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SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [ ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12
EATERIES, INC.
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(Name of Registrant as Specified in its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(l) and
0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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3240 W. Britton Road, Suite 202
Oklahoma City, Oklahoma 73120
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To be held June 24, 1997
The 1997 Annual Meeting of Shareholders of Eateries, Inc. will be held at
Garfield's Restaurant & Pub at Quail Springs Mall, 2501 W. Memorial Road,
Oklahoma City, Oklahoma, on Thursday, June 24, 1997, at 9:00 a.m., CDT. The
Annual Meeting will be held for the following purposes:
1. Approval of amendments to the Certificate of Incorporation and Bylaws
of Eateries, Inc. providing for a board of directors elected for staggered
three-year terms;
2. The election of seven directors; and
3. Such other matters as may properly come before the Annual Meeting or
any adjournment.
Shareholders of record at the close of business on April 25, 1997, are
entitled to notice of and to vote at the Annual Meeting or any adjournment.
By Order of the Board of Directors
PATRICIA L. ORZA
Secretary
PLEASE SIGN, DATE AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE
REGARDLESS OF WHETHER YOU PLAN TO ATTEND THE MEETING. YOU MAY REVOKE YOUR PROXY
AT ANY TIME BEFORE ITS EXERCISE. IF YOU ATTEND THE MEETING, YOU MAY WITHDRAW
THE PROXY AND VOTE IN PERSON.
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3240 W. Britton Road, Suite 202
Oklahoma City, Oklahoma 73120
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
June 24, 1997
The Board of Directors and management of Eateries, Inc. (the "Company") is
furnishing this Proxy Statement in connection with the solicitation of proxies
for use at the Company's 1997 Annual Meeting of Shareholders. The Annual
Meeting will be held at Garfield's Restaurant & Pub at Quail Springs Mall, 2501
W. Memorial Road, Oklahoma City, Oklahoma, on Thursday, June 24, 1997, at 9:00
a.m., CDT. The accompanying Notice of Meeting states the Annual Meeting's
purposes.
This Proxy Statement, Notice of Meeting, and accompanying proxy card were
mailed to shareholders on or about April 28, 1997.
GENERAL INFORMATION
Only shareholders of record at the close of business on April 25, 1997,
will be entitled to notice of and to vote the shares of the Company's common
stock held by them on such date at the Annual Meeting or any adjournments. On
April 25, 1997, the Company had _________ shares of its common stock
outstanding and entitled to vote at the meeting.
If the accompanying proxy is properly signed, returned to the Company, and
not revoked, the persons named as proxies will vote the proxy according to its
instructions. Unless contrary instructions are given, the proxies will support
the recommendations of the Board of Directors. Shareholders may revoke their
unexercised proxies by giving the Secretary of the Company a revoking
instrument or a duly executed proxy bearing a later date. Shareholders may also
revoke their proxies if they attend the Annual Meeting in person and request
revocation. Attendance at the Annual Meeting will not itself revoke a proxy.
The presence at the meeting, in person or by proxy, of a majority of the
shares of common stock outstanding on April 25, 1997, will constitute a quorum.
Each share of common stock entitles its holder to one vote on each matter
considered at the meeting. The affirmative vote by the holders of at least a
majority of the total outstanding shares of common stock will be
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required to approve the proposed amendments to the Company's certificate of
incorporation and bylaws. The election of directors shall be determined by a
plurality of votes cast. Any other matters properly brought before the Annual
Meeting for a vote of shareholders shall require for approval the affirmative
vote by the holders of at least a majority of the shares of common stock
represented in person or by proxy and entitled to vote at the meeting.
Abstentions and broker non-votes are counted for purposes of determining
the presence of a quorum. Abstentions are counted on all proposals other than
the election of directors. Broker non-votes are counted only when a proposal
requires the affirmative vote of a majority of the outstanding shares for
passage. Abstentions and broker non-votes have the effect of negative votes
when counted.
THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS
VOTE "FOR" APPROVAL OF THE PROPOSED AMENDMENTS TO THE CERTIFICATE OF
INCORPORATION AND BYLAWS AND "FOR" EACH OF THE DIRECTOR NOMINEES NAMED IN THIS
PROXY STATEMENT. THE ENCLOSED PROXY IS SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS.
PROPOSED AMENDMENTS TO CLASSIFY
THE BOARD OF DIRECTORS
Because the Proposed Amendments to the Restated Articles of Incorporation
and the Amended and Restated Bylaws may have an impact upon the rights of
shareholders and may be characterized as an anti-takeover measure which, if
adopted, may tend to insulate management and make the accomplishment of certain
transactions involving a potential change of control of the Company more
difficult, each shareholder should carefully study the description of the
Proposed Amendments contained herein and the text of the Proposed Amendments as
set forth in Exhibits A and B (the "Proposed Amendments") to this Proxy
Statement. The description of the Proposed Amendments set forth below is
qualified in its entirety by reference to the text of the Proposed Amendments
as set forth in Exhibits A and B.
REASONS FOR THE PROPOSED AMENDMENTS
The Board of Directors has unanimously approved and recommends that the
shareholders approve Proposed Amendments to the Company's Restated Articles of
Incorporation and the Company' s Amended and Restated Bylaws which provide for
the classification of the Company's directors, the filling of vacant
directorships and the removal of directors only for cause.
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Over the last several years there has been a trend towards the
accumulation of substantial stock positions in public corporations by outside
parties either with a view toward utilizing a controlling block of stock to
force a merger or consolidation or as a prelude to proposing a restructuring or
sale of all or part of a corporation or other similar extraordinary corporate
action requiring the approval of its board of directors. These actions are
often undertaken without advance notice to or consultation with management of
the corporation. In many cases, such third parties seek representation on the
corporation's board of directors in order to increase the likelihood that their
proposals will be implemented by the corporation. If the corporation resists
the efforts to obtain representation on the corporation' s board, the outside
parties may commence proxy contests to have themselves or their nominees
elected to the board in place of certain directors or the entire board.
It is believed that in many circumstances such efforts may not be
beneficial to the interests of a corporation and its shareholders because they
may deprive management of the time and information necessary to evaluate the
proposals, to study alternative proposals and to help ensure that the best
price is obtained in any transaction which may ultimately be undertaken. Thus,
the Proposed Amendments are designed to protect against rapid shifts in control
of the Board of Directors and assist in assuring continuity in the management,
affairs and business strategies of the Company. The Company is not aware of any
specific effort by a party to obtain control of the Company.
The Board of Directors believes that the Proposed Amendments would help
ensure continuity of experience which is desirable and in the best interests of
the Company and its shareholders generally. Because the officers and directors
of the Company as a group own or control approximately 33% of the outstanding
Common Stock, the Board of Directors of the Company has generally enjoyed
continuity of membership in recent years, although individual directors have
from time to time resigned for personal reasons and have been replaced.
