<PAGE>   1

                       SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C.  20549

                                   FORM 10-K

[X]      ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934 (NO FEE REQUIRED, EFFECTIVE OCTOBER 7, 1996)

For the fiscal year ended December 29, 1996
Commission file number 0-18629

                               O'CHARLEY'S INC.
            ------------------------------------------------------
            (Exact name of registrant as specified in its charter)

           Tennessee                                      62-1192475
 ----------------------------                       ----------------------
 (State of other jurisdiction                          (I.R.S. Employer
      of incorporation or                           Identification Number)
         jurisdiction)

       3038 Sidco Drive
     Nashville, Tennessee                                    37204
 ----------------------------                             ----------
     (Address of principal                                (Zip Code)
      executive offices)

Registrant's telephone number, including area code:    (615) 256-8500

Securities registered pursuant to Section 12(b) of the Act:   None

Securities registered pursuant to Section 12(g) of the Act: Common Stock, no
                                                            par value

         Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.  Yes   X     No
                                                ---       ---
         Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.  [ ]

         The aggregate market value of the voting stock held by non-affiliates
of the registrant on March 14, 1997 was approximately $83,895,045.  For
purposes of this calculation, shares held by non-affiliates excludes only those
shares beneficially owned by officers, directors and shareholders beneficially
owning 10% or more of the outstanding Common Stock.  The market value
calculation was determined using the closing sale price of the registrant's
common stock on March 14, 1997 ($13.00) as reported on The Nasdaq Stock
Market's National Market.

         Shares of common stock, no par value, outstanding on March 14, 1997,
were 7,872,146.


                      DOCUMENTS INCORPORATED BY REFERENCE

<TABLE>
<CAPTION>
                                                   Documents from which portions are
Part of Form 10-K                                  incorporated by reference
--------------------                               ---------------------------------
<S>                                                <C>
Part III                                           Proxy Statement relating to Company's Annual Meeting of Shareholders
                                                   to be held May 8, 1997
</TABLE>



<PAGE>   2

                                O'CHARLEY'S INC.

                                     PART I

ITEM 1. BUSINESS

         O'Charley's Inc. (the "Company") operates and franchises casual
dining, full service restaurants under the O'Charley's name.  The Company's
strategy is to compete in both the casual adult and family dining market
segments by featuring:

         o       a broad menu selection, including prime rib, steaks, poultry,
                 fresh seafood, salads, sandwiches and pasta, that is intended
                 to appeal to a wide range of consumer tastes;

         o       an emphasis on customer service that results from a
                 comprehensive training program and close supervision of
                 restaurant operations;

         o       moderate, value-oriented menu pricing that is designed to
                 attract customers of various income levels; and

         o       high food quality that is consistently maintained through the
                 operation of a centralized commissary that purchases,
                 processes and distributes most food products used in the
                 restaurants.

         At December 29, 1996, the Company operated 69 O'Charley's restaurants
in Alabama, Florida, Georgia, Indiana, Kentucky, Mississippi, North Carolina,
Ohio, South Carolina, and Tennessee, and had one franchised O'Charley's
restaurant in South Carolina.  The Company plans to expand in the near term
primarily through the development of additional Company-owned restaurants,
clustered in or near its existing markets and in selected metropolitan areas in
the South and Midwest.  Twelve to fourteen additional O'Charley's restaurants
are expected to open during 1997.

O'CHARLEY'S RESTAURANTS

         Each O'Charley's is a full service restaurant that offers a high
quality dining experience in a relaxed environment at moderate prices.  The
restaurants are open seven days a week, generally from 11:00 a.m. to 1:00 a.m.

         Restaurant Design.  The prototypical O'Charley's restaurant is a free
standing brick building containing approximately 6,500 square feet and seating
for approximately 210 customers.  The typical restaurant ambiance is open,
casual and well lighted.  The decor features color prints, warm woods, polished
brass, exposed brick and neon accents.  Black and white photographs of local
history, people, places and events add nostalgia and give the restaurants a
neighborhood feeling.  Each restaurant has a bar seating approximately 50
additional customers.  The prototypical restaurant kitchen is designed to
facilitate fast, efficient food preparation.  The kitchen design permits the
Company to be flexible in the types of food items which can be prepared and to
adapt to changing customer tastes and preferences.  A typical restaurant
location has 100 to 120 available parking spaces.

         Menu Offerings.  O'Charley's restaurants offer a varied menu of
approximately 45 items including appetizers, soups, salads, poultry, prime rib,
steaks, fresh seafood, sandwiches, burgers and desserts.  In addition, the
restaurants offer a weekend brunch and a children's menu.  Most menu food items
are prepared on the





                                       2

<PAGE>   3

premises using fresh ingredients according to original recipes.  The Company's
slogan is "quality creates demand"; therefore, the Company places special
emphasis on both excellent food and attentive customer service.  In 1996, the
average check per customer, including beverages, was approximately $10.30.
Sales of alcoholic beverages constituted approximately 13% of restaurant sales
in 1996.  The menu is moderately priced with programs such as "Express Lunch"
and "Kids Eat Free" reinforcing the Company's value oriented philosophy.  The
Company is continually developing new menu items which are test-marketed before
appearing on the regular menu.


OPERATIONS

         Restaurant Management.  The Company believes that each O'Charley's
restaurant requires an effective management team in order to ensure high
quality food and attentive service.  Each restaurant has six to seven
management personnel (a general manager, two assistant managers, two kitchen
managers and a dining room manager) and approximately 95 full and part-time
employees.  The Company employs area supervisors who have full responsibility
for the operating performance of three to four restaurants.  The Company also
employs four regional directors, who supervise those restaurants in the
particular regions which they oversee.  They also are responsible for the
development of new restaurants in their regions.

         In order to maintain control over the quality of its restaurant
operations, the Company emphasizes the careful selection and training of all
restaurant employees and has a detailed restaurant inspection system.  The
restaurant management recruiting and training program begins with an evaluation
and screening program.  In addition to multiple interviews, and background and
experience verification, the Company conducts a testing procedure designed to
identify those applicants who are best suited to manage the Company's
restaurant operations.  Once hired, management trainees are required to
complete an eleven-week training program, which encompasses all phases of
restaurant operations.  This program allows new managers the opportunity to
become familiar with all the responsibilities required at an individual
restaurant, and with the Company's operations, management objectives, controls,
and evaluation criteria before assuming restaurant management responsibility.

         As an incentive for restaurant managers to improve sales and
operational efficiency, the Company has adopted a monthly incentive
compensation plan.  Pursuant to this plan, a manager may earn a bonus, payable
during each four-week accounting period, based on a percentage of the sales of
the restaurant for which he has responsibility, provided certain costs (food,
supplies and store-level labor) are within budget.  In addition, the Company
has implemented a "3 Point Plan" to give managers a greater opportunity to
participate in the growth of the Company.  Pursuant to the "3 Point Plan",
managers receive a quarterly bonus in addition to their base salary based upon
a certain percentage of restaurant profit, and long-term stock options tied to
the performance of the Company as a whole. The area supervisors and regional
directors also participate in incentive based cash bonus and stock option plans
which are based on achieving certain targeted levels of profit pertaining to
Company and individually tailored goals. The Company's managerial turnover rate
was approximately 48% in 1996.

         Commissary Operations.  The Company operates its own commissary in
Nashville through which it purchases most of its food products and restaurant
supplies.  Management believes that its commissary enhances its restaurant
operations by maintaining consistent food quality and controlling costs.  The
commissary also simplifies the managers' purchasing duties, allowing greater
concentration on restaurant operations.  The commissary produces salad
dressings and fresh breads and operates a United States Department of
Agriculture ("USDA") approved meat processing plant.  Those food products and
restaurant supplies are distributed to O'Charley's restaurants (both
Company-owned and franchised) by Company-operated trucks.  O'Charley's





                                       3

<PAGE>   4

establishes food and other product quality standards, and the commissary then
negotiates directly with food manufacturers and other suppliers to obtain the
lowest possible prices at the required quality.  The Company also utilizes
select long-term contracts on certain items to avoid short-term food cost
fluctuations.  Certain perishable food and beverage items are purchased locally
by the Company's restaurants.

         In addition to servicing Company-owned and franchised restaurants, the
Company's commissary also sells food products and restaurant supplies to
certain other customers.  Management believes that the Company's commissary has
adequate capacity to service the Company's expanded operations for the
foreseeable future.

         Quality, Costs, and Inventory Controls.  Product quality and cost are
controlled centrally by the Company, allowing restaurant management to closely
monitor day to day restaurant operations.  The Company uses customer
evaluations, which are available to diners in the restaurants, as a means of
monitoring customer satisfaction, and the Company employs a "mystery shopper"
program to independently monitor quality control.  Additionally, costs are
reviewed regularly by management to determine if any material variances in food
costs or operating expenses have occurred.  The Company's computer system
provides restaurant operations information which is analyzed by management to
monitor sales mix and costs.  This system is also used in the development of
budget analyses, planning and inventory control.

         Marketing.  The Company has an ongoing advertising and marketing plan
for the development of television, radio, and newspaper advertising and also
uses point of sale and local store marketing.  The Company expended
approximately 2.4% of its 1996 restaurant sales on advertising.  The Company's
franchisee contributed 1.0% of its gross sales in 1996 to an advertising
production fund.


COMPANY RESTAURANT EXPANSION

         The Company plans to grow primarily through the development of
additional Company-owned restaurants, which will be clustered in existing
markets and in selected metropolitan markets in the South and Midwest in an
effort to enhance supervisory, marketing and distribution efficiencies.  Based
upon the Company's experience, management believes that clustering its
restaurants will not result in a material decrease in sales at existing
restaurants.





                                       4

<PAGE>   5

         During 1996, 12 new Company-owned restaurants were opened in the
following markets:

<TABLE>
<CAPTION>
         MONTH                                         LOCATION
         -----                                         --------
         <S>                                           <C>
         January                                       Indianapolis, Indiana
         February                                      Springdale, Ohio
         February                                      Cleveland, Tennessee
         March                                         Birmingham, Alabama
         April                                         Raleigh, North Carolina
         May                                           Lawrenceville, Georgia
         June                                          Cordova, Tennessee
         July                                          Indianapolis, Indiana
         August                                        Cincinnati, Ohio
         September                                     Hattiesburg, Mississippi
         October                                       Birmingham, Alabama
         November                                      Owensboro, Kentucky
</TABLE>


         In connection with the Company's expansion, management performs
extensive reviews of various available sites, gathering appropriate cost,
demographic and traffic data.  The Company utilizes an in-house
construction/real estate department to develop architectural and engineering
plans and to oversee new construction.

         In the Company's existing markets, capital investment for a new
restaurant on purchased premises averages approximately $1,950,000 and on
leased premises averages approximately $1,350,000.  Of this capital investment,
building, site and other expenses average $900,000, land costs average
$600,000, and equipment costs average $450,000.  Additionally, pre-opening
expenses average approximately $150,000.  Whenever possible, management prefers
to own rather than lease restaurants.





                                       5

<PAGE>   6

RESTAURANT LOCATIONS

         The following table shows the location and status as of December 29,
1996 of the 77 O'Charley's restaurants which are opened or under development.



<TABLE>
                 <S>                                               <C>       <C>                                              <C>
                            EXISTING COMPANY-OWNED RESTAURANTS
                            ----------------------------------
                 Alabama                                                     South Carolina
                          Birmingham . . . . . . . . . . . . . .   4                 Anderson  . . . . . . . . . . . . . . .  1
                          Huntsville . . . . . . . . . . . . . .   1         Tennessee
                          Mobile . . . . . . . . . . . . . . . .   1                 Chattanooga   . . . . . . . . . . . . .  2
                          Montgomery . . . . . . . . . . . . . .   1                 Clarksville   . . . . . . . . . . . . .  2
                          Oxford . . . . . . . . . . . . . . . .   1                 Cleveland   . . . . . . . . . . . . . .  1
                          Tuscaloosa . . . . . . . . . . . . . .   1                 Cookeville  . . . . . . . . . . . . . .  1
                 Florida                                                             Cordova   . . . . . . . . . . . . . . .  1
                          Pensacola  . . . . . . . . . . . . . .   1                 Farragut  . . . . . . . . . . . . . . .  1
                 Georgia                                                             Gatlinburg  . . . . . . . . . . . . . .  1
                          Atlanta  . . . . . . . . . . . . . . .   3                 Jackson   . . . . . . . . . . . . . . .  1
                          Dalton . . . . . . . . . . . . . . . .   1                 Johnson City  . . . . . . . . . . . . .  1
                          Lawrenceville  . . . . . . . . . . . .   1                 Knoxville   . . . . . . . . . . . . . .  3
                          Woodstock  . . . . . . . . . . . . . .   1                 Memphis   . . . . . . . . . . . . . . .  2
                 Indiana                                                             Murfreesboro  . . . . . . . . . . . . .  1
                          Clarksville  . . . . . . . . . . . . .   1                 Nashville   . . . . . . . . . . . . . .  7
                          Evansville . . . . . . . . . . . . . .   1                 Pigeon Forge  . . . . . . . . . . . . .  1
                          Indianapolis . . . . . . . . . . . . .   3                                                         --
                 Kentucky
                          Bowling Green  . . . . . . . . . . . .   1         Total . . . . . . . . . . . . . . . . . . . . .  69
                          Florence . . . . . . . . . . . . . . .   1                                                          ==
                          Lexington  . . . . . . . . . . . . . .   2
                          Louisville . . . . . . . . . . . . . .   4                   EXISTING FRANCHISED RESTAURANTS
                          Owensboro  . . . . . . . . . . . . . .   1                   -------------------------------
                          Paducah  . . . . . . . . . . . . . . .   1
                          Richmond . . . . . . . . . . . . . . .   1
                 Mississippi
                          Biloxi . . . . . . . . . . . . . . . .   1         South Carolina
                          Hattiesburg  . . . . . . . . . . . . .   1                 Greenville  . . . . . . . . . . . . . .  1
                 North Carolina                                                                                              --
                          Cary . . . . . . . . . . . . . . . . .   1
                          Raleigh  . . . . . . . . . . . . . . .   2         Total . . . . . . . . . . . . . . . . . . . . .  1
                          Winston Salem  . . . . . . . . . . . .   1                                                         ==
                 Ohio
                          Cincinnati . . . . . . . . . . . . . .   4
                          Springdale . . . . . . . . . . . . . .   1







</TABLE>





                                       6

<PAGE>   7

                               UNDER DEVELOPMENT

<TABLE>
                 <S>        <C>                                                         <C>
                 ALABAMA
                            Decatur . . . . . . . . . . . . . . . . . . . . . . . . . .  1
                 GEORGIA
                            Gainesville . . . . . . . . . . . . . . . . . . . . . . . .  1
                            Conyers . . . . . . . . . . . . . . . . . . . . . . . . . .  1
                 INDIANA
                            Indianapolis  . . . . . . . . . . . . . . . . . . . . . . .  2
                 KENTUCKY
                            Elizabethtown . . . . . . . . . . . . . . . . . . . . . . .  1
                 TENNESSEE
                            Lebanon . . . . . . . . . . . . . . . . . . . . . . . . . .  1
                                                                                         -

                 TOTAL  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  7
                                                                                         =
</TABLE>

FRANCHISED RESTAURANTS

         During 1996, the Company had one franchisee which owned one
O'Charley's restaurant in South Carolina.  The Company's franchisee is
unaffiliated with the Company.  The Company's expansion plans do not include
the solicitation of new franchisees.

