O Charleys (CHUX) DEF 14A Definitive proxy

SCHEDULE 14A

(Rule 14a-101)

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SCHEDULE 14A INFORMATION

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O’Charley’s Inc.

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TABLE OF CONTENTS

3038 Sidco Drive

Nashville, Tennessee 37204

(615) 256-8500

Dear Shareholder:

      It is my pleasure to extend to you a cordial invitation to attend the annual meeting of shareholders of O’Charley’s Inc. to be held at 9:00 a.m., local time, on Thursday, May 18, 2006, at the company’s home office located at 3038 Sidco Drive, Nashville, Tennessee.

      At the meeting, shareholders will be asked to elect two directors to the company’s board of directors. In addition, we will present a report on the condition and performance of the company, and you will have an opportunity to question management on matters that affect the interests of all shareholders.

      We hope you will be able to attend the meeting in person. Whether you expect to attend or not, we request that you complete and return the enclosed proxy card in the enclosed post-paid envelope. Your vote is important.

      I look forward to seeing you on Thursday, May 18.

Sincerely,

Gregory L. Burns

Chairman of the Board and

Chief Executive Officer

3038 Sidco Drive

Nashville, Tennessee 37204

(615) 256-8500

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

       As a shareholder of O’Charley’s Inc., you are hereby given notice of and invited to attend the annual meeting of shareholders of the company to be held at 9:00 a.m., local time, on Thursday, May 18, 2006, at the company’s home office located at 3038 Sidco Drive, Nashville, Tennessee, for the following purposes:

      1. To elect two Class I directors to hold office for a term of three years; and

      2. To transact such other business as may properly come before the annual meeting.

      Shareholders of record at the close of business on March 29, 2006 are entitled to notice of and to vote at the annual meeting and any adjournment or postponement thereof.

      You can ensure that your shares of common stock are voted at the annual meeting by signing and dating the enclosed proxy and returning it in the envelope provided. Sending in a signed proxy will not affect your right to attend the annual meeting and vote in person. WHETHER OR NOT YOU PLAN TO ATTEND, WE URGE YOU TO SIGN AND DATE THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENVELOPE PROVIDED.

By the Order of the Board of Directors

Lawrence E. Hyatt,Secretary

Nashville, Tennessee

April 19, 2006

O’CHARLEY’S INC.

3038 Sidco Drive

Nashville, Tennessee 37204

(615) 256-8500

PROXY STATEMENT

       The accompanying proxy is solicited by the board of directors of the company for use at the annual meeting of shareholders to be held on May 18, 2006, and at any adjournment or postponement thereof. The purposes of the annual meeting are to elect two Class I directors and to transact such other business as may properly be brought before the annual meeting. This proxy statement and the enclosed proxy are first being sent to shareholders on or about April 19, 2006.

      Shareholders of record at the close of business on the record date, March 29, 2006, are entitled to notice of and to vote at the annual meeting. Each shareholder is entitled to one vote for each share of common stock held on the record date.

      The presence at the meeting, in person or by proxy, of at least a majority of the outstanding shares of common stock entitled to vote is necessary to constitute a quorum to transact business at the meeting. As of the record date, 23,880,699 shares of the company’s common stock were outstanding. Proxies received but marked as abstentions or broker non-votes will be counted as present for purposes of determining a quorum on all matters.

      Shares of common stock represented by a proxy properly signed and received at or prior to the annual meeting, unless subsequently revoked, will be voted in accordance with the instructions thereon. Shareholders are urged to specify their choices by marking the appropriate boxes on the enclosed proxy. If a proxy is dated, signed, and returned without specifying choices, the shares will be voted as recommended by the company’s board of directors. A shareholder who signs and returns a proxy may revoke it at any time before it is voted by attending the annual meeting and electing to vote in person, by notifying the secretary of the company in writing, or by duly executing a proxy bearing a later date.

      The affirmative vote of a plurality of the votes cast at the annual meeting is required for the election of directors. Abstentions will not be counted as votes for or against any director nominee or any other matter considered at the annual meeting. The board of directors knows of no other matters that are to be brought to a vote at the annual meeting. If any other matter does come before the annual meeting, the persons appointed in the proxy or their substitutes will vote in accordance with their best judgment on such matters.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

      The following persons are known by the company to be the beneficial owners of more than 5% of the outstanding shares of the company’s common stock. The following information is based solely upon information set forth in Schedules 13G filed by such persons with the Securities and Exchange Commission.

		Amount and
		Nature of
		Beneficial			Percent
Name and Address of Beneficial Owner		Ownership			of Class
Bank of America Corporation			1,329,437	(1)		5.6	%
	100 North Tryon Street, Floor 25
	Bank of America Corporate Center
	Charlotte, North Carolina 28255
Dimensional Fund Advisors Inc.			1,196,445	(2)		5.0	%
	1299 Ocean Avenue, 11th Floor
	Santa Monica, California 90401

(1)	Bank of America, the parent holding company of Bank of America, NA and Columbia Management Advisors, LLC, an investment advisor, reported that it has shared voting power with respect to 1,052,053 shares and shared dispositive power with respect to 1,329,437 shares.
(2)	Dimensional, an investment advisor, reported that it has sole voting and dispositive power with respect to 1,196,445 shares.

CORPORATE GOVERNANCE

Corporate Governance Guidelines

      The company’s board of directors has approved a set of Corporate Governance Guidelines recommended by the company’s nominating and corporate governance committee. These guidelines address such matters as director qualifications, director nominations, board composition, director meetings, board committees and other matters. The board of directors believes such guidelines to be appropriate for the company in its effort to maintain “best practices” as to corporate governance. You may access a copy of the company’s Corporate Governance Guidelines on the “Investor Relations” section of the company’s website atwww.ocharleysinc.com.

Director Independence

      The board has determined that each of the following directors is an “independent director” within the meaning of Marketplace Rule 4200(a)(15) of the National Association of Securities Dealers, Inc. (the “NASD”):

William F. Andrews	Dale W. Polley
Richard Reiss, Jr.	G. Nicholas Spiva
John E. Stokely	H. Steve Tidwell
Robert J. Walker	Shirley A. Zeitlin

      During 2005, the independent directors met in executive session at which only independent directors were present following each of the regular quarterly meetings of the board. Richard Reiss, Jr. acted as the chair for the executive sessions. In his capacity as chair for the executive sessions, Mr. Reiss also advises the chairman of the board with respect to information needs relating to board meetings and matters addressed at the executive sessions relating to the performance of the chairman and senior officers of the company and performs other duties the board may from time to time delegate to him.

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Director Candidates

      The company’s Corporate Governance Guidelines contain membership criteria that apply to nominees for a position on the company’s board of directors. The company’s board of directors has created a nominating and corporate governance committee whose responsibilities include assisting the board of directors in identifying qualified individuals to become board members, determining the composition of the board of directors and its committees, monitoring a process to assess board effectiveness and developing and implementing the company’s Corporate Governance Guidelines. The responsibility of the nominating and corporate governance committee is to recommend nominees who would be the most effective, in conjunction with the other members of the board, in collectively serving the long-term interests of the shareholders. The nominating and corporate governance committee has not adopted any specific minimum qualifications that must be met by a nominee or any specific qualities or skills that are necessary for one or more of the directors to possess. Rather, the nominating and corporate governance committee may consider all factors it considers appropriate in its assessment of candidates for board membership, which may include:

•  ensuring that the board of directors, as a whole, consists of individuals with various and relevant career experience, relevant technical skills, business knowledge and experience, financial expertise (including expertise that could qualify a director as an “audit committee financial expert,” as that term is defined by the rules of the Securities and Exchange Commission), and local and community ties;

•  individual qualifications, including strength of character, mature judgment, time availability, familiarity with the company’s business and industry, independence of thought and an ability to work collegially; and

•  the extent to which the candidate would fill a need on the board of directors.

      Directors must be willing to devote sufficient time to carrying out their duties and responsibilities effectively, and should be committed to serve on the board of directors for an extended period of time.

Process for Identifying Candidates

      The nominating and corporate governance committee has no specifically defined process for identifying and evaluating nominees, but seeks to identify potential candidates for membership on the company’s board of directors through conversations with members of the board of directors, senior management and other constituencies. The nominating and corporate governance committee utilizes a third party search firm to identify or evaluate or assist in identifying or evaluating potential nominees. The nominating and corporate governance committee is also responsible for reviewing the qualifications and performance of incumbent directors to determine to recommend them to the board of directors as nominees for re-election. Director nominees Gregory L. Burns and Robert J. Walker are incumbent directors standing for re-election. The nominating and corporate governance committee assessed the nominees recommended for consideration as well as other possible candidates recommended by the chief executive officer, other members of the board and the search firm engaged by the committee. Following assessment of the candidates’ qualifications and suitability, the nominating and corporate governance committee recommended each of the nominees to the board of directors to be presented for shareholder approval at the annual meeting.