However, it should be noted that the Proposed Amendments would make a change in
directors and management for any reason more difficult at each election of
directors even if this would be beneficial to shareholders generally because
the staggering of terms of directors would have the effect of requiring at
least two shareholder meetings, instead of one, as at present, to effect a
change in majority control of the Board and would prohibit removal of incumbent
directors by a holder of a large block of the Company's shares except for
cause. If the Proposed Amendments are adopted, shareholders will elect
directors to longer terms and existing directors, if re-elected, would be the
initial beneficiaries of the extended terms.
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The Proposed Amendments are consistent with Oklahoma corporate law, which
authorizes the classification of a board of directors into two or three
classes. Oklahoma corporate law also provides that a corporation's certificate
of incorporation may contain procedures for removal of directors and filling
vacancies on the board. Shareholders should note that if the Board of Directors
were not classified, they would have the right under applicable Oklahoma
corporate law to remove directors, with or without cause, by a majority vote.
The full text of the Proposed Amendments is set forth as Exhibits A and B
to this Proxy Statement. The affirmative vote of the holders of at least 51% of
the Company's outstanding Common Stock is required to adopt the Proposed
Amendments. The Board of Directors recommends a vote "FOR" approval of the
Proposed Amendments and all proxies received will be voted in favor thereof
unless a contrary specification is made on the proxy by the shareholder.
CURRENT ANTI-TAKEOVER PROVISIONS
The management of the Company beneficially owns approximately 33% of the
outstanding Common Stock, including shares subject to acquisition upon the
exercise of outstanding stock options. The Board of Directors also has the
ability to issue Preferred Stock which may make it more difficult for, and may
discourage other persons or companies from making a tender offer for, or
attempting to acquire, substantial amounts of the Company's Common Stock. This
could have the effect of inhibiting changes in management and may also prevent
temporary fluctuations in the market price of the Company's Common Stock which
often result from actual or rumored takeover attempts.
The Amended and Restated Bylaws of the Company provide that shareholders
may take action without a meeting by unanimous consent. This provision could be
considered an anti-takeover provision. Subsequent to the adoption of this
bylaw, the corporate code of the State of Oklahoma was revised to provide that
shareholders may take action without a meeting by less than unanimous consent
provided holders of sufficient shares to take the proposed action consented in
writing to the action. Because the present statutory provision allowing less
than unanimous consent may be altered only by an amendment to the Company's
certificate of incorporation, it is the Company's view that the aforesaid bylaw
provision is void.
The Company is subject to the provisions of the Oklahoma Takeover
Disclosure Act of 1985 (the "Disclosure Act") regulating corporate takeovers.
The Disclosure Act requires certain notices to be given prior to making a
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take-over offer. Such notices include filing a registration statement with the
Securities Administrator of Oklahoma and delivering a copy of such notice to
the Company. The Disclosure Act applies to offers to take-over an issuer of
publicly traded securities of which at least 20% are held by Oklahoma
residents. A "take-over" offer includes offers in which the offerer discloses
its intention that, as a result of the offer: (i) the offerer will own 10% or
more of any class of equity securities, or (ii) ownership of any class of
equity securities will be increased by 5% or more.
The Company is subject to the provisions of Section 1090.3 of the Oklahoma
Corporation Act. That section provides, with certain exceptions, that an
Oklahoma corporation may not engage in any of a broad range of business
combinations with a person or an affiliate or associate of such person who is
an "Interested Shareholder" for a period of three years from the date that such
person became an Interested Shareholder unless: (a) the transaction, or
business combination, resulting in a person's becoming an Interested
Shareholder is approved by the board of directors of the corporation before the
person becomes an Interested Shareholder, (b) upon consummation of the
transaction which resulted in the person becoming an Interested Shareholder,
the Interested Shareholder owned 85% or more of the voting stock of the
corporation outstanding at the time the transaction commenced (excluding shares
owned by persons who are both officers and directors of the corporation and
shares held by certain employee stock ownership plans) or (c) on or after the
date the person became an Interested Shareholder, the business combination is
approved by the corporation's board of directors and by the holders of at least
66-2/3% of the corporation's outstanding voting stock at an annual or special
meeting, excluding shares owned by the Interested Shareholder. An "Interested
Shareholder" is defined as any person that is (a) the owner of 15% or more of
the outstanding voting stock of the corporation or (b) an affiliate or
associate of the corporation and was the owner of 15% or more of the
outstanding voting stock of the corporation at any time within the three-year
period immediately prior to the date on which it is sought to be determined
whether such person is an Interested Shareholder.
The Oklahoma Shares Control Act ("OSCA") (Section 1145 et seq. of the
Oklahoma Corporation Act) prohibits the voting of "control shares" without the
approval of a majority of shares held by non-interested shareholders. Under the
OSCA, "control shares" are shares acquired by a person which causes his
percentage ownership to exceed certain statutorily prescribed ranges of
ownership beginning at 20%. The OSCA was ruled unconstitutional shortly after
its adoption in 1987; however, certain amendments to the OSCA in 1990 and 1991
may have cured its constitutional infirmities.
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THE PROPOSED AMENDMENTS
The Proposed Amendments provide that the Board of Directors will be
divided into three classes, each class to be substantially equal in number. If
the Proposed Amendments are adopted, two directors will be elected for a term
expiring at the 1998 annual meeting; two directors will be elected for a term
expiring at the 1999 annual meeting; and three directors will be elected for a
term expiring at the 2000 annual meeting; and, in each case, until their
respective successors are duly elected and qualified. Starting with the 1998
annual meeting of shareholders, one class will be elected each year for a
three-year term.
The Proposed Amendments also provide that a majority of the remaining
directors may fill a vacancy on the Board occurring during the course of the
year, and the new director so elected will serve for the remainder of his or
her predecessor's term. In the event that a new directorship is created due to
an increase in the fixed number of directors, a majority of the directors in
office may fill such newly-created directorship, and the new director so
elected will serve for the same terms as that of the other directors of the
class of which he or she is a member.
The Proposed Amendments also provide that directors may be removed only by
shareholders holding at least a majority of the outstanding Common Stock acting
at a meeting called for such purpose and only for cause. "Cause" for purposes
of the Proposed Amendments shall be construed to exist only if (i) the director
whose removal is proposed has been convicted of a felony by a court of
competent jurisdiction and such conviction is no longer subject to direct
appeal, (ii) has been adjudged by a court of competent jurisdiction to be
liable for negligence or misconduct in the performance of his or her duty to
the Corporation in a matter of substantial importance to the Corporation, and
such adjudication is no longer subject to a direct appeal or (iii) any other
situation exists which eighty percent (80%) of the other directors agree
constitutes cause for removal. The bylaws currently provide for removal with or
without cause.
The Proposed Amendments also require the affirmative vote of sixty-six and
two-thirds percent (66-2/3%) of all classes of stock of the Corporation
entitled to vote generally in elections of directors to amend, alter, change,
repeal or adopt any provision inconsistent with the Proposed Amendments.
