corners OP that are owned by the Company.
The credit facilities shall be denominated in U.S. dollars.
We anticipate that the revolving credit facility shall mature four years from the closing date of the credit agreement and the term loan facility shall mature five years from the closing date of the credit agreement. Closing of the credit facilities is expected to take place on the date that the Spin-Off is consummated. We anticipate that Four Corners OP shall have the option of extending the maturity date of the revolving credit facility for up to one year on terms to be determined.
Interest
We anticipate that Four Corners OP will be able to elect that borrowings made under the credit facilities will bear interest either at an alternative base rate (“ABR interest rate loans”) or at a LIBOR interest rate (adjusted for any statutory reserve requirements for Eurocurrency liabilities) (“LIBOR interest rate loans”), in each case plus an applicable margin.
The applicable margin with respect to ABR interest rate loans and LIBOR interest rate loans is determined based on a leveraged based pricing grid, as set forth below.

58


 
 
ABR interest rate loans
 
LIBOR interest rate loans
Total Leverage Ratio
 
Revolving credit facility
 
Term loan facility
 
Revolving credit facility
 
Term loan facility
Less than 40%
 
0.75
%
 
0.70
%
 
1.75
%
 
1.70
%
Greater than or equal to 40% but less than 45%
 
0.875
%
 
0.825
%
 
1.875
%
 
1.825
%
Greater than or equal to 45% but less than 50%
 
1.00
%
 
0.95
%
 
2.00
%
 
1.95
%
Greater than or equal to 50%
 
1.50
%
 
1.45
%
 
2.50
%
 
2.45
%
At the consummation of the Spin-Off, we anticipate that our total leverage ratio will be approximately 26% and therefore the applicable margins will be those set forth under the row headed “Less than 40%.”
We anticipate that the default rate following the occurrence and during the continuation of an event of default under the credit agreement will be an increase of 2.0% per annum over the prevailing interest rate on outstanding loans under the credit facilities.
We anticipate hedging the interest rate on 100% of the term loan, including entering into an interest rate swap to fix the interest rate on 50% of the term loan facility amount and entering into an interest rate option to cap LIBOR at 3.0% on the remaining 50% of the term loan facility amount.
Conditions, Covenants and Events of Default
We anticipate that funding of the credit facilities will be subject to closing conditions that are customary for credit facilities of this nature.
We anticipate that Four Corners OP will be able to voluntarily prepay loans under the credit facilities at any time without any penalty, other than breakage fees incurred in connection with, among other things, any prepayment of a loan on a date other than the last day of the relevant interest period.
The credit agreement is expected to contain customary affirmative and negative covenants that, among other things, restrict, subject to certain exceptions incurrence of debt, incurrence of secured debt, the ability of Four Corners OP and the guarantors to enter into mergers, consolidations, sales of assets and similar transactions, limitations on distributions and other restricted payments, and limitations on transactions with affiliates and customary reporting obligations.
In addition, we anticipate that we will be required to comply with the following financial covenants: (1) maximum consolidated total leverage ratio, (2) maximum consolidated secured leverage ratio, (3) maximum consolidated secured recourse debt, (4) minimum fixed charge coverage ratio, (5) minimum consolidated tangible net worth, (6) maximum unhedged floating rate debt, (7) maximum unencumbered leverage ratio and (8) minimum unencumbered debt service coverage ratio.
We anticipate that the credit agreement will contain customary events of default including, without limitation, payment defaults, violation of covenants and other performance defaults, defaults on payment of indebtedness and monetary obligations, bankruptcy-related defaults, judgment defaults, REIT status default and the occurrence of certain change of control events.
Use of Proceeds
We expect that $351.1 million in cash funded from the proceeds of our term loan borrowings will be transferred to Darden, together with all of the outstanding Four Corners common stock in connection with the Spin-Off, and will be used to retire certain Darden debt. We expect to use a portion of the net proceeds from borrowings under the credit agreement to pay all or a portion of the cash portion of the Purging Distribution, which we would expect to make by January 31, 2017. The remaining net proceeds are expected to be available to us for working capital purposes, to fund acquisitions and for general corporate purposes. We will be able to repay and reborrow loans made under the revolving credit facility from time to time, subject to the satisfaction of certain customary conditions.

59


CAPITALIZATION
The following table sets forth the LongHorn San Antonio Business cash and capitalization as of June 30, 2015 on a historical basis and our cash and capitalization as of June 30, 2015 on a pro forma basis to give effect to our capitalization, the Spin-Off and the related transactions, as if they occurred on June 30, 2015. Explanation of the pro forma adjustments made to the LongHorn San Antonio Business’s combined historical financial statements can be found under “Four Corners’ Unaudited Pro Forma Consolidated Financial Data.” The following table should be reviewed in conjunction with “Four Corners’ Unaudited Pro Forma Consolidated Financial Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the LongHorn San Antonio Business’s historical combined financial statements and accompanying notes included elsewhere in this information statement.
 
As of June 30, 2015
 
LongHorn
San Antonio Business Historical
Four Corners Pro Forma
 
(Dollars in thousands)
Cash
$
7

$
74,500

Long-term debt:
 
 
Revolving credit facility1


Term loan facility2

392,500

Total debt

$
392,500

 
 
 
Parent company equity / shareholders’ equity:
 
 
Preferred stock, par value $0.0001 per share; no authorized, issued and outstanding shares: (actual); 25,000,000 shares authorized and no shares issued or outstanding, respectively: (pro forma)


Common stock and additional paid-in capital, par value $0.0001 per share; no authorized, issued and outstanding shares: (actual); 500,000,000 shares authorized, 42,443,994 shares issued and outstanding: (pro forma)

5

Parent company investment
8,974


Invested capital

443,463

Total parent company equity/ shareholders’ equity
8,974

443,463

Total capitalization
$
8,974

$
835,968

1 In connection with the Spin-Off, we anticipate that we will enter into a revolving credit facility in an aggregate principal amount of $350.0 million, which we anticipate will be undrawn at the date that the Spin-Off is consummated.
2 Long-term debt is presented net of lender fees of $7.5 million.