      The nominating and corporate governance committee also considers nominees proposed by the company’s shareholders in accordance with the provisions contained in the company’s bylaws. Nominations made by shareholders must be made by written notice setting forth the information required by the company’s bylaws received by the secretary of the company at least 120 days in advance of the anniversary date of the proxy statement for the previous year’s annual meeting for an election of directors at an annual meeting, or within ten days of the date on which notice of a special meeting for the election of directors is first given to shareholders for an election of directors at a special meeting. Shareholders may propose nominees for consideration by the nominating and corporate governance committee by submitting the names and supporting information to: Secretary, O’Charley’s Inc., 3038 Sidco Drive, Nashville, Tennessee 37204.

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Code of Conduct and Business Ethics Policy

      The company has a Code of Conduct and Business Ethics Policy (the “code of conduct”) that applies to all of the company’s employees, officers and directors. The purpose of the code of conduct is to, among other things, provide written standards that are reasonably designed to deter wrongdoing and to promote honest and ethical conduct; full, fair, accurate, timely and understandable disclosure in reports and documents that the company files with the Securities and Exchange Commission and other public communications by the company; compliance with applicable governmental laws, rules and regulations; prompt internal reporting of violations of the code of conduct; and accountability for adherence to the code of conduct.

      Under the Sarbanes-Oxley Act of 2002 and the Securities and Exchange Commission’s related rules, the company is required to disclose whether it has adopted a code of ethics that applies to the company’s principal executive officer, principal financial officer, principal accounting officer or controller or persons performing similar functions. The company’s chief executive officer and senior financial officers are bound by the company’s code of conduct which contains provisions consistent with the Securities and Exchange Commission’s description of a code of ethics. Each of these officers are required to read and certify that he or she has read, understands and complied with the code of conduct.

      A current version of the company’s code of conduct can be obtained from the “Investor Relations” section of the company’s website atwww.ocharleysinc.com. The company intends to disclose any legally required amendments to, or waivers from, the code of conduct with respect to its directors and officers in accordance with the rules and regulations of the Securities and Exchange Commission and the NASD. If such disclosure is made on the company’s website, it will be located in the “Investor Relations” section of the company’s website atwww.ocharleysinc.com. A waiver of any provision of the code of conduct with respect to any employee at the level of director and above may only be given by the audit committee.

Communications with Members of the Board

      The company’s board of directors has established procedures for the company’s shareholders to communicate with members of the board of directors. Shareholders may communicate with any of the company’s directors by writing to them c/o O’Charley’s Inc., 3038 Sidco Drive, Nashville, Tennessee 37204. Shareholders may also communicate with our directors by sending an email to boardofdirectors@ocharleys.com. Shareholders may communicate with the chair of any board committee by sending an email to auditchair@ocharleys.com (audit committee), nomgovchair@ocharleys.com (nominating and corporate governance committee) or compchair@ocharleys.com (compensation and human resources committee), or with our independent directors as a group by sending an email to outsidedirectors@ocharleys.com.

Board Member Attendance at Annual Meeting

      Pursuant to the company’s Corporate Governance Guidelines, each member of the board of directors should seek to attend the annual meeting of shareholders. All of the company’s incumbent directors attended the 2005 annual meeting of shareholders.

Director Stock Ownership Policy

      The company’s board of directors has adopted a policy that each director who has served on the board of directors for three years or more should own at least 12,750 shares of the company’s common stock. Under the terms of the policy, the board may from time to time evaluate whether exceptions should be made based on the personal circumstances of any director.

Director Education Policy

      The company’s board of directors has established a policy regarding continuing education for members of the board of directors. Under the terms of the policy, directors are required to participate in at least eight hours of continuing education programs annually. Directors are reimbursed for up to $2,500 for each program attended plus expenses.

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PROPOSAL 1:  ELECTION OF DIRECTORS

      The company’s board of directors is divided into three classes, each class to be as nearly equal in number as possible. At each annual meeting, directors of the class whose term expires in that year are elected for a three-year term. Two directors will be elected at the annual meeting. Upon the recommendation of the nominating and corporate governance committee, the board of directors has nominated Gregory L. Burns and Robert J. Walker as the two nominees for election as Class I directors for a three-year term expiring at the 2009 annual meeting and until their successors are elected and qualified. Each nominee is currently a director of the company and was elected as a director of the company by the shareholders at the 2003 annual meeting. The terms of the Class II and Class III directors will expire at the annual meeting in 2007 and 2008, respectively.

      Each nominee has consented to be a candidate and to serve, if elected. If a nominee becomes unable or unwilling to serve as a director, the persons named in the form of proxy have advised the company that they will vote for such substitute or substitutes as may be designated by the board of directors.

      The following table contains as of April 3, 2006 certain information concerning: (i) the current directors of the company, including the nominees; (ii) each of the currently serving named executive officers; and (iii) the current directors and executive officers as a group.

								Shares of
								Common Stock
								Beneficially
								Owned on
			Director		Term			April 3,		Percent
Name	Age		Since		Expires		Position	2006(1)		of Class
Gregory L. Burns(2)		51		1990		2006	Chairman of the Board and Chief Executive Officer		533,869		2.3	%
Lawrence E. Hyatt		51		—		—	Chief Financial Officer, Secretary and Treasurer		50,049		*
Randall C. Harris		55		—		—	Chief Human Resources Officer		37,504		*
John R. Grady		53		—		—	Concept President — Ninety Nine Restaurant & Pub		29,416		*
Herman A. Moore, Jr.		54		—		—	President, Commissary Operations		58,370		*
Robert J. Walker(2)(3)		65		2000		2006	Director		60,750		*
William F. Andrews(4)		74		2004		2007	Director		13,625		*
John E. Stokely(4)		53		2004		2007	Director		11,625		*
H. Steve Tidwell(2)(5)		63		1988		2007	Director		88,500		*
Dale W. Polley(2)(3)(4)		56		2001		2008	Director		38,750		*
Richard Reiss, Jr.(2)(5)		62		1983		2008	Director		135,000		*
G. Nicholas Spiva(3)(5)		54		1985		2008	Director		58,650		*
Shirley A. Zeitlin(3)(5)		71		1996		2008	Director		43,500		*
All current directors and executive officers as a group (16 persons)									1,288,308		5.5	%

*

less than one percent

(1)

Includes the following shares that the named individuals are entitled to acquire within 60 days of the date hereof upon the exercise of options: Gregory L. Burns — 153,838 shares; John R. Grady — 480 shares; Herman A. Moore, Jr. — 27,890 shares; Richard Reiss, Jr. — 24,002 shares; G. Nicholas Spiva — 24,000 shares; H. Steve Tidwell — 24,000 shares; Shirley A. Zeitlin — 24,000 shares; Robert J. Walker — 24,750 shares; Dale W. Polley — 21,250 shares; and all current directors and executive officers as a group (16 persons) — 384,860 shares. The shares described in this note are deemed to be outstanding for the purpose of computing the percentage of outstanding common stock owned by such persons individually and by the group, but are not deemed to be outstanding for the purpose of computing the percentage ownership of any other person.

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(2)	Member of the executive committee.
(3)	Member of the nominating and corporate governance committee.
(4)	Member of the audit committee.
(5)	Member of the compensation and human resources committee.

      The following is a brief summary of the business experience of each of the directors of the company, including the nominees.

     Gregory L. Burnshas served as Chairman of the Board and Chief Executive Officer since February 1994. Mr. Burns, a director since 1990, served as President from September 1996 to May 1999 and from May 1993 to February 1994, as Chief Financial Officer from October 1983 to September 1996, and as Executive Vice President and Secretary from October 1983 to May 1993. Mr. Burns is a director of Pinnacle Financial Partners, a bank holding company.

     Richard Reiss, Jr.is the Chairman of Georgica Advisors, LLC, a private investment management firm. Mr. Reiss is also a director of The Lazard Funds, Inc.

     G. Nicholas Spivahas served as President of Spiva-Hill Investments, a commercial real estate development company, since 1975. Mr. Spiva was an owner of the original O’Charley’s restaurant prior to its acquisition by the company.

     H. Steve Tidwellhas served as Chairman of SPFS, Inc., which operates 21 unaffiliated restaurants in five southern states, since January 2000 and served as President of SPFS from February 1991 to January 2000. From January 1987 to February 1991, Mr. Tidwell served as Secretary and Treasurer of SPFS. Mr. Tidwell served as Vice President of Real Estate and Construction at Shoney’s, Inc. from December 1978 to January 1987.

