-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MSdDbExFvBmfXtuSRfpuhAC9BPuYY/hhI5lEJGIMyDTZM7H+VPE978Af9JMx2Hgo 2kYjhDWMi+mMqv3JIXeyjQ== 0000912057-96-007516.txt : 19981229 0000912057-96-007516.hdr.sgml : 19981229 ACCESSION NUMBER: 0000912057-96-007516 CONFORMED SUBMISSION TYPE: DEF 14A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19960626 FILED AS OF DATE: 19960430 DATE AS OF CHANGE: 19981228 FILER: COMPANY DATA: COMPANY CONFORMED NAME: EATERIES INC CENTRAL INDEX KEY: 0000796369 STANDARD INDUSTRIAL CLASSIFICATION: 5812 IRS NUMBER: 731230348 STATE OF INCORPORATION: OK FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: DEF 14A SEC ACT: SEC FILE NUMBER: 000-14968 FILM NUMBER: 96553780 BUSINESS ADDRESS: STREET 1: 3240 W BRITTON RD STE 202 CITY: OKLAHOMA CITY STATE: OK ZIP: 73120 BUSINESS PHONE: 4057553607 DEF 14A 1 N&PS 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: / / 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 Section 240.14a-11(c) or Section 240.14a-12 EATERIES, INC. - - -------------------------------------------------------------------------------- (Name of Registrant as Specified In Its Charter) EATERIES, INC. - - -------------------------------------------------------------------------------- (Name of Person(s) Filing Proxy Statement, if other than the Registrant) Payment of Filing Fee (Check the appropriate box): /X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or Item 22(a)(2) of Schedule 14A. / / $500 per each party to the controversy pursuant to Exchange Act Rule 14a-6(i)(3). / / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) 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: ------------------------------------------------------------------------ [LOGO] 3240 W. Britton Road, Suite 202 Oklahoma City, Oklahoma 73120 NOTICE OF ANNUAL MEETING OF SHAREHOLDERS To be held June 26, 1996 The 1996 Annual Meeting of Shareholders of Eateries, Inc. will be held at Garfield's Restaurant & Pub at Quail Springs Mall, 2501 W. Memorial Road, Oklahoma City, Oklahoma, on Wednesday, June 26, 1996, at 9:00 a.m., CDT. The Annual Meeting will be held for the following purposes: 1. The election of six directors; and 2. Such other matters as may properly come before the Annual Meeting or any adjournment. Shareholders of record at the close of business on April 29, 1996, are entitled to notice of and to vote at the Annual Meeting or any adjournment. By Order of the Board of Directors PATRICIA L. ORZA Secretary PLEASE SIGN, DATE AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE REGARDLESS OF WHETHER YOU PLAN TO ATTEND THE MEETING. YOU MAY REVOKE YOUR PROXY AT ANY TIME BEFORE ITS EXERCISE. IF YOU ATTEND THE MEETING, YOU MAY WITHDRAW THE PROXY AND VOTE IN PERSON. [LOGO] 3240 W. Britton Road, Suite 202 Oklahoma City, Oklahoma 73120 PROXY STATEMENT ANNUAL MEETING OF SHAREHOLDERS June 26, 1996 The Board of Directors and management of Eateries, Inc. (the "Company") is furnishing this Proxy Statement in connection with the solicitation of proxies for use at the Company's 1996 Annual Meeting of Shareholders. The Annual Meeting will be held at Garfield's Restaurant & Pub at Quail Springs Mall, 2501 W. Memorial Road, Oklahoma City, Oklahoma, on Wednesday, June 26, 1996, at 9:00 a.m., CDT. The accompanying Notice of Meeting states the Annual Meeting's purposes. This Proxy Statement, Notice of Meeting, and accompanying proxy card were mailed to shareholders on or about May 13, 1996. GENERAL INFORMATION Only shareholders of record at the close of business on April 29, 1996, will be entitled to notice of and to vote the shares of the Company's common stock held by them on such date at the Annual Meeting or any adjournments. On April 15, 1996, the Company had 3,834,436 shares of its common stock outstanding and entitled to vote at the meeting. If the accompanying proxy is properly signed, returned to the Company, and not revoked, the persons named as proxies will vote the proxy according to its instructions. Unless contrary instructions are given, the proxies will support the recommendations of the Board of Directors. Shareholders may revoke their unexercised proxies by giving the Secretary of the Company a revoking instrument or a duly executed proxy bearing a later date. Shareholders may also revoke their proxies if they attend the Annual Meeting in person and request revocation. Attendance at the Annual Meeting will not itself revoke a proxy. The presence at the meeting, in person or by proxy, of a majority of the shares of common stock outstanding on April 29, 1996, will constitute a quorum. Each share of common stock entitles its holder to one vote on each matter considered at the meeting. The election of directors shall be determined by a plurality of votes cast. Any other matters properly brought before the Annual Meeting for a vote of shareholders shall require for approval the affirmative vote by the holders of at least a majority of the shares of