60


FOUR CORNERS’ UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA
The following unaudited pro forma consolidated financial statements, prepared in accordance with Article 11 of Regulation S-X, present our unaudited pro forma consolidated balance sheet as of June 30, 2015 and our unaudited pro forma consolidated statements of income for the six months ended June 30, 2015 and the year ended December 31, 2014.
The unaudited pro forma consolidated financial statements have been derived by applying pro forma adjustments to the historical consolidated financial statements of Four Corners, the Four Corners Properties and the LongHorn San Antonio Business included elsewhere in this information statement. Upon completion of the Spin-Off, our balance sheet will include the assets and liabilities associated with Four Corners Properties and the assets and liabilities of the LongHorn San Antonio Business. Our assets and liabilities will be recorded at their carry over basis at the completion of the Spin-Off in accordance with the provisions of FASB ASC 505-60. See “Treatment of the Spin-Off - Accounting Treatment”.
The pro forma adjustments give effect to events that are (1) directly attributable to the transactions referred to below, (2) factually supportable, and (3) with respect to the statements of income, expected to have a continuing impact on us. The adjustments necessary to fairly present the unaudited pro forma consolidated financial statements have been based on available information and assumptions that we believe are reasonable. The adjustments are described in the notes to the unaudited pro forma consolidated financial statements and present how our financial statements may have appeared had our capital structure reflected the below transactions as of the dates noted below.
The unaudited pro forma consolidated balance sheet assumes the pro rata distribution by Darden to its shareholders of all of our outstanding shares of common stock, the Spin-Off and the related transactions occurred on June 30, 2015. The unaudited pro forma consolidated statements of income for the six months ended June 30, 2015 and the year ended December 31, 2014 assumes the Spin-Off and the related transactions occurred on January 1, 2014.
The unaudited pro forma consolidated financial statements are presented for illustrative purposes only and do not purport to represent our financial position or results of operations that would actually have occurred had the transactions referred to below been consummated on June 30, 2015 for the unaudited pro forma consolidated balance sheet and on January 1, 2014 for the unaudited pro forma consolidated statements of income, or to project our financial positions or results of operations for any future date or period.
The following unaudited pro forma consolidated financial statements give effect to the Spin-Off and the related transactions, including: (i) the rental income associated with the leasing of the Four Corners Properties to Darden and the related depreciation expense on the leased properties, (ii) incremental costs related to the Franchise Agreements, (iii) incremental costs recorded within general and administrative expenses related to employment agreements entered into with our President and Chief Executive Officer, and Chief Financial Officer, and arrangement letters entered into with our audit firm and other third party service providers, (iv) the incurrence of long-term debt by us, the payment of fees to our lenders and the related interest expense, (v) the associated income tax expense as a “C-corporation” for the above items, (vi) the elimination of the parent company investment account balances attributable to the LongHorn San Antonio Business and the Four Corners Properties, (vii) the net cash distributed to Darden in connection with the Spin-Off and (viii) the distribution of 42,443,994 shares of our common stock by Darden pro rata to Darden shareholders in the Spin-Off.
Our unaudited pro forma consolidated financial statements do not give effect to the potential impact of current financial conditions, any anticipated synergies, operating efficiencies or cost savings that may result from the transactions described above. Additionally, Darden will provide us with certain administrative and support services on a transition basis pursuant to the Transition Services Agreement. We expect that the fees charged to us for transition services furnished pursuant to the Transition Services Agreement will approximate the actual costs incurred by Darden in providing the transition services to us for the relevant periods. Our unaudited pro forma consolidated financial statements do not give effect to the Transition Services Agreement with Darden, as the majority of these services are not expected to be recurring in nature and therefore do not have a continuing impact on our unaudited pro forma consolidated statements of income.

61


We expect to incur incremental general and administrative costs resulting from Four Corners operating as an independent, publicly traded, self-administered entity, including cash compensation of employees not hired as of the date of this filing, legal and board of director fees, stock exchange listing fees and other shareholder-related costs estimated to be approximately $7.0 million on an annual basis. These amounts have not been recorded in the unaudited pro forma consolidated statements of income. Non-cash stock-based compensation, incentive-based cash compensation and acquisition costs are not included in these amounts.
We intend to elect and qualify to be subject to tax as a real estate investment trust (“REIT”) for U.S. federal income tax purposes, commencing with our taxable year beginning January 1, 2016. As a result of our election to be treated as a REIT for U.S. federal income tax purposes, in order to comply with certain REIT qualification requirements, we intend to declare the Purging Distribution to our shareholders to distribute our accumulated earnings and profits attributable to non-REIT years, including any earnings and profits allocated to us in connection with the Spin-Off and earnings and profits generated by us in our taxable year ending December 31, 2015. The election to be subject to tax as a REIT and the Purging Distribution are not reflected as pro forma adjustments in the unaudited pro forma consolidated financial statements. The Purging Distribution will distribute our accumulated earnings and profits (“E&P”) attributable to our non-REIT years, including the E&P allocated to us in connection with the Spin-Off and the E&P generated by us in our taxable year ending December 31, 2015. The Purging Distribution will be paid to our shareholders in a combination of cash and Four Corners stock, with the cash portion constituting at least 20% of the total amount of the Purging Distribution. We expect to pay the majority of the Purging Distribution in Four Corners stock and to declare the Purging Distribution in 2016 and to make the Purging Distribution no later than January 31, 2017. We currently expect that the aggregate amount of the Purging Distribution will be between approximately $300 million and $400 million. The expected Purging Distribution range was based upon an assumption of relative valuations and an accumulated earnings and profit analysis, using historic tax returns through the tax year ended 2014 and estimates for the tax year ended 2015. The amount of earnings and profits to be distributed is a complex factual and legal determination. See the risk factor captioned “There are uncertainties relating to the Purging Distribution.” Additionally, because we will not elect and qualify to be subject to tax as a REIT for U.S. federal income tax purposes until January 1, 2016, we will incur a corporate tax expense for our fiscal year 2015. We will not continue to incur such an expense following the effective date of our election and qualification to be subject to tax as a REIT for U.S. federal income tax purposes with the exception that we will continue to incur a federal income tax expense for our TRS.
The non-recurring costs to effectuate the separation and our public company registration will be entirely borne by Darden, while Four Corners will pay its lender fees (estimated at 1% of the aggregate principal amount of the term loan and revolving credit facility, which has an aggregate facility size of up to $750.0 million) using a portion of the proceeds of the term loan prior to making the cash distribution to Darden.
This unaudited pro forma consolidated financial information should be read together with the other information contained in this information statement, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Description of Financing and Material Indebtedness” and both the Four Corners Properties and LongHorn San Antonio Business combined financial statements and the notes thereto.

