<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 [X]
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>
O'Charley's 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
O'Charley's Logo
3038 SIDCO DRIVE
NASHVILLE, TENNESSEE 37204
(615) 256-8500
Dear Shareholder:
It is my pleasure to extend to you a cordial invitation to attend the
Annual Meeting of Shareholders of O'Charley's Inc. (the "Company") to be held at
9:00 a.m., local time, on Thursday, May 8, 1997, at the Company's home office
located at 3038 Sidco Drive, Nashville, Tennessee.
Shareholders will be asked to elect two directors to the Company's Board of
Directors. In addition, we will present a report on the condition and
performance of the Company, and you will have an opportunity to question
management on matters that affect the interests of all shareholders.
We hope you will be able to attend the meeting in person. Whether you
expect to attend or not, we request that you complete and return the enclosed
proxy card in the enclosed post-paid envelope. Your vote is important.
I look forward to seeing you on Thursday, May 8.
Sincerely,
/s/ GREGORY L. BURNS
Gregory L. Burns
Chairman of the Board and
Chief Executive Officer
<PAGE> 3
O'Charley's Logo
3038 SIDCO DRIVE
NASHVILLE, TENNESSEE 37204
(615) 256-8500
---------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
---------------------
Notice is hereby given that the Annual Meeting of Shareholders (the "Annual
Meeting") of O'Charley's Inc. (the "Company"), will be held at 9:00 a.m., local
time, on Thursday, May 8, 1997, at the Company's home office located at 3038
Sidco Drive, Nashville, Tennessee, for the following purposes:
1. To elect two (2) Class I directors to hold office for a term of
three (3) years and until their successors are elected and qualified; and
2. To transact such other business as may properly come before the
Annual Meeting.
The Board of Directors has fixed the close of business on March 14, 1997 as
the record date for the determination of shareholders entitled to notice of and
to vote at the Annual Meeting.
Your attention is directed to the Proxy Statement accompanying this notice
for a more complete statement regarding matters to be acted upon at the Annual
Meeting.
By the Order of the Board of
Directors
/s/ A. CHAD FITZHUGH
A. Chad Fitzhugh, Secretary
Nashville, Tennessee
April 4, 1997
YOUR REPRESENTATION AT THE ANNUAL MEETING IS IMPORTANT. TO ENSURE YOUR
REPRESENTATION, WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE
COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY. SHOULD YOU DESIRE TO REVOKE
YOUR PROXY, YOU MAY DO SO AS PROVIDED IN THE ACCOMPANYING PROXY STATEMENT AT ANY
TIME BEFORE IT IS VOTED.
<PAGE> 4
O'CHARLEY'S INC.
3038 SIDCO DRIVE
NASHVILLE, TENNESSEE 37204
(615) 256-8500
---------------------
PROXY STATEMENT
---------------------
The accompanying proxy is solicited by the Board of Directors of
O'Charley's Inc. (the "Company") for use at the Annual Meeting of Shareholders
(the "Annual Meeting") to be held on May 8, 1997, and any adjournments thereof,
notice of which is attached hereto.
The purposes of the Annual Meeting are to elect two Class I directors and
to transact such other business as may properly be brought before the Annual
Meeting or any adjournment thereof.
A shareholder who signs and returns a proxy may revoke the same at any time
before the authority granted thereby is exercised by attending the Annual
Meeting and electing to vote in person, by filing with the Secretary of the
Company a written revocation or by duly executing a proxy bearing a later date.
Unless so revoked, the shares represented by the proxy will be voted at the
Annual Meeting. Where a choice is specified on the proxy, the shares represented
thereby will be voted in accordance with such specifications. If no
specification is made, such shares will be voted FOR the election of the two
director nominees.
The Board of Directors knows of no other matters which are to be brought to
a vote at the Annual Meeting. However, if any other matter does come before the
Annual Meeting, the persons appointed in the proxy or their substitutes will
vote in accordance with their best judgment on such matters.
The Board of Directors has fixed the close of business on March 14, 1997 as
the record date for the Annual Meeting. Only record holders of the Company's
common stock, no par value (the "Common Stock"), at the close of business on
that date will be entitled to vote at the Annual Meeting. On the record date,
the Company had outstanding 7,872,146 shares of Common Stock. Holders of the
Common Stock will be entitled to one vote for each share of Common Stock so
held, which may be given in person or by proxy duly authorized in writing.
The representation in person or by proxy of at least a majority of the
outstanding shares entitled to vote is necessary to provide a quorum at the
meeting. The directors shall be elected by a plurality of the votes cast in the
election by the holders of the Common Stock represented and entitled to vote at
the Annual Meeting. Any other matters submitted to the shareholders shall be
approved by the affirmative vote of a majority of the votes cast by the holders
of the Common Stock represented and entitled to vote at the Annual Meeting.