common stock represented in person or by proxy and entitled to vote at the meeting. Abstentions and broker non-votes are counted for purposes of determining the presence of a quorum. Abstentions are counted on all proposals other than the election of directors. Broker non-votes are counted only when a proposal requires the affirmative vote of a majority of the outstanding shares for passage. Abstentions and broker non-votes have the effect of negative votes when counted. THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" EACH OF THE DIRECTOR NOMINEES NAMED IN THIS PROXY STATEMENT. THE ENCLOSED PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. ELECTION OF DIRECTORS The Board of Directors proposes the election of the following six persons to serve as members of the Company's Board of Directors for a term of one year and until their successors are duly elected and qualified: James M. Burke Philip Friedman Thomas F. Golden Edward D. Orza Patricia L. Orza Vincent F. Orza, Jr. The Board believes that each nominee will serve if elected. If any nominee should become unavailable to serve as a director and if the Board should designate a substitute nominee, the persons named as proxies will vote for the substitute nominee designated by the Board of Directors. One vacancy presently exists on the Board of Directors. The Board does not have a candidate to fill the vacancy at this time but intends to continue to seek a suitable candidate, and to fill the vacancy when such a candidate is found. BIOGRAPHICAL INFORMATION The following information is submitted concerning the nominees named for election as directors and August A. Hehemann and Norma C. Karter, executive officers of the Company who are not nominees for director: JAMES M. BURKE, age 34, Vice President and Chief Operating Officer, Assistant Secretary, and a director since 1987, joined the Company in October 1984 as General Manager of the Company's first Garfield's restaurant. The Company promoted him to Supervisor in March 1985 and to Vice President in August 1985. His responsibilities include restaurant construction and development, restaurant and corporate operations, personnel planning, new product development and vendor relationships. From 1979 to 1984, Mr. Burke worked as a management trainer and General Manager for Chi-Chi's Mexican Restaurants. Mr. Burke serves as a director of the Meadows Center for Retarded Adults. PHILIP FRIEDMAN, age 49, served as a director of the Company from 1986 until 1991 when he became an advisory director. He served as an advisory director until November 1992, when he was appointed to the Board to fill the vacancy created by the death of Mr. George H. Marx. Mr. Friedman is the president and principal shareholder of P. Friedman & Associates, Inc., a food management and consulting company based in Rockville, Maryland. From 1984 through 1986, he was Vice President of Finance and Administration for Cini- Little International, Inc., the largest food service consulting firm in the United States. While with P. Friedman & Associates, Inc., Mr. Friedman has taken interim executive positions with certain clients. In 1996, Mr. Friedman was named interim President of Panda Management Company, Inc., a national chain of restaurants serving Chinese food. In 1990, he became the Chief Financial Officer of Service America Corporation during its financial and organizational restructuring. Service America Corporation filed for reorganization under Chapter 11 of the federal bankruptcy laws approximately 18 months after Mr. Friedman resigned as chief financial officer. In 1988, he served as Executive Vice President of Sutton Place Gourmet in Washington, D.C. Mr. Friedman graduated from the University of Connecticut with Bachelors and Masters degrees and received his MBA from the Wharton School of Business at the University of Pennsylvania. THOMAS F. GOLDEN, age 53, has served as a director since 1991. He is a shareholder and director of the law firm of Hall, Estill, Hardwick, Gable, Golden & Nelson, P.C., an Oklahoma law firm with offices in Tulsa and Oklahoma City. Mr. Golden has been with this firm since 1967. He served as outside general counsel for Williams Realty Corp. (1974-1987), the real estate developer of major downtown mixed-used centers including Tabor Center in Denver, Colorado and Rivercenter in San Antonio, Texas. He holds a Bachelor of Science degree in Economics from Oklahoma State University and a Juris Doctorate from the University of Tulsa. He is a member of the Urban Land -2- Institute and a board member of the Boys Home Foundation, DTU, Ltd. and Midwesco Industries, Inc. of Tulsa, Oklahoma. EDWARD D. ORZA, age 45, has served as a director since 1984. He has served as Chairman of the Board and President of Brockway Truck Sales, Inc., a heavy-duty truck parts distributor in New York, since August 1983. From September 1975 through August 1983, Mr. Orza served as Secretary/Treasurer and a director