62



FOUR CORNERS PROPERTY TRUST, INC.
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 2015
(Dollars in thousands)

 
As Reported
 
 
 
 
 
 
 
Four Corners
LongHorn San Antonio Business
 
Four Corners Properties
 
Pro Forma
Adjustments
 
Note
 
Pro Forma
ASSETS
 
 
 
 
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
 
 
 
 
Cash
$
1

$
7

 
$

 
$
392,500

 
A
 
$
74,508

 
 
 
 
 
 
(3,000
)
 
B
 

 
 
 
 
 
 
(315,000
)
 
C
 

 
 
 
 
 
 
 
 
 
 
 
Inventories

264

 

 

 
 
 
264

Prepaid expenses

54

 

 

 
 
 
54

Deferred income taxes

51

 

 

 
 
 
51

Total current assets
1

376

 

 
74,500

 
 
 
74,877

Land, buildings and equipment, net of accumulated depreciation of $551,525

11,375

 
827,322

 

 
 
 
838,697

Other assets

7

 

 
3,000

 
B
 
3,007

Total assets
$
1

$
11,758

 
$
827,322

 
$
77,500

 
 
 
$
916,581

LIABILITIES AND EQUITY
 
 
 
 
 
 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
 
 
 
 
Accounts payable
$

$
436

 
$

 
$

 
 
 
$
436

Accrued payroll

115

 

 

 
 
 
115

Other accrued taxes

223

 

 

 
 
 
223

Other current liabilities

384

 

 

 
 
 
384

Total current liabilities

1,158

 

 

 
 
 
1,158

 
 
 
 
 
 
 
 
 
 
 
Long-term debt


 

 
392,500

 
A
 
392,500

Deferred income taxes

1,008

 
77,829

 

 
 
 
78,837

Deferred rent

524

 

 

 
 
 
524

Other liabilities

94

 

 

 
 
 
94

Total liabilities

2,784

 
77,829

 
392,500

 
 
 
473,113

Equity:
 
 
 
 
 
 
 
 
 
 
Common stock and additional paid-in capital, par value $0.0001 per share; 500,000,000 shares authorized, 42,443,994 shares issued and outstanding: (pro forma)
1


 

 
4

 
D
 
5

Parent company investment
 
8,974

 
749,493

 
(758,467
)
 
E
 

Invested capital


 

 
(315,000
)
 
C
 
443,463

 
 
 
 
 
 
(4
)
 
D
 
 
 
 
 
 
 
 
758,467

 
E
 


Total equity
1

8,974

 
749,493

 
(315,000
)
 
 
 
443,468

Total liabilities and equity
$
1

$
11,758

 
$
827,322

 
$
77,500

 
 
 
$
916,581

See accompanying notes to unaudited pro forma consolidated financial data.

63



FOUR CORNERS PROPERTY TRUST, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 2015
(Dollars in thousands, except share and per share data)

 
As Reported LongHorn San Antonio Business
 
Pro Forma
Adjustments
 
Note
 
Pro Forma
Rental income
$

 
$
52,355

 
A
 
$
52,355

Sales, net
9,514

 
 
 
 
 
9,514

Total revenue
9,514

 
52,355

 
 
 
61,869

Cost and expenses:
 
 
 
 
 
 
 
Food and beverage
3,882

 
 
 
 
 
3,882

Restaurant labor
2,440

 
 
 
 
 
2,440

Restaurant expenses
1,499

 
 
 
 
 
1,499

Selling, general and administrative
1,027

 
598

 
C
 
2,661

 
 
 
1,036

 
D
 


Depreciation
397

 
22,919

 
B
 
23,316

Interest, net

 
7,184

 
E
 
7,184

Total costs and expenses
9,245

 
31,737

 
 
 
40,982

Income before income taxes
269

 
20,618

 
 
 
20,887

Income tax expense (benefit)
(11
)
 
7,851

 
F
 
7,840

Net income
$
280

 
$
12,767

 
 
 
$
13,047

 
 
 
 
 
 
 
 
Pro forma net income per share, basic and diluted:
 
 
 
 
G
 
$
0.31

 
 
 
 
 
 
 
 
Weighted average shares used to calculate pro forma net income per share, basic and diluted
 
 
 
 
G
 
42,443,994

See accompanying notes to unaudited pro forma consolidated financial data.

