<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. to be held at 9:00 a.m., local time,
on Thursday, May 6, 1999, at the company's home office located at 3038 Sidco
Drive, Nashville, Tennessee.
Shareholders will be asked to elect three 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 6.
Sincerely,
/s/ GREGORY L. BURNS
Gregory L. Burns
Chairman of the Board, President, 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
---------------------
As a shareholder of O'Charley's Inc., you are hereby given notice of and invited
to attend the annual meeting of shareholders of the company to be held at 9:00
a.m., local time, on Thursday, May 6, 1999, at the company's home office located
at 3038 Sidco Drive, Nashville, Tennessee, for the following purposes:
1. To elect three (3) Class III directors to hold office for a term of
three (3) years; and
2. To transact such other business as may properly come before the annual
meeting.
Shareholders of record at the close of business on March 19, 1999 are entitled
to notice of and to vote at the annual meeting and any adjournment or
postponement.
You can ensure that your shares of common stock are voted at the annual meeting
by signing and dating the enclosed proxy and returning it in the envelope
provided. Sending in a signed proxy will not affect your right to attend the
annual meeting and vote in person. WHETHER OR NOT YOU PLAN TO ATTEND, WE URGE
YOU TO SIGN AND DATE THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENVELOPE
PROVIDED.
By the Order of the Board of Directors
/s/ A. CHAD FITZHUGH
A. Chad Fitzhugh, Secretary
Nashville, Tennessee
April 8, 1999
<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 the company for
use at the annual meeting of shareholders to be held on May 6, 1999, and at any
adjournment or postponement thereof. The purposes of the annual meeting are to
elect three Class III directors and to transact such other business as may
properly be brought before the annual meeting. This proxy statement and the
enclosed proxy are first being sent to shareholders on or about April 8, 1999.
Shareholders of record at the close of business on the record date, March 19,
1999, are entitled to notice of and to vote at the annual meeting. Each
shareholder is entitled to one vote for each share of common stock held on the
record date.
The presence at the meeting, in person or by proxy, of at least a majority of
the outstanding shares of common stock entitled to vote is necessary to
constitute a quorum to transact business at the meeting. As of the record date,
15,414,712 shares of the company's common stock were outstanding. Proxies
received but marked as abstentions or broker non-votes will be counted as
present for purposes of determining a quorum on all matters. A broker non-vote
occurs when a broker holding shares registered in street name is permitted to
vote in the broker's discretion on routine matters without receiving
instructions from the client, but is not permitted to vote without instructions
on non-routine matters, and the broker returns a proxy card with no vote (the
"non-vote") on the non-routine matter.
Shares of common stock represented by a proxy properly signed and received at or
prior to the annual meeting, unless subsequently revoked, will be voted in
accordance with the instructions thereon. Shareholders are urged to specify
their choices by marking the appropriate boxes on the enclosed proxy. If a proxy
is dated, signed, and returned without specifying choices, the shares will be
voted as recommended by the company's board of directors. A shareholder who
signs and returns a proxy may revoke it at any time before it is voted by
attending the annual meeting and electing to vote in person, by notifying the
secretary of the company in writing, or by duly executing a proxy bearing a
later date.
The affirmative vote of a plurality of the votes cast at the annual meeting is
required for the election of directors. Any other matters submitted to the
shareholders will be approved if the number of shares voted in favor of the
proposal exceed the number of shares cast against it. Abstentions and broker
non-votes will not be counted as votes for or against any director nominee or
any other matter considered at the annual meeting. The board of directors knows
of no other matters that are to be brought to a vote at the annual meeting. 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.
<PAGE> 5
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following persons are known by the company to be the beneficial owners of
more than 5% of the outstanding shares of the common stock. The following
information is based solely upon information set forth in Schedules 13G filed by
such persons with the Securities and Exchange Commission.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
NAME AND ADDRESS BENEFICIAL PERCENT
OF BENEFICIAL OWNER OWNERSHIP OF CLASS
------------------- ---------- --------
<S> <C> <C>
David K. Wachtel, Jr................................ 1,601,399 10.4%
640 Spence Lane, Suite 123
Nashville, Tennessee 37217
St. Denis J. Villere & Company...................... 1,455,425(1) 9.4
210 Baronne Street, Suite 808
New Orleans, Louisiana 70112
Brown Investment Advisory & Trust Company........... 1,021,688 6.6
19 South Street
Baltimore, Maryland 21202
Wellington Management Company, LLP.................. 997,500(2) 6.5
75 State Street
Boston, Massachusetts 02109
Skyline Asset Management, L.P....................... 838,200(3) 5.4
311 South Wacker Drive, Suite 4500
Chicago, Illinois 60606
</TABLE>
- -------------------------
(1) Villere, an investment advisor, reported that it has shared voting and
dispositive power with respect to all shares.