     Shirley A. Zeitlin serves as Chief Executive Officer of Shirley Zeitlin & Co. Realtors, a real estate brokerage firm. Ms. Zeitlin has served as President and a member of the board of the Tennessee Association of Realtors and the Nashville Board of Realtors. She has also served as a member of the board of the Federal Reserve Bank of Nashville, where she served as chairman in 1991. Ms. Zeitlin serves as a director of numerous civic and charitable organizations.

     Robert J. Walker, an attorney, has been a partner in Walker, Bryant, Tipps & Malone, a law firm, since January 2000. From time to time, the company has engaged Walker, Bryant, Tipps & Malone to provide legal services to the company. Prior to forming Walker, Bryant, Tipps & Malone, Mr. Walker served in various capacities, including as a member, with Bass, Berry & Sims PLC, the company’s outside general counsel, for over 31 years.

     Dale W. Polley is currently retired. Mr. Polley was a founder in February 2000 of Pinnacle Financial Partners, a bank holding company, and serves as a member of its Board of Directors. Mr. Polley served as a Director for the Federal Reserve Bank of Atlanta, Nashville Branch from January 1995 to December 2001. Mr. Polley served as President and Vice Chairman of First American Corporation, a bank holding company, from 1991 to 2000.

     William F. Andrews has served as chairman of the board of directors of Corrections Corporation of America, an owner and operator of privatized correctional and detention facilities, since August 2000. Mr. Andrews has been a principal of Kohlberg & Company, a private equity firm specializing in middle market investing since 1995. He is currently the chairman of the board of directors of Katy Industries, Inc., a publicly-traded manufacturer and distributor of consumer electric corded products and maintenance cleaning products, among other product lines. Mr. Andrews served as the chairman of Scovill Fasteners Inc., a manufacturing company, from 1995 to 2001 and served as the chairman of Northwestern Steel and Wire Company, a manufacturing company, from 1998 to 2001. Mr. Andrews also currently serves as a director of Black Box Corporation and Trex Corporation.

     John E. Stokely is currently a self-employed business consultant. Mr. Stokely was the president, chief executive officer and chairman of the board of directors of Richfood Holdings, Inc., a retail food chain and

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wholesale grocery distributor, from January 1997 until August 1999. Mr. Stokely served on the board of directors and as president and chief operating officer of Richfood Holdings, Inc. from April 1995 to January 1997 and served as executive vice president and chief financial officer from 1990 to April 1995. Mr. Stokely also serves as a director of SCP Pool Corporation, a supplier of swimming pool supplies and related products, Transaction Systems Architects, Inc., a provider of enterprisee-payments ande-commerce solutions, and Performance Food Group Company, a marketer and distributor of national and private label food and food-related products.

      The board of directors held 9 meetings during the fiscal year ended December 25, 2005. Each of the incumbent directors attended more than 75% of the aggregate number of meetings of the board of directors and each committee on which he or she served.

Board Committees

      The board of directors has standing executive, audit, compensation and human resources and nominating and corporate governance committees. The membership and functions of the committees are as follows:

     Executive Committee — This committee exercises all the powers of the board of directors between scheduled meetings of the board of directors, subject to certain limitations of Tennessee law. Members of the executive committee are Messrs. Burns, Polley, Reiss, Tidwell and Walker. The executive committee held 9 meetings during 2005.

     Audit Committee — The company has a separately-designated standing audit committee established in accordance with applicable rules of the Securities Exchange Act of 1934. Members of the audit committee are Messrs. Polley, Andrews and Stokely, each of whom is “independent,” as defined by the applicable rules of the Securities and Exchange Commission and the NASD’s listing standards. The audit committee operates pursuant to the terms of a written Audit Committee Charter adopted by the board of directors, a copy of which is attached to this proxy statement as Appendix A and is available on the “Investor Relations” section of the Company’s website atwww.ocharleysinc.com. The Audit Committee Charter requires that the audit committee have at least one member who has accounting or related financial management experience or background sufficient to be an “audit committee financial expert” as defined by the Securities and Exchange Commission. The board of directors has determined that Dale W. Polley is an “audit committee financial expert” as that term is defined in Item 401(h) of Regulation S-K promulgated by the Securities and Exchange Commission and is “independent,” as that term is used in Item 7(d)(3)(iv) of Schedule 14A under the Securities Exchange Act of 1934.

      The audit committee ensures that the financial affairs of the company are subject to proper, effective and continuing independent audits and control procedures. The audit committee also approves the selection, evaluation and compensation of the company’s independent auditor, confers independently with the company’s independent auditor, serves as a liaison between the board of directors and the company’s independent auditor, and reviews various corporate policies, including those relating to accounting and internal control matters.

      Pursuant to the Audit Committee Charter, company management, internal auditors, the independent auditor, outside counsel and other consultants or advisors may attend each meeting or portions thereof as required by the audit committee. The audit committee held 12 meetings in 2005.

     Compensation and Human Resources Committee — This committee evaluates the performance of the company’s officers, reviews and approves compensation for officers, establishes bonuses for the company’s management, administers the company’s stock incentive plans and reviews significant human resources processes for the company to ensure the overall personnel needs of the company are being met. The compensation and human resources committee operates pursuant to the terms of a written Compensation and Human Resources Committee Charter adopted by the board of directors, a copy of which is available on the “Investor Relations” section of the Company’s website atwww.ocharleysinc.com. Members of the compensation and human resources committee are Messrs. Reiss, Spiva and Tidwell and Ms. Zeitlin, each of whom is independent as defined by the listing standards of the NASD. The compensation and human resources committee held 4 meetings during 2005.

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     Nominating and Corporate Governance Committee —This committee assists the board of directors in identifying qualified individuals to become board members, in determining the compositions of the board of directors and its committees, in monitoring a process to assess board effectiveness and in developing and implementing the company’s corporate governance guidelines. The nominating and corporate governance committee is also responsible for developing and recommending to the board of directors an annual self-evaluation process for the board and its committees and overseeing the annual self-evaluation process. The nominating and corporate governance committee operates pursuant to the terms of a written Nominating and Corporate Governance Committee Charter adopted by the board of directors, a copy of which is available on the “Investor Relations” section of the Company’s website atwww.ocharleysinc.com. Members of the nominating and corporate governance committee are Messrs. Walker, Polley and Spiva and Ms. Zeitlin, each of whom is independent as defined by the listing standards of the NASD. The nominating and corporate governance committee held 8 meetings during 2005.

Director Compensation

      During 2005, non-employee directors received an annual retainer of $15,000 payable in cash in quarterly installments, a fee of $3,000 for each board of directors meeting attended in person, a fee of $3,000 for each committee meeting attended in person (other than executive committee meetings), and a fee ranging from $500 to $1,000 for each board of directors meeting or committee meeting in which the director participated by telephone (other than executive committee meetings), and were reimbursed for travel expenses associated with serving as a director. In addition, each non-employee member of the executive committee was paid a fee of $3,000 per quarter. Directors who served as chairs of each of the audit committee, compensation and human resources committee and nominating and corporate governance committee received an annual fee of $4,000 payable in cash in quarterly installments. Directors who are officers or employees of the company receive no compensation for serving as members of the board of directors. The aggregate amount of fees paid to the non-employee directors for the 2005 fiscal year was $482,500. The company also matches charitable contributions by its non-employee directors up to an aggregate of $2,000 annually for each non-employee director.

      Each non-employee director also receives a grant of 5,625 shares of restricted stock under the terms of the 2000 Stock Incentive Plan on the date of his or her initial election or appointment to the board. These shares vest in three equal, annual installments beginning on the date of the next annual meeting of shareholders following the date of grant. In addition, on the date of each annual meeting, each non-employee director who will continue as a director following such meeting receives a grant of 3,000 shares of restricted stock under the terms of the 2000 Stock Incentive Plan. These shares vest in three equal, annual installments beginning on the date of the next annual meeting of shareholders following the date of grant.

      The board of directors may in the future adjust the compensation of directors as it deems advisable and consistent with the best interests of the company’s shareholders and the financial abilities of the company.

Section 16(a) Beneficial Ownership Reporting Compliance

      Section 16(a) of the Securities Exchange Act of 1934 requires the company’s officers and directors, and persons who own more than ten percent of the company’s common stock, to file reports of ownership and changes in ownership with the Securities and Exchange Commission. Officers, directors and greater than ten percent shareholders are required by regulation to furnish the company with copies of all Section 16(a) forms they file.