Abstentions and "non-votes" are counted as present in determining whether the
quorum requirement is satisfied. A "non-vote" occurs when a nominee holding
shares for a beneficial owner votes on one proposal, but does not vote on
another proposal because the nominee does not have discretionary voting power
and has not received instructions from the beneficial owner.
The cost of solicitation of proxies will be borne by the Company, including
expenses in connection with preparing, assembling and mailing this Proxy
Statement. Such solicitation will be made by mail, and may also be made by the
Company's regular officers or employees personally or by telephone or telegram.
The Company may reimburse brokers, custodians and nominees for their expenses in
sending proxies and proxy materials to beneficial owners.
This Proxy Statement and the Company's Annual Report to Shareholders have
been first mailed on or about April 4, 1997 to all shareholders of record at the
close of business on March 14, 1997.
<PAGE> 5
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information furnished to the Company
as of March 14, 1997 concerning persons known to the Company to be the
beneficial owners of more than 5% of the outstanding shares of the Common Stock.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
NAME AND ADDRESS BENEFICIAL PERCENT
OF BENEFICIAL OWNER OWNERSHIP OF CLASS
------------------- ---------- --------
<S> <C> <C>
David K. Wachtel, Jr........................................ 1,067,599(1) 13.6%
640 Spence Lane, Suite 123
Nashville, Tennessee 37217
Wellington Management Company, LLP.......................... 534,000(2) 6.8
75 State Street
Boston, Massachusetts 02109
St. Denis J. Villere & Company.............................. 485,800(3) 6.2
210 Baronne Street, Suite 808
New Orleans, Louisiana 70112
</TABLE>
- ---------------
(1) Based solely upon information set forth in a Schedule 13G filed with the
Securities and Exchange Commission (the "SEC") by Mr. Wachtel.
(2) Based solely upon information set forth in a Schedule 13G filed with the SEC
by Wellington Management Company, LLP, an investment advisor
("Wellington"). Wellington reported that it has shared voting power with
respect to 242,000 shares of Common Stock and shared dispositive power with
respect to 534,000 shares of Common Stock.
(3) Based solely upon information set forth in a Schedule 13G filed with the SEC
by St. Denis J. Villere & Company, an investment advisor.
PROPOSAL 1: ELECTION OF DIRECTORS
The Company's Restated Charter classifies the Board of Directors into three
classes, each class to be as nearly equal in number as possible, designated
Class I, Class II and Class III. At each annual meeting, directors of the class
whose term of office expires in that year are elected for a three-year term. The
terms of the two Class I directors, Gregory L. Burns and C. Warren Neel, will
expire upon the election and qualification of new directors at the Annual
Meeting. Charles F. McWhorter was a Class I director prior to his resignation
from the Board of Directors on September 9, 1996. The current Board of Directors
is comprised of nine positions, two of which will be filled at the Annual
Meeting. One Class I position is currently vacant. A successor, if any,
appointed to this vacant Class I position by the Board of Directors will hold
office until the next annual meeting of shareholders following such appointment.
The terms of each of the three Class II and three Class III directors will
expire at the annual meeting in 1998 and 1999, respectively. The Board of
Directors has nominated Gregory L. Burns and C. Warren Neel as the two nominees
for election as Class I directors for a three-year term expiring at the annual
meeting in 2000 and until their successors are elected and qualified. Messrs.
Burns and Neel are currently directors of the Company and were elected by the
shareholders.
Unless contrary instructions are received, it is intended that the shares
represented by proxies solicited by the Board of Directors will be voted in
favor of the election as directors of the two Class I nominees. Each nominee has
consented to be a candidate and to serve, if elected. While the Board has no
reason to believe that any nominee will be unable to accept nomination or
election as a director, if such an event should occur, the persons named in the
form of proxy have advised the Company that they will vote for such substitute
or substitutes as shall be designated by the current Board of Directors.
2
<PAGE> 6
The following table contains as of March 14, 1997 certain information
concerning: (i) the current directors of the Company, including the nominees;
(ii) each of the Named Executive Officers (as defined below); and (iii) the
directors and executive officers as a group, which information has been
furnished to the Company by the individuals named.
