<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 4, 2000, at the company's home office located at 3038 Sidco
Drive, Nashville, Tennessee.
Shareholders will be asked to elect four directors to the company's board of
directors, to consider and act upon a proposal to approve the O'Charley's 2000
Stock Incentive Plan and to consider and act upon certain amendments to the
company's CHUX Ownership Plan. 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 4.
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
---------------------
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 4, 2000, at the company's home office located
at 3038 Sidco Drive, Nashville, Tennessee, for the following purposes:
1. To elect four (4) Class I directors to hold office for a term of three
(3) years;
2. To consider and act upon a proposal to approve the O'Charley's 2000
Stock Incentive Plan;
3. To consider and act upon a proposal to approve certain amendments to the
CHUX Ownership Plan to expand the eligibility provisions to cover all of
the company's employees, to shorten the plan option period from one year to
six months, to allow each participant to make one lump sum contribution
during each plan period and to limit the scope of amendments requiring
shareholder approval; and
4. To transact such other business as may properly come before the annual
meeting.
Shareholders of record at the close of business on March 17, 2000 are entitled
to notice of and to vote at the annual meeting and any adjournment or
postponement thereof.
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 6, 2000
<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 4, 2000, and at any
adjournment or postponement thereof. The purposes of the annual meeting are to
elect four Class I directors, to consider and act upon a proposal to approve the
O'Charley's 2000 Stock Incentive Plan, to consider and act upon a proposal to
approve certain amendments to the CHUX Ownership Plan, 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 6, 2000.
Shareholders of record at the close of business on the record date, March 17,
2000, 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,
15,499,187 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. The O'Charley's 2000 Stock Incentive
Plan, the proposed amendments to the CHUX Ownership Plan, and any other matters
submitted to the shareholders will be approved if the number of shares voted in
favor of the proposal exceeds 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>
Brown Investment Advisory & Trust Company........... 1,896,050(1) 12.2
19 South Street
Baltimore, Maryland 21202
David K. Wachtel, Jr................................ 1,601,399 10.3
640 Spence Lane, Suite 123
Nashville, Tennessee 37217
St. Denis J. Villere & Company...................... 1,463,675(2) 9.4
210 Baronne Street, Suite 808
New Orleans, Louisiana 70112
T. Rowe Price Associates, Inc....................... 1,094,800(3) 7.1
100 E. Pratt Street
Baltimore, Maryland 21202
</TABLE>
- -------------------------
(1) Brown Investment, a bank, reported that it has sole voting power with
respect to 1,843,400 shares and sole dispositive power with respect to
1,896,050.
(2) Villere, an investment advisor, reported that it has sole voting and
dispositive power with respect to 102,600 shares and shared voting and
dispositive power with respect to 1,361,075 shares.
(3) T. Rowe Price, an investment advisor, reported that it has sole voting power
with respect to 164,100 shares and sole dispositive power with respect to
1,094,800 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. Four
directors will be elected at the annual meeting. The board of directors has
nominated Gregory L. Burns, Steven J. Hislop, C. Warren Neel and Robert J.
Walker as the four nominees for election as Class I directors for a three-year
term expiring at the 2003 annual meeting and until their successors are elected
and qualified. Messrs. Burns, Hislop and Neel are currently directors of the
company. Mr. Walker was recommended for nomination by the nominating committee
of the board of directors and nominated by the board of directors. The terms of
the Class II and Class III directors will expire at the annual meeting in 2001
and 2002, 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 have advised the company that they will vote for such
substitute or substitutes as may be designated by the board of directors.
2
<PAGE> 6
The following table contains as of March 17, 2000 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
current directors and executive officers as a group.
<TABLE>
<CAPTION>
SHARES OF
COMMON
STOCK
BENEFICIALLY
OWNED ON
DIRECTOR TERM MARCH 17, PERCENT
NAME AGE SINCE EXPIRES POSITION 2000(1) OF CLASS
---- --- -------- ------- -------- ------------- --------
<S> <C> <C> <C> <C> <C> <C>
Gregory L. Burns(2)(3)......... 45 1990 2000 Chairman of the 535,549 3.4
Board and Chief
Executive
Officer
Steven J. Hislop(3)............ 40 1998 2000 President and 287,038 1.8
Chief Operating
Officer;
Director
A. Chad Fitzhugh............... 39 -- -- Chief Financial 230,114 1.5
Officer,
Secretary and
Treasurer
William E. Hall, Jr............ 45 -- -- Executive Vice 104,744 *
President,
Operations
Herman A. Moore, Jr............ 48 -- -- Vice President, 45,607 *
Commissary
Operations
John W. Stokes, Jr.(3)(4)...... 63 1983 2001 Director 157,749(5) 1.0
Richard Reiss, Jr.(2)(3)(4).... 56 1983 2002 Director 123,250 *
G. Nicholas Spiva(4)........... 48 1985 2002 Director 60,725(6) *
H. Steve Tidwell(2)............ 57 1988 2001 Director 65,500 *
C. Warren Neel(7).............. 61 1990 2000 Director 36,250 *
Samuel H. Howard(7)............ 60 1992 2001 Director 16,000 *
Shirley A. Zeitlin(7).......... 65 1996 2002 Director 19,750 *
Robert J. Walker............... 59 -- -- Director Nominee 22,000 *
All current directors and executive officers as a group (13 persons).......... 1,704,851 10.2
</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 -- 415,473 shares; Steven J. Hislop -- 235,675 shares; A.
Chad Fitzhugh -- 225,050 shares; William E. Hall, Jr. -- 97,844 shares;
Herman A. Moore, Jr. -- 42,118 shares; John W. Stokes, Jr. -- 29,500 shares;
Richard Reiss, Jr. -- 29,500 shares; G. Nicholas Spiva -- 29,500 shares; H.
Steve Tidwell -- 29,500 shares; C. Warren Neel -- 29,500 shares; Samuel H.
Howard -- 16,000 shares; Shirley A. Zeitlin -- 18,250 shares; and all
directors and executive officers as a group (13 persons) -- 1,216,168
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 ownership of any
other person.
(2) Member of the executive committee.
(3) Member of the nominating committee.
(4) Member of the compensation committee.
3
<PAGE> 7
(5) Includes 58,099 shares owned by Mr. Stokes' wife, as to which Mr. Stokes
disclaims beneficial ownership.
(6) Includes 16,150 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. Mr. Burns, a director of the company since
1990, served as President of the company from September 1996 to May 1999 and
from May 1993 to February 1994, as Chief Financial Officer from October 1983 to
September 1996, and as Executive Vice President and Secretary of the company
from October 1983 to May 1993.
Steven J. Hislop has served as President of the company since May 1999, as Chief
Operating Officer of the company since March 1997 and as a director of the
company since March 1998. From March 1997 until May 1999, Mr. Hislop served as
Executive Vice President of the company. 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., Grey Advertising, Inc., and RFS Hotel Investors, Inc.
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 American Healthways, Inc., Clayton Homes, Inc., Saks, Inc. and
BankFirst Corporation.
Samuel H. Howard has served as Chairman of Phoenix Holdings, Inc., an investment
holding company, since January 1989, and as Chairman of Xantus Corporation, a
company
4
<PAGE> 8
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.
Robert J. Walker, an attorney, has been a partner in Walker, Bryant & Tipps, a
law firm, since January 2000. Prior to forming Walker, Bryant & Tipps, Mr.
Walker served in various capacities, including as a member, with Bass, Berry &
Sims PLC, the company's outside general counsel, for over 31 years.
The board of directors held four meetings during the fiscal year ended December
26, 1999. 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.
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 monthly meetings
during 1999.
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 and Neal and Ms. Zeitlin. The audit
committee held one meeting during 1999.
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 1999.
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 1999. For 2000, members of the nominating committee are Messrs. Burns,
Hislop, Reiss, and Stokes.
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
During 1999, non-employee directors received an annual retainer of $3,750, a fee
of $1,500 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 were paid
a fee of $1,350 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 1999 fiscal year was $98,600. During 2000, non-employee directors will
receive an annual retainer of $4,000 and a fee of $2,000 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. Members of the
executive committee will receive a fee of $1,500 per quarter.
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 26, 1999, there were seven
participants under the director option plan who held options covering an
aggregate of 184,000 shares at exercise prices ranging from $2.06 to $14.00 per
share.
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. If the O'Charley's 2000
Stock Incentive Plan is approved by the company's shareholders at the annual
meeting, non-employee directors will participate in the O'Charley's 2000 Stock
Incentive Plan and no further options will be granted pursuant to the 1991 Stock
Option Plan for Outside Directors.
CERTAIN PROCEEDINGS
Mr. Howard serves as Chairman of Xantus Corporation. During 1999, civil actions
for rehabilitation were filed against Xantus Healthplan of Mississippi, Inc. and
Xantus Healthplan of Tennessee, Inc., both subsidiaries of Xantus Corporation,
by the Commissioner of Insurance in their respective states.
6
<PAGE> 10
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 26, 1999.
EXECUTIVE COMPENSATION
The following table summarizes the compensation paid or accrued by the company
during the three fiscal years ended December 26, 1999 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($) OPTIONS(#)(1) COMPENSATION($)(2)
------------------ ---- --------- -------- ------------- ------------------
<S> <C> <C> <C> <C> <C>
Gregory L. Burns..... 1999 286,250 310,000 40,000 36,420
Chief Executive 1998 241,250 350,000 75,000 --
Officer 1997 216,250 259,694 -- 12,913
Steven J. Hislop..... 1999 216,250 260,000 35,000 30,300
President and 1998 176,250 280,000 37,500 26,243
Chief Operating 1997 141,250 192,125 -- 20,563
Officer
A. Chad Fitzhugh..... 1999 176,250 190,000 25,000 21,291
Chief Financial 1998 151,250 210,000 37,500 25,456
Officer, 1997 131,250 148,978 -- 15,677
Secretary, and
Treasurer
William E. Hall, 1999 146,250 120,000 50,000
Jr................. 17,100
Executive Vice 1998 121,250 125,000 -- 15,020
President, 1997 106,250 80,000 45,000 9,133
Operations
Herman A. Moore, 1999 133,000 75,000 20,000
Jr................. 11,458
Vice President, 1998 103,000 75,000 -- 5,163
Commissary 1997 91,000 73,268 -- 4,771
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) Includes amounts contributed by the company to the company's supplemental
executive retirement plan and 401(k) plan.
7
<PAGE> 11
OPTION 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 26, 1999.
<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..... 40,000 4.1% 15.25 2/18/09 383,626 972,183
Steven J. Hislop..... 35,000 3.6% 15.25 2/18/09 335,672 850,660
A. Chad Fitzhugh..... 25,000 2.5% 15.25 2/18/09 239,766 607,614
William E. Hall,
Jr................. 50,000 5.1% 15.25 2/18/09 479,532 1,215,229
Herman A. Moore,
Jr................. 20,000 2.0% 15.25 2/18/09 191,813 486,091
</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 26, 1999 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 26,
1999:
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS HELD AT IN-THE-MONEY OPTIONS AT
ACQUIRED DECEMBER 26, 1999 DECEMBER 26, 1999($)(1)
ON EXERCISE VALUE --------------------------- ---------------------------
NAME (#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Gregory L. Burns...... 11,250 152,606 371,910 125,590 2,194,373 116,040
Steven J. Hislop...... 56,627 810,199 210,705 77,795 1,151,648 58,020
A. Chad Fitzhugh...... 40,000 385,600 202,205 67,795 1,183,275 58,020
William E. Hall,
Jr.................. 40,000 385,600 87,219 78,181 406,823 31,159
Herman A. Moore,
Jr.................. -- -- 29,985 31,265 131,266 45,715
</TABLE>
- ---------------
(1) Based on the closing price of the company's common stock on the Nasdaq
National Market on December 23, 1999 ($11.625).
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) February 16, 2003 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
payment if he is terminated within 18 months of such change in control other
than for
8
<PAGE> 12
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 1999, 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.
During 1999, the company leased 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. Mr. Wachtel (14% ownership), Mr.
Burns (7% ownership), Mr. Reiss (14% ownership), Mr. Stokes (14% ownership), Mr.
Spiva (14% ownership), and Mr. Walker (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 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
9
<PAGE> 13
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 1999 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 1999 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 19 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 20.8% over levels in fiscal 1998. 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 18.7% to $286,250 from $241,250.
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. The compensation committee approved bonuses of $310,000, $260,000,
$190,000, $120,000 and $75,000 to Messrs. Burns, Hislop, Fitzhugh, Hall, and
Moore, respectively, pursuant to the bonus program for fiscal 1999. The
committee has approved a continuation of the cash bonus program for fiscal 2000.
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 390,000,
251,250, 251,250, 157,500, and 41,250 shares, respectively. In February 1999,
the Committee granted additional options to the Named Executive Officers under
the program as follows: Mr. Burns -- 40,000 shares; Mr. Hislop -- 35,000 shares;
Mr. Fitzhugh -- 25,000 shares; Mr. Hall -- 50,000 shares; and Mr. Moore 20,000
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 compensation committee
establishes certain market and/or company targeted financial goals for each of
the participants in the program. 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
10
<PAGE> 14
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 1999, the options granted to Messrs. Burns, Hislop,
Fitzhugh, and Hall pursuant to the program vested 21.25% each in 1999 and the
options granted to Mr. Moore vested 23.13%. In January 2000, the committee
established targeted levels for vesting in fiscal 2000 for options granted to
the named executive officers under the program based on targeted levels of
earnings.
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>
11
<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 25, 1994 and ending December 26, 1999. The following graph
assumes that the value of the investment in the company's common stock and each
index was $100 on December 25, 1994 and that all dividends were reinvested.
<TABLE>
<CAPTION>
NASDAQ STOCK MARKET
O'CHARLEY'S INC. INDEX S&P 500 RESTAURANT INDEX
---------------- ------------------- ------------------------
<S> <C> <C> <C>
12/94 100.00 100.00 100.00
12/95 142.00 141.00 150.00
12/96 118.00 174.00 148.00
12/97 149.00 213.00 159.00
12/98 190.00 300.00 249.00
12/99 168.00 542.00 254.00
</TABLE>
12
<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
1999, the company paid Two Mile Partners aggregate rent of $711,371.