      Based solely on its review of the copies of such forms received by it, the company believes that all filing requirements applicable to its officers, directors and greater than ten percent beneficial owners were complied with during the fiscal year ended December 25, 2005, except that each of Messrs, Polley and Stokely filed a Form 4 reporting one transaction that was not reported on a timely basis relating to the purchase of shares of common stock and Mr. Harris filed a Form 4 reporting one transaction that was not reported on a timely basis relating to the grant of shares of restricted stock.

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EXECUTIVE COMPENSATION

      The following table summarizes the compensation paid or accrued by the company during the three fiscal years ended December 25, 2005 for (i) the chief executive officer of the company, (ii) the four other most highly compensated executive officers of the company and (iii) Steven J. Hislop and Suzanne M. Osterberg who served as executive officers during 2005 but were not executive officers at year end (collectively, the “named executive officers”).

Summary Compensation Table

								Long-Term Compensation
								Awards				Payouts
				Annual Compensation				Restricted		Securities
Name and								Stock		Underlying		LTIP		All Other
Principal Position		Year		Salary($)		Bonus($)		Awards($)		Options(#)(1)		Payouts($)(2)		Compensation($)(3)
Gregory L. Burns			2005		574,478		—		—		—		—		8,617
	Chairman of the Board		2004		474,960		300,000		—		—		—		23,249
	and Chief Executive		2003		474,960		—		—		79,200		130,833		7,052
	Officer
Lawrence E. Hyatt(4)(5)			2005		377,876		35,000		—		—		—		69,237
	Chief Financial Officer,		2004		20,000		—		195,690		—		—		—
	Secretary, and Treasurer
Randall C. Harris(6)(7)			2005		80,769		48,750		283,400						92,526
	Chief Human
	Resources Officer
John R. Grady(8)			2005		269,984		25,000		—		—		—		81,204
	Concept President — Ninety		2004		255,641		103,764		—		—		—		87,001
	Nine Restaurant & Pub		2003		155,800		29,086		—		24,000		—		85,345
Herman A. Moore, Jr.			2005		237,748		21,000								3,881
	President, Commissary		2004		213,325		43,875		—		—		—		7,716
	Operations		2003		183,902		—		—		11,220		38,381		3,473
Steven J. Hislop(9)			2005		375,344		25,440		—		—		—		5,630
	Former President,		2004		354,960		198,000		—		—		—		16,589
	O’Charley’s Concept		2003		354,960		—		—		42,240		102,933		5,310
Suzanne M. Osterberg(10)			2005		246,786		22,000		—		—		—		4,032
	Former Chief Support		2004		209,132		74,750		—		—		—		8,516
	Officer		2003		168,888		—		—		10,880		18,083		2,533

(1)	Number of stock options granted under the company’s stock option plans.
(2)	Represents the value of stock issued upon the vesting of a portion of restricted stock units awarded in February 2002 based on the company achieving targeted earnings per share in fiscal 2002. The value of the payout is based upon the closing price of the company’s common stock of $22.16 on February 4, 2003, the date the compensation and human resources committee determined that the fiscal 2002 targets had been met. The restricted stock units were issued pursuant to the company’s 2000 Stock Incentive Plan. The restricted stock units were capable of vesting in three equal, annual installments in the event the company achieved annual targets for earnings per share established by the compensation and human resources committee. Persons holding restricted stock units were not entitled to receive dividends prior to the date of vesting. None of the restricted stock units granted in February 2002 vested in 2004 or 2005 based on the company not meeting the targeted earnings per share established by the compensation and human resources committee for fiscal 2003 and 2004, respectively. The number of restricted stock units originally issued to the named executive officers were 17,714 to Mr. Burns, 13,935 to Mr. Hislop, 2,450 to Ms. Osterberg and 5,196 to Mr. Moore.
(3)	Includes amounts contributed by the company to the company’s deferred compensation plan and 401(k) plan. In addition, the amounts include $76,779, $76,219 and $75,453 for 2005, 2004 and 2003, respectively, paid to Mr. Grady under the company’s agreement with the former owners of Ninety Nine Restaurant & Pub to pay a total of $1.0 million per year, plus accrued interest, through 2007 to certain key employees of Ninety Nine who continue to be employed at the time of such payments. The amounts also include relocation expenses paid in fiscal 2005 to Mr. Hyatt and Mr. Harris in the amount of $69,237 and $92,526, respectively.
(4)	Mr. Hyatt became the company’s Chief Financial Officer, Secretary and Treasurer on November 15, 2004. For a summary of his compensation, see “Agreements with Messrs. Hyatt and Harris” below.
(5)	In connection with his employment by the company, the company awarded 11,000 shares of restricted stock to Mr. Hyatt on November 15, 2004 that vests ratably over three years. Mr. Hyatt is entitled to

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receive any dividends paid on the shares of restricted stock. The closing price of the company’s common stock on the date of grant was $17.79 resulting in a value of $195,690 on the date of the grant.

(6)	Mr. Harris became the company’s Chief Human Resources Officer on October 3, 2005. Mr. Harris’ current annual base salary is $340,000. Mr. Harris’ bonus for fiscal 2005 was based on his contractual agreement with the company at the commencement of his employment. See “Agreements with Messrs. Hyatt and Harris.”
(7)	In connection with his employment by the company, the company awarded 20,000 shares of restricted stock to Mr. Harris on October 3, 2005 that will vest ratably over three years. Mr. Harris will be entitled to receive any dividends on the shares of restricted stock. The closing price of the company’s common stock on the date of grant was $14.17, resulting in a value of $283,400 on the date of grant.
(8)	Mr. Grady became an employee of the company on January 27, 2003, the date the company acquired Ninety Nine Restaurant & Pub.
(9)	Mr. Hislop resigned his employment effective January 1, 2006. Pursuant to the terms of a Severance Agreement and General Release and in partial consideration for his agreement to refrain from certain competing activities, the company agreed to pay Mr. Hislop the aggregate sum of $526,519, payable at the weekly rate of $7,115 with a final lump sum of $99,612 due March 1, 2007.

(10)  Mr. Osterberg ceased serving as the company’s Chief Support Officer on December 25, 2005 and currently serves as an Operations Director for the O’Charley’s concept.

Option Grants In Last Fiscal Year

      The company did not grant any options to the named executive officers during the fiscal year ended December 25, 2005.

Aggregated Option Exercises and Year-End Value Table

      The following table provides information with respect to unexercised options to purchase shares held by the named executive officers as of December 25, 2005. None of the named executive officers exercised options to purchase shares issued pursuant to the company’s stock option plans during the fiscal year ended December 25, 2005. Neither Mr. Hyatt nor Mr. Harris has held or exercised options to purchase shares of the company’s common stock.

					Number of Securities
					Underlying Unexercised				Value of Unexercised
					Options Held at				In-the-Money Options at
	Shares				December 25, 2005				December 23, 2005 ($)(1)
	Acquired		Value
Name	on Exercise (#)		Realized ($)		Exercisable		Unexercisable		Exercisable		Unexercisable
Gregory L. Burns		—		—		207,437		14,663		325,090		54,191
John R. Grady		—		—		24,000		—		—		—
Herman A. Moore, Jr.		—		—		39,170		7,050		36,055		26,120
Steven J. Hislop		—		—		123,909		10,831		176,932		39,869
Suzanne M. Osterberg		—		—		65,529		351		61,172		1,229

(1)  Based on the closing price of the company’s common stock on the Nasdaq National Market on December 23, 2005 ($15.58).

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Long-Term Incentive Plans — Awards in Last Fiscal Year

      The following table provides information with respect to performance based restricted stock awards granted to the named executive officers pursuant to long-term incentive plans during the fiscal year ended December 25, 2005. Neither Mr. Hyatt nor Mr. Harris received any performance based restricted stock awards during the fiscal year ended December 25, 2005.

					Estimated Future Payouts
			Performance or		Under Non-Stock
	Number of		Other Period		Price-Based Plans (#)
	Shares, Units		Until Maturation
Name	or Other Rights(1)		or Payout		Threshold			Target			Maximum
Gregory L. Burns		55,861		12/27/04-12/30/07		(1	)		(1	)		55,861
John R. Grady		9,613		12/27/04-12/30/07		(1	)		(1	)		9,613
Herman A. Moore, Jr.		8,241		12/27/04-12/30/07		(1	)		(1	)		8,241
Steven J. Hislop		25,484		12/27/04-12/30/07		(1	)		(1	)		25,484
Suzanne M. Osterberg		8,633		12/27/04-12/30/07		(1	)		(1	)		8,633

(1)  Represents shares of performance based restricted stock that vest over a three year period following the date of grant dependent upon the company meeting certain levels of cumulative growth in earnings per share. If the cumulative annual performance targets are achieved, up to 25% of the awards may vest in each of the first and second years and all unvested amounts may vest upon meeting the cumulative performance target in the third year. Any unvested amounts at the end of the third year will automatically be forfeited.