Because directors and executive officers as a group beneficially own 33% of the
outstanding Common Stock, they would be in a position to block any amendment
even if the amendment would be desired by or beneficial to shareholders holding
a majority of the Corporation's outstanding Common Stock.
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The Proposed Amendments also clarify that the Board of Directors may adopt
amendments to any of the Company's bylaws without shareholder approval. As
presently stated, the bylaws of the Company prohibit the board of directors
from effecting any amendment to the bylaws related to directors. This provision
was required under the Oklahoma corporate code as it existed at the time the
Company's Amended and Restated Bylaws were adopted. The adoption by Oklahoma of
a new corporate code eliminated this restriction on the directors' ability to
amend provisions of the bylaws pertaining to directors, and the Proposed
Amendments make the procedure for amending the Company's bylaws consistent with
current Oklahoma corporate law.
The Proposed Amendments, if adopted, would increase the number of annual
meetings necessary to effect a change in majority membership of the Board of
Directors from one annual meeting to two annual meetings. Further, the Proposed
Amendments, if adopted, would be applicable to every election of directors,
whether or not any takeover is threatened.
ELECTION OF DIRECTORS
At the annual meeting of shareholders, seven directors constituting the
entire Board of Directors of the Corporation, are to be elected. If the
Proposed Amendments are adopted, seven directors will be elected for the terms
set forth below. If the Proposed Amendments are not adopted, seven directors
will be elected to hold office until the next annual meeting of shareholders or
until their successors are duly elected and qualified. In either case,
directors will be elected by a plurality of the shares present and voting at
the meeting. Unless contrary instructions are given, the proxies will be voted
for the nominees listed below. It is expected these nominees will serve but, if
for any unforeseen cause any of them should decline or be unable to serve, the
proxies will be voted for the substitute nominee designated by the Board of
Directors.
BIOGRAPHICAL INFORMATION
The following information is submitted concerning the nominees named for
election as directors as well as Corey Gable and Norma C. Karter, executive
officers of the Company who are not nominees for director:
James M. Burke, age 35, Vice President and Chief Operating Officer,
Assistant Secretary, and a director since 1987, joined the Company in October,
1984 as General Manager of the Company's first Garfield's restaurant. The
Company promoted him to Supervisor in March, 1985 and to Vice President in
August, 1985. His responsibilities include restaurant construction and
development, restaurant and corporate operations, personnel planning, new
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product development and vendor relationships. From 1979 to 1984, Mr. Burke
worked as a management trainer and General Manager for Chi-Chi's Mexican
Restaurants. Mr. Burke serves as a director of the Meadows Center for Retarded
Adults.
Philip Friedman, age 50, served as a director of the Company from 1986
until 1991 when he became an advisory director. He served as an advisory
director until November, 1992, when he was appointed to the Board to fill the
vacancy created by the death of Mr. George H. Marx. Mr. Friedman is the
President and principal shareholder of P. Friedman & Associates, Inc., a food
management and consulting company based in Rockville, Maryland. From 1984
through 1986, he was Vice President of Finance and Administration for
Cini-Little International, Inc., the largest food service consulting firm in
the United States. While with P. Friedman & Associates, Inc., Mr. Friedman has
taken interim executive positions with certain clients. In 1996, Mr. Friedman
was named interim President of Panda Management Company, Inc., a national chain
of restaurants serving Chinese food. In 1990, he became the Chief Financial
Officer of Service America Corporation during its financial and organizational
restructuring. Service America Corporation filed for reorganization under
Chapter 11 of the Federal bankruptcy laws approximately 18 months after Mr.
Friedman resigned as Chief Financial Officer. In 1988, he served as Executive
Vice President of Sutton Place Gourmet in Washington, D.C. Mr. Friedman
graduated from the University of Connecticut with Bachelors and Masters degrees
and received his MBA from the Wharton School of Business at the University of
Pennsylvania. Mr. Friedman serves as a director of Roadhouse Grill, Inc. and
Paramark Enterprises, Inc., both of which are publicly-owned corporations.
Corey Gable, age 28, joined the Company in April, 1995, and was elected
Vice President of Finance and Treasurer in January, 1997. Mr. Gable is the
Company's Chief Financial and Accounting Officer and is also responsible for
the Company's corporate administration. Prior to January, 1997, Mr. Gable
served as the Company's Corporate Controller. From April, 1990 to April, 1995,
Mr. Gable was employed in the audit division of Arthur Andersen LLP, an
international accounting firm. Mr. Gable is a Certified Public Accountant and
holds a Bachelor of Business Administration degree in Accounting from the
University of Oklahoma.
Thomas F. Golden, age 54, has served as a director since 1991. He is a
shareholder and director of the law firm of Hall, Estill, Hardwick, Gable,
Golden & Nelson, P.C., an Oklahoma law firm with offices in Tulsa and Oklahoma
City. Mr. Golden has been with this firm since 1967. He served as outside
general counsel for Williams Realty Corp. (1974-1987), the real estate
developer of
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major downtown mixed-use centers, including Tabor Center in Denver, Colorado
and River Center in San Antonio, Texas. He holds a Bachelor of Science degree
in Economics from Oklahoma State University and a Juris Doctorate from the
University of Tulsa. He is a member of the Urban Land Institute and a board
member of the Boys Home Foundation, DTU, Ltd. and Midwesco Industries, Inc. of
Tulsa, Oklahoma.
Norma C. Karter, age 46, joined the Company in August, 1995 as Vice
President of Marketing. Ms. Karter is responsible for the Company's long-term
strategic marketing efforts including advertising, menu development and
consumer research and support. From January, 1980 until she joined the Company,
Ms. Karter was employed by Metromedia Restaurant Group, an $800 million
company, and owners of Bennigan's, Ponderosa and Steak and Ale restaurants.
Just prior to joining the Company, Ms. Karter served as Director of Marketing
for the Steak and Ale chain.
Larry Kordisch, age 49, was appointed to fill a vacancy in the Board of
Directors in April, 1997. Mr. Kordisch is the Executive Vice President -
Finance and Chief Executive Officer of Homeland Stores, Inc., a leading retail
grocery store chain based in Oklahoma City, Oklahoma. Mr. Kordisch has been
employed by Homeland since February 1995. He is responsible for finance,
accounting, risk management, and information technology functions. From 1985 to
1995, Mr. Kordisch served as Executive Vice President - Finance and
Administration, Chief Financial Officer and member of the Board of Directors of
Scrivner, Inc., a $6 billion food distribution company. Mr. Kordisch holds a
Bachelor of Science in Business Administration degree from the University of
Colorado.