During 1999, the company leased real estate for the operation of one of its
Nashville, Tennessee and one of its Lexington, Kentucky restaurants from CWF
Associates, Inc. These leases provided for annual rentals in an aggregate amount
equal to the greater of $160,800 or 6% of each restaurant's sales. Each lease
granted 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 such
purchase. In February 2000, the company exercised its options and purchased the
two properties from CWF Associates for an aggregate purchase price of $1.9
million. Mr. Wachtel (14% ownership), Mr. Burns (7% ownership), Mr. Reiss (14%
ownership), Mr. Stokes (14% ownership), Mr. Spiva (14% ownership), Mr. Walker
(14% ownership) and others are shareholders in CWF. In addition, Mr. Fitzhugh is
the Secretary of CWF. During fiscal 1999, the company paid CWF aggregate rent of
$416,776.
PROPOSAL 2: APPROVAL OF THE O'CHARLEY'S 2000 STOCK INCENTIVE PLAN
INTRODUCTION
The company believes that a key element of director, officer and employee
compensation is stock-based compensation. Stock-based compensation advances the
interests of the company by encouraging and providing for the acquisition of
equity interests in the company by directors, officers, and employees, thereby
providing substantial motivation and superior performance. In that regard, the
board of directors and the shareholders of the company have previously approved
the 1990 Employee Stock Plan and the 1991 Stock Option Plan for Outside
Directors. Pursuant to those plans, an aggregate of 2,923,256 shares of common
stock were authorized and available for future grant at March 17, 2000.
Pursuant to the terms of the plans, no options may be granted pursuant to the
1990 Employee Stock Plan after May 18, 2000 and no options may be granted
pursuant to the 1991 Stock Option Plan for Outside Directors after May 17, 2001.
In order to permit the company to continue to use stock-based compensation as an
element of its compensation policies, the board of directors has approved,
subject to shareholder approval, the O'Charley's 2000 Stock Incentive Plan and
recommended its submission to the company's shareholders. If the O'Charley's
2000 Stock Incentive Plan is approved by shareholders, the board of directors
will not grant any additional awards pursuant to the 1990 Employee Stock Plan or
the 1991 Stock Option Plan for Outside Directors. An aggregate of 3,000,000
shares of common stock would be authorized for issuance pursuant to the
O'Charley's 2000 Stock Incentive Plan. Approval of the O'Charley's 2000 Stock
Incentive Plan would result in a net increase of 76,744 in the number of shares
available for future grant pursuant to the company's stock plans. No awards have
been made under the O'Charley's 2000 Stock Incentive Plan.
13
<PAGE> 17
Section 162(m) of the Internal Revenue Code generally disallows a corporate
deduction for compensation over $1.0 million paid to a company's chief executive
officer and any of the four other most highly compensated officers. The $1.0
million limitation applies to amounts realized on the exercise of stock options
and other awards, unless, among other conditions, the awards are granted
pursuant to a plan that has been approved by the company's public shareholders.
The board of directors is submitting the O'Charley's 2000 Stock Incentive Plan
for approval by the company's shareholders to ensure compliance with Section
162(m) of the Internal Revenue Code.
The O'Charley's 2000 Stock Incentive Plan is described below and is set forth in
Appendix A to this proxy statement.
SUMMARY OF MATERIAL PROVISIONS OF THE O'CHARLEY'S 2000 STOCK INCENTIVE PLAN
The following summary of the material provisions of the O'Charley's 2000 Stock
Incentive Plan is qualified in its entirety by reference to the text of the plan
as set forth in Appendix A to this proxy statement.
Administration; Participation; Awards Under The Plan. Under the plan, the
compensation committee of the board of directors of the company has the
authority to grant to officers, other key employees and consultants of the
company, and the board of directors has the authority to grant to non-employee
directors, the following types of awards: (1) stock options; (2) stock
appreciation rights; (3) restricted stock; and/or (4) other stock-based awards.
Limitations. The aggregate number of shares of common stock that may be issued
under the plan is 3,000,000 shares of common stock. The maximum number of shares
of common stock for which awards may be made under the plan to any officer of
the company or other person whose compensation may be subject to the limitations
on deductibility under Section 162(m) of the Internal Revenue Code is 500,000
during any single fiscal year. Any shares as to which an option or other award
expires, lapses unexpired, or is forfeited, terminated, or canceled may become
subject to a new option or other award. The plan will terminate on, and no award
may be granted later than, May 4, 2010, but the exercise date of awards granted
prior to May 4, 2010 may extend beyond such date.
Non-Employee Director Grants. The plan also provides for automatic grants of
non-qualified stock options to non-employee directors of the company. Options to
purchase 11,250 shares of common stock are automatically granted to each person
serving as a non-employee director on the date of his or her initial election or
appointment to the board. Options granted to non-employee directors on the date
of initial election to the board will vest and become exercisable in five equal,
annual installments beginning on the first anniversary of the date of grant.
On the date of each annual meeting of shareholders of the company beginning with
the annual meeting of shareholders held in the year 2000, unless the plan has
been terminated, each non-employee director who will continue as a director
following the meeting and who has served as a non-employee director of the
company for a period of at least eleven months prior to the date of such annual
meeting will receive an option to purchase 3,500 shares of common stock, which
will vest six months following the date of grant.
14
<PAGE> 18
All options automatically granted to a non-employee director will enable the
optionee to purchase shares of common stock at the fair market value of the
common stock on the date of grant. Non-employee directors will not be able to
transfer or assign their options without the prior written consent of the board
of directors of the company other than (i) transfers by the optionee to a member
of his or her immediate family or a trust for the benefit of the optionee or a
member of his or her immediate family or (ii) transfers by will or by the laws
of descent and distribution. Options automatically granted to non-employee
directors will have a term of ten years from the date of grant and will not be
exercisable prior to vesting. The exercise price may be paid in cash or in
shares of common stock of the company. The board of directors, in its sole
discretion, may reduce the size of any non-employee director option or postpone
the vesting and exercisability of any non-employee director option prior to
grant.
Stock Options. Incentive stock options and non-qualified stock options may be
granted for such number of shares as the compensation committee may determine
and may be granted alone, in conjunction with, or in tandem with, other awards
under the plan or cash awards outside the plan. A stock option will be
exercisable at such times and subject to such terms and conditions as the
compensation committee will determine. In the case of an incentive stock option,
however, the term will be no more than ten years after the date of grant (five
years in the case of incentive stock options for certain 10% employee
shareholders). The option price for an incentive stock option will not be less
than 100% (110% in the case of certain 10% employee shareholders) of the fair
market value of common stock as of the date of grant and for any non-qualified
stock option will not be less than 50% of the fair market value as of the date
of grant. Incentive stock options granted under the plan may not be transferred
or assigned other than by will or by the laws of descent and distribution.
Non-qualified stock options may not be transferred or assigned without the prior
written consent of the compensation committee other than (i) transfers by the
optionee to a member of his or her immediate family or a trust for the benefit
of the optionee or a member of his or her immediate family or (ii) transfers by
will or by the laws of descent and distribution.
Stock Appreciation Rights. Stock appreciation rights may be granted under the
plan in conjunction with all or part of a stock option and will be exercisable
only when the underlying stock option is exercisable. Once a stock appreciation
right has been exercised, the related portion of the stock option underlying the
stock appreciation right will terminate. Upon the exercise of a stock
appreciation right, the company will pay to the employee or consultant in cash,
common stock, or a combination thereof (the method of payment to be at the
discretion of the compensation committee) an amount equal to the excess of the
fair market value of one share of company common stock on the exercise date over
the option price per share specified in the related stock option, multiplied by
the number of shares in respect of which the stock appreciation right shall have
been exercised. Stock appreciation rights may not be transferred or assigned
other than to the extent the underlying option is transferable or assignable.
Restricted Stock. Restricted stock awards may be granted alone, in addition to,
or in tandem with other awards under the plan or cash awards made outside the
plan. The provisions attendant to a grant of restricted stock may vary from
participant to participant. In making an award of restricted stock, the
compensation committee will determine the periods during which the restricted
stock is subject to forfeiture and may provide such other awards designed to
guarantee a minimum value for such stock. The compensation committee may also
impose such other conditions and restrictions on the shares of
15
<PAGE> 19
restricted stock as it deems appropriate, including the attainment of specified
performance goals or such other factors as the compensation committee may
determine. The compensation committee may provide that such restrictions will
lapse with respect to specified percentages of the awarded shares of restricted
stock on successive future dates. During the restriction period, the employee or
consultant may not sell, transfer, pledge, or assign the restricted stock, but
will be entitled to vote the restricted stock and to receive, at the election of
the compensation committee, cash or deferred dividends.
Other Awards. The compensation committee also may grant other types of awards,
such as convertible preferred stock, convertible debentures, or other
exchangeable securities that are valued, as a whole or in part, by reference to
or otherwise based on common stock. These awards may be granted alone, in
addition to, or in tandem with, stock options, stock appreciation rights,
restricted stock, or cash awards outside of the plan. Awards will be made upon
such terms and conditions as the compensation committee may determine.
Change in Control; Potential Change in Control. If there is a change of control
or a potential change of control of the company, stock appreciation rights, and
any stock options that are not then exercisable, will become fully exercisable
and vested and the restrictions and deferral limitations applicable to
restricted stock and other stock-based awards shall lapse and such shares and
awards will be deemed fully vested. For purposes of the plan, a change of
control is defined generally to include (i) any person or entity, other than the
company or a wholly-owned subsidiary of the company, becoming the beneficial
owner of the company's securities having 35% or more of the combined voting
power of the then outstanding securities that may be cast for the election of
directors; (ii) in connection with a cash tender, exchange offer, merger, or
other business combination, sale of assets, or contested election, less than a
majority of the combined voting power of the then outstanding securities of the
company entitled to vote generally in the election of directors being held in
the aggregate by the holders of the company's securities entitled to vote
generally in the election of directors of the company immediately prior to such
transaction; and (iii) during any period of two consecutive years, individuals
who at the beginning of any such period constitute the board of directors
ceasing to constitute at least a majority thereof, unless the election of each
director first elected during such period was approved by a vote of at least
two-thirds of the directors of the company then still in office who were
directors of the company at the beginning of any such period. For purposes of
the plan, a potential change in control is defined generally to include (i) the
approval by the shareholders of an agreement by the company, the consummation of
which would result in a change of control of the company; or (ii) the
acquisition of beneficial ownership, directly or indirectly, by any entity,
person or group (other than the company or a subsidiary of the company or any
company employee benefit plan) of securities of the company representing 5% or
more of the combined voting power of the company's outstanding securities and
the adoption by the compensation committee of a resolution to the effect that a
potential change in control has occurred. Stock options, stock appreciation
rights, restricted stock, and other stock-based awards will, unless otherwise
determined by the compensation committee in its sole discretion, be cashed out
on the basis of the change in control price (as defined in the plan and as
described below). The change of control price will be the highest price per
share paid in any transaction reported on the Nasdaq Stock Market's National
Market or paid or offered to be paid in any bona fide transaction relating to a
change in control of the company or potential change in control at any time
during the immediately preceding 60-day period, as determined by the
compensation committee.
16
<PAGE> 20
Amendments. The board of directors of the company may amend, alter, or
discontinue the plan, provided that no amendment may be made that would impair
the rights of an optionee or participant under an award made under the plan
without the participant's consent.
CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES
The following is a brief summary of certain U.S. Federal income tax aspects of
options awarded under the plan based upon the federal income tax laws in effect
on the date hereof. This summary is not intended to be exhaustive and the exact
tax consequences to any grantee will depend upon his or her particular
circumstances and other facts. The plan participants must consult their tax
advisors with respect to any state, local, and foreign tax considerations or
particular federal tax implications of options granted under the plan.
Incentive Stock Options. Neither the grant nor the exercise of an incentive
stock option will result in taxable income to the employee. The tax treatment on
sale of shares of common stock acquired upon exercise of an incentive stock
option depends on whether the holding period requirement is satisfied. The
holding period is met if the disposition of the employee occurs (i) at least two
years after the date of grant of the option; (ii) at least one year after the
date the shares were transferred to the employee; and (iii) while the employee
remains employed by the company or not more than three months after his or her
termination of employment (or not more than one year in the case of a disabled
employee). If the holding period requirement is satisfied, the excess of the
amount realized upon sale of the shares of common stock acquired upon the
exercise of the incentive stock option over the price paid for these shares will
be treated as a long-term capital gain. If the employee disposes of the common
stock acquired upon the exercise of the incentive stock option before the
holding period requirement is met (a "disqualifying disposition"), the excess of
the fair market value of the shares on the date of exercise or, if less, the
fair market value on the date of disposition, over the exercise price will be
taxable as ordinary compensation income to the employee at the time of
disposition, and the company will be entitled to a corresponding deduction. The
balance of the gain, if any, will be a capital gain for the employee. Any
capital gain recognized by the employee will be a long-term capital gain if the
employee's holding period for the shares of common stock at the time of
disposition is more than one year.
Although the exercise of an incentive stock option will not result in taxable
income to the employee, the excess of the fair market value of the common stock
on the date of exercise over the exercise price will be included in the
employee's "alternative minimum taxable income" under the Internal Revenue Code.
Nonqualified Stock Options. There will be no federal income tax consequences to
the company or to the grantee upon the grant of non-qualified stock options
under the plan. However, upon the exercise of a non-qualified stock option under
the plan, the grantee will recognize ordinary compensation income for federal
income tax purposes in an amount equal to the excess of the fair market value of
the shares of common stock purchased over the exercise price. The company will
generally be entitled to a tax deduction at such time and in the same amount
that the employee recognizes ordinary income. If the shares of common stock so
acquired are later sold or exchanged, the difference between the amount realized
from such sale or exchange and the fair market value of such stock on the date
of exercise of the option is generally taxable as long-term or short-term
capital gain or loss
17
<PAGE> 21
depending upon whether the shares of common stock have been held for more than
one year after such date.