Equity Compensation Plans

      The table below sets forth the following information as of December 25, 2005 with respect to the compensation plans (including individual compensation arrangements) under which the company’s equity securities are authorized for issuance, aggregated by (i) all compensation plans previously approved by the company’s security holders and (ii) all compensation plans not previously approved by the company’s security holders:

•  the number of securities to be issued upon the exercise of outstanding options;

•  the weighted-average exercise price of the outstanding options; and

•  the number of securities remaining available for future issuance under the plans.

      In addition to options, warrants and rights, the company’s stock incentive plan allows awards to be made in the form of restricted stock or other forms of equity-based compensation. Shares of restricted stock previously issued by the company are not reflected in the table below.

      Except as noted in the following sentences, all of the company’s stock compensation plans have been approved by the company’s shareholders. In November 2004, the company granted Lawrence E. Hyatt, the company’s Chief Financial Officer, Secretary and Treasurer, an aggregate of 11,000 shares of restricted stock that will vest ratably over three years and 20,000 shares of restricted stock that will vest over three years dependent upon the company meeting cumulative earnings per share targets which were established by the company’s compensation and human resources committee. In October 2005, the company granted Randall C. Harris, the company’s Chief Human Resources Officer, 20,000 shares of restricted stock that

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will vest ratably over three years. These restricted stock awards constitute inducement awards under NASDAQ Marketplace Rule 4350 and were not approved by the company’s shareholders.

					Number of
					securities
					remaining available
	Number of		Weighted-		for future issuance
	securities to be		average exercise		under equity
	issued upon		price of		compensation
	exercise of		outstanding		plans (excluding
	outstanding		options,		securities reflected
	options, warrants		warrants and		in the first
Plan category	and rights		rights		column)
Equity compensation plans approved by security holders		2,789,320	$	17.55		378,945
Equity compensation plans not approved by security holders		—		—		—
Total		2,789,320	$	17.55		378,945

Change in Control Agreements

      The company has entered into Severance Compensation Agreements with each of Messrs. Burns, Hyatt and Harris. Each severance agreement terminates upon the earliest of (i) one year (in the case of Mr. Burns) or three years (in the case of Messrs. Hyatt and Harris) from the date of the agreement if no change in control (as such term is defined in the severance agreements) has occurred, (ii) termination of the executive’s employment as a result of death, disability, retirement, or cause (as such terms are defined in the severance agreements), or by the executive other than for good reason (as such term is defined in the severance agreements), and (iii) 24 months from the date of a change in control, in the case of Mr. Burns, and 18 months from the date of a change in control, in the case of Messrs. Hyatt and Harris. Upon a change in control of the company, the executive is entitled to a lump sum payment if he is terminated within 24 months, in the case of Mr. Burns, and 18 months, in the case of Messrs. Hyatt and Harris, of such change in control other than for cause, disability, or retirement (as such terms are defined in the severance agreements) or if he terminates employment with the company following a change in his position, duties, responsibilities or status with the company, a reduction in his base salary, or a relocation of the company’s principal executive offices during the term of the severance agreement. In the event of such termination, Mr. Burns’ agreement provides that the company shall pay to him as severance pay in a lump sum, in cash, an amount equal to the sum of (i) three times the average of the aggregate annual salary paid to him by the company during the three calendar years preceding the change in control and (ii) three times the highest bonus compensation paid to him for any of the three calendar years preceding the change in control. The agreements for each of Messrs. Hyatt and Harris provide that the company shall pay to him as severance pay in a lump sum, in cash, an amount equal to the sum of (i) 150% of the average of the aggregate annual salary paid to him by the company during the three calendar years preceding the change in control and (ii) 150% of the highest bonus compensation paid to him for any of the three calendar years preceding the change in control. In no event, however, shall the lump sum severance payment, either alone or together with other payments which the executive has the right to receive from the company, exceed an amount which would be deemed to be a “parachute payment” under Section 280G of the Internal Revenue Code of 1986, as amended.

Agreements with Messrs. Hyatt and Harris

      The company is party to a Letter Agreement, a Non-Compete/Severance Letter Agreement and a Severance Compensation Agreement with each of Lawrence E. Hyatt and Randall C. Harris.

      Under the terms of the agreement with Mr. Hyatt, his annual base salary was initially set at $350,000 (currently, $370,000) and he was eligible to receive an annual incentive bonus for fiscal 2005 ranging from 0% to 120% of his base salary based on the company meeting certain performance criteria established by the compensation and human resources committee. The company has agreed to provide Mr. Hyatt with an annual car allowance of $25,000 and he is eligible to receive all management level employee benefits. The

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company also agreed, subject to limitations, to pay for or reimburse him for his costs (on an after tax basis) to relocate to the Nashville area.

      Under the terms of the agreement with Mr. Harris, his annual base salary was initially set at $325,000 (currently, $340,000). Mr. Harris was also entitled to receive a prorated bonus for fiscal 2005 at no less than the target level pursuant to which he received a bonus for fiscal 2005 of $48,750. The company has agreed to provide Mr. Harris with an annual car allowance of $25,000 and he is eligible to receive all management level employee benefits. The company also agreed, subject to limitations, to pay for or reimburse him for his costs (on an after tax basis) to relocate to the Nashville area.

      In connection with his employment, the company also granted Mr. Hyatt an aggregate of 11,000 shares of restricted stock that will vest ratably over three years and 20,000 shares of restricted stock that will vest over three years in the event the company meets certain cumulative earnings per share targets which were established by the compensation and human resources committee. The company did not meet the criteria established for fiscal 2005 and, accordingly, none of the performance based restricted stock award vested in 2005. In connection with his employment, the company granted Mr. Harris an aggregate of 20,000 shares of restricted stock that will vest ratably over three years.

      In partial consideration for their agreement to refrain from competing with the company during the term of their employment and for a period of 12 months following the termination of their employment, the company has agreed to make certain severance payments to Mr. Hyatt and Mr. Harris in the event that their employment is terminated without cause (as defined in the Non-Compete/Severance Letter Agreement) or if they terminate employment with good reason (as defined in the Non-Compete/Severance Letter Agreement). If such a termination occurs, Mr. Hyatt or Mr. Harris, as applicable, will be entitled to salary continuation for a period of 12 months, payment of the target bonus amount for the fiscal year in which the termination occurs and, subject to limitations, continuation of employee benefits for a period of 12 months.

      Each of Mr. Hyatt and Mr. Harris is also party to a Severance Compensation Agreement with the company. See “Change in Control Agreements” for a description of the terms of the Severance Compensation Agreement.

Compensation Committee Interlocks

      During fiscal year 2005, the compensation and human resources committee of the board of directors was composed of Messrs. Reiss, Spiva and Tidwell and Ms. Zeitlin. None of these persons has at any time been an officer or employee of the company or any of its subsidiaries. In addition, there are no relationships among the company’s executive officers, members of the compensation and human resources committee or entities whose executives serve on the board of directors or the compensation and human resources committee that require disclosure under applicable Securities and Exchange Commission regulations.

Compensation and Human Resources Committee Report

      The company’s executive compensation program is administered by the compensation and human resources committee, which is composed of four non-employee directors of the company. The compensation and human resources committee is responsible for overseeing the company’s overall compensation structure, policies and programs and approves compensation actions involving the senior management of the company, including the named executive officers, and establishes all compensation for the chief executive officer. The committee also approves long-term incentive awards for the named executive officers and other key employees of the company, and reviews and administers the cash and equity incentive compensation and other compensation plans of the company. Committee members have direct access to independent compensation consultants and outside survey data. The committee reports regularly to the board of directors on its activities.

      Under the supervision of the compensation and human resources committee, the company has developed and implemented compensation policies, plans and programs that are intended to enhance the profitability of the company by aligning the financial interests of the company’s management with those of

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its shareholders. In furtherance of these goals, the company relies on a combination of base salaries, cash bonuses and long-term stock based incentive compensation to attract and retain senior management of outstanding abilities and to motivate them to perform to the full extent of their abilities.

      The committee’s compensation strategy is designed to ensure that members of senior management are rewarded appropriately for their contribution to company growth and profitability and that the compensation strategy supports organization objectives and shareholder interests. To that end, base salaries are set below the competitive market, but with annual bonuses and long-term incentives resulting in compensation approximating competitive markets if targeted goals are met and in excess of competitive markets when performance meets superior targets established by the committee. Following is a discussion of each of the elements of the executive compensation program along with a description of the decisions and actions taken by the committee with regard to fiscal 2005 compensation for the named executive officers, including Mr. Burns.