         The Company's franchised restaurant is operated pursuant to a
franchise agreement that provides for royalties of 2% of gross sales, marketing
contributions of up to 1% of gross sales, and a 20 year term.  In addition, the
franchisee paid an initial fee to receive the franchise.  The Company also
retains the right to terminate the franchise agreement for a variety of
reasons, including the franchisee's significant and willful understatement of
gross receipts, failure to pay fees, material misrepresentation on an
application for a franchise, or material breach or default under the franchise
agreement, including failure to maintain Company operating standards.  South
Carolina law limits the ability of a franchisor to terminate or refuse to renew
a franchise.  The Company has the right to audit and receive certain monthly
and annual financial and other information from its franchisee.

         The Company's training program for its franchisee is similar to its
training program for management trainees in Company-owned restaurants.  See
"Business--Operations."  In order to ensure uniform quality standards, the
Company requires its franchisee to comply with Company specifications as to
space, design and decor, menu items, principal food ingredients and day-to-day
operations, as set forth in the Company's operations manual.  The Company's
management generally visits the franchise location an average of once a month.
The Company's current franchisee purchases food from the Company's commissary,
but is under no contractual obligation to do so.


SERVICE MARKS

         The Company has registered the name "O'Charley's" and its logo as a
service mark with the United States Patent and Trademark Office.  The Company
is aware of names and marks similar to the service marks of the Company used by
third parties in certain limited geographical areas.  Such third party use may
prevent the Company from licensing the use of its service marks for restaurants
in such areas.  Except for these limited





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<PAGE>   8

geographical areas, the Company is not aware of any infringing uses that could
materially affect its business.  The Company intends to protect its service
mark by appropriate legal action whenever necessary.


GOVERNMENT REGULATION

         The Company is subject to various federal, state, and local laws
affecting its business.  Each of the Company's restaurants is subject to
licensing and regulation by a number of governmental authorities, which may
include alcoholic beverage control, health, safety, sanitation, building, and
fire agencies in the state or municipality in which the restaurant is located.
In addition, most municipalities in which the Company's restaurants are located
require local business licenses.  The Company's commissary is licensed and
subject to regulation by the USDA.  Difficulties in obtaining or failures to
obtain the required licenses or approvals could delay or prevent the
development of a new restaurant in a particular area.  The Company is also
subject to federal and state environmental regulations, but they have not had a
material effect on the Company's operations to date.

         Approximately 13% of the Company's restaurant sales is attributable to
the sale of alcoholic beverages.  Each restaurant has appropriate licenses from
regulatory authorities allowing it to sell liquor, beer and wine, and in some
states or localities to provide service for extended hours and on Sunday.  Each
restaurant has food service licenses from local health authorities, and similar
licenses would be required for each new restaurant.  The failure of a
restaurant to obtain or retain liquor or food service licenses could adversely
affect, or in an extreme case, terminate its operations.  However, each
restaurant is operated in accordance with standardized procedures designed to
assure compliance with all applicable codes and regulations.  The Company is
subject in most states in which it operates restaurants to "dram-shop" statutes
or judicial interpretations, which generally provide a person injured by an
intoxicated person the right to recover damages from an establishment which
wrongfully served alcoholic beverages to such person.  The Company carries
liquor liability coverage as part of its existing comprehensive general
liability insurance.

         The Company is also subject to federal and a substantial number of
state laws regulating the offer and sale of franchises.  Such laws impose
registration and disclosure requirements on franchisors in the offer and sale
of franchises.  These laws also apply substantive standards to the relationship
between franchisor and franchisee and limit the ability of a franchisor to
terminate or refuse to renew a franchise.

         The Federal Americans With Disabilities Act (the "Act") prohibits
discrimination on the basis of disability in public accommodations and
employment.  The Act became effective as to public accommodations in January
1992 and as to employment in July 1992.  The Company currently designs its
restaurants to be accessible to the disabled and believes that it is in
substantial compliance with all current applicable regulations relating to
restaurant accommodations for the disabled.  The Company intends to comply with
future regulations relating to accommodating the needs of the disabled, and the
Company does not currently anticipate that such compliance will require the
Company to expend substantial funds.

         The development and construction of additional restaurants will be
subject to compliance with applicable zoning, land use and environmental
regulations.  The Company's restaurant operations are also subject to federal
and state minimum wage laws and other laws governing such matters as working
conditions, citizenship requirements, overtime and tip credits.  There are
currently proposals in Congress which would result in an increase in the
minimum wage.  The Company pays competitive wages to its hourly employees,
which are generally higher than the existing minimum wage.  In the event a
proposal is adopted which materially increases





                                       8

<PAGE>   9

the applicable minimum wage, such an increase would result in an increase in
the Company's payroll and benefits expense.


EMPLOYEES

         At December 31, 1996, the Company employed approximately 5,800
persons, 100 of whom were home office management and staff personnel, 135 of
whom were commissary personnel and the remainder were restaurant personnel.  A
substantial number of the Company's restaurant personnel are employed on a
part-time basis.  None of the Company's employees are covered by a collective
bargaining agreement.  The Company considers its employee relations to be good.


COMPETITION

         The restaurant industry is intensely competitive with respect to
price, service, location, and food quality, and there are many well-established
competitors with substantially greater financial and other resources than the
Company.  Such competitors include a large number of national and regional
restaurant chains.  Some of the Company's competitors have been in existence
for a substantially longer period than the Company and may be better
established in the markets where the Company's restaurants are or may be
located.  The restaurant business is often affected by changes in consumer
tastes, national, regional or local economic conditions, demographic trends,
traffic patterns, and the type, number and location of competing restaurants.
In addition, factors such as inflation, increased food, labor and benefits
costs and the lack of experienced management and hourly employees may adversely
affect the restaurant industry in general and the Company's restaurants in
particular.

RISK FACTORS

         In connection with the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995, the Company is including the
following cautionary statements identifying important factors that could cause
the Company's actual results to differ materially from those projected in
forward-looking statements made by, or on behalf of, the Company.

         Expansion Risks.  The Company's continued growth depends on its
ability to locate and open new restaurants and to operate such restaurants
profitably.  Some of the Company's new restaurants may by opened in geographic
markets in which the Company has limited or no previous operating experience.
The Company's ability to expand the number of its restaurants will depend on a
number of factors, including the selection and availability of quality
restaurant sites, the negotiation of acceptable lease or purchase terms, the
securing of required governmental permits and approvals, the adequate
supervision of construction, the hiring, training and retaining of skilled
management and other personnel, the availability of adequate financing and
other factors, many of which are beyond the control of the Company.  The hiring
and retention of management and other personnel may be difficult given the low
unemployment rates in the areas in which the Company operates.  There can be no
assurance that the Company will be successful in opening the number of
restaurants anticipated in a timely manner.  Furthermore, there can be no
assurance that the Company's new restaurants will generate revenues or profit
margins consistent with those of the Company's existing restaurants.

         Geographic Concentration.  The Company's existing restaurants are
located predominantly in the Southeastern United States with 25 of the 69
O'Charley's restaurants located in Tennessee.  The Company's plans





                                       9

<PAGE>   10

include significant further expansion in the Southeast.  As a result, the
Company is particularly susceptible to events affecting the economics of states
in the Southeast, particularly Tennessee, as well as other geographic regions
in which the Company locates restaurants.

         Changes in Food and Other Costs.  The profitability of the Company is
significantly dependent on its ability to anticipate and react to changes in
food, labor, employee benefits and similar costs over which the Company has
little control.  The Company is subject to the risk of possible shortages or
interruptions in supply caused by adverse weather or other conditions which
could adversely affect the availability and cost of such items.  While in the
past management has been able to anticipate and react to changing costs through
its purchasing practices or menu price adjustments without a material adverse
effect on profitability, there can be no assurance that it will be able to do
so in the future.

         Competition.  Competition in the restaurant industry is intense.
O'Charley's restaurants compete with other full-service, casual dining
restaurants primarily on the basis of price, service, location and food
quality.  The Company also competes with other restaurant operators and retail
establishments for quality sites for the construction of its restaurants.  Many
of the Company's competitors are well established and have substantially
greater financial, marketing and other resources than the Company.  See "--
Competition."

EXECUTIVE OFFICERS

         Officers of the Company are elected by the Board of Directors and
serve at the pleasure of the Board of Directors.  There are no family
relationships among any officers.  The following table sets forth certain
information regarding the executive officers of the Company.

<TABLE>
<CAPTION>
                                           Officer
Name                              Age       Since           Position
----                              ---      -------          --------
<S>                               <C>        <C>            <C>
Gregory L. Burns                  42         1983           President, Chief Executive Officer, and Chairman of the Board
                                                            of Directors

Steven J. Hislop                  37         1988           Executive Vice President and Chief Operating Officer

A. Chad Fitzhugh                  36         1987           Chief Financial Officer, Secretary, and
                                                            Treasurer

William E. Hall, Jr.              42         1997           Vice President - Operations

David W. Hill                     41         1997           Controller and Assistant Secretary
</TABLE>


         The following is a brief summary of the business experience of each of
the executive officers of the Company.

         Gregory L. Burns has served as Chairman of the Board and Chief
Executive Officer of the Company since February 1994, and as President of the
Company since September 1996.  Mr. Burns, a director of the Company since 1990,
served as Chief Financial Officer of the Company from October 1983 to September
1996,





                                       10

<PAGE>   11

as Executive Vice President and Secretary of the Company from October 1983 to
May 1993, and as President of the Company from May 1993 to February 1994.  Mr.
Burns is a certified public accountant.

         Steven J. Hislop has been Executive Vice President and Chief Operating
Officer of the Company since March 1997.  Mr. Hislop served as Senior Vice
President - Operations from June 1993 to March 1997, and as Vice President -
Operations from June 1990 to June 1993.

         A. Chad Fitzhugh has served as Chief Financial Officer since September
10, 1996, as Secretary of the Company since May 1993, and as Treasurer since
April 1990.  He served as Controller from 1987 until September 10, 1996.  Mr.
Fitzhugh is a certified public accountant.

         William E. Hall, Jr. has served as Vice President - Operations since
March 1997.  Mr. Hall served as a Regional Director of the Company from July
1992 to March 1997, and as an Area Supervisor of the Company from May 1991 to
July 1992.

         David W. Hill has served as Controller and Assistant Secretary of the
Company since March 1997.  Prior to March 1997, Mr. Hill served as Assistant
Controller of the Company for over six years.

ITEM 2.  PROPERTIES

         Of the 69 Company-operated restaurants, 37 are owned by the Company in
fee simple while the remainder are leased.  Seven of the leased locations are
owned by partnerships whose partners are affiliated with the Company.
Restaurant lease expirations range from 1997 to 2019, with the majority of the
leases providing for an option to renew for additional terms ranging from 5 to
20 years.  All of the Company's leases provide for a specified annual rental,
and some leases call for additional rental based on sales volume at the
particular location over specified minimum levels.  Generally, the leases are
net leases which require the Company to pay the cost of insurance and taxes.
The Company's executive offices and its commissary are located in Nashville,
Tennessee in approximately 130,000 square feet of office and warehouse space
under a lease which expires in March 2002. The Company has an option to extend
the lease for two additional five-year terms.  The Company has an option to
purchase the property at various times during the lease term.

ITEM 3.  LEGAL PROCEEDINGS

         On February 15, 1994, a purported class action suit was filed in the
United States District Court in the Western District of Tennessee against the
Company, Mr. Burns, David K. Wachtel, Jr.,  and Charles F. McWhorter (Messrs.
Wachtel and McWhorter are former directors and executive officers of the
Company).  The suit was later transferred to the United States District Court
for the Middle District of Tennessee.   The suit alleged racially
discriminatory job selection, termination and work environment practices in
violation of federal law.  The suit sought actual, compensatory and punitive
damages in an unspecified amount.  The court approved a consent decree
approving the definitive settlement of the suit on December 18, 1996.  The
settlement agreement created a settlement pool of $4.8 million for the benefit
of the class members and reserved $700,000 for claims administration and fees,
and included $2.0 million for the attorneys representing the class and an
additional $1.0 million for legal and other expenses related to the settlement.
Less than 30% of the estimated pool of class members submitted claims against
the settlement fund.  Therefore, an adjustment of approximately $2.3 million
was made to the settlement fund in December 1996.





                                       11

<PAGE>   12


         The Company is also involved in litigation and proceedings in the
ordinary course of its business.  The Company does not believe the outcome of
any such litigation will have a material adverse effect upon the Company.


ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SHAREHOLDERS

         No matters were submitted to a vote of the shareholders during the
fourth quarter ended December 29, 1996.

                                    PART II

ITEM 5.  MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
         MATTERS.

         The Company's common stock trades on The Nasdaq Stock Market's
National Market under the symbol "CHUX."  As of March 14, 1997, there were
approximately 610 shareholders of record. The following table shows quarterly
high and low prices for the common stock for 1996, 1995 and 1994, as reported
by Nasdaq.