64



FOUR CORNERS PROPERTY TRUST, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 2014
(Dollars in thousands, except share and per share data)

 
As Reported LongHorn San Antonio Business
 
Pro Forma
Adjustments
 
Note
 
Pro Forma
Rental income
$

 
$
104,711

 
A
 
$
104,711

Sales, net
17,695

 
 
 
 
 
17,695

Total revenue
17,695

 
104,711

 
 
 
122,406

Cost and expenses:
 
 
 
 
 
 
 
Food and beverage
7,124

 
 
 
 
 
7,124

Restaurant labor
4,639

 
 
 
 
 
4,639

Restaurant expenses
3,011

 
 
 
 
 
3,011

Selling, general and administrative
2,168

 
1,113

 
C
 
5,382

 
 
 
2,101

 
D
 


Depreciation
863

 
46,501

 
B
 
47,364

Interest, net

 
14,415

 
E
 
14,415

Total costs and expenses
17,805

 
64,130

 
 
 
81,935

Income (loss) before income taxes
(110
)
 
40,581

 
 
 
40,471

Income tax expense (benefit)
(142
)
 
15,452

 
F
 
15,310

Net income
$
32

 
$
25,129

 
 
 
$
25,161

 
 
 
 
 
 
 
 
Pro forma net income per share, basic and diluted
 
 
 
 
G
 
$
0.59

 
 
 
 
 
 
 
 
Weighted average shares used to calculate pro forma net income per share, basic and diluted
 
 
 
 
G
 
42,443,994

See accompanying notes to unaudited pro forma consolidated financial data.


65

FOUR CORNERS PROPERTY TRUST, INC.
NOTES TO THE UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA

NOTE 1 - BASIS OF PRO FORMA PRESENTATION
On June 23, 2015, Darden announced its plan to separate its business into two separate and independent publicly traded companies: Darden, which will continue to operate a wide range of restaurant and dining options at various price points through its existing operations; and Four Corners. Darden will accomplish the separation by effecting an internal restructuring resulting in the establishment of Four Corners, a Maryland corporation and an indirect wholly-owned subsidiary of Darden. Four Corners was incorporated on July 2, 2015 and capitalized on July 16, 2015. Additionally, Four Corners OP will be established as our wholly-owned subsidiary and Kerrow has been established as our wholly-owned indirect subsidiary. Prior to the separation, Darden will contribute the equity of entities that hold the Four Corners Properties, which span 44 states and represent restaurants from five of Darden’s brands, and $36.1 million in cash, to Four Corners OP and six LongHorn Steakhouse restaurants located in the San Antonio, Texas area to Kerrow in exchange for all of Four Corners’ common stock. Of the six restaurant properties that make up the LongHorn San Antonio Business, three will be properties that we will lease to Kerrow and three will be owned by Kerrow, subject to ground leases. In connection with the separation, $351.1 million in cash funded from the proceeds of our term loan borrowings will be transferred to Darden. At the time of separation, Darden will distribute all of the outstanding shares of Four Corners’ common stock pro rata to the holders of Darden common stock in the Spin-Off. Unless otherwise indicated or except where the context otherwise requires, references to “we,” “us,” or “our” refer to Four Corners and its subsidiaries after giving effect to the transfer of the assets and liabilities from Darden.
The accompanying unaudited pro forma consolidated financial statements are presented to reflect the following:
Agreements with Darden – Pursuant to the Leases, we will lease the Four Corners Properties to one or more of Darden’s operating subsidiaries on a triple net basis with terms comparable to similar leases negotiated on an arm’s length basis. Under the Leases, we and certain of our subsidiaries that own the properties subject to the Leases will be the landlords, and one or more of Darden’s operating subsidiaries will be the tenant. The Leases will be triple-net leases that provide for an average initial term of approximately fifteen years with stated annual rental payments and no purchase options provided that Darden will have a right of first offer with respect to our sale of any Property and we will be prohibited from selling any Properties to (i) any nationally recognized casual or fine dining brand restaurant or entity operating the same or (ii) any other regionally recognized casual or fine dining brand restaurant or entity operating the same, with 25 or more units. Under the Leases the rent is subject to annual escalations of 1.5%, as well as, in most of the leases, a fair market value adjustment at the start of one of the renewal options.
The Franchise Agreements will provide that Darden will agree to provide certain franchising services to our subsidiary, Kerrow, which will operate the LongHorn San Antonio Business. The franchising services will consist of licensing the right to use and display certain trademarks in connection with the operation of the LongHorn San Antonio Business, marketing services, training and access to certain LongHorn operating procedures. The Franchise Agreements will also contain provisions under which Darden may provide certain technical support for the LongHorn San Antonio Business. The fees and conditions of these franchising services are expected to be on terms comparable to similar franchising services negotiated on an arm’s length basis.
Financing Transactions - In connection with the Spin-Off, we will enter into a credit agreement providing for a revolving credit facility in an aggregate principal amount of $350.0 million and a term loan facility in an aggregate principal amount of $400.0 million to be provided by a syndicate of banks and other financial institutions.
We will be able to elect that borrowings made under the credit facilities will bear interest either at an alternate base rate (“ABR interest rate loans”) or at a LIBOR adjusted rate (adjusted for any statutory reserve requirements for Eurocurrency liabilities) (“LIBOR interest rate loans”), in each case plus an applicable margin. We anticipate that the term loan facility will be fully drawn at the date that the Spin-Off is consummated and that the revolving credit facility will be undrawn at the date that the Spin-Off is consummated.
Income Taxes - We will be taxed as a C corporation and expect to pay U.S. federal corporate income taxes for our taxable year ending December 31, 2015. We intend to elect and qualify to be subject to tax as a REIT for U.S. federal income tax purposes commencing with our taxable year beginning on January 1, 2016. Our qualification as a REIT will depend upon our ability to meet, on a continuing basis, through actual investment and operating results, various complex requirements under the