     Annual Compensation. Annual total cash compensation for senior management consists of base salary and a cash bonus. Setting of annual salaries in fiscal 2005 for the named executive officers was based on a review by the committee of targeted performance criteria, recommendations by the company’s chief executive officer and a review and analysis provided by an independent compensation consultant of the levels of compensation paid to senior executives by a peer group of comparable restaurant companies. Based on this review, the committee determined that the base salaries for the senior management team were below the level targeted by the committee in relation to the identified peer group. As a result, the committee determined to adjust the base salaries for the senior management team, resulting in an increase in Mr. Burns’ base salary in fiscal 2005 to $550,000 (Mr. Burns’ base salary was not increased for fiscal 2006). The committee determined that the base salaries as adjusted were consistent with its philosophy to set base salaries below the competitive market.

      Based on the committee’s evaluation of the company’s compensation strategy, the committee approved a cash bonus program for 2005 pursuant to which the committee assigned a target bonus for each member of senior management as a percentage of his or her base salary. The actual bonus would be earned based on attaining specified corporate, division (O’Charley’s, Ninety-Nine, Stoney River or Commissary) and/or individual criteria. The corporate targets were based on meeting threshold, target or superior levels of earnings per share and the division targets were based on meeting threshold, target or superior levels of operating income for the particular division. For members of senior management whose bonus was in part based on attaining individual criteria, these criteria were tailored to the individual officer, recommended to the committee by the chief executive officer and reviewed and approved by the committee. Mr. Burns’ cash bonus eligibility was based solely on the attainment of the corporate targets while bonuses for other members of senior management were based on a combination of corporate and individual targets and/or, when applicable, division targets. For 2005, the company did not achieve the threshold level of earnings per share or the targeted level of operating income for the operating divisions. Based on this analysis, and the fact that certain of the individual performance criteria had been achieved the committee approved cash bonuses in respect of 2005 for Mr. Hyatt of $35,000, Mr. Grady of $25,000, Ms. Osterberg of $22,000 and Mr. Moore of $21,000. Mr. Burns did not receive a cash bonus in respect of 2005. Pursuant to the terms of his letter agreement entered into with the company in connection with his employment by the company, Mr. Harris was entitled to receive a prorated bonus for fiscal 2005 at not less than the target level resulting in his receiving a bonus of $48,750.

     Long-Term Incentive Program. In 2005, the committee continued the long-term incentive program for senior management consisting of performance based restricted stock granted pursuant to the company’s stock incentive plan. Awards of performance based restricted stock granted in 2005 vest over a three year period, dependent upon cumulative growth in earnings per share. Based on the company not achieving targeted growth in earnings per share in fiscal 2005, none of the shares of performance based restricted stock awarded in 2004 or 2005 vested. For 2006, the committee has considered the relative merits of performance based vesting and time based vesting for restricted stock awards granted pursuant to the company’s stock incentive plan and determined to grant time based vesting awards to the recipients, including the senior management team, for 2006.

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      In November 2005, the committee recommended and the board approved, the acceleration of vesting of all “out-of-the-money” unvested options previously awarded under the company’s stock incentive plans that had an exercise price of $15.25 or higher. The $15.25 price was selected because it was higher than the price at which the company’s common stock was trading on the date of the acceleration. The committee determined that the acceleration was in the best interests of the company’s shareholders as it reduced by approximately $9.2 million the pretax stock option expense the company would have otherwise been required to record over the original option vesting period. In addition, because the options had exercise prices in excess of the market value of the company’s common stock, the committee determined that the options were not fully achieving their original objectives of incentive compensation and employee retention. The acceleration of these options resulted in the acceleration of vesting of options for an aggregate of 126,693 shares of the company’s common stock held by the named executive officers.

     Federal Income Tax Deductibility Limitations. Section 162(m) of the Internal Revenue Code, enacted as part of the Omnibus Budget Reconciliation Act in 1993, generally disallows a tax deduction to public companies for compensation over $1,000,000 paid to the company’s chief executive officer and four other most highly paid executive officers. Compensation paid to these officers in excess of $1,000,000 that does not qualify as “performance-based” under Section 162(m) cannot be claimed by the company as a tax deduction. The compensation committee believes it is appropriate to take into account the $1,000,000 limit on the deductibility of executive compensation and to seek to qualify the company’s long-term compensation awards as performance-based compensation excluded from the $1,000,000 limit. Based on the applicable tax regulations, any taxable compensation derived from awards granted pursuant to the company’s stock incentive plans (other than restricted stock awards that vest over time) should qualify as performance-based for purposes of Section 162(m). Because the amount and mix of individual compensation are based on competitive considerations as well as company and individual performance, executive officer compensation for purposes of Section 162(m) may exceed $1,000,000 in a given year. While the committee considers the tax implications of its compensation decisions, the committee believes its primary focus should be to implement compensation strategies designed to attract, retain and motivate executives.

      The tables set forth under “Executive Compensation,” and the accompanying narrative and footnotes, reflect the decisions covered by the above discussion.

Richard Reiss, Jr.       G. Nicholas Spiva       H. Steve Tidwell       Shirley A. Zeitlin

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SHAREHOLDER RETURN PERFORMANCE GRAPH

      The following graph compares the yearly percentage change in the unaudited total return on the company’s common stock against the cumulative annual total return of the Nasdaq Stock Market Total Return Index and the S&P 500 Restaurant Index commencing at the market close on December 29, 2000 and ending December 23, 2005. The following graph assumes that the value of the investment in the company’s common stock and each index was $100 at the market close on December 29, 2000 and that all dividends were reinvested.

COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*

Among O’Charley’s, Inc., The NASDAQ Stock Market (U.S.) Index

and the S&P Restaurants Index

	12/29/00		12/28/01		12/27/02		12/26/03		12/23/04		12/23/05
O’Charley’s Inc.		100.00		101.41		112.39		97.18		107.83		87.77
NASDAQ Stock Market Index		100.00		70.75		51.08		76.82		85.44		96.38
S&P 500 Restaurant Index		100.00		89.74		68.23		102.46		145.95		155.28

*  $100 invested on 12/29/00 in stock or on 12/31/00 in index-including reinvestment of dividends. Index calculated on month-end basis.

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CERTAIN TRANSACTIONS

      On January 1, 2006, the company entered into a Severance Agreement and General Release with Steven J. Hislop, the company’s former Concept President — O’Charley’s and a member of the company’s board of directors. Under the terms of the agreement, and in partial consideration for Mr. Hislop’s agreement to refrain from engaging in certain competing activities until after December 31, 2006, the company will provide him with the aggregate sum of $526,514, $426,902 of which is payable weekly at the rate of $7,115 commencing on January 1, 2006 and the remaining $99,612 of which is payable in a lump sum on March 1, 2007. In addition, if Mr. Hislop elects COBRA health insurance coverage, the company has agreed to pay the premiums for such coverage through December 31, 2006. Under the terms of the agreement, the company also agreed to extend until March 31, 2006 the time within which he may exercise certain employee stock options held by him (to the extent exercisable on the effective date of the agreement).

      On January 1, 2006, the company entered into a Severance Agreement and General Release with Richard D. May, the company’s former Chief Strategy Officer. Under the terms of the agreement, and in partial consideration for Mr. May’s agreement to refrain from engaging in certain competing activities until after December 31, 2006, the company will provide him with twelve months of salary continuation, including car allowance, at the rate of $3,846 per week, to be paid weekly for the period from the effective date of the agreement to December 31, 2006. In addition, if Mr. May elects COBRA health insurance coverage, the company has agreed to pay the premiums for such coverage through December 31, 2006. Under the terms of the agreement, the company also agreed to extend until March 31, 2006 the time within which he may exercise certain employee stock options held by him (to the extent exercisable on the effective date of the agreement).

AUDIT COMMITTEE REPORT

      The audit committee of the board of directors is composed of three directors who are independent directors as defined under the applicable rules of the Securities and Exchange Commission and the listing standards of the National Association of Securities Dealers. Currently, the members of the audit committee are Dale W. Polley, William F. Andrews and John E. Stokely.