<TABLE>
<CAPTION>
SHARES OF
COMMON STOCK
BENEFICIALLY
DIRECTOR TERM OWNED ON PERCENT
NAME AGE SINCE EXPIRES POSITION MARCH 14, 1997(1) OF CLASS
---- --- -------- ------- -------- ----------------- --------
<S> <C> <C> <C> <C> <C> <C>
Gregory L. Burns(2)(3)......... 42 1990 1997 President, Chief 263,939 3.3%
Executive Officer and
Chairman of the Board
A. Chad Fitzhugh............... 36 -- -- Chief Financial Officer, 88,496 1.1
Secretary and Treasurer
Steven J. Hislop............... 37 -- -- Executive Vice President 111,002 1.4
and Chief Operating
Officer
John W. Stokes, Jr.(4)......... 60 1983 1998 Director 126,562(5) 1.6
Richard Reiss, Jr.(2)(4)....... 53 1983 1999 Director 77,500 1.0
G. Nicholas Spiva(4)........... 45 1985 1999 Director 48,750(6) *
H. Steve Tidwell(2)(7)......... 54 1988 1998 Director 39,000 *
C. Warren Neel(7).............. 58 1990 1997 Director 19,500 *
Samuel H. Howard(3)(7)......... 57 1992 1998 Director 12,750 *
Shirley A. Zeitlin(3).......... 62 1996 1999 Director 4,500 *
Charles F. McWhorter(8)........ -- -- -- -- 103,116 1.3
All directors and executive officers as a group (13 persons)......................... 931,885 11.1%
</TABLE>
- ---------------
* less than one percent
(1) Includes the following shares which are not currently outstanding but which
the named individuals are entitled to acquire within 60 days of the date
hereof upon the exercise of options: Gregory L. Burns -- 147,540 shares; A.
Chad Fitzhugh -- 74,820 shares; Steven J. Hislop -- 91,871 shares; John W.
Stokes, Jr. -- 15,000 shares; Richard Reiss, Jr. -- 15,000 shares; G.
Nicholas Spiva -- 15,000 shares; H. Steve Tidwell -- 15,000 shares; C.
Warren Neel -- 15,000 shares; Samuel H. Howard -- 12,000 shares; Shirley A.
Zeitlin -- 3,000 shares; Charles F. McWhorter -- 80,340; and all directors
and executive officers as a group (13 persons) -- 513,476 shares. The shares
described in this note are deemed to be outstanding for the purpose of
computing the percentage of outstanding Common Stock owned by such persons
individually and by the group, but are not deemed to be outstanding for the
purpose of computing the percentage of ownership of any other person.
(2) Member of the Executive Committee.
(3) Member of the Nominating Committee.
(4) Member of the Compensation Committee.
(5) Includes 43,462 shares owned by Mr. Stokes' wife, as to which Mr. Stokes
disclaims beneficial ownership.
(6) Includes 14,500 shares held by a trust for the benefit of Mr. Spiva.
(7) Member of the Audit Committee.
(8) Mr. McWhorter resigned as President, Chief Operating Officer and Co-Chairman
of the Board on September 9, 1996.
3
<PAGE> 7
The following is a brief summary of the business experience of each of the
directors of the Company, including the nominees.
Gregory L. Burns has served as Chairman of the Board and Chief Executive
Officer of the Company since February 1994, and as President of the Company
since September 1996. Mr. Burns, a director of the Company since 1990, served as
Chief Financial Officer of the Company from October 1983 to September 1996, as
Executive Vice President and Secretary of the Company from October 1983 to May
1993, and as President of the Company from May 1993 to February 1994. Mr. Burns
is a certified public accountant.
John W. Stokes, Jr. is Vice Chairman and President of The Equity Capital
Markets of Morgan Keegan, Inc., a wholly-owned subsidiary of Morgan Keegan &
Company, Inc. Mr. Stokes also serves as a director of RFS Hotel Investors, Inc.
and Ardent Studios, Inc.
Richard Reiss, Jr. is the Managing Partner of Georgica Advisors, a private
investment management firm. From January 1982 to December 1996, Mr. Reiss was
the Managing Partner of Cumberland Associates, Cumberland Partners and Longview
Partners, a private investment management firm and two domestic investment
partnerships, respectively. Mr. Reiss is also a director of The Lazard Funds,
Inc., Eller Media Corporation, and Page One Communications, Ltd.
G. Nicholas Spiva is President of Spiva-Hill Investments, a commercial real
estate development company. Mr. Spiva was an owner of the original O'Charley's
restaurant prior to its acquisition by the Company.
H. Steve Tidwell is President of SPFS, Inc., which operates 19 unaffiliated
restaurants in five southern states. Mr. Tidwell served as Vice President of
Real Estate and Construction at Shoney's, Inc. from December 1978 to January
1987.
Dr. C. Warren Neel is the Dean of the University of Tennessee College of
Business Administration. From October 1985 to January 1987, Dr. Neel was
Commissioner of Employment Security of the State of Tennessee. Dr. Neel was a
member of the Board of Directors of the Federal Reserve Bank of Nashville from
1980 to 1986, where he served as Chairman in 1985. Dr. Neel is a member of the
Board of Directors of Proffitt's, Inc., American Healthcorp, Inc. and Clayton
Homes, Inc.
Samuel H. Howard is Chairman of Phoenix Holdings, Inc., an investment
holding company, Chairman of Phoenix Healthcare Corporation, a health
maintenance organization, and President and Chief Executive Officer of Phoenix
Communications Group, Inc., a company engaged in radio broadcasting. From 1981
to 1989, Mr. Howard was Senior Vice President, Public Affairs for Hospital
Corporation of America. Mr. Howard is a member of the Board of Directors of
Genesis Health Ventures, Inc.