66

FOUR CORNERS PROPERTY TRUST, INC.
NOTES TO THE UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA

Code, relating to, among other things, the sources of our gross income, the composition and value of our assets, our distribution levels and the diversity of ownership of our shares.
Transfer of Assets and Liabilities - Immediately following the Spin-Off, we will own the Four Corners Properties, the LongHorn San Antonio Business and $36.1 million in cash that will be contributed to us from Darden. Once the assets and business are transferred, we will record an elimination of the historical parent company investment account balances attributable to the LongHorn San Antonio Business and Four Corners Properties.
Distribution of Shares and Proceeds from Debt - We will distribute all shares of our common stock to Darden, all of which will be distributed pro rata to Darden shareholders through a tax-free distribution in the Spin-Off. In connection with the Spin-Off, $351.1 million in cash funded from the proceeds of our term loan borrowings will be transferred to Darden.
NOTE 2 - ADJUSTMENTS TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
A. Reflects the closing of our term loan facility in an aggregate principal amount of $400.0 million, net of fees paid to lenders of $7.5 million.
B. Reflects a one-time lender fee to cap 50% of our variable LIBOR interest rate at 3.0% over the life of the term loan for an estimated $3.0 million. This amount is presented within the Other Assets line item and also netted against the cash received from the term loan within the Cash line item on the balance sheet.
C. Reflects the transfer of cash of $351.1 million to Darden, net of $36.1 million received from Darden as part of the assets contributed to us in connection with the Spin-Off.
D. Reflects the distribution of 42,443,994 shares of our common stock to Darden, at a par value of $0.0001 per share and the reduction to invested capital.
E. Reflects the elimination of the parent company investment account balances attributable to the LongHorn San Antonio Business and Four Corners Properties.
(in thousands)
Adjustment for parent company investment in the LongHorn San Antonio Business
$
8,974

Adjustment for parent company investment in the Four Corners Properties
749,493

Invested capital
$
758,467

NOTE 3 - ADJUSTMENTS TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF INCOME
A. For the year ended December 31, 2014 and for the six months ended June 30, 2015, reflects the rental income associated with the Leases which we will recognize on a straight line basis to include the effects of base rent escalators of 1.5% annually over the initial term of the lease. Cash rent to be paid to us in the first lease year is expected to be approximately $94.4 million.
B. Reflects depreciation expense for the Four Corners Properties which have estimated lives ranging from two to 40 years.
C. Reflects the incremental expense related to the Franchise Agreements we will enter into with Darden pursuant to which Darden and its affiliates will provide to us for an agreed upon charge, various services to support the operations of the LongHorn San Antonio Business.
D. Reflects the incremental expense related to general and administrative expenses which include the employment of the President and Chief Executive Officer, and the Chief Financial Officer who have signed employment agreements, accounting outsourcing fees and external audit fees.
E. Reflects the associated interest expense related to the incurrence of new indebtedness with a weighted average LIBOR-based interest rate of 3.17% a year (including consideration of the LIBOR interest rate cap and an interest rate swap as described in the “Description of Financing and Material Indebtedness” section). The adjustment also reflects non-cash interest expense for

67

FOUR CORNERS PROPERTY TRUST, INC.
NOTES TO THE UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA

the amortization of the fees paid to lenders of $7.5 million as well as the amortization of the $3.0 million LIBOR interest rate cap fee paid to our lenders to enter into the LIBOR interest rate cap arrangement, which are amortized over the term of the debt instrument using the effective interest rate method. In addition, this adjustment reflects interest expense for the 0.35% undrawn commitment fee we incur on the undrawn revolving credit facility balance, which is assumed to be undrawn at the date that the Spin-Off is consummated.
Interest expense was calculated assuming constant debt levels throughout the periods presented. Interest expense may be higher or lower if our amount of debt outstanding changes. The actual interest rate will depend on market conditions when the debt is issued and the final composition of the debt structure is determined. A 1/8% change to the annual interest rate would change interest expense by approximately $0.1 million for the six months ended June 30, 2015 and $0.3 million for the year ended December 31, 2014.
F. Reflects the associated income tax expense for all of the adjustments noted above. The income tax provision was based on the estimated statutory tax rate of 38.1%.
We intend to elect and qualify to be subject to tax as a REIT for U.S. federal income tax purposes commencing with our taxable year beginning on January 1, 2016. As it is expected we will be taxable as a REIT and not a C corporation beginning in January 2016, only our LongHorn San Antonio Business, our taxable REIT subsidiary, will continue to be subject to federal income taxes commencing on January 1, 2016.
G. Our pro forma earnings per share is based upon the distribution of one share of our common stock for every three shares of Darden common stock, or 42,443,994 shares.
The number of our shares used to compute basic and diluted earnings per share for the six months ended June 30, 2015 and the year ended December 31, 2014 is based on the number of shares of our common stock assumed to be outstanding on the distribution date, based on the number of Darden common shares outstanding on June 30, 2015, assuming a distribution ratio of one share of our common stock for every three shares of Darden common shares.