<TABLE>
<CAPTION>
1996                                                               High                        Low
                                                                   ----                        ---
<S>                                                                <C>                         <C>
First Quarter . . . . . . . . . . . . . . . . . . . . . .          14 3/4                      10 1/2
Second Quarter  . . . . . . . . . . . . . . . . . . . . .          15 1/2                      10 1/2
Third Quarter . . . . . . . . . . . . . . . . . . . . . .          12 1/2                       9 3/4
Fourth Quarter  . . . . . . . . . . . . . . . . . . . . .          13 1/8                       9 1/2


1995                                                               High                         Low
                                                                   ----                         ---
First Quarter . . . . . . . . . . . . . . . . . . . . . .          14 3/4                       9 3/4
Second Quarter  . . . . . . . . . . . . . . . . . . . . .          14 1/8                      11
Third Quarter . . . . . . . . . . . . . . . . . . . . . .          17 3/4                      13
Fourth Quarter  . . . . . . . . . . . . . . . . . . . . .          15                          11
</TABLE>


         The Company has never paid a dividend on its common stock.  The
Company presently intends to retain its earnings to finance the growth and
development of its business and does not expect to pay any cash dividends in
the foreseeable future.

        On January 5, 1996, the Company issued an aggregate of 666,666 shares
of Common Stock to the shareholders of Shoex, Inc., a franchisee of the Company
("Shoex"), in connection with the merger of Shoex with and into the Company.
The shares were issued without registration in reliance on the exemption
contained in Section 4(2) of the Securities Act and the rules and regulations
promulgated thereunder.





                                       12

<PAGE>   13
ITEM 6.  SELECTED FINANCIAL DATA

         The following table sets forth the selected financial data for each of
the years in the five-year period ended December 29, 1996. Each fiscal year has
been restated to reflect the combined operations of the Company and Shoex as
their merger was accounted for as a pooling-of-interests.

<TABLE>
<CAPTION>
                                             December 29,   December 31,   December 25,   December 26,  December 27,
(In Thousands, Except Per Share Data)           1996           1995           1994            1993          1992
                                             -----------------------------------------------------------------------
<S>                                             <C>           <C>            <C>            <C>            <C>
For the Year Ended
RESULTS OF OPERATIONS
    Revenues                                    $164,530      $147,557       $122,697       $95,586        $82,542
    Restaurant Operating Margin                   29,320        25,016         19,904        14,416         12,193
    Advertising, General and
         Administrative Expenses                   9,370         8,187          7,717         5,894          5,116
    Depreciation and Amortization                  8,141         6,164          4,711         3,437          3,479
    Litigation                                     6,200         1,000             --            --            --
    Income From Operations                         6,838        11,138          8,051         5,582          4,067
    Asset Revaluation                              5,110            --             --            --            --
    Earnings (Loss) Before
         Income Taxes                             (1,944)       16,662          7,465         5,085          3,514
    Income Tax Expense (Benefit) 1                  (797)        6,071          2,492         1,867          1,277
    Net Earnings (Loss) 1                         (1,147)       10,591          4,973         3,218          2,237
                                                ------------------------------------------------------------------
PER SHARE DATA
    Net Earnings (Loss) 1                       $  (0.14)        $1.26          $0.61         $0.42         $0.31
    Weighted Average Common
         Shares Outstanding                        8,390         8,438          8,137         7,689         7,279
                                                -----------------------------------------------------------------
At Year End
FINANCIAL POSITION
    Cash                                          $1,616        $2,576         $1,727        $1,180         $1,049
    Working Capital                              (10,864)       (7,344)        (3,050)       (3,327)        (1,946)
    Property and Equipment, net                  103,281        81,512         64,609        50,219         37,247
    Total Assets                                 117,159        93,351         76,082        57,971         43,831
    Long-Term Debt                                29,822        11,990         15,140         8,987          3,904
    Capitalized Lease Obligations                 11,797         9,272          5,744         4,697          3,651
    Shareholders' Equity                          50,926        51,787         40,804        33,204         27,897
                                                ------------------------------------------------------------------
</TABLE>



 1 The income tax expense, net earnings and per share data for fiscal years
1995, 1994, 1993 and 1992 represent pro forma amounts (see Note 2 and Note 10
in Notes to Financial Statements).


See notes to financial statements.

                                       13
<PAGE>   14


ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS.


The following table highlights the operating results for fiscal years 1996,
1995 and 1994 as a percentage of total revenues unless otherwise indicated.
Fiscal years 1996 and 1994 are comprised of 52 weeks while 1995 is comprised of
53 weeks. Each fiscal year has been restated to reflect the combined operations
of the Company and Shoex, Inc., as the merger was accounted for as a
pooling-of-interests.

<TABLE>
<CAPTION>
                                                                          1996        1995         1994
                                                                          -----------------------------
<S>                                                                       <C>         <C>          <C>
REVENUES:
    Restaurant sales                                                       98.6%       93.6%        91.4%
    Commissary sales                                                        1.4%        6.4%         8.6%
                                                                          ------------------------------
                                                                          100.0%      100.0%       100.0%


COSTS AND EXPENSES:
    Cost of restaurant sales: 1
         Cost of food, beverage and supplies                               35.9%       36.7%        36.9%
         Payroll and benefits                                              30.9%       30.1%        30.0%
         Restaurant operating costs                                        15.1%       15.1%        15.4%
                                                                          ------------------------------
                                                                           81.9%       81.9%        82.3%
                                                                          ------------------------------
         Restaurant operating margin                                       18.1%       18.1%        17.7%

    Cost of commissary sales 2                                             95.2%       95.3%        94.8%
    Advertising, general and administrative expenses                        5.7%        5.5%         6.3%
    Depreciation and amortization                                           4.9%        4.2%         3.8%
    Asset revaluation                                                       3.1%         --           --


OTHER (INCOME) EXPENSE:
    Interest expense, net                                                   1.6%        1.3%         1.1%
    Litigation                                                              3.8%         .7%          --
    Other, net                                                              0.0%       (5.7%)       (0.6%)

EARNINGS (LOSS) BEFORE INCOME TAXES                                        (1.2%)      11.3%         6.1%

INCOME TAX EXPENSE (BENEFIT) 3                                              (.5%)       4.1%         2.0%

NET EARNINGS (LOSS) 3                                                       (.7%)       7.2%         4.1%
                                                                          ------------------------------
</TABLE>

1 As a percentage of restaurant sales.
2 As a percentage of commissary sales.
3 The income tax expense and net earnings for 1995 and 1994 represent pro forma
  amounts.





                                      14

<PAGE>   15

RESULTS OF OPERATIONS

The following discussion includes certain forward-looking statements. Actual
results could differ materially from those reflected by the forward-looking
statements and a number of factors may affect future results, liquidity and
capital resources. These factors include increased food, labor and employee
benefit costs, the availability of experienced management and hourly employees,
the Company's ability to locate and open new restaurants and to operate such
restaurants profitably and the intense competition in the restaurant
industry. Although the company believes it has the business strategy and
resources needed for improved operations, future revenue and margin trends
cannot be reliably predicted and may cause the Company to adjust the strategy
during fiscal 1997.

REVENUES. Total revenues in 1996 increased $17.0 million, or 11.5%, due to an
increase in restaurant sales of $24.1 million, or 17.5%, partially offset by a
decrease in commissary sales of $7.2 million, or 76.0%. Contributing to the
increase in restaurant sales were 12 new restaurants which were opened in 1996
and an increase in same store sales of 1.1%. Same store sales includes all
restaurants opened for the entire period under comparison but excludes the six
Shoex stores acquired on January 5, 1996. The following table presents the
number of restaurants in operation for each of the respective years:

<TABLE>
<CAPTION>
                                                                          1996        1995         1994
                                                                          -----------------------------
         <S>                                                              <C>         <C>          <C>
         Beginning number of Company restaurants                           55          44           38
         Newly opened during the year                                      12          11            6
         Restaurants acquired from Franchisee                               6          --           --
         Restaurants closed during the year                                (4)         --           --
                                                                          ----------------------------
         Ending number of Company restaurants                              69          55           44
                                                                          ----------------------------
</TABLE>



Additionally, restaurant sales were positively affected by higher average unit
volumes of newly opened units. In 1996, the Company experienced an increase in
its average check due primarily to a menu price increase of 1.5% taken in the
fourth quarter of 1995. The Company introduced a new menu in September 1996
which increased the average check by approximately $0.20. This average check
increase was accomplished by redesigning and adding certain menu items. The
increase in restaurant sales was lessened as compared to 1995 due to fiscal
1996 being comprised of 52 weeks versus 53 weeks in 1995 and by the closing of
four units in the third quarter of 1996. Restaurant sales were significantly
impacted during January and February of 1996 due to unusually severe winter
storms in the Company's markets. The percentage of liquor sales to total sales
continued to decrease in 1996 to approximately 13.5% reflecting industry
trends.

The decrease in commissary sales in 1996 is the result of discontinuing sales
to Logan's Roadhouse Restaurants and to certain unaffiliated restaurants.
Following its initial public offering, Logan's ceased purchasing products from
the commissary in October 1995. The effect on net earnings from the decrease in
commissary sales was immaterial. The commissary's primary focus is on providing
consistent food quality and service to the O'Charley's restaurants while using
its purchasing expertise and volume to obtain the lowest possible price. The
commissary supplements its efforts with outside sales of certain products which
are primarily being manufactured or distributed to the O'Charley's stores.

Total revenue in 1995 increased $24.9 million, or 20.3%, due to an increase in
restaurant sales of $25.9 million, or 23.1%, partially offset by a decrease in
commissary sales of $1.1 million, or 10.1%. The increase in restaurant sales in
1995 was the result of opening 11 new restaurants, an increase in same store
sales of 3.2% and an additional week of operations in fiscal 1995. The increase
in same store sales was primarily the result of an increase in customer counts
partially offset by a slight decrease in the overall check average. In 1995,
the percentage of liquor sales to total sales decreased to 14.4% reflecting
industry trends. The decrease in commissary sales in 1995 is primarily the
result of discontinuing sales to certain unaffiliated restaurants. The decrease
in commissary sales was partially offset by increased sales to Logan's.


                                       15


<PAGE>   16

RESTAURANT OPERATING MARGIN, defined as restaurant sales less cost of
restaurant sales, increased $4.3 million, or 17.2%, in 1996 over 1995. The
overall increase is attributable to the increase in restaurant sales and a
decrease in the percentage cost of food, beverage and supplies partially offset
by an increase in the percentage costs of payroll and benefits. Restaurant
operating margin, as a percentage of restaurant sales, was 18.1% in 1996 and in
1995.

COST OF FOOD, BEVERAGE AND SUPPLIES as a percentage of restaurant sales
decreased .8% in 1996 to 35.9%. The decrease is primarily related to an overall
decrease in food costs due to cost reductions in certain high volume food
commodities and to the increased purchasing power and operating efficiencies of
the Company's commissary. The Company experienced lower overall produce cost in
1996 due primarily to lower lettuce and potato costs. Additionally, the
Company's overall poultry and red meat costs were lower in 1996. Other overall
wholesale costs increased slightly in 1996 but did not have a significant
impact on food and beverage cost. The new menu introduced in the fourth quarter
of 1996 slightly lowered the overall food cost percentage.

The percentage cost of food, beverage and supplies decreased .2% in 1995 as
compared to 1994. The improvement is primarily attributable to the increased
purchasing power and operating efficiencies of the Company's commissary.

PAYROLL AND BENEFITS as a percentage of restaurant sales increased .8% in 1996
primarily due to higher hourly wage rates, increased bonuses and increases in
employee benefit costs including vacation expense and health insurance. In
addition, an increase in the federal minimum wage rate to $4.75 from $4.25 on
October 1, 1996, had a slight negative impact on labor cost. These increases
were partially offset by a reduction in workers compensation expense. As a
result of increased competition and the low unemployment rates in the markets
in which O'Charley's restaurants are located, the Company continued to increase
wages and benefits in order to attract and retain management and hourly
coworkers. This trend is expected to continue in 1997. Additionally, the
federal minimum wage rate will increase another $0.50 per hour on October 1,
1997, which will have a slight impact on payroll costs.

In 1995, payroll and benefits as a percentage of restaurant sales increased .1%
as compared to fiscal 1994. Actual base salaries, hourly wage rates and
employee benefit costs increased in 1995 which were partially offset by lower
workers compensation costs, slightly lower bonus expense and economies achieved
from overall higher sales volumes.

RESTAURANT OPERATING COSTS, which consist primarily of supervisory cost and
direct restaurant operating cost including utilities, rent, repairs,
maintenance, outside services and insurance, remained at 15.1% of restaurant
sales in 1996.  The Company continued to achieve a lower restaurant operating
cost percentage from allocating certain supervisory and overhead costs over a
greater number of stores. Additionally, rent expense as a percentage of
restaurant sales was lower as the Company continued to purchase most of its
restaurant sites. The above-mentioned decreases were offset by increases in
certain operating costs including utilities, outside services and taxes.

In 1995, the percentage restaurant operating cost decreased .3% to 15.1%
primarily as a result of the economies achieved through the improvement in same
store sales and gains in overall restaurant sales volume. Additionally, the
Company achieved a lower restaurant operating cost percentage from allocating
certain supervisory and overhead costs over a greater number of stores.

COST OF COMMISSARY SALES as a percentage of commissary sales decreased .1% in
1996 as compared to 1995 and increased .5% in 1995 as compared to 1994. The
commissary's primary purpose is to service the O'Charley's restaurants. The
majority of its sales and related cost of sales are eliminated in the
consolidation of the Company's financial results. Therefore, any increased
efficiencies, as well as direct wholesale price increases and decreases are,
for the most part, reflected in the cost of food, beverage and supplies.

ADVERTISING, GENERAL AND ADMINISTRATIVE EXPENSES as a percentage of total
revenues increased .2% to 5.7% in 1996. The Company increased the amount of
advertising expenditures in 1996, particularly during the fourth quarter as the
new menu was introduced in conjunction with a new radio and television
advertising campaign. Additionally, the Company incurred higher salary and
related payroll costs due to the hiring of additional management personnel in

                                       16


<PAGE>   17

the areas of information services, advertising and real estate. These increases
were partially offset by a decrease in executive officers' bonus compensation
which is based in part on a formula of increased profits. Certain other cost
percentages decreased as a result of spreading certain general and
administrative expenses over a greater volume of total revenues. The Company
currently expects to increase the amount of advertising expenditures in 1997 as
a percentage of total revenues.

