<PAGE> 1
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:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
EATERIES, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
-----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-----------------------------------------------------------------------
(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):
-----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------------
(5) Total fee paid:
-----------------------------------------------------------------------
[ ] 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:
-----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-----------------------------------------------------------------------
(3) Filing Party:
-----------------------------------------------------------------------
(4) Date Filed:
-----------------------------------------------------------------------
<PAGE> 2
3240 W. Britton Road, Suite 202
Oklahoma City, Oklahoma 73120
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To be held July 7, 1998
The 1998 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 Tuesday, July 7, 1998, at 9:00 a.m., CDT.
The Annual Meeting will be held for the following purposes:
1. The election of seven directors; and
2 . Such other matters as may properly come before the Annual Meeting
or any adjournment.
Shareholders of record at the close of business on May 12, 1998, 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.
<PAGE> 3
3240 W. Britton Road, Suite 202
Oklahoma City, Oklahoma 73120
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
July 7, 1998
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 1998 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 Tuesday, July 7, 1998, 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 May 12, 1998.
GENERAL INFORMATION
Only shareholders of record at the close of business on May 12, 1998,
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 15, 1998, the Company had 3,914,669 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 May 12, 1998, will constitute a
quorum. Each share of common stock entitles its holder to one vote on each
matter considered at the meeting. 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" EACH OF THE DIRECTOR NOMINEES NAMED IN THIS PROXY STATEMENT. THE
ENCLOSED PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
-2-
<PAGE> 4
ELECTION OF DIRECTORS
At the Annual Meeting of Shareholders, seven directors constituting the
entire Board of Directors of the Company, are to be elected for a term of one
year and until their successors are duly elected and qualified. 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 36, 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
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 51, 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 29, 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 55, 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), a real estate developer
of major downtown mixed-use centers, including Tabor Center in Denver, Colorado
-3-
<PAGE> 5
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 DTU, Ltd. and Midwesco Industries, Inc.
Norma C. Karter, age 47, 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 50, was appointed to fill a vacancy in the Board of
Directors in April, 1997. Mr. Kordisch is the Executive Vice President - Finance
and Chief Financial 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 47, 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 44, 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.
Dr. Vincent F. Orza, Jr., age 47, has been Chairman of the Board of
Directors, President and Chief Executive Officer of the Company since its
organization in June, 1984. Dr. Orza created the Garfield's Restaurant & Pub
concept with the Company's Vice President and Chief Operating Officer, 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.
-4-
<PAGE> 6
Mr. Edward D. Orza is the cousin and Ms. Patricia L. Orza is the spouse
of Dr. Vincent F. Orza, Jr.
BOARD OF DIRECTORS AND ITS COMMITTEES
The Company's Board of Directors (the "Board") consists of seven
members. Each director serves for a term of one year or until his or her
successor has been elected and qualified, subject to earlier resignation,
removal or death. 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. Philip Friedman and Mr. Larry Kordisch,
who serves as chairman of the committee. The Audit Committee met one time in
1997.
The Board's Compensation Committee is comprised of Mr. Larry Kordisch
and Mr. Thomas F. Golden, who chairs the committee. The Compensation Committee
recommends, reviews and approves salary ranges and cash benefits for all
employees at the executive level. Awards under the Company's Omnibus Equity
Compensation Plan are approved by the entire Board of Directors. As previously
stated, Mr. Edward D. Orza is the cousin of Dr. Vincent F. Orza, Jr. Mr. Golden
is a shareholder and director of the law firm that generally represents the
Company. The Compensation Committee met one time in 1997, with all members
present.
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.
Awards under the Company's Omnibus Equity Compensation Plan are 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.
-5-
<PAGE> 7
BASE SALARIES
The base salary component has been historically determined 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 8 for historical overview. The Compensation
Committee believes that management's base salary levels are and have been at or
below 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.
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 9 for summary
of options granted in 1997. As of April 15, 1998, 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.