of TriCounty Crane Carriers, Inc., which engaged in new truck sales. PATRICIA L. ORZA, age 42, has served as Secretary and a director of the Company since 1984. Prior to ceasing active employment in 1982, Ms. Orza worked in management and purchasing positions with several retail stores. Ms. Orza earned a Bachelors degree from the University of Central Oklahoma in 1980. VINCENT F. ORZA, JR., age 45, has been Chairman of the Board of Directors, President and Chief Executive Officer of the Company since its organization in June, 1984. Dr. Orza created the Garfield's Restaurant & Pub concept with the Company's Vice President, James M. Burke. Before that time, Dr. Orza was Senior Vice President of Marketing and Administration at a franchisee of Chi-Chi's Mexican Restaurants. Dr. Orza also operates Advertising and Marketing Associates, an Oklahoma City-based, market research and advertising company. Dr. Orza is a speaker, panelist, and organizer of numerous national restaurant conferences and conventions. He serves as a director of the Oklahoma Restaurant Association, the Juvenile Diabetes Foundation and the Oklahoma Leukemia Society, Chairman of the United Cerebral Palsy Telethon of Oklahoma, and was a 1990 candidate for Governor of the State of Oklahoma. Dr. Orza also served as Business and Economics Editor and News Anchor for KOCO-TV, an ABC news affiliate, where he received numerous national awards for excellence in business journalism. He was also a tenured professor in Oklahoma's largest School of Business at the University of Central Oklahoma. A contributor and editor of several professional textbooks, journals, and other publications, Dr. Orza was awarded several fellowships in various marketing disciplines. He holds a Doctor of Education degree from the University of Oklahoma and a Bachelor of Science in Business and a Master of Education degrees from Oklahoma City University. Mr. Edward Orza is the cousin and Ms. Patricia Orza is the spouse of Dr. Vincent Orza, Jr. AUGUST A. HEHEMANN, age 42, joined the Company in January, 1995, and was elected Vice President of Finance and Treasurer. Mr. Hehemann is the Company's Chief Financial and Accounting Officer and is also responsible for the Company's corporate administration. From August, 1985, until he joined the Company, Mr. Hehemann served as Vice President and Treasurer of Scrivner, Inc., a $6 billion food wholesaler and retailer. As Vice President and Treasurer at Scrivner, Mr. Hehemann was responsible for maintaining relationships with over one hundred financial institutions and was instrumental in establishing credit facilities aggregating $1.7 billion. He was also a member of Scrivner's strategic planning and acquisition/divestiture teams along with being responsible for treasury operations, payroll, budgeting and various special tax and accounting projects. Prior to August 1985 Mr. Hehemann served in various management positions for nine years as a certified public accountant in the audit division of Arthur Andersen & Co., an international accounting firm. He graduated from the University of Dayton in 1976 with a Bachelor of Science degree in Accounting. -3- NORMA C. KARTER, age 45, joined the Company in August, 1995 as Vice President of Marketing. Ms. Karter is responsible for the Company's long-term strategic marketing efforts including advertising, menu development and consumer research and support. From January, 1980 until she joined the Company, Ms. Karter was employed by Metromedia Restaurant Group, an $800 million company, and owners of Bennigan's, Ponderosa and Steak and Ale restaurants. Just prior to joining the Company, Ms. Karter served as Director of Marketing for the Steak and Ale chain. BOARD OF DIRECTORS AND ITS COMMITTEES The Board of Directors of the Company consists of seven members, including one vacant board seat. Each director serves for a term of one year or until his successor has been elected and qualified, subject to earlier resignation, removal or death. The number of directors comprising the Board of Directors may be increased or decreased by amendment to the Company's bylaws. Each director attended the two meetings of the Board of Directors which were held during 1995. The Company's officers serve at the discretion of the Board of Directors, subject to contractual arrangements. The Board has established an Audit Committee and a Compensation Committee. The Board's Audit Committee recommends the appointment of independent auditors, supervises the engagement, performance and fees of the auditors, and reviews and responds to all recommendations and reports of the auditors. The members of the Audit Committee are Mr. Thomas Golden and Mr. Philip Friedman who serves as chairman of the committee. The Audit Committee met one time in 1995, with all members attending. The Board's Compensation Committee comprises Mr. Thomas Golden, Mr. Phil Friedman and Mr. Edward Orza, who chairs the committee. The Compensation