In 1995, advertising, general and administrative expenses as a percentage of
total revenues decreased .8% from 1994.  This decrease was primarily the result
of spreading certain general and administrative expenses over a greater volume
of total revenue, and from a decrease in the percentage cost of advertising
expenditures.

DEPRECIATION AND AMORTIZATION EXPENSE as a percentage of total revenues
increased .7% in 1996 and .4% in 1995.  Preopening amortization expense has
increased each of the last two years due to the increased number of new stores
open for less than one year. In 1996, the Company incurred additional capital
expenditures for several major restaurant remodels, computer equipment and
technological upgrades which increased the amount of depreciation expense. Due
to the expected increase in new store openings in 1997, depreciation and
amortization expense, as a percentage of total revenues, is likely to increase.

ASSET REVALUATION in 1996 represents charges for assets impaired under
Statement of Financial Accounting Standard No.  121 (FAS 121). Losses at
certain restaurant units prompted an evaluation of net realizable value of
certain assets in accordance with FAS 121. The $5.1 million expense represents
the difference between fair value and net book value for certain identifiable
assets. See Note 3 of Notes to Financial Statements.

INTEREST EXPENSE, net increased $668,000, or 34.8%, in 1996 and increased
$630,000, or 48.8%, in 1995. The increased amount of interest expense is
directly related to the increase in borrowings under the Company's line of
credit facility and increased borrowings under capitalized lease obligations.
This increase was partially offset by an overall interest rate reduction in
1996 as compared to 1995. Interest expense in 1997 is expected to continue to
increase due to expected borrowings needed to fund new restaurant sites.

LITIGATION EXPENSE in 1996 and 1995 represents charges related to a class
action lawsuit alleging racial discrimination.  The Company will continue to
pay legal fees and other costs related to the lawsuit in 1997 with no
anticipated additional charges to the statement of earnings as management
believes any additional payments are adequately reserved for on the Company's
balance sheet. See Liquidity and Capital Resources and Note 9 of Notes to
Financial Statements.

OTHER INCOME, NET decreased significantly in 1996 from 1995 due to the sale of
the Company's interest in Logan's Partnership in 1995. During the first three
quarters of 1995 and in fiscal 1994, the Company recorded its equity earnings
of Logan's and net rental income and guarantee fees related to its ownership of
the five Logan's restaurant sites in other income, net. In July 1995, Logan's
completed an initial public offering and the Company sold substantially all of
its interest in Logan's and recorded a gain of approximately $7.4 million.
Consequently, the Company no longer receives any income from Logan's except
that in the first quarter of 1996, the Company sold its remaining 7,000 shares
of Logan's common stock. Also, in the first quarter of 1996, the Company
expensed approximately $290,000 in acquisition costs associated with the Shoex
merger.

INCOME TAXES as a percentage of pretax earnings (loss) were (41.0%), 36.4% and
33.4% in 1996, 1995 and 1994, respectively. The income tax rate benefit in 1996
was higher than the expected rate of 36% due to the amount of the Federal
Insurance Contribution Act (FICA) tip credits in relation to a lower taxable
income. Taxable income was lower due to the tax deductibility of certain
litigation and FAS 121 expenses. The income tax rate in 1995 increased
primarily due to the reduction in targeted job tax credits (TJTC) and an
increase in the Company's federal income tax rate. The TJTC program was
discontinued at the beginning of 1995. Beginning in October 1996, the Work
Opportunity Tax Credit (WOTC) program was started which replaced the expired
TJTC program. The WOTC

                                       17


<PAGE>   18

program is similar to the TJTC program in that companies receive federal tax
credits for hiring certain qualified disadvantaged workers. The Company is in
the process of implementing the new program, and the amount of tax credits and
the effect on the income tax rate in 1997 is unknown.

LIQUIDITY AND CAPITAL RESOURCES

During 1996, the Company expended approximately $33.7 million in capital
expenditures for new stores and improvements to existing facilities.
Additionally, the Company capitalized approximately $2.2 million in preopening
costs and made $3.6 million in principal reductions in its long-term debt and
capitalized lease obligations. These cash outlays were funded primarily by
$12.9 million in cash generated from operations (prior to the additions to
preopening cost), borrowings of $18.5 million under the Company's unsecured
line of credit facility and borrowings under capitalized lease obligations of
$5.9 million.

On November 22, 1996, the Company entered into an amended and restated
revolving credit agreement which increased the amount of credit available under
its unsecured line of credit facility to $70 million from $30 million and
extended its term for an additional three years to November 30, 1999. The
revolving credit agreement requires monthly interest payments at a floating
rate based on the bank's prime rate plus or minus a certain percentage spread
or the LIBOR rate plus a certain percentage spread. The interest rate spread on
the restructured facility may vary and will be recalculated quarterly based on
certain financial ratios achieved by the Company. The new facility includes a
provision to extend the maturity annually by one year beginning on the first
anniversary of the facility. At December 29, 1996, $29 million was outstanding
under the facility compared with $10.5 million at December 31, 1995. The
increase in borrowings is primarily attributable to the expenditures incurred
for new stores and remodeling costs. At December 29, 1996, the Company was in
compliance with the financial and other covenants as outlined in the credit
agreement.

The Company opened 12 new restaurants in 1996. As of December 29, 1996, the
Company had six additional restaurants under construction of which five are
expected to open in the first quarter of 1997. For fiscal 1997, the Company
expects to open between 12 and 14 new company-owned restaurants. Management
estimates that the Company will spend approximately $34 million in capital
expenditures in 1997. Actual capital expenditures in 1997 may increase based on
a number of factors, including the timing of additional purchases of future
restaurant sites. The Company intends to continue to finance the furniture,
fixtures and equipment for its new stores with capitalized lease obligations.
The Company believes that available cash, cash generated from operations and
borrowings under its available credit facility and capital lease obligations
will be sufficient to finance its operations and expected growth through 1997.

As of the beginning of 1995, the Company owned 20% of Logan's Partnership (the
"Partnership") pursuant to the Logan's Partnership Agreement (the "Agreement").
Under the Agreement, the Company had the option to purchase the remaining 80%
interest in the Partnership at a 25% discount from its then appraised value.
The Agreement was amended and the Company agreed to forego its purchase option
in the event the Partnership consummated a "qualifying initial public offering"
(as defined in the amended Agreement), and at such time, the Company's
percentage interest in the Partnership would increase depending on the timing
of any such qualifying offering. During the third quarter of 1995, Logan's
Roadhouse, Inc. (LRI) was formed, and the Company's interest in the Partnership
was transferred to LRI in exchange for a 31.1% interest (as determined under
the amended Agreement) in LRI which occurred upon a qualifying initial public
offering. The LRI initial public offering became effective on July 26, 1995, at
which time the Company sold substantially all of its shares (628,995 shares)
and received net proceeds from the sale of approximately $7.9 million. In
connection with the offering, the Partnership purchased all the Logan's
restaurant properties owned by the Company at their appraised fair market value
of approximately $6.1 million. The total proceeds from the offering of $14.0
million netted cash of approximately $10.7 million after federal and state
taxes. As a result of the initial public offering, the Company earned and
reported a one-time gain in the third quarter of 1995 of $0.55 per share.
Proceeds from the offering were used to reduce long-term debt.


                                       18


<PAGE>   19

On January 5, 1996, the shareholders of the Company approved an Agreement and
Plan of Merger, dated October 9, 1995, to acquire Shoex, Inc., a franchisee of
the Company which owned and operated six O'Charley's restaurants in Alabama.
The transaction is accounted for as a pooling-of-interests. The Company
exchanged 666,666 shares of Company stock valued at approximately $9.5 million.
The Company assumed approximately $1.9 million in net obligations of Shoex,
Inc. (defined as long-term debt, capitalized lease obligations and working
capital deficit). Under the terms of the agreement, O'Charley's acquired the
six restaurants and regained the rights to develop other O'Charley's
restaurants in Alabama, Mississippi and specific locations in Florida and
Georgia. The accompanying financial statements reflect the transactions and
balances of Shoex since the transaction was accounted for as a
pooling-of-interests. The Company recorded acquisition charges of approximately
$290,000 in the first quarter of 1996 as a result of this merger. The Company
now has one remaining franchisee which operates one franchised O'Charley's. The
Company has full territorial rights to develop its restaurants in all markets.

During the fourth quarter of 1996, a consent decree approving the definitive
settlement agreement of a two-year old class action lawsuit alleging racial
discrimination against the Company was approved by the U.S. District Court. The
class action lawsuit was originally filed on February 15, 1994, against the
Company and certain of its executive officers and directors alleging racially
discriminatory job selection, termination and work environment practices in
violation of federal law. The settlement agreement created a settlement pool of
$4.8 million for the benefit of present and past African-American employees of
O'Charley's (the "Class") whose claims arose on or after March 31, 1992 and
reserved $700,000 for claims administration and fees, and included $2.0 million
for the attorneys representing the Class. The total settlement amount of $7.5
million plus an additional $1.0 million for legal and other expenses related to
the settlement was recorded in the second quarter of 1996. In the fourth
quarter of 1996, a $2.3 million adjustment to the original $7.5 million accrual
was recorded as income as a result of the relatively low number of claims
submitted by members of the announced plaintiff class. After recalculating the
actual level of participation, the total settlement amount at December 29,
1996, is approximately $5.2 million of which approximately $750,000 will be
paid through the issuance of Company stock and the remainder of $4.5 million
will be paid in cash of which approximately $1.4 million was paid in 1996. The
additional cash outlay of approximately $3.1 million is expected to be paid in
the first quarter of 1997 and will be funded by additional borrowings under the
Company's $70 million credit facility. See Note 9 of Notes to Financial
Statements.

The Company implemented FAS 121 in 1996 and recorded a $5.1 million charge
relating to the impairment of certain assets.  The write down of these assets
did not have an impact on cash. The Company closed four underperforming stores
in 1996 whereby the excess of fair market value over net realizable value for
these units were included in the FAS 121 write down. The effect of closing
these stores will have a positive effect on earnings and cash. Two of the four
restaurant sites and buildings were later sold. See Note 3 of Notes to
Financial Statements for additional details.

The Company does not believe that inflation has had a material effect on net
earnings during the past several years. The Company generally has been able to
increase menu prices or modify its operating procedures to substantially offset
increases in operating costs.





                                       19


<PAGE>   20
ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.


<TABLE>
<CAPTION>

INDEX TO FINANCIAL STATEMENTS                                             PAGE
-----------------------------                                             ----
<S>                                                                       <C>
Independent Auditors' Report                                               21

Balance Sheets of O'Charley's Inc. as of December 29, 1996
      and December 31, 1995                                                22

Statements of Operations of O'Charley's Inc. for the years ended
      December 29, 1996, December 31, 1995, and December 25, 1994          23

Statements of Shareholders' Equity of O'Charley's Inc. for the
      years ended December 29, 1996, December 31, 1995,
      and December 25, 1994                                                24

Statements of Cash Flows of O'Charley's Inc. for the years ended
      December 29, 1996, December 31, 1995, and December 25, 1994          25

Notes to Financial Statements                                              26

</TABLE>




                                     20

<PAGE>   21



                         INDEPENDENT AUDITORS' REPORT


The Board of Directors and Shareholders
O'Charley's Inc.
Nashville, Tennessee:

We have audited the balance sheets of O'Charley's Inc. as of December 29, 1996,
and December 31, 1995, and the related statements of operations, shareholders'
equity, and cash flows for each of the years in the three-year period ended
December 29, 1996. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on the
financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statement. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the financial statement referred to above present fairly, in
all material respects, the financial position of O'Charley's Inc. as of
December 29, 1996, and December 31, 1995, and the results of its operations and
its cash flows for each of the years in the three-year period ended December
29, 1996, in conformity with generally accepted accounting principles.



                                          KPMG PEAT MARWICK LLP


Nashville, Tennessee
February 6, 1997




                                      21
<PAGE>   22


                                 BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                             December 29,       December 31,
(Dollars in Thousands)                                                          1996               1995
                                                                             -----------------------------
<S>                                                                          <C>                   <C>
ASSETS
CURRENT ASSETS:
    Cash                                                                     $  1,616              $ 2,576
    Accounts receivable, less allowance for doubtful
         accounts of $58 in 1996 and $92 in 1995                                1,546                1,244
    Due from related parties                                                      --                   108
    Inventories                                                                 4,505                3,780
    Preopening costs                                                            1,097                1,045
    Deferred income taxes                                                       2,334                  839
    Other current assets                                                        1,357                  971
                                                                              ----------------------------
         Total current assets                                                  12,455               10,563

PROPERTY AND EQUIPMENT, NET                                                   103,281               81,512

OTHER ASSETS                                                                    1,423                1,276

                                                                             $117,159              $93,351
                                                                             -----------------------------

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
    Accounts payable                                                         $  5,022              $ 4,423
    Accrued payroll and related expenses                                        3,365                3,435
    Accrued expenses                                                            9,162                4,650
    Federal, state and local taxes                                              2,461                2,606
    Current portion of long-term debt and capitalized leases                    3,309                2,793
                                                                              ----------------------------
         Total current liabilities                                             23,319               17,907

DEFERRED INCOME TAXES                                                           1,295                2,395

LONG-TERM DEBT                                                                 29,822               11,990

CAPITALIZED LEASE OBLIGATIONS                                                  11,797                9,272

SHAREHOLDERS' EQUITY:
    Common stock--No par value; authorized, 50,000,000
         shares; issued and outstanding, 7,854,369 in 1996 and
         7,770,964 in 1995                                                     29,592               28,991
    Additional paid-in capital                                                    652                  967
    Retained earnings                                                          20,682               21,829
                                                                             -----------------------------
         Total shareholders' equity                                            50,926               51,787
                                                                             -----------------------------
                                                                             $117,159              $93,351
                                                                             -----------------------------
</TABLE>



See notes to financial statements.