Exercise with Shares. A grantee who pays the exercise price upon exercise of an
incentive stock option or non-qualified stock option, in whole or in part, by
delivering shares of common stock already owned by him or her will recognize no
gain or loss for federal income tax purposes to the extent of the fair market
value of the shares surrendered, but with respect to shares received in excess
of such exercise price, a grantee will recognize ordinary compensation income
equal to the fair market value of such shares. Shares of common stock acquired
upon exercise that are equal in number to the shares surrendered will have a tax
basis equal to the tax basis of the shares surrendered, and (except as noted
below with respect to disqualifying dispositions) the holding period of such
shares will include the holding period of shares surrendered. In the case of a
non-qualified stock option, the basis of additional shares received upon
exercise of the non-qualified stock option will be equal to the fair market
value of such shares on the date of exercise, and the holding period for such
additional shares will commence on the date the option is exercised. In the case
of an incentive stock option, the tax basis of the additional shares received
will be zero, and the holding period of such shares will commence on the date of
the exchange. If any of the shares received upon exercise of the incentive stock
option are disposed of within two years of the date of the grant of the
incentive stock option or within one year after exercise, the shares with the
lowest (i.e., zero) basis will be deemed to be disposed of first, and such
disposition will be a disqualifying disposition giving rise to ordinary income
as previously discussed above.
Stock Appreciation Rights. No income will be realized by a participant in
connection with the grant of a stock appreciation right. When the stock
appreciation right is exercised, the participant will generally be required to
include as taxable ordinary income in the year of exercise, an amount equal to
the amount of cash and the fair market value of any shares received. The company
will be entitled to a deduction at the time and in the amount included in the
participant's income by reason of the exercise. If the participant receives
common stock upon exercise of a stock appreciation right, the post-exercise
appreciation or deprecation will be treated in the same manner discussed above
under "Non-Qualified Stock Options."
Restricted Stock. A participant receiving restricted stock generally will
recognize ordinary income in the amount of the fair market value of the
restricted stock at the time the stock is no longer subject to forfeiture, less
the consideration paid for the stock. However, a participant may elect, under
Section 83(b) of the Internal Revenue Code within 30 days of the grant of the
stock, to recognize taxable ordinary income on the date of grant equal to the
excess of the fair market value of the shares of restricted stock (determined
without regard to the restrictions) over the purchase price of the restricted
stock. Thereafter, if the shares are forfeited, the participant will be entitled
to a deduction, refund, or loss, for tax purposes only, in an amount equal to
the purchase price of the forfeited shares regardless of whether she or he made
a Section 83(b) election. With respect to the sale of shares after the
forfeiture period has expired, the holding period to determine whether the
participant has long-term or short-term capital gain or loss generally begins
when the restriction period expires and the tax basis for such shares will
generally be based on the fair market value of such shares on such date. If the
participant makes an election under Section 83(b), however, the holding period
will commence on the date of grant, the tax basis will be equal to the fair
market value of shares on such date (determined without regard to restrictions),
and the company generally will be entitled to a deduction equal to
18
<PAGE> 22
the amount that is taxable as ordinary income to the participant in the year
that such income is taxable.
Dividends and Dividend Equivalents. Dividends paid on restricted stock
generally will be treated as compensation that is taxable as ordinary income to
the participant, and will be deductible by the company. If the participant makes
a Section 83(b) election, however, the dividends will be taxable as ordinary
income to the participant but will not be deductible by the company.
Other Stock-Based Awards. The federal income tax treatment of other stock-based
awards will depend on the nature of any such award and the restrictions
applicable to such award. Such an award may, depending on the conditions
applicable to the award, be taxable as an option, an award of restricted stock,
or in a manner not described herein.
The plan is not intended to be a "qualified plan" under Section 401(a) of the
Internal Revenue Code.
Because awards under the O'Charley's 2000 Stock Incentive Plan are at the
discretion of the compensation committee of the board of directors, the benefits
that will be awarded under the plan to persons other than non-employee directors
are not currently determinable.
If the plan is approved by the shareholders of the company, the plan will become
effective as of May 4, 2000 and the company will not grant any additional
options pursuant to the 1990 Employee Stock Plan or the 1991 Stock Option Plan
for Outside Directors. The board of directors believes that it is in the best
interest of the company and its shareholders to approve the plan.
The plan will be approved if the number of shares of common stock voted in favor
of the plan exceeds the number of shares of common stock voted against it.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" APPROVAL OF
THIS PROPOSAL.
PROPOSAL 3: APPROVAL OF THE AMENDMENTS TO THE CHUX OWNERSHIP PLAN
INTRODUCTION
The company believes that broad-based ownership of equity interests in the
company by its employees provides a substantial motivation for superior
performance by more closely aligning the economic interests of those employees
with the overall performance of the company. In order to encourage ownership of
the company's common stock by its employees, the board of directors and
shareholders of the company previously approved the CHUX Ownership Plan. The
board of directors has reviewed the CHUX Ownership Plan and has concluded that,
in order to encourage increased participation in the plan by the company's
employees, the company should amend the plan to (i) expand the eligibility
provisions of the plan to cover all employees of the company and its
subsidiaries, (ii) shorten the plan option period from one year to six months,
(iii) allow each participant to make one optional lump sum contribution to the
plan during each plan period; and (iv) limit the scope of amendments to the plan
requiring shareholder approval to only those amendments that increase the number
of shares authorized for issuance under the plan.
19
<PAGE> 23
The CHUX Ownership Plan, as proposed to be amended, is described below and is
set forth in Appendix B to this proxy statement.
SUMMARY OF MATERIAL PROVISIONS OF THE CHUX OWNERSHIP PLAN, AS AMENDED
The following is a summary of the material provisions of the CHUX Ownership
Plan, as proposed to be amended. The summary is qualified in its entirety by
reference to the text of the plan as set forth in Appendix B to this proxy
statement.
Participation; Awards Under the Plan. Pursuant to the plan, all employees of
the company and its subsidiaries (including executive officers of the company)
who have been employed by the company for at least six months as of any October
1 and, effective as of April 1, 2000, all employees of the company or its
subsidiaries on the next application date (as defined in the plan) following
their date of employment may elect to deduct from their compensation an
after-tax amount of not less than $5.00 and up to 15% of their base pay (as
defined in the plan) each payroll period. The dollar amount deducted is credited
to the participant's contribution account (as defined in the plan). In addition,
effective April 1, 2000, a participant is permitted to make one lump sum
contribution during each plan period, as long as the total aggregate amount of
salary deductions does not exceed 15% of the participant's base pay per month on
the application date multiplied by six. On the exercise date (the last trading
day of each plan period), the amount deducted from each participant's salary and
any additional amounts contributed on a lump-sum basis over the course of the
period will be used to purchase the maximum number of shares of common stock at
a purchase price (the "exercise price") equal to the lesser of (a) 85% of the
closing market price of the shares of common stock on the exercise date; or (b)
85% of the average of the closing market price of the shares of common stock on
the grant date (the first trading date of each six-month period) and the closing
market price of the common stock on the exercise date for such period. On an
exercise date, all options shall be automatically exercised, except for persons
whose employment has terminated or who have withdrawn all contributions.
Options granted under the plan are subject to the following limitations: (i) the
maximum number of shares of common stock which may be purchased by any
participant on exercise dates, within any calendar year, shall be equal to the
lesser of (a) 2,500 shares of common stock or (b) common stock having a market
value of $25,000, as determined based on the closing market price on the grant
date for the plan period during which each share of common stock is purchased;
(ii) no option may be granted to a participant who immediately after such grant
would own 5% or more of the common stock of the company; and (iii) no
participant may assign, transfer or otherwise alienate any options granted to
him, except by will or the laws of descent and distribution, and such options
must be exercised during the participant's lifetime only by him.
At December 26, 1999, the company and its subsidiaries had approximately 9,400
employees who were eligible to participate in the plan. Non-employee directors
of the company and holders of 5% or more of the outstanding shares of common
stock are not eligible to participate in the Plan.
Administration. The plan will be administered by a plan administrator, which
plan administrator will initially be the compensation committee of the board of
directors.
Upon termination of a participant's employment, the employee shall cease being a
participant under the plan, and the balance of the employee's contribution
account shall be
20
<PAGE> 24
paid to the participant as soon as practical after termination. Any option
granted to such a participant shall be null and void from the date of
termination. Upon the death, retirement or disability of a participant, the
participant, or his legal representative, may withdraw the balance in his
contribution account or may have the accumulated balance used to purchase stock
under the plan. Any remaining money which is insufficient to purchase a whole
share will be returned to the participant or his legal representative.
Adjustments. In the case of a stock split, stock dividend, reclassification,
recapitalization, merger, reorganization, or other change in the company's
structure affecting the common stock, appropriate adjustments will be made by
the plan administrator, subject to direction by the board of directors, in the
number of shares reserved for issuance under the plan and the calculation of the
exercise price.
Amendment. Without the approval of the shareholders of the company, the plan
may not be amended to increase the number of shares reserved under the Plan
(except pursuant to certain changes in the capital structure of the company).
All other amendments, including termination of the plan, may be made without
shareholder approval.
Federal Income Tax Aspects. The following is a brief summary of the Federal
income tax aspects of awards made under the plan based upon the Federal income
tax laws in effect on the date hereof. This summary is not intended to be
exhaustive and does not describe state or local tax consequences.
A holder will not recognize income for Federal tax purposes on account of the
initial discount when shares are purchased. Instead, income may be recognized
when a holder disposes of his or her stock.
If shares of stock are disposed of before a statutory holding period is met,
income is recognized in an amount equal to the difference between the price paid
for the shares and the market value of the shares on the date such shares were
purchased. If shares are disposed of after meeting the holding period
requirement, the holder receives ordinary taxable income in the calendar year of
disposition equal to the lesser of (i) the original 15% discount on the shares
assuming the stock had been purchased on the grant date or (ii) the excess of
the fair market value of such shares of common stock on the day of disposition
over the price paid for such shares. In either case, (i) if a holder's
disposition is by gift, such holder will have no further income tax consequences
and (ii) in the case of a sale of such shares, the difference between the net
proceeds on the date of disposition and the holder's tax basis in such shares
(including ordinary income recognized in the disposition) will be taxable as
capital gain or loss.
If an employee leaves contributions in the plan to purchase common stock after
he or she retires, the tax consequences depend on whether the termination date
is within three months of the exercise date. If the termination date is not more
than three months prior to the exercise date, the tax consequences are as
described above. However, if the termination date is more than three months
prior to the exercise date, the holder is treated as exercising a non-qualified
option and is taxed on the exercise date on the excess of market value of the
stock on that date over the price paid.
21
<PAGE> 25
If approved by the shareholders, the amendments will become effective as of
October 1, 1999.
The amendment to the CHUX Ownership Plan will be approved if the votes cast in
favor of the amendment exceed the votes cast against it.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE APPROVAL OF THE
AMENDMENTS TO THE CHUX OWNERSHIP PLAN.
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 7, 2000. 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 7, 2000 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 received prior to
December 7, 2000, 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.
22
<PAGE> 26
APPENDIX A
O'CHARLEY'S 2000 STOCK INCENTIVE PLAN
SECTION 1. PURPOSE; DEFINITIONS.
The purpose of the O'Charley's 2000 Stock Incentive Plan (the "Plan") is to
enable O'Charley's Inc. (the "Corporation") to attract, retain and reward key
employees of and consultants to the Corporation and its Subsidiaries and
Affiliates, and directors who are not also employees of the Corporation, and to
strengthen the mutuality of interests between such key employees, consultants,
and directors by awarding such key employees, consultants, and directors
performance-based stock incentives and/or other equity interests or equity-based
incentives in the Corporation, as well as performance-based incentives payable
in cash. The creation of the Plan shall not diminish or prejudice other
compensation programs approved from time to time by the Board.
For purposes of the Plan, the following terms shall be defined as set forth
below:
A. "Affiliate" means any entity other than the Corporation and its Subsidiaries
that is designated by the Board as a participating employer under the Plan,
provided that the Corporation directly or indirectly owns at least 20% of the
combined voting power of all classes of stock of such entity or at least 20% of
the ownership interests in such entity.
B. "Board" means the Board of Directors of the Corporation.
C. "Cause" has the meaning provided in Section 5(j) of the Plan.
D. "Change in Control" has the meaning provided in Section 10(b) of the Plan.
E. "Change in Control Price" has the meaning provided in Section 10(d) of the
Plan.
F. "Code" means the Internal Revenue Code of 1986, as amended from time to time,
and any successor thereto.
G. "Common Stock" means the Corporation's common stock, no par value per share.
H. "Committee" means the Committee referred to in Section 2 of the Plan.
I. "Corporation" means O'Charley's Inc., a corporation organized under the laws
of the State of Tennessee, or any successor corporation.
J. "Disability" means disability as determined under the Corporation's Group
Long Term Disability Insurance Plan.
K. "Early Retirement" means retirement, for purposes of this Plan with the
express consent of the Corporation at or before the time of such retirement,
from active employment with the Corporation and any Subsidiary or Affiliate
prior to age 65, in accordance with any applicable early retirement policy of
the Corporation then in effect or as may be approved by the Committee.
L. "Effective Date" has the meaning provided in Section 14 of the Plan.
M. "Exchange Act" means the Securities Exchange Act of 1934, as amended from
time to time, and any successor thereto.
A-1
<PAGE> 27
N. "Fair Market Value" means with respect to the Common Stock, as of any given
date or dates, unless otherwise determined by the Committee in good faith, the
reported closing price of a share of Common Stock on NASDAQ or such other market
or exchange as is the principal trading market for the Common Stock, or, if no
such sale of a share of Common Stock is reported on NASDAQ or other exchange or
principal trading market on such date, the fair market value of a share of
Common Stock as determined by the Committee in good faith.
O. "Incentive Stock Option" means any Stock Option intended to be and designated
as an "Incentive Stock Option" within the meaning of Section 422 of the Code.
P. "Immediate Family" means any child, stepchild, grandchild, parent,
stepparent, grandparent, spouse, sibling, mother-in-law, father-in-law,
son-in-law, daughter-in-law, brother-in-law, or sister-in-law, and shall include
adoptive relationships.
Q. "Non-Employee Director" means a member of the Board who is a Non-Employee
Director within the meaning of Rule 16b-3(b)(3) promulgated under the Exchange
Act and an outside director within the meaning of Treasury Regulation Sec.
162-27(e)(3) promulgated under the Code.
R. "Non-Qualified Stock Option" means any Stock Option that is not an Incentive
Stock Option.
