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Exhibit 10.1 SECOND SETTLEMENT AGREEMENT
SECOND SETTLEMENT AGREEMENT ,
dated the 22nd day of December, 2008 (this " Agreement "),
by and among O’Charley’s Inc., a Tennessee corporation
(the " Company "), and Eric S. Rosenfeld, Crescendo Partners
II, L.P., Series Z (" Crescendo Partners II "),
Crescendo Partners III, L.P., Crescendo Investments II, LLC,
Crescendo Investments III, LLC (collectively, " Crescendo "
and each a " Crescendo Party ").
WHEREAS , Crescendo and the
Company entered into a settlement agreement dated March 12,
2008 (the " First Settlement Agreement "), pursuant to
which, among other things: (i) Arnaud Ajdler, Gregory Monahan
and Douglas Benham (each a " Crescendo Director ," and
together with the individual to be appointed to the Company’s
Board of Directors (the " Board ") pursuant to
Section 1(a) , the " Crescendo Directors ") were
appointed to the Board and certain of its committees; (ii) the
Company agreed to declassify its Board of Directors, which such
declassification was subsequently approved by the Company’s
shareholders; (iii) the parties agreed to take certain actions
with respect to the Company’s 2008 Annual Meeting of
Shareholders; and (iv) Crescendo agreed to refrain from certain
other actions generally through the adjournment of the 2009 Annual
Meeting of Shareholders (the " 2009 Annual Meeting "),
subject to certain conditions, which were not met; and
WHEREAS , the parties desire
to avoid a proxy contest with respect to the 2009 Annual Meeting,
and in light of the Chief Executive Officer’s planned
retirement from the Company, have concluded that it is in the
Company’s and its shareholders’ best interests to come
to an agreement with respect to certain matters related to the 2009
Annual Meeting and certain other matters, as provided herein.
NOW, THEREFORE , in
consideration of the foregoing premises and the respective
representations, warranties, covenants and agreements hereinafter
set forth, and, intending to be legally bound hereby, the parties
hereby agree as follows:
1. Crescendo Board Appointment; 2009 Annual Meeting and
Related Matters .
(a)
Board Expansion . The Company hereby agrees that, no later
than 10 business days from the date hereof, the size of the Board
will be expanded from 11 to 12 directors. Promptly following the
execution of this Agreement, Crescendo shall recommend to the Board
an individual with relevant restaurant, hospitality or retail
industry experience who qualifies as "independent" under NASDAQ
listing standards to fill the newly-created directorship resulting
from the increase in the size of the Board; provided, that the
Board, upon the recommendation of its Nominating and Corporate
Governance Committee (the " Nominating Committee "), will
have determined, after a prompt, good faith, reasonable and
customary review that such individual qualifies to serve on the
Board and is "independent" pursuant to the listing standards of the
NASDAQ Stock Market (the " NASDAQ "). If the Nominating
Committee determines that such person does not meet the
qualifications of the Board or is not "independent" pursuant to the
listing standards of the NASDAQ Stock Market, Crescendo shall have
the right to propose additional individuals so qualified to be
considered and appointed in accordance with the provisions of this
Section 1(a) . The Board shall immediately appoint any
such qualified candidate proposed by Crescendo to fill the newly
created directorship as soon as such candidate’s
qualifications have been reviewed and approved by the Nominating
Committee. The Company will promptly thereafter expand the size of
the Board and appoint such individual to the Board, subject only to
the Nominating Committee’s and the Board’s prompt, good
faith, reasonable and customary review of such individual’s
qualifications.
(b)
Board Composition Following 2009 Annual Meeting . The
parties hereby agree to the following with respect to the
composition of the Board of Directors:
(i)
Board Size Through 2009 Annual Meeting . The size of the
Board will not be increased to more than 12 directors before the
Company’s Board of Directors’ meeting held in
connection with the Company’s 2009 Annual Meeting.