                                     22

<PAGE>   23


                            STATEMENTS OF OPERATIONS



<TABLE>
<CAPTION>
                                                                             Year Ended
                                                             ----------------------------------------------
                                                             December 29,     December 31,     December 25,
(In Thousands, Except Per Share Data)                           1996             1995             1994
                                                             ----------------------------------------------
<S>                                                             <C>              <C>              <C>
REVENUES:
    Restaurant sales                                            $162,235         $138,098         $112,183
    Commissary sales                                               2,264            9,429           10,483
    Franchise revenue                                                 31               30               31
                                                                ------------------------------------------
                                                                 164,530          147,557          122,697
COSTS AND EXPENSES:
    Cost of restaurant sales:
         Cost of food, beverage and supplies                      58,184           50,687           41,356
         Payroll and benefits                                     50,227           41,511           33,641
         Restaurant operating costs                               24,504           20,884           17,282
    Cost of commissary sales                                       2,156            8,986            9,939
    Advertising, general and administrative expenses               9,370            8,187            7,717
    Depreciation and amortization                                  8,141            6,164            4,711
    Asset revaluation                                              5,110              --               --
                                                                ------------------------------------------
                                                                 157,692          136,419          114,646
                                                                ------------------------------------------
INCOME FROM OPERATIONS                                             6,838           11,138            8,051

OTHER (INCOME) EXPENSE:
    Interest expense, net                                          2,588            1,920            1,290
    Litigation                                                     6,200            1,000               --
    Other, net                                                        (6)          (8,444)            (704)
                                                                ------------------------------------------
                                                                   8,782           (5,524)             586
                                                                ------------------------------------------
EARNINGS (LOSS) BEFORE INCOME TAXES                               (1,944)          16,662            7,465

INCOME TAX EXPENSE (BENEFIT)                                        (797)           5,785            2,236
                                                                ------------------------------------------
NET EARNINGS (LOSS)                                              $(1,147)         $10,877           $5,229
                                                                ------------------------------------------
PRO FORMA DATA:
    Earnings before income taxes as reported                                      $16,662           $7,465
    Pro forma income tax expense                                                    6,071            2,492
                                                                                  ------------------------
    Pro forma net earnings                                                        $10,591           $4,973
                                                                                  ------------------------
EARNINGS (LOSS) PER COMMON SHARE 1                                $(0.14)           $1.26            $0.61
                                                                ------------------------------------------
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING                         8,390            8,438            8,137
                                                                ------------------------------------------
</TABLE>



1 Earnings per common share for 1995 and 1994 represent pro forma amounts (see
Note 2 in Notes to Financial Statements).




See notes to financial statements.

                                     23

<PAGE>   24


                      STATEMENTS OF SHAREHOLDERS' EQUITY

<TABLE>
<CAPTION>

                                                         Common Stock          Additional
                                                       -----------------          Paid-in    Retained
(In Thousands)                                         Shares     Amount          Capital    Earnings      Total
                                                       ---------------------------------------------------------
<S>                                                      <C>        <C>             <C>                    <C>
Balance, December 26, 1993, as originally reported       6,545      $25,656           $0       $7,300      $32,956

    Adjustment to reflect the merger with
         Shoex, Inc. on January 5, 1996                    667           --          248           --          248
                                                         ---------------------------------------------------------

Balance, December 26, 1993, as adjusted                  7,212       25,656          248        7,300       33,204

    1994 Net earnings                                       --           --          768        4,461        5,229
    Cash distribution to Shoex, Inc. shareholders           --           --         (440)          --         (440)
    Exercise of employee stock options including
         tax benefits                                      468        2,629           --           --        2,629
    Shares issued under CHUX Ownership Plan                 19          182           --           --          182
                                                         ---------------------------------------------------------

Balance, December 25, 1994                               7,699       28,467          576       11,761       40,804

    1995 Net earnings                                       --           --          809       10,068       10,877
    Cash distribution to Shoex, Inc. shareholders           --           --         (418)          --         (418)
    Exercise of employee stock options including
         tax benefits                                       55          320           --           --          320
    Shares issued under CHUX Ownership Plan                 17          204           --           --          204
                                                         ---------------------------------------------------------

Balance, December 31, 1995                               7,771       28,991          967       21,829       51,787

    1996 Net loss                                           --           --           --       (1,147)      (1,147)
    Cash distribution to Shoex, Inc. shareholders           --           --         (315)          --         (315)
    Exercise of employee stock options including
         tax benefits                                       65          446           --           --          446
    Shares issued under CHUX Ownership Plan                 18          155           --           --          155
                                                         ---------------------------------------------------------

Balance, December 29, 1996                               7,854      $29,592         $652      $20,682      $50,926
                                                         ---------------------------------------------------------
</TABLE>





See notes to financial statements.

                                     24

<PAGE>   25


                           STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                        Year Ended
                                                                       --------------------------------------------
                                                                       December 29,     December 31,   December 25,
(In Thousands)                                                            1996             1995           1994
                                                                       --------------------------------------------
<S>                                                                       <C>              <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
    Net earnings (loss)                                                   $(1,147)         $10,877         $5,229
    Adjustments to reconcile net earnings to net cash
         provided by operating activities:
           Depreciation and amortization                                    5,982             4,875         3,876
           Amortization of preopening costs                                 2,159             1,289           835
           Deferred income taxes                                           (2,595)              936          (216)
           Gain on sale of assets                                            (157)           (7,448)           --
           Asset revaluation                                                5,110               --             --
    Changes in assets and liabilities:
           Accounts receivable                                               (302)              (84)         (464)
           Due from related parties                                           108               281          (172)
           Inventories                                                       (725)              699        (1,446)
           Additions to preopening costs                                   (2,211)           (1,970)         (794)
           Other current assets                                              (386)             (120)         (356)
           Accounts payable                                                   599               981           705
           Accrued payroll and other accrued expenses                       4,297             2,241         2,041
                                                                          ---------------------------------------
             Net cash provided by operating activities                     10,732            12,557         9,238

CASH FLOWS FROM INVESTING ACTIVITIES:
    Additions to property and equipment                                   (27,744)          (20,439)      (15,364)
    Proceeds from sale of property and equipment                            1,341             6,100            48
    Proceeds from sale of unconsolidated partnership                          --              7,894            --
    Other, net                                                               (516)              (85)         (360)
                                                                          ---------------------------------------
             Net cash used by investing activities                        (26,919)           (6,530)      (15,676)

CASH FLOWS FROM FINANCING ACTIVITIES:
    Proceeds from long-term debt                                           18,503             6,000        13,300
    Payments on long-term debt and capitalized
         lease obligations                                                 (3,563)          (11,284)       (8,943)
    Distribution to shareholders of acquired entity                          (315)             (418)         (440)
    Exercise of employee incentive stock options                              602               524         2,811
                                                                          ---------------------------------------
             Net cash provided (used) by financing activities              15,227            (5,178)        6,728
                                                                          ---------------------------------------
(Decrease) Increase in Cash                                                  (960)              849           290

Cash at Beginning of the Period                                             2,576             1,727         1,437
                                                                          ---------------------------------------
Cash at End of the Period                                                  $1,616           $2,576         $1,727
                                                                          ---------------------------------------
</TABLE>





See notes to financial statements

                                     25

<PAGE>   26


                         NOTES TO FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

O'CHARLEY'S INC. (the "Company") owns, operates and franchises 70 (at December
29, 1996) full-service restaurant facilities in various cities in 10
southeastern and midwestern states under the trade name of "O'Charley's." The
financial statements include the accounts of the Company and its wholly owned
subsidiaries. All significant intercompany accounts and transactions have been
eliminated. The Company's fiscal year ends on the last Sunday in December.
While fiscal year 1995 was comprised of 53 weeks, fiscal years 1996 and 1994
were comprised of 52 weeks.

FINANCIAL STATEMENTS and these accompanying notes have been restated to reflect
the combined operations of the Company and Shoex, Inc., a merger accounted for
as a pooling-of-interests (see also Note 2).

INVENTORIES are valued at the lower of cost (first-in, first-out method) or
market and consist primarily of food, beverages and supplies.

PREOPENING COSTS represent costs incurred prior to a restaurant opening. These
costs are capitalized and amortized over a 12-month period commencing the date
the restaurant opens.

PROPERTY AND EQUIPMENT are stated at cost and depreciated on a straight-line
method over the following estimated useful lives: buildings and
improvements--30 years; furniture, fixtures and equipment--3 to 10 years.
Leasehold improvements are amortized over the lesser of the asset's estimated
useful life or the lease term. Equipment under capitalized leases is amortized
to its expected value to the Company at the end of the lease term. Property
leased to others includes land, buildings and improvements which are
depreciated over the Company's standard estimated useful lives for these
assets.  Gains or losses are recognized upon the disposal of property and
equipment, and the asset and related accumulated depreciation and amortization
are removed from the accounts. Maintenance, repairs and betterments which do
not enhance the value of or increase the life of the assets are charged to
costs and expenses as incurred.

EXCESS OF COST OVER FAIR VALUE OF NET ASSETS ACQUIRED, which is included in
other assets, is amortized over 20 years using the straight-line method. The
Company periodically reviews the value of these assets to assess recoverability
and impairment, and impairment would be recognized in the statement of
operations if a permanent impairment was determined to have occurred.

ADVERTISING COSTS. The Company generally expenses advertising costs as incurred
except for certain creative and development production costs which are
amortized over its expected period of future benefits.

DEFERRED REVENUE, which is included in accrued expenses, includes deferred gift
certificate revenue. The Company records a deferred liability at the time
certificates are sold at an amount equal to the anticipated redemption value.
The deferred liability is reduced when gift certificates are redeemed; and
accordingly, at that time, the Company records restaurant sales.

INCOME TAXES are accounted for in accordance with the asset and liability
method. Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between financial statement carrying
amounts of existing assets and liabilities and their respective tax basis.
Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in the statement
of earnings in the period that includes the enactment date.

STOCK OPTION PLAN. Prior to January 1, 1996, the Company accounted for its
stock option plans in accordance with the provisions of Accounting Principles
Board ("APB") Opinion No. 25, Accounting for Stock Issued to Employees, and
related interpretations. As such, the compensation expense would be recorded on
the date of grant only if the current market price of the underlying stock
exceeded the exercise price. On January 1, 1996, the

                                     26

<PAGE>   27




Company adopted Statement of Financial Accounting Standards No. 123(FAS 123),
Accounting for Stock-based Compensation, which permits entities to recognize as
expense over the vesting period the fair value of all stock-based awards on the
date of the grant. Alternatively, FAS 123 also allows entities to continue to
apply the provisions of APB Opinion No. 25 and provide pro forma net earnings
and pro forma earnings per share disclosures for employee stock option grants
made in 1995 and future years as if the fair-value-based method defined in FAS
123 had been applied. The Company has elected to continue to apply the
provisions of APB Opinion No. 25 and provide the pro forma disclosure
provisions of FAS 123.

FRANCHISE REVENUES. Initial franchise fees are recognized when all material
services have been substantially performed by the Company and the restaurant
has opened for business. Franchise royalties, which are based on a percentage
of monthly sales, are recognized as income on the accrual basis. Costs
associated with franchise operations are expensed as incurred.

PER SHARE DATA has been computed on the basis of the weighted average number of
shares outstanding, including common stock equivalents, which consist of stock
options. In determining the number of dilutive common stock equivalents, the
Company includes average common shares attributable to dilutive stock options
using the treasury stock method. Fully diluted earnings per share is not
presented since it approximates earnings per common share.

USE OF ESTIMATES. Management of the Company has made certain estimates and
assumptions relating to the reporting of assets and liabilities and the
disclosure of contingent assets and liabilities to prepare these financial
statements in conformity with generally accepted accounting principles. Actual
results could differ from these estimates.

FAIR VALUE OF FINANCIAL INSTRUMENTS. The Company has adopted Statement of
Financial Accounting Standards No. 107, Disclosures about Fair Value of
Financial Instruments (FAS 107), which requires disclosure of the fair values
of most on-and-off balance sheet financial instruments for which it is
practicable to estimate that value. The scope of FAS 107 excludes certain
financial instruments such as trade receivables and payables when the carrying
value approximates the fair value, employee benefit obligations, lease
contracts, and all nonfinancial instruments such as land, buildings, and
equipment. The fair values of the financial instruments are estimates based
upon current market conditions and quoted market prices for the same or similar
instruments as of December 29, 1996. Book value approximates fair value for
substantially all of the Company's assets and liabilities which fall under the
scope of FAS 107.

IMPAIRMENT OF LONG-LIVED ASSETS. The Company has adopted Statement of Financial
Accounting Standards No. 121 (FAS 121), Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of. This statement
requires that long-lived assets and certain identifiable intangibles be
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. All assets that
management determined to be permanently impaired have been written down to fair
value.

CERTAIN RECLASSIFICATIONS have been made to the accompanying financial
statements for the previous fiscal years to conform to the 1996 presentation.


2. BUSINESS ACQUISITION

On January 5, 1996, the shareholders of the Company approved an Agreement and
Plan of Merger, dated October 9, 1995, to merge with Shoex, Inc. (Shoex), a
franchisee of the Company which owned and operated six O'Charley's restaurants
in Alabama. The transaction is accounted for as a pooling-of-interests. The
Company exchanged 666,666 shares of Company stock valued at approximately $9.5
million. The Company assumed approximately $1.9 million in net obligations of
Shoex, Inc. (defined as long-term debt, capitalized lease obligations and
working capital deficit). As a result of the merger, O'Charley's owns the six
restaurants and the rights to develop other O'Charley's restaurants in Alabama,
Mississippi and specific locations in Florida and Georgia. All comparative
financial statements presented reflect the combined results of the Company and
Shoex for all periods presented.