(2) Wellington, an investment advisor, reported that it has shared voting power
with respect to 477,500 shares and shared dispositive power with respect to
997,500 shares.
(3) Skyline, an investment advisor, reported that it has shared voting and
dispositive power with respect to all shares.
PROPOSAL 1: ELECTION OF DIRECTORS
The company's board of directors is divided into three classes, each class to be
as nearly equal in number as possible. At each annual meeting, directors of the
class whose term expires in that year are elected for a three-year term. The
current board of directors is comprised of nine positions. Three directors will
be elected at the annual meeting. The board of directors has nominated Richard
Reiss, Jr., G. Nicholas Spiva, and Shirley A. Zeitlin, all of whom are currently
serving as directors of the company, as the three nominees for election as Class
III directors for a three-year term expiring at the 2002 annual meeting and
until their successors are elected and qualified. The terms of the Class I and
Class II directors will expire at the annual meeting in 2000 and 2001,
respectively.
Each nominee has consented to be a candidate and to serve, if elected. If a
nominee becomes unable or unwilling to serve as a director, the persons named in
the form of proxy
2
<PAGE> 6
have advised the company that they will vote for such substitute or substitutes
as may be designated by the board of directors.
The following table contains as of March 19, 1999 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.
<TABLE>
<CAPTION>
SHARES OF
COMMON
STOCK
BENEFICIALLY
OWNED ON
DIRECTOR TERM MARCH 19, PERCENT
NAME AGE SINCE EXPIRES POSITION 1999(1) OF CLASS
---- --- -------- ------- -------- ------------- --------
<S> <C> <C> <C> <C> <C> <C>
Gregory L. Burns(2)(3)......... 44 1990 2000 Chairman of the 499,797 3.2%
Board, President
and Chief
Executive
Officer
Steven J. Hislop(3)............ 39 1998 2000 Executive Vice 261,487 1.7
President
and Chief
Operating
Officer;
Director
A. Chad Fitzhugh............... 38 -- -- Chief Financial 234,444 1.5
Officer,
Secretary and
Treasurer
William E. Hall, Jr............ 44 -- -- Vice President, 98,400 *
Director of
Operations
Herman A. Moore, Jr............ 47 -- -- Vice President, 33,985 *
Commissary
Operations
John W. Stokes, Jr.(4)......... 62 1983 2001 Director 193,249(5) 1.3
Richard Reiss, Jr.(2)(4)....... 55 1983 1999 Director 120,750 *
G. Nicholas Spiva(4)........... 47 1985 1999 Director 63,825(6) *
H. Steve Tidwell(2)(7)......... 56 1988 2001 Director 63,000 *
C. Warren Neel(3)(7)........... 60 1990 2000 Director 33,750 *
Samuel H. Howard(7)............ 59 1992 2001 Director 25,875 *
Shirley A. Zeitlin............. 64 1996 1999 Director 15,000 *
All directors and executive officers as a group (13 persons).................. 1,672,002 10.1
</TABLE>
- -------------------------
* less than one percent
(1) Includes the following shares that the named individuals are entitled to
acquire within 60 days of the date hereof upon the exercise of options:
Gregory L. Burns -- 354,810 shares; Steven J. Hislop -- 254,507 shares; A.
Chad Fitzhugh -- 229,380 shares; William E. Hall, Jr. -- 91,500 shares;
Herman A. Moore, Jr. -- 29,985 shares; John W. Stokes, Jr. -- 27,000 shares;
Richard Reiss, Jr. -- 27,000 shares; G. Nicholas Spiva -- 27,000 shares; H.
Steve Tidwell -- 27,000 shares; C. Warren Neel -- 27,000 shares; Samuel H.
Howard -- 24,750 shares; Shirley A. Zeitlin -- 13,500 shares; and all
directors and executive officers as a group (13 persons) -- 1,151,365
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.
3
<PAGE> 7
(2) Member of the executive committee.
(3) Member of the nominating committee.
(4) Member of the compensation committee.
(5) Includes 66,099 shares owned by Mr. Stokes' wife, as to which Mr. Stokes
disclaims beneficial ownership.
