<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>
LOGAN'S ROADHOUSE, 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
[LOGO]
565 MARRIOTT DRIVE
SUITE 490
NASHVILLE, TENNESSEE 37214
To Our Shareholders:
You are cordially invited to attend the Annual Meeting of Shareholders,
which is to be held on Thursday, May 15, 1997, at 9:00 a.m. at the Marriott
Hotel, Knoxville Room, 600 Marriott Drive, Nashville, Tennessee. The following
pages contain the formal notice of the Annual Meeting and our Proxy Statement,
which describe the specific business to be considered and voted upon at the
Annual Meeting.
It is important that your shares be represented at the meeting. Whether
or not you expect to attend in person, we would greatly appreciate your
returning the enclosed Proxy as soon as possible. If you decide to attend the
Annual Meeting, you may withdraw your Proxy should you wish to vote in person.
We look forward to seeing you at the Annual Meeting.
Sincerely yours,
[SIG]
EDWIN W. MOATS, JR.
Chairman of the Board,
President and Chief Executive Officer
<PAGE> 3
LOGAN'S ROADHOUSE, INC.
565 MARRIOTT DRIVE
SUITE 490
NASHVILLE, TENNESSEE 37214
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD
THURSDAY, MAY 15, 1997
_______________
Notice is hereby given that the Annual Meeting of Shareholders (the
"Annual Meeting") of Logan's Roadhouse, Inc. (the "Company") will be held on
Thursday, May 15, 1997 at 9:00 a.m. at the Marriott Hotel, Knoxville Room, 600
Marriott Drive, Nashville, Tennessee, for the following purposes:
(1) To elect two nominees as Class II directors of the
Company;
(2) To approve the proposed amendments to the Company's 1995
Incentive Stock Plan to (i) increase from 472,500 to 722,500 the number
of shares of Common Stock authorized thereunder, (ii) require that no
more than 250,000 shares of Common Stock be awarded to any person in a
three-year period, (iii) eliminate the requirement of shareholder
approval of certain administrative amendments and (iv) eliminate the
restriction on the transfer of non-qualified stock options;
(3) To approve the proposed amendments to the Company's 1995
Non-Employee Director Stock Option Plan to (i) increase the number of
shares of Common Stock authorized thereunder from 97,500 to that number
of shares which equals two percent of the total number of shares of
Common Stock outstanding at that time, (ii) provide for grants of stock
options thereunder at the sole discretion of the compensation committee
of the Board of Directors and (iii) eliminate the restriction on the
transfer of non-qualified stock options;
(4) To certify the appointment of KPMG Peat Marwick LLP as
independent public accountants to audit the consolidated financial
statements of the Company and its subsidiaries for the fiscal year ended
December 28, 1997; and
(5) To transact such other business as may properly come
before the meeting or any adjournments thereof.
Only shareholders of record at the close of business on March 20, 1997
will be entitled to vote at the Annual Meeting.
The enclosed Proxy Statement contains more information pertaining to
matters to be voted on at the Annual Meeting. Please read the Proxy Statement
carefully.
Each shareholder who does not plan to attend the Annual Meeting is
requested to date, sign and return the accompanying Proxy in the enclosed,
postage-paid envelope.
By Order of the Board of Directors,
[SIG]
DAVID J. McDANIEL
Secretary
Nashville, Tennessee
April 21, 1997
<PAGE> 4
LOGAN'S ROADHOUSE, INC.
565 MARRIOTT DRIVE
SUITE 490
NASHVILLE, TENNESSEE 37214
---------------
PROXY STATEMENT
FOR THE
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 15, 1997
---------------
This Proxy Statement is furnished to the holders of Common Stock, $.01
par value per share, of Logan's Roadhouse, Inc. (the "Company") in connection
with the solicitation of proxies by the Board of Directors of the Company to be
voted at the annual meeting of shareholders of the Company (the "Annual
Meeting") to be held on Thursday, May 15, 1997 at 9:00 a.m. at the Marriott
Hotel, Knoxville Room, 600 Marriott Drive, Nashville, Tennessee 37214, and at
any adjournments or postponements thereof.
Only the holders of Common Stock of the Company of record at the close of
business on March 20, 1997 will be entitled to vote at the Annual Meeting. On
such date, 6,016,659 shares of Common Stock were outstanding. Each shareholder
is entitled to one vote per share held of record on the record date. This
Proxy Statement and the accompanying proxy are first being mailed on or about
April 21, 1997.
A majority of the shares of Common Stock entitled to vote, represented in
person or by proxy, is required to constitute a quorum. If a quorum is not
present at the time of the Annual Meeting, or if for any reason the Company
believes that additional time should be allowed for the solicitation of
proxies, the Company may adjourn or postpone the Annual Meeting with or without
a vote of the shareholders. If adjournment is proposed by the Company, the
person named on the enclosed proxy card will vote such shares for which they
have voting authority in favor of adjournment.
All shares of Common Stock represented at the Annual Meeting by properly
executed proxies received prior to or at the Annual Meeting and not properly
revoked will be voted at the Annual Meeting in accordance with the instructions
indicated thereon. If no specification is made, the proxies will be voted in
favor of the matters listed on the proxy card. Directors must be elected by a
plurality of votes cast (in person or by proxy) by the holders of Common Stock
entitled to vote at the Annual Meeting if a quorum is present. All other
matters shall be determined based upon the vote of the majority of votes cast
(in person or by proxy) by the holders of Common Stock entitled to vote at the
Annual Meeting if a quorum is present. Abstentions and broker non-votes will
be counted for purposes of constituting a quorum, but will not have the effect
of voting in opposition to a director or of a vote against the other proposals.
All expenses of the Annual Meeting, including the cost of soliciting
proxies, will be paid by the Company. The Company may reimburse persons
holding shares in their names for others, or holding shares for others who have
the right to give voting instructions, such as brokers, banks, fiduciaries and
nominees, for such persons' reasonable expenses in forwarding the proxy
materials to their principals.
Any shareholder giving a proxy may revoke it by delivering a written
notice of such revocation to the Secretary of the Company at 565 Marriott
Drive, Suite 490, Nashville, Tennessee 37214 prior to the Annual Meeting, by
submitting to the Company a more recently dated proxy or by attending the
Annual Meeting and voting at any time before it is exercised.
In voting by proxy in regard to the election of two nominees as Class II
directors to serve until the annual meeting of shareholders for which such
director's class will stand for election, shareholders may vote in favor of
both nominees, withhold their votes as to both nominees or withhold their votes
as to a specific nominee. If no instructions are indicated, such proxies will
be voted FOR the election of both nominees as directors.
<PAGE> 5
PROPOSAL 1: ELECTION OF DIRECTORS
The Company's Amended and Restated Charter provides that the Board of
Directors shall be divided into three classes of as nearly equal size as
possible. Approximately one-third of the directors are elected each year. The
Board of Directors has nominated the two individuals named below under the
caption "Class II Nominees" for election as directors to serve until the annual
meeting of shareholders in 2000 or until their successors have been elected and
qualified. The Class II nominees are currently serving on the Board of
Directors of the Company with terms expiring at this Annual Meeting.
The Company's Bylaws provide that the Board of Directors shall consist of
not less than four nor more than 11 directors. The Board of Directors
currently consists of eight directors.
CLASS II NOMINEES:
THOMAS E. ERVIN
Age -- 62
Director since 1995
Thomas E. Ervin is currently retired. Mr. Ervin was previously employed
by H&C Communications, Inc., a Nashville CBS television affiliate, and was
serving as President when the company was acquired by Landmark Communications,
Inc. in 1991. Mr. Ervin serves on the advisory board of directors of
NationsBank of Tennessee, N.A.
GEORGE S. WALTMAN
Age -- 47
Director since 1995
George S. Waltman has served as Vice President of Operations of the
Company since its inception in March 1995. From November 1992 to July 1995, he
served in various capacities with Logan's Partnership (the "Predecessor"), a
general partnership acquired by the Company prior to the Company's initial
public offering in July 1995 (the "IPO"), including restaurant manager,
supervisor and director of operations. From March 1990 to November 1991, Mr.
Waltman served as Chairman, President and Chief Executive Officer of Benjamin's
Steak and Seafood Restaurants.
CONTINUING DIRECTORS:
The persons named below will continue to serve as directors until the
annual meeting of shareholders in the year indicated and until their successors
are elected and take office. Shareholders are not voting on the election of
Class I and Class III directors. The following lists the names, ages and
principal occupations of each continuing director and the year in which each
was first elected to the Board of Directors.
CLASS III DIRECTORS SERVING UNTIL THE 1998 ANNUAL MEETING:
B. TOM COLLINS
Age -- 54
Director since 1995
B. Tom Collins has owned and operated Tom Collins Music, Inc., an
independent music publishing company, since 1982. From October 1992 to July
1995, Mr. Collins served on the management committee of the Predecessor.
EDWIN W. MOATS, JR.
Age -- 49
Director since 1995
Edwin W. Moats, Jr. has served as Chairman of the Board, President and
Chief Executive Officer of the Company since its inception in March 1995. From
July 1992 to July 1995, Mr. Moats served as Managing Partner of the Predecessor
and President and Chief Executive Officer of Logan's Management Group, Inc.
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<PAGE> 6
("LMG"), a Tennessee corporation which was a general partner of the Predecessor
before merging into the Company prior to the Company's IPO. For a more
detailed discussion of LMG, see "Certain Transactions." Prior to co-founding
the Predecessor in 1992, Mr. Moats served as a consultant to Bluegrass Steaks,
Inc., a Tennessee corporation ("Bluegrass") owned by David K. Wachtel, Jr., a
principal shareholder of the Company, which owned and operated the first
Logan's Roadhouse restaurant in Lexington, Kentucky. See "Certain
Transactions." From 1991 to 1995, Mr. Moats provided consultant services to
Tri-M Management Company, an owner and operator of restaurants. Since 1977, he
has been an owner and partner of The Haury & Moats Company, a franchisee of six
Captain D's Seafood Restaurants in Alabama and Louisiana.
TED H. WELCH
Age -- 63
Director since 1995
Ted H. Welch has been a self-employed real estate investor since 1975.
Since 1993, Mr. Welch has served as President and Chief Executive Officer of
Eagle Communications, Inc., a publisher of periodicals. Mr. Welch also serves
as a director of National Health Investors, Inc. and First American
Corporation.
CLASS I DIRECTORS SERVING UNTIL THE 1999 ANNUAL MEETING:
GARY T. BAKER
Age -- 50
Director since 1995
Gary T. Baker has served as Chairman of the Board of Peterbilt of
Nashville, Inc. since 1985 and as its Secretary since 1995. Mr. Baker has
served as Chairman of the Board and President of GT Investment Corp., a real
estate investment company, since 1986.
JERRY O. BRADLEY
Age -- 57
Director since 1995
Jerry O. Bradley has served as President of Opryland Music Group, Inc., a
music publishing business and an indirect wholly-owned subsidiary of Gaylord
Entertainment Company, and as Vice President of Opryland USA, Inc., an indirect
wholly-owned subsidiary of Gaylord Entertainment Company, since 1986.
DAVID J. MCDANIEL
Age -- 54
Director since 1995
David J. McDaniel has served as Vice President of Finance, Chief
Financial Officer, Secretary and Treasurer of the Company since its inception
in March 1995. From November 1994 to July 1995, Mr. McDaniel served as Chief
Financial Officer of the Predecessor. For a more detailed description of the
Predecessor, see "Certain Transactions." From 1980 to November 1994, he served
as Senior Vice President, Secretary and Treasurer of Southern Hospitality
Corporation, an operator of fast food and full service restaurants.