Edward D. Orza, age 46, has served as a director since 1984. He has served
as Chairman of the Board and President of Brockway Truck Sales, Inc., a
heavy-duty truck parts distributor in New York, since August, 1983. From
September, 1975 through August, 1983, Mr. Orza served as Secretary/Treasurer
and a director of TriCounty Crane Carriers, Inc., which engaged in new truck
sales.
Patricia L. Orza, age 43, has served as Secretary and a director of the
Company since 1984. Prior to ceasing active employment in 1982, Ms. Orza worked
in management and purchasing positions with several retail stores. Ms. Orza
earned a Bachelors degree from the University of Central Oklahoma in 1980.
Vincent F. Orza, Jr., age 46, has been Chairman of the Board of Directors,
President and Chief Executive Officer of the Company since its organization in
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June, 1984. Dr. Orza created the Garfield's Restaurant & Pub concept with the
Company's Vice President, James M. Burke. Before that time, Dr. Orza was Senior
Vice President of Marketing and Administration at a franchisee of Chi-Chi's
Mexican Restaurants. Dr. Orza also operates Advertising and Marketing
Associates, an Oklahoma City-based, market research and advertising company.
Dr. Orza is a speaker, panelist, and organizer of numerous national
restaurant conferences and conventions. He serves as a director of the Oklahoma
Restaurant Association, the Juvenile Diabetes Foundation and the Oklahoma
Leukemia Society, Chairman of the United Cerebral Palsy Telethon of Oklahoma,
and was a 1990 candidate for Governor of the State of Oklahoma.
Dr. Orza also served as Business and Economics Editor and News Anchor for
KOCO-TV, an ABC news affiliate, where he received numerous national awards for
excellence in business journalism. He was also a tenured professor in
Oklahoma's largest School of Business at the University of Central Oklahoma. A
contributor and editor of several professional textbooks, journals, and other
publications, Dr. Orza was awarded several fellowships in various marketing
disciplines. He holds a Doctor of Education degree from the University of
Oklahoma and Bachelor of Science in Business and Master of Education degrees
from Oklahoma City University.
Mr. Edward Orza is the cousin and Ms. Patricia Orza is the spouse of Dr.
Vincent Orza, Jr.
Directors to be Elected to Serve Until the 1998 Annual Meeting:
Larry Kordisch
Patricia L. Orza
Directors to be Elected to Serve Until the 1999 Annual Meeting:
Philip Friedman
Thomas F. Golden
Directors to be Elected to Serve Until the 2000 Annual Meeting:
Vincent F. Orza, Jr.
Edward D. Orza
James M. Burke
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BOARD OF DIRECTORS AND ITS COMMITTEES
The Board of Directors of the Company consists of seven members. During
1996, each director served for a term of one year or until his or her successor
had been elected and qualified, subject to earlier resignation, removal or
death, and directors will continue to serve for a one year term unless the
Proposed Amendments are adopted. The number of directors comprising the Board
of Directors may be increased or decreased by amendment to the Company's
bylaws. The Company's officers serve at the discretion of the Board of
Directors, subject to contractual arrangements. The Board has established an
Audit Committee and a Compensation Committee.
The Board's Audit Committee recommends the appointment of independent
auditors, supervises the engagement, performance and fees of the auditors, and
reviews and responds to all recommendations and reports of the auditors. The
members of the Audit Committee are Mr. Thomas Golden and Mr. Philip Friedman,
who serves as chairman of the committee. The Audit Committee met one time in
1996.
The Board's Compensation Committee is comprised of Mr. Thomas Golden, Mr.
Philip Friedman and Mr. Edward Orza, who chairs the committee. The Compensation
Committee recommends, reviews and approves salary ranges and cash benefits for
all employees at the executive level, but no longer makes awards under the
Company's Omnibus Equity Compensation Plan, which awards are now approved by
the entire Board of Directors. As previously stated, Mr. Edward Orza is the
cousin of Mr. Vincent Orza, Jr. Mr. Golden is a shareholder and director of the
law firm that generally represents the Company. The Compensation Committee met
two times in 1996, with all members present at each meeting.
COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
The Compensation Committee is responsible for developing, implementing and
administering the Company's management compensation programs. It develops or
reviews the Company's compensation programs and policies, monitors management's
performance and compensation, and makes recommendations and reports to the
Board of Directors about the levels of management compensation. Its members are
directors employed outside the Company.
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During 1996, the Compensation Committee made awards under the Company's
Omnibus Equity Compensation Plan. These awards are now made by the entire Board
of Directors.
No member of the Committee is a current officer or employee of the Company
and no employee of the Company serves or has served on the compensation
committee (or board of directors of a corporation lacking a compensation
committee) of a corporation employing a member of this Committee.
PRINCIPAL COMPONENTS OF EXECUTIVE COMPENSATION
The Company's management compensation policies are designed to attract and
retain capable personnel, and to motivate them through rewards based on
employee performance, the Company's financial performance and stock price
appreciation. These programs have three components: (i) base salary; (ii) stock
incentives that reward management for stock price appreciation and align
management and shareholder interests; and (iii) possible cash bonuses based on
achieving annual operating income targets.
BASE SALARIES
The base salary component has been historically fixed by a subjective mix
of the Company's performance, its size, cash availability, and the levels of
compensation received by executives at similar companies. See Summary
Compensation Table on page 16 for historical overview. The Compensation
Committee believes that management's base salary levels are and have been lower
than the levels of compensation received by executives at similar companies.
This belief is based on the collective knowledge of the Committee members and
on informal compensation surveys of public corporations in the restaurant
industry, which the Committee regards as a reasonable sampling of industry
standards.
STOCK INCENTIVES
The stock incentive program was introduced in 1987. Its purpose is to
provide long-term management incentives for stock price appreciation and to
align management and shareholder interests. The stock incentive program is
currently composed of (i) a stock grant program and stock option grants for
lower level management; (ii) stock option agreements for the President and
Company Vice Presidents; and (iii) stock option grants for incoming and
long-term directors.
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Beginning in 1987, the Company has granted stock options to its
executives. These options have offered incentive compensation instead of more
traditional compensation packages offering broad insurance coverages,
retirement plans, and higher base salaries. By placing a substantial portion of
management's compensation in a stock incentive program, the Company put that
compensation "at risk" in much the same way that a shareholder's stock purchase
price is "at risk." Management only earns this incentive compensation through
its ability to make the Company perform, thereby improving its value and the
corresponding price of its stock. Thus, management and the shareholders benefit
together, and their interests are aligned.
See "Option/SAR Grants in Last Fiscal Year" table on page 18 for summary
of options granted in 1996. As of April 15, 1997, no additional employee
options have been awarded.
In 1987, the Company created a director stock option plan. This plan
currently grants incoming directors an option to purchase 50,000 shares of
common stock. Directors who have served as such for five or more years receive
annual grants of options to purchase 10,000 shares of common stock. The purpose
of the director stock option plan was and is the same as the senior management
stock option agreements: to reward shareholder interests. As in the case of
senior management, the Company was unwilling to pay the level of director fees
commonly paid directors of publicly-held companies. Moreover, it felt it must
compensate its directors for their personal risks in serving a company with no
director liability insurance. It did so through its director stock option plan.