Shirley A. Zeitlin is President of Shirley Zeitlin & Co. Realtors, a real
estate brokerage firm. Ms. Zeitlin has served as President and a member of the
Board of the Tennessee Association of Realtors and the Nashville Board of
Realtors and is a Director of the National Association of Realtors and the
Federal Reserve Bank of Nashville. In addition to serving on the advisory Board
of Directors of First American National Bank, Ms. Zeitlin serves on the Boards
of numerous civic and charitable organizations.
The Board of Directors has an Executive Committee which is authorized
generally to act on behalf of the Board of Directors between scheduled meetings
of the Board, subject to certain limitations established by the Board and
applicable corporate law. Messrs. Burns, Reiss and Tidwell comprise the
Executive Committee.
The Board of Directors has an Audit Committee for the purpose of
recommending the Company's auditors, reviewing the scope of their engagement,
consulting with such auditors, reviewing the results of the audit examination,
acting as a liaison between the Board and the internal auditors and reviewing
various Company policies, including those related to accounting and internal
controls matters. Messrs. Tidwell, Neel and Howard comprise the Audit Committee,
which met two times during the fiscal year ended December 29, 1996.
The Board of Directors has a Compensation Committee for the purpose of
evaluating the performance of the Company's officers, to review and approve
setting officers' compensation, formulating bonuses for the
4
<PAGE> 8
Company's management and administering the Company's stock incentive plans.
Messrs. Stokes, Reiss and Spiva comprise the Compensation Committee, which met
four times during the fiscal year ended December 29, 1996.
The Board of Directors has a Nominating Committee for the purpose of
recommending to the Board of Directors nominees to be presented to the Company's
shareholders for election to the Board of Directors. The Nominating Committee is
comprised of one member of the Board who is also an executive officer of the
Company and one member of the Board of Directors who is not an officer or
employee from each of the two classes of directors whose term is not expiring at
the next annual meeting of shareholders. Messrs. Burns and Howard and Ms.
Zeitlin currently comprise the Nominating Committee.
In accordance with the Company's Amended and Restated Bylaws, nominations
for election to the Board of Directors may be made by the Board of Directors, a
nominating committee appointed by the Board of Directors, or by any shareholder
entitled to vote for the election of directors. Nominations made by shareholders
must be made by written notice (setting forth the information required by the
Company's Bylaws) received by the Secretary of the Company at least 120 days in
advance of an annual meeting or within 10 days of the date on which notice of a
special meeting for the election of directors is first given to shareholders.
The Board of Directors held five meetings during the fiscal year ended
December 29, 1996. All incumbent directors attended more than 75% of the
meetings of the Board and each committee of the Board on which such directors
served.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors, and persons who own more than ten percent of the
Company's Common Stock, to file reports of ownership and changes in ownership
with the SEC. Officers, directors and greater than ten percent shareholders are
required by SEC regulation to furnish the Company with copies of all Section
16(a) forms they file.
Based solely on its review of the copies of such forms received by it, or
written representations from certain reporting persons that no Forms 5 were
required for those persons, the Company believes that all filing requirements
applicable to its officers, directors and greater than ten percent beneficial
owners were complied with during the fiscal year ended December 29, 1996.
5
<PAGE> 9
EXECUTIVE COMPENSATION
The following table summarizes the compensation paid or accrued by the
Company during the three fiscal years ended December 29, 1996 for (i) the Chief
Executive Officer of the Company during the last completed fiscal year and (ii)
each of the other executive officers of the Company whose cash compensation
exceeded $100,000 (collectively, the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
-------------
AWARDS
-------------
ANNUAL COMPENSATION SECURITIES
NAME AND --------------------- UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS(#)(1) COMPENSATION
------------------ ---- --------- -------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Gregory L. Burns................... 1996 $190,975 -- -- --
President and Chief 1995 166,050 167,319 60,000 --
Executive Officer 1994 142,800 144,962 -- --
Steven J. Hislop................... 1996 125,975 56,962 -- --
Executive Vice President and 1995 106,050 101,406 30,000 --
Chief Operating Officer 1994 88,125 87,856 -- --
A. Chad Fitzhugh................... 1996 113,550 41,646 -- --
Chief Financial Officer, 1995 97,800 70,984 30,000 --
Secretary, and Treasurer 1994 80,850 61,499 -- --
Charles F. McWhorter(2)............ 1996 125,317 -- -- 65,658(3)
President and Chief 1995 166,050 167,319 60,000 --
Operating Officer 1994 142,800 144,962 -- --
</TABLE>
- ---------------
(1) Number of stock options granted under the 1990 Employee Stock Plan (the
"1990 Plan"). Although the 1990 Plan permits grants of restricted stock and
stock appreciation rights, no grants of those incentives have been made.
(2) Mr. McWhorter resigned as President, Chief Operating Officer and Co-Chairman
of the Board on September 9, 1996.