INFORMATION REGARDING THE BOARD OF DIRECTORS
The Board of Directors held five meetings during 1996, including regular
and special meetings. Each director attended at least 75% of the meetings of
the Board of Directors and committees thereof on which the director serves.
The Committees of the Board of Directors consist of an Audit Committee,
on which Messrs. Baker and Welch serve, and a Compensation Committee, on which
Messrs. Bradley, Collins and Ervin serve. During 1996, the Audit Committee did
not meet, and the Compensation Committee met three times.
The Audit Committee is responsible for recommending the independent
public accountants to the Board of Directors, reviewing audit fees and
supervising matters relating to audit functions and other financial controls.
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<PAGE> 7
The Compensation Committee is responsible for approving compensation
arrangements for executive officers of the Company, reviewing compensation
plans and administering stock option and other employee benefit plans of the
Company.
COMPENSATION OF DIRECTORS
Directors who are employees of the Company do not receive additional
compensation for serving as a director of the Company. Non-employee directors
of the Company are entitled to receive a fee of $750 for each board or
committee meeting attended. All directors also are entitled to reimbursement
for their actual out-of-pocket expenses incurred in connection with attending
meetings.
Non-employee directors also are entitled to participate in the Company's
1995 Non-Employee Director Stock Option Plan (the "Director Plan"). See
"Proposal 3 - Approval of Amendments to the Company's 1995 Non-Employee
Director Stock Option Plan."
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE ELECTION
OF BOTH OF THE PROPOSED CLASS II NOMINEES TO THE BOARD OF DIRECTORS.
PROPOSAL 2: APPROVAL OF AMENDMENTS TO THE COMPANY'S
1995 INCENTIVE STOCK PLAN
The Board of Directors of the Company has adopted, subject to the
approval of the shareholders, amendments to the Company's 1995 Incentive Stock
Plan (the "Incentive Plan") (i) increasing the number of authorized shares of
Common Stock under the Incentive Plan from 472,500 to 722,500, (ii) requiring
that no more than 250,000 shares of Common Stock be awarded to any person in a
three-year period, (iii) eliminating the requirement of shareholder approval of
certain administrative amendments and (iv) eliminating the restriction on the
transfer of non-qualified stock options.
The following is a brief description of the material terms of the
Incentive Plan and the proposed amendments thereto. Such description is
qualified in its entirety by reference to the full text of the Incentive Plan
and the Amendments to the Incentive Plan which are attached hereto as Appendix
A(1) and Appendix A(2), respectively.
DESCRIPTION OF PROPOSED AMENDMENTS
Currently, 472,500 shares of Common Stock have been reserved for issuance
under the Incentive Plan, of which 443,502 have been used in connection with
the granting of (i) "incentive stock options" ("ISOs") described in Section 422
of the Internal Revenue Code of 1986, as amended (the "Code") and (ii) options
that are not ISOs ("NSOs"). If the amendments are approved, an additional
250,000 shares would be available for grant under the Incentive Plan. The
Incentive Plan currently does not restrict the number of shares that may be
granted to any person. The amendments, if approved, would require that no more
than 250,000 shares of Common Stock be awarded to any person under the
Incentive Plan during a three-year period. In addition, the Incentive Plan
currently requires shareholder approval of any amendment that could materially
increase benefits accruing to option holders, as that term is used in Rule
16b-3 promulgated by the Securities and Exchange Commission (the "SEC") under
the Securities Exchange Act of 1934 ("Rule 16b- 3"). If approved, the
amendments would limit the requirement of shareholder approval to those matters
that are enumerated in Sections 422 and 162(m) of the Code. Finally, the
amendments, if approved, would remove restrictions on the transfer of NSOs
received under the Incentive Plan by a person prior to death with the consent
of the Compensation Committee of the Board of Directors.
REASONS FOR CHANGES
The Incentive Plan is an essential part of the Company's compensation and
reward program for its employees because awards under the Incentive Plan permit
employees to benefit from the Company's growth and financial performance. The
Board of Directors believes that it is in the best interest of the Company to
authorize additional shares under the Incentive Plan to continue to provide
employees compensation and reward
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<PAGE> 8
for their efforts to accomplish the Company's long-term and short-term goals.
The limit on the number of shares that can be awarded to an individual under
the Incentive Plan is recommended because there currently is no such limit
under the Incentive Plan, and this restriction will enable the Company to treat
compensation recognized by recipients of grants as "performance based" pay
under Section 162(m) of the Code. Compensation that is not performance based
pay cannot be deducted for tax purposes to the extent it exceeds $1,000,000 in
a year. This amendment is intended to preserve the Company's right to deduct
compensation recognized by recipients, as described under "Federal Income Tax
Consequences." The Board of Directors believes that it is appropriate to
eliminate the Rule 16b-3 requirements for shareholder approval of future
amendments because Rule 16b-3 has been itself amended to delete these
shareholder approval requirements. Instead, consistent with the requirements
of the Code, the amended Incentive Plan will require shareholder approval of
amendments that increase the aggregate number of shares that can be issued
pursuant to the Incentive Plan, change the class of employees eligible to
receive ISOs, change the maximum number of shares that can be awarded to any
employee under the Incentive Plan, or increase the period during which options
may be granted or exercised. Removing the restrictions on the transfer of NSOs
prior to death is recommended so that award recipients will have more
flexibility in financial planning, particularly estate and tax planning.
Previously, the Incentive Plan's restrictions on transfer were required under
Rule 16b-3. The Board of Directors now believes it is appropriate to allow the
Compensation Committee to determine appropriate circumstances for allowing
transfers of NSOs by individuals. The amendment does not eliminate the
restrictions on transfers of ISOs.
DESCRIPTION OF INCENTIVE PLAN
The purpose of the Incentive Plan is to provide a performance incentive
to employees and others who perform services that enhance the value of
shareholders' equity. Plan participants, from time to time, are awarded ISOs
and NSOs. These awards are intended to serve as an encouragement to
participants in the Incentive Plan to remain with the Company and to more
closely align their interests with the interests of the Company and its
shareholders. The Compensation Committee of the Board of Directors is
authorized to administer the Incentive Plan and to award options to Company
employees and to certain others who provide significant services to the
Company. ISOs may be granted only to Company employees. As of March 31, 1997,
the Company employed approximately 1,900 people. The Incentive Plan will
terminate in 2005 if not terminated earlier.
The Compensation Committee determines which individuals are to receive
awards under the Incentive Plan, whether to award ISOs or NSOs and the exercise
prices and vesting dates of award. The exercise price of NSOs may not be less
than 85% of the fair market value of the Common Stock on the date of grant.
The exercise price of ISOs may not be less than 100% of the fair market value
of the Common Stock on the date of grant (110% in the case of an individual
who, at the time of the grant, owns more than 10% of the total outstanding
Common Stock, as determined in good faith by the Compensation Committee). The
aggregate fair market value of Common Stock with regard to which ISOs are
exercisable by an individual for the first time during any calendar year may
not exceed $100,000. No option shall be exercisable after the expiration of
ten years from the date the option is granted (five years in the case of ISOs
granted to employees who at the time of grant own more than 10% of the total
outstanding Common Stock).
The Company currently has options outstanding to purchase 443,502 shares
of Common Stock under the Incentive Plan. The exercise price under which
options have been granted has been the fair market value of the Company's
Common Stock on the date of grant, which has ranged from $9.00 to $19.50 per
share. All options vest 25% per year commencing on the first anniversary of
the date of grant. As of March 20, 1997, the aggregate market value of the
443,502 shares of Common Stock underlying the options issued pursuant to the
Incentive Plan was approximately $9.9 million.
Once an option has become exercisable, the participant may purchase
shares of Common Stock from the Company by paying the exercise price in cash or
in other consideration acceptable to the Compensation Committee. The Company
is authorized to loan, or guarantee loans of, the purchase price of shares
issuable upon exercise of options granted under the Incentive Plan.
Options awarded under the Incentive Plan become exercisable without
regard to the applicable vesting schedule in the event of the death, permanent
disability or retirement of the recipient. Subject to limitations on
deductibility of "golden parachute" payments described in Section 280G of the
Code, options also become
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<PAGE> 9
fully exercisable upon the occurrence of a merger or certain other corporate
transactions in which the Company is not the survivor.
The amount of any award under the Incentive Plan is subject to the
discretion, within the terms of the Incentive Plan, of the Compensation
Committee and, therefore, cannot be determined in advance. Similarly, the
dollar value of such awards cannot be determined prior to their grant. The
table below provides information for 1996 regarding the dollar value and the
number of shares underlying awards granted under the Incentive Plan.
The table below provides information for fiscal year 1996 regarding the
dollar value and the number of shares underlying awards granted under the
Incentive Plan:
1995 INCENTIVE STOCK PLAN
<TABLE>
<CAPTION>
DOLLAR VALUE OF NUMBER OF SHARES
SHARES UNDERLYING UNDERLYING STOCK
NAME AND POSITION STOCK OPTIONS($)(1) OPTIONS(2)
----------------- ------------------- --------------
<S> <C> <C>
Edwin W. Moats, Jr. $366,875 65,000
Chairman of the Board, President and Chief Executive
Officer
Ralph W. McCracken $380,388 47,500
Vice President of Development
David J. McDaniel $152,500 28,000
Vice President of Finance, Chief Financial Officer,
Secretary, Treasurer and Director
George S. Waltman $ 14,375 5,000
Vice President of Operations and Director
Executive Officer Group $914,138 145,500
Non-Executive Director Group -- --
Non-Executive Officer Employee Group $244,755(3) 37,000
</TABLE>
_______________
(1) Based upon the closing sale price of the Company's Common Stock of $22.38
per share as reported on The Nasdaq Stock Market's National Market (the
"Nasdaq National Market") on March 20, 1997, less the exercise prices of
the options granted.
(2) Reflects the Company's three-for-two stock split effected in June 1996.
(3) Based upon the closing sale price of the Company's Common Stock of $22.38
per share as reported on the Nasdaq National Market on March 20, 1997,
less the weighted average of the exercise prices of the options granted.
FEDERAL INCOME TAX CONSEQUENCES
Tax consequences to the Company and to participants of awards of options
will vary with the type of option awarded. A participant will not recognize
income, and the Company is not entitled to take a deduction, upon the grant of
an ISO or NSO under the Incentive Plan. If the participant does not sell the
Common Stock acquired through the option for at least two years after the date
of grant of an ISO and one year after exercising the ISO, he will not recognize
ordinary income on the purchase of Common Stock. Any gain or loss on the sale
of the Common Stock after these holding periods will be subject to capital
gains treatment.
A participant who disposes of the Common Stock before these holding
periods are satisfied will have engaged in a "disqualifying disposition" and
will recognize taxable compensation on the difference between the exercise
price of the ISO and the fair market value of the Common Stock at the time the
ISO was exercised. The participant's basis in the Common Stock after a
disqualifying disposition is its fair market value at the time of exercise.
The participant will also be subject to tax on capital gain, if any, upon the
sale of the Common
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<PAGE> 10
Stock on the amount realized in excess of the increased basis. Generally, the
Company is not entitled to a tax deduction upon the grant of an option or the
exercise of an ISO under the Incentive Plan. However, if the participant
engages in a disqualifying disposition, the Company may take a tax deduction
for the amount of ordinary income recognized by the participant.
Upon exercise of a NSO, the participant recognizes taxable compensation
on the difference between the fair market value of the Common Stock and the
exercise price paid under the NSO. The Company is entitled to deduct this
amount for tax purposes, provided that the Company pays an appropriate amount
of withholding tax to the Internal Revenue Service for the income recognized by
the participant. The participant is also subject to capital gains treatment on
the subsequent sale of the Common Stock acquired through the exercise of an
option.