S. "NASDAQ" means The Nasdaq Stock Market's National Market.
T. "Normal Retirement" means retirement from active employment with the
Corporation and any Subsidiary or Affiliate on or after age 65.
U. "Other Stock-Based Award" means an award under Section 8 below that is valued
in whole or in part by reference to, or is otherwise based on, the Common Stock.
V. "Outside Director" means a member of the Board who is not an officer or
employee of the Corporation or any Subsidiary or Affiliate of the Corporation.
W. "Outside Director Option" means an award to an Outside Director under Section
9 below.
X. "Plan" means this O'Charley's 2000 Stock Incentive Plan, as amended from time
to time.
Y. "Restricted Stock" means an award of shares of Common Stock that is subject
to restrictions under Section 7 of the Plan.
Z. "Restriction Period" has the meaning provided in Section 7(c)(i) of the Plan.
AA. "Retirement" means Normal or Early Retirement.
BB. "Section 162(m) Maximum" has the meaning provided in Section 3(a) hereof.
CC. "Stock Appreciation Right" means the right pursuant to an award granted
under Section 6 below to surrender to the Corporation all (or a portion) of a
Stock Option in exchange for an amount equal to the difference between (i) the
Fair Market Value, as of the date such Stock Option (or such portion thereof) is
surrendered, of the shares of Common Stock covered by such Stock Option (or such
portion thereof), subject, where applicable, to the pricing provisions in
Section 6(b)(ii), and (ii) the aggregate exercise price of such Stock Option (or
such portion thereof).
A-2
<PAGE> 28
DD. "Stock Option" or "Option" means any option to purchase shares of Common
Stock (including Restricted Stock, if the Committee so determines) granted
pursuant to Section 5 below.
EE. "Subsidiary" means any entity (other than the Corporation) in an unbroken
chain of entities beginning with the Corporation if each of the entities (other
than the last entity in the unbroken chain) owns stock, membership interest or
partnership interest possessing 50% or more of the total combined voting power
of all classes of stock, membership interest or partnership interest in one of
the other entities in the chain.
SECTION 2. ADMINISTRATION.
The Plan shall be administered by a Committee of not less than two Non-Employee
Directors, who shall be appointed by the Board and who shall serve at the
pleasure of the Board. The functions of the Committee specified in the Plan may
be exercised by an existing Committee of the Board composed exclusively of
Non-Employee Directors. The initial Committee shall be the Compensation
Committee of the Board. In the event there are not at least two Non-Employee
Directors on the Board, the Plan shall be administered by the Board and all
references herein to the Committee shall refer to the Board.
The Committee shall have authority to grant, pursuant to the terms of the Plan,
to officers, other key employees, Outside Directors, and consultants eligible
under Section 4: (i) Stock Options, (ii) Stock Appreciation Rights, (iii)
Restricted Stock, and/or (iv) Other Stock-Based Awards; provided, however, that
the power to grant and establish the terms and conditions of awards to Outside
Directors other than Outside Director Options shall be reserved to the Board.
With respect to options granted to Outside Directors other than Outside Director
Options, all references to the Committee shall be deemed to be references to the
Board.
In particular, the Committee or the Board, as the case may be, shall have the
authority, consistent with the terms of the Plan:
(a) to select the officers, key employees, Outside Directors, and
consultants to the Corporation and its Subsidiaries and Affiliates to whom
Stock Options, Stock Appreciation Rights, Restricted Stock, and/or Other
Stock-Based Awards may from time to time be granted hereunder;
(b) to determine whether and to what extent Incentive Stock Options,
Non-Qualified Stock Options, Stock Appreciation Rights, Restricted Stock,
and/or Other Stock-Based Awards, or any combination thereof, are to be
granted hereunder to one or more eligible persons;
(c) to determine the number of shares to be covered by each such award
granted hereunder;
(d) to determine the terms and conditions, not inconsistent with the terms
of the Plan, of any award granted hereunder (including, but not limited to,
the share price and any restriction or limitation, or any vesting
acceleration or waiver of forfeiture restrictions regarding any Stock
Option or other award and/or the shares of Common Stock relating thereto,
based in each case on such factors as the Committee shall determine, in its
sole discretion); and to amend or waive any such terms and conditions to
the extent permitted by Section 11 hereof;
A-3
<PAGE> 29
(e) to determine whether and under what circumstances a Stock Option may be
settled in cash or Restricted Stock under Section 5(l) or (m), as
applicable, instead of Common Stock;
(f) to determine whether, to what extent, and under what circumstances
Option grants and/or other awards under the Plan are to be made, and
operate, on a tandem basis vis-a-vis other awards under the Plan and/or
cash awards made outside of the Plan;
(g) to determine whether, to what extent, and under what circumstances
shares of Common Stock and other amounts payable with respect to an award
under this Plan shall be deferred either automatically or at the election
of the participant (including providing for and determining the amount (if
any) of any deemed earnings on any deferred amount during any deferral
period);
(h) to determine whether to require payment of tax withholding requirements
in shares of Common Stock subject to the award; and
(i) to impose any holding period required to satisfy Section 16 under the
Exchange Act.
The Committee shall have the authority to adopt, alter, and repeal such rules,
guidelines, and practices governing the Plan as it shall, from time to time,
deem advisable; to interpret the terms and provisions of the Plan and any award
issued under the Plan (and any agreements relating thereto); and to otherwise
supervise the administration of the Plan; provided, however, that, to the extent
that this Plan otherwise requires the approval of the Board or the shareholders
of the Corporation, all decisions of the Committee shall be subject to such
Board or shareholder approval. Subject to the foregoing, all decisions made by
the Committee pursuant to the provisions of the Plan shall be made in the
Committee's sole discretion and shall be final and binding on all persons,
including the Corporation and Plan participants.
SECTION 3. SHARES OF COMMON STOCK SUBJECT TO PLAN.
(a) The aggregate number of shares of Common Stock that may be issued under the
Plan shall be 3,000,000 shares. The shares of Common Stock issuable under the
Plan shall be issued from the Corporation's authorized but unissued shares. No
officer of the Corporation or other person whose compensation may be subject to
the limitations on deductibility under Section 162(m) of the Code shall be
eligible to receive awards pursuant to this Plan relating to in excess of
500,000 shares of Common Stock in any fiscal year (the "Section 162(m)
Maximum").
(b) If any shares of Common Stock that have been optioned cease to be subject to
a Stock Option, or if any shares of Common Stock that are subject to any
Restricted Stock or Other Stock-Based Award granted hereunder are forfeited
prior to the payment of any dividends, if applicable, with respect to such
shares of Common Stock, or any such award otherwise terminates without a payment
being made to the participant in the form of Common Stock, such shares shall
again be available for distribution in connection with future awards under the
Plan.
(c) In the event of any merger, reorganization, consolidation, recapitalization,
extraordinary cash dividend, stock dividend, stock split or other change in
corporate structure affecting the Common Stock, an appropriate substitution or
adjustment shall be made in
A-4
<PAGE> 30
the maximum number of shares that may be awarded under the Plan, in the number
and option price of shares subject to outstanding Options granted under the
Plan, in the number of shares underlying Outside Director Options to be granted
under Section 9 hereof, the Section 162(m) Maximum and in the number of shares
subject to other outstanding awards granted under the Plan as may be determined
to be appropriate by the Committee, in its sole discretion, provided that the
number of shares subject to any award shall always be a whole number. An
adjusted option price shall also be used to determine the amount payable by the
Corporation upon the exercise of any Stock Appreciation Right associated with
any Stock Option.
SECTION 4. ELIGIBILITY.
Officers, other key employees and Outside Directors of and consultants to the
Corporation and its Subsidiaries and Affiliates who are responsible for or
contribute to the management, growth and/or profitability of the business of the
Corporation and/or its Subsidiaries and Affiliates are eligible to be granted
awards under the Plan.
SECTION 5. STOCK OPTIONS.
Stock Options may be granted alone, in addition to, or in tandem with other
awards granted under the Plan and/or cash awards made outside of the Plan. Any
Stock Option granted under the Plan shall be in such form as the Committee may
from time to time approve.
Stock Options granted under the Plan may be of two types: (i) Incentive Stock
Options and (ii) Non-Qualified Stock Options. Incentive Stock Options may be
granted only to individuals who are employees of the Corporation or any
Subsidiary of the Corporation.
Subject to the foregoing, the Committee shall have the authority to grant to any
optionee Incentive Stock Options, Non-Qualified Stock Options, or both types of
Stock Options (in each case with or without Stock Appreciation Rights).
Options granted to officers, key employees, Outside Directors and consultants
under the Plan shall be subject to the following terms and conditions and shall
contain such additional terms and conditions, not inconsistent with the terms of
the Plan, as the Committee shall deem desirable.
(a) Option Price. The option price per share of Common Stock purchasable
under a Stock Option shall be determined by the Committee at the time of
grant but shall be not less than 100% (or, in the case of any employee who
owns stock possessing more than 10% of the total combined voting power of
all classes of stock of the Corporation or of any of its Subsidiaries, not
less than 110%) of the Fair Market Value of the Common Stock at grant, in
the case of Incentive Stock Options, and not less than 50% of the Fair
Market Value of the Common Stock at grant, in the case of Non-Qualified
Stock Options.
(b) Option Term. The term of each Stock Option shall be fixed by the
Committee, but no Incentive Stock Option shall be exercisable more than ten
years (or, in the case of an employee who owns stock possessing more than
10% of the total combined voting power of all classes of stock of the
Corporation or any of its Subsidiaries or parent corporations, more than
five years) after the date the Option is granted.
A-5
<PAGE> 31
(c) Exercisability. Stock Options shall be exercisable at such time or
times and subject to such terms and conditions as shall be determined by
the Committee at or after grant; provided, however, that except as provided
in Section 5(g) and (h) and Section 10, unless otherwise determined by the
Committee at or after grant, no Stock Option shall be exercisable prior to
the first anniversary date of the granting of the Option. The Committee may
provide that a Stock Option shall vest over a period of future service at a
rate specified at the time of grant, or that the Stock Option is
exercisable only in installments. If the Committee provides, in its sole
discretion, that any Stock Option is exercisable only in installments, the
Committee may waive such installment exercise provisions at any time at or
after grant, in whole or in part, based on such factors as the Committee
shall determine in its sole discretion.
(d) Method of Exercise. Subject to whatever installment exercise
restrictions apply under Section 5(c), Stock Options may be exercised in
whole or in part at any time during the option period, by giving written
notice of exercise to the Corporation specifying the number of shares to be
purchased. Such notice shall be accompanied by payment in full of the
purchase price, either by check, note, or such other instrument as the
Committee may accept. As determined by the Committee, in its sole
discretion, at or (except in the case of an Incentive Stock Option) after
grant, payment in full or in part may also be made in the form of shares of
Common Stock already owned by the optionee or, in the case of a
Non-Qualified Stock Option, shares of Restricted Stock or shares subject to
such Option or another award hereunder (in each case valued at the Fair
Market Value of the Common Stock on the date the Option is exercised). If
payment of the exercise price is made in part or in full with Common Stock,
the Committee may award to the employee a new Stock Option to replace the
Common Stock that was surrendered. If payment of the option exercise price
of a Non-Qualified Stock Option is made in whole or in part in the form of
Restricted Stock, such Restricted Stock (and any replacement shares
relating thereto) shall remain (or be) restricted in accordance with the
original terms of the Restricted Stock award in question, and any
additional Common Stock received upon the exercise shall be subject to the
same forfeiture restrictions, unless otherwise determined by the Committee,
in its sole discretion, at or after grant. No shares of Common Stock shall
be issued until full payment therefor has been made. An optionee shall
generally have the rights to dividends or other rights of a shareholder
with respect to shares subject to the Option when the optionee has given
written notice of exercise, has paid in full for such shares, and, if
requested, has given the representation described in Section 13(a).
(e) Transferability of Options. No Non-Qualified Stock Option shall be
transferable by the optionee without the prior written consent of the
Committee other than (i) transfers by the Optionee to a member of his or
her Immediate Family or a trust for the benefit of the optionee or a member
of his or her Immediate Family, or (ii) transfers by will or by the laws of
descent and distribution. No Incentive Stock Option shall be transferable
by the optionee otherwise than by will or by the laws of descent and
distribution and all Incentive Stock Options shall be exercisable, during
the optionee's lifetime, only by the optionee.
(f) Bonus for Taxes. In the case of a Non-Qualified Stock Option or an
optionee who elects to make a disqualifying disposition (as defined in
Section 422(a)(1) of the Code) of Common Stock acquired pursuant to the
exercise of an Incentive Stock Option, the Committee in its discretion may
award at the time of grant or thereafter
A-6
<PAGE> 32
the right to receive upon exercise of such Stock Option a cash bonus
calculated to pay part or all of the federal and state, if any, income tax
incurred by the optionee upon such exercise.
(g) Termination by Death. Subject to Section 5(k), if an optionee's
employment by the Corporation and any Subsidiary or (except in the case of
an Incentive Stock Option) Affiliate terminates by reason of death, any
Stock Option held by such optionee may thereafter be exercised, to the
extent such option was exercisable at the time of death or (except in the
case of an Incentive Stock Option) on such accelerated basis as the
Committee may determine at or after grant (or except in the case of an
Incentive Stock Option, as may be determined in accordance with procedures
established by the Committee) by the legal representative of the estate or
by the legatee of the optionee under the will of the optionee, for a period
of one year (or such other period as the Committee may specify at or after
grant) from the date of such death or until the expiration of the stated
term of such Stock Option, whichever period is the shorter.