(ii)
Board Restructuring at 2009 Annual Meeting . Effective as of
the adjournment of the 2009 Annual Meeting, the Board will be
comprised of 10 directors. To effect this reduction in the
Board’s size from 12 to 10 members: (a) Gregory L. Burns
will not stand for re-election at the 2009 Annual Meeting and his
term as a director will expire at the adjournment thereof;
(b) the Company will either (x) nominate a total of seven
directors for election at the 2009 Annual Meeting, which slate will
consist of Messrs. Ajdler and Monahan, the individual
appointed to the Board upon the recommendation of Crescendo
pursuant to Section 1(a) and four other nominees of the
Company, or (y) the Company will, effective as of the
adjournment of the 2009 Annual Meeting, obtain the resignation of
an incumbent director (other than Douglas Benham) whose term
expires at the 2010 Annual Meeting of Shareholders (the " 2010
Annual Meeting "), and will nominate a total of eight directors
for election, which will consist of Messrs. Ajdler and
Monahan, the individual appointed to the Board upon the
recommendation of Crescendo pursuant to Section 1(a) and
five other nominees of the Company.
The Company will solicit proxies for
the election of the Crescendo Directors at the 2009 Annual Meeting
in the same manner as it does with respect to all other director
nominees. The Company will use its reasonable best efforts to cause
all Voting Securities (as such term is defined in
Section 10 ) that members of the Board are entitled to
vote at the 2009 Annual Meeting to be voted in favor of the
election of Crescendo Directors. Each Crescendo Party will vote,
and will cause its respective Affiliates and Associates (as such
terms are defined in Section 10 ) to vote, all Voting
Securities (as such term is defined in Section 10 )
that it is entitled to vote at the 2009 Annual Meeting (i) in
favor of the election of each of the Company’s nominees for
election to the Board, and (iii) in its discretion with regard
to any other items of business that are brought before such
meeting. Notwithstanding anything to
the contrary herein, the Board may expand its size at any time by
one director in connection with the hiring of a new permanent chief
executive officer (the " New CEO "), if the Board determines
to appoint the New CEO to the Board.
(iii)
2009 Annual Meeting Date and Items of Business . The Company
will hold its 2009 Annual Meeting at such time as is determined by
the Board; provided , that the Company will use all
reasonable efforts to cause the 2009 Annual Meeting to be held on
or before May 29, 2009, and in no event will such meeting be
held later than June 30, 2009. The only items to be put to a
shareholder vote at the 2009 Annual Meeting will be (i) the
election of directors as contemplated herein,
(ii) ratification of the Company’s auditors and
(iii) any shareholder proposal that the Company is required to
bring to a vote under applicable law.
(iv)
Board Representation Upon Reduction in Crescendo Ownership .
Notwithstanding anything to the contrary herein, at any time during
the term hereof, (A) if Crescendo owns less than the lesser of
5% of the Company’s outstanding Voting Securities (as such
term is defined in Section 10 ) and 1,065,774 shares of
the Company’s common stock (" Common Stock "), but
more than the lesser of 1% of the Company’s outstanding
Voting Securities and 213,155 shares of Common Stock, it will be
entitled to representation on the Board of no more than two
Crescendo Directors and (B) if Crescendo owns less than the
lesser of 1% of the Company’s outstanding Voting Securities
and 213,155 shares of common stock, it will not be entitled to any
representation on the Board. Immediately after Crescendo’s
beneficial ownership of the Company’s Voting Securities falls
below the aforementioned requisite thresholds, Crescendo will so
notify the Company and will cause the appropriate number of
Crescendo Directors to immediately resign. If a Crescendo Director
is required to resign from the Board
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pursuant to subpart (A) of the preceding sentence,
Crescendo will cause a Crescendo Director appointed to the class of
directors whose current terms expire at the 2009 Annual Meeting to
resign.
(v)
Crescendo Director Vacancies . If any Crescendo Director
leaves the Board (whether by resignation or otherwise) before the
2010 Annual Meeting (other than pursuant to Section 1(b)(iv)
hereof), Crescendo will be entitled to recommend to the Nominating
Committee replacement director(s) (each of whom will be deemed a
Crescendo Director for purposes of this Agreement) who will qualify
as "independent" pursuant to NASDAQ listing standards;
provided , that any such successor nominee to Douglas Benham
or the individual appointed to the Board pursuant to
Section 1(a) (the " New Director ") will have
relevant restaurant, hospitality or retail industry experience. The
Nominating Committee will not unreasonably withhold acceptance of
any replacement director(s) recommended by Crescendo. In the event
the Nominating Committee does not accept a replacement director(s)
recommended by Crescendo, Crescendo will have the right to
recommend additional replacement director(s) for consideration by
the Nominating Committee. The Board will appoint such replacement
director(s) to the Board no later than five (5) business days
after the Nominating Committee’s recommendation of such
replacement director(s).