Corporate deductions for reasonable compensation paid to certain
executive officers are limited to $1 million per year under Section 162(m) of
the Code. The Incentive Plan is intended to be a "performance-based
compensation plan" under Section 162(m) of the Code so that all compensation
amounts recognized through the exercise of options will be deductible by the
Company.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS APPROVAL OF THE
AMENDMENTS TO THE COMPANY'S 1995 INCENTIVE STOCK PLAN.
PROPOSAL 3: APPROVAL OF AMENDMENTS TO THE COMPANY'S
1995 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
The Board of Directors of the Company has adopted, subject to the
approval of the shareholders, the amendments to the Director Plan (i)
increasing the number of shares of Common Stock authorized under the Director
Plan from 97,500 to that number of shares which equals two percent of the total
number of shares of Common Stock outstanding at that time, (ii) providing for
grants of NSOs under the Director Plan at the sole discretion of the
Compensation Committee and (iii) eliminating the restriction on the transfer of
NSOs.
The following is a brief description of the material terms of the
Director Plan and the proposed amendments thereto. Such description is
qualified in its entirety by reference to the full text of the Director Plan
and the Amendments to the Director Plan which are attached hereto as Appendix
B(1) and Appendix B(2), respectively.
DESCRIPTION OF PROPOSED AMENDMENTS
Currently, 97,500 shares of Common Stock have been reserved for issuance
under the Director Plan, of which 52,500 have been used in connection with the
granting of NSOs. If the amendments are approved, an additional 22,833 shares
would be available for grant under the Director Plan based on the 6,016,659
shares of Common Stock outstanding as of the record date. The Director Plan
currently provides for the grant of a specified number of shares to each
non-employee director once a year. The amendments, if approved, would enable
the Compensation Committee of the Board of Directors to determine in its sole
discretion the number of shares subject to options to grant to non-employee
directors. In addition, the amendments, if approved, would remove restrictions
on the transfer of NSOs received under the Director Plan by a person prior to
death with the consent of the Compensation Committee.
DESCRIPTION OF DIRECTOR PLAN
The purpose of the Director Plan is to maintain the Company's ability to
attract and retain the services of experienced and highly qualified
non-employee directors and to enhance long-term shareholder value by more
closely aligning the interests of non-employee directors with those of the
shareholders. Currently, the Director Plan provides for the grant of options
to purchase 7,500 shares to each non-employee director of the Company on the
date of such director's initial election to the Board of Directors at an
exercise price equal to the fair market value of the Common Stock on the date
the options are granted. Further, the Director Plan provides for the grant to
each non-employee director of the Company of options to purchase 1,500 shares
on each January 1 thereafter during the director's term (each date of grant
being referred to as the "Grant Date"). The
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<PAGE> 11
Board of Directors may revoke, on or prior to each Grant Date, the next
automatic grant of options otherwise provided for by the Director Plan if no
options have been granted since the preceding Grant Date to employees under the
Incentive Plan or any other employee stock option plan that the Company might
adopt hereafter. Each option will be exercisable in full beginning one year
after the Grant Date, and will expire ten years after the Grant Date, unless
cancelled sooner as a result of termination of service or death, or unless such
option is fully exercised prior to the end of such ten-year period.
On July 26, 1995, the Company granted options to purchase an aggregate of
37,500 shares of Common Stock under the Director Plan at an exercise price per
share of $9.00, the IPO price. Messrs. Baker, Bradley, Collins, Ervin and
Welch, the non-employee directors, each received options to purchase 7,500
shares. On January 1, 1996, the Company granted options to purchase 1,500
shares of Common Stock to each of Messrs. Baker, Bradley, Collins, Ervin and
Welch at an exercise price of $11.50 per share. On January 1, 1997, the
Company granted options to purchase 1,500 shares of Common Stock to each of
Messrs. Baker, Bradley, Collins, Ervin and Welch at an exercise price of $23.50
per share.
Under the terms of the Director Plan, as proposed to be amended,
non-employee directors would be entitled to receive options for the purchase of
shares of the Company's Common Stock at the sole discretion of the Compensation
Committee at a price per share equal to the fair market value of the Common
Stock on the Grant Date. Each option will continue to be exercisable in full
beginning one year after the Grant Date and will expire ten years after the
Grant Date, unless cancelled sooner as a result of termination of service or
death, or unless such option is fully exercised prior to the end of such
ten-year period.
Below is a table setting forth information regarding stock options
granted under the Director Plan to non-employee directors as a group for the
fiscal year ended December 29, 1996:
1995 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
<TABLE>
<CAPTION>
DOLLAR VALUE OF NUMBER OF SHARES
SHARES UNDERLYING UNDERLYING STOCK
NAME AND POSITION STOCK OPTIONS(1) OPTIONS(2)
----------------- ---------------- --------------
<S> <C> <C>
Non-Executive Director Group $81,563 7,500
</TABLE>
- ---------------
(1) Based upon the closing sale price of the Company's Common Stock of $22.38
per share as reported on the Nasdaq National Market on March 20, 1997,
less $11.50 per share, the exercise price of the options granted.
(2) Reflects the Company's three-for-two stock split effected in June 1996.
FEDERAL INCOME TAX CONSEQUENCES
A non-employee director will not recognize any income, and the Company
will not be entitled to any deduction upon the grant of the options under the
Director Plan. Upon the exercise of an option, the non-employee director will
recognize ordinary income in an amount equal to the excess, if any, of the fair
market value, on the date of exercise, of the stock acquired over the exercise
price of the option. The Company will then be entitled to a tax deduction in
an amount equal to the ordinary income recognized by the non-employee director.
A non-employee director will have a tax basis in the shares equal to the amount
paid for such shares plus the amount of the ordinary income recognized. Any
additional gain or loss realized by the non-employee director on disposition of
the shares generally will be capital gain or loss to the non-employee director
and will not result in any additional tax deduction to the Company.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE APPROVAL
OF THE COMPANY'S 1995 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN.
8
<PAGE> 12
PROPOSAL 4: SELECTION OF AUDITORS
Upon the recommendation of the Audit Committee, the Board of Directors of
the Company has appointed, subject to the approval of the shareholders, the
firm of KPMG Peat Marwick LLP as independent public accountants to audit the
Company's consolidated financial statements for the fiscal year ended December
28, 1997. If the appointment of KPMG Peat Marwick LLP is not approved by the
shareholders, the matter will be referred to the Audit Committee for further
review.
It is anticipated that representatives of KPMG Peat Marwick LLP will
attend the Annual Meeting and will have an opportunity to make a statement, if
they determine to do so, and will be available to respond to questions at that
time.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE
SELECTION OF KPMG PEAT MARWICK LLP AS THE COMPANY'S INDEPENDENT
PUBLIC ACCOUNTANTS TO AUDIT THE COMPANY'S CONSOLIDATED FINANCIAL
STATEMENTS FOR THE FISCAL YEAR ENDED DECEMBER 28, 1997.
9
<PAGE> 13
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
The following table sets forth certain information regarding beneficial
ownership of the Common Stock as of March 20, 1997 (unless otherwise noted) by
(i) each director and nominee for director who beneficially owns Common Stock,
(ii) each executive officer named in the Summary Compensation Table, (iii) each
person known by the Company to be the beneficial owner of more than 5% of the
Common Stock of the Company, and (iv) all directors and executive officers as a
group. Except as otherwise indicated, the beneficial owners listed below have
sole voting and investment power with respect to all shares owned by them,
except to the extent such power is shared by a spouse under applicable law.
<TABLE>
<CAPTION>
SHARES PERCENTAGE OF
BENEFICIALLY OUTSTANDING
NAME AND ADDRESS OF BENEFICIAL OWNER OWNED(1) SHARES
------------------------------------ -------- ------
<S> <C> <C>
Edwin W. Moats, Jr. (2) . . . . . . . . . . . . . . . . . . . . . 352,512 5.8
Ralph W. McCracken (3) . . . . . . . . . . . . . . . . . . . . . . 6,000 *
David J. McDaniel (4) . . . . . . . . . . . . . . . . . . . . . . 15,375 *
George S. Waltman (5) . . . . . . . . . . . . . . . . . . . . . . 14,475 *
Gary T. Baker (6) . . . . . . . . . . . . . . . . . . . . . . . . 9,000 *
Jerry O. Bradley (7) . . . . . . . . . . . . . . . . . . . . . . . 10,500 *
B. Tom Collins (8) . . . . . . . . . . . . . . . . . . . . . . . . 12,900 *
Thomas E. Ervin (9) . . . . . . . . . . . . . . . . . . . . . . . 16,200 *
Ted H. Welch (10) . . . . . . . . . . . . . . . . . . . . . . . . 12,000 *
David K. Wachtel, Jr. (11) . . . . . . . . . . . . . . . . . . . . 469,701 7.8%
Charles F. McWhorter, Jr. (12) . . . . . . . . . . . . . . . . . . 450,537 7.5
Pilgrim Baxter & Associates (13) . . . . . . . . . . . . . . . . . 544,350 9.0
Oberweis Asset Management, Inc. (14) . . . . . . . . . . . . . . . 401,150 6.7
All directors and executive officers as a group (nine persons) (15) 448,962 7.3
</TABLE>
- ------------------
* Less than 1%.
(1) Includes shares of Common Stock subject to options which may be
exercised within 60 days of March 20, 1997. Such shares are deemed to
be outstanding for the purposes of computing the percentage ownership
of the individual holding such shares, but are not deemed outstanding
for purposes of computing the percentage of any other person shown in
the table.
(2) Includes 1,500 shares beneficially owned by Edwin A. Moats and 1,500
shares beneficially owned by Jeffrey S. Moats, Mr. Moats's sons. Mr.
Moats disclaims beneficial ownership of such shares. Also includes
options to purchase 18,750 shares of Common Stock. Mr. Moats's
address is 565 Marriott Drive, Suite 490, Nashville, Tennessee 37214.
(3) Includes options to purchase 5,625 shares of Common Stock. Mr.
McCracken's address is 565 Marriott Drive, Suite 490, Nashville,
Tennessee 37214.
(4) Includes options to purchase 9,375 shares of Common Stock. Mr.
McDaniel's address is 565 Marriott Drive, Suite 490, Nashville,
Tennessee 37214.
(5) Includes options to purchase 13,875 shares of Common Stock. Mr.
Waltman's address is 565 Marriott Drive, Suite 490, Nashville,
Tennessee 37214.
(6) Includes options to purchase 9,000 shares of Common Stock. Mr.
Baker's address is Baker, Campbell & Parsons, 303 Church Street, Suite
300, Nashville, Tennessee 37201-1713.
(7) Includes options to purchase 9,000 shares of Common Stock. Mr.
Bradley's address is 65 Music Square West, Nashville, Tennessee
37203.
(8) Includes options to purchase 9,000 shares of Common Stock. Mr.
Collins's address is 25 Music Square West, Nashville, Tennessee
37203.
(9) Includes options to purchase 9,000 shares of Common Stock. Mr.
Ervin's address is 401 Bowling Avenue, Unit 48, Nashville, Tennessee
37205.
(10) Includes options to purchase 9,000 shares of Common Stock. Mr.
Welch's address is 611 Commerce Street, Suite 2920, Nashville,
Tennessee 37203.
(11) Mr. Wachtel's address is 640 Spence Lane, Suite 123, Nashville,
Tennessee 37217.
(12) Mr. McWhorter's address is 3038 Sidco Drive, Nashville, Tennessee
37204.