                                     27

<PAGE>   28



Revenues, net earnings and changes in shareholders' equity of the separate
companies for the periods preceding the acquisition were as follows:

<TABLE>
<CAPTION>
                                                                                                Changes in
                                                                                      Net    Shareholders'
(In Thousands)                                                  Revenues         Earnings           Equity
                                                                ------------------------------------------
<S>                                                             <C>               <C>               <C>
Fiscal year ended December 31, 1995:
    O'Charley's, as previously reported                         $136,605          $10,068              --
    Shoex                                                         14,827              809           $(440)
    Pro forma adjustments                                         (3,875)            (286)             --
                                                                -----------------------------------------
    Combined                                                    $147,557          $10,591           $(440)
                                                                -----------------------------------------
Fiscal year ended December 25, 1994
    O'Charley's, as previously reported                         $112,128           $4,461              --
    Shoex                                                         13,986              768           $(418)
    Pro forma adjustments                                         (3,417)            (256)             --
                                                                -----------------------------------------
    Combined                                                    $122,697           $4,973           $(418)
                                                                -----------------------------------------
</TABLE>


3. ASSET REVALUATION

Operating losses at certain restaurant units prompted an evaluation of net
realizable value of certain assets in accordance with FAS 121.  Accordingly,
the Company recorded a $5,110,000 charge to earnings for assets impaired under
FAS 121.  This amount represents the difference between fair value and net book
value for certain identifiable assets consisting primarily of buildings,
improvements and equipment.  The fair value for these assets was determined
using several evaluation techniques including the present value of estimated
expected future cash flows, quoted market prices and prices for similar assets.
The $5,110,000 charge is comprised of the following impaired restaurant assets:
(1)Assets to be disposed of: $536,000 for two restaurant units which were
closed in the third quarter of 1996 and were later sold in 1996 and $1,967,000
for two units which were closed in the third quarter of 1996 and are expected
to be disposed of in 1997 having a carrying value on December 29, 1996 of
$1,747,000; (2)Assets to be held: $445,000 primarily for restaurant computer
equipment and $2,162,000 for five restaurant units expected to remain open or
be relocated. The 1996 results of operations for the four units closed include
revenues of $4,293,000 and costs and expenses of $4,865,000.


4. PROPERTY AND EQUIPMENT

Property and equipment at December 29, 1996, and December 31, 1995, consist of
the following:

<TABLE>
<CAPTION>
(In Thousands)                                                              1996                   1995
                                                                            ------------------------------
<S>                                                                         <C>                    <C>
Land and improvements                                                         $26,500              $20,524
Buildings and improvements                                                    36,680                26,582
Furniture, fixtures and equipment                                             26,365                20,195
Leasehold improvements                                                        20,154                18,332
Equipment under capitalized leases                                            19,066                15,990
Property leased to others                                                      1,032                   951
                                                                            ------------------------------
                                                                             129,797               102,574
Less accumulated depreciation and amortization                               (26,516)              (21,062)
                                                                            ------------------------------
                                                                            $103,281               $81,512
                                                                            ------------------------------
</TABLE>



                                     28

<PAGE>   29



5. OTHER ASSETS

Other assets at December 29, 1996, and December 31, 1995, consist of the
following:

<TABLE>
<CAPTION>
(In Thousands)                                                                 1996                 1995
                                                                               ---------------------------
<S>                                                                            <C>                  <C>
Excess of cost over fair value of net assets acquired,
    net of accumulated amortization of $83 in 1996
    and $144 in 1995                                                             $239                 $490
Prepaid expenses                                                                  647                  469
Trade notes receivable                                                            537                  317
                                                                               ---------------------------
                                                                               $1,423               $1,276
                                                                               ---------------------------
</TABLE>


6. ACCRUED EXPENSES

Accrued expenses at December 29, 1996, and December 31, 1995, include the
following:

<TABLE>
<CAPTION>
(In Thousands)                                                                 1996                 1995
                                                                               ---------------------------
<S>                                                                            <C>                  <C>
Deferred revenue-gift certificates                                             $1,151                 $807
Workers' compensation expenses                                                  1,325                1,363
Accrued litigation                                                              4,627                  605
Other accrued expenses                                                          2,059                1,875
                                                                               ---------------------------
                                                                               $9,162               $4,650
                                                                               ---------------------------
</TABLE>


7. LONG-TERM DEBT

Long-term debt at December 29, 1996, and December 31, 1995, consists of the
following:

<TABLE>
<CAPTION>
(In Thousands)                                                                1996                 1995
                                                                              ----------------------------
<S>                                                                           <C>                  <C>
$70 million revolving line of credit                                          $29,000              $10,500
Secured mortgage notes payable                                                    251                  845
Installment notes payable                                                         722                  972
                                                                              ----------------------------
                                                                               29,973               12,317
Less current maturities                                                          (151)                (327)
                                                                              ----------------------------
                                                                              $29,822              $11,990
                                                                              ----------------------------
</TABLE>


On November 22, 1996, the Company entered into an amended and restated
revolving credit agreement (the "Credit Agreement") which increased its
unsecured line of credit facility to $70 million from $30 million. The Credit
Agreement requires monthly interest payments at a floating rate based on the
bank's prime rate plus or minus a certain percentage spread or the LIBOR rate
plus a certain percentage spread. The interest rate spread on the restructured
facility is based on certain financial ratios achieved by the Company and is
recomputed quarterly. At December 29, 1996, the $29,000,000 outstanding balance
carried interest rates from 6.84% (LIBOR rate plus 1.25%) to 7.75% (prime minus
 .5%). The new credit facility includes a provision to extend its November 30,
1999, maturity annually by one year beginning on the first anniversary of the
facility. The Credit Agreement also requires the Company to meet certain
financial and other covenants. During fiscal 1996, the Company was in
compliance with all covenants.



                                     29

<PAGE>   30



The secured mortgage note payable at December 29, 1996, bears interest at 10.6%
and is payable in monthly installments, including interest, through June 2010.
This debt is collateralized by land and buildings having a depreciated cost of
approximately $979,000 at December 29, 1996.

The installment notes payable at December 29, 1996, bear interest at 9.1% and
are  payable in monthly installments, including interest, through October 2002.
Debt of $624,000 is secured by an airplane with a depreciated cost of
approximately $605,000 at December 29, 1996. The remaining debt of $98,000,
issued in connection with the 1993 merger of Burbet Foods, Inc. is unsecured.

The annual maturities of long-term debt as of December 29, 1996, are:
$151,000-1997; $143,000-1998; $29,113,000-1999; $124,000-2000; $135,000-2001;
and $307,000 thereafter.


8. LEASE COMMITMENTS

The Company has various leases for certain restaurant land and buildings under
operating lease agreements. Under these leases, the Company pays taxes,
insurance and maintenance costs in addition to the lease payments. Certain
leases also provide for additional contingent rentals based on a percentage of
sales in excess of a minimum rent. The Company leases certain equipment and
fixtures under capital lease agreements having lease terms from five to seven
years. The Company expects to exercise its options under these agreements to
purchase the equipment in accordance with the provisions of the lease
agreements.

As of December 29, 1996, approximately $19,066,000 cost less $4,014,000
accumulated amortization of the Company's property and equipment is under
capitalized lease obligations. Interest rates on capitalized lease obligations
range from 6.6% to 10.5%. Future minimum lease payments at December 29, 1996,
are as follows:

<TABLE>
<CAPTION>
                                                                           Capitalized
                                                                           Equipment            Operating
(In Thousands)                                                                Leases               Leases
                                                                           -------------------------------
<S>                                                                           <C>                  <C>
1997                                                                          $ 4,188              $ 3,746
1998                                                                            4,203                3,749
1999                                                                            3,523                3,714
2000                                                                            3,508                3,523
2001                                                                            2,049                3,474
Thereafter                                                                        300               31,267
                                                                              ----------------------------
Total minimum rentals                                                          17,771              $49,473
                                                                                                   -------
Less amount representing interest                                              (2,816)
                                                                              -------
Net minimum lease payments                                                     14,955
Less current maturities                                                        (3,158)
                                                                              -------
Capitalized lease obligations                                                 $11,797
                                                                              -------
</TABLE>



Rent expense for the fiscal years ending in December for operating leases is as
follows:

<TABLE>
<CAPTION>
(In Thousands)                                                    1996             1995             1994
                                                                  ----------------------------------------
<S>                                                               <C>              <C>              <C>
Minimum rentals                                                   $3,100           $3,525           $3,105
Contingent rentals                                                   417              428              314
                                                                  ----------------------------------------
                                                                  $3,517           $3,953           $3,419
                                                                  ----------------------------------------
</TABLE>



                                     30

<PAGE>   31



9. COMMITMENTS AND CONTINGENCIES

On February 15, 1994, a class action suit was filed in the United States
Federal District Court against the Company and certain of the Company's
executive officers and directors. The suit alleged racially discriminatory
practices by the defendant parties in violation of federal law. During the
fourth quarter of 1996, the Court approved a consent decree which approved a
definitive settlement agreement. The settlement agreement provided for a
settlement pool of $4.8 million for the benefit of present and past
African-American employees of O'Charley's (the "Class") whose claims arose on
or after March 31, 1992, reserved $700,000 for claims administration and fees,
and included $2.0 million for the attorneys representing the Class. Based on
the relatively low number of class members electing to participate in the
settlement, the original $7.5 million total settlement amount has been reduced
to approximately $5.2 million. As of December 29, 1996, the Company has paid
approximately $1.4 million towards the total settlement. Estimated amounts to
be paid in 1997 include approximately $3.1 million in cash and approximately
$750,000 in Company stock. The Company believes there are adequate reserves
recorded for the anticipated future payments of the lawsuit settlement.

The Company is involved in other legal actions incidental to its business. In
the opinion of management, the ultimate disposition of these matters will not
have a material adverse effect on the Company's operating results or financial
position.


10. INCOME TAXES

The total income tax expense (benefit) for the fiscal years ending in December
is allocated as follows:

<TABLE>
<CAPTION>
(In Thousands)                                                1996             1995                 1994
                                                              --------------------------------------------
<S>                                                           <C>              <C>                  <C>
Earnings                                                      $(797)           $5,785               $2,236
Shareholders' equity, tax benefit derived from
    non-statutory stock options exercised                       (200)             (77)              (1,100)
                                                              --------------------------------------------
                                                              $ (997)          $5,708               $1,136
                                                              --------------------------------------------
</TABLE>


Effective January 5, 1996, the Company merged with Shoex, Inc. which is
accounted for as a pooling-of-interests. Shoex, Inc. was an S Corporation
whereby its income was taxable at the shareholder level. Had Shoex been subject
to income taxes, additional income tax expense of $286,000 and $256,000 in 1995
and 1994, respectively, would have been recorded.  The pro forma data presented
on the face of the statements of operations reflect these amounts.

Income tax expense (benefit) related to earnings for the fiscal years ending in
December consists of:

<TABLE>
<CAPTION>
(In Thousands)                                                    1996             1995             1994
                                                                  ----------------------------------------
<S>                                                               <C>              <C>              <C>
Current                                                           $1,798           $4,849           $2,452
Deferred                                                          (2,595)             936             (216)
                                                                  ----------------------------------------
                                                                  $ (797)          $5,785           $2,236
                                                                  ----------------------------------------
</TABLE>





                                     31

<PAGE>   32



Income tax expense (benefit) attributable to earnings differs from the amounts
computed by applying the applicable U.S.  federal income tax rate to pretax
earnings from operations as a result of the following:

<TABLE>
<CAPTION>
                                                                1996               1995            1994
                                                                ---------------------------------------
<S>                                                             <C>                <C>             <C>
Federal statutory rate                                          (34.0%)            35.0%           34.0%
Increase (decrease) in taxes due to:
    State income taxes, net of federal tax benefit                (1.8)              3.9             3.9
    Utilization of tax credits                                   (21.3)             (2.8)           (5.1)
    Adjustment to deferred tax assets and liabilities for
         change in tax status of Shoex                            12.1               --              --
    Earnings attributable to S Corporation                         --               (1.7)           (3.4)
    Other (primarily goodwill amortization)                        4.0                .3              .6
                                                                ----------------------------------------
                                                                (41.0%)            34.7%           30.0%
                                                                ----------------------------------------
</TABLE>


The tax effects of temporary differences that give rise to significant portions
of the deferred tax assets and deferred tax liabilities at each of the
respective fiscal year ends are as follows:

<TABLE>
<CAPTION>
(In Thousands)                                                                      1996             1995
                                                                                   -----------------------
<S>                                                                                <C>               <C>
Deferred tax assets:
    Accrued expenses, principally due to accruals for workers'
    compensation, employee health and retirement benefits                          $1,161             $833
Accrued litigation                                                                  1,827              182
Other                                                                                  27              141
                                                                                   -----------------------
    Total gross deferred tax assets                                                 3,015            1,156

Deferred tax liabilities:
    Property and equipment, principally due to differences in
         depreciation and capitalized lease amortization                            1,468            2,203
Preopening cost, due to cost in excess of amortization                                428              403
Other                                                                                  80              106
                                                                                  ------------------------
    Total gross deferred tax liabilities                                            1,976            2,712
                                                                                  ------------------------
         Net deferred tax liability (asset)                                       $(1,039)          $1,556
                                                                                  ------------------------
</TABLE>


The net deferred tax liability (asset) at December 29, 1996, and December 31,
1995, are recorded as follows:

<TABLE>
<CAPTION>
(In Thousands)                                                                    1996              1995
                                                                                  ------------------------
<S>                                                                               <C>               <C>
Deferred income taxes, long-term liability                                         $1,295           $2,395
Deferred income taxes, current asset                                               (2,334)            (839)
                                                                                  ------------------------
                                                                                  $(1,039)          $1,556
                                                                                  ------------------------
</TABLE>


Statement 109 requires an evaluation of the deferred tax asset components and
recognition of a valuation allowance if it is determined that more likely than
not all or some portion of the deferred asset will not be realized. Based on
the Company's history of annual increases in taxable income and management's
projections of future taxable income, the Company estimates, it is more likely
than not all of the deferred assets will be realized; thus, no valuation
allowance is recorded.


                                     32

<PAGE>   33



11. SHAREHOLDERS' EQUITY

The Company's charter authorizes 100,000 shares of preferred stock of which the
Board of Directors may, without shareholder approval, issue with voting or
conversion rights upon the occurrence of certain events. At December 29, 1996,
no preferred shares had been issued.

12. STOCK OPTION AND PURCHASE PLANS

The Company has four incentive stock option plans: the 1985 Stock Option Plan,
the 1989 Consultant Stock Program, the 1990 Employee Stock Plan and the 1991
Stock Option Plan for Outside Directors.  Options under these plans include
both statutory and nonstatutory stock options and are issued to officers, key
employees, nonemployee directors and consultants of the Company.   The Company
has reserved 3,737,500 shares of common stock for these plans under which the
options are granted at 100% of the fair market value of common stock on the
date of the grant, expire 10 years from the date of the grant and are
exercisable at various times as previously determined by the Board of
Directors.  The Company accounts for these plans under the direction of APB
Opinion No. 25, and accordingly, no compensation cost has been recognized.