(3) Amounts paid to Mr. McWhorter in connection with his resignation from
employment with the Company pursuant to the terms of a Severance Agreement
and General Release, dated September 9, 1996.
AGGREGATED OPTION EXERCISES AND YEAR-END VALUE TABLE.
Shown below is information with respect to exercises by the Named Executive
Officers during the fiscal year ended December 29, 1996 of options to purchase
shares issued pursuant to the Company's stock option plans and information with
respect to unexercised options to purchase shares held by the Named Executive
Officers as of the end of the fiscal year ended December 29, 1996:
AGGREGATED OPTION EXERCISES IN FISCAL 1996 AND FISCAL 1996 YEAR-END OPTION
VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS HELD AT IN-THE-MONEY OPTIONS AT
SHARES ACQUIRED DECEMBER 29, 1996 DECEMBER 29, 1996(1)
ON EXERCISE VALUE --------------------------- ---------------------------
NAME (#) REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- --------------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Gregory L. Burns................. -- -- 158,340 141,660 $1,047,101 $399,146
Steven J. Hislop................. -- -- 90,971 90,780 559,710 270,982
A. Chad Fitzhugh................. -- -- 72,120 92,880 339,213 286,657
Charles F. McWhorter............. 21,000 $171,499 80,340 -- 314,352 --
</TABLE>
- ---------------
(1) Based on the closing price of the Common Stock on the Nasdaq National Market
on December 27, 1996 ($12.25).
6
<PAGE> 10
The Company has not awarded stock appreciation rights to any employee and
has no long-term incentive plans, as that term is defined in regulations
promulgated by the SEC. The Company has various stock option and stock purchase
plans. During the fiscal year ended December 29, 1996, the Company did not
adjust or amend the exercise price of stock options awarded the Named Executive
Officers, whether through amendment, cancellation or replacement grants, or
other means. Also, the Company presently has no defined benefit or actuarial
plans covering any employees of the Company.
DIRECTOR COMPENSATION
Non-employee directors receive an annual retainer of $3,000 and a fee of
$1,000 for each Board meeting attended, $1,000 for each committee meeting
attended on a day on which there is no regularly scheduled Board meeting and are
reimbursed for travel expenses associated with serving as a director. In
addition, members of the Executive Committee are paid a fee of $1,250 per
quarter. Directors who are officers or employees of the Company receive no
compensation for serving as members of the Board. The aggregate amount of fees
paid to the non-employee directors for the 1996 fiscal year was $67,600.
Non-employee directors participate in the Company's 1991 Stock Option Plan
for Outside Directors (the "Director's Plan"). Non-employee directors receive an
option to purchase 7,500 shares upon their initial election to the Board of
Directors. The options become exercisable in 20% annual increments commencing on
the first anniversary of the date of grant. The Director's Plan also provides
for annual grants of options to purchase 1,500 shares to each non-employee
director in addition to the grant upon initial election to the Board of
Directors. All such options become exercisable six months following the date of
their issuance. All options issued under the Director's Plan have an exercise
price per share at the date of grant equal to the closing sale price on the
Nasdaq National Market on that date. At December 29, 1996, there were seven
participants under the Director's Plan who held options covering an aggregate of
97,500 shares at exercise prices ranging from $3.08 to $13.75 per share. There
have been no exercises to date of options granted under the Director's Plan.
The Board of Directors may in the future adjust the compensation of
directors as it deems advisable and consistent with the best interests of the
Company's shareholders and the financial abilities of the Company.
SEVERANCE AGREEMENT
On September 16, 1996, the Company entered into a Severance Compensation
Agreement with Gregory L. Burns (the "Severance Agreement"). The Severance
Agreement terminates upon the earliest of (i) September 16, 1999 if no Change in
Control (as such term is defined in the Severance Agreement) has occurred, (ii)
termination of Mr. Burns' employment due to death, disability, retirement, or
cause (as such terms are defined in the Severance Agreement), or by Mr. Burns
other than for good reason (as such term is defined in the Severance Agreement),
and (iii) 18 months from the date of a Change in Control. Upon a Change in
Control of the Company, Mr. Burns is entitled to a lump sum payment if he is
terminated within 18 months of such Change in Control other than for cause,
disability, or retirement (as such terms are defined in the Severance Agreement)
or if he terminates employment with the Company following a change in his
position, duties, responsibilities or status with the Company, a reduction in
his base salary, or a relocation of the Company's principal executive offices
during the term of the Severance Agreement. In the event of such termination,
the Company shall pay to Mr. Burns as severance pay in a lump sum, in cash, an
amount equal to the sum of (i) three times the average of the aggregate annual
salary paid to him by the Company during the three calendar years preceding the
Change in Control and (ii) three times the highest bonus compensation paid to
him for any of the three calendar years preceding the Change in Control. In no
event, however, shall the lump sum severance payment, either alone or together
with other payments which Mr. Burns has the right to receive from the Company,
exceed an amount which would be deemed to be a "parachute payment" under Section
280G of the Internal Revenue Code of 1986, amended (the "Code").