      The audit committee operates under a written charter adopted by the board of directors, a copy of which is attached hereto as Appendix A and is also contained on the “Investor Relations” section of the company’s website at www.ocharleysinc.com. The audit committee reviews the company’s financial reporting process on behalf of the board of directors. Management has primary responsibility for the company’s financial statements and financial reporting process, including assessing the effectiveness of the company’s internal control over financial reporting. The company’s independent auditor is responsible for planning and carrying out annual audits and quarterly reviews of the company’s financial statements in accordance with standards established by the Public Company Accounting Oversight Board, expressing an opinion on the conformity of the company’s audited financial statements with U.S. generally accepted accounting principles, evaluating and reporting on the fairness of management’s assessment of the company’s internal control over financial reporting and auditing and reporting on the effectiveness of the company’s internal control over financial reporting.

      The audit committee discussed with the independent auditor the overall scope and plans for their audits. The audit committee meets with the independent auditor, with and without management present, to discuss the results of their examinations, the evaluations of the company’s internal control over financial reporting and the overall quality of the company’s financial reporting. Specifically, the audit committee has reviewed and discussed with management and the auditor the audited financial statements. The audit committee has discussed with the independent auditor the matters required to be discussed by Statement on Auditing Standards No. 61 (Communication with Audit Committees), as amended. In addition, the audit committee has received from the independent auditor the written disclosures and the letter required by Independence Standards Board Standard No. 1 (Independence Discussion with Audit Committees) and has discussed with them their independence from the company and its management. The audit committee

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has considered whether the independent auditor’s provision of any non-audit services to the company is compatible with the independent auditor’s independence.

      In reliance on the reviews and discussions referred to above, the audit committee recommended to the board of directors, and the board has approved, that the audited financial statements be included in our Annual Report on Form 10-K for the year ended December 25, 2005, for filing with the Securities and Exchange Commission.

Dale W. Polley (Chair) William F. Andrews John E. Stokely

      The foregoing report of the audit committee shall not be deemed incorporated by reference by any general statement incorporating by reference the proxy statement into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent that the company specifically incorporates this information by reference, and shall not otherwise be deemed filed under such acts.

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

      The audit committee of the board of directors of the company has selected KPMG LLP to serve as the independent registered public accounting firm for the current fiscal year. Such firm has served as the company’s independent registered public accounting firm since August 1991. Representatives of KPMG LLP are expected to be present at the annual meeting and will be given the opportunity to make a statement if they desire to do so and to respond to appropriate questions.

Fees Billed to the Company by KPMG LLP During 2005 and 2004

      On behalf of the company, the audit committee retained KPMG LLP to audit the company’s consolidated financial statements and its internal control over financial reporting for 2005 and to attest to management’s report on internal control over financial reporting. In addition, the audit committee retained KPMG LLP to provide certain other auditing and advisory services. In connection with the audit of the company’s consolidated financial statements for fiscal 2005, the audit committee entered into an engagement letter with KPMG LLP which set forth the terms by which KPMG performed its audit services. That agreement is subject to alternative dispute resolution procedures, which the company has agreed are the sole methodologies for the resolution of any disputes, and contains an exclusion of punitive damages.

     Audit Fees. Audit fees include fees paid by the company to KPMG LLP in connection with its annual audit of the company’s consolidated financial statements and internal control over financial reporting, review of the company’s interim financial statements and attestation of management’s report on internal control over financial reporting. Audit fees also include fees for services performed by KPMG LLP that are closely related to the audit and in many cases could only be provided by the company’s independent registered public accounting firm. Such services include comfort letters and consents related to registration statements filed with the Securities and Exchange Commission and other capital-raising activities. The aggregate fees billed to the company by KPMG LLP for audit services rendered to the company and its subsidiaries for the years ended December 25, 2005 and December 26, 2004 were $500,000 and $730,000, respectively.

     Audit Related Fees. Audit related services include due diligence and audit services related to mergers and acquisitions, accounting consultations, internal control reviews, employee benefit plan audits and certain attest services. The aggregate fees billed to the company by KPMG LLP for audit related services rendered to the company and its subsidiaries for the years ended December 25, 2005 and December 26, 2004 were $0 and $10,000, respectively.

     Tax Fees. Tax fees include corporate tax compliance and counsel and advisory services. The aggregate fees billed to the company by KPMG LLP for the tax related services rendered to the company and its subsidiaries for the years ended December 25, 2005 and December 26, 2004 were $82,615 and $99,640, respectively.

     All Other Fees. KPMG LLP did not bill any other fees to the company for the fiscal years ended December 25, 2005 or December 26, 2004.

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      The audit committee considered these fees and concluded that the performance of these services was consistent with KPMG LLP’s independence.

      The audit committee also has adopted a formal policy concerning approval of audit and non-audit services to be provided by the independent registered public accounting firm to the company. The policy requires that all services that KPMG LLP, the company’s independent auditor, may provide to the company, including audit services and permitted audit-related and non-audit services, be pre-approved by the audit committee. The audit committee approved all audit and non-audit services provided by KPMG LLP during the year ended December 25, 2005.

PROPOSALS OF SHAREHOLDERS

      Shareholders intending to submit proposals for presentation at the next annual meeting of the shareholders of the company and inclusion in the proxy statement and form of proxy for such meeting should forward such proposals to Lawrence E. Hyatt, Secretary, O’Charley’s Inc., 3038 Sidco Drive, Nashville, Tennessee 37204. Proposals must be in writing and must be received by the company prior to December 21, 2006. Proposals should be sent to the company by certified mail, return receipt requested.

      In addition, the company’s bylaws contain an advance notice provision that provides that for a shareholder proposal to be brought before and considered at the next annual meeting of shareholders, such shareholder must provide notice thereof to the secretary of the company no later than December 12, 2006 and the proposal and the shareholder must comply with Regulation 14A under the Securities Exchange Act. In the event that a shareholder proposal intended to be presented for action at the next annual meeting is not received prior to December 21, 2006, then the persons designated as proxies in the proxies solicited by the board of directors in connection with the annual meeting will be permitted to use their discretionary voting authority with respect to the proposal, whether or not the proposal is discussed in the proxy statement for the annual meeting.

PROXY SOLICITATION COSTS

      The enclosed form of proxy is solicited on behalf of the board of directors of the company. The cost of solicitation of proxies will be borne by the company, including expenses in connection with preparing, assembling, and mailing this proxy statement. Such solicitation will be made by mail and may also be made by the company’s regular officers or employees personally or by telephone or telecopy. The company may reimburse brokers, custodians, and their nominees for their expenses in sending proxies and proxy materials to beneficial owners.

DELIVERY OF SHAREHOLDER DOCUMENTS

      The rules of the Securities and Exchange Commission allow the company to send a single copy of the proxy statement and annual report to shareholders to any household at which two or more shareholders reside if the company believes the shareholders are members of the same family, unless the company has received contrary instructions from a shareholder. This process, known as “householding,” reduces the volume of duplicate information received at your household and helps reduce the company’s expenses. The rules apply to the company’s annual reports and proxy statements. Each shareholder in the household will continue to receive a separate proxy card.

      If your shares are registered in your own name and you would like to receive your own set of the company’s annual disclosure documents this year or in future years, or if you share an address with another shareholder and together both of you would like to receive only a single set of the company’s annual disclosure documents, please contact the company’s corporate secretary by calling 615-256-8500 or writing to the company at O’Charley’s Inc., 3038 Sidco Drive, Nashville, Tennessee 37204, Attention: Secretary. If a bank, broker or other nominee holds your shares, please contact your bank, broker or other nominee directly. The company will deliver promptly upon oral or written request a separate copy of the proxy statement or annual report to shareholders to a shareholder at a shared address to which a single copy of the documents was delivered.

     A copy of the Company’s Annual Report on Form 10-K for the fiscal year ended December 25, 2005 may be obtained, without charge, by any shareholder to whom this proxy statement is sent, upon written request to Lawrence E. Hyatt, Secretary, O’Charley’s Inc., 3038 Sidco Drive, Nashville, Tennessee 37204.

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Appendix A

O’CHARLEY’S INC.

Audit Committee Charter

GENERAL

      The Audit Committee (the “Committee”) of the Board of Directors of O’Charley’s Inc. (the “Company”) shall consist of at least three directors. Members of the Committee shall not receive any compensation from the Company except for their board or committee service, and shall also satisfy the requirements for independence established from time to time by the Nasdaq Stock Market and the Securities and Exchange Commission. As determined by the Board of Directors, the members of the Committee will be financially literate with at least one having accounting or related financial management experience or background sufficient to be an “audit committee financial expert” as defined by the Securities and Exchange Commission. Company management and internal and external independent auditors may attend each meeting or portions thereof as required by the Committee. Outside counsel and other consultants and/or advisors may attend meetings at the invitation of the Committee. The Committee shall be authorized, if it determines such action to be appropriate, to utilize the services of the Company’s regular counsel and to retain at the Company’s expense, independent counsel, accountants or other consultants and/or advisors. The Company shall provide for appropriate funding, as determined by the Committee, for payment of compensation to the independent auditors engaged for the purpose of preparing or issuing an audit report or performing other audit, review or attest services and for ordinary administrative expenses of the Committee that are necessary or appropriate in carrying out its duties. The Committee will have a minimum of four meetings each year (typically once a quarter) and will have special meetings if and when required.