Committee recommends, reviews and approves salary ranges and benefits for all employees at the executive level, including all awards under the Company's Omnibus Equity Compensation Plan. As previously stated, Mr. Edward Orza is the cousin of Mr. Vincent Orza, Jr. Mr. Golden is a shareholder and director of the law firm that generally represents the Company. The Compensation Committee met three times in 1995, with all members present at each meeting. COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION The Compensation Committee is responsible for developing, implementing and administering the Company's management compensation programs. It develops or reviews the Company's compensation programs and policies, administers the Company's Omnibus Equity Compensation Plan, monitors management's performance and compensation, and makes recommendations and reports to the Board of Directors about the levels of management compensation. Its members are directors employed outside the Company. No member of the Committee is a current officer or employee of the Company and no employee of the Company serves or has served on the compensation committee (or board of directors of a corporation lacking a compensation committee) of a corporation employing a member of this Committee. PRINCIPAL COMPONENTS OF EXECUTIVE COMPENSATION The Company's management compensation policies are designed to attract and retain capable personnel, and to motivate them through rewards based on employee performance, the Company's financial performance and stock price appreciation. These programs have three components: (i) base salary; (ii) stock incentives that reward management for stock price appreciation and align management and shareholder interests; and (iii) possible cash bonuses based on achieving annual operating income targets. -4- BASE SALARIES The base salary component has been historically fixed by a subjective mix of the Company's performance, its size, cash availability, and the levels of compensation received by executives at similar companies. From 1990 through 1992, the base salaries of the President and the Vice Presidents were held constant. In 1993 and 1994, these persons were given base salary increases in light of the Company's financial performance for the previous years, however, the 1994 increases did not take effect until 1995. The Compensation Committee believes that management's base salary levels are and have been lower than the levels of compensation received by executives at similar companies. This belief is based on the collective knowledge of the Committee members and on published and informal compensation surveys of public corporations in the restaurant industry, which the Committee regards as a reasonable sampling of industry standards. STOCK INCENTIVES The stock incentive program was introduced in 1987. Its purpose is to provide long-term management incentives for stock price appreciation and to align management and shareholder interests. The stock incentive program is currently composed of (i) a stock grant program and stock option grants for lower level management; (ii) stock option agreements for the President and Company Vice Presidents; and (iii) stock option grants for incoming and long- term directors. Beginning in 1987, the Company has granted stock options to its executives. These options have offered incentive compensation instead of more traditional compensation packages offering broad insurance coverages, retirement plans, and higher base salaries. By placing a major portion of management's compensation in a stock incentive program, the Company put that compensation "at risk" in much the same way that a shareholder's stock purchase price is "at risk". Management only earns this incentive compensation through its ability to make the Company perform, thereby improving its value and the corresponding price of its stock. Thus management and the shareholders benefit together, and their interests are aligned. In 1987, the Company created a director stock option plan. This plan currently grants incoming directors an option to purchase 50,000 shares of common stock. Directors who have served as such for five or more years receive annual grants of options to purchase 10,000 shares of common stock. The purpose of the director stock option plan was and is the same as the upper level management stock option agreements: to reward shareholder interests. As in the case of senior management, the Company was unwilling to pay the level of director fees commonly paid directors of publicly held companies. Moreover, it felt it must compensate its directors for their personal risks in serving a company with no director liability insurance. It did so through its director stock option plan. The Board of Directors has been stable and enjoyed greater longevity than might otherwise be expected from emerging young companies like Eateries. The Company adopted in 1994 an employee stock purchase plan