(6) Includes 21,750 shares held by a trust for the benefit of Mr. Spiva.
(7) Member of the audit committee.
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 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.
Steven J. Hislop has served as Executive Vice President and Chief Operating
Officer of the company since March 1997 and as a director of the company since
March 1998. Mr. Hislop served as Senior Vice President -- Operations from
January 1993 to March 1997, and as Vice President -- Operations from April 1990
to January 1993.
John W. Stokes, Jr. has served as Vice Chairman of Morgan Keegan & Company, Inc.
since 1983. From 1984 to August 1997, Mr. Stokes served as President of The
Equity Capital Markets of Morgan Keegan & Company, Inc., a wholly-owned
subsidiary of Morgan Keegan & Company, Inc. Mr. Stokes also serves as a director
of RFS Hotel Investors, Inc.
Richard Reiss, Jr. is the President of Georgica Advisors, LLC, 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. and Page One Communications, Ltd.
G. Nicholas Spiva has served as President of Spiva-Hill Investments, a
commercial real estate development company, since 1975. Mr. Spiva was an owner
of the original O'Charley's restaurant prior to its acquisition by the company.
H. Steve Tidwell has served as President of SPFS, Inc., which operates 18
unaffiliated restaurants in five southern states, since February 1991. From
January 1987 to February 1991, Mr. Tidwell served as Secretary and Treasurer of
SPFS. 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 has served as the Dean of the University of Tennessee College
of Business Administration since 1977. 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 also serves as
a director of Proffitt's, Inc.,
4
<PAGE> 8
American Healthcorp, Inc., Clayton Homes, Inc., Promus Hotel Corporation, and
BankFirst Corporation.
Samuel H. Howard has served as Chairman of Xantus Corporation, a company that
owns and operates health maintenance organizations, since April 1993. From 1971
to 1998, Mr. Howard served as President and Chief Executive Officer of Phoenix
Communications Group, 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 also serves as a director of Genesis Health
Ventures, Inc.
Shirley A. Zeitlin has served as President and Chief Executive Officer of
Shirley Zeitlin & Co. Realtors, a real estate brokerage firm, since 1979. Ms.
Zeitlin has served as President and a member of the board of the Tennessee
Association of Realtors and the Nashville Board of Realtors. She has also served
as a member of the board of the Federal Reserve Bank of Nashville, where she
served as chairman in 1991. In addition to serving on the advisory board of
directors of First American National Bank, Ms. Zeitlin serves as a director of
numerous civic and charitable organizations.
The board of directors held four meetings during the fiscal year ended December
27, 1998. Each of the incumbent directors attended more than 75% of the
aggregate number of meetings of the board of directors and each committee on
which he or she served, with the exception of Ms. Zeitlin, who attended 50% of
such meetings.
BOARD COMMITTEES
The board of directors has standing executive, audit, compensation, and
nominating committees. The membership and functions of the committees are as
follows:
Executive Committee -- This committee exercises all the powers of the board of
directors between scheduled meetings of the board of directors, subject to
certain limitations of Tennessee law. Members of the executive committee are
Messrs. Burns, Reiss, and Tidwell. The executive committee held four meetings
during 1998.
Audit Committee -- This committee recommends the appointment of the company's
auditors, reviews the scope and results of the audit examination, confers
independently with the company's auditors, serves as a liaison between the board
of directors and the company's auditors, and reviews various corporate policies,
including those relating to accounting and internal controls matters. Members of
the audit committee are Messrs. Howard, Neal, and Tidwell. The audit committee
held one meeting during 1998.
Compensation Committee -- This committee evaluates the performance of the
company's officers, reviews and approves compensation for officers, establishes
bonuses for the company's management, and administers the company's stock
incentive plans. Members of the compensation committee are Messrs. Reiss, Spiva,
and Stokes. The compensation committee held one meeting during 1998.
Nominating Committee -- This committee recommends 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 two directors who are
also executive officers of the company and one director who is not an executive
officer or employee of the company from each of the two classes of directors
whose term is not expiring at the annual meeting of shareholders to be held in
that year. The nominating committee held one meeting
5
<PAGE> 9
during 1998. For 1999, members of the nominating committee are Messrs. Burns,
Hislop, Neel, and Tidwell.
In accordance with the company's 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 ten days of the date on which notice of a special
meeting for the election of directors is first given to shareholders.