7
<PAGE> 11
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During fiscal year 1996, the Board's Compensation Committee was composed of
Messrs. Stokes, Reiss and Spiva. None of these persons has at any time been an
officer or employee of the Company or any of its subsidiaries. In addition,
except as set forth below, there are no relationships among the Company's
executive officers, members of the Compensation Committee or entities whose
executives serve on the Board or the Compensation Committee that require
disclosure under applicable SEC regulations.
The Company leases real estate for the operation of one of its Nashville,
Tennessee, one of its Lexington, Kentucky, and its Huntsville, Alabama
restaurants from CWF Associates, Inc., a Tennessee corporation ("CWF"). Mr.
Wachtel (14% ownership), Mr. Burns (7% ownership), Mr. Reiss (14% ownership),
Mr. Stokes (14% ownership), and Mr. Spiva (14% ownership) are shareholders in
CWF. See "Certain Transactions."
COMPENSATION COMMITTEE REPORT
The Company's executive compensation program is administered by the
Compensation Committee (the "Committee"), a committee of the Board of Directors
composed of non-employee directors of the Company. The Committee approves
compensation actions involving the senior management of the Company, including
the Named Executive Officers. The Committee also approves long-term incentive
awards for the Named Executive Officers and other key employees of the Company,
and reviews and administers the incentive compensation, stock option and other
compensation plans of the Company. The members of the Committee, which met four
times during fiscal 1996, are Messrs. Stokes, Reiss and Spiva.
Under the supervision of the Committee, the Company has developed and
implemented compensation policies, plans and programs which are intended to
enhance the profitability of the Company by aligning closely the financial
interests of the Company's management with those of its shareholders. In
furtherance of these goals, annual base salaries are generally set somewhat
below competitive levels so that the Company relies to a large degree on annual
cash bonuses and long-term stock based incentive compensation to attract and
retain senior management of outstanding abilities and to motivate them to
perform to the full extent of their abilities.
In designing and administering the individual elements of the executive
compensation program, the Committee strives to balance short and long-term
incentive objectives and employ prudent judgement in establishing performance
criteria, evaluating performance and determining actual incentive payments.
Following is a discussion of each of the elements of the executive compensation
program along with a description of the decisions and actions taken by the
Committee with regard to fiscal 1996 compensation and a specific discussion of
Mr. Burns' compensation.
ANNUAL COMPENSATION
Annual total cash compensation for senior management consists of base
salary and an annual cash bonus. Setting of annual salaries in fiscal 1996 for
the Named Executive Officers was based on a review by the Committee of targeted
performance criteria, recommendations by the Company's Chief Executive Officer
and a review of the levels of salary paid by a peer group of 25 comparable
restaurant companies for comparable executive ability and experience. Based on
such information, the Committee approved increases in annual salary for the
Named Executive Officers of approximately 16.0% over levels in fiscal 1995.
Consistent with the criteria utilized for determining annual salary increases
for the other Named Executive Officers, the Committee approved an increase in
Mr. Burns' annual salary of 15.0% to $190,975 from $166,050.
At the beginning of fiscal 1996, the Committee implemented a cash bonus
program whereby cash bonuses for each of the Named Executive Officers, including
Mr. Burns, were to be based upon a percentage of the amount by which pretax
earnings for fiscal 1996 exceeded fiscal 1995 levels, plus an additional
percentage of the amount by which pretax earnings for fiscal 1996 exceeded
internally budgeted levels. The Company failed to meet the criteria established
by the Committee for fiscal 1996. Therefore no bonuses were paid pursuant to the
bonus program for fiscal 1996. In January 1997, the Committee approved a
continuation
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<PAGE> 12
of the cash bonus program for the Named Executive Officers utilizing a similar
formula. The Committee approved cash bonuses of $56,962 and $41,646,
respectively, for Messrs. Hislop and Fitzhugh for fiscal 1996 based upon Mr.
Hislop's increased responsibilities resulting from Mr. McWhorter's resignation
in September 1996, and Mr. Fitzhugh's increased responsibilities resulting from
his promotion to Chief Financial Officer in September 1996.
LONG-TERM INCENTIVE PROGRAM
The long-term incentive program for senior management consists of stock
option awards granted pursuant to the 1990 Plan. The Committee has typically
granted stock options to members of senior management and other key employees at
its first meeting following a review of the Company's operating results for the
prior fiscal year. During the latter portion of fiscal 1993, the Committee in
consultation with members of senior management adopted the Senior Management
Stock Option Bonus Program (the "Program"). The purpose of the Program is to
encourage senior management over the term of the Program to meet and exceed
budgeted increases in targeted performance criteria in the respective operating
areas for which members of senior management have primary responsibility and for
the Company as a whole. Pursuant to the Program, the Committee granted options
under the 1990 Plan in October 1993 to each of Mr. Burns, Mr. McWhorter, Mr.