(h) Termination by Reason of Disability. Subject to Section 5(k), if an
optionee's employment by the Corporation and any Subsidiary or (except in
the case of an Incentive Stock Option) Affiliate terminates by reason of
Disability, any Stock Option held by such optionee may thereafter be
exercised by the optionee, to the extent it was exercisable at the time of
termination or (except in the case of an Incentive Stock Option) on such
accelerated basis as the Committee may determine at or after grant (or,
except in the case of an Incentive Stock Option, as may be determined in
accordance with procedures established by the Committee), for a period of
(i) three years (or such other period as the Committee may specify at or
after grant) from the date of such termination of employment or until the
expiration of the stated term of such Stock Option, whichever period is the
shorter, in the case of a Non-Qualified Stock Option and (ii) one year from
the date of termination of employment or until the expiration of the stated
term of such Stock Option, whichever period is shorter, in the case of an
Incentive Stock Option; provided however, that, if the optionee dies within
the period specified in (i) above (or other such period as the committee
shall specify at or after grant), any unexercised Non-Qualified Stock
Option held by such optionee shall thereafter be exercisable to the extent
to which it was exercisable at the time of death for a period of twelve
months from the date of such death or until the expiration of the stated
term of such Stock Option, whichever period is shorter. In the event of
termination of employment by reason of Disability, if an Incentive Stock
Option is exercised after the expiration of the exercise period applicable
to Incentive Stock Options, but before the expiration of any period that
would apply if such Stock Option were a Non-Qualified Stock Option, such
Stock Option will thereafter be treated as a Non-Qualified Stock Option.
(i) Termination by Reason of Retirement. Subject to Section 5(k), if an
optionee's employment by the Corporation and any Subsidiary or (except in
the case of an Incentive Stock Option) Affiliate terminates by reason of
Normal or Early Retirement, any Stock Option held by such optionee may
thereafter be exercised by the optionee, to the extent it was exercisable
at the time of such Retirement or (except in the case of an Incentive Stock
Option) on such accelerated basis as the Committee may determine at or
after grant (or, except in the case of an Incentive Stock Option, as may be
determined in accordance with procedures established by the Committee), for
a period of (i) three years (or such other period as the Committee
A-7
<PAGE> 33
may specify at or after grant) from the date of such termination of
employment or the expiration of the stated term of such Stock Option,
whichever period is the shorter, in the case of a Non-Qualified Stock
Option and (ii) three months from the date of such termination of
employment or the expiration of the stated term of such Stock Option,
whichever period is the shorter, in the event of an Incentive Stock Option;
provided however, that, if the optionee dies within the period specified in
(i) above (or other such period as the Committee shall specify at or after
grant), any unexercised Non-Qualified Stock Option held by such optionee
shall thereafter be exercisable to the extent to which it was exercisable
at the time of death for a period of twelve months from the date of such
death or until the expiration of the stated term of such Stock Option,
whichever period is shorter. In the event of termination of employment by
reason of Retirement, if an Incentive Stock Option is exercised after the
expiration of the exercise period applicable to Incentive Stock Options,
but before the expiration of the period that would apply if such Stock
Option were a Non-Qualified Stock Option, the option will thereafter be
treated as a Non-Qualified Stock Option.
(j) Other Termination. Subject to Section 5(k), unless otherwise
determined by the Committee (or pursuant to procedures established by the
Committee) at or (except in the case of an Incentive Stock Option) after
grant, if an optionee's employment by the Corporation and any Subsidiary or
(except in the case of an Incentive Stock Option) Affiliate is
involuntarily terminated for any reason other than death, Disability or
Normal or Early Retirement, the Stock Option shall thereupon terminate,
except that such Stock Option may be exercised, to the extent otherwise
then exercisable, for the lesser of three months or the balance of such
Stock Option's term if the involuntary termination is without Cause. For
purposes of this Plan, "Cause" means (i) a felony conviction of a
participant or the failure of a participant to contest prosecution for a
felony or (ii) a participant's willful misconduct or dishonesty that is
directly and materially harmful to the business or reputation of the
Corporation or any Subsidiary or Affiliate. If an optionee voluntarily
terminates employment with the Corporation and any Subsidiary or (except in
the case of an Incentive Stock Option) Affiliate (except for Disability,
Normal or Early Retirement), the Stock Option shall thereupon terminate;
provided, however, that the Committee at grant or (except in the case of an
Incentive Stock Option) thereafter may extend the exercise period in this
situation for the lesser of three months or the balance of such Stock
Option's term.
(k) Incentive Stock Options. Anything in the Plan to the contrary
notwithstanding, no term of this Plan relating to Incentive Stock Options
shall be interpreted, amended, or altered, nor shall any discretion or
authority granted under the Plan be so exercised, so as to disqualify the
Plan under Section 422 of the Code, or, without the consent of the
optionee(s) affected, to disqualify any Incentive Stock Option under such
Section 422. No Incentive Stock Option shall be granted to any participant
under the Plan if such grant would cause the aggregate Fair Market Value
(as of the date the Incentive Stock Option is granted) of the Common Stock
with respect to which all Incentive Stock Options are exercisable for the
first time by such participant during any calendar year (under all such
plans of the Company and any Subsidiary) to exceed $100,000. To the extent
permitted under Section 422 of the Code or the
A-8
<PAGE> 34
applicable regulations thereunder or any applicable Internal Revenue
Service pronouncement:
(i) if (x) a participant's employment is terminated by reason of death,
Disability, or Retirement and (y) the portion of any Incentive Stock
Option that is otherwise exercisable during the post-termination period
specified under Section 5(g), (h) or (i), applied without regard to the
$100,000 limitation contained in Section 422(d) of the Code, is greater
than the portion of such Option that is immediately exercisable as an
"Incentive Stock Option" during such post-termination period under
Section 422, such excess shall be treated as a Non-Qualified Stock
Option; and
(ii) if the exercise of an Incentive Stock Option is accelerated by
reason of a Change in Control, any portion of such Option that is not
exercisable as an Incentive Stock Option by reason of the $100,000
limitation contained in Section 422(d) of the Code shall be treated as a
Non-Qualified Stock Option.
(l) Buyout Provisions. The Committee may at any time offer to buy out an
Option previously granted for a payment in cash, Common Stock, or
Restricted Stock, based on such terms and conditions as the Committee shall
establish and communicate to the optionee at the time that such offer is
made.
(m) Settlement Provisions. If the option agreement so provides at grant or
(except in the case of an Incentive Stock Option) is amended after grant
and prior to exercise to so provide (with the optionee's consent), the
Committee may require that all or part of the shares to be issued with
respect to the spread value of an exercised Option take the form of
Restricted Stock, which shall be valued on the date of exercise on the
basis of the Fair Market Value (as determined by the Committee) of such
Restricted Stock determined without regards to the forfeiture restrictions
involved.
(n) Performance and Other Conditions. The Committee may condition the
exercise of any Option upon the attainment of specified performance goals
or other factors as the Committee may determine, in its sole discretion.
Unless specifically provided in the option agreement, any such conditional
Option shall vest six months prior to its expiration if the conditions to
exercise have not theretofore been satisfied.
(o) Termination of Consultant. The Committee shall have discretion in
determining when a termination under Sections 5(g), (h), (i) or (j) above
shall occur with respect to a consultant's relationship with the
Corporation.
SECTION 6. STOCK APPRECIATION RIGHTS.
(a) Grant and Exercise. Stock Appreciation Rights may be granted in conjunction
with all or part of any Stock Option granted under the Plan. In the case of a
Non-Qualified Stock Option, such rights may be granted either at or after the
time of the grant of such Stock Option. In the case of an Incentive Stock
Option, such rights may be granted only at the time of the grant of such Stock
Option. A Stock Appreciation Right or applicable portion thereof granted with
respect to a given Stock Option shall terminate and no longer be exercisable
upon the termination or exercise of the related Stock Option, subject to such
provisions as the Committee may specify at grant where a Stock Appreciation
Right is granted with respect to less than the full number of shares covered by
a related Stock Option. A Stock Appreciation Right may be exercised by an
optionee, subject to Section 6(b), in accordance with the procedures established
by the Committee for such
A-9
<PAGE> 35
purpose. Upon such exercise, the optionee shall be entitled to receive an amount
determined in the manner prescribed in Section 6(b). Stock Options relating to
exercised Stock Appreciation Rights shall no longer be exercisable to the extent
that the related Stock Appreciation Rights have been exercised.
(b) Terms and Conditions. Stock Appreciation Rights shall be subject to such
terms and conditions, not inconsistent with the provisions of the Plan, as shall
be determined from time to time by the Committee, including the following:
(i) Stock Appreciation Rights shall be exercisable only at such time or
times and to the extent that the Stock Options to which they relate shall
be exercisable in accordance with the provisions of Section 5 and this
Section 6 of the Plan.
(ii) Upon the exercise of a Stock Appreciation Right, an optionee shall be
entitled to receive an amount in cash and/or shares of Common Stock equal
in value to the excess of the Fair Market Value of one share of Common
Stock over the option price per share specified in the related Stock Option
multiplied by the number of shares in respect of which the Stock
Appreciation Right shall have been exercised, with the Committee having the
right to determine the form of payment. When payment is to be made in
shares, the number of shares to be paid shall be calculated on the basis of
the Fair Market Value of the shares on the date of exercise. When payment
is to be made in cash, such amount shall be calculated on the basis of the
Fair Market Value of the Common Stock on the date of exercise.
(iii) Stock Appreciation Rights shall be transferable only when and to the
extent that the underlying Stock Option would be transferable under Section
5(e) of the Plan.
(iv) Upon the exercise of a Stock Appreciation Right, the Stock Option or
part thereof to which such Stock Appreciation Right is related shall be
deemed to have been exercised for the purpose of the limitation set forth
in Section 3 of the Plan on the number of shares of Common Stock to be
issued under the Plan.
(v) The Committee, in its sole discretion, may also provide that, in the
event of a Change in Control and/or a Potential Change in Control, the
amount to be paid upon the exercise of a Stock Appreciation Right shall be
based on the Change in Control Price, subject to such terms and conditions
as the Committee may specify at grant.
(vi) The Committee may condition the exercise of any Stock Appreciation
Right upon the attainment of specified performance goals or other factors
as the Committee may determine, in its sole discretion.
SECTION 7. RESTRICTED STOCK.
(a) Administration. Shares of Restricted Stock may be issued either alone, in
addition to, or in tandem with other awards granted under the Plan and/or cash
awards made outside the Plan. The Committee shall determine the eligible persons
to whom, and the time or times at which, grants of Restricted Stock will be
made, the number of shares of Restricted Stock to be awarded to any person, the
price (if any) to be paid by the recipient of Restricted Stock (subject to
Section 7(b)), the time or times within which such awards may be subject to
forfeiture, and the other terms, restrictions and conditions of the awards in
addition to those set forth in Section 7(c). The Committee may condition the
grant of Restricted Stock upon the attainment of specified performance goals or
such
A-10
<PAGE> 36
other factors as the Committee may determine, in its sole discretion. The
provisions of Restricted Stock awards need not be the same with respect to each
recipient.
(b) Awards and Certificates. The prospective recipient of a Restricted Stock
award shall not have any rights with respect to such award, unless and until
such recipient has executed an agreement evidencing the award and has delivered
a fully executed copy thereof to the Corporation, and has otherwise complied
with the applicable terms and conditions of such award.
(i) The purchase price for shares of Restricted Stock shall be established
by the Committee and may be zero.
(ii) Awards of Restricted Stock must be accepted within a period of 60 days
(or such shorter period as the Committee may specify at grant) after the
award date, by executing a Restricted Stock Award Agreement and paying
whatever price (if any) is required under Section 7(b)(i).
(iii) Each participant receiving a Restricted Stock award shall be issued a
stock certificate in respect of such shares of Restricted Stock. Such
certificate shall be registered in the name of such participant (or a
transferee permitted by Section 13(h) hereof), and shall bear an
appropriate legend referring to the terms, conditions, and restrictions
applicable to such award.
(iv) The Committee shall require that the stock certificates evidencing
such shares be held in custody by the Corporation until the restrictions
thereon shall have lapsed, and that, as a condition of any Restricted Stock
award, the participant shall have delivered a stock power, endorsed in
blank, relating to the shares of Common Stock covered by such award.
(c) Restrictions and Conditions. The shares of Restricted Stock awarded
pursuant to this Section 7 shall be subject to the following restrictions and
conditions:
(i) In accordance with the provisions of this Plan and the award agreement,
during a period set by the Committee commencing with the date of such award
(the "Restriction Period"), the participant shall not be permitted to sell,
transfer, pledge, assign, or otherwise encumber shares of Restricted Stock
awarded under the Plan. Within these limits, the Committee, in its sole
discretion, may provide for the lapse of such restrictions in installments
and may accelerate or waive such restrictions, in whole or in part, based
on service, performance, such other factors or criteria as the Committee
may determine in its sole discretion.
(ii) Except as provided in this paragraph (ii) and Section 7(c)(i), the
participant shall have, with respect to the shares of Restricted Stock, all
of the rights of a shareholder of the Corporation, including the right to
vote the shares, and the right to receive any cash dividends. The
Committee, in its sole discretion, as determined at the time of award, may
permit or require the payment of cash dividends to be deferred and, if the
Committee so determines, reinvested, subject to Section 13(e), in
additional Restricted Stock to the extent shares are available under
Section 3, or otherwise reinvested. Pursuant to Section 3 above, stock
dividends issued with respect to Restricted Stock shall be treated as
additional shares of Restricted Stock that are subject to the same
restrictions and other terms and conditions that apply to the shares with
respect to which such dividends are issued. If the Committee so
A-11
<PAGE> 37
determines, the award agreement may also impose restrictions on the right
to vote and the right to receive dividends.
(iii) Subject to the applicable provisions of the award agreement and this
Section 7, upon termination of a participant's employment with the
Corporation and any Subsidiary or Affiliate for any reason during the
Restriction Period, all shares still subject to restriction will vest, or
be forfeited, in accordance with the terms and conditions established by
the Committee at or after grant.
(iv) If and when the Restriction Period expires without a prior forfeiture
of the Restricted Stock subject to such Restriction Period, certificates
for an appropriate number of unrestricted shares shall be delivered to the
participant (or a transferee permitted by Section 13(h) hereof) promptly.
(d) Minimum Value Provisions. In order to better ensure that award payments
actually reflect the performance of the Corporation and service of the
participant, the Committee may provide, in its sole discretion, for a tandem
performance-based or other award designed to guarantee a minimum value, payable
in cash or Common Stock to the recipient of a restricted stock award, subject to
such performance, future service, deferral, and other terms and conditions as
may be specified by the Committee.
SECTION 8. OTHER STOCK-BASED AWARDS.