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 BONUSES
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 a
combination of factors including net income, revenue, growth and various other
criteria. In 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. In 1997,
-6-
<PAGE> 8
total bonuses of $50,000 were paid to Vincent F. Orza, Jr., President and Chief
Executive Officer; $30,000 to James M. Burke, Vice President and Chief Operating
Officer; $10,000 to Corey Gable, Vice President/Treasurer and Chief Financial
Officer; and $2,217 to Norma Karter. 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 prohibits 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 cash bonuses totalling $50,000 in 1997. The Committee believes
that the Company's stability, growth and earnings in recent years justify the
compensation paid to Dr. Orza.
Dated: April 15, 1998 Compensation Committee of Eateries, Inc.
Mr. Thomas F. Golden, Chairman
Mr. Larry Kordisch
COMPLIANCE WITH SECTION 16(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
executive officers and directors and persons who beneficially own more than ten
percent (10%) of the Company's Common Stock to file initial reports of
ownership and reports of changes in ownership with the Securities and Exchange
Commission ("SEC"). Executive officers, directors, and greater than ten percent
(10%) beneficial owners are required by SEC regulations to furnish the Company
with copies of all Section 16(a) forms they file.
Based solely on a review of the copies of such forms furnished to the
Company and written representations from the executive officers, directors and
holders of 10% or more of the Company's Common Stock, the Company believes that
all Section 16(a) filing requirements applicable to its executive officers,
directors and 10% beneficial owners were complied with except Form 3 for
Mr. Larry Kordisch required in connection with his appointment to the Company's
Board of Directors in April 1998, and Form 4 for Mr. Edward D. Orza required in
connection with the sale of 13,000 shares of the Company's Common Stock on
October 31, 1997. Mr. Kordisch filed his Form 3 on July 9, 1997. Mr. Orza
filed his Form 4 on December 8, 1997.
-7-
<PAGE> 9
COMPLIANCE WITH SECTION 16(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
executive officers and directors and persons who beneficially own more than ten
percent (10%) of the Company's Common Stock to file initial reports of
ownership and reports of changes in ownership with the Securities and Exchange
Commission ("SEC"). Executive officers, directors, and greater than ten percent
(10%) beneficial owners are required by SEC regulations to furnish the Company
with copies of all Section 16(a) forms they file.
Based solely on a review of the copies of such forms furnished to the
Company and written representations from the executive officers, directors and
holders of 10% or more of the Company's Common Stock, the Company believes that
all Section 16(a) filing requirements applicable to its executive officers,
directors and 10% beneficial owners were complied with except (i) Form 3 for
Mr. Larry Kordisch required in connection with his appointment to the Company's
Board of Directors in April 1998, and Form 4 for Mr. Edward D. Orza required in
connection with the sale of 13,000 shares of the Company's Common Stock on
October 31, 1997. Mr. Kordisch filed his Form 3 on July 9, 1997. Mr. Orza
filed his Form 4 on December 8, 1997.
<PAGE> 10
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 $100,000 in compensation in
1997 (the "named executives").
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long-Term
Compensation
-------------
Annual Compensation (1) Awards
--------------------------------- ------
# of Shares
Underlying Stock
Name and Other Annual Options All Other
Principal Position Year Salary ($) Bonus ($) Compensation Granted Compensation (2)
------------------- ---- ---------- --------- ------------ ------------ ----------------
<S> <C> <C> <C> <C> <C> <C>
Vincent F. Orza, Jr 1997 $208,450 $ 50,000 $ 6,000(3) 20,000(4) $ 285
Chairman of the Board, 1996 208,450 -- 6,000(3) 270,000(4) 373
President 1995 208,450 -- * 20,000(4) 280
and CEO
James M. Burke 1997 $146,110 $ 30,000 $ 6,000(3) 10,000 $ 133
Vice President, Chief 1996 146,110 -- 6,000(3) 110,000 152
Operating Officer, Assistant 1995 146,110 -- * 10,000 175
Secretary and Director
Norma C. Karter 1997 $109,688 $ 2,217 * -- --
Vice President of 1996 103,620 17,011 * -- --
Marketing 1995 38,516 -- * 50,000
</TABLE>
- ---------------------------
* 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
executives in the amounts of $8,450, $6,110, and $0, respectively, and in
the amount of $14,560 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 L. Orza, a
director of the Company.