which gives all employees (except for those owning 5% or more of the Company's common stock) the right to purchase shares of common stock at a discount from market price. This program is intended to give all employees a financial stake in the Company's success. -5- CASH BONUS The cash bonus program was introduced in 1992. In contrast to the long- term stock incentive program, the discretionary cash bonus program offers incentives for short-term (annual) performance. The program is based on the Company's achievement of an annual net earnings target. The Committee sets the target based on internal financial forecasts prepared before the target year. Extraordinary, unusual or infrequently occurring items are disregarded. In 1994 and 1995, no bonuses were paid. The Committee believes that, while short-term performance is important and should be rewarded, it is less important than long- term growth, profitability and stock price appreciation. Accordingly, the levels of compensation from the cash bonus program are significantly less than that potentially available from the stock incentive programs. 401-K PLAN Effective May 1, 1996, the Company adopted the Eateries, Inc. and Subsidiaries 401(k) Savings Plan which allows employees who have attained age 21 and have completed one year of service to defer receipt of a portion of their compensation and contribute such amounts to various investment funds. The Company does not intend to match any portion of the employees contributions during 1996. POLICY ON DEDUCTIBILITY OF CERTAIN COMPENSATION A 1993 amendment to the federal tax code prohibited public companies from deducting annual compensation in excess of $1,000,000 paid to certain executive officers after 1993. The Committee does not believe this restriction is likely to affect its compensation decisions because of the relatively low levels of salary and cash bonus historically paid its management. Although the exercise of stock options could cause the $1,000,000 cap to be exceeded, the Compensation Committee does not intend to consider the cap when awarding stock options. COMPENSATION OF CHIEF EXECUTIVE OFFICER The base salary of the Company's Chief Executive Officer is $200,000. Dr. Orza has not been awarded any cash bonus for 1995. The Committee believes that the Company's growth and strong earnings in recent years justify the compensation paid to Dr. Orza. Dated: April 15, 1996 Compensation Committee of Eateries, Inc. Mr. Edward D. Orza, Chairman Mr. Thomas F. Golden Mr. Philip Friedman -6- EXECUTIVE COMPENSATION SUMMARY COMPENSATION TABLE. The following table sets forth information about the compensation of the Company's chief executive officer and the other executive officers of the Company (the "named executives"). SUMMARY COMPENSATION TABLE
LONG TERM COMPENSATION ANNUAL COMPENSATION(1) AWARDS -------------------------------------------- ------------- # OF SHARES UNDERLYING NAME AND OTHER ANNUAL STOCK OPTIONS ALL OTHER PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) COMPENSATION GRANTED COMPENSATION(2) - - ---------------------- ---- ---------- --------- ------------ ------------- --------------- Vincent F. Orza, Jr., 1995 $208,450 -- * 20,000(3) $280 Chairman of the Board, 1994 $158,450 -- * 20,000(3) $280 President and CEO 1993 $158,450 $ 4,828 * -- $280 James M. Burke 1995 $146,110 -- * 10,000 $175 Vice President of 1994 $106,110 -- * 10,000 $175 Operations, Assistant 1993 $106,110 $ 3,621 * -- $175 Secretary and Director August Hehemann 1995 $136,110 -- * 100,000 -- Vice President of 1994 -- -- * -- -- Finance, Treasurer 1993 -- -- * -- -- and CFO
_________________ * Less than 10% of total annual salary and bonus. (1) Amounts shown include cash and non-cash compensation earned and received by executive officers as well as amounts earned but deferred at the election of those officers and includes automobile allowances for the three named individuals in the amounts of $8,450, $6,110, and $6,110, respectively, and in the amount of $20,670 for the group. (2) The amounts shown under this column represent the premiums paid by the Company under split dollar life insurance plans. Under these plans, the Company pays the premiums for life insurance issued to the named executive. Repayment of the premiums is secured by the death benefit or the cash surrender value of the policy, if any, if the executive cancels and surrenders the policy. (3) Includes stock options granted to Dr. Orza's spouse, Patricia Orza, a director of the Company. EMPLOYMENT AGREEMENTS. The Company has employment agreements with Dr. Vincent F. Orza, Jr. and Mr. James M. Burke, dated as of October 1, 1995, with Norma C. Karter dated as of August 16, 1995, and with Mr. August Hehemann, dated as of January 1, 1995. The employment agreements with Dr. Orza and Mr. Burke provide for three-year terms which, unless terminated, automatically renew for additional one-year terms on each December 31. The employment agreements