If compensation cost for these plans had been determined consistent with FAS
Statement No. 123, the Company's net earnings and earnings per share would have
been reduced to the following pro forma amounts:

<TABLE>
<CAPTION>
                                                                                    1996             1995
                                                                                -----------------------------
<S>                               <C>                                           <C>               <C>
Net Earnings (Loss):              As reported (pro forma in 1995)               $(1,147,000)      $10,590,000
                                  Pro forma, as adjusted under FAS 123           (1,493,000)       10,303,000
Earnings (Loss) per
 Common Share:                    As reported (pro forma in 1995)                    $(0.14)            $1.26
                                  Pro forma, as adjusted under FAS 123                (0.18)             1.22
</TABLE>

Because the Statement 123 method of accounting has not been applied to options
granted prior to January 1, 1995, the resulting pro forma compensation cost may
not be representative of that to be expected in future years.

A summary of stock option activity during the periods indicated is as follows:


<TABLE>
<CAPTION>
                                                           Number of          Weighted-Average
                                                            Shares             Exercise Price
                                                           ------------------------------------
 <S>                                                       <C>                       <C>
 Balance at December 25, 1994                              1,618,225                 $7.16
         Granted                                             457,475                 11.75
         Exercised                                           (69,741)                 4.91
         Forfeited                                           (54,790)                 8.97
                                                           -------------------------------
 Balance at December 31, 1995                              1,951,169                  8.22
         Granted                                             195,250                 12.36
         Exercised                                           (65,670)                 3.91
         Forfeited                                          (241,140)                10.15
                                                           -------------------------------
 Balance at December 29, 1996                              1,839,609                 $8.53
                                                           -------------------------------
</TABLE>





                                     33

<PAGE>   34



The following table summarizes information about stock options outstanding at
December 29, 1996:

<TABLE>
<CAPTION>
                                 Options Outstanding                        Options Exercisable
                         ---------------------------------------------------------------------------------
                             Number       Weighted-Avg.                          Number
                         Outstanding          Remaining    Weighted-Avg.     Exercisable     Weighted-Avg.
 Exercise Price          at 12/29/96   Contractual Life   Exercise Price     at 12/29/96    Exercise Price
-----------------------------------------------------------------------------------------------------------
<S>                        <C>            <C>                      <C>           <C>                 <C>
$2.00 to 03.50               188,851        3.3  years             $2.81         165,301             $2.85
$4.17 to 06.83               221,900        5.4                     5.19         167,825              5.09
$8.41 to 11.67             1,180,703        7.2                     9.25         453,767              8.89
$12.00 to 14.37              248,155        8.9                    12.49          40,587             12.71
----------------------------------------------------------------------------------------------------------
$2.00 to 14.37             1,839,609        6.8                    $8.53         827,480             $7.10
----------------------------------------------------------------------------------------------------------
</TABLE>


At December 29, 1996, and December 31, 1995, the number of options exercisable
was 827,480 and 781,000, respectively, and the weighted-average exercise price
of those options was $7.10 and $6.37, respectively.

The fair value of each option grant is estimated on the date of grant using the
Black-Scholes option pricing model with the following weighted-average
assumptions used for grants in 1996 and 1995:  risk-free interest rate of 6.7%;
expected life of 7.4 years; expected volatility of 41.6%.

The Company has established the CHUX Ownership Plan for the purpose of
providing an opportunity for eligible employees of the Company  to become
shareholders in O'Charley's.  The Company has reserved 450,000 common shares
for this plan.  The CHUX Ownership Plan is intended to be an employee stock
purchase plan which qualifies for favorable federal income tax treatment under
Section 423 of the Internal Revenue Code.  The Plan allows participants to
purchase common stock at 85% of fair market value, which is issued at the end
of each Plan year.  Contributions of up to 15% of base salary are made by each
participant through payroll deductions. The Plan year begins October 1. As of
December 29, 1996, 54,000 shares have been issued under this Plan.

13. EMPLOYEE BENEFIT PLAN

The Company has a 401(k) salary reduction and profit-sharing plan called the
CHUX Savings Plan. Under the Plan, employees, including Shoex employees, can
make contributions up to 15% of their annual compensation. The Company
contributes annually to the Plan an amount equal to 40% of employee
contributions, subject to certain  limitations. Additional contributions are
made at the discretion of the Board of Directors. Company contributions vest at
the rate of 20% each year beginning after the employee's initial year of
employment. Company contributions were approximately $84,000 in 1996, $77,000
in 1995 and $65,000 in 1994.

14. RELATED-PARTY TRANSACTIONS

As discussed in the Business Acquisition footnote, the Company merged with
Shoex, Inc. on January 5, 1996. An officer and a director of the Company each
had an interest in Shoex and, accordingly, received their respective pro rata
share of the Company's Common Stock which was issued to the shareholders of
Shoex. Previous to the merger, the Company's commissary sold food products and
supplies to Shoex, and the Company also received a fee for providing accounting
and administrative services. The merger with Shoex is accounted for as a
pooling-of-interests; therefore, all related-party transactions previously
reported have been eliminated through the restatement of the financial
statements.

An officer of the Company, a principal shareholder, and certain directors own a
certain percentage of partnerships which have lease agreements with the Company
for eight of its restaurant facilities. The leases expire at various times
through 2012, with options to renew for a term of 10 years. The lease
agreements grant the Company an option to purchase the properties at fair
market value at any time during the term of the lease.


                                     34

<PAGE>   35



On July 26, 1995, the Company sold substantially all of its interest in Logan's
Partnership (Logan's) upon Logan's initial public offering. An officer and a
director of the Company, at that time, had an ownership interest in Logan's.
The Company received $7.9 million net proceeds from the sale of its Logan's
shares. In addition, Logan's Partnership purchased all five of the Logan's
restaurant properties owned by the Company at their appraised fair market value
of approximately $6.1 million. As a result of the transactions, the Company
reported a one-time gain (included in other income, net) of approximately $7.4
million in 1995 or $0.55 per share.  During the time of the Company's ownership
in Logan's, the Company owned certain land, building and improvements and
leased certain property which was leased or subleased to Logan's Partnership.
Each of the leases was treated as an operating lease and provided for
additional contingent rentals based on a percentage of sales in excess of
minimum rent. Additionally, the Company guaranteed a line of credit and
equipment leases on behalf of Logan's Partnership, sold products from the
Company's commissary and provided accounting and administrative services to the
Partnership for a fee. Previously, the Company's commissary sold products to
other restaurant entities controlled by a director of the Company and certain
of its officers.

In the opinion of management and the Company's Board of Directors, all
related-party transactions, including terms and amounts, are comparable to
those which could be obtained from unaffiliated third parties.

The aforementioned related-party transactions are reflected in the financial
statements as follows:

<TABLE>
<CAPTION>
(In Thousands)                                                      1996          1995              1994
                                                                    ------------------------------------
<S>                                                                 <C>           <C>               <C>
BALANCE SHEETS
Current Assets:
    Due from related parties                                         --             $108              $388
Property and equipment, net (property leased to others)              --               --             4,630
Other Assets:
    Investment in unconsolidated partnership                         --               --               283

STATEMENTS OF EARNINGS
Revenues:
    Commissary sales                                                 --            6,463             4,075
Costs and Expenses:
    Restaurant operating costs:
         Rent expense                                               843              843               859
         Contingent rentals                                         293              256               219
    Depreciation and amortization (property leased to others)        --               69                57
Other (Income) Expense:
    Interest income (guarantee fee)                                  --              (54)              (15)
    Other, net:
         Accounting and administrative fees                          --              (56)              (68)
         Net rental income                                           --             (534)             (396)
         Equity earnings in Partnership                              --             (273)             (328)
         Gain on sale of assets                                      --           (7,448)               --

STATEMENTS OF CASH FLOWS
Cash Flows From Investing Activities:
    Additions to property and equipment                              --               --            (3,285)
    Proceeds from sale of property and equipment                     --            6,100                --
    Proceeds from sale of unconsolidated partnership                 --            7,894                --
</TABLE>





                                     35

<PAGE>   36



15. STATEMENTS OF CASH FLOWS

Supplemental disclosure of cash flow information is as follows:

<TABLE>
<CAPTION>
(In Thousands)                                                    1996             1995             1994
                                                                  --------------------------------------
<S>                                                               <C>              <C>              <C>
Cash paid for interest                                            $3,074           $2,158           $1,300
Additions to capitalized lease obligations                         5,922            6,242            2,938
Income taxes paid                                                  1,979            4,508            1,404
</TABLE>


16. SELECTED QUARTERLY DATA (UNAUDITED)

Summarized quarterly financial data for 1996 and 1995 is shown below:

<TABLE>
<CAPTION>

                                                First           Second            Third             Fourth
                                              Quarter          Quarter          Quarter            Quarter
(In Thousands, Except Per Share Data)       (16 weeks)       (12 weeks)       (12 weeks)        (12 weeks)
                                            --------------------------------------------------------------
<S>                                            <C>               <C>              <C>              <C>
Year Ended December 29, 1996
    Net revenues                               $47,079           $38,485          $39,295          $39,671
    Income (loss) from operations                3,258            (2,425)           2,852            3,153
    Net earnings (loss)                          1,569            (7,483)           1,497            3,270
    Earnings (loss) per common share               .19              (.89)             .18              .39
</TABLE>




<TABLE>
<CAPTION>
                                             First          Second            Third                 Fourth
                                            Quarter           Quarter         Quarter              Quarter
(In Thousands, Except Per Share Data)      (16 weeks)      (12 weeks)        (12 weeks)         (13 weeks)
                                           ---------------------------------------------------------------
<S>                                         <C>              <C>              <C>                  <C>
Year Ended December 31, 1995 1
    Net revenues                            $41,858          $33,676          $34,091              $37,932
    Income from operations                    3,120            2,520            2,449                3,049
    Net earnings                              1,242           1,493             6,050                1,805
    Earnings per common share                   .15            .18                .72                  .21
</TABLE>


 1 The income tax expense and net earnings for 1995 represent pro forma amounts
(see Notes 2 and 10).





                                     36

<PAGE>   37
ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE

         Not applicable

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

         The Proxy Statement issued in connection with the shareholders meeting
to be held on May 8, 1997, to be filed with the Securities and Exchange
Commission pursuant to Rule 14a-6(b), contains under the caption "Election of
Directors" information required by Item 10 of Form 10-K as to directors of the
Company and is incorporated herein by reference.  Pursuant to General
Instruction G(3), certain information concerning executive officers of the
Company is included in Part I of this Form 10-K, under the caption "Executive
Officers."

ITEM 11. EXECUTIVE COMPENSATION.

         The Proxy Statement issued in connection with the shareholders meeting
to be held on May 8, 1997, to be filed with the Securities and Exchange
Commission pursuant to Rule 14a-6(b), contains under the caption "Executive
Compensation" information required by Item 11 of Form 10-K and is incorporated
herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
         MANAGEMENT.

         The Proxy Statement issued in connection with the shareholders meeting
to be held on May 8, 1997, to be filed with the Securities and Exchange
Commission pursuant to Rule 14a-6(b), contains under the captions "Security
Ownership of Certain Beneficial Owners" and "Election of Directors" information
required by Item 12 of Form 10-K and is incorporated herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

         The Proxy Statement issued in connection with the shareholders meeting
to be held on May 8, 1997, to be filed with the Securities and Exchange
Commission pursuant to Rule 14a-6(b), contains under the caption "Certain
Transactions" information required by Item 13 of Form 10-K and is incorporated
herein by reference.




                                     37
<PAGE>   38


                                    PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES.

(a)      1.      Financial Statements:  See Item 8.

         2.      Financial Statement Schedules

                 Not Applicable

         3.      Management Contracts and Compensatory Plans and Arrangements

                 -        O'Charley's Inc. 1985 Stock Option Plan (included as
                          Exhibit 10.11)
                 -        O'Charley's Inc. 1990 Employee Stock Plan (included
                          as Exhibit 10.12)
                 -        First Amendment to O'Charley's Inc. 1990 Employee
                          Stock Plan (included as Exhibit 10.13)
                 -        Second Amendment to O'Charley's Inc. 1990 Employee
                          Stock Plan (included as Exhibit 10.14)
                 -        O'Charley's 1991 Stock Option Plan for Outside
                          Directors, as amended (included as Exhibit 10.15)
                 -        CHUX Ownership Plan (included as Exhibit 10.16)
                 -        Severance Agreement and General Release, dated
                          September 9, 1996, by and between O'Charley's Inc.
                          and Charles F. McWhorter (included as Exhibit 10.20)
                 -        Severance Compensation Agreement, dated September 16,
                          1996, by and between O'Charley's Inc. and Gregory L.
                          Burns (included as Exhibit 10.21)

         4.      Exhibits:

Exhibit
Number                                     Description
-------                                    -----------
 2               ----     Amended and Restated Agreement and Plan of Merger
                          dated as of November 16, 1995 by and between
                          O'Charley's Inc. and Shoex, Inc. (incorporated by
                          reference to Exhibit 2 of the Company's Current
                          Report on Form 8-K dated January 5, 1996)

 3.1             ----     Restated Charter of the Company (incorporated by
                          reference to Exhibit 3.1 of the Company's
                          Registration Statement on Form S-1, Registration No.
                          33-35170)

 3.2             ----     Amended and Restated Bylaws of the Company
                          (incorporated by reference to Exhibit 3.2 of the
                          Company's Annual Report on Form 10-K for the year
                          ended December 30, 1990)

 4.1             ----     See Exhibits 3.1 and 3.2 for provisions of the
                          Restated Charter and the Amended and Restated Bylaws
                          defining the rights of holders of the Common Stock
                          of the Company.

 4.2             ----     Form of Stock Certificate for the Common Stock of the
                          Company (incorporated by reference to Exhibit 4.1
                          of the Company's Registration Statement on Form S-1,
                          Registration No. 33-35170).