Hislop and Mr. Fitzhugh to purchase 150,000, 150,000, 112,500 and 112,500
shares, respectively. In January 1995, the Committee granted additional options
to the Named Executive Officers under the Program as follows: Mr.
Burns -- 60,000 shares; Mr. McWhorter -- 60,000 shares; Mr. Hislop -- 30,000
shares; and Mr. Fitzhugh -- 30,000 shares. The options were granted at an
exercise price equal to the closing price on the Nasdaq National Market on the
date of grant. At the beginning of each fiscal year during the ten year term of
the options, the Committee will establish targeted increases for each of the 31
participants in the Program in operating results for the respective operating
areas for each of the participants and for the Company as a whole. The options
vest 2% annually during the first nine years of the terms of the options and
will vest in full in the tenth year if still outstanding at that time. The
options permit accelerated vesting of up to 25% each year based on meeting or
exceeding the targeted levels established by the Committee at the beginning of
each such year.
Based on the targeted levels established by the Committee at the beginning
of fiscal 1996, the options granted to the Named Executive Officers pursuant to
the Program vested 2% each in 1996. In January 1997, the Committee established
targeted levels for vesting in fiscal 1997 for options granted to the Named
Executive Officers under the Program based on targeted levels of increases in
pretax earnings. It is not anticipated that additional options will be granted
to the Named Executive Officers in 1997.
FEDERAL INCOME TAX DEDUCTIBILITY LIMITATIONS
Section 162(m) of the Code, enacted as part of the Omnibus Budget
Reconciliation Act in 1993 ("OBRA") generally disallows a tax deduction to
public companies for compensation over $1,000,000 paid to the Company's chief
executive officer and four other most highly paid executive officers.
Compensation paid to these officers in excess of $1,000,000 that is not
performance-based cannot be claimed by the Company as a tax deduction. The
Committee believes it is appropriate to take into account the $1,000,000 limit
on the deductibility of executive compensation and to seek to qualify the
Company's long-term compensation awards as performance-based compensation
excluded from the $1,000,000 limit. Grants of stock options pursuant to the 1990
Plan should be considered performance-based. None of the Company's executive
officers has received other compensation that could potentially exceed the
applicable limits under OBRA.
The tables set forth under "Executive Compensation," and the accompanying
narrative and footnotes, reflect the decisions covered by the above discussion.
<TABLE>
<S> <C> <C>
John W. Stokes, Jr. Richard Reiss, Jr. G. Nicholas Spiva
</TABLE>
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<PAGE> 13
SHAREHOLDER RETURN PERFORMANCE GRAPH
The following graph compares the yearly percentage change in the unaudited
total return on the Company's Common Stock against the cumulative annual total
return of the Nasdaq Stock Market Total Return Index and the S&P 500 Restaurant
Index commencing December 27, 1991 and ending December 29, 1996. The following
graph assumes that the value of the investment in the Company's Common Stock and
each index was $100 on December 27, 1991 and that all dividends were reinvested.
<TABLE>
<CAPTION>
NASDAQ S&P 500
Measurement Period O'CHARLEY'S STOCK RESTAURANT
(Fiscal Year Covered) INC. MARKET INDEX INDEX
<S> <C> <C> <C>
12/91 100 100 100
12/92 175 116 128
12/93 242 134 150
12/94 275 131 149
12/95 369 185 224
12/96 325 227 221
</TABLE>
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<PAGE> 14
CERTAIN TRANSACTIONS
The Company leases real estate for the operation of its Goodlettsville,
Murfreesboro and Clarksville, Tennessee and Bowling Green, Kentucky restaurants
from Two Mile Partners, a Tennessee general partnership owned 75% by Mr. Wachtel
and 25% by Mr. Burns ("Two Mile Partners"). These four leases provide for annual
rentals in an aggregate amount equal to the greater of $429,900 or 6% of each
restaurant's sales. These leases expire at various times through 2006, with
options by the Company to renew for up to ten additional years on the same
terms. Each lease grants the Company an option, exercisable at any time during
the term of the lease, to purchase the property at the greater of its fair
market value or the indebtedness outstanding with respect to such property at
the time of any such purchase. During fiscal 1996, the Company paid Two Mile
Partners aggregate rent of $625,398.
During fiscal 1996, the Company leased real estate for the operation of its
Melbourne, Florida restaurant from Two Mile Partners II, a Tennessee general
partnership owned 80% by Mr. Wachtel and 20% by Mr. Burns ("Two Mile Partners
II"). The lease provides for annual rentals in an aggregate amount equal to the
greater of $135,300 or 6% of the restaurant's sales. The lease expires December
31, 2012. The lease grants the Company the option to purchase the property at
its fair market value at any time during the term of the lease. During fiscal
1996, the Company paid Two Mile Partners II aggregate rent of $139,920. The
Company closed its Melbourne, Florida restaurant during fiscal 1996, and is
currently subleasing the property to a third party.