with Ms. Karter and Mr. Hehemann are for one-year terms which, unless terminated, automatically renew for another one-year term as of the last day of each contract year. The current base salary of each executive under his or her respective employment agreement is as follows: Vincent F. Orza, Jr. $200,000 James M. Burke 140,000 August Hehemann 130,000 Norma C. Karter 100,000 If Dr. Orza or Mr. Burke should die during the term of the agreement, the Company must pay to his estate an amount equal to two years' salary out of the proceeds of the key man life insurance policy maintained on the life of the -7- employee. If Ms. Karter or Mr. Hehemann should die during the term of the agreement, the Company must pay their estates regular installments of base salary for a period of one year from the date of death. OPTIONS GRANTED. The following table provides information regarding options granted to each of the named executives during 1995: OPTION/SAR GRANTS IN LAST FISCAL YEAR
POTENTIAL REALIZED VALUE # OF SHARES % OF TOTAL AT ASSUMED ANNUAL RATES OF DATE UNDERLYING OPTIONS STOCK PRICE APPRECIATION OF OPTIONS GRANTED TO EXERCISE EXPIRATION FOR OPTION TERM GRANT GRANTED EMPLOYEES PRICE(1) DATE -------------------------- NAME (MO/DAY) DURING 1995 IN 1995 ($ SHARE) (MO./YR.) 5%(2) 10%(3) - - ---- -------- ----------- ---------- --------- ---------- -------- -------- Vincent F. Orza, Jr. 6/15 20,000(4) 8.3% $3.25 5/01 $ 22,100 $ 50,050 James M. Burke 6/15 10,000 4.2% $3.25 6/01 $ 11,050 $ 22,100 August Hehemann 1/4 100,000 41.7% $3.00 (5) $165,000 $407,370
__________________ (1) Exercise Price was market price on date of grant. (2) Assumes 5% annual increase in stock price over term of option. (3) Assumes 10% annual increase in stock price over term of option. (4) Includes options granted to Dr. Orza's spouse, Ms. Patricia Orza, director of the Company. (5) Expires in annual increments of 25,000 shares commencing 1/2001 and ending on 1/2004. As of January 4, 1996, Dr. Orza was granted stock options to acquire a total of 250,000 shares, and Mr. Burke was granted stock options to acquire a total of 100,000 shares, at an exercise price of $2.625 per share. OPTIONS EXERCISED AND HOLDINGS. The following table provides information about options exercised by each of the named executives in 1995 and the value of their outstanding options measured by the closing price of the Company's common stock on December 31, 1995: AGGREGATED OPTION/SAR EXERCISES AND FISCAL YEAR-END OPTION/SAR VALUE TABLE
SHARES NUMBER OF SHARES VALUE OF UNEXERCISED ACQUIRED UNDERLYING UNEXERCISED IN-THE-MONEY ON VALUE OPTIONS AT FY-END(#) OPTIONS AT FY-END($) NAME EXERCISE REALIZED(1) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE - - ---- -------- ----------- ------------------------- ------------------------- Vincent F. Orza, Jr.(2)(3) - - 119,830/20,000 $212,139/0 James M. Burke(2) - - 60,665/10,000 $107,663/0 August Hehemann - - 25,000/75,000 0/0
__________________ (1) Market value at exercise date less exercise price. (2) The options held by Dr. Vincent Orza, Jr. and Mr. James Burke include options received for service as directors of the Company. (3) The information shown for Dr. Orza includes the beneficial ownership of director options for 69,165 shares held by his spouse, Ms. Patricia Orza. DIRECTOR COMPENSATION. The Company's directors receive $2,000 for each meeting and $1,000 for each full board committee meeting. Outside directors receive $1,000 for travel days and for each day devoted to Company business. Aggregate director compensation in 1995 was $34,000. In addition, each director receives stock options upon initial election as a director and additional options after five years of service. See "Omnibus Equity Compensation Plan." During 1995, the Company incurred legal fees of $127,000 with the law firm of which Mr. Golden is a shareholder. -8- OMNIBUS EQUITY COMPENSATION PLAN. Under the Company's Omnibus Equity Compensation Plan (the "Omnibus Plan"), the Compensation Committee may grant stock options, restricted stock or other derivative securities to employees of the Company. At present, non-qualified stock options to acquire a total of 1,405,000 shares of common stock have been issued to key employees, options to acquire 878,000 shares of employee stock options have been exercised and options to acquire 527,500 shares remain outstanding. An employee stock purchase plan is also included in the Omnibus Plan. Also, during 1995, 120,000 restricted (not granted under the Omnibus Plan) stock options were issued and remain outstanding. Under the Omnibus Plan, at the time of his or her initial election, each director (including both outside and employee directors) receives options ("Director Initial Options") for 50,000 shares of common stock. Directors who have served for more than five years receive an annual stock option grant of 10,000 shares [upon re-election] ("Director Continuing Options"). No options may be