(13) Pilgrim Baxter & Associates, a registered investment advisor
("Pilgrim"), has shared voting power as to 544,350 shares. Pilgrim's
address is 1255 Drummers Lane, Suite 300, Wayne, Pennsylvania 19087.
Information is as of December 31, 1996 and is derived from SEC
filings.
(14) Oberweis Asset Management, Inc., a registered investment advisor
("Oberweis"), has shared voting power as to 401,150 shares.
Oberweis's address is 951 Ice Cream Drive, Suite 200, North Aurora,
Illinois 60542. Information is as of December 31, 1996 and is derived
from SEC filings.
(15) Includes options to purchase 92,625 shares of Common Stock.
10
<PAGE> 14
COMPLIANCE WITH REPORTING REQUIREMENTS OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers, directors and persons who own more than 10% of a registered
class of the Company's securities to file reports of ownership and changes in
ownership with the SEC.
Based solely on a review of copies of reports filed with the SEC and
written representations from certain of the Company's directors and executive
officers that no other reports were required, the Company believes that all
persons subject to the reporting requirements pursuant to Section 16(a) filed
the required reports on a timely basis with the SEC.
EXECUTIVE COMPENSATION
The following table sets forth summary information concerning
compensation paid or accrued by the Company in 1996 on behalf of (i) the
Company's Chief Executive Officer and (ii) the three other executive officers
of the Company as of the end of 1996 (hereinafter, collectively referred to as
the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL
COMPENSATION LONG-TERM COMPENSATION
---------------------------- -----------------------------
NAME AND SECURITIES
PRINCIPAL POSITION YEAR SALARY($) BONUS($) UNDERLYING OPTIONS(#)(1)
------------------ ---- -------------- ----------- -----------------------------
<S> <C> <C> <C> <C>
Edwin W. Moats, Jr. . . . . 1996 $150,000 $80,000 65,000
Chairman of the Board, 1995 75,000 90,600 75,000
President and Chief
Executive Officer
Ralph W. McCracken (2) . . 1996 85,000 25,000 47,500
Vice President of
Development
David J. McDaniel . . . . . 1996 95,000 25,000 28,000
Vice President of Finance, 1995 85,000 17,000 37,500
Chief Financial Officer,
Secretary and Treasurer
George S. Waltman . . . . . 1996 85,000 40,000 5,000
Vice President of 1995 57,200 45,300 55,500
Operations
</TABLE>
- ---------------
(1) Reflects the three-for-two stock split of the Company's Common Stock
effected in June 1996.
(2) Mr. McCracken joined the Company in January 1996.
11
<PAGE> 15
The following table sets forth information concerning the stock
options granted to the Named Executive Officers in 1996:
OPTION GRANTS IN LAST FISCAL YEAR
(INDIVIDUAL GRANTS)
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF
SECURITIES TOTAL OPTIONS EXERCISE
UNDERLYING GRANTED TO OR BASE
OPTIONS EMPLOYEES IN PRICE EXPIRATION
NAME GRANTED (#)(1) FISCAL YEAR ($/SH) DATE
---- -------------- ----------- ------ ----
<S> <C> <C> <C> <C>
Edwin W. Moats, Jr. . . . . . . . . . . . 45,000 24.7% $15.50 7/29/06
20,000 11.0 19.50 11/15/06
Ralph W. McCracken . . . . . . . . . . . 22,500 12.3 11.33 1/17/06
15,000 8.2 15.50 7/29/06
10,000 5.5 19.50 11/15/06
David J. McDaniel . . . . . . . . . . . 18,000 9.9 15.50 7/29/06
10,000 5.5 19.50 11/15/06
George S. Waltman . . . . . . . . . . . . 5,000 2.7 19.50 11/15/06
</TABLE>
- ---------------
(1) Options become exercisable in four equal annual installments beginning
on the first anniversary of the date of the grant. Options listed in
the table were granted under the Incentive Plan.
The following table sets forth information with respect to unexercised
options held as of the end of 1996 by the Named Executive Officers. No Named
Executive Officer exercised any options for the purchase of shares of Common
Stock during 1996.
FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT FISCAL YEAR-END(#) AT FISCAL YEAR-END($)(1)
--------------------------------- --------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- --------------- --------------- ---------------- ---------------
<S> <C> <C> <C> <C>
Edwin W. Moats, Jr. . . . . 18,750 121,250 $271,875 $1,255,625
Ralph W. McCracken . . . . 5,625 41,875 68,456 305,369
David J. McDaniel . . . . . 9,375 56,125 135,938 591,813
George S. Waltman . . . . . 13,875 46,625 201,188 623,563
</TABLE>
- ---------------
(1) Based upon the closing sale price of the Common Stock ($23.50 per
share) as reported on the Nasdaq National Market on December 27, 1996,
less the exercise price for the options.
The Company has not awarded stock appreciation rights to any of its
executive officers, directors or employees. The Company has no long-term
incentive, defined benefit or actuarial plans, as those terms are defined in
SEC regulations, covering employees of the Company.
12
<PAGE> 16
EMPLOYMENT CONTRACTS AND TERMINATION AND CHANGE-IN-CONTROL ARRANGEMENTS
Pursuant to an employment agreement, effective as of August 1, 1996,
Mr. Moats is employed as President and Chief Executive Officer of the Company.
The employment agreement provides for an annual base salary of $150,000, which
is subject to annual review by the Compensation Committee or Board of
Directors, and bonuses, which amounts will be determined in accordance with the
Company's 1996 Executive Bonus Plan administered by the Compensation Committee.
The term of the employment agreement is three years.
Mr. Moats may terminate his employment agreement without cause by
giving the Company 90 days prior written notice. Pursuant to the terms of his
employment agreement, Mr. Moats has agreed not to disclose the Company's
confidential information and not to compete against the Company during the term
of his employment agreement and for a period of 12 months thereafter.
In the event Mr. Moats is terminated upon a "change-in-control" (as
defined in the employment agreement), he will be paid all accrued base salary,
bonus compensation to the extent earned, vested deferred compensation (other
than plan benefits which will be paid in accordance with the applicable plan)
and other benefits through the date of termination. In addition, Mr. Moats
will receive as severance pay his base salary in monthly installments for the
greater of 12 months or the remaining term of the agreement, or at his
election, a lump sum severance payment equal to the present value of the cash
flow of severance payments that would otherwise be paid to him.
Notwithstanding the foregoing, the Company is not required to pay any amount
which is not deductible for federal income tax purposes.
Mr. Moats is entitled to receive his accrued base salary, earned bonus
and other benefits through the date of termination in the event that the
Company terminates his employment without cause. He also will receive as
severance compensation his base salary for the greater of 12 months or the
remaining term of the employment agreement and an amount equal to his average
monthly bonus for the two years preceding the date of termination (as if such
bonus were paid monthly). In addition, Mr. Moats's unvested stock options will
become fully vested and immediately exercisable.
In the event Mr. Moats is terminated for cause (as defined in the
employment agreement), he is entitled to receive all accrued base salary,
earned bonus compensation and unreimbursed expenses through the date of
termination, but shall receive no other severance benefits. The employment
agreement may also be terminated if Mr. Moats dies, in which event his estate
will receive these same payments and severance payments equal to six months'
salary, and all unvested options will become fully vested and immediately
exercisable.
In the event Mr. Moats becomes disabled for a period of 60 consecutive
days, he is entitled to receive his base salary, insurance, bonus and other
benefits for a period of six months from the date such disability began or for
such shorter period as he is unable to perform his duties hereunder. In the
event he is unable to perform his duties hereunder after the expiration of the
six-month period, the employment agreement will terminate.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board of Directors during 1996
consisted of Messrs. Bradley, Collins and Ervin. None of the members of the
Compensation Committee have at any time been an officer or employee of the
Company or any of its subsidiaries, nor have any of the members had any
relationship with the Company requiring disclosure by the Company.
13
<PAGE> 17
EXECUTIVE OFFICERS OF THE COMPANY
The executive officers of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Edwin W. Moats, Jr. . . . . . . . . . . . . . 49 Chairman of the Board, President and Chief
Executive Officer
Ralph W. McCracken . . . . . . . . . . . . . 48 Director of Franchise Development
David J. McDaniel . . . . . . . . . . . . . . 54 Vice President of Finance, Chief Financial
Officer, Secretary and Treasurer
George S. Waltman . . . . . . . . . . . . . . 47 Vice President of Operations
</TABLE>
See "Proposal 1: Election of Directors" for information regarding the
backgrounds of Messrs. Moats, McDaniel and Waltman.
Ralph W. McCracken has served as Director of Franchise Development of
the Company since January 1996. Mr. McCracken founded Tri-M Management
Company, an owner and operator of full-service, casual dining restaurants, and
served as its President, Chief Executive Officer and as a director from 1981
until joining the Company.
CERTAIN TRANSACTIONS
Prior to the IPO, the Company's operations were conducted through the
Predecessor, of which O'Charley's, Inc., a publicly held company operating
casual dining restaurants ("O'Charley's"), and LMG were the general partners.
The Company acquired the partnership interests of the Predecessor immediately
prior to the IPO (the "Reorganization") from O'Charley's and the former
shareholders of LMG, who were Messrs. Moats, McWhorter and Wachtel. Prior to
the IPO and the Reorganization, the Predecessor made periodic distributions to
LMG and O'Charley's in accordance with their respective ownership interests in
the Predecessor. In 1994, the Predecessor distributed approximately $574,000
to LMG and approximately $144,000 to O'Charley's, and in 1995, the Predecessor
distributed approximately $402,000 to LMG and $101,000 to O'Charley's.
Pursuant to the Reorganization, the Company distributed approximately $203,000
to LMG and $51,000 to O'Charley's, such amounts equaling the estimated income
taxes payable on the Predecessor's earnings through July 9, 1995. After the
IPO, the Company paid approximately $43,000 directly to a state taxing
authority on behalf of LMG, and distributed approximately $42,000 in the
aggregate to the former LMG shareholders and $10,000 to O'Charley's in
accordance with their respective former ownership interests in the Predecessor,
such amounts equaling the estimated income taxes payable on the Predecessor's
earnings in accordance with the Predecessor's final tax return. All
distributions to LMG and O'Charley's were funded by cash provided from
operations.
Pursuant to the Reorganization, O'Charley's contributed to the Company
all of its interest in the Predecessor in exchange for 953,993 shares of Common
Stock, and Messrs. Moats, McWhorter and Wachtel received 396,282, 594,425 and
1,122,801 shares, respectively, of Common Stock in exchange for their shares of
LMG Common Stock. O'Charley's and Messrs. Moats, McWhorter and Wachtel sold
943,493, 65,520, 127,388 and 473,100 shares, respectively, of Common Stock in
the IPO. Based on the IPO price of $9.00 per share, O'Charley's and the former
LMG shareholders exchanged their interests in the Predecessor for shares of
Common Stock valued at approximately $8.6 million and $19.0 million,
respectively. The number of shares of Common Stock issued to O'Charley's and
the former LMG shareholders was based on their respective former
14
<PAGE> 18
ownership interests in the Predecessor and the proposed IPO price. In
connection with the Reorganization, each of O'Charley's and Messrs. McWhorter
and Wachtel entered into a Restrictive Covenant Agreement with the Company,
whereby O'Charley's and Messrs. McWhorter and Wachtel agreed not to solicit or
hire certain management employees of the Company, and the Company agreed not to
solicit or hire certain management employees of O'Charley's or certain
restaurants controlled by Mr. Wachtel. Each Restrictive Covenant Agreement
will expire on July 25, 1997.
In connection with the Reorganization, each of O'Charley's and Messrs.