68


SELECTED HISTORICAL COMBINED FINANCIAL DATA
The following tables present the selected historical combined financial data of the LongHorn San Antonio Business. The selected historical combined financial data as of December 31, 2014 and 2013 and for the three years ended December 31, 2014, 2013 and 2012, as set forth below, was derived from the audited combined financial statements of the LongHorn San Antonio Business, which are included elsewhere in this information statement. The selected historical combined balance sheet data as of December 31, 2012 was derived from the unaudited financial statements of the LongHorn San Antonio Business which are not included in this information statement. The selected historical combined financial data as of June 30, 2015 and for the six months ended June 30, 2015 and 2014 was derived from the unaudited interim combined financial statements of the LongHorn San Antonio Business, which are included elsewhere in this information statement. In management’s opinion, the unaudited combined financial statements have been prepared on the same basis as the audited combined financial statements and include all adjustments, consisting only of ordinary recurring adjustments, necessary for a fair presentation of the information for the periods presented.
The selected historical combined financial information may not necessarily reflect the LongHorn San Antonio Business’s financial position, results of operations or cash flows as if they had operated as a stand-alone public company during all periods presented, including changes that will occur in our operations and capitalization as a result of the Spin-Off and related transactions. Accordingly, the historical results should not be relied upon as an indicator of the LongHorn San Antonio Business’s future performance.
The following tables should be read together with, and are qualified in their entirety by reference to, the LongHorn San Antonio Business’s historical combined financial statements and the related notes included elsewhere in this information statement. Among other things, the historical combined financial statements include more detailed information regarding the basis of presentation for the information in the following tables. The tables should also be read together with the sections entitled “Capitalization,” “Unaudited Pro Forma Consolidated Financial Statements” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

69



 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
For the Six Months Ended June 30,
 
For the Years Ended December 31,
(Dollars in thousands)
2015
 
2014
 
2014
 
2013
 
2012
 
(Unaudited)
 
 
 
 
 
 
Operating Results
 
 
 
 
 
 
 
 
 
Sales, net
$
9,514

 
$
9,026

 
$
17,695

 
$
16,907

 
$
16,524

Costs and expenses:
 
 
 
 
 
 
 
 
 
Food and beverage
3,882

 
3,608

 
7,124

 
6,766

 
6,565

Restaurant labor
2,440

 
2,312

 
4,639

 
4,518

 
4,229

Restaurant expenses
1,499

 
1,600

 
3,011

 
2,716

 
2,875

Selling, general and administrative1
1,027

 
1,056

 
2,168

 
2,127

 
2,154

Depreciation
397

 
418

 
863

 
875

 
881

Total costs and expenses
9,245

 
8,994

 
17,805

 
17,002

 
16,704

Income (loss) before income taxes
269

 
32

 
(110
)
 
(95
)
 
(180
)
Income tax (benefit)
(11
)
 
(58
)
 
(142
)
 
(124
)
 
(141
)
Net income (loss) and comprehensive income (loss)
$
280

 
$
90

 
$
32

 
$
29

 
$
(39
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
As of:
(Dollars in thousands)
 
 
June 30, 2015
 
December 31, 2014
 
December 31, 2013
 
December 31, 2012
 
 
 
(unaudited)
 
 
 
 
 
(unaudited)
Financial Position
 
 
 
 
 
 
 
 
 
Total assets
 
 
$
11,758

 
$
11,949

 
$
12,807

 
$
13,630

Land, buildings and equipment, net
 
 
11,375

 
11,722

 
12,545

 
13,408

Long-term liabilities
 
 
1,626

 
1,616

 
1,725

 
1,785

Parent company investment
 
 
8,974

 
8,998

 
9,872

 
10,731

 
 
 
 
 
 
 
 
 
 
 
 
 
As of and for the Six Months Ended
 
As of and for the Years Ended
(Dollars in thousands)
 
 
June 30, 2015
 
December 31, 2014
 
December 31,
2013
 
December 31,
2012
 
 
 
(Unaudited)
 
 
 
 
 
 
Other Statistics
 
 
 
 
 
 
 
Cash flows provided by operating activities
 
 
$
354

 
$
961

 
$
914

 
$
806

Capital expenditures
 
 
(50
)
 
(55
)
 
(26
)
 
(131
)
Number of restaurants
 
 
6

 
6

 
6

 
6

1 Selling, general and administrative expenses include $0.5 million and $0.6 million of corporate expense allocated from Darden for the six months ended June 30, 2015 and June 30, 2014, respectively (unaudited). Selling general and administrative expenses include $1.2 million, 1.2 million, and $1.3 million of corporate expense allocated from Darden for the years ended December 31, 2014, 2013 and 2012, respectively.