granted under the Omnibus Plan at an exercise price which is less than 85% of the fair market value of the common stock on the date of grant, and all director options must be granted at fair market value on the date of grant. At present, 226,993 shares of common stock are reserved for issuance under currently outstanding director options. Director Initial Options are exercisable at the rate of 20% per year beginning on the first anniversary of a director's initial election to the Board or, as to directors elected before 1988, beginning in 1989. Director Continuing Options become exercisable in full one year from the date of grant. All director options have a term of five years from the start of the exercise period, subject to a one year extension to the estate of a deceased director. Director options are nontransferable except by will or the laws of descent. Under the Omnibus Plan, a change in control of the Company will cause all unvested stock options to vest and all outstanding stock options or other Plan awards shall be cashed out unless the Compensation Committee determines otherwise. CERTAIN TRANSACTIONS The Company has employed as its advertising agency the firm of Advertising & Marketing Associates ("AMA"), which is owned by Dr. Vincent F. Orza, Jr. AMA purchases most of the Company's electronic and print media advertising, and has provided creative materials and marketing research for the Company. AMA billed the Company $424,000 for media costs in 1995, from which AMA retained standard agency discounts. Dr. Orza has represented that the 1995 discounts were approximately $40,000 net of expenses. AMA does not charge the Company for creative or marketing research. The Company has budgeted approximately $250,000 for media and advertising in 1996 of which AMA will be reimbursed with a commission at or below standard agency commissions. The Board of Directors has adopted a policy that requires that any transactions between the Company and its officers, directors, and affiliates be on terms no less favorable to the Company than those that the Company could obtain from unrelated third parties. The Board has considered AMA's media purchases and creative and marketing research in light of this policy, and believes that the Company's arrangement with AMA is consistent with the policy and in the Company's best interests. ADDITIONAL INFORMATION WITH RESPECT TO COMPENSATION COMMITTEE INTERLOCK AND INSIDER PARTICIPATION IN COMPENSATION DECISIONS. Tom Golden, a member of the Company's Compensation Committee, is a shareholder and director of the Company's primary outside law firm. In 1995, the Company incurred legal fees of $127,000 with such law firm. -9- PERFORMANCE GRAPH The following graph compares the Company's performance for the periods indicated with the respective performances of the CRSP Total Return Index for the NASDAQ Market and the NASDAQ Retail Trade Index. The five-year cumulative total returns reflect reinvested dividends and are weighted on a market capitalization basis. COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN Among Eateries, Inc., CRSP Total Return Index for the NASDAQ Market and NASDAQ Retail Trade Index Fiscal Year Ending December 31 [GRAPH] GRAPH DOLLAR VALUES 1990 1991 1992 1993 1994 1995 Eateries, Inc. 100 179 916 1,095 714 491 CRSP Total Return Index 100 161 187 215 210 296 NASDAQ Retail Trade Index 100 190 179 189 172 190 The foregoing graph depicts the comparative return on an investment in the common stock for the periods indicated. Historical returns may not necessarily be indicative of actual returns which may be attained in the future. -10- OTHER INFORMATION ABOUT DIRECTORS, OFFICERS AND CERTAIN SHAREHOLDERS BENEFICIAL OWNERSHIP OF DIRECTORS, OFFICERS AND CERTAIN SHAREHOLDERS The following table sets forth certain information regarding the beneficial ownership of the Company's common stock as of April 15, 1996, by (i) each person known by the Company to own beneficially more than 5% of the Company's common stock, (ii) each director and executive officer of the Company, and (iii) all executive officers and directors of the Company as a group.
PRESENTLY- SHARES BENEFICIALLY SHARES EXERCISABLE OWNED(3) DIRECTLY STOCK ------------------- NAME OWNED(1) OPTIONS(2) NUMBER PERCENT ---- -------- ----------- --------- ------- Vincent F. Orza, Jr. 344,261 143,332 487,593 11.7% Patricia L. Orza 2001 Cambridge Way Edmond, Oklahoma Edward D. Orza 465,119 20,000 485,119 11.7% 45 Lounsbury Rd. Croton-on-Hudson, New York James M. Burke 177,993 66,666 244,659 5.9% 6701 Reed Dr. Oklahoma City, Oklahoma August A. Hehemann 0 25,000 25,000 * Norma C. Karter 0 0 0 0 Philip Friedman 35,999 33,333 69,332 1.7% Thomas F. Golden 11,000 33,652 44,652 1.1% Wasatch Advisors, Inc. 472,361 0 472,361 11.4% 68 South Main Street, Suite 400 Salt Lake City, Utah 84101 Kennedy Capital Management, Inc. 234,850 0 234,850 5.7% 425 N. New Ballas Road, Suite 181 St. Louis, Missouri 63141-6821 First Union Corporation 234,000 0 234,000 5.6% One First Union Center Charlotte, North Carolina 28288 Executive Officers and Directors 1,034,372 321,983 1,356,355 32.6% as a group (8 persons)