Employment Agreements. The Company has employment agreements with Dr.
Vincent F. Orza, Jr. and Mr. James M. Burke, dated as of October 1, 1995, and
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 a 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:
-8-
<PAGE> 11
<TABLE>
<S> <C>
Vincent F. Orza, Jr. $225,000
James M. Burke 155,000
Norma C. Karter 109,688
</TABLE>
If Dr. Orza or Mr. Burke should die during the term of the agreement, the
Company must pay to his estate an amount equal to two years' salary out of the
proceeds of the key man life insurance policy maintained on the life of
employee. If Ms. Karter should die during the term of the agreement, the Company
must pay her estate regular installments of base salary for a period of one year
from the date of death.
Stock Put Agreements. In the event of the death of Dr. Orza or Mr.
Burke, the Company has granted their estate or other legal representative the
right (but not the obligation) to compel the Company to purchase all or part of
the common stock owned by or under stock options to Dr. Orza or Mr. Burke or the
members of their immediate families (i.e. spouse or children) or controlled by
any of them through trusts, partnerships, corporations or other entities on the
date of their death. These agreements shall be funded on both individuals by and
limited to the proceeds of the key man life insurance policies the Company holds
on both Dr. Orza and Mr. Burke.
Options Granted. The following table provides information regarding
options granted to each of the named executives during 1997:
<TABLE>
<CAPTION>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
# of Shares % of Total Potential Realized Value
Date Underlying Options at Assumed Annual Rates of
of Options Granted to Exercise Expiration Stock Price Appreciation
Grant Granted Employees Price(2) Date for Option Term
Name (Mo/Day) During 1997 in 1997(1) ($ share) (Mo/Yr) 5%(3) 10%(4)
---- -------- ----------- ------------ --------- ------- --------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Vincent F. Orza, Jr 6/24 20,000(5) 18.2% $ 2.563 6/03 $ 17,433 $ 39,550
James M. Burke 6/24 10,000 9.1% 2.563 6/03 8,717 19,775
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 L. Orza,
director of the Company.
Options Exercised and Holdings. The following table provides
information about options exercised by each of the named executives in 1997 and
the value of their outstanding options measured by the closing price of the
Company's common stock on December 28, 1997:
-9-
<PAGE> 12
AGGREGATED OPTION/SAR EXERCISES AND
FISCAL YEAR-END OPTION/SAR VALUE TABLE
<TABLE>
<CAPTION>
Shares Number of Shares Value of Unexercised
Acquired Underlying Unexercised in-the-Money
on Value Options at FY-End (#) Options at FY-End ($)
Name Exercise Realized(1) Exercisable/Unexercisable Exercisable/Unexercisable
---- -------- ----------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Vincent F. Orza, Jr.(2)(3) 26,666 $49,999 186,666/170,000 $197,031/$182,290
James M. Burke(2) 13,333 24,999 63,333/90,000 66,566/96,470
Norma C. Karter - - 10,000/40,000 8,150/32,600
</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 53,333 shares held by his spouse, Ms. Patricia
Orza.
Director Compensation. During 1997, the Company's directors received
$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 1997 was
$48,000. 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." On October 14, 1997, the Compensation Committee
resolved that effective January 1, 1998, the Company would pay each director an
annual retainer of $10,000 payable in quarterly installments and $500 for each
Board meeting, Committee meeting or travel day.