(c)
Committee Membership of Crescendo Directors . Upon the
execution of this Agreement, Gregory Monahan shall continue to
serve as a member of each of the Nominating Committee of the Board
and Executive Committee of the Board and Arnaud Ajdler shall
continue to serve as a member of the Compensation and Human
Resources Committee of the Board. The Company will take all action
necessary in furtherance of the appointment of the New Director to
the Audit Committee of the Board assuming he satisfies the
applicable NASDAQ listing requirements and Securities and Exchange
Commission (" SEC ") rules and subject to his approval to
serve on such committee.
(d)
Related Board Matters; Liaison Director . The parties hereby
agree to the following with respect to certain other matters
relating to the Board of Directors:
(i)
Resignation of Gregory Burns . Messr. Burns will continue to
serve as the Company’s Chief Executive Officer, President,
Chairman of the Board and Chairman of the Executive Committee of
the Board through the Board’s regularly scheduled meeting in
February 2009 (the " February Board Meeting "), at
which time Messr. Burns will tender his resignation from each such
position with the Company; provided however, Messr. Burns shall
continue to serve as a director until the 2009 Annual Meeting.
(ii)
Matters Relating to the February Board Meeting . At the
February Board Meeting, the Board will (i) name Lawrence E.
Hyatt as interim Chief Executive Officer and President to act in
that capacity until the hiring of the New CEO, (ii) appoint
Messr. Benham as Chairman of the Executive Committee of the Board
and (iii) appoint Richard Reiss, Jr. as Lead Independent
Director.
(iii)
Interim Liaison Director . Upon the execution of this
Agreement, the Company will take all action necessary in
furtherance of (i) the appointment of Messr. Benham to the
Executive Committee of the Board, (ii) the creation of the
role of Interim Liaison Director of the Executive Committee of the
Board and (iii) the appointment of Messr. Benham to serve as
Interim Liaison Director beginning as of the date hereof. Messr.
Benham’s duties in his role as Interim Liaison Director shall
include (i) spending two days per week, on average, at the
Company beginning the week of January 5, 2009,
(ii) serving as liaison between the management team and the
Executive Committee of the Board, (iii) monitoring the
performance of the Company, (iv) attending meetings of the
Company’s Executive Leadership Council, (v) providing
advice and guidance to the management team on strategic direction
and major decisions and (vi) performing such other duties as
requested by the Executive
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Committee and agreeable to Messr. Benham. Messr. Benham’s
role as Interim Liaison Director shall terminate upon Messr.
Benham’s appointment as Chairman of the Executive Committee
of the Board at the February Board Meeting, at which time Messr.
Benham will continue the aforementioned duties of Interim Liaison
Director in such new role. In connection with serving as Interim
Liaison Director and Chairman of the Executive Committee of the
Board, the Company has agreed to compensate Messr. Benham as
follows: (i) on January 5, 2009, Messr. Benham will be
granted 7,500 shares of the Company’s common stock under the
Company’s 2008 Equity and Incentive Plan and be paid $15,000
in cash; (ii) on February 27, 2009 and at the conclusion
of every subsequent four-week accounting period (an " Accounting
Period ") in which he serves in such capacity, Messr. Benham
will be paid $30,000, which amounts shall be in addition to the
compensation Messr. Benham otherwise receives in connection with
his service as a director of the Company and which shall be
prorated accordingly in the event Messr. Benham’s service
begins or ends during any Accounting Period; and (iii) the
Company will reimburse Messr. Benham for his reasonable
out-of-pocket expenses, including travel expenses, incurred in
connection with serving as Interim Liaison Director or Chairman of
the Executive Committee of the Board, as the case may be. After
serving in such role for a period of four Accounting Periods, the
Executive Committee of the Board will review the duties performed
by Messr. Benham and the related time requirements for such
services and decide whether Messr. Benham’s duties should be
adjusted and the appropriate level of compensation for such duties.
Any decision to revise Messr. Benham’s duties as Chairman
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