The Board of Directors has been stable and enjoyed greater longevity than might
otherwise be expected from small, young companies like Eateries.
The Company adopted in 1994 an employee stock purchase plan which gives
all employees (except for those owning 5% or more of the Company's common
stock) the right to purchase shares of common stock at a discount from market
price. This program is intended to give all employees a financial stake in the
Company's success.
CASH BONUS
The cash bonus program was introduced in 1992. In contrast to the
long-term stock incentive program, the discretionary cash bonus program offers
incentives for short-term (annual) performance. The program is based on the
Company's achievement of an annual net earnings target. The Committee sets the
target based on internal financial forecasts prepared before the target
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<PAGE> 16
year. Extraordinary, unusual or infrequently occurring items are disregarded.
In 1994 and 1995, no bonuses were paid. In 1996, total bonuses of $17,011 were
paid to Norma Karter, Vice President of Marketing, as a result of her meeting
certain performance objectives. The Committee believes that, while short-term
performance is important and should be rewarded, it is less important than
long-term growth, profitability and stock price appreciation. Accordingly, the
levels of compensation from the cash bonus program are significantly less than
that potentially available from the stock incentive programs.
401(k) PLAN
In 1996, the Company adopted a 401(k) plan which is intended to assist
employees in providing for their retirement.
POLICY ON DEDUCTIBILITY OF CERTAIN COMPENSATION
A 1993 amendment to the federal tax code prohibited public companies from
deducting annual compensation in excess of $1,000,000 paid to certain executive
officers after 1993. The Committee does not believe this restriction is likely
to affect its compensation decisions because of the relatively low levels of
salary and cash bonus historically paid to its management. Although the
exercise of stock options could cause the $1,000,000 cap to be exceeded, the
Compensation Committee does not intend to consider the cap when awarding stock
options.
COMPENSATION OF CHIEF EXECUTIVE OFFICER
The base salary of the Company's Chief Executive Officer is $200,000. Dr.
Orza received no cash bonus in 1996. The Committee believes that the Company's
stability, growth and earnings in recent years justify the compensation paid to
Dr. Orza.
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<PAGE> 17
Dated: April 15, 1997 Compensation Committee of Eateries, Inc.
Mr. Edward D. Orza, Chairman
Mr. Thomas F. Golden
Mr. Philip Friedman
EXECUTIVE COMPENSATION
Summary Compensation Table. The following table sets forth information
about the compensation of the Company's chief executive officer and the other
executive officers of the Company who earned over $100,000 in compensation in
1996 (the "named executives").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term
Compensation
------------
Annual Compensation (1) Awards
-------------------------------------------- ----------
# of Shares
Underlying
Stock
Name and Other Annual Options All Other
Principal Position Year Salary ($) Bonus ($) Compensation Granted Compensation (2)
- -------------------------------- ---- ---------- --------- ------------ ---------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Vincent F. Orza, Jr. 1996 $ 208,450 -- $ 6,000(3) 270,000(4) $ 373
Chairman of the Board, President 1995 $ 208,450 -- * 20,000(4) $ 280
and CEO 1994 $ 158,450 -- * 20,000(4) $ 280
James M. Burke 1996 $ 146,110 -- $ 6,000(3) 110,000 $ 152
Vice President, Chief Operating 1995 $ 146,110 -- * 10,000 $ 175
Officer, Assistant Secretary 1994 $ 106,110 -- * 10,000 $ 175
and Director
August Hehemann(5) 1996 $ 136,110 -- * -- --
Vice President of Finance, 1995 $ 136,110 -- * 100,000 --
Treasurer and CFO 1994 -- -- -- -- --
Norma C. Karter 1996 $ 103,620 $ 17,011 * -- --
Vice President of 1995 $ 38,516 -- * 50,000 --
Marketing 1994 -- -- -- -- --
</TABLE>
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<PAGE> 18
- ---------------
* Less than 10% of total annual salary and bonus.
(1) Amounts shown include cash and non-cash compensation earned and received
by executive officers as well as amounts earned but deferred at the
election of those officers and includes automobile allowances for the
three named individuals in the amounts of $8,450, $6,110, and $6,110,
respectively, and in the amount of $20,670 for the group.
(2) The amounts shown under this column represent the premiums paid by the
Company under split dollar life insurance plans. Under these plans, the
Company pays the premiums for life insurance issued to the named
executive. Repayment of the premiums is secured by the death benefit or
the cash surrender value of the policy, if any, if the executive cancels
and surrenders the policy.
(3) Amounts shown represent directors' fees.
(4) Includes stock options granted to Dr. Orza's spouse, Patricia Orza, a
director of the Company.
(5) Mr. Hehemann left the employ of the Company effective as of December 31,
1996.
Employment Agreements. The Company has employment agreements with Dr.
Vincent F. Orza, Jr. and Mr. James M. Burke, dated as of October 1, 1995, with
Norma C. Karter dated as of August 16, 1995. The employment agreements with Dr.
Orza and Mr. Burke provide for three-year terms which, unless terminated,
automatically renew for additional one-year terms on each December 31. The
employment agreement with Ms. Karter is for one-year term which, unless
terminated, automatically renews for another one-year term as of the last day
of each contract year. The current base salary of each executive under his or
her respective employment agreement is as follows:
Vincent F. Orza, Jr. $200,000
James M. Burke 140,000
Norma C. Karter 109,688
If Dr. Orza or Mr. Burke should die during the term of the agreement, the
Company must pay to his estate an amount equal to two years' salary out of the
proceeds of the key man life insurance policy maintained on the life of
employee. If Ms. Karter should die during the term of the agreement, the
Company must pay her estate regular installments of base salary for a period of
one year from the date of death.
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<PAGE> 19
Stock Put Agreements. In the event of the death of Mr. Orza or Mr. Burke,
the Company has granted their estate or other legal representative the right
(but not the obligation) to compel the Company to purchase all or part of the
common stock owned by or under stock options to Mr. Orza or Mr. Burke or the
members of their immediate families (i.e. spouse or children) or controlled by
any of them through trusts, partnerships, corporations or other entities on the
date of their death. These agreements shall be funded on both individuals by
and limited to the proceeds of the key man life insurance policies the Company
holds on both Mr. Orza and Mr. Burke.