DIRECTOR COMPENSATION
Non-employee directors receive an annual retainer of $3,500, a fee of $1,250 for
each board of directors meeting attended and for each committee meeting attended
on a day on which there is no regularly scheduled board of directors 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 of directors. The aggregate
amount of fees paid to the non-employee directors for the 1998 fiscal year was
$73,000.
Non-employee directors participate in the company's 1991 Stock Option Plan for
Outside Directors. Non-employee directors receive an option to purchase 11,250
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 option plan also provides for annual grants of
options to purchase 2,250 shares to each non-employee director in addition to
the grant upon his or her initial election to the board of directors. Such
options become exercisable six months following the date of grant. All options
issued under the director option plan have an exercise price per share at the
date of grant equal to the closing sale price of the common stock on the Nasdaq
National Market on that date. At December 27, 1998, there were seven
participants under the director option plan who held options covering an
aggregate of 177,750 shares at exercise prices ranging from $2.06 to $13.67 per
share. There have been no exercises to date of options granted under the
director option 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.
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 Securities and Exchange Commission. Officers, directors and greater
than ten percent shareholders are required by 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 Filings 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 27, 1998.
6
<PAGE> 10
EXECUTIVE COMPENSATION
The following table summarizes the compensation paid or accrued by the company
during the three fiscal years ended December 27, 1998 for (i) the Chief
Executive Officer of the company 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....... 1998 241,250 350,000 75,000 --
President and 1997 216,250 259,694 -- 12,913
Chief Executive 1996 190,975 -- -- 16,750
Officer
Steven J. Hislop....... 1998 176,250 280,000 37,500 26,243(2)
Executive Vice 1997 141,250 192,125 -- 20,563
President and 1996 125,975 56,962 -- 10,805
Chief Operating
Officer
A. Chad Fitzhugh....... 1998 151,250 210,000 37,500 25,456(3)
Chief Financial 1997 131,250 148,978 -- 15,677
Officer, 1996 113,550 41,646 -- 10,459
Secretary, and
Treasurer
William E. Hall, Jr.... 1998 121,250 125,000 -- 15,020(2)
Vice President, 1997 106,250 80,000 45,000(4) 9,133
Director of 1996 81,500 36,000 -- 4,593
Operations
Herman A. Moore, Jr.... 1998 103,000 75,000 -- 5,163(2)
Vice President, 1997 91,000 73,268 -- 4,771
Commissary 1996 87,000 58,776 -- 4,827
Operations
</TABLE>
- -------------------------
(1) Number of stock options granted under the 1990 Employee Stock Plan. Although
the plan permits grants of restricted stock and stock appreciation rights,
no grants of those incentives have been made.
(2) Amount contributed by the company to the company's supplemental executive
retirement plan.
(3) Includes $23,056 contributed by the company to the company's supplemental
executive retirement plan and $2,400 contributed by the company to the
company's 401(k) plan.
(4) Adjusted to reflect a 3-for-2 stock split effective June 2, 1998.
7
<PAGE> 11
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table provides information as to options granted to the named
executive officers during the fiscal year ended December 27, 1998. The number of
shares subject to options and the per share exercise price have been adjusted to
reflect a 3-for-2 stock split effective June 2, 1998.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
NUMBER OF ANNUAL RATE OF STOCK
SECURITIES PERCENT OF PRICE APPRECIATION FOR
UNDERLYING TOTAL OPTIONS EXERCISE OPTION TERM($)
OPTIONS GRANTED TO PRICE EXPIRATION -----------------------
NAME GRANTED EMPLOYEES PER SHARE($) DATE 5% 10%
---- ---------- ------------- ------------ ---------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Gregory L. Burns..... 75,000 16.2% 12.08 2/19/08 569,779 1,443,931
Steven J. Hislop..... 37,500 8.1% 12.08 2/19/08 284,889 721,965
A. Chad Fitzhugh..... 37,500 8.1% 12.08 2/19/08 284,889 721,956
</TABLE>
AGGREGATED OPTION EXERCISES AND YEAR-END VALUE TABLE
The following table provides information with respect to exercises by the named
executive officers during the fiscal year ended December 27, 1998 of options to
purchase shares issued pursuant to the company's stock option plans and
information with respect to unexercised options to purchase shares held by the
named executive officers as of the end of the fiscal year ended December 27,
1998:
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS HELD AT IN-THE-MONEY OPTIONS AT
ACQUIRED DECEMBER 27, 1998(1) DECEMBER 27, 1998($)(2)
ON EXERCISE VALUE --------------------------- ---------------------------
NAME (#)(1) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Gregory L. Burns........ 33,750 393,862 324,810 143,940 2,602,975 489,668
Steven J. Hislop........ -- -- 233,882 76,245 1,944,556 276,960
A. Chad Fitzhugh........ -- -- 208,755 76,245 1,615,371 276,960
William E. Hall, Jr..... -- -- 91,500 63,900 624,523 287,158
Herman A. Moore, Jr..... 4,500 43,650 22,282 18,968 131,538 107,317
</TABLE>
- ---------------
(1) Adjusted to reflect a 3-for-2 stock split effective June 2, 1998.