_________________ * Less than one percent. (1) Excludes shares which the shareholder has the right to acquire through the exercise of stock options. (2) Shares the shareholder may acquire through the exercise of presently exercisable stock options or stock options which will become exercisable within 60 days of April 15, 1996. (3) Includes shares directly owned and shares subject to presently exercisable stock options as described in footnotes (1) and (2) above. -11- OTHER INFORMATION ABOUT THE ANNUAL MEETING OTHER MATTERS COMING BEFORE THE MEETING As of the date of this proxy statement, the Company knows of no business to come before the meeting other than that referred to above. The Company's rules of conduct for the annual meeting prohibit the introduction of substantive matters not previously presented to the shareholders in a proxy statement. As to other business, such as procedural matters, that may come before the meeting, the persons holding proxies will vote those proxies in the manner they believe to be in the best interests of the Company and its shareholders. SHAREHOLDER PROPOSALS FOR THE NEXT ANNUAL MEETING Any shareholder who wishes to present a proposal at the Company's 1996 Annual Meeting of Shareholders must deliver such proposal to the Secretary of the Company by December 31, 1996, for inclusion in the Company's proxy, notice of meeting, and proxy statement for the 1997 Annual Meeting. AUDITORS Ernst & Young has audited the Company's financial statements for the years ended December 31, 1993, 1994 and 1995. Their report is included in the Company's Annual Report to Shareholders that accompanies this Proxy Statement. Representatives of Ernst & Young will be present at the Annual Meeting and available to answer questions regarding their audit, and will make a statement if they wish. Consistent with prior practices, the Board has not asked the shareholders to ratify its selection of auditors, believing that shareholder ratification is unnecessary. ADDITIONAL INFORMATION The Company will bear the cost of soliciting proxies. Officers and regular employees of the Company may solicit proxies by further mailing, personal conversations, or by telephone or telegraph. They will do so without compensation other than their regular compensation. The Company will, upon request, reimburse brokerage firms and others for their reasonable expenses in forwarding solicitation material to the beneficial owners of stock. THE COMPANY'S ANNUAL REPORT ON FORM 10-K, INCLUDING THE FINANCIAL STATEMENTS AND SCHEDULES THERETO, FOR THE YEAR ENDED DECEMBER 31, 1995, AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, WILL BE FURNISHED WITHOUT CHARGE TO ANY SHAREHOLDER UPON WRITTEN REQUEST ADDRESSED TO MS. PATRICIA L. ORZA, SECRETARY, EATERIES, INC., 3240 W. BRITTON ROAD, SUITE 202, OKLAHOMA CITY, OKLAHOMA 73120. SHAREHOLDERS REQUESTING EXHIBITS TO THE FORM 10-K WILL BE PROVIDED THE SAME UPON PAYMENT OF REPRODUCTION EXPENSES. By order of the Board of Directors PATRICIA L. ORZA Secretary April 29, 1996 -12- EATERIES, INC. 3240 W. Britton Rd., Suite 202 Oklahoma City, Oklahoma 73120 - - ------------------------------ THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. The undersigned hereby appoints Vincent F. Orza, Jr., James M. Burke and Edward D. Orza as Proxies, each with the power to appoint his substitute, and hereby authorizes them to represent and to vote, as designated below, all the shares of common stock of Eateries, Inc. held of record by the undersigned on April 29, 1996, at the Annual Meeting of Shareholders to be held on June 26, 1996, or any adjournments thereof. ELECTION OF DIRECTORS FOR all nominees listed below / / (except as marked to the contrary below) WITHHOLD AUTHORITY / / to vote for all nominees listed below (INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE THROUGH THE NOMINEE'S NAME BELOW.) James M. Burke, Thomas F. Golden, Edward D. Orza Philip Friedman, Patricia L. Orza, and Vincent F. Orza, Jr. 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 FOR EACH OF THE DIRECTOR NOMINEES. THIS PROXY CONFERS DISCRETIONARY AUTHORITY UPON THE NAMED PROXIES TO VOTE THE UNDERSIGNED SHARES ON ANY OTHER MATTERS WHICH MAY BE PROPERLY BROUGHT BEFORE THE MEETING, INCLUDING VOTING AGAINST ANY DIRECTOR NOMINEES NOT IDENTIFIED ABOVE. Please sign exactly as name appears below. When shares are held by joint tenants, both should sign. 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: _________________________________, 1996 ______________________________________________ (Signature) ______________________________________________ (Signature if held jointly) Please mark, sign, date and return this Proxy Card promptly using the enclosed envelope. -----END PRIVACY-ENHANCED MESSAGE-----