Options Granted. The following table provides information regarding
options granted to each of the named executives during 1996:
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
# of Shares % of Total Potential Realized Value
Date Underlying Options at Assumed Annual Rates of
of Options Granted to Exercise Expiration Stock Price Appreciation
Grant Granted Employees Price(2) Date for Option Term
Name (Mo/Day) During 1996 in 1996(1) ($ share) (Mo/Yr) 5%(3) 10%(4)
---- -------- ----------- ---------- --------- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Vincent F. Orza, Jr. 1/4 250,000 57.4% 2.625 (6) 313,330 750,480
6/26 20,000(5) 4.375 6/02 29,751 67,491
James M. Burke 1/4 100,000 23.4% 2.625 (7) 125,332 300,192
6/26 10,000 4.375 6/02 14,875 33,746
August Hehemann -- -- -- -- -- -- --
Norma C. Karter -- -- -- -- -- -- --
</TABLE>
- ---------------
(1) Includes options granted to non-employee directors.
(2) Exercise Price was market price on date of grant.
(3) Assumes 5% annual increase in stock price over term of option.
(4) Assumes 10% annual increase in stock price over term of option.
(5) Includes options granted to Dr. Orza's spouse, Ms. Patricia Orza, director
of the Company.
(6) Expires in annual increments of 50,000 shares commencing 1/2001 and ending
1/2004.
(7) Expires in annual increments of 20,000 shares commencing 1/2001 and ending
1/2004.
-18-
<PAGE> 20
Options Exercised and Holdings. The following table provides information
about options exercised by each of the named executives in 1996 and the value
of their outstanding options measured by the closing price of the Company's
common stock on December 29, 1996:
AGGREGATED OPTION/SAR EXERCISES AND
FISCAL YEAR-END OPTION/SAR VALUE TABLE
<TABLE>
<CAPTION>
Number of Shares Value of Unexercised
Shares Underlying Unexercised in-the-Money
Acquired Options at FY-End (#) Options at FY-End ($)
on Value -------------------------- --------------------------
Name Exercise Realized(1) Exercisable/Unexercisable Exercisable/Unexercisable
---- -------- ----------- -------------------------- --------------------------
<S> <C> <C> <C> <C>
Vincent F. Orza, Jr.(2)(3) 46,498 $ 72,653 143,332/220,000 171,247/125,000
James M. Burke(2) 23,999 $ 37,498 66,666/90,000 82,498/50,000
August Hehemann -- -- 25,000/- 6,250/-
Norma C. Karter -- -- -/50,000 -/18,750
</TABLE>
- ---------------
(1) Market value at exercise date less exercise price.
(2) The options held by Dr. Vincent F. Orza, Jr. and Mr. James M. Burke
include options received for service as directors of the Company.
(3) The information shown for Dr. Orza includes the beneficial ownership of
director options for 56,666 shares held by his spouse, Ms. Patricia Orza.
Director Compensation. The Company's directors receive $2,000 for each
meeting and $1,000 for travel days and for each other day devoted to the
Company's business. Aggregate director compensation in 1996 was $49,000. In
addition, each director receives stock options upon initial election as a
director and additional options after five years of service. See "Omnibus
Equity Compensation Plan." During 1996, the Company paid legal fees of $148,000
to the law firm of which Mr. Golden is a member.
Omnibus Equity Compensation Plan. Under the Company' s Omnibus Equity
Compensation Plan (the "Omnibus Plan"), the Board of Directors may grant stock
options, restricted stock or other derivative securities to employees of the
Company. At present, non-qualified stock options to acquire a total of
1,430,000 shares of common stock have been issued to key employees, options to
acquire 884,000 shares of employee stock options have been exercised and
options to acquire 507,500 shares remain outstanding. An employee stock
purchase plan is also included in the Omnibus Plan.
Under the Omnibus Plan, at the time of his or her initial election, each
director (including both outside and employee directors) receives options
("Director Initial Options") for 50,000 shares of common stock. Directors who
have served for more than five years receive an annual stock option grant of
-19-
<PAGE> 21
10,000 shares upon re-election ("Director Continuing Options") . No options may
be granted under the Omnibus Plan at an exercise price which is less than 85%
of the fair market value of the common stock on the date of grant, and all
director options must be granted at fair market value on the date of grant.
At present, 286,993 shares of common stock are reserved for issuance under
currently outstanding director options. Director Initial Options are
exercisable at the rate of 20% per year beginning on the first anniversary of a
director's initial election to the Board or, as to directors elected before
1988, beginning in 1989. Director Continuing Options become exercisable in full
one year from the date of grant. All director options have a term of five years
from the start of the exercise period, subject to a one year extension to the
estate of a deceased director. Director options are nontransferable except by
will or the laws of descent.
Under the Omnibus Plan, a change in control of the Company will cause all
unvested stock options to vest and all outstanding stock options or other Plan
awards shall be cashed out unless the Compensation Committee determines
otherwise.
CERTAIN TRANSACTIONS
The Company has employed as its advertising agency the firm of Advertising
& Marketing Associates ("AMA"), which is owned by Dr. Vincent F. Orza, Jr. AMA
purchases most of the Company's electronic and print media advertising, and has
provided creative materials and marketing research for the Company. AMA billed
the Company $168,000 for media costs in 1996, from which AMA retained standard
agency discounts. Dr. Orza has represented that the 1996 discounts were
approximately $15,000 net of expenses. AMA does not charge the Company for
creative or marketing research. The Company has budgeted approximately $578,000
for media and advertising in 1997 of which AMA will be reimbursed with a
commission at or below standard agency commissions.
The Board of Directors has adopted a policy that requires that any
transactions between the Company and its officers, directors, and affiliates be
on terms no less favorable to the Company than those that the Company could
obtain from unrelated third parties. The Board has considered AMA's media
purchases and creative and marketing research in light of this policy, and
believes that the Company's arrangement with AMA is consistent with the policy
and in the Company's best interests.
-20-
<PAGE> 22
ADDITIONAL INFORMATION WITH RESPECT TO COMPENSATION COMMITTEE INTERLOCK AND
INSIDER PARTICIPATION IN COMPENSATION DECISIONS
Tom Golden, a member of the Company's Compensation Committee, is a
shareholder and director of the Company's primary outside law firm. In l996,
the Company incurred legal fees of $148,000 with such law firm.
PERFORMANCE GRAPH
The following graph compares the Company's performance for the periods
indicated with the respective performances of the CRSP Total Return Index for
the NASDAQ Market and the NASDAQ Retail Trade Index. The six-year cumulative
total returns reflect reinvested dividends and are weighted on a market
capitalization basis.
[GRAPH]
<TABLE>
<CAPTION>
GRAPH DOLLAR VALUES 1991 1992 1993 1994 1995 1996
- ------------------- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Eateries, Inc. 100 513 613 400 275 325
CRSP Total Return Index 100 116 134 131 185 227
NASDAQ Retail Trade Index 100 94 99 91 100 119
</TABLE>
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<PAGE> 23
The foregoing graph depicts the comparative return on an investment in the
common stock for the periods indicated. Historical returns may not necessarily
be indicative of actual returns which may be attained in the future.