McWhorter, Wachtel and Moats entered into a Registration Rights Agreement with
the Company which gave them certain rights with respect to the registration
under the Securities Act of shares of Common Stock held by them from time to
time, including a single demand registration right and unlimited piggy-back
registration rights. In connection with the Company's secondary offering
completed on April 15, 1996, O'Charley's and Messrs. McWhorter and Wachtel
exercised their piggy-back registration rights and sold 10,500, 16,500 and
180,000 shares, respectively, of Common Stock. They received net proceeds of
approximately $171,000, $269,000 and $2.9 million, respectively, from the
secondary offering.
In 1992, the Company entered into an asset purchase agreement and a
sublease agreement with Bluegrass, for the purpose of obtaining the right to
develop and operate the Logan's Roadhouse restaurant located in Lexington,
Kentucky. In connection with the asset purchase agreement, the Company
executed an unsecured installment note bearing interest at a rate of 9.5%
payable in monthly principal installments of $4,314, plus interest, that was
paid in full in August 1995. The Company paid a total of $51,767 in principal
payments to Bluegrass in both 1993 and 1994 and $34,510 in 1995. The sublease
agreement calls for minimum annual lease payments of approximately $148,000
through September 2002, subject to contingent rentals based on certain achieved
sales levels, and requires Bluegrass to pay all taxes other than real property
taxes and assessments related to the restaurant property and improvements. The
Company paid approximately $148,000 in basic rentals in each of 1993, 1994,
1995 and 1996, and contingent rentals of approximately $84,000, $102,000,
$107,000 and $85,000 in 1993, 1994, 1995 and 1996, respectively, under this
lease.
In connection with the franchising of Logan's Roadhouse restaurants in
select market areas not in the Company's immediate expansion plans for owned
restaurants, the Company entered into Area Development Agreements and Franchise
Agreements with each of L.W. Group, Inc., a corporation controlled by Mr.
Wachtel, and CMAC Incorporated, a corporation controlled by Mr. McWhorter, in
January 1996 and March 1997, respectively. L.W. Group currently operates two
Logan's Roadhouse restaurants in Edmond and Oklahoma City, Oklahoma. CMAC
plans to open its first franchised restaurant in Greenville, South Carolina in
August 1997.
Each Development Agreement requires the franchisees to locate sites
for and develop a specified number of Logan's Roadhouse restaurants within
specified geographic areas. Under the terms of each Development Agreement, the
franchisees are required to open a specified number of restaurants during
scheduled intervals, and management of the Company has the right to approve
each restaurant site. Franchisees are required to enter into individual
franchise agreements for each Logan's Roadhouse restaurant it develops. Each
Development Agreement prohibits the franchisees and their principals from
owning, operating or assisting other restaurants with menus or methods of
operation similar to those of Logan's Roadhouse restaurants that are located
within the geographic area covered by the Development Agreement. The initial
terms of the Development Agreements with L.W. Group and CMAC expire on December
31, 2000 and March 31, 2002, respectively, subject to automatic renewal for an
additional five years following such initial term, provided the franchisees
have satisfied the development schedule specified in their respective
Development Agreements. The Company has the right to purchase all of the
outstanding stock of L.W. Group and CMAC beginning in January 2001 and March
2002, respectively, upon the occurrence of specified events on the terms and
conditions as set forth in their respective
15
<PAGE> 19
Development Agreements. The franchisees could lose their exclusive development
rights under their respective Development Agreements if they fail to meet the
performance and other requirements specified in the Development Agreements or
the Franchise Agreements.
Each Franchise Agreement grants to the franchisees the right to
operate a Logan's Roadhouse restaurant in a specified location for a period of
20 years, with two additional five-year renewal options. Each Franchise
Agreement licenses the right to use the Company's trademarks and service marks
with respect to this specific restaurant site, subject to appropriate oversight
by the Company. In developing a Logan's Roadhouse restaurant, the franchisees
are required to comply with the Company's general construction specifications,
designs, color schemes, signs and equipment, formulas for preparation of food
and beverage products, operations and financial control methods, and management
training plans. The Company is obligated to provide a three week training
program for a fee ranging from $45,000 to $55,000 per restaurant during which
certain of the franchisees' personnel are educated and instructed at the
franchisees' restaurant in all aspects of the Company's system of operations.
The course will begin approximately one week prior to the opening of the
franchisees' restaurant and will end approximately two weeks after such
opening. Pursuant to the terms of the Franchise Agreement, additional training
by the Company's training crew may be conducted at the franchisees' restaurant
upon request. The franchisee is responsible for all expenses incurred by its
personnel while in training, including travel and living expenses. Each
Franchise Agreement prohibits the franchisee from transferring ownership of the
franchise without the prior approval of the Company, and provides the Company a
right of first refusal to purchase the franchise on the same terms and
conditions as any proposed transfer by the franchisee. For a period of 24
months following the date of termination or expiration of the Franchise
Agreement, the franchisees and certain of their principals may not compete with
the Company within a 50-mile radius of any existing or planned Company owned or
franchised restaurant, subject to certain exceptions. Additionally, the
franchisees may not solicit any previously serviced accounts, groups or
clientele for or on behalf of any casual dining restaurant for one year
following the termination or expiration of the Franchise Agreement.
The Franchise Agreements require the franchisee to pay an initial
$30,000 franchise fee and a monthly royalty fee of 3.0% of gross sales. In
addition, the Company may require the franchisees to contribute up to 1.0% of
gross sales to the Company's general advertising account and expend on an
annual basis up to 3.0% of gross sales for local promotional activities,
subject to the approval of the Company. In 1996, L.W. Group paid the Company
$60,000 for the initial franchise fees in connection with the two restaurants
opened in Oklahoma and total royalty fees of approximately $65,000.
Management is considering other future franchising opportunities in
areas which are not in the Company's immediate expansion plans for owned
restaurants, and has had preliminary discussions with third parties that could
result in the franchising of additional Logan's Roadhouse restaurants on
similar terms as the Company's agreements with its franchisees.
The Company's Board of Directors has adopted a policy that all
transactions between the Company and its officers, directors, principal
shareholders and affiliates be on terms no less favorable to the Company than
those obtainable from unrelated third parties. Although all of the above
transactions necessarily involved conflicts of interests, management of the
Company believes that all of the above transactions were entered into on such
terms based on (i) a comparison of terms and conditions available from third
parties, (ii) the advice of counsel and other outside experts, (iii) the use of
and reliance on an independent appraisal in connection with the purchase of
real property and (iv) a determination by the Company's board of directors in
certain instances.
16
<PAGE> 20
SHAREHOLDER PROPOSALS
If a shareholder wishes to have a proposal considered for inclusion in
the Company's proxy materials for the 1998 annual meeting of shareholders, the
proposal must comply with the Securities and Exchange Commission's proxy rules,
be stated in writing and be submitted on or before November 30, 1997. Any
proposals should be mailed to the Company at 565 Marriott Drive, Suite 490,
Nashville, Tennessee 37214, Attention: David J. McDaniel, Secretary.
OTHER MATTERS
The Board of Directors is not aware of any other matters to be brought
before the Annual Meeting. If any other matters, however, are properly brought
before the Annual Meeting, the persons named in the enclosed form of proxy will
have discretionary authority to vote all proxies with respect to such matters
in accordance with their best judgment.
UPON THE WRITTEN REQUEST OF ANY HOLDER OF THE COMPANY'S COMMON STOCK
ENTITLED TO VOTE AT THE 1997 ANNUAL MEETING OF SHAREHOLDERS, THE COMPANY WILL
FURNISH, WITHOUT CHARGE, A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-KSB
FOR THE FISCAL YEAR ENDED DECEMBER 29, 1996, INCLUDING FINANCIAL STATEMENTS, AS
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. REQUESTS SHOULD BE DIRECTED
TO DAVID J. MCDANIEL, VICE PRESIDENT OF FINANCE, CHIEF FINANCIAL OFFICER,
SECRETARY AND TREASURER, LOGAN'S ROADHOUSE, INC., 565 MARRIOTT DRIVE, SUITE
490, NASHVILLE, TENNESSEE 37214.
By Order of the Board of Directors
[Sig]
David J. McDaniel
Secretary
17
<PAGE> 21
APPENDIX A(1)
LOGAN'S ROADHOUSE, INC.
1995 INCENTIVE STOCK PLAN
1. The Purpose of the Plan. This incentive stock plan
(the "Plan") is intended to provide an opportunity for the employees and
officers of Logan's Roadhouse, Inc., a Tennessee corporation (the
"Corporation"), and its subsidiaries, as subsidiaries are defined in section
424 of the Code1 (its "subsidiaries"), to acquire shares of the Corporation's
stock and to provide for additional compensation based on appreciation of the
Corporation's stock. The Plan provides for the grant of incentive stock
options, as defined in Section 422 of the Code ("Incentive Stock Options"), and
stock options not qualifying as Incentive Stock Options ("Non-Qualified Stock
Options") providing an equity interest in the Corporation's business as an
incentive to service or continued service with the Corporation and to aid the
Corporation in retaining and obtaining key personnel of outstanding ability.
2. Stock Subject to the Plan. The maximum number of
shares of the Company's Common Stock, $.01 par value (the "Stock"), which may
be issued under Incentive Stock Options and Non-Qualified Stock Options granted
under the Plan (the "Options") shall be a total of 315,000 shares of Stock,
which may be either authorized and unissued Stock or Stock held in the treasury
of the Corporation, as shall be determined by the Board of Directors of the
Corporation. If an Option expires or terminates for any reason without being
exercised in full, the unpurchased shares subject to such Option not exercised
shall again be available for purposes of the Plan.
3. Administration of the Plan. This Plan shall be
administered by the Compensation Committee of the Board of Directors consisting
of not less than two directors, each of whom are "disinterested persons"
(within the meaning of that term as used in Rule 16b-3 promulgated by the
Securities and Exchange Commission ("Rule 16b-3")). As used herein, the term
"Committee" refers to such committee or, in the absence of appointment of such
committee, to the Board of Directors. The Board of Directors shall administer
the Plan only if each member is a disinterested person. Subject to the
provisions of the Plan, the Committee shall have full and conclusive authority
to interpret the Plan; to prescribe, amend and rescind rules and regulations
relating to the Plan; to determine the terms and provisions of the respective
Option agreements (which need not be identical); to determine the restrictions
on transferability of Stock acquired upon exercise of Options (which
restrictions need not be identical); and to make all other determinations
necessary or advisable for the proper administration of the Plan.
4. Eligibility and Limits. Options may be granted to
employees and officers as are selected by the Committee. Incentive Stock
Options may, however, only be granted to employees of the Corporation and its
present or future subsidiaries. The aggregate fair market value (determined as
of the time an Incentive Stock Option is granted) of the Stock with respect to
which Incentive Stock Options are exercisable by an individual for the first
time during any
- --------------------
(1) The "Code" herein refers to the Internal Revenue Code of
1986, as amended.
<PAGE> 22
calendar year, taking into account Incentive Stock Options granted under this
Plan and under all other plans of the Corporation and its parent or subsidiary
corporations (as defined in Section 424 of the Code), shall not exceed
$100,000.
5. Incentive Stock Options and Non-Qualified Stock
Options. At the time any Option is granted under this Plan, the Committee
shall determine whether said Option is to be an Incentive Stock Option or a
Non-Qualified Stock Option, and the Option shall be clearly identified as to
its status as an Incentive Stock Option or a Non- Qualified Stock Option. The
number of shares as to which Incentive Stock Options and Non-Qualified Stock
Options shall be granted shall be determined by the Committee in its sole
discretion, subject to the provisions of paragraph 4 above with respect to the
aggregate fair market value of the Stock for which Incentive Stock Options held
by any individual may become exercisable in any calendar year and subject to
the provisions of paragraph 2 above as to the total number of shares for which
Options may be granted under the Plan. At the time any Incentive Stock Option
granted under this Plan is exercised, the certificates representing the shares
of Stock purchased pursuant to said Option shall be clearly identified by
legend as representing shares purchased upon exercise of an Incentive Stock
Option.