(a) Administration. Other Stock-Based Awards, including, without limitation,
performance shares, convertible preferred stock, convertible debentures,
exchangeable securities and Common Stock awards or options valued by reference
to earnings per share or Subsidiary performance, may be granted either alone, in
addition to, or in tandem with Stock Options, Stock Appreciation Rights, or
Restricted Stock granted under the Plan and cash awards made outside of the
Plan; provided that no such Other Stock-Based Awards may be granted in tandem
with Incentive Stock Options if that would cause such Stock Options not to
qualify as Incentive Stock Options pursuant to Section 422 of the Code. Subject
to the provisions of the Plan, the Committee shall have authority to determine
the persons to whom and the time or times at which such awards shall be made,
the number of shares of Common Stock to be awarded pursuant to such awards, and
all other conditions of the awards. The Committee may also provide for the grant
of Common Stock upon the completion of a specified performance period. The
provisions of Other Stock-Based Awards need not be the same with respect to each
recipient.
(b) Terms and Conditions. Other Stock-Based Awards made pursuant to this
Section 8 shall be subject to the following terms and conditions:
(i) Shares subject to awards under this Section 8 and the award agreement
referred to in Section 8(b)(v) below, may not be sold, assigned,
transferred, pledged, or otherwise encumbered prior to the date on which
the shares are issued, or, if later, the date on which any applicable
restriction, performance, or deferral period lapses.
(ii) Subject to the provisions of this Plan and the award agreement and
unless otherwise determined by the Committee at grant, the recipient of an
award under this Section 8 shall be entitled to receive, currently or on a
deferred basis, interest or dividends or interest or dividend equivalents
with respect to the number of shares covered by the award, as determined at
the time of the award by the Committee, in its sole discretion, and the
Committee may provide that such amounts (if any) shall
A-12
<PAGE> 38
be deemed to have been reinvested in additional shares of Common Stock or
otherwise reinvested.
(iii) Any award under Section 8 and any shares of Common Stock covered by
any such award shall vest or be forfeited to the extent so provided in the
award agreement, as determined by the Committee in its sole discretion.
(iv) In the event of the participant's Retirement, Disability, or death, or
in cases of special circumstances, the Committee may, in its sole
discretion, waive in whole or in part any or all of the remaining
limitations imposed hereunder (if any) with respect to any or all of an
award under this Section 8.
(v) Each award under this Section 8 shall be confirmed by, and subject to
the terms of, an agreement or other instrument by the Corporation and the
participant.
(vi) Common Stock (including securities convertible into Common Stock)
issued on a bonus basis under this Section 8 may be issued for no cash
consideration. Common Stock (including securities convertible into Common
Stock) purchased pursuant to a purchase right awarded under this Section 8
shall be priced at least 85% of the Fair Market Value of the Common Stock
on the date of grant.
SECTION 9. AWARDS TO OUTSIDE DIRECTORS.
(a) The provisions of this Section 9 shall apply only to awards to Outside
Directors in accordance with this Section 9. The Committee shall have no
authority to determine the timing of or the terms or conditions of any award
under this Section 9.
(b) On the date of his or her initial election or appointment to the Board, each
Outside Director will receive a Non-Qualified Stock Option to purchase 11,250
shares of Common Stock (an "Initial Grant"). The exercise price per share of
each option granted pursuant to this Section 9(b) shall equal the Fair Market
Value per share of Common Stock on the date of grant. Such option shall vest and
become exercisable in five equal, annual installments beginning on the first
anniversary of the date of grant.
(c) On the date of each Annual Meeting of Shareholders of the Corporation
beginning with the Annual Meeting of Shareholders in 2000, unless this Plan has
been previously terminated, each Outside Director who will continue as a
director following such meeting will receive a Non-Qualified Stock Option to
purchase 3,500 shares of Common Stock; provided, that no Outside Director shall
be entitled to receive options granted pursuant to this Section 9(c) until such
Outside Director has served as a director of the Corporation for a period of at
least eleven months prior to the date of the Annual Meeting of Shareholders at
which options are to be granted. The exercise price per share of each option
granted pursuant to this Section 9(c) shall equal the Fair Market Value per
share of Common Stock on the date of grant. Such option shall vest and become
exercisable, with respect to all shares, six months following the date of grant.
(d) No Outside Director Option shall be exercisable prior to vesting. Each
Outside Director Option shall expire, if unexercised, on the tenth anniversary
of the date of grant. The exercise price may be paid in cash or in shares of
Common Stock, including shares of Common Stock subject to the Outside Director
Option.
(e) Outside Director Options shall not be transferable without the prior written
consent of the Board other than (i) transfers by the optionee to a member of his
or her Immediate
A-13
<PAGE> 39
Family or a trust for the benefit of optionee or a member of his or her
Immediate Family, or (ii) transfers by will or by the laws of descent and
distribution.
(f) Grantees of Outside Director Options shall enter into a stock option
agreement with the Corporation setting forth the exercise price and other terms
as provided herein.
(g) Upon termination of an Outside Director's service as a director of the
Corporation, (i) all Outside Director Options theretofore exercisable and held
by such Outside Director will remain vested and exercisable through the
expiration date and (ii) all remaining Outside Director Options held by such
Outside Director will become exercisable and vested and remain so through the
expiration date to the extent of any shares that would have become exercisable
and vested within a period of less than twelve months following the date of
termination of service. Any unvested Outside Director Options held by the
Outside Director on the date of termination of service will be forfeited to the
extent of any shares that would not have become vested and exercisable until at
least twelve months from the date of termination of service. The Board may, in
its sole discretion, elect to accelerate the vesting of any Outside Director
Options in connection with the termination of service of any individual Outside
Director.
(h) Outside Director Options shall be subject to Section 10. The number of
shares and the exercise price per share of each Outside Director Option
theretofore awarded shall be adjusted automatically in the same manner as the
number of shares and the exercise price for Stock Options under Section 3(c)
hereof at any time that Stock Options are adjusted as provided in Section 3(c).
The number of shares underlying Outside Director Options to be awarded in the
future shall be adjusted automatically in the same manner as the number of
shares underlying outstanding Stock Options are adjusted under Section 3(c)
hereof at any time that Stock Options are adjusted under Section 3(c) hereof.
(i) The Board, in its sole discretion, may determine to reduce the size of any
Outside Director Option prior to grant or to postpone the vesting and
exercisability of any Outside Director Option prior to grant.
SECTION 10. CHANGE IN CONTROL PROVISIONS.
(a) Impact of Event. In the event of:
(1) a "Change in Control" as defined in Section 10(b); or
(2) a "Potential Change in Control" as defined in Section 10(c), but only
if and to the extent so determined by the Committee or the Board at or
after grant (subject to any right of approval expressly reserved by the
Committee or the Board at the time of such determination),
(i) Subject to the limitations set forth below in this Section 10(a),
the following acceleration provisions shall apply:
(a) Any Stock Appreciation Rights, any Stock Option or Outside
Director Option awarded under the Plan not previously exercisable
and vested shall become fully exercisable and vested.
(b) The restrictions applicable to any Restricted Stock and Other
Stock-Based Awards, in each case to the extent not already vested
under the Plan, shall lapse and such shares and awards shall be
deemed fully vested.
A-14
<PAGE> 40
(ii) Subject to the limitations set forth below in this Section 10(a),
the value of all outstanding Stock Options, Stock Appreciation Rights,
Restricted Stock, Outside Director Options and Other Stock-Based Awards,
in each case to the extent vested, shall, unless otherwise determined
Board or by the Committee in its sole discretion prior to any Change in
Control, be cashed out on the basis of the "Change in Control Price" as
defined in Section 10(d) as of the date such Change in Control or such
Potential Change in Control is determined to have occurred or such other
date as the Board or Committee may determine prior to the Change in
Control provided, however, that this Section 10(a)(ii) shall have no
effect if it would preclude the pooling method of accounting for the
specific transaction that resulted in a Change in Control (if the
pooling method of accounting is proposed for such a transaction).
(iii) The Board or the Committee may impose additional conditions on the
acceleration or valuation of any award in the award agreement.
(b) Definition of Change in Control. For purposes of Section 10(a), a "Change
in Control" means the happening of any of the following:
(i) any person or entity, including a "group" as defined in Section
13(d)(3) of the Exchange Act, other than the Corporation or a wholly-owned
subsidiary thereof or any employee benefit plan of the Corporation or any
of its Subsidiaries, becomes the beneficial owner of the Corporation's
securities having 35% or more of the combined voting power of the then
outstanding securities of the Corporation that may be cast for the election
of directors of the Corporation (other than as a result of an issuance of
securities initiated by the Corporation in the ordinary course of
business); or
(ii) as the result of, or in connection with, any cash tender or exchange
offer, merger or other business combination, sales of assets or contested
election, or any combination of the foregoing transactions, less than a
majority of the combined voting power of the then outstanding securities of
the Corporation or any successor corporation or entity entitled to vote
generally in the election of the directors of the Corporation or such other
corporation or entity after such transaction are held in the aggregate by
the holders of the Corporation's securities entitled to vote generally in
the election of directors of the Corporation immediately prior to such
transaction; or
(iii) during any period of two consecutive years, individuals who at the
beginning of any such period constitute the Board cease for any reason to
constitute at least a majority thereof, unless the election, or the
nomination for election by the Corporation's shareholders, of each director
of the Corporation first elected during such period was approved by a vote
of at least two-thirds of the directors of the Corporation then still in
office who were directors of the Corporation at the beginning of any such
period.
(c) Definition of Potential Change in Control. For purposes of Section 10(a), a
"Potential Change in Control" means the happening of any one of the following:
(i) The approval by shareholders of an agreement by the Corporation, the
consummation of which would result in a Change in Control of the
Corporation as defined in Section 10(b); or
(ii) The acquisition of beneficial ownership, directly or indirectly, by
any entity, person or group (other than the Corporation or a Subsidiary or
any Corporation
A-15
<PAGE> 41
employee benefit plan (including any trustee of such plan acting as such
trustee)) of securities of the Corporation representing 5% or more of the
combined voting power of the Corporation's outstanding securities and the
adoption by the Committee of a resolution to the effect that a Potential
Change in Control of the Corporation has occurred for purposes of this
Plan.
(d) Change in Control Price. For purposes of this Section 10, "Change in
Control Price" means the highest price per share paid in any transaction
reported on NASDAQ or such other exchange or market as is the principal trading
market for the Common Stock, or paid or offered in any bona fide transaction
related to a Potential or actual Change in Control of the Corporation at any
time during the 60 day period immediately preceding the occurrence of the Change
in Control (or, where applicable, the occurrence of the Potential Change in
Control event), in each case as determined by the Committee except that, in the
case of Incentive Stock Options and Stock Appreciation Rights relating to
Incentive Stock Options, such price shall be based only on transactions reported
for the date on which the optionee exercises such Stock Appreciation Rights or,
where applicable, the date on which a cash out occurs under Section 10(a)(ii).
SECTION 11. AMENDMENTS AND TERMINATION.
The Board may at any time amend, alter or discontinue the Plan; provided,
however, that, without the approval of the Corporation's shareholders, no
amendment or alteration may be made that would (a) except as a result of the
provisions of Section 3(c) of the Plan, increase the maximum number of shares
that may be issued under the Plan or increase the Section 162(m) Maximum, (b)
change the provisions governing Incentive Stock Options except as required or
permitted under the provisions governing incentive stock options under the Code,
(c) amend Section 9 hereof so as to increase the size of any award (other than
as contemplated by Section 3(c) and Section 9(i) hereof) or otherwise materially
increase the benefits to Outside Directors under Section 9 hereof, or (d) make
any change for which applicable law or regulatory authority (including the
regulatory authority of NASDAQ or any other market or exchange on which the
Common Stock is traded) would require shareholder approval or for which
shareholder approval would be required to secure full deductibility of
compensation received under the Plan under Section 162(m) of the Code. No
amendment, alteration, or discontinuation shall be made that would impair the
rights of an optionee or participant under a Stock Option, Stock Appreciation
Right, Restricted Stock, Other Stock-Based Award or Outside Director Option
theretofore granted, without the participant's consent. The Committee may amend
the terms of any Stock Option or other award theretofore granted, prospectively
or retroactively, but, subject to Section 3 above, no such amendment shall
impair the rights of any holder without the holder's consent.
SECTION 12. UNFUNDED STATUS OF PLAN.
The Plan is intended to constitute an "unfunded" plan for incentive and deferred
compensation. With respect to any payments not yet made to a participant or
optionee by the Corporation, nothing contained herein shall give any such
participant or optionee any rights that are greater than those of a general
creditor of the Corporation. In its sole discretion, the Committee may authorize
the creation of trusts or other arrangements to meet the obligations created
under the Plan to deliver Common Stock or payments in lieu of or with respect to
awards hereunder; provided, however, that, unless the Committee
A-16
<PAGE> 42
otherwise determines with the consent of the affected participant, the existence
of such trusts or other arrangements is consistent with the "unfunded" status of
the Plan.
SECTION 13. GENERAL PROVISIONS.
(a) The Committee may require each person purchasing shares pursuant to a Stock
Option or other award under the Plan to represent to and agree with the
Corporation in writing that the optionee or participant is acquiring the shares
without a view to distribution thereof. The certificates for such shares may
include any legend that the Committee deems appropriate to reflect any
restrictions on transfer. All certificates for shares of Common Stock or other
securities delivered under the Plan shall be subject to such stock-transfer
orders and other restrictions as the Committee may deem advisable under the
rules, regulations, and other requirements of the Commission, any stock exchange
upon which the Common Stock is then listed, and any applicable Federal or state
securities law, and the Committee may cause a legend or legends to be put on any
such certificates to make appropriate reference to such restrictions.
(b) Nothing contained in this Plan shall prevent the Board from adopting other
or additional compensation arrangements, subject to shareholder approval if such
approval is required; and such arrangements may be either generally applicable
or applicable only in specific cases.
(c) The adoption of the Plan shall not confer upon any employee of the
Corporation or any Subsidiary or Affiliate any right to continued employment
with the Corporation or a Subsidiary or Affiliate, as the case may be, nor shall
it interfere in any way with the right of the Corporation or a Subsidiary or
Affiliate to terminate the employment of any of its employees at any time.