OTHER INFORMATION ABOUT DIRECTORS, OFFICERS
AND CERTAIN SHAREHOLDERS
BENEFICIAL OWNERSHIP OF DIRECTORS, OFFICERS AND CERTAIN SHAREHOLDERS
The following table sets forth certain information regarding beneficial
ownership of the Company's common stock as of April 15, 1997, by (i) each
person known by the Company to own beneficially more than 5% of the Company's
common stock, (ii) each director and executive officer of the Company, and
(iii) all executive officers and directors of the Company as a group.
<TABLE>
<CAPTION>
Presently- Shares Beneficially
Shares Exercisable Owned (3)
Directly Stock ---------------------
Name Owned (1) Options (2) Number Percent
- ---- --------- ----------- ------- -------
<S> <C> <C> <C> <C>
Vincent F. Orza, Jr 344,261 193,332 537,593 13.2%
Patricia L. Orza
2001 Cambridge Way
Edmond, Oklahoma
Edward D. Orza 465,119 20,000 485,119 12.5%
45 Lounsbury Rd
Croton-on-Hudson, New York
James M. Burke 177,993 86,666 264,659 6.7%
6701 Reed Dr.
Oklahoma City, Oklahoma
Norma C. Karter -- -- -- --
Corey Gable 239 10,000 10,239 *
Philip Friedman 35,999 33,333 69,332 1.8%
Thomas F. Golden 11,000 33,652 44,652 1.1%
Larry Kordisch -- -- -- --
Microcap Partners Limited Partnership 236,500 -- 236,500 6.1%
905 W. Main Street, Box 23, Suite 25A
Durham, North Carolina 27701
Astoria Capital Partners, L.P. 311,700 -- 311,700 8.1%
735 Second Avenue
San Francisco, California 94118
Executive Officers and Directors 1,034,611 376,983 1,411,594 33.3%
as a group (7 persons)
</TABLE>
-22-
<PAGE> 24
- ---------------
* Less than one percent.
(1) Excludes shares which the shareholder has the right to acquire through
the exercise of stock options.
(2) Shares the shareholder may acquire through the exercise of
presently-exercisable stock options or stock options which will become
exercisable within 60 days of April 25, 1997.
(3) Includes shares directly owned and shares subject to presently-exercisable
stock options as described in footnotes (1) and (2) above.
OTHER INFORMATION ABOUT THE ANNUAL MEETING
OTHER MATTERS COMING BEFORE THE MEETING
As of the date of this proxy statement, the Company knows of no business
to come before the meeting other than that referred to above. The Company's
rules of conduct for the annual meeting prohibit the introduction of
substantive matters not previously presented to the shareholders in a proxy
statement. As to other business, such as procedural matters, that may come
before the meeting, the persons holding proxies will vote those proxies in the
manner they believe to be in the best interests of the Company and its
shareholders.
SHAREHOLDER PROPOSALS FOR THE NEXT ANNUAL MEETING
Any shareholder who wishes to present a proposal at the Company's 1998
Annual Meeting of Shareholders must deliver such proposal to the Secretary of
the Company by December 31, 1997, for inclusion in the Company's proxy, notice
of meeting, and proxy statement for the 1998 Annual Meeting.
AUDITORS
Ernst & Young LLP has audited the Company's financial statements for each
of the three years in the period ended December 29, 1996. Their report is
included in the Company's Annual Report to Shareholders that accompanies this
Proxy Statement.
Representatives of Ernst & Young LLP will be present at the Annual Meeting
and available to answer questions regarding their audit, and will make a
statement if they wish. Consistent with prior practices, the Board has not
asked the shareholders to ratify its selection of auditors, believing that
shareholder ratification is unnecessary.
-23-
<PAGE> 25
ADDITIONAL INFORMATION
The Company will bear the cost of soliciting proxies. Officers and regular
employees of the Company may solicit proxies by further mailing, personal
conversations, or by telephone or telegraph. They will do so without
compensation other than their regular compensation. The Company will, upon
request, reimburse brokerage firms and others for their reasonable expenses in
forwarding solicitation material to the beneficial owners of stock.
THE COMPANY'S ANNUAL REPORT ON FORM 10-K, INCLUDING THE FINANCIAL
STATEMENTS AND SCHEDULES THERETO, FOR THE YEAR ENDED DECEMBER 29, 1996, AS
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, WILL BE FURNISHED WITHOUT
CHARGE TO ANY SHAREHOLDER UPON WRITTEN REQUEST ADDRESSED TO MS. PATRICIA L.
ORZA, SECRETARY, EATERIES, INC., 3240 W. BRITTON ROAD, SUITE 202, OKLAHOMA
CITY, OKLAHOMA 73120. SHAREHOLDERS REQUESTING EXHIBITS TO THE FORM 10-K WILL BE
PROVIDED THE SAME UPON PAYMENT OF REPRODUCTION EXPENSES.
By order of the Board of Directors
PATRICIA L. ORZA
Secretary
April 28, 1997
-24-
<PAGE> 26
EXHIBIT A
PROPOSED AMENDMENTS OF ARTICLE EIGHT OF
THE RESTATED ARTICLES OF INCORPORATION
RESOLVED, That the Restated Articles of Incorporation of the Corporation,
as amended, be further amended by the deletion of existing Article Eight and
the substitution of the following text, so that Article Eight shall be and read
in its entirety as follows:
ARTICLE EIGHT
(a) The number of directors which shall constitute the entire Board of
Directors shall be not less than three (3) nor more than fifteen (15)
directors. Within these limits, the number of directors shall be fixed from
time to time in the bylaws. The directors shall be elected at the annual
shareholders' meeting, except as otherwise provided in subparagraph (b) of this
Article Eight. The directors shall be divided into three (3) classes as nearly
equal in number as may be. At the annual shareholders' meeting in 1997, one
class of two directors shall be elected for a one-year term, one class of two
directors shall be elected for a two-year term, and one class of three
directors shall be elected for a three-year term. Commencing with the annual
shareholders' meeting in 1998 and at each succeeding annual shareholders'
meeting, successors to the class of directors whose terms expire at such annual
shareholders' meeting shall be elected for a three-year term. If the number of
directors is changed, any increase or decrease in directors shall be
apportioned among the classes so as to maintain the number of directors
comprising each class as nearly equal as possible. Any additional directors of
a class shall hold office for a term which will coincide with the remaining
term of the other directors of the class.
(b) A director shall hold office until the annual shareholders' meeting
for the year in which his or her term expires and until his or her successor
shall be elected. Directors may be removed only by the holders of at least a
majority of the outstanding Common Stock and only for cause at a meeting called
for such purpose. Except as may otherwise be provided by law, cause for removal
shall be construed to exist only if (i) the director whose removal is proposed
has been convicted of a felony by a court of competent jurisdiction and the
conviction is no longer subject to direct appeal, (ii) the director has been
adjudged by a court of competent jurisdiction to be liable for negligence or
misconduct in the performance of his or her duty to the corporation in a matter
of substantial importance to the corporation, and the adjudication is no longer
-25-
<PAGE> 27
subject to direct appeal or (iii) any other situation exists which eighty
percent (80%) of the other directors, in their sole discretion, agree
constitutes cause for removal.