(2) Based on the closing price of the company's common stock on the Nasdaq
National Market on December 24, 1998 ($13.125).
CHANGE IN CONTROL AGREEMENTS
The company has entered into Severance Compensation Agreements with each of
Messrs. Burns, Hislop and Fitzhugh. Each severance agreement terminates upon the
earliest of (i) September 16, 1999 in the case of Mr. Burns and March 4, 2001 in
the case of Messrs. Hislop and Fitzhugh if no change in control (as such term is
defined in the severance agreements) has occurred, (ii) termination of the
executive's employment as a result of death, disability, retirement, or cause
(as such terms are defined in the severance agreements), or by the executive
other than for good reason (as such term is defined in the severance
agreements), and (iii) 18 months from the date of a change in control. Upon a
change in control of the company, the executive is entitled to a lump sum
8
<PAGE> 12
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 agreements) 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, Mr. Burns' agreement provides that the company shall pay to
him 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. The agreements for each of
Messrs. Hislop and Fitzhugh provide that the company shall pay to him as
severance pay in a lump sum, in cash, an amount equal to the sum of (i) 150% of
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) 150% of 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 the
executive 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.
COMPENSATION COMMITTEE INTERLOCKS
During fiscal year 1998, the compensation committee of the board of directors
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 of directors or the compensation committee
that require disclosure under applicable Securities and Exchange Commission
regulations.
The company leases real estate for the operation of one of its Nashville,
Tennessee and one of its Lexington, Kentucky restaurants from CWF Associates,
Inc., a Tennessee corporation. During 1998, the company also leased real estate
in Huntsville, Alabama from CWF on which the company operated its Huntsville
restaurant. The company and CWF terminated the lease for the Huntsville property
in January 1999. 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, which is composed of non-employee directors of the company. The
compensation committee approves compensation actions involving the senior
management of the company, including the named executive officers. The
compensation 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.
Under the supervision of the compensation committee, the company has developed
and implemented compensation policies, plans and programs that are intended to
enhance the
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<PAGE> 13
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 compensation committee strives to balance short-term
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 compensation committee with regard to fiscal 1998 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 1998 for the named executive officers was based on a review by the
compensation 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 16 comparable restaurant companies for comparable executive
ability and experience. Based on such information, the compensation committee
approved increases in annual salary for the named executive officers of
approximately 15.6% over levels in fiscal 1997. Consistent with the criteria
utilized for determining annual salary increases for the other named executive
officers, the compensation committee approved an increase in Mr. Burns' annual
salary of 11.6% to $241,250 from $216,250.
In January 1998, the committee approved a cash bonus program whereby cash
bonuses for each of the named executive officers were to be based upon the
attainment of targeted levels of earnings per share. The compensation committee
approved bonuses of $350,000, $280,000, $210,000, $125,000 and $75,000 to
Messrs. Burns, Hislop, Fitzhugh, Hall, and Moore, respectively, pursuant to the
bonus program for fiscal 1998. The committee has approved a continuation of the
cash bonus program for fiscal 1999.
Long-Term Incentive Program. The long-term incentive program for senior
management consists of stock option awards granted pursuant to the 1990 Employee
Stock Plan. The compensation 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 compensation committee in
consultation with members of senior management adopted the Senior Management
Stock Option Bonus Program. The purpose of this 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, between 1993 and 1998 the compensation
committee granted options under the 1990 Employee Stock Plan to each of Messrs.
Burns, Hislop, Fitzhugh, Hall, and Moore to purchase an aggregate of 315,000,
213,750, 213,750, 157,500, and 41,250 shares, respectively. In February 1998,
the Committee granted additional options to the Named Executive Officers under
the program as follows: Mr. Burns -- 75,000 shares; Mr. Hislop -- 37,500 shares;
and Mr. Fitzhugh -- 37,500 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
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<PAGE> 14
year term of the options, the compensation committee establishes targeted
increases for each of the 41 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
compensation committee at the beginning of each such year.