6. Terms and Conditions of Options. Subject to the
following provisions, all Options shall be in such form and upon such terms and
conditions as the Committee, in its discretion, may from time to time
determine.
(a) Option Price.
(i) Incentive Stock Options. The Option price per share
shall in no event be less than 100% of the fair market value per share of the
Stock (as determined in good faith by the Committee) on the date the Option is
granted. If the employee owns (as defined in Code Section 424) more than 10%
of the total combined voting power of all classes of the Corporation's stock or
of the stock of its parent or subsidiary, the Option price per share shall not
be less than 110% of the fair market value per share of the Stock (as
determined in good faith by the Committee) on the date the Option is granted.
(ii) Non-Qualified Stock Options. The option price per
share shall not be less than 85% of the fair market value per share of the
Stock (as determined in good faith by the Committee) on the date the Option is
granted.
(b) Date of Grant. For purposes of this subparagraph 6,
the date the Option is granted shall be the date on which the Committee has
approved the terms and conditions of a stock option agreement evidencing the
Option and has determined the recipient of the Option and the number of shares
covered by the Option and has taken all such other action as is necessary to
complete the grant of the Option.
(c) Option Term. No Option shall be exercisable after
the expiration of ten years from the date the Option is granted. No Incentive
Stock Option granted to an employee
2
<PAGE> 23
who at the time of grant owns (as defined in Code Section 424) more than 10% of
the total combined voting power of all classes of the Corporation's stock or of
the stock of its parent or subsidiary shall be exercisable after the expiration
of five years from the date it is granted.
(d) Payment. Payment for all shares purchased pursuant
to exercise of an Option shall be made in cash or, if approved by the Committee
either at the time of grant or at the time of exercise, by delivery of (i)
outstanding shares of Stock or (ii) currently exercisable Options, each at its
fair market value, as determined by the Committee, on the date of delivery or
by any combination of cash, Stock or Options, in an amount equal to the
exercise price of the Options being exercised. For purposes of this
subparagraph 6, the fair market value of an Option shall be equal to the
product of (i) the amount by which the fair market value of the Stock, as
determined by the Committee, on the date of exercise exceeds the exercise price
contained in the Option and (ii) the number of shares of Stock subject to the
Option relinquished. Such payment shall be made at the time that the Option or
any part thereof is exercised, and no shares shall be issued until full payment
therefor has been made. The holder of an Option shall, as such, have none of
the rights of a shareholder.
(e) Nontransferability of Options. Options shall not be
transferable or assignable except by will or by the laws of descent and
distribution and shall be exercisable, during the holder's lifetime, only by
him; provided, however, that Non-Qualified Stock Options may be transferred
pursuant to a qualified domestic relations order as defined by Title I of the
Employee Retirement Income Security Act.
(f) Termination of Employment or Death. Except as
provided below, an Option may not be exercised by a holder unless he has been
an employee or officer of the Corporation or one of its subsidiaries
continually from the date of the grant until the date ending three months
before the date of exercise. If a holder ceases to be an employee or officer
by reason of disability, within the meaning of Section 422(c)(6) of the Code,
the holder may not exercise an Option (to the extent that the holder shall have
been entitled to do so at the date of his disability) later than twelve months
after the date he ceases to be an employee or removed as an officer or until
the expiration of the stated term of such Option, whichever is shorter. If the
holder of an Option dies, such Option may be exercised (to the extent that the
holder shall have been entitled to do so at the date of his death) by a legatee
or legatees of the holder under his last will, or by his personal
representative or distributees, at any time during the twelve-month period
following his death or until the expiration of the stated term of such Option,
whichever is shorter. If a holder is discharged as an employee or officer for
cause, as determined by the Committee, Options held by him shall not be
exercisable after such discharge or removal. Notwithstanding this subparagraph
(f), no Option may be exercised more than ten years after the date on which
such Option was granted. For purposes of this subparagraph (f), a holder shall
be deemed to be an employee or officer so long as the holder is an employee or
officer of a parent or subsidiary of the Corporation or by another corporation
(or a parent or subsidiary corporation of such other corporation) which has
assumed the Option of the holder in a transaction to which Section 424(a) of
the Code is applicable.
3
<PAGE> 24
(g) Limited Right of Exercise. An Option may be
exercised during the Option term as to the full number of shares covered by the
Option upon the occurrence of any of the following events (each a "Change in
Control") if: (1) a tender offer or exchange offer has been made for shares of
Stock, provided that the corporation, person or other entity making such offer
purchases or otherwise acquires shares of Stock representing 50% or more of the
outstanding shares of Stock pursuant to such offer; (2) the shareholders of the
Corporation have approved a definitive agreement (the "Agreement") to merge or
consolidate with or into another corporation pursuant to which the Corporation
will not survive or will survive only as a subsidiary of another corporation,
or to sell or otherwise dispose of all or substantially all of its assets; or
(3) any person or group (as such terms are defined in Section 13(d)(3) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")), becomes the
holder of 50% or more of the outstanding shares of Stock. If a Change in
Control has occurred, the Option shall be fully exercisable: (x) in the event
of (1) above, during the term of the tender or exchange offer; (y) in the event
of (2) above, within a 30-day period commencing on the date of approval by the
shareholders of the Agreement; or (z) in the event of (3) above, within a 30-
day period commencing on the date upon which the Corporation is provided a copy
of Schedule 13D (filed pursuant to Section 13(d) of the Exchange Act and the
rules and regulations promulgated thereunder) indicating that any person or
group has become the holder of 50% or more of the outstanding shares of Stock
or, if the Corporation is not subject to Section 13(d) of the Exchange Act,
within a 30-day period commencing on the date upon which the Corporation
receives written notice that any person or group has become the holder of 50%
or more of the outstanding shares of Stock. Notwithstanding the foregoing, no
person subject to Section 16(a) of the Exchange Act with respect to the Stock
may sell or otherwise dispose of Stock acquired pursuant to an Option granted
within six months of the date of sale or other disposition.
7. Guarantees and Loans. The Corporation is hereby
authorized to guarantee or make loans to the holder of an Option to enable him
to exercise such Option. Any loan made or guaranteed herein shall be in such
amount as determined by the Committee but shall not exceed the exercise price
of the Options being exercised by the holder. Any loans made or guaranteed
shall be with full recourse against the borrower, shall be secured by the Stock
received from exercise of the related Option, shall provide for a market rate
of interest and shall contain such other terms and conditions as are acceptable
to the Committee. The determination of whether loans are to be made or
guaranteed shall be made by the Committee.
8. Changes in Capitalization; Merger; Liquidation. (a)
The number of shares of Stock as to which Options may be granted, the number of
shares covered by each outstanding Option, and the exercise price per share in
each outstanding Option shall be proportionately adjusted for any increase or
decrease in the number of issued shares of Stock resulting from a subdivision
or combination of shares or the payment of a stock dividend in shares of Stock
to holders of outstanding shares of Stock or any other increase or decrease in
the number of such shares effected without receipt of consideration by the
Corporation.
(b) If the Corporation shall be the surviving corporation
in any merger or consolidation, recapitalization, reclassification of shares or
similar reorganization, the holder of each outstanding Option shall be entitled
to purchase, at the same times and upon the same terms
4
<PAGE> 25
and conditions as are then provided in the Option, the number and class of
shares of Stock or other securities to which a holder of the number of shares
of Stock subject to the Option at the time of such transaction would have been
entitled to receive as a result of such transaction.
(c) In the event of any change in capitalization of the
Corporation, the Committee may make such additional adjustments in the number
and class of shares of Stock or other securities with respect to which
outstanding Options are exercisable and with respect to which future Options
may be granted as the Committee in its sole discretion shall deem equitable or
appropriate, subject to the provisions of this paragraph 8.
(d) A dissolution or liquidation of the Corporation shall
cause each outstanding Option to terminate.
(e) In the event of any Change in Control in which shares
of Stock are purchased for cash in a tender offer or are to be converted into
cash in a merger, then, unless the Committee otherwise determines, each Option
(other than an Option granted within the last six months held by a person
subject to Section 16(b) of the Exchange Act) shall be converted into a fully
exercisable right to receive an amount in cash per share subject to such Option
equal to (A) in the case of a tender offer or merger, the excess, if any, of
the price paid in such tender offer or merger over the exercise price of such
Option and (B) in the case of conversion, the excess, if any, of the highest
market price of the Stock on the date of conversion over the exercise price of
such Option. Upon a merger or consolidation, other than a cash merger or
consolidation, in which the Corporation is not the surviving corporation, the
surviving corporation shall substitute another Option with equivalent value for
an outstanding Option in a transaction to which Section 424(a) of the Code is
applicable.
(f) In the event of a change of the Corporation's shares
of Stock with par value into the same number of shares with a different par
value or without par value, the shares resulting from any such change shall be
deemed to be the Stock within the meaning of the Plan. Except as expressly
provided in this paragraph 8, the holder of an Option shall have no rights by
reason of any subdivision or combination of shares of Stock of any class or the
payment of any stock dividend or any other increase or decrease in the number
of shares of Stock of any class or by reason of any dissolution, liquidation,
merger or consolidation or distribution to the Corporation's shareholders of
assets or stock of another corporation, and any issue by the Corporation of
shares of Stock of any class, or securities convertible into shares of Stock of
any class, shall not affect, and no adjustment by reasons thereof shall be made
with respect to, the number or price of shares of Stock subject to the Options.
The existence of the Plan and the Options granted pursuant to the Plan shall
not affect in any way the right or power of the Corporation to make or
authorize any adjustment, reclassification, reorganization or other change in
its capital or business structure, any merger or consolidation of the
Corporation, any issue of debt or equity securities having preferences or
priorities as to the Stock or the rights thereof, the dissolution or
liquidation of the Corporation, any sale or transfer of all or any part of its
business or assets, or any other corporate act or proceeding.
5
<PAGE> 26
9. Termination and Amendment of the Plan. The Plan
shall terminate on the date ten years after adoption of the Plan by the Board
of Directors, and no Option shall be granted under the Plan after that date,
but Options granted before termination of the Plan shall remain exercisable
thereafter until they expire or lapse according to their terms. The Plan may
be terminated, modified or amended by the shareholders or the Board of
Directors of the Corporation; provided, however, that:
(a) no such termination, modification or amendment
without the consent of the holder of a Option shall adversely affect his rights
under such Option; and
(b) any modification or amendment which would (1)
increase the aggregate number of shares of Stock which may be issued under the
Plan (other than an increase merely reflecting a change in capitalization such
as a stock dividend or stock split), (2) modify the designation of the persons
eligible to receive Options under the Plan, or (3) materially increase the
benefits accruing to holders of Options granted or to be granted under the
Plan, within the meaning of Rule 16b-3, shall be effective only if it is
approved by the shareholders of the Corporation after the date of adoption by
the Board of Directors of such modification or amendment.
10. Approval. This Plan is subject to the approval of
the holders of a majority of the outstanding shares of common stock of the
Corporation and unless so approved within twelve months of its adoption by the
Board of Directors, this Plan and any Options granted hereunder shall become
void thereafter.
11. Incentive Stock Option. All Incentive Stock Options
to be granted hereunder are intended to comply with Sections 422 and 424 of the
Code, and all provisions of this Plan and all Incentive Stock Options granted
hereunder shall be construed in such manner as to effectuate that intent.