During 1997, the Company incurred legal fees of $132,000 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 517,500 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
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, 303,652 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.
-10-
<PAGE> 13
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, outdoor and print
media advertising, and has provided creative materials and marketing research
for the Company. AMA billed the Company $554,000 for media costs in 1997, from
which AMA retained standard agency discounts. Dr. Orza has represented that the
1997 discounts were approximately $50,000 net of expenses. AMA does not charge
the Company for creative or marketing research. The Company has budgeted
approximately $679,000 for media and advertising in 1998 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.
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 1997, the
Company incurred legal fees of $132,000 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.
-11-
<PAGE> 14
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
Among Eateries, Inc., CRSP Total Return Index for the NASDAQ Market
and NASDAQ Retail Trade Index
[GRAPH]
<TABLE>
<CAPTION>
GRAPH DOLLAR VALUES 1992 1993 1994 1995 1996 1997
- ------------------- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Eateries, Inc. 100 119 78 54 63 72
CRSP Total Return Index 100 115 112 159 195 240
NASDAQ Retail Trade Index 100 106 96 106 126 149
</TABLE>
-12-
<PAGE> 15
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, 1998, 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
Name Shares Exercisable Owned (3)
- ---- Directly Stock ---------------------
Owned (1) Options (2) Number Percent
--------- ----------- -------- ---------
<S> <C> <C> <C> <C>
Vincent F. Orza, Jr. 392,053 210,000 602,053 14.6%
Patricia L. Orza
2001 Cambridge Way
Edmond, Oklahoma
Edward D. Orza 450,000 30,000 480,000 12.2%
45 Lounsbury Rd.
Croton-on-Hudson, New York
James M. Burke 200,945 90,000 290,945 7.3%
6701 Reed Dr.
Oklahoma City, Oklahoma
Norma C. Karter - 10,000 10,000 *
Corey Gable 501 20,000 20,501 *
Philip Friedman 49,332 30,000 79,332 2.0%
Thomas F. Golden 11,000 43,652 54,652 1.4%
Larry Kordisch 5,000 10,000 15,000 *
Microcap Partners Limited Partnership 274,500 - 274,500 7.0%
905W. Main Street, Box 23, Suite 25A
Durham, North Carolina 27701
Astoria Capital Partners, L.P. 485,000 - 485,000 12.4%
735 Second Avenue
San Francisco, California 94118
Executive Officers and Directors 1,108,831 443,652 1,552,483 35.6%
as a group (7 persons)
</TABLE>
- --------------------
* 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 15, 1998.
(3) Includes shares directly owned and shares subject to presently
exercisable stock options as described in footnotes (1) and (2) above.
-13-
<PAGE> 16
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 1999
Annual Meeting of Shareholders must deliver such proposal to the Secretary of
the Company by December 31, 1998, for inclusion in the Company's proxy, notice
of meeting, and proxy statement for the 1999 Annual Meeting.
AUDITORS
Arthur Andersen LLP has audited the Company's financial statements for
the year ended December 28, 1997. Ernst & Young LLP has audited the Company's
financial statements for each of the two years in the period ended December 29,
1996. Their reports are included in the Company's Annual Report to Shareholders
that accompanies this Proxy Statement.
Representatives of Arthur Andersen 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.
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 28, 1997, 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 27, 1998
-14-
<PAGE> 17
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 May 12, 1998, at
the Annual Meeting of Shareholders to be held on July 7, 1998, or any
adjournment thereof.
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 an individual nominee,
strike through the nominee's name below.
James M. Burke, Thomas F. Golden, Edward D. Orza, Larry Kordisch, Philip
Friedman, Patricia L. Orza, and Vincent F. Orza, Jr.
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. 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 ABOVE.
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: , 1998
---------------------------------
---------------------------------------------
(Signature)
---------------------------------------------
(Signature, if held jointly)
Please mark, sign, date and return this
Proxy Card promptly using the enclosed
envelope.