The Company leases real estate for the operation of one of its Nashville,
Tennessee, one of its Lexington, Kentucky, and its Huntsville, Alabama
restaurants from CWF. Mr. Wachtel (14% ownership), Mr. Burns (7% ownership), Mr.
Reiss (14% ownership), Mr. Stokes (14% ownership), Mr. Spiva (14% ownership) and
others are shareholders in CWF. In addition, A. Chad Fitzhugh, Chief Financial
Officer, Secretary, and Treasurer of the Company, is the Secretary of CWF. These
leases provide for annual rentals in an aggregate amount equal to the greater of
$160,800 or 6% of each restaurant's sales. These leases expire at various times
through 2007, with options by the Company to renew for up to ten additional
years on the same terms. Each lease grants the Company an option, exercisable at
any time during the term of the lease, to purchase the property at the greater
of its fair market value or the indebtedness outstanding with respect to such
property at the time of any such purchase. During fiscal 1996, the Company paid
CWF aggregate rent of $365,785.
Effective January 5, 1996, the Company completed the merger (the "Merger")
of Shoex, Inc. ("Shoex"), a franchisee of the Company which owned and operated
six O'Charley's restaurants in Alabama, with and into the Company in a
transaction accounted for as a "pooling of interests." Shoex was owned 30% by
Mr. Wachtel, 10% by Mr. Burns and 30% by another employee of the Company, with
the remaining ownership held by non-affiliates of the Company. In the Merger,
Mr. Wachtel received 199,999 shares of Common Stock, Mr. Burns received 66,666
shares of Common Stock, and the remaining Shoex shareholders received an
aggregate of 399,999 shares of Common Stock.
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors of the Company has selected KPMG Peat Marwick, LLP
to serve as independent auditors for the current fiscal year. Such firm has
served as the Company's independent auditors since August 1991. Representatives
of KPMG Peat Marwick, LLP are expected to be present at the Annual Meeting and
will be given the opportunity to make a statement if they desire to do so and to
respond to appropriate questions.
PROPOSALS OF SHAREHOLDERS
Shareholders intending to submit proposals for presentation at the next
annual meeting of the shareholders of the Company and inclusion in the proxy
statement and form of proxy for such meeting should forward such proposals to A.
Chad Fitzhugh, Secretary, O'Charley's Inc., 3038 Sidco Drive, Nashville,
Tennessee 37204. Proposals must be in writing and must be received by the
Company prior to December 5, 1997. Proposals should be sent to the Company by
certified mail, return receipt requested.
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APPENDIX A
O'CHARLEY'S INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR USE AT THE
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD AT 9:00 A.M., ON THURSDAY, MAY 8,
1997.
The undersigned hereby appoints Gregory L. Burns, A. Chad Fitzhugh, and each
of them, attorneys and proxies with full power of substitution to vote in the
name of and as proxy for the undersigned all the shares of common stock of
O'Charley's Inc. (the "Company") held of record by the undersigned on March 14,
1997, at the Annual Meeting of Shareholders of the Company to be held at 9:00
a.m., local time, on Thursday, May 8, 1997, at the Company's home office located
at 3038 Sidco Drive, Nashville, Tennessee, and at any adjournment thereof.
1. To elect the following nominees as Class I directors to serve until the
2000 Annual Meeting of Shareholders and until their successors are
elected and qualified.
Gregory L. Burns and C. Warren Neel
<TABLE>
<S> <C> <C> <C>
[ ] FOR all nominees listed above [ ] WITHHOLD AUTHORITY to vote
(except as indicated to the contrary below) for all nominees
</TABLE>
(To withhold authority to vote for any individual nominee, write that
nominee's name in the space below.)
----------------------------------------------------------------------------
2. In their discretion, the Proxies are authorized to consider and take
action upon such other matters as may properly come before the meeting
or any adjournment thereof.
PROPERLY EXECUTED PROXIES WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE
UNDERSIGNED. IF NO SUCH DIRECTIONS ARE GIVEN, SUCH PROXIES WILL BE VOTED FOR THE
ELECTION AS DIRECTORS OF THE NOMINEES REFERRED TO IN PARAGRAPH 1.
The undersigned revokes any prior proxies to vote the shares covered by this
proxy.
<TABLE>
<S> <C>
Date: ---------------------------------------- , 1997 ---------------------------------------------
Signature
---------------------------------------------
Signature
(When signing as attorney, executor,
administrator, trustee or guardian, please
give full title as such. If shareholder is a
corporation, corporate name should be signed
by an authorized officer and the corporate
seal affixed. If shareholder is a
partnership, please sign in partnership name
by authorized persons. For joint accounts,
each joint owner should sign.)
</TABLE>
PLEASE SIGN, DATE, AND MAIL THIS PROXY PROMPTLY IN THE ENCLOSED REPLY ENVELOPE
WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