(c) If any vacancy occurs on the Board of Directors or any new
directorship is created by an increase in the authorized number of directors, a
majority of the directors in office, though less than a quorum, may fill the
vacancy or fill the newly created directorship. Any director elected to fill a
vacancy shall have the same term as that of his or her predecessor, or, if such
vacancy is a result of an increase in the number of directors, as that of the
other directors of the class of which he or she shall be a member.
(d) Notwithstanding any other provision of this Certificate of
Incorporation or of the Bylaws, the affirmative vote of the holders of
sixty-six and two-thirds percent (66-2/3%) of all classes of stock of the
Corporation entitled to vote generally in elections of directors, shall be
required to amend, alter, change, repeal, or adopt any provision inconsistent
with, this Article Eight.
-26-
<PAGE> 28
EXHIBIT B
PROPOSED AMENDMENTS OF THE
AMENDED AND RESTATED BYLAWS OF
EATERIES, INC.
1. RESOLVED, That Sections 1, 2, 5 and 6 of Article IV of the Amended and
Restated Bylaws of the Corporation be and are hereby deleted in their entirety
and the following provisions placed in their stead:
Section 1. Number. The number of Directors of the Corporation shall be
seven (7).
Section 2. Election and Terms. The Directors shall be elected at the
annual shareholders' meeting. The Directors shall be divided into three (3)
classes as nearly equal in number as may be. At the annual shareholders'
meeting in 1997, one class of two directors shall be elected for a one-year
term, one class of two directors shall be elected for a two-year term, and one
class of three directors shall be elected for a three-year term. Commencing
with the annual shareholders' meeting in 1998 and at each succeeding annual
shareholders' meeting, successors to the class of directors whose terms expire
at such annual shareholders' meeting, shall be elected for a three-year term.
If the number of directors is changed, any increase or decrease in directors
shall be apportioned among the classes so as to maintain the number of
directors comprising each class as nearly equal as possible. Any additional
directors of a class shall hold office for a term which will coincide with the
remaining term of the other directors of the class.
Section 5. Vacancies. If any vacancy occurs on the Board of Directors or
any new directorship is created by an increase in the authorized number of
directors, a majority of the directors in office, though less than a quorum,
may fill the vacancy or fill the newly-created directorship. Any director
elected to fill a vacancy shall have the same term as that of his or her
predecessor, or, if such vacancy is a result of an increase in the number of
directors, as that of the other directors of the class of which he or she shall
be a member.
Section 6. Removal. A director shall hold office until the annual
shareholders' meeting for the year in which his or her term expires and until
his or her successor shall be elected. Directors may be removed only by the
holders of at least a majority of the outstanding Common Stock and only for
cause at a meeting called for such purpose. Except as may otherwise be
-27-
<PAGE> 29
provided by law, cause for removal shall be construed to exist only if (i) the
director whose removal is proposed has been convicted of a felony by a court of
competent jurisdiction and the conviction is no longer subject to direct
appeal, (ii) the director has been adjudged by a court of competent
jurisdiction to be liable for negligence or misconduct in the performance of
his or her duty to the corporation in a matter of substantial importance to the
corporation, and the adjudication is no longer subject to direct appeal or
(iii) any other situation exists which eighty percent (80%) of the other
directors, in their sole discretion, agree constitutes cause for removal.
2. RESOLVED, That Article XIII of the Amended and Restated Bylaws of the
Corporation be and is hereby deleted in its entirety and the following
provision placed in its stead:
ARTICLE XIII
AMENDMENTS
Section 1. Method of Amendment. These bylaws may be altered, amended or
repealed or new bylaws may be adopted by the shareholders or by the board of
directors. Approval of an amendment to these bylaws by the shareholders shall
require the approval of a majority of the outstanding capital stock of the
Corporation except that the affirmative vote of the holders of sixty-six and
two-thirds percent (66-2/3%) of the outstanding capital stock of each class of
stock of the Corporation entitled to vote generally in elections of directors,
shall be required to directly or indirectly amend, alter, change, repeal, or
adopt any provision inconsistent with, Article IV of these bylaws.
-28-
<PAGE> 30
EATERIES, INC.
3240 W. Britton Rd., Suite 202
Oklahoma City, Oklahoma 73120
______________________________
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. The undersigned
hereby appoints Vincent F. Orza Jr., James M. Burke and Edward D. Orza as
Proxies, each with the power to appoint his substitute, and hereby authorizes
them to represent and to vote, as designated below, all the shares of common
stock of Eateries, Inc. held of record by the undersigned on April 25, 1997, at
the Annual Meeting of Shareholders to be held on June 24, 1997, or any
adjournment thereof.
1. Approval of Proposed Amendments to the amended and restated articles of
incorporation and amended and restated bylaws of Eateries, Inc. which will
have the effect of approving a classified board of directors, prohibiting
removal of directors without cause and permitting directors to amend any
of the bylaws of Eateries, Inc.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
2. ELECTION OF DIRECTORS
FOR all nominees listed below [ ] WITHHOLD AUTHORITY [ ]
(except as marked to the contrary below) to vote for all nominees listed below
(INSTRUCTIONS: To withhold authority to vote for any individual nominee,
strike through the nominee's name below. The year in the parenthetical
after each director's name indicates the year his term in office will
expire if the Proposed Amendments described in proposal 1. above are
approved.)
James M. Burke (To be elected to serve until the 2000 Annual Meeting), Thomas
F. Golden (To be elected to serve until the 1999 Annual Meeting), Edward D.
Orza (To be elected to serve until the 2000 Annual Meeting), Larry Kordisch (To
be elected to serve until the 1998 Annual Meeting), Philip Friedman (To be
elected to serve until the 1999 Annual Meeting), Patricia L. Orza (To be
elected to serve until the 1998 Annual Meeting), and Vincent F. Orza, Jr. (To
be elected to serve until the 2000 Annual Meeting)
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR EACH OF THE DIRECTOR NOMINEES AND "FOR" PROPOSAL 1. THIS PROXY
CONFERS DISCRETIONARY AUTHORITY UPON THE NAMED PROXIES TO VOTE THE
UNDERSIGNED'S SHARES ON ANY OTHER MATTERS WHICH MAY BE PROPERLY BROUGHT BEFORE
THE MEETING, INCLUDING VOTING AGAINST ANY DIRECTOR NOMINEES NOT IDENTIFIED IN
PROPOSAL 2.
Please sign exactly as name appears below. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by President or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
DATED: ___________________________, 1997
________________________________________
(Signature)
________________________________________
(Signature if held jointly)
Please mark, sign, date and return this
Proxy Card promptly using the enclosed
envelope.