(d) No later than the date as of which an amount first becomes includible in the
gross income of the participant for Federal income tax purposes with respect to
any award under the Plan, the participant shall pay to the Corporation, or make
arrangements satisfactory to the Committee regarding the payment of, any
Federal, state, or local taxes of any kind required by law to be withheld with
respect to such amount. The Committee may require withholding obligations to be
settled with Common Stock, including Common Stock that is part of the award that
gives rise to the withholding requirement. The obligations of the Corporation
under the Plan shall be conditional on such payment or arrangements and the
Corporation and its Subsidiaries or Affiliates shall, to the extent permitted by
law, have the right to deduct any such taxes from any payment of any kind
otherwise due to the participant.
(e) The actual or deemed reinvestment of dividends or dividend equivalents in
additional Restricted Stock (or other types of Plan awards) at the time of any
dividend payment shall only be permissible if sufficient shares of Common Stock
are available under Section 3 for such reinvestment (taking into account then
outstanding Stock Options and other Plan awards).
(f) The Plan and all awards made and actions taken thereunder shall be governed
by and construed in accordance with the laws of the State of Tennessee.
(g) The members of the Committee and the Board shall not be liable to any
employee or other person with respect to any determination made hereunder in a
manner that is not inconsistent with their legal obligations as members of the
Board. In addition to such other rights of indemnification as they may have as
directors or as members of the Committee,
A-17
<PAGE> 43
the members of the Committee shall be indemnified by the Corporation against the
reasonable expenses, including attorneys' fees actually and necessarily incurred
in connection with the defense of any action, suit or proceeding, or in
connection with any appeal therein, to which they or any of them may be a party
by reason of any action taken or failure to act under or in connection with the
Plan or any option granted thereunder, and against all amounts paid by them in
settlement thereof (provided such settlement is approved by independent legal
counsel selected by the Corporation) or paid by them in satisfaction of a
judgment in any such action, suit or proceeding, except in relation to matters
as to which it shall be adjudged in such action, suit or proceeding that such
Committee member is liable for negligence or misconduct in the performance of
his duties; provided that within 60 days after institution of any such action,
suit or proceeding, the Committee member shall in writing offer the Corporation
the opportunity, at its own expense, to handle and defend the same.
(h) In addition to any other restrictions on transfer that may be applicable
under the terms of this Plan or the applicable award agreement, no Stock Option,
Stock Appreciation Right, Restricted Stock award, or Other Stock-Based Award or
other right issued under this Plan is transferable by the participant without
the prior written consent of the Committee, or, in the case of an Outside
Director, the Board, other than (i) transfers by an optionee to a member of his
or her Immediate Family or a trust for the benefit of the optionee or a member
of his or her Immediate Family or (ii) transfers by will or by the laws of
descent and distribution. The designation of a beneficiary will not constitute a
transfer.
(i) The Committee may, at or after grant, condition the receipt of any payment
in respect of any award or the transfer of any shares subject to an award on the
satisfaction of a six-month holding period, if such holding period is required
for compliance with Section 16 under the Exchange Act.
SECTION 14. EFFECTIVE DATE OF PLAN.
The Plan shall be effective as of May 4, 2000 (the "Effective Date"), provided
that it has been approved by the Board of the Corporation and by a majority of
the votes cast by the holders of the Corporation's Common Stock.
SECTION 15. TERM OF PLAN.
No Stock Option, Stock Appreciation Right, Restricted Stock Award, Other
Stock-Based Award or Outside Director Option award shall be granted pursuant to
the Plan on or after the tenth anniversary of the Effective Date of the Plan,
but awards granted prior to such tenth anniversary may be extended beyond that
date.
A-18
<PAGE> 44
APPENDIX B
CHUX OWNERSHIP PLAN
ARTICLE I
INTRODUCTION
1.1 RESTATEMENT OF PLAN
O'Charley's Inc., a Tennessee corporation ("O'Charley's") with principal offices
located in Nashville, Tennessee, amends and restates the following employee
stock purchase plan for its eligible employees, effective on October 1, 1999,
except as otherwise expressly provided herein. This Plan, known as the CHUX
Ownership Plan, was originally effective October 1, 1993 in accordance with a
document executed August 10, 1993.
1.2 PURPOSE
The purpose of this Plan is to provide an opportunity for eligible employees of
the Employer to become shareholders in O'Charley's. It is believed that
broad-based employee participation in the ownership of the business will help to
achieve the unity of purpose conducive to the continued growth of the Employer
and to the mutual benefit of its employees and shareholders.
1.3 QUALIFICATION
This Plan is intended to be an employee stock purchase plan which qualifies for
favorable Federal income tax treatment under Section 423 of the Code and is
intended to comply with the provisions thereof, including the requirement of
Section 423(b)(5) of the Code that all Employees granted options to purchase
Stock under the Plan have the same rights and privileges with respect to such
options.
1.4 RULE 16B-3 COMPLIANCE
This Plan is intended to comply with Rule 16b-3 under the Securities Exchange
Act of 1934, and should be interpreted in accordance therewith.
ARTICLE II
DEFINITIONS
As used herein, the following words and phrases shall have the meanings
specified below:
2.1 Application Date: Each October 1 and April 1.
2.2 Board of Directors: The Board of Directors of O'Charley's Inc.
2.3 Closing Market Price: The last sale price of the Stock as reported in the
NASDAQ National Market System on the date specified; or if no sales occurred on
such day, at the mean between the closing "bid" and "asked" prices on such day;
but if there should be any material alteration in the present system of
reporting sales prices of such Stock, or if
B-1
<PAGE> 45
such Stock should no longer be listed on NASDAQ's National Market System, the
market value of the Stock as of a particular date shall be determined in such a
method as shall be specified by the Plan Administrator.
2.4 Code: The Internal Revenue Code of 1986, as amended from time to time.
2.5 Contribution Account: The account established on behalf of a Participant to
which shall be credited the amount of the Participant's contribution, pursuant
to Article V.
2.6 Effective Date: October 1, 1999.
2.7 Employee: Each employee of an Employer except (for periods prior to April
1, 2000):
(i) any employee whose customary employment is twenty (20) hours per week
or less, or
(ii) any employee whose customary employment is for not more than five
months in any calendar year.
2.8 Employer: O'Charley's Inc. and any corporation (i) which is a Subsidiary of
O'Charley's Inc., (ii) which is authorized by the Board of Directors to adopt
this Plan with respect to its Employees, and (iii) which adopts this Plan. The
term "Employer" shall include any corporation into which an Employer may be
merged or consolidated or to which all or substantially all of its assets may be
transferred, provided that the surviving or transferee corporation would qualify
as a subsidiary under Section 2.19 hereof and that such corporation does not
affirmatively disavow this Plan.
2.9 Exercise Date: The last trading date of the Plan Period on the NASDAQ
National Market System.
2.10 Exercise Price: The price per share of the Stock to be charged to
Participants at the Exercise Date, as determined in Section 6.3.
2.11 Five-Percent Shareholder: An Employee who owns five percent (5%) or more
of the total combined voting power or value of all classes of stock of
O'Charley's or any Subsidiary thereof. In determining this five percent test,
shares of stock which the Employee may purchase under outstanding options, as
well as stock attributed to the Employee under Section 424(d) of the Code, shall
be treated as stock owned by the Employee in the numerator, but shares of stock
which may be issued under options shall not be counted in the total of
outstanding shares in the denominator.
2.12 Grant Date: The first trading date of the Plan Period on the NASDAQ
National Market System.
2.13 NASDAQ: The National Association of Securities Dealers Automated Quotation
System.
2.14 Participant: Any Employee of an Employer who has met the conditions for
eligibility as provided in Article IV and who has elected to participate in the
Plan.
2.15 Plan: CHUX Ownership Plan.
2.16 Plan Administrator: The committee composed of one or more individuals to
whom authority is delegated by the Board of Directors to administer the Plan.
The initial committee shall be the Compensation Committee of the Board of
Directors.
B-2
<PAGE> 46
2.17 Plan Period: A six (6) month period beginning on the first day of each
October and April and ending on the last day of the following September and
March, respectively.
2.18 Stock: Those shares of common stock of O'Charley's which are reserved
pursuant to Section 6.1 for issuance upon the exercise of options granted under
this Plan.
2.19 Subsidiary: Any corporation in an unbroken chain of corporations beginning
with O'Charley's each of which (other than the last corporation in the chain)
owns stock possessing fifty percent (50%) or more of the combined voting power
of all classes of stock in one of the other corporations in such chain.
ARTICLE III
SHAREHOLDER APPROVAL
3.1 CONDITION SUBSEQUENT
If the restated Plan is not approved by the shareholders of O'Charley's before
September 30, 2000, the Plan and all options thereunder granted to individuals
who were not Employees pursuant to the terms of the Plan in effect immediately
prior to this restatement shall terminate, the balance in each such
Participant's Contribution Account shall be refunded in cash as promptly as
possible, and all rights and obligations thereunder shall be void ab initio.
3.2 SHAREHOLDER APPROVAL REQUIRED
Without the approval of the shareholders of O'Charley's, no amendment to this
Plan shall increase the number of shares reserved under the Plan, other than as
provided in Section 10.3. Approval by shareholders must: (i) occur within one
year of such amendment or such amendment shall be void ab initio; (ii) comply
with applicable provisions of the corporate charter and bylaws of O'Charley's;
and (iii) comply with Tennessee law prescribing the method and degree of
shareholder approval required for issuance of corporate stock or options.
ARTICLE IV
ELIGIBILITY AND PARTICIPATION
4.1 CONDITIONS
Each Employee shall become eligible to become a Participant on an October 1 if
such Employee has been employed by the Employer for a continuous period of at
least six (6) months prior to such October 1; provided, however, that effective
April 1, 2000, each Employee shall become eligible to become a Participant on
the Application Date next following the date of his employment. No Employee who
is a Five-Percent Shareholder shall be eligible to participate in the Plan.
Notwithstanding anything to the contrary contained herein, no individual who is
not an Employee shall be granted an option to purchase Stock under the Plan.
B-3
<PAGE> 47
4.2 APPLICATION FOR PARTICIPATION
Each Employee who becomes eligible to participate shall be furnished a summary
of the Plan and an enrollment form. If such Employee elects to participate
hereunder, he shall complete such form and file it with his Employer no later
than seven (7) days prior to the next Application Date. The completed enrollment
form shall indicate the amount of Employee contribution authorized by the
Employee. If no new enrollment form is filed by a Participant in advance of any
Plan Period after the initial Plan Period, that Participant shall be deemed to
have elected to continue to participate with the same contribution previously
elected (subject to the limit of 15% of base pay). If any Employee does not
elect to participate in any given Plan Period, he may elect to participate on
any future Application Date so long as he continues to meet the eligibility
requirements.
4.3 DATE OF PARTICIPATION
All Employees who elect to participate shall be enrolled in the Plan commencing
with the first paydate after the Application Date following their submission of
the enrollment form. Upon becoming a Participant, the Participant shall be bound
by the terms of this Plan, including any amendments whenever made.
ARTICLE V
CONTRIBUTION ACCOUNT
5.1 EMPLOYEE CONTRIBUTIONS
The enrollment form signed by each Participant shall authorize the Employer to
deduct from the Participant's compensation an after-tax amount during each
payroll period not less than five dollars ($5.00) nor more than an amount which
is fifteen percent (15%) of the Participant's base pay on the Application Date.
The term "base pay" shall be determined before subtracting any of the Employee's
contributions to O'Charley's 401(k) plan. The dollar amount deducted each payday
shall be credited to the Participant's Contribution Account. Participant
contributions will not be permitted to commence at any time during the Plan
Period other than on an Application Date. No interest will accrue on any
contributions or on the balance in a Participant's Contribution Account.
5.2 MODIFICATION OF CONTRIBUTION RATE
No change shall be permitted in a Participant's amount of withholding except
upon an Application Date, and then only if the Participant files a new
enrollment form with the Employer at least seven (7) days in advance of the
Application Date designating the desired withholding rate. Notwithstanding the
foregoing, a Participant may notify the Employer at any time (except during the
period from September 21 through September 30 and the period from March 22
through March 31) that he wishes to discontinue his contributions. This notice
shall be in writing and on such forms as provided by the Employer and shall
become effective as of a date provided on the form not more than thirty (30)
days following its receipt by the Employer. The Participant shall become
eligible to recommence contributions on the next Application Date.
B-4
<PAGE> 48
5.3 WITHDRAWAL OF CONTRIBUTIONS
A Participant may elect to withdraw the balance of his Contribution Account at
any time during the Plan Period prior to the Exercise Date (except during the
period from September 21 through September 30 and the period from March 22
through March 31). The option granted to a Participant shall be canceled upon
his withdrawal of the balance in his Contribution Account. This election to
withdraw must be in writing on such forms as may be provided by the Employer. If
contributions are withdrawn in this manner, further contributions during that
Plan Period will be discontinued in the same manner as provided in Section 5.2,
and the Participant shall become eligible to recommence contributions on the
next Application Date.
5.4 LUMP SUM CONTRIBUTIONS
Effective for the Plan Period commencing on April 1, 2000, subject to the
limitations described in Section 5.5, a Participant who has not discontinued his
contributions pursuant to Section 5.2 or elected to withdraw his contributions
pursuant to Section 5.3 may make no more than one (1) lump sum contribution
during each Plan Period. These lump sum contributions shall be paid by check by
the Participant, delivered at least ten (10) days prior to the last day of the
Plan Period and shall be credited to the Participant's Contribution Account.
5.5 LIMITATIONS ON CONTRIBUTIONS
Effective for the Plan Period commencing on April 1, 2000, during each Plan
Period the total contributions by a Participant to his contribution Account
(including both contributions by payroll deduction pursuant to Section 5.1 and
lump sum contributions pursuant to Section 5.4) shall not exceed fifteen percent
(15%) of the Participant's base pay per month on the Application Date multiplied
by six (6) months. If a Participant's total contributions should exceed this
limit, the excess shall be returned to the Participant without interest.
ARTICLE VI
ISSUANCE AND EXERCISE OF OPTIONS
6.1 RESERVED SHARES OF STOCK
O'Charley's originally reserved three hundred thousand (300,000) shares of Stock
for issuance upon exercise of the options granted under this Plan. As a result
of adjustments to reflect changes in capitalization of O'Charley's made pursuant
to Section 10.3 hereof, the number of shares originally reserved has been
increased to six hundred and seventy-five thousand 675,000 shares of Stock as of
the Effective Date.