10.1             ----     Lease dated May 1, 1987 between CWF Associates and
                          CWF Corporation and all amendments thereto for 2895
                          Richmond Road, Lexington, KY 40509 (incorporated by





                                     38
<PAGE>   39

                          reference to Exhibit 10.1 of the Company's
                          Registration Statement on Form S-1, Registration No.
                          33-35170)

10.2             ----     Lease Agreement and Option to Purchase dated May 1,
                          1987 between CWF Associates and O'Charley's Inc. for
                          equipment located at 2895 Richmond Road, Lexington,
                          KY (incorporated by reference to Exhibit 10.2 of the
                          Company's Registration Statement on Form S-1,
                          Registration No. 33-35170)

10.3             ----     Lease dated August 15, 1987 between CWF Associates
                          and O'Charley's Inc. and all amendments thereto for
                          improvements located at 17 White Bridge Road,
                          Nashville, TN (incorporated by reference to Exhibit
                          10.3 of the Company's Registration Statement on Form
                          S-1, Registration No.  33-35170)

10.4             ----     Lease Agreement and Option to Purchase dated August
                          15, 1987 between CWF Associates and O'Charley's Inc.
                          for equipment located at 17 White Bridge Road,
                          Nashville, TN (incorporated by reference to Exhibit
                          10.4 of the Company's Registration Statement on Form
                          S-1, Registration No.  33-35170)

10.5             ----     Lease dated October 25, 1985 between Two Mile
                          Partners and CWF Corporation and all amendments
                          thereto for 912 Two Mile Parkway, Goodlettsville, TN
                          (incorporated by reference to Exhibit 10.5 of the
                          Company's Registration Statement on Form S-1,
                          Registration No. 33-35170)

10.6             ----     Lease dated December 30, 1985 between Two Mile
                          Partners and CWF Corporation for 644 N.  Riverside
                          Dr., Clarksville, TN (incorporated by reference to
                          Exhibit 10.6 of the Company's Registration Statement
                          on Form S-1, Registration No. 33-35170)

10.7             ----     Lease dated September 9, 1985 between Two Mile
                          Partners and CWF Corporation for 1720 U.S. 31-W
                          Bypass Building, Bowling Green, KY (incorporated by
                          reference to Exhibit 10.7 of the Company's
                          Registration Statement on Form S-1, Registration No.
                          33-35170)

10.8             ----     Lease dated December 26, 1986 between Two Mile
                          Partners and CWF Corporation for 1006 Memorial Blvd.,
                          Murfreesboro, TN (incorporated by reference to
                          Exhibit 10.8 of the Company's Registration Statement
                          on Form S-1, Registration No. 33-35170)

10.9             ----     Area Development Agreement dated July 9, 1987,
                          between O'Charley's Inc. and O'Charley's of the
                          Carolinas, Inc. (incorporated by reference to Exhibit
                          10.18 of the Company's Registration Statement on Form
                          S-1, Registration No. 33-35170)

10.10            ----     License Agreement dated July 9, 1987, between
                          O'Charley's Inc. and O'Charley's of the Carolinas,
                          Inc. (incorporated by reference to Exhibit 10.19 of
                          the Company's Registration Statement on Form S-1,
                          Registration No. 33-35170)

10.11            ----     O'Charley's Inc. 1985 Stock Option Plan (incorporated
                          by reference to Exhibit 10.27 of the Company's
                          Registration Statement on Form S-1, Registration No.
                          33-35170)





                                     39
<PAGE>   40


10.12            ----     O'Charley's Inc. 1990 Employee Stock Plan
                          (incorporated by reference to Exhibit 10.26 of the
                          Company's Registration Statement on Form S-1,
                          Registration No. 33-35170)

10.13            ----     First Amendment to O'Charley's Inc. 1990 Employee
                          Stock Plan (incorporated by reference to Exhibit
                          10.24 of the Company's Annual Report on Form 10-K for
                          the year ended December 29, 1991)

10.14            ----     Second Amendment to O'Charley's Inc. 1990 Employee
                          Stock Plan (incorporated by reference to Exhibit
                          10.23 of the Company's Annual Report on Form 10-K for
                          the year ended December 26, 1993)

10.15            ----     O'Charley's Inc. 1991 Stock Option Plan for Outside
                          Directors, As Amended (incorporated by reference to
                          Exhibit 10.25 of the Company's Annual Report on Form
                          10-K for the year ended December 27, 1992)

10.16            ----     CHUX Ownership Plan (incorporated by reference to the
                          Company's Quarterly Report on Form 10-Q for the
                          quarter ended October 3, 1993)

10.17            ----     Lease Agreement dated as of December 30, 1990 between
                          Two Mile Partners, II and O'Charley's Inc.
                          (incorporated by reference to Exhibit 10.26 of the
                          Company's Annual Report on Form 10-K for the year
                          ended December 30, 1990)

10.18            ----     Amended and Restated Revolving Credit Agreement,
                          dated as of November 22, 1996, among O'Charley's Inc.
                          and Mercantile Bank of St. Louis National
                          Association, Bank One, Dayton, N.A., NationsBank of
                          Tennessee, N.A., as Co-Agent, and First American
                          National Bank, as Agent

10.19            ----     Registration Rights Agreement dated as of January 5,
                          1996 by and among O'Charley's Inc., R.  Wayne
                          Browning, Gregory L. Burns, Mike Martin and David K.
                          Wachtel, Jr. (incorporated by reference to Exhibit
                          10.36 of the Company's Annual Report on Form 10-K
                          for the year ended December 31, 1995)

10.20            ----     Severance Agreement and General Release, dated
                          September 9, 1996, by and between O'Charley's Inc.
                          and Charles F. McWhorter

10.21            ----     Severance Compensation Agreement, dated September 16,
                          1996, by and between O'Charley's Inc. and Gregory L.
                          Burns

11               ----     Statement re computation of earnings per common share

23.1             ----     Consent of KPMG Peat Marwick, LLP

27               ----     Financial Data Schedule (for SEC use only)



(b) During the quarter ended December 29, 1996, the Company filed no reports on
    Form 8-K.



                                     40
<PAGE>   41

                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Nashville,
State of Tennessee.

                                     O'CHARLEY'S INC.


Date: March 28, 1997                 By:     /s/ Gregory L. Burns
                                             ---------------------------------
                                             Gregory L. Burns
                                             President, Chief Executive
                                             Officer, and Chairman of
                                             the Board

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons in the capacities and on the
dates indicated.

<TABLE>
<CAPTION>
            Signature                                    Title                                   Date
-------------------------------------          -----------------------------------             ---------------
<S>                                            <C>                                             <C>
/s/ Gregory L. Burns                           President, Chief Executive Officer,             March 28, 1997
-------------------------------------          and Chairman of the Board
(Gregory L. Burns)

/s/ A. Chad Fitzhugh                           Chief Financial Officer, Secretary,             March 28, 1997
-------------------------------------          and Treasurer
(A. Chad Fitzhugh)

/s/ John W. Stokes, Jr.                        Director                                        March 28, 1997
-------------------------------------
(John W. Stokes, Jr.)

/s/ Richard Reiss, Jr.                         Director                                        March 28, 1997
-------------------------------------
(Richard Reiss, Jr.)

/s/ G. Nicholas Spiva                          Director                                        March 28, 1997
-------------------------------------
(G. Nicholas Spiva)

/s/ H. Steve Tidwell                           Director                                        March 28, 1997
-------------------------------------
(H. Steve Tidwell)

/s/ C. Warren Neel                             Director                                        March 28, 1997
-------------------------------------
(C. Warren Neel)

/s/ Samuel H. Howard                           Director                                        March 28, 1997
-------------------------------------
(Samuel H. Howard)

/s/ Shirley A. Zeitlin                         Director                                        March 28, 1997
-------------------------------------
(Shirley A. Zeitlin)
</TABLE>





                                     41
<PAGE>   42

                              Index to Exhibits

Exhibit
Number                                     Description
-------                                    -----------
 2               ----     Amended and Restated Agreement and Plan of Merger
                          dated as of November 16, 1995 by and between
                          O'Charley's Inc. and Shoex, Inc. (incorporated by
                          reference to Exhibit 2 of the Company's Current
                          Report on Form 8-K dated January 5, 1996)

 3.1             ----     Restated Charter of the Company (incorporated by
                          reference to Exhibit 3.1 of the Company's
                          Registration Statement on Form S-1, Registration No.
                          33-35170)

 3.2             ----     Amended and Restated Bylaws of the Company
                          (incorporated by reference to Exhibit 3.2 of the
                          Company's Annual Report on Form 10-K for the year
                          ended December 30, 1990)

 4.1             ----     See Exhibits 3.1 and 3.2 for provisions of the
                          Restated Charter and the Amended and Restated Bylaws
                          defining the rights of holders of the Common Stock
                          of the Company.

 4.2             ----     Form of Stock Certificate for the Common Stock of the
                          Company (incorporated by reference to Exhibit 4.1
                          of the Company's Registration Statement on Form S-1,
                          Registration No. 33-35170).

10.1             ----     Lease dated May 1, 1987 between CWF Associates and
                          CWF Corporation and all amendments thereto for 2895
                          Richmond Road, Lexington, KY 40509 (incorporated by





<PAGE>   43

                          reference to Exhibit 10.1 of the Company's
                          Registration Statement on Form S-1, Registration No.
                          33-35170)

10.2             ----     Lease Agreement and Option to Purchase dated May 1,
                          1987 between CWF Associates and O'Charley's Inc. for
                          equipment located at 2895 Richmond Road, Lexington,
                          KY (incorporated by reference to Exhibit 10.2 of the
                          Company's Registration Statement on Form S-1,
                          Registration No. 33-35170)

10.3             ----     Lease dated August 15, 1987 between CWF Associates
                          and O'Charley's Inc. and all amendments thereto for
                          improvements located at 17 White Bridge Road,
                          Nashville, TN (incorporated by reference to Exhibit
                          10.3 of the Company's Registration Statement on Form
                          S-1, Registration No.  33-35170)

10.4             ----     Lease Agreement and Option to Purchase dated August
                          15, 1987 between CWF Associates and O'Charley's Inc.
                          for equipment located at 17 White Bridge Road,
                          Nashville, TN (incorporated by reference to Exhibit
                          10.4 of the Company's Registration Statement on Form
                          S-1, Registration No.  33-35170)

10.5             ----     Lease dated October 25, 1985 between Two Mile
                          Partners and CWF Corporation and all amendments
                          thereto for 912 Two Mile Parkway, Goodlettsville, TN
                          (incorporated by reference to Exhibit 10.5 of the
                          Company's Registration Statement on Form S-1,
                          Registration No. 33-35170)

10.6             ----     Lease dated December 30, 1985 between Two Mile
                          Partners and CWF Corporation for 644 N.  Riverside
                          Dr., Clarksville, TN (incorporated by reference to
                          Exhibit 10.6 of the Company's Registration Statement
                          on Form S-1, Registration No. 33-35170)

10.7             ----     Lease dated September 9, 1985 between Two Mile
                          Partners and CWF Corporation for 1720 U.S. 31-W
                          Bypass Building, Bowling Green, KY (incorporated by
                          reference to Exhibit 10.7 of the Company's
                          Registration Statement on Form S-1, Registration No.
                          33-35170)

10.8             ----     Lease dated December 26, 1986 between Two Mile
                          Partners and CWF Corporation for 1006 Memorial Blvd.,
                          Murfreesboro, TN (incorporated by reference to
                          Exhibit 10.8 of the Company's Registration Statement
                          on Form S-1, Registration No. 33-35170)

10.9             ----     Area Development Agreement dated July 9, 1987,
                          between O'Charley's Inc. and O'Charley's of the
                          Carolinas, Inc. (incorporated by reference to Exhibit
                          10.18 of the Company's Registration Statement on Form
                          S-1, Registration No. 33-35170)

10.10            ----     License Agreement dated July 9, 1987, between
                          O'Charley's Inc. and O'Charley's of the Carolinas,
                          Inc. (incorporated by reference to Exhibit 10.19 of
                          the Company's Registration Statement on Form S-1,
                          Registration No. 33-35170)

10.11            ----     O'Charley's Inc. 1985 Stock Option Plan (incorporated
                          by reference to Exhibit 10.27 of the Company's
                          Registration Statement on Form S-1, Registration No.
                          33-35170)





<PAGE>   44


10.12            ----     O'Charley's Inc. 1990 Employee Stock Plan
                          (incorporated by reference to Exhibit 10.26 of the
                          Company's Registration Statement on Form S-1,
                          Registration No. 33-35170)

10.13            ----     First Amendment to O'Charley's Inc. 1990 Employee
                          Stock Plan (incorporated by reference to Exhibit
                          10.24 of the Company's Annual Report on Form 10-K for
                          the year ended December 29, 1991)

10.14            ----     Second Amendment to O'Charley's Inc. 1990 Employee
                          Stock Plan (incorporated by reference to Exhibit
                          10.23 of the Company's Annual Report on Form 10-K for
                          the year ended December 26, 1993)

10.15            ----     O'Charley's Inc. 1991 Stock Option Plan for Outside
                          Directors, As Amended (incorporated by reference to
                          Exhibit 10.25 of the Company's Annual Report on Form
                          10-K for the year ended December 27, 1992)

10.16            ----     CHUX Ownership Plan (incorporated by reference to the
                          Company's Quarterly Report on Form 10-Q for the
                          quarter ended October 3, 1993)

10.17            ----     Lease Agreement dated as of December 30, 1990 between
                          Two Mile Partners, II and O'Charley's Inc.
                          (incorporated by reference to Exhibit 10.26 of the
                          Company's Annual Report on Form 10-K for the year
                          ended December 30, 1990)

10.18            ----     Amended and Restated Revolving Credit Agreement,
                          dated as of November 22, 1996, among O'Charley's Inc.
                          and Mercantile Bank of St. Louis National
                          Association, Bank One, Dayton, N.A., NationsBank of
                          Tennessee, N.A., as Co-Agent, and First American
                          National Bank, as Agent

10.19            ----     Registration Rights Agreement dated as of January 5,
                          1996 by and among O'Charley's Inc., R.  Wayne
                          Browning, Gregory L. Burns, Mike Martin and David K.
                          Wachtel, Jr. (incorporated by reference to Exhibit
                          10.36 of the Company's Annual Report on Form 10-K
                          for the year ended December 31, 1995)

10.20            ----     Severance Agreement and General Release, dated
                          September 9, 1996, by and between O'Charley's Inc.
                          and Charles F. McWhorter

10.21            ----     Severance Compensation Agreement, dated September 16,
                          1996, by and between O'Charley's Inc. and Gregory L.
                          Burns

11               ----     Statement re computation of earnings per common share

23.1             ----     Consent of KPMG Peat Marwick, LLP

27               ----     Financial Data Schedule (for SEC use only)