RESPONSIBILITIES

      The Committee’s purpose is to oversee the accounting and financial reporting processes of the Company and the audits of the financial statements of the Company. The Committee’s role is one of oversight; whereas the Company’s management is responsible for the adequacy of the Company’s systems of internal accounting controls and procedures and for preparing the Company’s financial statements. The independent auditors are responsible for auditing those financial statements. The Committee is not providing any expert or special assurance as to the Company’s financial statements or any professional certification as to the independent auditor’s work. The following functions shall be the key responsibilities of the Committee in carrying out its oversight function.

      1. Ensure that the affairs and practices of the Company and its subsidiaries are subject to proper, effective and continuing independent audits and control procedures.

      2. Appoint, compensate, retain and oversee the work of the independent auditors and any registered public accounting firm engaged to perform audit, review or attest services. The Committee will also:

•  Ensure that the annual audit will be prepared in accordance with standards of the Public Company Accounting Oversight Board and that the Company’s financial statements are prepared in accordance with generally accepted accounting principles. The audit will include an appropriate evaluation of the Company’s internal control over financial reporting, and the issuance of a report regarding such internal control over financial reporting.

•  Review and discuss with management and the independent auditors the annual audited and quarterly unaudited financial statements including the Company’s disclosures under “Management’s Discussion and Analysis of Financial Condition and Results of Operations”.

•  Receive timely reports from the independent auditor concerning the Company’s critical accounting policies and practices, all alternative treatments of financial information within generally accepted accounting principles that have been discussed with management, the ramifications of alternative disclosures and treatments and the treatment preferred by the independent auditor, and all other material written communications between the independent

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	auditor and the Company’s management, and resolve any disagreements between management and the independent auditor.
•	Review and discuss annually with the independent auditors the matters required to be discussed by SAS No. 61 and No. 90, as amended or supplemented, and following such review, reach a determination to recommend to the full Board that such audited financial statements be included in the annual report filed with the Securities and Exchange Commission.
•	Approve in advance the retention of the independent auditor for all auditing services and permitted non-audit services (including the fees and terms thereof), subject to the de minimis exceptions for non-audit services described in Section 10A(i)(1)(B) of the Securities Exchange Act of 1934 which are approved by the Committee prior to the completion of the audit. Committee pre-approval will not be required if the engagement for the services is entered into pursuant to pre-approval policies and procedures established by the Committee regarding the Company’s engagement of the independent auditor, provided the policies and procedures are detailed as to the particular services, the Committee is informed of the services provided and such policies and procedures do not include delegation of the Committee’s responsibilities under the Securities Exchange Act of 1934 to the Company’s management. The Committee may delegate to one or more designated Committee members the authority to grant pre-approvals of audit and permitted non-audit services, provided that any decision to pre-approve shall be presented to the full Committee at its next scheduled meeting.
•	Confirm the independence of the independent auditors and obtain a written statement delineating all relationships between the independent auditors and the Company, including all non-audit services and fees. The Committee will also discuss with the independent auditors any relationship or service that would impact the auditors’ objectivity and independence and will recommend that the Board take appropriate action in response to the auditor’s statement to ensure the independence of the independent auditors.

      3. Determine whether to retain a third party accounting firm (which shall not be the independent auditor) to provide all or a portion of the internal audit function. Annually evaluate and approve the internal audit plan and the selection and terms and conditions, including fees, of any third party accounting firm engaged to provide all or a portion of the internal audit function. The Committee will determine that the internal audit staff has:

•  Examined and evaluated the effectiveness of the system of internal control over financial reporting and the quality of performance in carrying out assigned responsibilities in the organization.

•  Reviewed the reliability and integrity of financial and operating information used and reported.

•  Examined compliance with applicable regulations, laws and policies and the internal systems in place to assure ongoing compliance and report violations or internal system deficiencies and recommended improvements.

      4. Ensure that the internal and external audit staffs have appropriate and direct access to the Committee and periodically meet with the Committee in private session as appropriate.

      5. Establish policies for the Company’s hiring of employees or former employees of the independent auditor who were engaged on the Company’s account.

      6. Inquire of Company management and independent auditors regarding the appropriateness and quality of accounting principles followed by the Company, changes in accounting principles and their impact on the financial statements and the effect of regulatory and accounting initiatives, as well as any off-balance sheet items on the Company’s financial statements.

      7. Receive reports from the principal executive and financial officers of the Company regarding (i) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting; (ii) any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting; and (iii) whether

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there were significant changes in the Company’s internal control over financial reporting or in other factors that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

      8. Establish procedures for the receipt, retention and treatment of complaints regarding accounting, internal accounting controls, or auditing matters and for the confidential, anonymous submission by employees of concerns regarding questionable accounting or auditing matters.

      9. Review quarterly, prior to the filing of the Company’s Form 10-Q or Form 10-K with the Securities and Exchange Commission, a report from the Company’s Chief Executive Officer and Chief Financial Officer concerning their certifications filed with such reports.

      10. Discuss with management the Company’s earnings press releases as well as earnings guidance provided by the Company.

      11. Review and approve in advance all related party transactions to the extent required under NASDAQ Stock Market qualification standards.

      12. Receive reports from management as to any violations of, changes to or waivers granted under the Company’s code of conduct with respect to the Company’s employees at the level of director and above.

      13. Receive regular reports on management’s progress in addressing any problems or issues identified in all audit reports.

      14. Review any recommendations or findings of the Board of Directors or any other Board Committees with a heightened sense of awareness to those matters that have an impact on the financial statements and the internal control over financial reporting of the Company.

      15. Review all significant litigation involving the Company and any of its subsidiaries with the Company’s legal counsel.

      16. Prepare a report for inclusion in the Company’s proxy statement disclosing that the Committee has reviewed and discussed the audited financial statements with management and discussed certain other matters with the independent auditors. Based upon these discussions, state in the report whether the Committee recommended to the Board that the audited financial statements be included in the Company’s annual report.

      17. Review and assess the adequacy of the Committee’s charter annually. If any revisions therein are deemed necessary or appropriate, submit the same to the Board for its consideration and approval.

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O’CHARLEY’S INC.

    This Proxy is solicited on behalf of the Board of Directors of O’Charley’s Inc. (the “Company”) for use at the Annual Meeting of Shareholders of the Company to be held at 9:00 a.m., local time, on Thursday, May 18, 2006.

    The undersigned hereby appoints Gregory L. Burns, Lawrence E. Hyatt, and each of them, attorneys and proxies with full power of substitution to vote in the name of and as proxy for the undersigned all the shares of common stock of the Company held of record by the undersigned on March 29, 2006, at the Annual Meeting of Shareholders of the Company to be held at 9:00 a.m., local time, on Thursday, May 18, 2006, at the Company’s home office located at 3038 Sidco Drive, Nashville, Tennessee, and at any adjournment thereof.

    1. To elect the following nominees as Class I directors to serve until the 2009 Annual Meeting of Shareholders and until their successors are elected and qualified.

    Gregory L. Burns and Robert J. Walker

o FORall nominees listed above (except as indicated to the contrary below) o WITHHOLD AUTHORITYto vote for all nominees

(To withhold authority to vote for any individual nominee, write that nominee’s name in the space below.)

    2. In their discretion, the Proxies are authorized to consider and take action upon such other matters as may properly come before the meeting or any adjournment thereof.

PROPERLY EXECUTED PROXIES WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED. IF NO SUCH DIRECTIONS ARE GIVEN, SUCH PROXIES WILL BE VOTED FOR THE ELECTION AS DIRECTORS OF THE NOMINEES REFERRED TO IN PARAGRAPH 1.

The undersigned revokes any prior proxies to vote the shares covered by this proxy.

Date: --------------------------------- , 2006

Signature

Signature

(When signing as attorney, executor, administrator, trustee or guardian, please give full title as such. If shareholder is a corporation, corporate name should be signed by an authorized officer and the corporate seal affixed. If shareholder is a partnership, please sign in partnership name by authorized persons. For joint accounts, each joint owner should sign.)

PLEASE SIGN, DATE, AND MAIL THIS PROXY PROMPTLY IN THE ENCLOSED REPLY ENVELOPE WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.