Based on the targeted levels established by the compensation committee at the
beginning of fiscal 1998, the options granted to Messrs. Burns, Hislop,
Fitzhugh, and Hall pursuant to the program vested 25% each in 1998 and the
options granted to Mr. Moore vested 18.4%. In January 1999, the committee
established targeted levels for vesting in fiscal 1999 for options granted to
the named executive officers under the program based on targeted levels of
earnings per share.
Federal Income Tax Deductibility Limitations. Section 162(m) of the Internal
Revenue Code, enacted as part of the Omnibus Budget Reconciliation Act in 1993
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 compensation 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 Employee Stock Plan should be considered
performance-based. None of the company's executive officers has received other
compensation that could potentially exceed the applicable deductibility limits.
The compensation committee intends for all compensation paid to the company's
executives to be fully deductible under federal tax laws.
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> 15
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, 1993 and ending December 27, 1998. The following graph
assumes that the value of the investment in the company's common stock and each
index was $100 on December 27, 1993 and that all dividends were reinvested.
<TABLE>
<CAPTION>
NASDAQ
Stock S&P 500
Measurement Period O'Charley's Market Restaurant
(Fiscal Year Covered) Inc. Index Index
<S> <C> <C> <C>
12/93 100 100 100
12/94 120 98 100
12/95 170 138 150
12/96 141 170 148
12/97 179 209 159
12/98 227 293 249
</TABLE>
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<PAGE> 16
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. 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. During fiscal
1998, the company paid Two Mile Partners aggregate rent of $692,606.
During fiscal 1998, the company leased from Two Mile Partners II, a Tennessee
general partnership owned 80% by Mr. Wachtel and 20% by Mr. Burns, real estate
in Melbourne, Florida on which the company formerly operated a restaurant. The
lease provided for annual rentals in an aggregate amount equal to the greater of
$135,300 or 6% of the restaurant's sales. The lease was a month to month lease.
On March 4, 1998, the Company gave notice of termination of the lease effective
June 2, 1998. During fiscal 1998, the company paid Two Mile Partners II
aggregate rent of $50,039.
The company leases real estate for the operation of one of its Nashville,
Tennessee and one of its Lexington, Kentucky restaurants from CWF Associates,
Inc. 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 1998, the
company also leased real estate in Huntsville, Alabama from CWF on which the
company operated its Huntsville restaurant. The company and CWF terminated the
Huntsville lease in January 1999. In connection with the termination of the
lease, the company paid CWF a fee of $116,000. 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. During fiscal 1998, the company paid CWF aggregate rent of
$397,503.
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 10, 1999. Proposals should be sent to the company by certified mail,
return receipt requested.
In addition, the company's bylaws contain an advance notice provision that
provides that for a shareholder proposal to be brought before and considered at
the next annual meeting of shareholders, such shareholder must provide notice
thereof to the Secretary of the company no later than December 10, 1999 and the
proposal and the shareholder must comply with Regulation 14A under the
Securities Exchange Act. In the event that a shareholder proposal intended to be
presented for action at the next annual meeting is not
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<PAGE> 17
received prior to December 10, 1999, then the persons designated as proxies in
the proxies solicited by the board of directors in connection with the annual
meeting will be permitted to use their discretionary voting authority with
respect to the proposal, whether or not the proposal is discussed in the proxy
statement for the annual meeting.
PROXY SOLICITATION COSTS
The enclosed form of proxy is solicited on behalf of the board of directors of
the company. 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
telecopy. The company may reimburse brokers, custodians, and their nominees for
their expenses in sending proxies and proxy materials to beneficial owners.
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The board of directors of the company has selected KPMG 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 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.
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<PAGE> 18
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 6,
1999.
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 19,
1999, at the Annual Meeting of Shareholders of the Company to be held at 9:00
a.m., local time, on Thursday, May 6, 1999, 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 III directors to serve until
the 2002 Annual Meeting of Shareholders and until their successors are
elected and qualified.
Richard Reiss, Jr., G. Nicholas Spiva, and Shirley A. Zeitlin
<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: , 1999
---------------------------------------- ---------------------------------------------
Signature
---------------------------------------------
Signature
(When signing as attorney, executor, adminis-
trator, 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.