70


MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following is a discussion and analysis of (i) the historical results of operations of the LongHorn San Antonio Business that we will own and operate upon completion of the Spin-Off and (ii) our anticipated financial condition immediately following the Spin-Off. The 424 restaurant properties that we will own following the Spin-Off were not operated by Darden as a stand-alone business and, accordingly, there are no historical results of operations related to these assets. The following should be read in conjunction with the LongHorn San Antonio Business historical combined financial statements, the Four Corners’ Properties historical combined balance sheet and our unaudited pro forma consolidated financial statements and accompanying notes, each of which are included elsewhere in this information statement. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those projected, forecasted or expected in these forward-looking statements as a result of various factors, including those which are discussed below and elsewhere in this information statement. See also “Risk Factors” and “Cautionary Statement Regarding Forward-Looking Statements.” Our financial statements may not necessarily reflect our financial condition and results of operations in the future, or what they would have been had we been a separate, stand-alone company during the periods presented.
OVERVIEW
At the completion of the Spin-Off, we will own the Four Corners Properties and the LongHorn San Antonio Business. The Four Corners Properties will be leased to one or more of Darden’s operating subsidiaries pursuant to the Leases. In addition to leasing the Four Corners Properties to one or more of Darden’s operating subsidiaries, we will also generate revenue by operating the LongHorn San Antonio Business. Of the six restaurant properties that make up the LongHorn San Antonio Business, three will be properties that we will lease to Kerrow and three will be owned by Kerrow, subject to ground leases.
Following the Spin-Off, we will be an independent publicly traded, self-administered company primarily engaged in the ownership, acquisition and leasing of restaurant and retail properties. We expect to generate revenues primarily by leasing restaurant properties to restaurant operators in triple-net lease arrangements, under which the tenant is primarily responsible for the costs related to the assets (including property taxes, insurance, common area maintenance charges and maintenance and repair costs). We expect to grow our portfolio by pursuing opportunities to acquire additional facilities that will be leased to a diverse group of local, regional and national restaurant and retail operators, which will include Darden, as well as related businesses. We also anticipate diversifying our portfolio over time by acquiring assets in different geographic markets, and in different asset classes.
We intend to elect and qualify to be subject to tax as a REIT for U.S. federal income tax purposes commencing with our taxable year beginning January 1, 2016. As a result, we will pay federal and state income taxes for our taxable year ending December 31, 2015. We intend to operate in what is commonly referred to as an UPREIT structure, in which substantially all of our properties and assets will be held through Four Corners OP. Four Corners OP will be managed by Four Corners GP, the sole general partner of Four Corners OP. While Four Corners GP will be responsible for the management of Four Corners OP in accordance with Delaware law and Four Corners OP’s limited partnership agreement, Four Corners GP will not have any employees (all employees will be at the Four Corners OP level), and the directors and officers of Four Corners who are identified in this information statement under the heading “Management” will control the management decisions made by Four Corners GP. We, Four Corners GP and Four Corners OP will initially lack certain non-management administrative capabilities, and accordingly we will be entering into the Transition Services Agreement pursuant to which Darden will provide administrative services that are customary for a transaction such as the Spin-Off for a limited transition period.
To maintain REIT status, we must meet a number of organizational and operational requirements, including a requirement that we annually distribute to our shareholders at least 90% of our REIT taxable income, determined without regard to the dividends paid deduction and excluding any net capital gains. See “U.S. Federal Income Tax Considerations.”

71


COMPONENTS OF OUR REVENUES AND EXPENSES FOLLOWING THE SPIN-OFF
Revenues
Following the Spin-Off, we expect our earnings initially to primarily be attributable to rental revenues from the leasing of the Four Corners Properties pursuant to the Leases. Under the Leases, Darden will be primarily responsible for the costs related to operating the Four Corners Properties, including property taxes, insurance, common area maintenance charges and maintenance and repair costs. The Leases will have an average initial term of approximately fifteen years with a certain number of five-year renewal options and will encompass approximately 145 distinct market areas. The number and duration of the renewal terms for any given Four Corners Property may vary, however, based on the initial term of the relevant Lease and other factors. The rent for the initial term will be a stated amount set near the time of the Spin-Off. We currently anticipate that the initial estimated annual cash rent under the Leases will be approximately $94.4 million during the first year of the Leases. Commencing with the second year of the Leases and continuing for the initial term, under the Leases, the rent is subject to annual escalation of 1.5%, as well as, in most of the leases, a fair market value adjustment at the start of one of the renewal options. Each renewal option will provide Darden the opportunity to renew any of the Leases. Rental revenues over the average initial term of the Leases will be recognized in the financial statements on a straight-line basis, or approximately $104.7 million per year.
General and Administrative Expenses
General and administrative costs are expected for items such as compensation costs (including stock-based compensation awards), professional services, office costs and other costs associated with administrative activities. To the extent requested by us, Darden will provide us with certain administrative and support services on a transitional basis pursuant to the Transition Services Agreement. We expect that the fees charged to us for transition services furnished pursuant to the Transition Services Agreement will approximate the actual cost incurred by Darden in providing such transition services to us for the relevant period.
General and administrative expenses are anticipated to be approximately $12.0 million in the first year after the Spin-Off, consisting of cash compensation, professional services, administration and other costs and transitional services costs. These amounts were determined based on the experience of management and discussions with outside service providers, consultants and advisors. Non-cash stock-based compensation, incentive-based cash compensation and acquisition costs are not included in these amounts. The details of our future anticipated equity grants and compensation have not yet been determined for our board of directors or executive officers. The amount of compensation-related expense, including incentive-based cash compensation and non-cash stock compensation expense, actually incurred by us in the first year after the Spin-Off will be based on determinations by our compensation committee and board of directors following the Spin-Off.
Depreciation Expense
We will incur depreciation expense for the land, buildings and equipment transferred to us from Darden, which is expected to be between $41.0 million and $45.0 million in the first year after the Spin-Off. This amount was determined based on the remaining useful lives of the assets as of June 30, 2015.
Operations of the LongHorn San Antonio Business
We will own and operate the LongHorn San Antonio Business, which will operate as a TRS. The LongHorn San Antonio Business consists of six LongHorn Steakhouse restaurants located in the San Antonio, Texas area. As a TRS, we expect the LongHorn San Antonio Business will be taxed at corporate tax rates.
Interest Expense
We will incur interest expense from our borrowing obligations and the amortization of our lender fees and fee to purchase the LIBOR interest rate cap related to our indebtedness. Our current estimate of debt outstanding following the Spin-Off is $400.0 million in an outstanding term loan and $350.0 million of a revolving credit facility. We anticipate that the term loan

72


facility will be fully drawn at the date that the Spin-Off is consummated and that the revolving credit facility will be undrawn at the date that the Spin-Off is consummated. Annual interest costs are expected of approximately $14.5 million based on a weighted-average interest rate of 3.17%. See “Liquidity and Capital Resources” below for more information.
DISCUSSION OF HISTORICAL RESULTS OF OPERATIONS OF THE LONGHORN SAN ANTONIO BUSINESS
BASIS OF PRESENTATION
The historical financial statements of the LongHorn San Antonio Business were prepared on a stand-alone basis and were derived from the consolidated financial statements and accounting records of Darden. These statements reflect the historical financial condition and results of operations of the LongHorn San Antonio Business, which we will own following the Spin-Off, in accordance with GAAP.
RESULTS OF OPERATIONS
Six Months Ended June 30, 2015 and 2014 (unaudited)
The following table sets forth selected operating data and that operating data as a percent of sales, for the periods indicated. All information is derived from the unaudited combined statements of comprehensive income for the six months ended June 30, 2015 and 2014 found elsewhere in this information statement.
 