6.2 ISSUANCE OF OPTIONS
On the Grant Date each Participant shall be deemed to receive an option to
purchase Stock with the number of shares and Exercise Price determined as
provided in this Article VI, subject to the maximum limits specified in Section
6.6(a). All such options shall be automatically exercised on the following
Exercise Date, except for options which
B-5
<PAGE> 49
are canceled when a Participant withdraws the balance of his Contribution
Account or which are otherwise terminated under the provisions of this Plan.
6.3 DETERMINATION OF EXERCISE PRICE
The Exercise Price of the options granted under this Plan for any Plan Period
shall be the lesser of
(i) eighty-five percent (85%) of the Closing Market Price of the Stock on
the Exercise Date, or
(ii) eighty-five percent (85%) of the average of the Closing Market Price
of the Stock on the Grant Date and the Closing Market Price of the Stock on
the Exercise Date.
6.4 PURCHASE OF STOCK
On an Exercise Date, all options shall be automatically exercised, except that
the options of a Participant who has terminated employment pursuant to Section
7.1 or who has withdrawn all his contributions shall expire. The Contribution
Account of each Participant shall be used to purchase the maximum number of
whole shares of Stock determined by dividing the Exercise Price into the balance
of the Participant's Contribution Account. Any money remaining in a
Participant's Contribution Account representing a fractional share shall remain
in his Contribution Account to be used in the next Plan Period along with new
contributions in the next Plan Period; provided, however, that if the
Participant does not enroll for the next Plan Period, the balance remaining
shall be returned to him in cash.
6.5 TERMS OF OPTIONS
Options granted under this Plan shall be subject to such amendment or
modification as the Employer shall deem necessary to comply with any applicable
law or regulation, including but not limited to Section 423 of the Code, and
shall contain such other provisions as the Employer shall from time to time
approve and deem necessary.
6.6 LIMITATIONS ON OPTIONS
The options granted hereunder are subject to the following limitations:
(a) The maximum number of shares of Stock which may be purchased by any
Participant on Exercise Dates within any calendar year shall be equal to
the lesser of
(i) two thousand five hundred (2,500) shares, or
(ii) the number of shares of Stock having a market value of twenty-five
thousand dollars ($25,000.00), as determined based on the Closing Market
Price on the Grant Date for the Plan Period during which each such share
of Stock is purchased, as provided in Section 423(b)(8) of the Code.
The maximum number of shares as determined above shall be adjusted upon the
occurrence of an event described in Section 10.3.
(b) No option may be granted to a Participant if the Participant
immediately after the option is granted would be a Five-Percent
Shareholder.
B-6
<PAGE> 50
(c) No Participant may assign, transfer or otherwise alienate any options
granted to him under this Plan, otherwise than by will or the laws of
descent and distribution, and such options must be exercised during the
Participant's lifetime only by him.
6.7 PRO-RATA REDUCTION OF OPTIONED STOCK
If the total number of shares of Stock to be purchased under option by all
Participants on an Exercise Date exceeds the number of shares of Stock remaining
authorized for issuance under Section 6.1, a pro-rata allocation of the shares
of Stock available for issuance will be made among Participants in proportion to
their respective Contribution Account balances on the Exercise Date, and any
money remaining in the Contribution Accounts shall be returned to the
Participants.
6.8 STATE SECURITIES LAWS
Notwithstanding anything to the contrary contained herein, the Company shall not
be obligated to issue shares of Stock to any Participant if to do so would
violate any State securities law applicable to the sale of Stock to such
Participant. In the event that the Company refrains from issuing shares of Stock
to any Participant in reliance on this Section, the Company shall return to such
Participant the amount in such Participant's Contribution Account that would
otherwise have been applied to the purchase of Stock.
ARTICLE VII
TERMINATION OF PARTICIPATION
7.1 TERMINATION OF EMPLOYMENT
Any Employee whose employment with the Employer is terminated during the Plan
Period for any reason except death, disability or retirement at or after age 65
shall cease being a Participant immediately. The balance of that Participant's
Contribution Account shall be paid to such Participant as soon as practical
after his termination. The option granted to such Participant shall be null and
void.
7.2 DEATH
If a Participant should die while employed by the Employer, no further
contributions on behalf of the deceased Participant shall be made. The legal
representative of the deceased Participant may elect to withdraw the balance in
said Participant's Contribution Account by notifying the Employer in writing
prior to the Exercise Date in the Plan Period during which the Participant died
(except during the period from September 21 through September 30 and the period
from March 22 through March 31). In the event no election to withdraw is made on
or before the September 20 or March 21 preceding the Exercise Date, the balance
accumulated in the deceased Participant's Contribution Account shall be used to
purchase shares of Stock in accordance with Section 6.4. Any money remaining
which is insufficient to purchase a whole share shall be paid to the legal
representative.
B-7
<PAGE> 51
7.3 RETIREMENT
If a Participant should retire from the employment of the Employer at or after
attaining age 65, no further contributions on behalf of the retired Participant
shall be made. The Participant may elect to withdraw the balance in his
Contribution Account by notifying the Employer in writing prior to the Exercise
Date in the Plan Period during which the Participant retired (except during the
period from September 21 through September 30 and the period from March 22
through March 31). In the event no election to withdraw is made on or before the
September 20 or March 21 preceding the Exercise Date, the balance accumulated in
the retired Participant's Contribution Account shall be used to purchase shares
of Stock in accordance with Section 6.4, and any money remaining which is
insufficient to purchase a whole share shall be paid to the retired Participant.
7.4 DISABILITY
If a Participant should terminate employment with the Employer on account of
disability, as determined by reference to the definition of "disability" in the
Employer's long-term disability plan, no further contributions on behalf of the
disabled Participant shall be made. The Participant may elect to withdraw the
balance in his Contribution Account by notifying the Employer in writing prior
to the Exercise Date in the Plan Period during which the Participant became
disabled (except during the period from September 21 through September 30 and
the period from March 22 through March 31). In the event no election to withdraw
is made on or before the September 20 or March 21 preceding the Exercise Date,
the balance accumulated in the disabled Participant's Contribution Account shall
be used to purchase shares of Stock in accordance with Section 6.4, and any
money remaining which is insufficient to purchase a whole share shall be paid to
the disabled Participant.
ARTICLE VIII
OWNERSHIP OF STOCK
8.1 STOCK CERTIFICATES
Certificates for Stock purchased through exercise of the options granted
hereunder shall be issued as soon as practical after the Exercise Date.
Certificates may be issued, at the request of the Participant, in the name of
the Participant, jointly in the name of the Participant and a member of the
Participant's family, or to the Participant as custodian for the Participant's
child under the Gift to Minors Act.
8.2 PREMATURE SALE OF STOCK
If a Participant (or former Participant) sells or otherwise disposes of any
shares of Stock obtained under this Plan
(i) prior to two (2) years after the Grant Date of the option under which
such shares were obtained, or
(ii) prior to one (1) year after the Exercise Date on which such shares
were obtained,
B-8
<PAGE> 52
that Participant (or former Participant) must notify the Employer immediately in
writing concerning such disposition.
ARTICLE IX
ADMINISTRATION AND AMENDMENT
9.1 ADMINISTRATION
The Plan Administrator shall (i) administer the Plan and keep records of the
Contribution Account balance of each Participant, (ii) interpret the Plan, and
(iii) determine all questions arising as to eligibility to participate, amount
of contributions permitted, determination of the Exercise Price, and all other
matters of administration. The Plan Administrator shall have such duties, powers
and discretionary authority as may be necessary to discharge the foregoing
duties, and may delegate any or all of the foregoing duties to any individual or
individuals (including officers or other Employees who are Participants). The
Board of Directors shall have the right at any time and without notice to remove
or replace any individual or committee of individuals serving as Plan
Administrator. All determinations by the Plan Administrator shall be conclusive
and binding on all persons. Any rules, regulations, or procedures that may be
necessary for the proper administration or functioning of this Plan that are not
covered in this Plan document shall be promulgated and adopted by the Plan
Administrator.
9.2 AMENDMENT
The Board of Directors of the Employer may at any time amend the Plan in any
respect, including termination of the Plan, without notice to Participants. If
the Plan is terminated, all options outstanding at the time of termination shall
become null and void and the balance in each Participant's Contribution Account
shall be paid to that Participant. Notwithstanding the foregoing, no amendment
of the Plan as described in Section 3.2 shall become effective until and unless
such amendment is approved by the shareholders of O'Charley's.
ARTICLE X
MISCELLANEOUS
10.1 EXPENSES
The Employer will pay all expenses of administering this Plan that may arise in
connection with the Plan.
10.2 NO CONTRACT OF EMPLOYMENT
Nothing in this Plan shall be construed to constitute a contract of employment
between an Employer and any Employee or to be an inducement for the employment
of any Employee. Nothing contained in this Plan shall be deemed to give any
Employee the right to be retained in the service of an Employer or to interfere
with the right of an Employer to discharge any Employee at any time, with or
without cause, regardless of the effect which such discharge may have upon him
as a Participant of the Plan.
B-9
<PAGE> 53
10.3 ADJUSTMENT UPON CHANGES IN STOCK
The aggregate number of shares of Stock reserved for purchase under the Plan as
provided in Section 6.1, and the calculation of the Exercise Price as provided
in Section 6.3, shall be adjusted by the Plan Administrator (subject to
direction by the Board of Directors) in an equitable manner to reflect changes
in the capitalization of O'Charley's, including, but not limited to, such
changes as result from merger, consolidation, reorganization, recapitalization,
stock dividend, dividend in property other than cash, stock split, combination
of shares, exchange of shares and change in corporate structure. If any
adjustment under this Section 10.3 would create a fractional share of Stock or a
right to acquire a fractional share of Stock, such fractional share shall be
disregarded and the number of shares available under the Plan and the number of
shares covered under any options granted pursuant to the Plan shall be the next
lower number of shares, rounding all fractions downward.
10.4 EMPLOYER'S RIGHTS
The rights and powers of any Employer shall not be affected in any way by its
participation in this Plan, including but not limited to the right or power of
any Employer to make adjustments, reclassifications, reorganizations or changes
of its capital or business structure or to merge or to consolidate or to
dissolve, liquidate or sell, or transfer all or any part of its business or
assets.
10.5 LIMIT ON LIABILITY
No liability whatever shall attach to or be incurred by any past, present or
future shareholders, officers or directors, as such, of O'Charley's or any
Employer, under or by reason of any of the terms, conditions or agreements
contained in this Plan or implied therefrom, and any and all liabilities of any
and all rights and claims against O'Charley's, an Employer, or any shareholder,
officer or director as such, whether arising at common law or in equity or
created by statute or constitution or otherwise, pertaining to this Plan, are
hereby expressly waived and released by every Participant as a part of the
consideration for any benefits under this Plan; provided, however, no waiver
shall occur, solely by reason of this Section 10.5, of any right which is not
susceptible to advance waiver under applicable law.
10.6 GENDER AND NUMBER
For the purposes of the Plan, unless the contrary is clearly indicated, the use
of the masculine gender shall include the feminine, and the singular number
shall include the plural and vice versa.
10.7 GOVERNING LAW
The validity, construction, interpretation, administration and effect of this
Plan, and any rules or regulations promulgated hereunder, including all rights
or privileges of any Participants hereunder, shall be governed exclusively by
and in accordance with the laws of the State of Tennessee, except that the Plan
shall be construed to the maximum extent possible to comply with Section 423 of
the Code and the Treasury regulations promulgated thereunder.
B-10
<PAGE> 54
10.8 HEADINGS
Any headings or subheadings in this Plan are inserted for convenience of
reference only and are to be ignored in the construction of any provisions
hereof.
10.9 SEVERABILITY
If any provision of this Plan is held by a court to be unenforceable or is
deemed invalid for any reason, then such provision shall be deemed inapplicable
and omitted, but all other provisions of this Plan shall be deemed valid and
enforceable to the full extent possible under applicable law.
IN WITNESS WHEREOF, the Employer has adopted this amended and restated Plan
effective October 1, 1999 subject to approval by the shareholders of O'Charley's
Inc. on or before the expiration of the time period specified in Section 3.1.
Date: September 30, 1999
O'CHARLEY'S INC.
By: /s/ A. Chad Fitzhugh
-----------------------------------
ATTEST:
/s/ Terri Parks
- ---------------------------------------------
B-11
<PAGE> 55
O'CHARLEY'S INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF O'CHARLEY'S
INC. (THE "COMPANY") FOR USE AT THE ANNUAL MEETING OF SHAREHOLDERS OF THE
COMPANY TO BE HELD AT 9:00 A.M., LOCAL TIME, ON THURSDAY, MAY 4, 2000.
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 (the
Company) held of record by the undersigned on March 17, 2000, at the Annual
Meeting of Shareholders of the Company to be held at 9:00 a.m., local time, on
Thursday, May 4, 2000, 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
2003 Annual Meeting of Shareholders and until their successors are
elected and qualified.
Gregory L. Burns, Steven J. Hislop, C. Warren Neel and Robert J. Walker
<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. For approval of the O'Charley's 2000 Stock Incentive Plan.
[ ] FOR [ ] AGAINST [ ] WITHHOLD AUTHORITY (ABSTAIN)
3. For approval of the amendments to the CHUX Ownership Plan.
[ ] FOR [ ] AGAINST [ ] WITHHOLD AUTHORITY (ABSTAIN)
4. 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.
<PAGE> 56
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, FOR THE
APPROVAL OF THE O'CHARLEY'S 2000 STOCK INCENTIVE PLAN REFERRED TO IN PARAGRAPH 2
AND FOR THE APPROVAL OF THE AMENDMENTS TO THE CHUX OWNERSHIP PLAN REFERRED TO IN
PARAGRAPH 3.
The undersigned revokes any prior proxies to vote the shares covered by this
proxy.
<TABLE>
<S> <C>
Date: ---------------------------------------- , 2000 -------------------------------------------------------
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.)
PLEASE SIGN, DATE, AND MAIL THIS PROXY PROMPTLY IN THE
ENCLOSED REPLY ENVELOPE WHICH REQUIRES NO POSTAGE IF
MAILED IN THE UNITED STATES.
</TABLE>