12. General Provisions.
(a) Legends; Restrictions on Transfer. The
Committee may require each person purchasing shares pursuant to an Option to
represent to and agree with the Corporation in writing that the shares are
acquired without a view to distribution thereof. The certificates for such
shares may include any legend which the Committee deems appropriate to reflect
any restrictions on transfer.
All certificates for shares of Stock 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 Securities and Exchange Commission, any stock exchange upon
which the 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.
6
<PAGE> 27
(b) Other Compensation. Nothing contained in
this Plan shall prevent the Board of Directors 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) No Rights to Continued Employment. Neither
the adoption of the Plan, nor the granting of any Option hereunder, shall
confer upon any employee of the Corporation or any subsidiary any right to
continued employment with the Corporation or a subsidiary, as the case may be,
nor shall it interfere in any way with the right of the Corporation or a
subsidiary to terminate the employment of any of its employees at any time.
(d) Governing Law. 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.
(e) Compliance with Section 16(b). This Plan is
intended to comply with, and to the extent necessary or appropriate shall be
interpreted to comply with, Rule 16b-3.
7
<PAGE> 28
APPENDIX A(2)
AMENDMENT TO LOGAN'S ROADHOUSE, INC.
1995 INCENTIVE STOCK PLAN
WHEREAS, on May 26, 1995, Logan's Roadhouse, Inc. (the "Corporation")
adopted the 1995 Incentive Stock Plan (the "Plan"); and
WHEREAS, the Board of Directors desires to (1) increase the number of
authorized shares available for issuance under the Plan, (2) modify the terms
of the Plan so that compensation amounts payable thereunder will be treated as
"performance based compensation" that is described in Section 162(m) of the
Internal Revenue Code of 1986, as amended (the "Code"), (3) consistent with
modifications to Rule 16b-3 promulgated under the Securities Exchange Act of
1934, provide for approval of amendments to the Plan only in circumstances
described in Sections 162(m) and 422 of the Code and (4) modify the terms of
the Plan to remove restrictions on the transfer of non-qualified stock options
received under the Plan;
NOW, THEREFORE, the Plan is hereby amended as follows, effective April 16,
1997:
1. Section 2 of the Plan is hereby amended by deleting the reference to
"315,000 shares of Stock" and replacing such reference with "722,500
shares of Stock".
2. The following language is added to the end of Section 4 of the Plan:
"No person may receive an Option to purchase more than 250,000 shares
of Stock (subject to increases and adjustments for changes in the
capitalization of the Corporation) during any three year period."
3. Section 6(e) of the Plan is deleted in its entirety and restated as
follows:
(e) Transferability of Options. Incentive Stock Options shall not be
transferrable or assignable except by will or by the laws of descents
and distribution and shall be exercisable, during the holder's
lifetime, only by such holder. Non-Qualified Stock Options shall be
transferable by will or by the laws of descent and distribution only,
except as otherwise expressly provided for in a written agreement
(including any amendment or supplement thereto) between the
Corporation and the holder specifying the terms and conditions of an
Option granted to such holder.
4. Section 9 of the Plan is deleted in its entirety and restated as follows:
9. Termination and Amendment of the Plan. The Plan shall terminate on
the date ten years after the adoption of the Plan by the Board of
Directors and no Option shall be granted under the Plan after that
date, but Options granted before termination of the Plan shall remain
exercisable thereafter until they expire or
<PAGE> 29
lapse according to their terms. The Board of Directors may otherwise sooner
amend or terminate this Plan at any time; provided, however, an amendment that
would have a material adverse effect on the rights of a holder of an existing
Option is not valid with respect to such Option without the holder's consent.
Provided further that the shareholders of the Corporation must approve any
amendment:
(a) 12 months before or after the date an amendment is adopted that increases
the aggregate number of shares of Stock that may be issued under Incentive
Stock Options or changes the employees (or class of employees) eligible to
receive Incentive Stock Options.
(b) Before the effective date of an amendment that changes the number of
shares in the aggregate which may be issued pursuant to Options granted
under the Plan or the maximum number of shares with respect to which any
individual may receive Options during any period specified herein.
(c) Before the effective date of an amendment that increases the period during
which Options may be granted or exercised.
IN WITNESS WHEREOF, the undersigned officer has executed this Amendment
pursuant to authority granted by the Board of Directors of the Corporation
this ___ day of 1997.
LOGAN'S ROADHOUSE, INC.
By:
---------------------------------
Title:
-------------------------------
2
<PAGE> 30
APPENDIX B(1)
LOGAN'S ROADHOUSE, INC.
1995 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
R E C I T A L S:
A. Effective as of May 26, 1995, (the "Effective Date"), the
Board of Directors (the "Board of Directors") of Logan's Roadhouse, Inc., a
Tennessee corporation (the "Company"), hereby adopts this Logan's Roadhouse,
Inc. 1995 Non-Employee Director Stock Option Plan (the "Plan").
B. The purposes of the Plan are to provide to each of the
directors of the Company who is not also either an employee or an officer of
the Company added incentive to continue in the service of the Company and a
more direct interest in the future success of the operations of the Company by
granting to such directors options (the "Options", or individually, the
"Option"), to purchase shares of the Company's Common Stock, $.01 par value
(the "Common Stock"), subject to the terms and conditions described below.
ARTICLE I
GENERAL
1.01. Definitions. For purposes of this Plan and as used
herein, "non-employee director" shall mean an individual who (a) is now, or
hereafter becomes, a member of the Board of Directors by virtue of an election
by the shareholders of the Company, (b) is neither an employee nor an officer
of the Company and (c) has not elected to decline to participate in the Plan
pursuant to the next succeeding sentence. A director otherwise eligible to
participate in the Plan may make an irrevocable, one-time election, by written
notice to the Company within 30 days after his initial election to the Board of
Directors or, in the case of the directors in office on the Effective Date,
prior to December 31, 1995, to decline to participate in the Plan. For
purposes of this Plan, "employee" shall mean an individual whose wages are
subject to the withholding of federal income tax under Section 3401 of the
Internal Revenue Code of 1986, as amended from time to time (the "Code"), and
"officer" shall mean an individual elected or appointed by the Board of
Directors or chosen in such other manner as may be prescribed in the Bylaws of
the Company to serve as such, except that for the purposes of this Plan any
individual serving as the Chairman of the Board, but in no other capacity as an
officer or employee, will not be deemed to be an officer of the Company.
For purposes of this Plan, and as used herein, the "fair
market value" of a share of Common Stock is the closing sales price of the
Common Stock as reported on The Nasdaq Stock Market's National Market on the
Grant Date, as hereinafter defined, of the Options (or, if there was no
reported sale on such date, on the last preceding day on which any reported
sale occurred).
<PAGE> 31
1.02. Options. The Options granted hereunder shall be
options that are not qualified under Section 422 of the Code.
ARTICLE II
ADMINISTRATION
The Plan shall be administered by the Board of Directors or
the Compensation Committee thereof. The Board of Directors shall have no
authority, discretion or power to select the participants who will receive
Options, to set the number of shares to be covered by each Option, or to set
the exercise price or the period within which the Options may be exercised, or
to alter any other terms or conditions specified herein, except in the sense of
administering the Plan subject to the express provisions of the Plan and except
in accordance with sections 3.02(a) and 5.02 hereof. Subject to the foregoing
limitations, the Board of Directors or the Compensation Committee shall have
authority and power to adopt such rules and regulations and to take such action
as it shall consider necessary or advisable for the administration of the Plan,
and to construe, interpret and administer the Plan. The decisions of the Board
of Directors or Compensation Committee relating to the Plan shall be final and
binding upon the Company, the Holders, as defined hereinafter, and all other
persons. No member of the Board of Directors shall incur any liability by
reason of any action or determination made in good faith with respect to the
Plan or any stock option agreement entered into pursuant to the Plan.
ARTICLE III
OPTIONS
3.01. Participation. Each non-employee director shall be
granted Options to purchase Common Stock under the Plan on the terms and
conditions herein described.
3.02. Stock Option Agreements. Each Option granted under the
Plan shall be evidenced by a written stock option agreement, which agreement
shall be entered into by the Company and the non-employee director to whom the
Option is granted (the "Holder"), and which agreement shall include,
incorporate or conform to the following terms and conditions, and such other
terms and conditions not inconsistent therewith or with the terms and
conditions of this Plan as the Board of Directors considers appropriate in each
case:
(a) Option Grant Date; Number. An Option to
purchase 5,000 shares of Common Stock (subject to adjustment in accordance with
section 4.02 hereof) shall be granted initially as of the date the Company
commences its initial public offering of Common Stock to each non-employee
director serving the Company as a director on such date. In addition, an
Option to purchase 5,000 shares of Common Stock (subject to adjustment in
accordance with
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<PAGE> 32
section 4.02 hereof) shall be granted to each non-employee director elected
after the Company commences its initial public offering as of the date of such
director's initial election to the Board of Directors. Thereafter, on January
1 of each year during the term of the Plan, beginning on January 1, 1996, an
Option to purchase 1,000 shares of Common Stock (subject to adjustment in
accordance with section 4.02 hereof) shall be granted automatically to the
non-employee directors serving the Company as directors on such date. The date
of grant of an Option pursuant to the Plan shall be referred to hereinafter as
the "Grant Date" of such Option. Notwithstanding anything herein to the
contrary, the Board of Directors may revoke, on or prior to each Grant Date,
the next automatic grant of Options otherwise provided for by the Plan if no
options have been granted to employees since the preceding Grant Date under the
Company's 1995 Incentive Stock Plan or any other employee stock option plan
that the Company might adopt hereafter.
If, on any Grant Date during the term of the Plan,
fewer than 1,000 shares of Common Stock (subject to adjustment in accordance
with section 4.02 hereof) multiplied by the then number of non-employee
directors remain available for grant on such date pursuant to Section 4.01
hereof, the remaining shares shall be allocated pro rata in determining the
number of shares of Common Stock to be subject to each Option to be granted to
each non-employee director on such date.
(b) Price. The price at which each share of
Common Stock covered by an Option may be purchased pursuant to this Plan shall
be the fair market value of the shares on the Grant Date of such Option.
(c) Option Period. The period within which each
Option may be exercised shall expire, in all cases, ten years from the Grant
Date of such Option (the "Option Period"), unless terminated sooner pursuant to
section 3.02(d) below.
(d) Termination of Service, Death, Etc. Each
stock option agreement shall provide as follows with respect to the exercise of
the Option granted thereby in the event that the Holder ceases to be a non-
employee director for the reasons described in this section 3.02(d):
(i) If the directorship of the Holder is
terminated within the Option Period on account of fraud,
dishonesty or other acts detrimental to the interests of the
Company or any direct or indirect majority-owned subsidiary of
the Company, the Option shall automatically terminate as of
the date of such termination;
(ii) If the Holder shall die during the Option
Period while a director of the Company (or during the
additional three-month period provided by paragraph (iii) of
this section 3.02(d)), the Option may be exercised, to the
extent that the Holder was entitled to exercise it at the date
of Holder's death, within one year after such date (if
otherwise within the Option Period), but not
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<PAGE> 33
thereafter, by the executor or administrator of the estate of
Holder, or by any person or persons who shall have acquired
the Option directly from the Holder by bequest or inheritance;
or
(iii) If the directorship of a Holder is terminated
for any reason (other than the circumstances specified in
paragraphs (i) and (ii) of this Section 3.02(d)) within the
Option Period, the Option may be exercised, to the extent
Holder was able to do so at the date of termination of the
directorship, within three months after such termination (if
otherwise within the Option Period), but not thereafter.