Six Months Ended June 30,
 
2015
 
2014
 
(unaudited)
 
(unaudited)
(Dollars in thousands)
$
 
% of Sales
 
$
 
% of Sales
Sales, net
$
9,514

 
100.0
 %
 
$
9,026

 
100.0
 %
Cost and expenses:
 
 
 
 
 
 
 
Food and beverage
3,882

 
40.8

 
3,608

 
40.0

Restaurant labor
2,440

 
25.6

 
2,312

 
25.6

Restaurant expenses
1,499

 
15.8

 
1,600

 
17.7

Selling, general and administrative
1,027

 
10.8

 
1,056

 
11.7

Depreciation
397

 
4.2

 
418

 
4.7

Total costs and expenses
9,245

 
97.2

 
8,994

 
99.7

Income before income taxes
269

 
2.8

 
32

 
0.3

Income tax (benefit)
(11
)
 
(0.1
)
 
(58
)
 
(0.7
)
Net income and comprehensive income
$
280

 
2.9
 %
 
$
90

 
1.0
 %
The LongHorn San Antonio Business had six restaurants open at the end of each of the six months ended June 30, 2015 and 2014.
SALES
Sales for the six months ended June 30, 2015 increased $0.5 million, or 5.4 percent, compared to the same period in 2014 driven by a 3.9 percent increase in the average check and a 1.5 percent increase in guest counts.
COSTS AND EXPENSES
Six Months Ended June 30, 2015 versus Six Months Ended June 30, 2014
Total costs and expenses increased $0.3 million or 2.8 percent. As a percent of sales, total costs and expenses decreased from 99.7 percent to 97.2 percent.

73


Food and beverage costs increased $0.3 million, or 7.6 percent. As a percent of sales, food and beverage costs increased from 40.0 percent to 40.8 percent as a result of food cost inflation, primarily beef, partially offset by increased pricing.
Restaurant labor costs increased $0.1 million or 5.5 percent. Restaurant labor costs as a percent of sales were flat at 25.6 percent.
Restaurant expenses (which include utilities, common area maintenance charges, repairs and maintenance, credit card fees, lease expense, property tax, workers’ compensation, and other restaurant-level operating expenses) decreased $0.1 million or 6.3 percent. As a percent of sales, restaurant expenses decreased primarily as a result of decreased workers’ compensation costs, utilities and favorable sales leverage, partially offset by increased repair and maintenance and security costs.
Selling, general and administrative expenses decreased 2.7 percent. As a percent of sales, selling, general and administrative expenses decreased primarily as a result of a reduction in corporate expenses allocated to us from Darden and favorable sales leverage.
Depreciation expense decreased 5.0 percent. As a percent of sales, depreciation expense decreased as a result of favorable sales leverage.
INCOME TAXES
The effective income tax rate was a benefit of 4.1 percent and 181.3 percent for the six months ended June 30, 2015 and 2014, respectively. The change in the effective income tax rate for the six months ended June 30, 2015 as compared to the six months ended June 30, 2014 is primarily attributable to an increase in earnings before income taxes. 
NET INCOME
Net income for the six months ended June 30, 2015 increased $0.2 million or 211.1 percent compared to the six months ended June 30, 2014, primarily due to higher sales and lower restaurant expenses, selling, general and administrative expenses and depreciation expenses as a percent of sales, partially offset by higher food and beverage costs and lower income tax benefit as a percent of sales.
SEASONALITY
Sales volumes fluctuate seasonally. Typically, our average sales per restaurant are highest in the spring and winter, followed by the summer, and lowest in the fall. Holidays, changes in the economy, severe weather and similar conditions may impact sales volumes seasonally. Because of the seasonality of our business, results for any quarter are not necessarily indicative of the results that may be achieved for the full year.

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Years Ended December 31, 2014, 2013 and 2012
The following table sets forth selected operating data and that operating data as a percent of sales for the periods indicated. This information is derived from the LongHorn San Antonio Business combined statements of comprehensive income (loss) found elsewhere in this information statement.
 
Years Ended December 31,
 
2014
 
2013
 
2012
(Dollars in thousands)
$
 
% of Sales
 
$
 
% of Sales
 
$
 
% of Sales
Sales
$
17,695

 
100.0
 %
 
$
16,907

 
100.0
 %
 
$
16,524

 
100.0
 %
Costs and expenses:
 
 
 
 
 
 
 
 
 
 
 
Food and beverage
7,124

 
40.3

 
6,766

 
40.0

 
6,565

 
39.7

Restaurant labor
4,639

 
26.2

 
4,518

 
26.7

 
4,229

 
25.6

Restaurant expenses
3,011

 
17.0

 
2,716

 
16.0

 
2,875

 
17.4

Selling, general and administrative
2,168

 
12.2

 
2,127

 
12.6

 
2,154

 
13.0

Depreciation
863

 
4.9

 
875

 
5.2

 
881

 
5.4

Tota