(e) Transferability. An Option granted under the
Plan shall not be transferable by the Holder, otherwise than by will or by the
laws of descent and distribution, and during the lifetime of Holder, is
exercisable only by Holder.
(f) Agreement to Continue in Service. Each
Holder shall agree to remain in the service of the Company, at the pleasure of
the Company's shareholders, for a continuous period of at least one year after
the Grant Date of any Option, at the retainer rate then in effect or at such
changed rate as the Company from time to time may establish.
(g) Exercise, Payments, Etc. Each stock option
agreement shall provide that the method for exercising the Option granted
thereby shall be by delivery to the Company of, or by sending by United States
registered or certified mail, postage prepaid, addressed to the Company (for
the attention of its secretary), written notice signed by Holder specifying the
number of shares of Common Stock with respect to which such Option is being
exercised. Such notice shall be accompanied by the full amount of the purchase
price of such shares. Payment may be made at the election of the Holder as
follows: (i) in cash; (ii) in outstanding shares of Common Stock at their fair
market value, as determined by the Board of Directors, on the date of exercise;
or (iii) by delivery of Options with a value equal to the exercise price, such
value to be equal to the difference between the fair market value of the Common
Stock on the exercise date subject to such Option and the exercise price
thereof. Any such notice shall be deemed to be given three days after the same
was deposited in a regularly maintained receptacle for the deposit of United
States mail, addressed and sent as above stated. In addition to the foregoing,
promptly after demand by the Company, the exercising Holder shall pay to the
Company an amount equal to applicable withholding taxes, if any, due in
connection with such exercise.
(h) Delivery and Exercise. Each Option shall be
held by the Company and delivered to the Holder one year after the Grant Date
and shall be exercisable in full upon receipt.
4
<PAGE> 34
ARTICLE IV
AUTHORIZED COMMON STOCK
4.01 Authorized Shares. The total number of shares of Common
Stock as to which Options may be granted pursuant to the Plan shall be 65,000,
in the aggregate, except as such number of shares shall be adjusted from and
after the Effective Date in accordance with the provisions of Section 4.02
hereof. If any outstanding Option under the Plan shall expire or be terminated
for any reason before the end of the Option Period, the shares of Common Stock
allocable to the unexercised portion of such Option may again be subject to the
Plan. The Company shall, at all times during the life of any outstanding
Options, retain as authorized and unissued Common Stock at least the number of
shares from time to time included in the outstanding Options or otherwise
assure itself of its ability to perform its obligations under the Plan.
4.02.Adjustments Upon Changes in Common Stock. In the event
the Company shall effect a split of the Common Stock or dividend payable in
Common Stock, or in the event the outstanding Common Stock shall be combined
into a smaller number of shares, the maximum number of shares as to which
Options may be granted under the Plan shall be increased or decreased
proportionately. In the event that before delivery by the Company of all of
the shares of Common Stock in respect of which any Option has been granted
under the Plan, the Company shall have effected such a split, dividend or
combination, the shares still subject to the Option shall be increased or
decreased proportionately and the purchase price per share shall be increased
or decreased proportionately so that the aggregate purchase price for all the
then optioned shares shall remain the same as immediately prior to such split,
dividend or combination.
In the event of a reclassification of the Common Stock not
covered by the foregoing, or in the event of a liquidation or reorganization,
including a merger, consolidation or sale of assets, the Board of Directors of
the Company shall make such adjustments, if any, as it may deem appropriate in
the number, purchase price and kind of shares covered by the unexercised
portions of Options theretofore granted under the Plan. The provisions of this
Section 4.02 shall only be applicable if, and only to the extent that, the
application thereof does not conflict with any valid governmental statute,
regulation or rule.
ARTICLE V
GENERAL PROVISIONS
5.01. Termination of Plan. The Plan shall terminate whenever
the Board of Directors adopts a resolution to that effect. If not sooner
terminated under the preceding sentence, the Plan shall expire at the close of
business on June 30, 2005. After termination of
5
<PAGE> 35
the Plan, no Options shall be granted under the Plan, but the Company shall
continue to recognize Options previously granted.
5.02. Amendment of Plan. The Board of Directors may from
time to time amend, modify, suspend or terminate the Plan; provided, however,
that the Plan may not be amended, modified or suspended more than once every
six months, other than to comport with changes in the Code, the Employee
Retirement Income Security Act or the rules thereunder. No amendment,
modification, suspension or termination shall (a) impair any Options
theretofore granted under the Plan or deprive any Holder of any shares of
Common Stock which he might have acquired through or as a result of the Plan,
or (b) be made without the approval of the shareholders of the Company where
such change would (i) increase the total number of shares of Common Stock which
may be granted under the Plan or decrease the purchase price under the Plan
(other than as provided in Section 4.02 hereof), (ii) materially alter the
class of persons eligible to be granted Options under the Plan, (iii)
materially increase the benefits accruing to Holders under the Plan or (iv)
extend the term of the Plan or the Option Period.
5.03. Treatment of Proceeds. Proceeds from the sale of
Common Stock pursuant to Options granted under the Plan shall constitute
general funds of the Company.
5.04. Effectiveness. This Plan shall become effective as of
the Effective Date, subject to the conditions stated in the following sentence.
This Plan and each Option granted or to be granted hereunder is conditional on
and shall be of no force and effect, and no Option shall be exercised, unless
and until the Plan is approved by the affirmative votes of the holders of a
majority of the shares of Common Stock present, or represented, and entitled to
vote at a meeting of shareholders duly held not later than the date of the next
annual meeting of shareholders of the Company.
5.05. Paragraph Headings. The paragraph headings included
herein are only for convenience, and they shall have no effect on the
interpretation of the Plan.
5.06. Compliance with Rule 16b-3. The grant and exercise
of Options under the Plan is intended to be exempt under Rule 16b-3 under the
Securities Exchange Act of 1934, as amended, and subject to the limitations on
the exercise of discretion as provided in Article II hereof, this Plan shall be
interpreted so as to comply with Rule 16b-3.
6
<PAGE> 36
APPENDIX B(2)
AMENDMENT TO LOGAN'S ROADHOUSE, INC.
1995 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
WHEREAS, on May 26, 1995, Logan's Roadhouse, Inc. (the "Corporation")
adopted the 1995 Non-Employee Director Stock Option Plan (the "Plan"); and
WHEREAS, the Board of Directors, subject to the approval of the
shareholders of the Corporation, desires to increase the number of authorized
shares available for issuance under the Plan and adopt certain other changes to
the Plan.
NOW, THEREFORE, it is hereby agreed. subject to shareholder approval, that
the Plan be amended as follows:
1. Article II of the Plan is hereby deleted in its entirety and replaced
by a new Article II which reads as follows:
ARTICLE 11
ADMINISTRATION
This Plan shall be administered by the "Committee' that is
appointed by the Board of Directors and consists of not less than two
individuals who are members of the Board of Directors and are not
employees of the Corporation or an "affiliate" of the Corporation (as
defined in Section 424(f) of the Code), or such other composition
that satisfies Section 162(m)(4)(C) of the Code and Rule 16b-3
promulgated by the Securities and Exchange Commission ("Rule 16b-3").
Subject to the provisions of the Plan, the Committee shall have
full and conclusive authority to interpret the Plan; to prescribe,
amend and rescind rules and regulations relating to the Plan; to
determine the terms and provisions of the respective Option
agreements (which need not be identical); to determine the
restrictions on transferability of Stock acquired upon exercise of
Options (which restrictions need not be identical); and to make all
other determinations necessary or advisable for the proper
administration of the Plan.
2. Section 3.02(a) is hereby deleted in its entirety and replaced by a
new Section 3.02(a) which reads as follows:
(a) Grant of Options: Grant Date. The number of shares as to
which Options shall be granted shall be determined by the Committee
in its sole discretion, subject to the provisions of Section 1.01
above with respect to the fair market value of the shares of Common
Stock and subject to the provisions of
<PAGE> 37
Section 4.01 below as to the total number of shares for which Options
may be granted under the Plan.
The date the Option is granted (the "Grant Date') shall be the
date on which the Committee has approved the terms and conditions of
a stock option agreement evidencing the Option and has determined
the recipient of the Option and the number of shares covered by the
Option and has taken all such other action as is necessary to
complete the grant of the Option.
3. Section 3.02(e( of the Plan is hereby deleted in its entirety and
restated as follows:
(e) Transferability. An Option granted under this Plan shall be
transferable by will or by the laws of descent and distribution only,
except as otherwise expressly provided for in a written Option
agreement (including any amendment or supplement thereto) between the
Corporation and the Holder specifying the terms and conditions of an
Option granted to such Holder.
4. The first sentence of Section 4.01 of the Plan is deleted in its
entirety and restated as follows:
"The total number of shares of Common Stock as to which Options may
be granted pursuant to the Plan shall be equal to that number of
shares which equals 2% of the total number of shares of Common Stock
of the Corporation outstanding at that time.'
IN WITNESS WHEREOF, the undersigned officer has executed this Amendment
pursuant to authority granted by the Board of Directors of the Corporation on
this day of ,1997.
----- ------
LOGAN'S ROADHOUSE, INC.
By:
-------------------------------------
Title:
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2
<PAGE> 38
APPENDIX C
LOGAN'S ROADHOUSE, INC.
ANNUAL MEETING OF SHAREHOLDERS
MAY 15, 1997
The undersigned hereby appoints Edwin W. Moats, Jr. and David J.
McDaniel, or either of them, with power of substitution, as proxies to vote
all stock of Logan's Roadhouse, Inc. (the "Company") owned by the undersigned
at the Annual Meeting of Shareholders to be held at the Marriott Hotel,
Knoxville Room, 600 Marriott Drive, Nashville, Tennessee 37214, at 9:00 a.m. on
May 15, 1997, and any adjournment thereof, on the following matters as
indicated below and such other business as may properly come before the
meeting.
1. [ ] FOR the election as director of all nominees listed: Thomas E.
Ervin and George S. Waltman (except as marked to the contrary
below)
[ ] WITHHOLD AUTHORITY to vote for all nominees listed: Thomas E.
Ervin and George S. Waltman.
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR INDIVIDUAL
NOMINEES, WRITE THEIR NAME(S) IN THE SPACE PROVIDED
BELOW:
--------------------------------------------------------------------
2. Proposal to amend the 1995 Incentive Stock Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Proposal to amend the 1995 Non-Employee Director Stock Option Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. Proposal to ratify the appointment of KPMG Peat Marwick LLP as the
independent public accountants of the Company for fiscal year 1997.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
IN THEIR DISCRETION, THE PROXIES NAMED ABOVE MAY VOTE UPON SUCH
OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING OR ANY
ADJOURNMENT THEREOF.
THIS PROXY MUST BE DATED AND SIGNED ON THE REVERSE SIDE
THIS PROXY IS SOLICITED ON BEHALF OF THE COMPANY'S BOARD OF DIRECTORS.
This Proxy, when properly executed, will be voted in the manner directed
herein by the undersigned shareholder. If no direction is made, this Proxy
will be voted (i) FOR the two nominees as Class II directors of the Company,
(ii) FOR the amendments to the 1995 Incentive Stock Plan, (iii) FOR the
amendments to the 1995 Non-Employee Director Stock Option Plan and (iv) FOR the
proposal to ratify the appointment of KPMG Peat Marwick LLP.
Please sign exactly as your name appears on this Proxy Card. When
signing as attorney, executor, administrator, trustee or guardian, please give
full title as such. If a corporation, please sign in full corporate name by
President or other authorized officer. If a partnership, please sign in
partnership name by authorized person.
Dated: , 1997
---------------------------
, Signature of Shareholder
------------------------------------
, Signature if held jointly
------------------------------------
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE
