<PAGE>

                       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

For the fiscal year ended December 30, 2001
Commission file number 0-18629

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

            Tennessee                                 62-1192475
   -------------------------------                 -------------------
   (State or other jurisdiction of                  (I.R.S. Employer
    incorporation or organization)                 Identification No.)

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

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
                                             Series A Junior Preferred Stock
                                             Purchase Rights

         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 25, 2002 was approximately $365.0 million. 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 25, 2002 ($22.26) as reported on the Nasdaq National Market.

         The number of shares of common stock outstanding on March 25, 2002 was
18,882,502.

                       DOCUMENTS INCORPORATED BY REFERENCE

                                    Documents from which portions are
Part of Form 10-K                   incorporated by reference
-----------------                   ---------------------------------

Part III                            Proxy Statement relating to the registrant's
                                    Annual Meeting of Shareholders to be held
                                    May 9, 2002


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                                O'CHARLEY'S INC.

                                     PART I

ITEM 1.  BUSINESS.

         As of December 30, 2001, we operated 161 O'Charley's restaurants in
Alabama, Arkansas, Florida, Georgia, Illinois, Indiana, Kentucky, Mississippi,
Missouri, North Carolina, Ohio, South Carolina, Tennessee and Virginia, and two
Stoney River Legendary Steaks restaurants in Atlanta, and one in Chicago.
O'Charley's is a leading casual dining restaurant concept known for its high
quality, freshly prepared food, moderate prices and friendly and attentive
customer service. Stoney River Legendary Steaks restaurants are upscale
steakhouses that are intended to appeal to both upscale casual dining and fine
dining customers by offering the high-quality food and attentive customer
service typical of high-end steakhouses at more moderate prices.

THE O'CHARLEY'S CONCEPT

         O'Charley's restaurants provide fresh, high quality food in a relaxed,
friendly atmosphere. Our goal is to differentiate our O'Charley's restaurants by
exceeding customer expectations as to the quality of food and the friendliness
of service. The key elements of the O'Charley's concept include the following:

         Offer High-Quality, Freshly Prepared American Fare. The O'Charley's
menu is mainstream, but innovative and distinctive in taste. The O'Charley's
menu features approximately 45 items including USDA Choice hand-cut and aged
steaks, baby-back ribs basted with our own tangy BBQ sauce, chicken that is
always fresh and never frozen, fresh salmon and grilled tuna with a spicy ginger
sauce, a variety of fresh-cut salads with special recipe salad dressings and
O'Charley's signature caramel pie. All entrees are made from original recipes,
are cooked to order and feature two side items in addition to our hot,
freshly-baked yeast rolls. O'Charley's restaurants are open seven days a week
and serve lunch, dinner and Sunday brunch. Specialty menu items include
"limited-time" promotions, O'Charley's Express Lunch, daily special selections
and a special kids menu. We are continually developing new menu items for our
O'Charley's restaurants to respond to changing customer tastes and preferences.

         Provide an Attractive Price-to-Value Relationship. We believe that the
pricing strategy for our O'Charley's restaurants, as well as the generous
portions we serve, create an attractive price-to-value relationship. This
strategy, coupled with our high food quality, is intended to appeal to a broad
spectrum of customers from a diverse income base, including mainstream casual
dining customers, as well as upscale casual dining and value oriented customers.
Lunch entrees range in price from $6.49 to $7.99, with dinner entrees ranging
from $6.49 to $16.99. In 2001, the average check per customer, including
beverages, was $9.68 for lunch and $12.43 for dinner.

         Ensure a Superior Dining Experience. Our strategy stresses providing
prompt, friendly and attentive service to ensure customer satisfaction. Our
strategy is to staff each restaurant with an experienced management team that is
dedicated to enhancing customer satisfaction and to keep our table-to-server
ratios low. In order to promote customer satisfaction, we adopted the following
strategy, which we refer to as "The Promise:"

         -        create a friendly, warm environment;

         -        provide prompt food and service;

         -        present a clean, professional appearance; and

         -        have the knowledge needed to give each guest the best dining
                  experience possible.

         Our management team, including area supervisors, district directors,
regional directors and home office personnel, visit our restaurants frequently
in order to reinforce our commitment to customer service to our restaurant level
managers and hourly employees and communicate with and receive feedback from
customers. We also employ a "mystery shopper" program to independently monitor
quality control in areas such as timeliness of service, atmosphere, employee
attitude and food quality. Through the use of customer surveys, we receive
valuable feedback on our restaurants and, where appropriate,


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respond promptly to customer comments in order to demonstrate our continuing
dedication to customer satisfaction.

         Create a Casual, Neighborhood Atmosphere Through Our Restaurant Design.
We seek to create a casual, neighborhood atmosphere in our O'Charley's
restaurants through an open layout and exposed kitchen and by tailoring the
decor of our restaurants to the local community. The prototypical O'Charley's
restaurant is a free-standing brick building containing approximately 6,800
internal square feet and seating for approximately 275 customers, including
approximately 52 bar seats. The exterior features old-style red brick, bright
red and green neon borders, multi-colored awnings and attractive landscaping.
The interior is open, casual and well lighted and features warm woods, exposed
brick, color prints and hand-painted murals depicting local history, people,
places and events. In addition, the kitchen design provides flexibility in the
types of food items that can be prepared so that we can adapt to changing
customer tastes and preferences. We periodically update the interior and
exterior of our restaurants to reflect refinements in the concept and respond to
changes in customer tastes and preferences.

         Provide an Attractive Operating Environment for Our Employees. We
believe that a well-trained, highly-motivated restaurant management team is
critical to achieving our operating objectives. Our training and compensation
systems are designed to create accountability at the restaurant management level
for the performance of each restaurant. We invest significant resources to
train, motivate and educate our restaurant level managers and hourly employees
and operate an approximately 9,500 square foot management training facility at
our home office in Nashville, Tennessee. Each new manager participates in a
comprehensive ten-week training program that combines hands-on experience in one
of our training restaurants and instruction at the training facility. To instill
a sense of ownership, a large portion of the compensation of our restaurant
level managers is based upon restaurant operating results, employee turnover and
mystery shopper reports. This focus on restaurant level operations is intended
to create a "single store mentality" and provide an incentive for managers to
improve same store sales and restaurant operating results. We believe our strong
focus on employee satisfaction has resulted in a decrease in our employee
turnover rate in each of the past five years.

         Leverage Our Commissary Operations. We operate an approximately 220,000
square foot commissary in Nashville, Tennessee through which we purchase and
distribute a substantial majority of the food products and supplies for our
restaurants. The commissary operates a USDA-approved and inspected facility at
which we age and cut our beef and a production facility at which we prepare the
yeast rolls, salad dressings and sauces served in our O'Charley's restaurants.
We believe our commissary enhances restaurant operations by maintaining
consistent food quality, helping to ensure reliable distribution services to our
restaurants and simplifying our restaurant managers' food cost management
responsibilities. We attribute the decreases in food cost as a percentage of our
restaurant sales over the past four years, in part, to the financial leverage
generated from the increased purchasing volumes and operating efficiencies of
our commissary. In 2001, we completed an expansion of our commissary facilities
to add approximately 15,500 square feet of refrigerated storage and 36,000
square feet of production facilities, which we believe will enable us to meet a
substantial majority of the distribution needs of our existing and planned
restaurants for the next several years.

         Pursue Disciplined Growth Strategy. During 2001, we opened 24 new
O'Charley's restaurants in the following markets:

         Atlanta, Georgia(2)                Kingsport, Tennessee
         Charleston, South Carolina         Mobile, Alabama
         Charlotte, North Carolina(2)       Nashville, Tennessee
         Cincinnati, Ohio(2)                Panama City, Florida
         Columbus, Ohio                     Raleigh, North Carolina
         Destin, Florida                    Richmond, Virginia(2)
         Indianapolis, Indiana(2)           Springfield, Illinois(2)
         Jonesboro, Arkansas                St. Louis, Missouri(3)

     We plan to open 18 to 22 O'Charley's restaurants in 2002. We intend to
continue to develop new O'Charley's restaurants in our target markets, primarily
in the Southeast and Midwest. Our target markets include both metropolitan
markets and smaller markets in close proximity to metropolitan markets where we
have a significant presence. Our strategy is


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to cluster our new restaurants to enhance supervisory, marketing and
distribution efficiencies.

         Management devotes significant time and resources to analyzing
prospective restaurant sites and gathering appropriate cost, demographic and
traffic data. We utilize an in-house construction and real estate department to
develop architectural and engineering plans and to oversee new construction.
While we prefer to develop restaurants based on our prototype O'Charley's
restaurant, we from time to time develop O'Charley's restaurants in existing
buildings. Our ability to remodel an existing building into an O'Charley's
restaurant can permit greater accessibility to quality sites in more developed
markets.

THE STONEY RIVER LEGENDARY STEAKS CONCEPT

         Stoney River restaurants are upscale steakhouses that are intended to
appeal to both upscale casual dining and fine dining customers by offering the
high-quality food and attentive customer service typical of high-end steakhouses
at more moderate prices. Stoney River restaurants have an "upscale mountain
lodge" design with a large stone fireplace, plush sofas and rich woods that make
the interior of the restaurant inviting and comfortable. The menu features
hand-cut, premium midwestern beef along with fresh seafood and a variety of
other gourmet entrees. An extensive assortment of freshly prepared salads and
side dishes is available a la carte. The menu also includes several specialty
appetizers and desserts. The price range of entrees is $16.95 to $29.95. In
2001, the average check per customer was $33.96. Stoney River restaurants are
open for dinner during the week and opening times on the weekend vary by
location with some opening at noon and others opening in the early afternoon.
During 2001, we opened one new Stoney River restaurant in Chicago. We plan to
open two Stoney River restaurants in 2002. Our growth strategy for the Stoney
River concept is to concentrate on major metropolitan markets in the Southeast
and Midwest with disciplined, controlled development and the potential to
accelerate development over the next several years. At December 30, 2001, we
operated three Stoney River restaurants: two in Atlanta and one in Chicago.

O'CHARLEY'S RESTAURANT OPERATIONS

         Restaurant Management. Each O'Charley's restaurant requires an
effective management team in order to ensure high quality food and attentive
service. Each restaurant typically has five to six managers (a general manager,
two to three assistant managers, a kitchen manager and an assistant kitchen
manager) and an average of approximately 80 full-time and part-time employees.
We employ area supervisors who have day-to-day responsibility for the operating
performance of approximately three to six O'Charley's restaurants. In certain
larger markets, we have district directors who supervise 16 to 20 restaurants.
Our four regional directors each currently supervise 31 to 60 restaurants in
their respective regions and are directly involved in the development of new
O'Charley's restaurants. Our Executive Vice President, Operations oversees all
O'Charley's restaurant operations.

         As an incentive for restaurant managers to improve sales and operating
efficiency, we have a monthly incentive compensation plan. Pursuant to this
plan, each member of the restaurant management team may earn a bonus, payable
during each four-week accounting period, based on a percentage of the sales of
the restaurant for which the manager has responsibility. The monthly bonus is
earned when budgeted and prior year financial results are exceeded, subject to
adjustment based upon same store sales increases and certain operating
performance factors. We also offer a restaurant management stock option program
pursuant to which each member of the restaurant management team is eligible to
receive annual grants of options upon the attainment of certain
performance-based goals.

         We also provide a "3-Point Compensation Plan" that gives general
managers of our O'Charley's restaurants an opportunity to participate in the
growth of their restaurant and our company. Pursuant to the 3-Point Compensation
Plan, general managers receive a competitive minimum base salary, are eligible
to receive a bonus calculated quarterly and paid annually, and receive long-term
stock options that provide an incentive for general managers to improve
restaurant level operating results. The annual bonuses are based on the
attainment of certain performance targets that the managers establish each year
for their own restaurants.

         We believe that our compensation plans, particularly the bonus plans,
encourage the general managers to establish and implement an annual strategy.
Area supervisors, district directors, regional directors and senior management
also are eligible to receive performance based cash bonuses and participate in
the senior management stock program pursuant to which they receive stock
options, the vesting of which can be accelerated based on our achievement of
certain specified financial targets.


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         Recruiting and Training. We emphasize the careful selection and
training of all restaurant employees. The restaurant management recruiting and
training program begins with an evaluation and screening program. In addition to
multiple interviews and background and experience verification, we conduct a
testing procedure designed to identify those applicants who we believe are well
suited to manage restaurant operations. Management trainees are required to
complete a ten-week training program, a portion of which is conducted at our
training center in Nashville, Tennessee. The training facility has a
theater-style auditorium, facilities for operational and information services
training and an area for team-building exercises. The program familiarizes new
managers with the responsibilities required at an individual restaurant and with
our operations, management objectives, controls and evaluation criteria before
they assume restaurant management responsibility. Each new hourly employee is
trained by an in-restaurant trainer called an "ETE" (Educator Through
Excellence). Each restaurant has approximately 14 ETE's who are qualified and
tested in their area of responsibility. Restaurant level management is
responsible for the hiring and training of servers and kitchen staff, but they
typically involve hourly employees in the process.

COMMISSARY OPERATIONS

         We operate an approximately 220,000 square foot commissary in
Nashville, Tennessee through which we purchase and distribute a substantial
majority of the food products and supplies for our restaurants. The commissary
operates a USDA-approved and inspected facility at which we age and cut our beef
and a production facility at which we manufacture O'Charley's yeast rolls, salad
dressings and sauces. The commissary primarily services our restaurants;
however, it also sells food products and supplies to certain other customers,
including retail grocery chains, mass merchandisers and wholesale clubs. Food
products and other restaurant supplies are distributed to our restaurants twice
each week by our trucks. Seafood and some produce, which require more frequent
deliveries, are typically purchased locally by restaurant management to ensure
freshness. In 2001, we completed an expansion of our commissary facilities to
add additional capacity. The commissary contains approximately 45,000 square
feet of dry storage, approximately 52,000 square feet of refrigerated storage,
approximately 52,000 square feet of production facilities and approximately
71,000 square feet of office and additional warehouse facilities.

         We believe our commissary enhances restaurant operations by maintaining
consistent food quality, helping to ensure reliable distribution services to our
restaurants and simplifying our restaurant managers' food cost management
responsibilities by negotiating prices on food items and supplies for our
restaurants. We set food and other product quality standards for our
restaurants, and the commissary negotiates directly with food manufacturers and
other suppliers to obtain lower prices for those items through volume
purchasing.

SUPPORT OPERATIONS

         Quality Control. We use written customer evaluations, which are
available to customers in the restaurants, as a means of monitoring customer
satisfaction. We also employ a "mystery shopper" program to independently
monitor quality control in areas such as timeliness of service, atmosphere,
cleanliness, employee attitude and food quality. In addition, our customer
service department receives calls from customers and, when necessary, routes
comments to the appropriate personnel.

         Advertising and Marketing. We have an ongoing advertising and marketing
plan for the development of television, radio and newspaper advertising for our
O'Charley's restaurants and also use point of sale and local restaurant
marketing. We focus our marketing efforts on building brand loyalty and
emphasizing the distinctiveness of the O'Charley's atmosphere and menu
offerings. We conduct annual studies of changes in customer tastes and
preferences and are continually evaluating the quality of our menu offerings.
During 2001, our advertising expenses were approximately 3.0% of restaurant
sales. In addition to advertising, we encourage unit level personnel to become
active in their communities through local charities and other organizations and
sponsorships. We are currently developing an advertising and marketing plan for
our Stoney River restaurants.

         Restaurant Reporting. Our use of technology and management information
systems is essential for the management oversight needed to produce strong
operating results. In the past several years, we have made significant
improvements in our technology and systems. We maintain operational and
financial controls in each restaurant, including management information


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systems to monitor sales, inventory, and labor, that provide reports and data to
our home office. The management accounting system polls data from our
restaurants and generates daily reports of sales, sales mix, customer counts,
check average, cash, labor and food cost. Management utilizes this data to
monitor the effectiveness of controls and to prepare periodic financial and
management reports. We also utilize these systems for financial and budgetary
analysis, including analysis of sales by restaurant, product mix and labor
utilization.

         Real Estate and Construction. We maintain an in-house construction and
real estate department to assist in the site selection process, develop
architectural and engineering plans and oversee new construction. We maintain a
broad database of possible sites and our Director of Real Estate and certain
other members of our executive management team, together with other members of
management, analyze prospective sites. Once a site is selected, our real estate
department oversees the zoning process, obtains required governmental permits,
develops detailed building plans and specifications and equips the restaurants.

         Human Resources. We maintain a human resources department that supports
restaurant operations through the design and implementation of policies,
programs, procedures and benefits for our employees. The human resources
department also includes an employee relations manager and maintains a toll-free
number for employee comments and questions. We conduct annual "Impact" meetings
at our O'Charley's restaurants that provide a forum for corporate management to
receive feedback from restaurant managers and hourly employees. We have had in
place for several years a plan to foster diversity throughout our workforce.

         We maintain a company-wide alternative dispute resolution program
pursuant to which employees use a three-tiered dispute resolution process that
involves an open door policy, mediation and, if necessary, binding arbitration.
We believe this alternative dispute resolution program helps us and our
employees to resolve issues that arise in the workplace without litigation and
enhances our relationship with our employees.

RESTAURANT LOCATIONS

         At December 30, 2001, we operated 161 O'Charley's and three Stoney
River Legendary Steak restaurants. As of that date, we owned the land and
building at 99 of our O'Charley's restaurants, leased the land and buildings at
ten of our O'Charley's restaurants and leased the land only at 52 of our
O'Charley's restaurants. The following table sets forth the markets in which our
O'Charley's restaurants were located at December 30, 2001, including the number
of restaurants in each market. Two of our Stoney River restaurants are located
in Atlanta and the other Stoney River restaurant is located in Chicago. We own
the land and building at one of our Stoney River restaurants in Atlanta and
lease the land only at our other Stoney River restaurants in Atlanta and
Chicago.


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<TABLE>
<S>                                  <C>                                <C>
ALABAMA                              KENTUCKY                           OHIO
  Birmingham(6)                        Bowling Green                      Cincinnati(7)
  Decatur                              Elizabethtown                      Columbus(5)
  Dothan                               Florence                           Dayton(2)
  Florence                             Frankfort                        SOUTH CAROLINA
  Huntsville(2)                        Hopkinsville                       Anderson
  Mobile(3)                            Lexington(3)                       Charleston
  Montgomery(2)                        Louisville(5)                      Columbia(2)
  Oxford                               Owensboro                          Greenville
  Tuscaloosa                           Paducah                            Greenwood
ARKANSAS                               Richmond                           Rock Hill
   Jonesboro                         MISSISSIPPI                          Spartanburg
FLORIDA                                Biloxi                           TENNESSEE
  Destin                               Hattiesburg                        Chattanooga(2)
  Panama City                          Jackson                            Clarksville(2)
  Pensacola                            Meridian                           Cleveland
GEORGIA                                Pearl                              Cookeville
  Atlanta(14)                          Southhaven                         Gatlinburg
  Canton                               Tupelo                             Jackson
  Columbus                           MISSOURI                             Johnson City
  Dalton                               St. Louis(4)                       Kingsport
  Gainesville                        NORTH CAROLINA                       Knoxville(5)
  Macon(2)                             Asheville                          Memphis(3)
ILLINOIS                               Burlington                         Morristown
  Champaign                            Charlotte(6)                       Murfreesboro
  O'Fallon                             Fayetteville                       Nashville(11)
   Springfield(2)                      Greensboro                         Pigeon Forge
INDIANA                                Hickory                          VIRGINIA
  Bloomington                          Raleigh(4)                         Bristol
  Clarksville                          Winston-Salem                      Lynchburg
  Evansville(2)                                                           Roanoke
  Indianapolis(8)                                                         Richmond(2)
  Lafayette
</TABLE>

FRANCHISING

         We have recently completed a detailed study of the potential
franchising of the O'Charley's concept and, based upon the results of this
study, intend to begin franchising O'Charley's restaurants in 2002. We expect to
enter into franchising arrangements with experienced restaurant operators for
the development of O'Charley's restaurants in areas that are outside of our
current development and growth plans. Franchisees will be required to comply
with our specifications as to restaurant space, design and decor, menu items,
principal food ingredients, employee training and day-to-day operations.


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SERVICE MARKS

         The name "O'Charley's" and its logo and the names "Stoney River" and
"Legendary Steaks" are registered service marks with the United States Patent
and Trademark Office. We are aware of names and marks similar to our service
marks used by third parties in certain limited geographical areas. Use of our
service marks by third parties may prevent us from licensing the use of our
service marks for restaurants in those areas. Except for these limited
geographical areas, we are not aware of any infringing uses that could
materially affect our business. We intend to protect our service marks by
appropriate legal action whenever necessary.

GOVERNMENT REGULATION

         We are subject to various federal, state, and local laws affecting our
business. Our commissary is licensed and subject to regulation by the USDA. In
addition, each of our 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. Most municipalities in which
our restaurants are located require local business licenses. 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. We are also
subject to federal and state environmental regulations, but those regulations
have not had a material adverse effect on our operations to date.

         Approximately 10% of our restaurant sales in 2001 was attributable to
the sale of alcoholic beverages. Each restaurant, where permitted by local law,
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. 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. We have
established standardized procedures for our restaurants designed to assure
compliance with applicable codes and regulations.

         We are subject in most states in which we operate 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 that wrongfully served alcoholic beverages to the intoxicated
person.

         The Federal Americans With Disabilities Act prohibits discrimination on
the basis of disability in public accommodations and employment. We design our
restaurants to be accessible to the disabled and believe that we are in
substantial compliance with all current applicable regulations relating to
restaurant accommodations for the disabled.

         The development and construction of additional restaurants will be
subject to compliance with applicable zoning, land use and environmental
regulations.

         Our restaurant operations are also subject to federal and state minimum
wage laws and other laws governing matters such as working conditions,
citizenship requirements, overtime and tip credits. In the event a proposal is
adopted that materially increases the applicable minimum wage, the wage increase
would likely result in an increase in payroll and benefits expense.

EMPLOYEES

         At December 30, 2001, we employed approximately 4,750 full-time and
8,900 part-time employees, approximately 175 of whom were home office management
and staff personnel, approximately 200 of whom were commissary personnel and the
remainder of whom were restaurant personnel. None of our employees is covered by
a collective bargaining agreement. We consider our employee relations to be
good.

RISK FACTORS

         Some of the statements we make in this Annual Report on Form 10-K are
forward-looking. Forward-looking statements are generally identifiable by the
use of the words "anticipate," "will," "believe," "estimate," "expect," "plan,"


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"intend," "seek" or similar expressions. These forward-looking statements
include all statements that are not historical statements of fact and those
regarding our intent, belief, plans or expectations including, but not limited
to, the discussions of our operating and growth strategy, projections of
revenue, income or loss, information regarding future restaurant openings and
capital expenditures, potential increases in food and other operating costs, and
our development, expansion and franchising plans and future operations.
Forward-looking statements involve known and unknown risks and uncertainties
that may cause actual results in future periods to differ materially from those
anticipated in the forward-looking statements. Those risks and uncertainties
include, among others, the risks and uncertainties discussed below. Although we
believe that the assumptions underlying the forward-looking statements contained
herein are reasonable, any of these assumptions could prove to be inaccurate,
and, therefore, there can be no assurance that the forward-looking statements
included in this Annual Report on Form 10-K will prove to be accurate. In light
of the significant uncertainties inherent in the forward-looking statements
included herein, you should not regard the inclusion of such information as a
representation by us or any other person that our objectives and plans will be
achieved. We do not undertake any obligation to publicly release any revisions
to any forward-looking statements contained herein to reflect events and
circumstances occurring after the date hereof or to reflect the occurrence of
unanticipated events.

OUR CONTINUED GROWTH DEPENDS ON OUR ABILITY TO OPEN NEW RESTAURANTS AND OPERATE
OUR NEW RESTAURANTS PROFITABLY; WE MAY EXPERIENCE UNEXPECTED DELAYS IN OPENING
NEW RESTAURANTS AND WE MAY NOT BE ABLE TO OPERATE NEW RESTAURANTS PROFITABLY.

         A significant portion of our historical growth has been due to opening
new restaurants. We opened 24 O'Charley's restaurants and one new Stoney River
restaurant in 2001 and plan to open 18 to 22 additional O'Charley's restaurants
and two Stoney River restaurants during 2002. Our ability to open new
restaurants will depend on a number of factors, such as:

         o        the selection and availability of quality restaurant sites;

         o        our ability to negotiate acceptable lease or purchase terms;

         o        our ability to hire, train and retain the skilled management
                  and other personnel necessary to open new restaurants;

         o        our ability to secure the governmental permits and approvals
                  required to open new restaurants;

         o        our ability to manage the amount of time and money required to
                  build and open new restaurants, including the possibility that
                  adverse weather conditions may delay construction and the
                  opening of new restaurants; and o the availability of adequate
                  financing.

         Many of these factors are beyond our control. We cannot assure you that
we will be successful in opening new restaurants in accordance with our current
plans or otherwise or that our rate of future growth, if any, will not decline
from our recent historical growth rates. Furthermore, we cannot assure you that
our new restaurants will generate revenues or profit margins consistent with
those of our existing restaurants, or that the new restaurants will be operated
profitably. In May 2000, we acquired the Stoney River Legendary Steaks concept,
including two Stoney River restaurants in suburban Atlanta. As of December 30,
2001, we have opened one Stoney River restaurant in the Chicago metropolitan
area. These restaurants are more upscale than an O'Charley's restaurant and are
more expensive to construct. We cannot assure you that we will be able to
operate these restaurants profitably.

OUR GROWTH MAY STRAIN OUR MANAGEMENT AND INFRASTRUCTURE, WHICH COULD SLOW OUR
DEVELOPMENT OF NEW RESTAURANTS AND ADVERSELY AFFECT OUR ABILITY TO MANAGE
EXISTING RESTAURANTS.

         Our growth has placed significant demands upon our management. We also
face the risk that our existing systems and procedures, restaurant management
systems, financial controls, and information systems will be inadequate to
support our planned growth. We cannot predict whether we will be able to respond
on a timely basis to all of the changing demands that our planned growth will
impose on management and these systems and controls. In May 2000, we acquired
the Stoney River


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<PAGE>

Legendary Steaks concept. The development of this new concept will place
significant demands on our management. These demands on our management and
systems could also adversely affect our ability to manage our existing
restaurants. If our management is unable to meet these demands or if we fail to
continue to improve our information systems and financial controls or to manage
other factors necessary for us to achieve our growth objectives, our operating
results or cash flows could be materially adversely affected.

UNANTICIPATED EXPENSES AND MARKET ACCEPTANCE COULD AFFECT THE RESULTS OF
RESTAURANTS WE OPEN IN NEW MARKETS.

         As part of our growth plans, we may open new restaurants in areas in
which we have little or no operating experience and in which potential customers
may not be familiar with our restaurants. As a result, we may have to incur
costs related to the opening, operation and promotion of those new restaurants
that are substantially greater than those incurred in other areas. Even though
we may incur substantial additional costs with these new restaurants, they may
attract fewer customers than our more established restaurants in existing
markets. As a result, the results of operations at new restaurants may be
inferior to those of our existing restaurants. The new restaurants may even
operate at a loss.

         Another part of our growth plans is to open restaurants in markets in
which we already have existing restaurants. We may be unable to attract enough
customers to the new restaurants for them to operate at a profit. Even if we are
able to attract enough customers to the new restaurants to operate them at a
profit, those customers may be former customers of one of our existing
restaurants in that market and the opening of a new restaurant in the existing
market could reduce the revenue of our existing restaurants in that market.

WE MAY EXPERIENCE HIGHER OPERATING COSTS, WHICH WOULD ADVERSELY AFFECT OUR
OPERATING RESULTS IF WE CANNOT INCREASE MENU PRICES TO COVER THEM.

         Our operating results are significantly dependent on our ability to
anticipate and react to increases in food, labor, employee benefits and other
costs. The cost of many items we serve in our restaurants are subject to
seasonal fluctuations, weather, demand and other factors. We compete with other
restaurants for experienced management personnel and hourly employees. Given the
low unemployment rates in certain areas in which we operate, we will likely be
required to continue to enhance our wage and benefits package in order to
attract qualified management and other personnel. In addition, any increase in
the federal minimum wage rate would likely cause an increase in our labor costs.
We cannot assure you that we will be able to anticipate and react to changing
costs through our purchasing and hiring practices or menu price increases. As a
result, increases in operating costs could have a material adverse effect on our
business and results of operations.

         We have completed a feasibility study on franchising our O'Charley's
restaurant concept and are in the process of finalizing the proper legal and
regulatory requirements in order to begin franchising. We have begun marketing
the franchise concept, but we do not believe we will generate any revenue or
profits in 2002. We project approximately $750,000 in expenditures for this
franchising project in 2002, and we may continue to experience expenditures and
losses until such time, if ever, that we generate sufficient revenue to cover
these expenditures.

WE COULD FACE LABOR SHORTAGES THAT COULD ADVERSELY AFFECT OUR RESULTS OF
OPERATIONS.

         Our success depends in part upon our ability to attract, motivate and
retain a sufficient number of qualified employees, including restaurant
managers, kitchen staff and servers, necessary to continue our operations and to
keep pace with our growth. Qualified individuals of the requisite caliber and
quantity needed to fill these positions are in short supply. Given the low
unemployment rates in certain areas in which we operate, we may have difficulty
hiring and retaining qualified management and other personnel. Any inability to
recruit and retain sufficient qualified individuals may adversely affect
operating results at existing restaurants and delay the planned openings of new
restaurants. Any delays in opening new restaurants or any material increases in
employee turnover rates in existing restaurants could have a material adverse
effect on our business, financial condition, operating results or cash flows.
Additionally, competition for qualified employees could require us to pay higher
wages to attract a sufficient number of competent employees, resulting in higher
labor costs.


                                       10

<PAGE>

FLUCTUATIONS IN OUR OPERATING RESULTS AND OTHER FACTORS MAY RESULT IN DECREASES
IN OUR STOCK PRICE.

         In recent periods, the market price for our common stock has fluctuated
substantially. From time to time, there may be significant volatility in the
market price of our common stock. We believe that the current market price of
our common stock reflects expectations that we will be able to continue to
operate our existing restaurants profitably and to develop new restaurants at a
significant rate and operate them profitably. If we are unable to operate our
restaurants as profitably as we have in the past or develop restaurants at a
pace that reflects the expectations of the market, investors could sell shares
of our common stock at or after the time that it becomes apparent that the
expectations of the market may not be realized, resulting in a decrease in the
market price of our common stock.

         In addition to our operating results, the operating results of other
restaurant companies, changes in financial estimates or recommendations by
analysts, adverse weather conditions, which can reduce the number of customers
visiting our restaurants, increase food costs and delay the construction and
opening of new restaurants, changes in general conditions in the economy or the
financial markets or other developments affecting us or our industry, such as
outbreaks of "mad cow" and "foot and mouth" disease, could cause the market
price of our common stock to fluctuate substantially. In recent years, the stock
market has experienced extreme price and volume fluctuations. This volatility
has had a significant effect on the market prices of securities issued by many
companies for reasons unrelated to their operating performance.

         Preopening costs represent costs incurred prior to a restaurant opening
for business. Prior to 1999, we capitalized preopening costs and amortized them
over one year. Commencing in the first quarter of 1999, we expense preopening
costs in the period in which those costs are incurred. See note 1 to our
consolidated financial statements included elsewhere in this Annual Report on
Form 10-K. Our preopening costs may vary significantly from quarter to quarter
primarily due to the timing of restaurant openings. This variability may
increase in future periods as we anticipate higher preopening costs for each
Stoney River restaurant we open as compared to the average preopening costs for
an O'Charley's restaurant. We typically incur most preopening costs for a new
restaurant within the two months immediately preceding, and the month of, its
opening. In addition, our labor and operating costs for a newly opened
restaurant during the first three to six months of operation generally are
materially greater than what can be expected after that time, both in aggregate
dollars and as a percentage of restaurant sales. Accordingly, the volume and
timing of new restaurant openings in any quarter may have a significant impact
on our results of operations for that quarter. As a result of these factors, our
results may fluctuate significantly, which could adversely affect the market
price of our common stock.

OUR RESTAURANTS ARE CONCENTRATED GEOGRAPHICALLY; IF ANY ONE OF THE REGIONS IN
WHICH OUR RESTAURANTS ARE LOCATED EXPERIENCES AN ECONOMIC DOWNTURN OR OTHER
MATERIAL CHANGE, OUR BUSINESS RESULTS MAY SUFFER.

         Our existing restaurants are located predominantly in the Southeastern
and Midwestern United States. As of December 30, 2001, 32 of our 161 O'Charley's
restaurants were located in Tennessee. Our plans include significant further
expansion in the Southeast and Midwest. As a result, our business and our
financial or operating results may be materially adversely affected by adverse
economic, weather or business conditions in the Southeast and Midwest, as well
as in other geographic regions in which we locate restaurants.

OUR FUTURE PERFORMANCE DEPENDS ON OUR SENIOR MANAGEMENT WHO ARE EXPERIENCED IN
RESTAURANT MANAGEMENT AND WHO COULD NOT EASILY BE REPLACED WITH EXECUTIVES OF
EQUAL EXPERIENCE AND CAPABILITIES.

         We depend significantly on the services of Gregory L. Burns, our Chief
Executive Officer, Steven J. Hislop, our President and Chief Operating Officer,
and A. Chad Fitzhugh, our Chief Financial Officer. If we lose the services of
Messrs. Burns, Hislop, or Fitzhugh for any reason, we may be unable to replace
them with qualified personnel, which could have a material adverse effect on our
business and development. We do not have employment agreements with any of our
executive officers and we do not carry key person life insurance on any of our
executive officers.

OUR RESTAURANTS MAY NOT BE ABLE TO COMPETE SUCCESSFULLY WITH OTHER RESTAURANTS,
WHICH COULD ADVERSELY AFFECT OUR RESULTS OF OPERATIONS.

         If our restaurants are unable to compete successfully with other
restaurants in new and existing markets, our results of operations will be
adversely affected. The restaurant industry is intensely competitive with
respect to price, service, location


                                       11

<PAGE>

and food quality, and there are many well-established competitors with
substantially greater financial and other resources than us, including a large
number of national and regional restaurant chains. Some of our competitors have
been in existence for a substantially longer period than us and may be better
established in the markets where our restaurants are or may be located. To the
extent that we open restaurants in larger cities and metropolitan areas, we
expect competition to be more intense in those markets. We also compete with
other restaurants for experienced management personnel and hourly employees and
with other restaurants and retail establishments for quality sites.

CHANGING CONSUMER PREFERENCES AND DISCRETIONARY SPENDING PATTERNS COULD FORCE US
TO MODIFY OUR CONCEPTS AND MENUS AND COULD RESULT IN A REDUCTION IN OUR
REVENUES.

         Even if we are able to compete successfully with other restaurant
companies, we may be forced to make changes in our concepts and menus in order
to respond to changes in consumer tastes or dining patterns. Consumer
preferences could be affected by health concerns about the consumption of beef,
the primary item on our Stoney River menu, or by specific events such as E. coli
food poisoning or outbreaks of "mad cow" and "foot and mouth" disease. If we
change a restaurant concept or menu, we may lose customers who do not prefer the
new concept or menu, and may not be able to attract a sufficient new customer
base to produce the revenue needed to make the restaurant profitable. In
addition, we may have different or additional competitors for our intended
customers as a result of a concept change and may not be able to compete
successfully against those competitors. Our success also depends on numerous
factors affecting discretionary consumer spending, including economic
conditions, disposable consumer income and consumer confidence. Adverse changes
in these factors could reduce guest traffic or impose practical limits on
pricing, either of which could reduce revenues.

WE MAY INCUR COSTS OR LIABILITIES AND LOSE REVENUE AS THE RESULT OF GOVERNMENT
REGULATION.

         Our restaurants are subject to extensive federal, state and local
government regulation, including regulations related to the preparation and sale
of food, the sale of alcoholic beverages, zoning and building codes, and other
health, sanitation and safety matters. Our restaurants may lose revenue if they
are unable to maintain liquor or other licenses required to serve alcoholic
beverages or food. In addition, our commissary is licensed and subject to
regulation by the United States Department of Agriculture and is subject to
further regulation by state and local agencies. Our failure to obtain or retain
federal, state or local licenses for our commissary or to comply with applicable
regulations could adversely affect our commissary operations and disrupt
delivery of food and other products to our restaurants. If one or more of our
restaurants was unable to serve alcohol or food for even a short time period, we
could experience a reduction in our overall revenue.

         The costs of operating our restaurants may increase if there are
changes in laws governing minimum hourly wages, workers' compensation insurance
rates, unemployment tax rates, sales taxes or other laws and regulations, such
as the federal Americans with Disabilities Act, which governs access for the
disabled. If any of the above costs increase, we cannot assure you that we will
be able to offset the increase by increasing our menu prices or by other means,
which would adversely affect our results of operations.

RESTAURANT COMPANIES HAVE BEEN THE TARGET OF CLASS ACTIONS AND OTHER LAWSUITS
ALLEGING VIOLATIONS OF FEDERAL AND STATE LAW.

         We are subject to the risk that our results of operations may be
adversely affected by legal or governmental proceedings brought by or on behalf
of our employees or customers. In recent years, a number of restaurant companies
have been subject to lawsuits, including class action lawsuits, alleging
violations of federal and state law regarding workplace and employment matters,
discrimination and similar matters. A number of these lawsuits have resulted in
the payment of substantial damages by the defendants. Similar lawsuits have been
instituted against us from time to time and we cannot assure you that we will
not incur substantial damages and expenses resulting from lawsuits of this type,
which could have a material adverse effect on our business.


                                       12

<PAGE>

WE MAY INCUR COSTS OR LIABILITIES AS A RESULT OF LITIGATION AND PUBLICITY
CONCERNING FOOD QUALITY, HEALTH AND OTHER ISSUES THAT CAN CAUSE CUSTOMERS TO
AVOID OUR RESTAURANTS.

         We are sometimes the subject of complaints or litigation from customers
alleging illness, injury or other food quality or health concerns. Litigation or
adverse publicity resulting from these allegations may materially adversely
affect us or our restaurants, regardless of whether the allegations are valid or
whether we are liable. In addition, our restaurants are subject in each state in
which we operate to "dram shop" laws that allow a person to sue us if that
person was injured by an intoxicated person who was wrongfully served alcoholic
beverages at one of our restaurants. A lawsuit under a dram shop law or alleging
illness or injury from food may result in a verdict in excess of our liability
insurance policy limits, which could result in substantial liability for us and
may have a material adverse effect on our results of operations.

OUR BUSINESS MAY BE ADVERSELY AFFECTED BY OUR LEVERAGE AND OUR OBLIGATIONS UNDER
CAPITAL AND OPERATING LEASES.

         As of December 30, 2001, the total amount of our long-term debt and
capitalized lease obligations, including current portion, was approximately
$121.9 million. In addition, as of December 30, 2001, we were a party to
operating leases requiring approximately $77.4 million in minimum future lease
payments. In addition, we intend to continue to make borrowings under our
revolving credit facility in connection with the development of new restaurants
and for other general corporate purposes, and the aggregate amount of our
indebtedness and capitalized and operating lease obligations will likely
increase, perhaps substantially.

         The amount of our indebtedness and lease obligations could have
important consequences to investors, including the following:

         o        our ability to obtain additional financing in the future may
                  be impaired;

         o        a substantial portion of our cash flow from operations must be
                  applied to pay principal and interest on our indebtedness and
                  lease payments under capitalized and operating leases, thus
                  reducing funds available for other purposes;

         o        some of our borrowings, including borrowings under our
                  revolving credit facility, and, to the extent utilized in the
                  future, lease payments under our synthetic lease facility are
                  and will continue to be at variable rates based upon
                  prevailing interest rates, which will expose us to the risk of
                  increased interest rates;

         o        we may be constrained by financial covenants and other
                  restrictive provisions contained in credit agreements and
                  other financing documents;

         o        we may be substantially more leveraged than some of our
                  competitors, which may place us at a competitive disadvantage;
                  and

         o        our leverage may limit our flexibility to adjust to changing
                  market conditions, reduce our ability to withstand competitive
                  pressures and make us more vulnerable to a downturn in general
                  economic conditions or our business.

OUR SHAREHOLDER RIGHTS PLAN, CHARTER AND BYLAWS AND TENNESSEE LAW COULD DELAY OR
PREVENT A CHANGE IN CONTROL OF OUR COMPANY THAT OUR SHAREHOLDERS CONSIDER
FAVORABLE.

         We have a shareholder rights plan that may have the effect of
discouraging unsolicited takeover proposals. The rights issued under the
shareholder rights plan would cause substantial dilution to a person or group
that attempts to acquire us on terms not approved in advance by our board of
directors. In addition, provisions in our charter and bylaws and Tennessee law
may discourage, delay or prevent a merger, acquisition or change in control
involving our company that our shareholders may consider favorable. These
provisions could also discourage proxy contests and make it more difficult for
shareholders to elect directors and take other corporate actions. Among other
things, these provisions:

         o        authorize us to issue preferred stock, the terms of which may
                  be determined at the sole discretion of our board of directors
                  and may adversely affect the voting or economic rights of our
                  common shareholders;


                                       13

<PAGE>

         o        provide for a classified board of directors with staggered
                  three year terms so that no more than one-third of our
                  directors could be replaced at any annual meeting;

         o        provide that directors may be removed only for cause;

         o        provide that any amendment or repeal of the provisions of our
                  charter establishing our classified board of directors and
                  concerning the removal of directors must be approved by the
                  affirmative vote of the holders of two-thirds of our
                  outstanding shares; and

         o        establish advance notice requirements for nominations for
                  election to the board of directors or for proposing matters
                  that can be acted on by shareholders at a meeting.

         We also have severance agreements with our senior management and we are
subject to anti-takeover provisions under Tennessee law. These provisions of our
charter and bylaws, Tennessee law, our shareholder rights plan and the severance
agreements may discourage transactions that otherwise could provide for the
payment of a premium over prevailing market prices for our common stock and also
could limit the price that investors are willing to pay in the future for shares
of our common stock.

WE MAY ISSUE A SUBSTANTIAL NUMBER OF SHARES OF OUR COMMON STOCK UNDER OUR STOCK
OPTION AND STOCK PURCHASE PLANS, AND SHAREHOLDERS MAY BE ADVERSELY AFFECTED BY
THE ISSUANCE OF THOSE SHARES.

         As of December 30, 2001, options to purchase 3,598,218 shares of our
common stock, representing 19.6% of our shares outstanding at that date, were
outstanding. These options had a weighted average exercise price of $11.11 per
share. As of December 30, 2001, we had a total of 6,350,873 shares reserved for
issuance under our stock purchase and stock option plans, including the shares
reserved for issuance upon the exercise of outstanding stock options. The total
shares reserved for issuance under our plans represented 34.6% of our
outstanding shares at December 30, 2001. We believe that the issuance of stock
options is an important tool to motivate our employees and align their interests
with those of our shareholders and we intend to continue issuing stock options
to our employees. We believe that the shares reserved for issuance under our
plans will be sufficient to cover awards to our employees for at least the next
several years, although there can be no assurance in this regard. The issuance
of significant additional shares of our common stock upon the exercise of
outstanding options or otherwise pursuant to these stock plans could have a
material adverse effect on the market price of our common stock and could
significantly dilute the interests of other shareholders.

EXECUTIVE OFFICERS

         Our executive officers are elected by the board of directors and serve
at the pleasure of the board of directors. The following table sets forth
certain information regarding our executive officers.

<TABLE>
<CAPTION>
Name                       Age              Position
----                       ---              --------
<S>                        <C>              <C>
Gregory L. Burns           47               Chief Executive Officer and Chairman of the Board

Steven J. Hislop           42               President and Chief Operating Officer

A. Chad Fitzhugh           41               Chief Financial Officer, Secretary, and Treasurer

William E. Hall, Jr.       47               Executive Vice President, Operations

Herman A. Moore, Jr.       50               Vice President, Commissary Operations
</TABLE>

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

         Gregory L. Burns has served as Chairman of the Board and Chief
Executive Officer since February 1994. Mr. Burns, a director since 1990, served
as President from September 1996 to May 1999 and from May 1993 to February 1994,
as


                                       14

<PAGE>

Chief Financial Officer from October 1983 to September 1996, and as Executive
Vice President and Secretary from October 1983 to May 1993.

         Steven J. Hislop has served as President since May 1999, as Chief
Operating Officer since March 1997 and as a director since March 1998. From
March 1997 until May 1999, Mr. Hislop served as an Executive Vice President of
our company. Mr. Hislop served as Senior Vice President - Operations from
January 1993 to March 1997, and as Vice President - Operations from April 1990
to January 1993.

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

         William E. Hall, Jr. has served as Executive Vice President, Operations
since September 1999. Mr. Hall served as Vice President, Operations from March
1997 to September 1999, as Director of Operations from December 1996 to March
1997, as a Regional Director from July 1992 to December 1996, and as an Area
Supervisor from May 1991 to July 1992.

         Herman A. Moore, Jr. has served as Vice President, Commissary
Operations since January 1996. Mr. Moore served as Director of Commissary
Operations from 1988 to January 1996.

ITEM 2.  PROPERTIES.

         Of the 161 O'Charley's and three Stoney River restaurants in operation
at December 30, 2001, we own 100 restaurants, lease the land and building for
ten restaurants, and lease only the land for the remaining 54 restaurants. Two
of the restaurant locations we leased at December 30, 2001 were owned by
partnerships whose partners are affiliated with our company. We purchased these
two properties in January 2002. Restaurant lease expirations range from 2003 to
2019, with the majority of the leases providing for an option to renew for
additional terms ranging from five to 20 years. All of our restaurant 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, our restaurant leases are net leases, which require us to pay
the cost of insurance and taxes.

         Our executive offices and commissary are located in Nashville,
Tennessee in approximately 290,000 square feet of office and warehouse space. We
own these facilities.

ITEM 3.  LEGAL PROCEEDINGS.

         In November 2000, we were sued by Two Mile Partners in the circuit
court for Montgomery County, Tennessee. Two Mile Partners is a Tennessee general
partnership whose partners were the late David K. Wachtel, Jr., who owned 75%
and was the managing partner of the partnership and a former director and
executive officer of O'Charley's, and Gregory L. Burns, who owns 25% of the
partnership and is our Chairman of the Board and Chief Executive Officer. Prior
to Mr. Wachtel's death in November 2001, all decisions regarding the prosecution
of this suit by Two Mile Partners were made by Mr. Wachtel in his capacity as
managing partner. In the complaint, Two Mile Partners sought $1.5 million in
damages, plus interest, attorneys' fees and costs as a result of our alleged
breach of a lease entered into in 1985 for a restaurant property owned by the
partnership and located in Clarksville, Tennessee. Two Mile Partners alleged
that we breached a continuous operation provision in the lease by vacating the
property in July 2000 and opening another O'Charley's restaurant in Clarksville,
Tennessee.

         In January 2002, we entered into a comprehensive settlement agreement
with Two Mile Partners settling all litigation and business matters between us.
As a result of the settlement, (i) we purchased restaurant properties located in
Goodlettsville, Murfreesboro and Clarksville, Tennessee that we leased from Two
Mile Partners for $1.7 million, $1.6 million and $1.0 million, respectively,
(ii) we terminated our lease with Two Mile Partners for a restaurant property
located in Bowling Green, Kentucky on which we formerly operated our Bowling
Green restaurant and sold Two Mile Partners an adjoining parcel of property used
for parking for a payment of $300,000, and (iii) Two Mile Partners dismissed
with prejudice the litigation pending against us in consideration of a payment
by us of $200,000.


                                       15

<PAGE>

         Mr. Burns recused himself from our discussions and considerations of
any matters relating to the settlement. We believe that we terminated the
Clarksville lease in accordance with its terms and deny the allegations
contained in the complaint filed by Two Mile Partners. Nevertheless, a special
committee of the Board of Directors comprised of disinterested directors
approved the settlement and believed it was in our best interest in order to
settle the litigation to avoid the expense, uncertainty and distraction of this
litigation. We believe the terms of the purchase of the Goodlettsville,
Murfreesboro and Clarksville properties and the sale of the Bowling Green
property were fair to the Company, and on terms no less favorable than, we would
have obtained in an arms' length transaction with an unrelated third party.

         We are also defendants from time to time in various legal proceedings
arising in the ordinary course of our business, including claims relating to the
workplace and employment matters, discrimination and similar matters, claims
resulting from "slip and fall" accidents and claims from customers or employees
alleging illness, injury or other food quality, health or operational concerns.
We do not believe that any of the legal proceedings pending against us as of the
date of this report will have a material adverse effect on our operating
results, liquidity or financial condition.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

         No matters were submitted to a vote of shareholders during the fourth
quarter ended December 30, 2001.

                                     PART II

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

         Our common stock trades on the NASDAQ National Market under the symbol
"CHUX." As of December 30, 2001, there were approximately 3,200 shareholders of
record of our common stock. The following table shows quarterly high and low
closing prices for our common stock for the periods indicated, as reported by
the NASDAQ National Market.

<TABLE>
<CAPTION>
                                                                  High                       Low
                                                                 ------                     ------
<S>                                                              <C>                        <C>
FISCAL 2001
First Quarter...............................................     $21.45                     $15.38
Second Quarter..............................................      21.05                      17.00
Third Quarter...............................................      19.54                      14.25
Fourth Quarter..............................................      19.33                      14.51

FISCAL 2000
First Quarter...............................................     $13.50                     $10.75
Second Quarter..............................................      16.75                      11.56
Third Quarter...............................................      15.62                      12.25
Fourth Quarter..............................................      18.07                      10.75
</TABLE>

         We have never paid a cash dividend on our common stock and we presently
intend to retain our cash to finance the growth and development of our business.
Presently, our revolving credit facility prohibits the payment of cash dividends
on our common stock without the consent of the participating banks.

         We did not sell any securities during the fiscal year ended December
30, 2001 without registration under the Securities Act of 1933, as amended.



                                       16
<PAGE>

ITEM 6.  SELECTED FINANCIAL DATA

<TABLE>
<CAPTION>
                                                                                      FISCAL YEARS
                                                         -------------------------------------------------------------------------
                                                            2001           2000(1)         1999            1998            1997
                                                         ---------       ---------       ---------       ---------       ---------
                                                                           (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                                      <C>             <C>             <C>             <C>             <C>
STATEMENT OF EARNINGS DATA:
Revenues:
     Restaurant sales ............................       $ 440,875       $ 373,700       $ 299,014       $ 243,416       $ 197,554
     Commissary sales ............................           4,056           3,562           3,191           2,630           2,819
     Franchise revenue ...........................              --              --              --              --              30
                                                         ---------       ---------       ---------       ---------       ---------
                                                           444,931         377,262         302,205         246,046         200,403
Costs and expenses:
     Cost of restaurant sales:
        Cost of food, beverage and supplies ......         143,422         121,859          99,736          84,370          68,584
        Payroll and benefits .....................         138,009         115,029          90,625          73,561          60,431
        Restaurant operating costs ...............          62,428          52,439          42,460          34,190          28,563
     Cost of commissary sales ....................           3,808           3,341           3,013           2,479           2,642
     Advertising, general and administrative
        expenses .................................          29,979          24,480          19,235          15,533          12,932
     Depreciation and amortization (2) ...........          22,135          18,202          14,060          13,452          10,331
     Preopening costs (2) ........................           5,654           4,705           4,037              --              --
     Asset impairment and exit costs(3) ..........           5,798              --              --              --              --
                                                         ---------       ---------       ---------       ---------       ---------
                                                           411,233         340,055         273,166         223,585         183,483
                                                         ---------       ---------       ---------       ---------       ---------
Income from operations ...........................          33,698          37,207          29,039          22,461          16,920
Other (income) expense:
     Interest expense, net .......................           6,610           7,398           4,174           2,801           3,459
     Other, net ..................................             189              24              82            (186)           (225)
                                                         ---------       ---------       ---------       ---------       ---------
                                                             6,799           7,422           4,256           2,615           3,234
                                                         ---------       ---------       ---------       ---------       ---------
 Earnings before income taxes and cumulative
   effect of change in accounting
   principle .....................................          26,899          29,785          24,783          19,846          13,686
Income taxes .....................................           9,347          10,425           8,674           6,946           4,886
                                                         ---------       ---------       ---------       ---------       ---------
 Earnings before cumulative effect of change
   in accounting principle .......................          17,552          19,360          16,109          12,900           8,800
 Cumulative effect of change in accounting
   principle, net of tax (2) .....................              --              --          (1,348)             --              --
                                                         ---------       ---------       ---------       ---------       ---------
Net earnings .....................................       $  17,552       $  19,360       $  14,761       $  12,900       $   8,800
                                                         =========       =========       =========       =========       =========
 Basic earnings per common share before
   cumulative effect of change in accounting
   principle .....................................       $    0.99       $    1.24       $    1.04       $    0.84       $    0.71
 Cumulative effect of change in accounting
   principle, net of tax (2) .....................              --              --           (0.09)             --              --
                                                         ---------       ---------       ---------       ---------       ---------
Basic earnings per common share ..................       $    0.99       $    1.24       $    0.95       $    0.84       $    0.71
                                                         =========       =========       =========       =========       =========
 Diluted earnings per common share before
   cumulative effect of change in accounting
   principle .....................................       $    0.93       $    1.17       $    0.97       $    0.79       $    0.66
 Cumulative effect of change in accounting
   principle, net of tax(2) ......................              --              --           (0.08)             --              --
                                                         ---------       ---------       ---------       ---------       ---------
 Diluted earnings per common share ...............       $    0.93       $    1.17       $    0.89       $    0.79       $    0.66
                                                         =========       =========       =========       =========       =========
Weighted average common shares outstanding -
   diluted .......................................          18,873          16,525          16,656          16,392          13,361
BALANCE SHEET DATA (AT END OF PERIOD):
Working capital (deficit) ........................       $ (15,222)      $ (20,185)      $ (19,411)      $ (11,571)      $ (11,309)
Total assets .....................................         383,430         311,018         240,180         193,782         150,515
Current portion of long-term debt and
   capitalized lease obligations .................           7,924           7,574           7,013           5,429           4,621
Long-term debt and capitalized lease
   obligations, including current portion ........         121,929         122,244          80,471          57,338          32,339
Total shareholders' equity .......................         204,202         143,490         122,689         108,774          95,383
OTHER DATA:
Restaurant Operating Income(4) ...................       $  97,016       $  84,373       $  66,193       $  51,295       $  39,976
</TABLE>


                                       17

<PAGE>

---------------
(1)      In May 2000, we acquired two Stoney River restaurants and all
         associated trademarks and intellectual property for approximately $15.8
         million in a cash transaction accounted for as a purchase. Accordingly,
         the results of operations of the two Stoney River restaurants have been
         included in our consolidated results of operations since the date of
         acquisition. Fiscal 2000 consisted of 53 weeks.
(2)      During the first quarter of 1999, we adopted Statement of Position 98-5
         "Reporting on the Costs of Start-Up Activities," which requires that
         restaurant preopening costs be expensed rather than capitalized.
         Previously, we capitalized restaurant preopening costs and amortized
         these amounts over one year from the opening of each restaurant. The
         depreciation and amortization expense recorded in 1997 and 1998
         included preopening cost amortization of $2.4 million and $2.9 million,
         respectively. For 1999, 2000 and 2001, the depreciation and
         amortization line item does not include amortization of preopening
         costs. We incurred a pre-tax charge of $2.1 million, or $1.3 million
         net of tax, in the first quarter of 1999 as a result of this change in
         accounting principle.
(3)      During the third quarter of 2001, we decided to close certain
         restaurant locations. As a result, we recorded a non-cash charge of
         $5.0 million pursuant to the provisions of Statement of Financial
         Accounting Standards No. 121, "Accounting for the Impairment of
         Long-Lived Assets and for Long-Lived Assets to be Disposed Of" to
         reflect the differences between the fair value and net book value of
         the assets and a charge of $800,000 for exit costs associated with the
         closure of such locations.
(4)      Reflects restaurant sales less cost of restaurant sales. While
         restaurant operating income is a non-GAAP measurement, we believe it is
         a relevant and useful metric in discussing our operating results.


                                       18








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

General

         As of December 30, 2001, we operated 161 O'Charley's restaurants in
Alabama, Arkansas, Florida, Georgia, Illinois, Indiana, Kentucky, Mississippi,
Missouri, North Carolina, Ohio, South Carolina, Tennessee and Virginia and two
Stoney River restaurants in Atlanta and one in Chicago. O'Charley's are casual
dining restaurants that are intended to appeal to mainstream casual dining
customers as well as upscale casual dining and value oriented customers by
offering high quality, freshly prepared food at moderate prices with friendly
and attentive customer service. Our growth strategy for the O'Charley's concept
is to continue penetrating existing and new targeted major metropolitan areas
while opening new units in smaller secondary markets in close proximity to our
metropolitan markets. Stoney River restaurants are upscale steakhouses that are
intended to appeal to both upscale casual dining and fine dining customers by
offering hand-cut, premium midwestern beef along with fresh seafood and other
gourmet entrees with attentive service in a warm, friendly and relaxed
environment. Our growth strategy for Stoney River is to concentrate on major
metropolitan markets in the Southeast and Midwest with disciplined, controlled
development and the potential to accelerate development over the next several
years.

         We operate a commissary for the primary purpose of providing our
restaurants with consistent quality food products that meet our specifications
while obtaining lower prices for those items through volume purchasing. A
substantial majority of the food products served in our restaurants are
distributed to the restaurants by the commissary. In addition to purchasing food
and other non-food products, the commissary manufactures certain proprietary
products and ages and cuts red meat into steaks in its USDA-approved and
inspected facility. We believe our commissary gives us a competitive advantage
in servicing our restaurants and a financial advantage. We attribute the
decreases in food cost as a percentage of our restaurant sales over the past
three years, in part, to the financial leverage generated from the increased
purchasing volumes and operating efficiencies of our commissary.

         On May 26, 2000, we purchased two existing Stoney River restaurants and
all associated trademarks and intellectual property for approximately $15.8
million in a cash transaction accounted for as a purchase. Accordingly, the
results of operations of the two Stoney River restaurants have been included in
our consolidated results of operations since the date of acquisition. Total
revenues for the Stoney River concept were $10.8 million and $5.4 million in
2001 and 2000, respectively. Our interest expense increased as a result of the
indebtedness incurred to finance the acquisition. Our depreciation and
amortization increased as a result of the $10.7 million of goodwill associated
with the acquisition. The pretax loss for the Stoney River concept was $2.3
million and $1.3 million in 2001 and 2000, respectively.

         The following tables reflects changes in the number of restaurants we
operated during the years presented:

<TABLE>
<CAPTION>
                   O'Charley's Restaurants               2001        2000       1999
                   -----------------------               ----        ----       ----
                  <S>                                    <C>         <C>        <C>
                  In operation, beginning of year         138         117         99
                  Restaurants opened                       24          21         18
                  Restaurant closed                        (1)         --         --
                                                         ----         ---        ---
                  In operation, end of year               161         138        117
                                                         ====         ===        ===
<CAPTION>

                  Stoney River Restaurants               2001        2000       1999
                  ------------------------               ----        ----       ----
                  <S>                                    <C>         <C>        <C>
                  In operation, beginning of year           2          --         --
                  Restaurants acquired                     --           2         --
                  Restaurant opened                         1          --         --
                                                         ----         ---        ---
                  In operation, end of year                 3           2         --
                                                         ====         ===        ===
</TABLE>

         During the third quarter of 2001, we incurred a charge of approximately
$5.8 million, or approximately $0.20 per diluted share, related to the closing
of five stores. These current closings are the result of a comprehensive review
of the past and expected performance of all locations, taking into consideration
the difficult economic environment. We closed one of the five restaurants closed
in 2001. We


                                       19
<PAGE>

closed two additional stores in the first quarter of 2002.

         We have completed a feasibility study on franchising our O'Charley's
restaurant concept and are in the process of finalizing the proper legal and
regulatory requirements in order to begin franchising. We have begun marketing
the franchise concept, but we do not believe we will generate any revenue or
profits in 2002. We project approximately $750,000 in expenditures for this
franchising project in 2002, and we may continue to experience expenditures and
losses until such time, if ever, that we generate sufficient revenue to cover
these expenditures.

         Revenues consist of restaurant sales and to a lesser extent commissary
sales. Restaurant sales include food and beverage sales and are net of
applicable state and local sales taxes. Commissary sales represent sales to
outside parties consisting primarily of sales of O'Charley's branded food items,
primarily salad dressings, to retail grocery chains, mass merchandisers and
wholesale clubs.

         Cost of food, beverage and supplies primarily consists of the costs of
beef, poultry, seafood, produce and alcoholic and non-alcoholic beverages. We
believe our menu offers a broad selection of menu items and as a result there is
not a high concentration of our food costs in any one product category. Various
factors beyond our control, including adverse weather, cause periodic
fluctuations in food and other costs. Generally, temporary increases in these
costs are not passed on to customers; however, we have in the past generally
adjusted menu prices to compensate for increased costs of a more permanent
nature.

         Payroll and benefits include payroll and related costs and expenses
directly relating to restaurant level activities including restaurant management
salaries and bonuses, hourly wages for restaurant level employees, payroll
taxes, workers' compensation, various health, life and dental insurance
programs, vacation expense and sick pay. We have an incentive bonus plan that
compensates restaurant management for achieving and exceeding certain restaurant
level financial targets and performance goals. We typically pay our employees
more than minimum wage and do not expect an immediate adverse effect on our
financial performance from any further increase in the federal minimum wage
rate. However, as in prior years, we do expect that overall wage inflation will
be higher for several years following any minimum wage increase. As Congress has
raised the federal minimum wage rate in recent years, the base wage rate for our
tipped employees has remained at $2.13. Any increase to the base wage rate for
our tipped employees would increase payroll costs.

         Restaurant operating costs include occupancy and other expenses at the
restaurant level, except property and equipment depreciation and amortization.
Rent, supervisory salaries, bonuses and expenses, management training salaries,
general liability and property insurance, property taxes, utilities, repairs and
maintenance, outside services and credit card fees account for the major
expenses in this category. We are evaluating a possible sale leaseback facility
pursuant to which the lessor would acquire certain of our restaurant properties
and then lease those properties to us. To the extent that proceeds from any sale
leaseback transaction are used to repay indebtedness under our revolving credit
facility, this would reduce our interest expense. We would incur additional rent
expense, however, which would increase our restaurant operating costs. The
accounting standards setting bodies are currently considering changes to the
accounting rules that could impact how we would account for such a transaction.

         Advertising, general and administrative expenses include all
advertising and home office administrative functions that support the existing
restaurant base and provide the infrastructure for future growth. Advertising,
executive management and support staff salaries, bonuses and related expenses,
data processing, legal and accounting expenses and office expenses account for
the major expenses in this category.

         Depreciation and amortization primarily includes depreciation on
property and equipment calculated on a straight-line basis over an estimated
useful life. Depreciation and amortization also includes amortization of
goodwill, which relates primarily to the acquisition of the Stoney River
concept. Our depreciation and amortization increased as a result of the $10.7
million of goodwill incurred in connection with our May 2000 acquisition of the
Stoney River Legendary Steaks concept. In accordance with a new accounting
pronouncement, SFAS No. 142, (Statement of Financial Accounting Standards No.
142 "Goodwill and Other Intangibles") beginning in 2002, goodwill and intangible
assets with indefinite useful lives will no longer be amortized. We are
currently evaluating the fair value of these assets that have a carrying value
of approximately $10.0 million at December 30, 2001. We would be required to
record a charge in 2002


                                       20
<PAGE>

if the fair value is determined to be less than the carrying value at December
31, 2001. Any such impairment loss would be recognized as a cumulative effect of
a change in accounting principle. See "Accounting Changes and Recent Accounting
Pronouncements" - SFAS No. 142 in Accounting Changes and Recent Accounting
Pronouncements.

         Preopening costs include operating costs and expenses incurred prior to
a new restaurant opening. Our current practice of expensing preopening costs may
cause fluctuations in our results of operations from quarter to quarter and year
to year depending on when those costs are incurred. See "Risk Factors -
Fluctuations in our operating results and other factors may result in decreases
in our stock price." We recognized a charge for the cumulative effect of this
change in accounting policy in the first quarter of 1999. Starting in 1999, we
began reflecting our preopening costs on a separate line item labeled
"preopening costs" on the statement of earnings rather than reporting these
costs in the depreciation and amortization line item. The amount of preopening
costs incurred in any one year includes costs incurred during the year for
restaurants opened and under development. We incurred average preopening costs
of approximately $220,000 for each new O'Charley's restaurant opened during
2001. We anticipate higher preopening costs for each Stoney River restaurant we
open as compared to the average preopening costs for an O'Charley's restaurant.

         The following information should be read in conjunction with "Selected
Financial Data" and our consolidated financial statements and the related notes
thereto included elsewhere in this Annual Report and on Form 10-K. The following
table reflects our operating results for 1999, 2000, and 2001 as a percentage of
total revenues unless otherwise indicated. Fiscal years 2001 and 1999 were
comprised of 52 weeks while fiscal year 2000 was comprised of 53 weeks. As a
result, some of the variations reflected in the following data may be attributed
to the different lengths of the fiscal years.


                                       21
<PAGE>

<TABLE>
<CAPTION>
                                                                                         2001          2000          1999
                       <S>                                                              <C>           <C>           <C>
                       Revenues:
                             Restaurant sales ...................................         99.1%         99.1%         98.9%
                             Commissary sales ...................................          0.9           0.9           1.1
                                                                                         -----         -----         -----
                                                                                         100.0%        100.0%        100.0%
                                                                                         -----         -----         -----
                       Costs and expenses:
                             Cost of restaurant sales:
                                Cost of food, beverage and supplies (1) .........         32.5%         32.6%         33.4%
                                Payroll and benefits (1) ........................         31.3          30.8          30.3
                                Restaurant operating costs (1) ..................         14.2          14.0          14.2
                                                                                         -----         -----         -----
                                    Total cost of restaurant sales (1) ..........         78.0%         77.4%         77.9%
                                                                                         -----         -----         -----

                             Restaurant Operating Margin (2) ....................         22.0%         22.6%         22.1%

                             Cost of commissary sales (3) .......................         93.9          93.8          94.4
                             Advertising, general and administrative expenses ...          6.7           6.5           6.4
                             Depreciation and amortization ......................          5.0           4.8           4.7
                             Asset impairment and exit costs ....................          1.3            --            --
                             Preopening costs ...................................          1.3           1.2           1.3

                                                                                           7.6           9.9           9.6

                       Income from operations

                             Interest expense, net ..............................          1.5           2.0           1.4
                             Other, net .........................................           --            --            --
                                                                                         -----         -----         -----
                       Earnings before income taxes and cumulative effect of change in
                            accounting principle ................................          6.1           7.9           8.2
                       Income taxes .............................................          2.1           2.8           2.9
                                                                                         -----         -----         -----
                       Earnings before cumulative effect of change in accounting
                          Principle .............................................          4.0           5.1           5.3
                       Cumulative effect of change in accounting principle,
                          net of tax ............................................           --            --          (0.4)
                                                                                         -----         -----         -----
                       Net earnings .............................................          4.0%          5.1%          4.9%
                                                                                         =====         =====         =====
</TABLE>

----------------------

(1)      As a percentage of restaurant sales.
(2)      Reflects restaurant sales less cost of restaurant sales. While
         restaurant operating margin is a non-GAAP measurement, we believe it is
         a relevant and useful metric in discussing our operating results.
(3)      As a percentage of commissary sales.


                                       22
<PAGE>

Fiscal Year 2001 Compared with Fiscal Year 2000

         Total revenues in 2001 increased $67.7 million, or 17.9%, to $444.9
million from $377.3 million in 2000 primarily as a result of an increase in
restaurant sales of $67.2 million, or 18.0%. The increase in restaurant sales
was attributable to the addition of 24 new O'Charley's restaurants, the
inclusion of the two original Stoney River restaurants for the entire year
following their acquisition in May 2000, one new Stoney River restaurant opened
in 2001, and an increase in same store sales at our O'Charley's restaurants of
2.1%, including a customer traffic increase of 1.5%. Our overall check average
for the O'Charley's concept was $11.28 in 2001 and $11.13 in 2000. The increases
in revenue were partially offset by us having 52 weeks of operations in 2001 as
compared to 53 weeks in 2000. In January 2001, we increased menu prices at our
O'Charley's restaurants by approximately 2.0%. We believe we realized the
majority of that price increase during the first quarter of 2001, but by the end
of the first quarter, we began to see slowing consumer spending which resulted
in a lower than expected check average. In response to the slowing consumer
spending patterns, we increased our marketing efforts and began to promote lower
priced entrees and lowered certain daily entree specials. As a result of this
effort, we believe we maintained our increases in customer traffic but lowered
our overall check average. Near the end of the third quarter of 2001, we began
to see increases in consumer spending which raised our check average but we
continued to promote lower priced entrees through the end of 2001.

         Cost of food, beverage and supplies in 2001 increased $21.6 million, or
17.7%, to $143.4 million from $121.9 million in 2000. As a percentage of
restaurant sales, cost of food, beverage and supplies decreased to 32.5% in 2001
from 32.6% in 2000. Although we experienced a slight improvement in the cost of
food, beverage, and supplies in 2001, the reduction was not as significant as in
the previous two years. We continued to experience improved purchasing and
operating efficiencies in our restaurants and commissary, which was partially
offset by significantly higher costs for certain commodity food items, including
red meat, cheese, and baby back ribs. Additionally, food costs were impacted by
our Stoney River restaurants in 2002 where the food costs are higher than
O'Charley's due primarily to a higher percentage of red meat sales. Food costs
were also impacted by the promotion of lower priced entrees in 2001. We
anticipate more moderate increases in commodity costs in 2002.

         Payroll and benefits increased $23.0 million, or 20.0%, to $138.0
million in 2001 from $115.0 million in 2000. Payroll and benefits, as a
percentage of restaurant sales, increased to 31.3% in 2001 from 30.8% in 2000.
The increase was attributable to increasing salaries for restaurant management
along with higher employee benefit costs, including workers' compensation and
health insurance costs in 2001. Our markets generally have low unemployment
rates and we compete with other restaurants for employees. We anticipate
continued increases in wage rates and employee benefit costs in 2002.

         Restaurant operating costs in 2001 increased $10.0 million, or 19.0%,
to $62.4 million from $52.4 million in 2000. Restaurant operating costs, as a
percentage of restaurant sales, increased to 14.2% in 2001 from 14.0% in 2000.
In 2001, we experienced higher utility costs, primarily natural gas, and higher
insurance expenses, primarily general and liquor liability insurance. These
increases were partially offset by a decrease in supervisory expenses in 2001 as
a percentage of total revenue. Overall utilities in 2001 increased $2.6 million,
or 28%, as compared to 2000. Natural gas prices were significantly higher during
the first three quarters of 2001, but decreased during the fourth quarter to
similar levels in the same quarter of 2000. We expect to continue to see higher
insurance expenses in 2002 and are currently evaluating this area for our
upcoming annual renewal.

         Advertising, general and administrative expenses increased $5.5
million, or 22.5%, to $30.0 million in 2001 from $24.5 million in 2000. As a
percentage of total revenues, advertising, general and administrative expenses
increased to 6.7% in 2001 from 6.5% in 2000. Advertising expenditures increased
39.6% to $13.3 million in 2001 from $9.5 million in 2000 and, as a percentage of
restaurant sales, increased to 3.0% in 2001 from 2.5% in 2000. Stoney River
restaurants rely primarily on word of mouth to attract new customers rather than
advertising. O'Charley's advertising, as a percentage of O'Charley's restaurant
sales, was 3.1% in 2001 compared to 2.6% in 2000. We increased our advertising
expenditures beginning in the second quarter of 2001 through the end of the year
in response to the slowing consumer spending trends we began to experience near
the end of the first quarter. An increase in television costs represented the
primary share of the overall increase in advertising expenditures. General and
administrative expenses increased 11.6% to $16.7 million in 2001 from $15.0
million in 2000, but as a percentage of total revenues, decreased to 3.8% in
2001 from 4.0% in 2000. The decrease in general and administrative expenses
primarily resulted from a decrease in bonus and legal


                                       23
<PAGE>

expenses.

         Depreciation and amortization in 2001 increased $3.9 million, or 21.6%,
to $22.1 million in 2001 from $18.2 million in 2000. As a percentage of total
revenues, depreciation and amortization increased to 5.0% in 2001 from 4.8% in
2000. The increase in depreciation expense was primarily attributable to the
growth in the number of new restaurants and capital expenditures for
improvements to existing restaurants.

         Asset impairment and exit costs were $5.8 million during 2001. During
the third quarter of 2001, we made the decision to close five restaurants. The
decision followed a review of historical and projected cash flows of our stores
in view of the difficult economic environment in which we were operating. As a
result of this decision, we recognized a charge during the third quarter of 2001
for asset impairment of approximately $5.0 million and exit costs of
approximately $800,000 primarily associated with certain related lease
commitments.

         Preopening costs in 2001 increased $1.0 million, or 20.2%, to $5.7
million from $4.7 million in 2000. As a percentage of total revenues, preopening
costs increased to 1.3% in 2001 from 1.2% in 2000. This increase is attributable
primarily to the cost incurred for the new O'Charley's restaurants in addition
to higher preopening costs incurred for the new Stoney River restaurant.

         Income from operations decreased $3.5 million, or 9.4%, to $33.7
million in 2001 from $37.2 million in 2000. Excluding the asset impairment and
exit costs, income from operations increased $2.3 million, or 6.2%, to $39.5
million, in 2001. This increase is less than our original expectations due
primarily to slowing consumer spending, higher than expected costs of certain
food commodities, higher utilities, higher insurance costs and increased
advertising expenditures.

         Interest expense, net decreased $800,000 in 2001 to $6.6 million from
$7.4 million in 2000. This decrease is primarily the result of overall lower
interest rates in 2001. The weighted average interest rate on our revolving
credit facility decreased to 5.2% in 2001 as compared with 7.4% in 2000 due to
lower short term LIBOR rates in 2001. Additionally, overall interest expense was
reduced due to decreased borrowings on our revolver as we used the $41.7 million
proceeds from the sale of our common stock in April 2001 to reduce our debt. See
"Liquidity and Capital Resources".

         Earnings before income taxes for 2001 decreased $2.9 million, or 9.7%,
to $26.9 million from $29.8 million in 2000. Excluding the effect of the asset
impairment and exit costs, earnings before income taxes increased 9.8 % to $32.7
million in 2001.

         Income taxes for 2001 decreased $1.1 million, or 10.3%, to $9.3 million
from $10.4 million in 2000. This decrease was primarily the result of the
decrease in earnings before income taxes. The effective tax rate decreased to
34.8% of pre-tax earnings from 35.0% in 2000 due primarily to higher tax
credits. We currently expect our effective tax rate to be unchanged in 2002.

         The number of diluted weighted shares outstanding was 18.9 million
shares in 2001, compared with 16.5 million shares in 2000. The primary reason
for this increase is the 2.3 million shares of our common stock sold in April
2001.

Fiscal Year 2000 Compared with Fiscal Year 1999

         Total revenues in 2000 increased $75.1 million, or 24.8%, to $377.3
million from $302.2 million in 1999 primarily as a result of an increase in
restaurant sales of $74.7 million, or 25.0%. The increase in restaurant sales
was attributable to the addition of 21 new O'Charley's restaurants, an increase
in same store sales of 2.6%, the additional week of sales as 2000 was comprised
of 53 weeks compared to 52 weeks in 1999, and the inclusion of Stoney River
restaurant sales following their acquisition in May 2000. In March 2000, we
increased menu prices by approximately 2.0%.

         Cost of food, beverage and supplies in 2000 increased $22.1 million, or
22.2%, to $121.9 million from $99.7


                                       24
<PAGE>

million in 1999. As a percentage of restaurant sales, cost of food, beverage and
supplies decreased to 32.6% in 2000 from 33.4% in 1999. We attribute these lower
food cost percentages primarily to three factors: a menu price increase in March
2000, which increased the average check; a decrease in the cost of several food
items; and improved purchasing and operating efficiencies in our restaurants and
commissary. These improvements were partially offset by the inclusion of the
Stoney River restaurants which we acquired in May 2000 and which have a higher
cost of food, beverage and supplies as a percentage of sales, and an increase in
poultry, red meat and baby back rib costs.

         Payroll and benefits increased $24.4 million, or 26.9%, to $115.0
million in 2000 from $90.6 million in 1999. Payroll and benefits, as a
percentage of restaurant sales, increased to 30.8% in 2000 from 30.3% in 1999.
The increase was attributable to increasing wage rates and salaries for
restaurant support staff and management along with higher workers compensation
and health insurance costs in 2000. Those higher wages and salaries were
partially offset by economies achieved from higher average restaurant sales
volumes and reduced turnover rates for our hourly employees.

         Restaurant operating costs in 2000 increased $10.0 million, or 23.5%,
to $52.4 million from $42.5 million in 1999. Restaurant operating costs, as a
percentage of restaurant sales, decreased to 14.0% in 2000 from 14.2% in 1999.
This decrease was primarily attributable to economies achieved from higher
average restaurant sales volumes. Utility costs began to significantly increase
in December 2000.

         Advertising, general and administrative expenses increased $5.2
million, or 27.3%, to $24.5 million in 2000 from $19.2 million in 1999. As a
percentage of total revenues, advertising, general and administrative expenses
increased to 6.5% in 2000 from 6.4% in 1999. Advertising expenditures increased
15.5% to $9.5 million in 2000 from $8.2 million in 1999 and, as a percentage of
restaurant sales, decreased to 2.5% in 2000 from 2.8% in 1999. O'Charley's
advertising, as a percentage of O'Charley's restaurant sales, was 2.6% in 2000
compared to 2.8% in 1999. General and administrative expenses increased 36.1% to
$15.0 million in 2000 from $11.0 million in 1999, and as a percentage of total
revenues, increased to 4.0% in 2000 from 3.6% in 1999. The increase in general
and administrative expenses resulted from the inclusion of the Stoney River
restaurants acquired in May 2000 and increased salary, bonus and legal expenses.

         Depreciation and amortization in 2000 increased $4.1 million, or 29.5%,
to $18.2 million from $14.1 million in 1999. As a percentage of total revenues,
depreciation and amortization increased to 4.8% in 2000 from 4.7% in 1999. The
increase in depreciation expense was primarily attributable to the growth in the
number of new restaurants, capital expenditures for improvements to existing
restaurants and the amortization of goodwill associated with the acquisition in
May 2000 of the Stoney River Legendary Steaks concept.

         Preopening costs, excluding the one-time cumulative adjustment made in
1999 for the change in accounting principle as measured under SOP 98-5,
increased 16.6% in 2000 to $4.7 million from $4.0 million in 1999. As a
percentage of total revenues, preopening costs decreased to 1.2% in 2000 from
1.3% in 1999.

         Income from operations increased $8.2 million, or 28.1%, to $37.2
million in 2000 from $29.0 million in 1999.

         Interest expense, net increased $3.2 million in 2000 to $7.4 million
from $4.2 million in 1999. The increase was primarily related to the increased
borrowings due to the addition of new restaurants and the acquisition of the
Stoney River Legendary Steaks concept. Additionally, our weighted average
interest rate on borrowed funds increased to 7.4% in 2000 from 6.2% in 1999 due
to increases in LIBOR.

         Earnings before income taxes and cumulative effect of change in
accounting principle for 2000 increased $5.0 million, or 20.2%, to $29.8 million
from $24.8 million in 1999.

         Income taxes for 2000 increased $1.7 million, or 20.2%, to $10.4
million from $8.7 million in 1999.

         The cumulative effect of the change in accounting principle, net of
tax, recorded in the first quarter of 1999 and included in 1999 results,
represented the write-off of unamortized preopening costs in accordance with SOP
98-5. The $2.1 million of unamortized preopening costs remaining on our balance
sheet at December 27, 1998 was written off in this one-time adjustment. After
adjusting for the tax benefit, the net cumulative effect was $1.3 million.


                                       25
<PAGE>

QUARTERLY FINANCIAL AND RESTAURANT OPERATING DATA

         The following is a summary of certain unaudited quarterly results of
operations data for each of the last three fiscal years. For accounting
purposes, the first quarter consists of 16 weeks and the second, third and
fourth quarters each consist of 12 weeks (13 weeks in the fourth quarter of 2000
because it was a 53-week year). As a result, some of the variations reflected in
the following table may be attributed to the different lengths of the fiscal
quarters.

<TABLE>
<CAPTION>
                                                            FIRST        SECOND         THIRD        FOURTH
                                                           QUARTER       QUARTER       QUARTER       QUARTER
                                                          ----------    ----------    ----------    ----------
                                                              (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                                    <C>            <C>           <C>          <C>
2001 (1)
Revenues.........................................      $    130,084   $   103,335   $   105,757  $    105,755
Income from operations...........................      $     12,771   $     8,800   $     2,146  $      9,982
Net earnings.....................................      $      6,738   $     4,860   $       495  $      5,458
Basic earnings per common share..................      $       0.42   $      0.26   $      0.03  $       0.29
Diluted earnings per common share................      $       0.39   $      0.25   $      0.03  $       0.28
Restaurants in operation, end of quarter.........               147           154           159           161

2000
Revenues.........................................      $    106,298   $    85,411   $    89,145  $     96,408
Income from operations...........................      $     10,549   $     8,225   $     8,419  $     10,014
Net earnings.....................................      $      5,689   $     4,265   $     4,257  $      5,149
Basic earnings per common share..................      $       0.37   $      0.27   $      0.27  $       0.33
Diluted earnings per common share................      $       0.35   $      0.26   $      0.26  $       0.31
Restaurants in operation, end of quarter.........               125           131           135           138

1999
Revenues.........................................      $     87,849   $    70,225   $    72,148  $     71,983
Income from operations...........................      $      8,084   $     6,590   $     6,894  $      7,472
Earnings before cumulative change in accounting        $      4,470   $     3,629   $     3,821  $      4,190
  principle......................................
Net earnings.....................................      $      3,122   $     3,629   $     3,821  $      4,190
Basic earnings per common share:
    Earnings before change in accounting principle...  $       0.29   $      0.24   $      0.25  $       0.27
    Net earnings.................................      $       0.20   $      0.24   $      0.25  $       0.27
Diluted earnings per common share:
    Earnings before change in accounting principle...  $       0.27   $      0.22   $      0.23  $       0.25
    Net earnings.................................      $       0.19   $      0.22   $      0.23  $       0.25
Restaurants in operation, end of quarter.........               106           111           114           117
</TABLE>

         Fiscal years 1999 and 2001 consisted of 52 weeks and fiscal 2000
consisted of 53 weeks.

         (1)During the third quarter 2001, management decided to close five
restaurants. As a result, we recorded a non-cash charge of $5.0 million pursuant
to the provisions of Statement of Financial Accounting Standards No. 121
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of" to reflect the differences between the fair value and net book
value of the assets, and a charge of $800,000 for exit costs associated with the
closure of such locations.

LIQUIDITY AND CAPITAL RESOURCES

         Our primary sources of cash have historically been cash provided by
operations, borrowings under our revolving credit facility, capitalized lease
obligations, and sales of our common stock. Our principal cash needs arise
primarily from the purchase and development of new restaurants, equipment
replacement, improvements to existing restaurants, and the repayment of debt.

         Our working capital historically has had current liabilities in excess
of current assets due to cash reinvestments in long-term assets, mostly property
and equipment additions, and does not indicate a lack of liquidity. We expect to
meet our


                                       26
<PAGE>

obligations as they come due through available cash and internally generated
funds, and borrowings under our revolving credit facility. At December 30, 2001,
our working capital deficiency was $15.2 million. The total net increase in cash
was $3.8 million in 2001.

         Cash provided by operations was $46.7 million in 2001, compared to
$40.0 million in 2000 and $37.5 million in 1999. Other primary sources of cash
in 2001 were $41.7 million in net proceeds from the sale of approximately 2.3
million shares of our common stock, net borrowings of $38.7 million under our
revolving credit facility, $5.0 million of proceeds received upon the exercise
of employee stock options and issuances under our stock purchase plan, and
approximately $1.4 million from the sale of assets. Additionally, we financed
$10.6 million in new restaurant equipment through capitalized lease obligations.

         Property and equipment expenditures were $84.0 million in 2001,
including $10.6 million of equipment acquired under capital leases. These
expenditures were made primarily for 24 new O'Charley's restaurants opened
during the year, the purchase of our home office and commissary facility, one
new Stoney River restaurant opened during the year, restaurants under
construction at December 30, 2001, and improvements to existing restaurants and
our commissary facilities. Other primary uses of cash in 2001 included the
reduction of our credit facility using the $41.7 million from the sale of our
common stock, $7.9 million in principal payments on capitalized lease
obligations and other long-term debt, and $5.2 million for the repurchase of
286,000 shares of our common stock.

         We have an unsecured revolving credit facility that has a maximum
borrowing capacity of $135 million that matures in October 2006. The amount
outstanding under this facility was $89 million on December 30, 2001, a decrease
of $3.0 million from December 31, 2000. The change in the amount outstanding in
2001 resulted from a reduction in the outstanding balance with the $41.7 million
in net proceeds from the sale of our common stock, partially offset by net
borrowings under the facility of approximately $38.7 million. The maximum
borrowing capacity under our revolving credit facility is reduced by amounts
financed under our synthetic lease facility described below. The credit facility
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 (75 basis points at December 30,
2001) is based on certain financial ratios and is recomputed quarterly. The
weighted average interest rate on the outstanding borrowings under the facility
during 2001 was 5.2%, as compared with 7.4% during 2000. On December 30, 2001,
the average interest rate on the outstanding balance of the facility was 2.9%,
as compared with 7.6% at the end of 2000. Our credit facility imposes
restrictions on us with respect to the maintenance of certain financial ratios,
the incurrence of indebtedness, sale of assets, mergers and the payment of
dividends.

         From time to time, we may enter into interest rate swap agreements with
certain financial institutions for the purpose of fixing the amount of interest
we pay over a certain period of time at varying notional amounts. At December
30, 2001, there were $20 million in aggregate amounts of interest rate swap
agreements outstanding that carried a weighted average interest rate of 5.6%.
The effective amount of interest we pay on the notional amounts of these swap
agreements is calculated using the interest rate of the swap plus the percentage
spread on our revolving credit facility. The swap agreements outstanding at
December 30, 2001 expire as follows: $10 million in January 2004, and $10
million in January 2006.

         We have available a synthetic lease facility pursuant to which the
lessor has agreed to acquire or construct up to $25.0 million of properties and
lease the properties to us. The terms of the facility provide for a separate
operating lease agreement to be entered into for each property upon acquisition
or completion of construction, each with a lease term ending October 5, 2006.
Monthly rental payments for each property lease are based on the total costs
advanced by the lessor to acquire or construct such property, and the amount of
those payments varies based upon the floating interest rate in effect from time
to time under our revolving credit facility. The acquisition and construction
costs paid by the lessor under the synthetic lease facility reduce the maximum
borrowing capacity under our revolving credit facility. In the fourth quarter of
2001, we elected to purchase $6.0 million of these properties from the lessor.
We are not currently leasing any assets under this facility and have no current
plans to utilize it in the future. We may do so in the future, however, subject
to, among other factors, clarification of the impact of new accounting rules
that appear to be forthcoming from the accounting standards setting bodies for
such off-balance sheet financing arrangements.


                                       27
<PAGE>

         On September 2, 1998, our board of directors approved the repurchase of
up to 5.0% of our outstanding common stock. As of December 30, 2001,
approximately 581,000 shares, or 3.1% of our outstanding stock, had been
repurchased. We repurchased approximately 286,000 shares in 2001 for a total
expenditure of approximately $5.2 million.

         On May 26, 2000, we purchased two existing Stoney River Legendary
Steaks restaurants and all associated trademarks and intellectual property for
approximately $15.8 million in cash. The transaction includes an earn-out
provision pursuant to which we may be required to pay the former owners up to
$1.25 million at the end of 2002, $1.25 million at the end of 2003, and $2.5
million at the end of 2004. The potential earn-out is based on the Stoney River
Legendary Steaks concept achieving certain performance thresholds (income before
taxes and preopening costs) for such year. Based on our 2002 projected results
for the Stoney River concept, we currently do not believe any earn-out amounts
will be owed for 2002.

         We have budgeted approximately $75.0 million to $80.0 million in 2002
for capital expenditures for the planned 18 to 22 new O'Charley's restaurants,
improvements to existing O'Charley's restaurants, two new Stoney River
restaurants, purchase of three O'Charley's restaurants previously leased,
expansion of our commissary facilities, and information systems improvements.
There can be no assurance that actual capital expenditures in 2002 will not vary
significantly from budgeted amounts based upon a number of factors, including
the timing of additional purchases of restaurant sites.

         We expect to finance these capital expenditures with operating cash
flows, borrowings under our revolving credit facility and capitalized lease
obligations. We intend to continue financing the furniture, fixtures and
equipment for our new restaurants primarily with capitalized lease obligations.

         We are currently evaluating a possible $40 to $60 million sale
leaseback facility pursuant to which we would sell some of the 100 restaurant
properties at which we currently own the land and building and then lease those
properties from the buyer. We currently anticipate that proceeds from the sale
would be used primarily to repay indebtedness under our revolving credit
facility, which would increase the amount available for future borrowings. The
effect of a sale leaseback transaction on our results of operations would be to
replace interest expense and depreciation expense of the cost of the applicable
properties with rent expense. Any gain on the sale of any properties would be
amortized over the life of the lease. Subsequent to a sale leaseback
transaction, our earnings could be negatively impacted due to rent expense being
higher than the interest and depreciation expense. We cannot assure you that we
will enter into a sale and leaseback facility or, if we do so, the number of
restaurant properties that we may sell or the terms of the leases pursuant to
which we lease properties from the buyer.

         We believe that available cash, cash generated from operations and
borrowings under our revolving credit facility, and capitalized lease
obligations will be sufficient to finance our operations and expected capital
outlays for at least the next 12 months. We have historically produced
sufficient cash flow from operations to supplement our capital needs each year.
Our ability to meet our capital needs are highly dependent on us continuing to
generate sufficient cash from operations and there can be no assurance that we
will continue to do so. Our growth strategy includes possible acquisitions or
strategic joint ventures. Any acquisitions, joint ventures or other growth
opportunities may require additional external financing, and we may from time to
time seek to obtain additional funds from a public or private issuance of equity
or debt securities. There can be no assurances that such sources of financing
will be available to us.

CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS

         The following tables set forth our contractual obligations and
commercial commitments at December 30, 2001.


                                       28
<PAGE>

<TABLE>
<CAPTION>
                                                                    PAYMENTS DUE BY PERIOD
            CONTRACTUAL                   -------------------------------------------------------------------------
            OBLIGATION                     TOTAL            1 YR           2-3 YRS        4-5 YRS        THEREAFTER
                                          --------        --------        --------        --------       ----------
                                                                 (in thousands)
<S>                                       <C>             <C>             <C>             <C>             <C>
Long-term debt                            $ 89,306        $    125        $     35        $ 89,044        $    102
Capitalized lease obligations (1)           37,699           9,626          14,970          11,492           1,611
Operating leases                            77,445           7,060          13,448          12,842          44,095
Unconditional purchase obligations           1,937           1,937              --              --              --
                                          --------        --------        --------        --------        --------
Total contractual cash obligations        $206,387        $ 18,748        $ 28,453        $113,378        $ 45,808
                                          ========        ========        ========        ========        ========

<CAPTION>
                                                         AMOUNT OF COMMITMENT EXPIRATION PER PERIOD
                                      -----------------------------------------------------------------------------
       OTHER COMMERCIAL               TOTAL COMMITTED       1 YR           2-3 YRS        4-5 YRS        THEREAFTER
         COMMITMENTS                  ---------------     --------        --------        --------       ----------
                                                                       (in thousands)
<S>                                   <C>                 <C>             <C>             <C>            <C>
Lines of credit (2)                       $135,000              --              --        $135,000              --
</TABLE>

(1)      Capitalized lease obligations include the interest expense component.

(2)      This pertains to our revolving line of credit of which $89.0 million is
         included in long-term debt shown above.

CRITICAL ACCOUNTING POLICIES

Our critical accounting policies are as follows:

-        Property and equipment

-        Excess of cost over fair value of net assets acquired (goodwill)

-        Impairment of long-lived assets


PROPERTY AND EQUIPMENT

         As discussed in Note 1 to the Consolidated Financial Statements, our
property and equipment are stated at cost and depreciated on a straight-line
method over the following estimated useful lives: building 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
expected lease term. Equipment under capital leases is amortized to its expected
value at the end of the lease term. 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 that do not enhance the value of or increase the life of
the assets are expensed as incurred.

         Inherent in the policies regarding property and equipment are certain
significant management judgments and estimates, including useful life, residual
value to which the asset is depreciated, the expected value at the end of the
lease term for equipment under capital leases, and the determination as to what
constitutes enhancing the value of or increasing the life of assets. These
significant estimates and judgments, coupled with the fact that the ultimate
useful life and economic value at the end of a lease are typically not known
until the passage of time, through proper maintenance of the asset, or through
continued development and maintenance of a given market in which a store
operates can, under certain


                                       29
<PAGE>

circumstances, produce distorted or inaccurate depreciation and amortization or,
in some cases result in a write down of the value of the assets under Statement
of Financial Accounting Standards ("SFAS") No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of".
See Critical Accounting Policy "Impairment of Long-Lived Assets" below.

         We believe that our accounting policy for property and equipment
provides a reasonably accurate means by which the costs associated with an asset
are recognized in expense as the cash flows associated with the assets use are
realized.

EXCESS OF COST OVER FAIR VALUE OF NET ASSETS ACQUIRED (GOODWILL)

         As discussed in Note 1 to the Consolidated Financial Statements, as of
December 30, 2001, we currently amortize goodwill over 20 years. Beginning in
fiscal 2002, we will be required to adopt SFAS No. 142 "Goodwill and Other
Intangibles". SFAS No. 142 requires that goodwill and intangible assets with
indefinite useful lives no longer be amortized, but instead tested for
impairment at least annually in accordance with the provisions of SFAS No. 142.
SFAS No. 142 also requires that intangible assets with definite useful lives be
amortized over their respective estimated useful lives to their estimated
residual values, and reviewed for impairment in accordance with SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of". The goodwill to be tested is primarily related to the
acquisition in May 2000 of the Stoney River Legendary Steaks concept.

         Inherent in the policies regarding goodwill are the significant
management judgments regarding the ongoing cash flow potential of the Stoney
River Legendary Steak concept and our ability to locate and develop profitable
locations in the future. Since the May 2000 acquisition, we have opened two new
Stoney River stores and plan to open one additional store in 2002. These stores,
not unlike any new store, may take time to reach a desired profitability point
as the costs associated with labor and food cost in the first few months of
operation are much higher as training, scheduling, and food preparation
processes must be adjusted to meet customer demand. While we fully expect this
concept to ultimately operate at a positive cash flow after its opening, the
newness of the concept to our management team and our ability to effectively
gauge customer demand can materially affect the ultimate cash flow picture for
the concept and thereby affect the amount of goodwill deemed to be impaired in
accordance with SFAS No. 142.

         At this time, because we have not finished our analysis pursuant to
implementing SFAS No. 142, we cannot reasonably estimate the ultimate effect
that this new statement will have on our consolidated financial statements.

IMPAIRMENT OF LONG-LIVED ASSETS

         As discussed in Note 1 to the Consolidated Financial Statements,
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," 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. Recoverability of
assets to be held and used is measured by a comparison of the carrying amount of
an asset to future net cash flows expected to be generated by the asset. If such
assets are considered to be impaired, the impairment to be recognized is
measured by the amount by which the carrying amount of the assets exceeds the
fair value of the assets. Assets to be disposed of are reported at the lower of
carrying amount or fair value less costs to sell.

         The judgments made related to the ultimate expected useful life and our
ability to realize undiscounted cash flows in excess of the carrying value of an
asset are affected by such issues as ongoing maintenance of the asset, continued
development and sustenance of a given market within which a store operates,
including the presence of traffic generating businesses in the area, and our
ability to operate the store efficiently and effectively can cause the Company
to realize an impairment charge. We assess the projected cash flows and carrying
values at the restaurant level, which is the level where identifiable cash flows
are largely independent of the cash flows of other groups of assets, whenever
events or changes in circumstances indicate that the long-lived assets
associated with a restaurant may not be recoverable.

         We believe that our accounting policy for impairment of long-lived
assets provides reasonable assurance that any assets that are impaired are
written down to their fair value and a charge is taken in earnings on a timely
basis.


                                       30
<PAGE>

ACCOUNTING CHANGES AND RECENT ACCOUNTING PRONOUNCEMENTS

         In July 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 141, "Business
Combinations", and SFAS No. 142, "Goodwill and Other Intangible Assets". SFAS
No. 141 requires that the purchase method of accounting be used for all business
combinations initiated after June 30, 2001. SFAS No. 141 also specifies criteria
which intangible assets acquired in a purchase method business combination must
meet to be recognized and reported apart from goodwill. SFAS No. 142 requires
that goodwill and intangible assets with indefinite useful lives no longer be
amortized, but instead tested for impairment at least annually in accordance
with the provisions of SFAS No. 142. SFAS No. 142 also requires that intangible
assets with definite useful lives be amortized over their respective estimated
useful lives to their estimated residual values, and reviewed for impairment in
accordance with SFAS No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of".

         We are required to adopt the provisions of SFAS No. 141 immediately,
except with regard to business combinations initiated prior to July 1, 2001. We
were required to adopt SFAS No. 142 on December 31, 2001. Goodwill and
intangible assets acquired in business combinations completed before July 1,
2001 will continue to be amortized prior to the adoption of SFAS No. 142.

         In connection with the transitional goodwill impairment evaluation,
SFAS No. 142 will require us to perform an assessment of whether there is an
indication that goodwill is impaired as of the date of adoption. To accomplish
this we must identify our reporting units and determine the carrying value of
each reporting unit by assigning the assets and liabilities, including the
existing goodwill and intangible assets, to those reporting units as of the date
of adoption. We will then have up to six months from the date of adoption to
determine the fair value of each reporting unit and compare it to the reporting
unit's carrying amount. To the extent a reporting unit's carrying amount exceeds
its fair value, an indication exists that the reporting unit's goodwill may be
impaired and we must perform the second step of the transitional impairment
test. In the second step, we must compare the implied fair value of the
reporting unit's goodwill, determined by allocating the reporting unit's fair
value to all of it assets (recognized and unrecognized) and liabilities in a
manner similar to a purchase price allocation in accordance with SFAS No. 141,
to its carrying amount, both of which would be measured as of the date of
adoption. This second step is required to be completed as soon as possible, but
no later than the end of the year of adoption. Any transitional impairment loss
will be recognized as the cumulative effect of a change in accounting principle
in our consolidated statement of earnings.

         As of the date of adoption of SFAS No. 142, we had unamortized goodwill
in the amount of approximately $10.0 million, which is subject to the transition
provisions of SFAS No. 141 and 142. Amortization expense related to goodwill was
$544,000 for the year ended December 30, 2001 and $335,000 for the year ended
December 31, 2000. Because of the extensive effort needed to comply with
adopting SFAS No. 141 and 142, we have not completed our analysis of the impact
of adopting these Statements on our consolidated financial statements at the
date of this report, including whether any transitional impairment losses will
be required to be recognized as the cumulative effect of a change in accounting
principle.

         In August 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets", which supersedes both SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of" and the accounting and reporting provisions of APB
Opinion No. 30, "Reporting the Results of Operations--Reporting the Effects of
Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently
Occurring Events and Transactions", for the disposal of a segment of a business
(as previously defined in that Opinion). SFAS No. 144 retains the fundamental
provisions in SFAS No. 121 for recognizing and measuring impairment losses on
long-lived assets held for use and long-lived assets to be disposed of by sale,
while also resolving significant implementation issues associated with SFAS No.
121.

         We are required to adopt SFAS No. 144 in the first quarter of 2002. We
do not expect the adoption of SFAS No. 144 for long-lived assets held for use to
have a material impact on our consolidated financial statements because the
impairment assessment under SFAS No. 144 is largely unchanged from SFAS No. 121.
The provisions of the statement for assets held for sale or other disposal
generally are required to be applied prospectively after the adoption date to


                                       31
<PAGE>

newly initiated disposal activities. Therefore, we cannot determine the
potential effect that adoption of SFAS No. 144 will have on our consolidated
financial statements.

         In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 was later amended by SFAS No.
137 and SFAS No. 138. SFAS No. 133, as amended, requires recognition of the fair
value of all derivative instruments, including certain derivative instruments
embedded in other contracts (collectively referred to as derivatives), on the
balance sheet and establishes new accounting rules for hedging activities. We
were required to adopt SFAS No. 133, as amended, on January 1, 2001 and the
adoption did not impact our results of operations, cash flows or financial
position.

RELATED PARTY TRANSACTIONS

         During 2001, we leased the land and building of three of our
restaurants from Two Mile Partners, a partnership whose partners were the late
David K. Wachtel, Jr., who owned 75% and was the managing partner of the
partnership and a former director and executive officer of O'Charley's, and
Gregory L. Burns, who owns 25% of the partnership and is our Chairman and Chief
Executive Officer. During 2000, we terminated a lease with this entity for one
of our previously operated restaurants. Subsequently, Two Mile Partners, in an
action initiated by Mr. Wachtel in his capacity as managing partner, sued us
alleging that we breached a continuous operation provision in the lease by
vacating the property and opening another O'Charley's restaurant in Clarksville,
Tennessee. We paid approximately $490,000 in 2001 and $775,000 in 2000 in rent
expense to Two Mile Partners. In January 2002, we entered into a comprehensive
settlement agreement with Two Mile Partners settling all litigation and business
matters between us. As a result of the settlement, (i) we purchased restaurant
properties located in Goodlettsville, Murfreesboro and Clarksville, Tennessee
that we leased from Two Mile Partners for $1.7 million, $1.6 million and $1.0
million, respectively, (ii) we terminated our lease with Two Mile Partners for a
restaurant property located in Bowling Green, Kentucky on which we formerly
operated our Bowling Green restaurant and sold Two Mile Partners an adjoining
parcel of property used for parking for a payment of $300,000, and (iii) Two
Mile Partners dismissed with prejudice the litigation pending against us in
consideration of a payment by us of $200,000.

         Mr. Burns recused himself from our discussions and considerations of
any matters relating to the settlement. We believe that we terminated the
Clarksville lease in accordance with its terms and deny the allegations
contained in the complaint filed by Two Mile Partners. Nevertheless, a special
committee of the Board of Directors comprised of disinterested directors
approved the settlement and believed it was in our best interest in order to
settle the litigation to avoid the expense, uncertainty and distraction of this
litigation. We believe the terms of the purchase of the Goodlettsville,
Murfreesboro and Clarksville properties and the sale of the Bowling Green
property were fair to, and on terms no less favorable than, we would have
obtained in an arms' length transaction with an unrelated third party. See Notes
to the Consolidated Financial Statements - Related Party Transactions, and
"Commitments and Contingencies," and "Legal Proceedings."

IMPACT OF INFLATION

         The impact of inflation on the cost of food, labor, equipment, land and
construction costs could adversely affect our operations. A majority of our
employees are paid hourly rates related to federal and state minimum wage laws.
As a result of increased competition and the low unemployment rates in the
markets in which our restaurants are located, we have continued to increase
wages and benefits in order to attract and retain management personnel and
hourly employees. In addition, most of our leases require us to pay taxes,
insurance, maintenance, repairs and utility costs, and these costs are subject
to inflationary pressures. We attempt to offset the effect of inflation through
periodic menu price increases, economies of scale in purchasing and cost
controls and efficiencies at our restaurants.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         We are subject to market risk from exposure to changes in interest
rates based on our financing, investing, and cash management activities. We
currently utilize a balanced mix of debt maturities along with both fixed-rate
and variable-rate debt to manage our exposure to changes in interest rates. Our
fixed-rate debt consists primarily of capitalized leases and our variable-rate
debt consists primarily of our revolving credit facility. In addition, to the
extent


                                       32
<PAGE>

we utilize our synthetic lease facility in the future, lease payments would be
at variable rates based upon prevailing interest rates.

         As an additional method of managing our interest rate exposure on our
revolving credit facility, at certain times we enter into interest rate swap
agreements whereby we agree to pay over the life of the swaps a fixed interest
rate payment on a notional amount and in exchange we receive a floating rate
payment calculated on the same amount over the same time period. The fixed
interest rates are dependent upon market levels at the time the swaps are
consummated. The floating interest rates are generally based on the monthly
LIBOR rate and rates are typically reset on a monthly basis, which is intended
to coincide with the pricing adjustments on our revolving credit facility. As of
December 30, 2001, we had in effect $20.0 million in swaps at an average fixed
rate of 5.6%, $10.0 million of which matures in January 2004 and $10.0 million
of which matures in January 2006.


                                       33
<PAGE>
ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
                                O'CHARLEY'S INC.

<TABLE>
<CAPTION>
                                                                                                                 PAGE

<S>                                                                                                              <C>
Independent Auditors' Report                                                                                      35
Consolidated Balance Sheets at December 31, 2000 and December 30, 2001                                            36
Consolidated Statements of Earnings for the Years Ended December 26, 1999, December 31, 2000,
   And December 30, 2001                                                                                          37
Consolidated Statements of Shareholders' Equity and Comprehensive Income for the Years Ended
   December 26, 1999, December 31, 2000, and December 30, 2001                                                    38
Consolidated Statements of Cash Flows for the Years Ended December 26, 1999, December 31, 2000,
   And December 30, 2001                                                                                          39
Notes to Consolidated Financial Statements                                                                        40
</TABLE>


                                      34
<PAGE>


                          INDEPENDENT AUDITORS' REPORT


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

         We have audited the consolidated balance sheets of O'Charley's Inc.
and subsidiaries as of December 30, 2001 and December 31, 2000, and the related
consolidated statements of earnings, shareholders' equity and comprehensive
income, and cash flows for each of the years in the three-year period ended
December 30, 2001. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on the consolidated financial statements based on our audits.

         We conducted our audits in accordance with auditing standards
generally accepted in the United States of America. 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 statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statements presentation. We believe that our
audits provide a reasonable basis for our opinion.

         In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position of
O'Charley's Inc. and subsidiaries as of December 30, 2001 and December 31,
2000, and the results of their operations and their cash flows for each of the
years in the three-year period ended December 30, 2001, in conformity with
accounting principles generally accepted in the United States of America.



                                             KPMG LLP

Nashville, Tennessee
February 7, 2002


                                      35
<PAGE>


                          CONSOLIDATED BALANCE SHEETS


<TABLE>
<CAPTION>
                                                                              DECEMBER 30,         DECEMBER 31,
                                                                                 2001                 2000
                                                                              ------------         ------------
                                                                                   (DOLLARS IN THOUSANDS)
                            ASSETS

<S>                                                                             <C>                 <C>
Current Assets:
   Cash ..............................................................          $   6,369           $   2,552
   Accounts receivable, less allowance for doubtful accounts
     of $153 in 2001 and $144 in 2000 ................................              4,348               3,636
   Inventories .......................................................             18,288              12,605
   Deferred income taxes .............................................              3,914               1,292
   Short term notes receivable .......................................              2,025                  --
   Other current assets ..............................................              1,611               1,393
                                                                                ---------           ---------
     Total current assets ............................................             36,555              21,478
Property and Equipment, net ..........................................            330,553             274,271
Other Assets .........................................................             16,322              15,269
                                                                                ---------           ---------
                                                                                $ 383,430           $ 311,018
                                                                                =========           =========
             LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
   Accounts payable ..................................................          $  11,334           $  12,639
   Accrued payroll and related expenses ..............................             10,789               7,780
   Accrued expenses ..................................................              9,490               6,216
   Deferred revenue ..................................................              4,974               3,336
   Federal, state and local taxes ....................................              7,266               4,118
   Current portion of long-term debt and capitalized
     leases ..........................................................              7,924               7,574
                                                                                ---------           ---------
     Total current liabilities .......................................             51,777              41,663
Long-Term Debt, net of current portion ...............................             89,181              92,306
Capitalized Lease Obligations, net of current portion ................             24,824              22,364
Deferred Income Taxes ................................................              9,576               8,431
Other Liabilities ....................................................              3,870               2,764
Shareholders' Equity:
   Common stock--No par value; authorized, 50,000,000 shares;
     issued and outstanding, 18,392,554 in 2001 and
     15,703,600 in 2000 ..............................................            110,636              67,207
   Accumulated other comprehensive loss, net of tax ..................               (490)               (220)
   Retained earnings .................................................             94,056              76,503
                                                                                ---------           ---------
     Total shareholders' equity ......................................            204,202             143,490
                                                                                ---------           ---------
                                                                                $ 383,430           $ 311,018
                                                                                =========           =========
</TABLE>

               See notes to the consolidated financial statements


                                      36
<PAGE>


                      CONSOLIDATED STATEMENTS OF EARNINGS

<TABLE>
<CAPTION>
                                                                                              YEAR ENDED
                                                                             ------------------------------------------
                                                                             DECEMBER 30,     DECEMBER 31,    DECEMBER 26,
                                                                                2001             2000            1999
                                                                             ------------     -----------     ---------
                                                                              (IN THOUSANDS, EXCEPT PER SHARE DATA)

<S>                                                                           <C>             <C>             <C>
Revenues:
   Restaurant sales ..................................................        $440,875        $373,700        $ 299,014
   Commissary sales ..................................................           4,056           3,562            3,191
                                                                              --------        --------        ---------
                                                                               444,931         377,262          302,205
Costs and Expenses:
   Cost of restaurant sales:
     Cost of food, beverage and supplies .............................         143,422         121,859           99,736
     Payroll and benefits ............................................         138,009         115,029           90,625
     Restaurant operating costs ......................................          62,428          52,439           42,460
   Cost of commissary sales ..........................................           3,808           3,341            3,013
   Advertising, general and administrative expenses ..................          29,979          24,480           19,235
   Depreciation and amortization .....................................          22,135          18,202           14,060
   Asset impairment and exit costs ...................................           5,798              --               --
   Preopening costs ..................................................           5,654           4,705            4,037
                                                                              --------        --------        ---------
                                                                               411,233         340,055          273,166
                                                                              --------        --------        ---------

Income from Operations ...............................................          33,698          37,207           29,039
Other (Income) Expense:
   Interest expense, net .............................................           6,610           7,398            4,174
   Other, net ........................................................             189              24               82
                                                                              --------        --------        ---------
                                                                                 6,799           7,422            4,256
                                                                              --------        --------        ---------

Earnings Before Income Taxes and Cumulative Effect of Change
   in Accounting Principle ...........................................          26,899          29,785           24,783
Income Taxes .........................................................           9,347          10,425            8,674
                                                                              --------        --------        ---------

Earnings Before Cumulative Effect of Change in Accounting
   Principle .........................................................          17,552          19,360           16,109
Cumulative Effect of Change in Accounting Principle, net of
   tax ...............................................................              --              --           (1,348)
                                                                              --------        --------        ---------
Net Earnings .........................................................        $ 17,552        $ 19,360        $  14,761
                                                                              ========        ========        =========

Basic Earnings Per Common Share Before Cumulative Effect of
   Change in Accounting Principle ....................................        $   0.99        $   1.24        $    1.04
Cumulative Effect of Change in Accounting Principle, net of
   tax ...............................................................              --              --            (0.09)
                                                                              --------        --------        ---------
Basic Earnings Per Common Share ......................................        $   0.99        $   1.24        $    0.95
                                                                              ========        ========        =========

Diluted Earnings Per Common Share Before Cumulative Effect of
   Change in Accounting Principle ....................................        $   0.93        $   1.17        $    0.97
Cumulative Effect of Change in Accounting Principle, net of
   tax ...............................................................              --              --            (0.08)
                                                                              --------        --------        ---------
Diluted Earnings Per Common Share ....................................        $   0.93        $   1.17        $    0.89
                                                                              ========        ========        =========
</TABLE>

               See notes to the consolidated financial statements


                                      37
<PAGE>

              CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY AND
                              COMPREHENSIVE INCOME

<TABLE>
<CAPTION>
                                                                                       ACCUMULATED
                                                   COMMON STOCK            ADDITIONAL     OTHER
                                               --------------------         PAID-IN   COMPREHENSIVE  RETAINED
                                               SHARES      AMOUNT           CAPITAL     LOSS, NET    EARNINGS        TOTAL
                                               ------     ---------        ---------- -------------  ---------     ---------
                                                                              (IN THOUSANDS)

<S>                                            <C>        <C>                 <C>       <C>          <C>           <C>
Balance, December 27, 1998 ...............     15,394     $  65,986           $ 509     $   (103)    $  42,382     $ 108,774
   Comprehensive income:
   1999 net earnings .....................         --            --              --           --        14,761        14,761
   Change  in  unrealized loss on
     available for sale securities,
     net of tax .........................          --            --              --          (83)           --           (83)
                                               ------     ---------           -----     --------     ---------     ---------
       Total comprehensive income ........                                                                            14,678
                                                                                                                   =========

   Repurchase of common stock ............       (245)       (2,637)           (509)          --            --        (3,146)
   Exercise of employee stock
     options including  tax benefits .....        328         2,124              --           --            --         2,124
   Shares issued under CHUX
     Ownership Plan ......................         25           259              --           --            --           259
                                               ------     ---------           -----     --------     ---------     ---------
Balance, December 26, 1999 ...............     15,502        65,732              --         (186)       57,143       122,689
   Comprehensive income:
   2000 net earnings .....................         --            --              --           --        19,360        19,360
   Change  in  unrealized loss on
     available for sale  securities,
     net of tax ..........................         --            --              --          (34)           --           (34)
                                               ------     ---------           -----     --------     ---------     ---------
       Total comprehensive income ........                                                                            19,326
                                                                                                                   =========

   Repurchase of common stock ............        (52)         (584)             --           --            --          (584)
   Exercise of employee stock
     options including tax benefits ......        196         1,436              --           --            --         1,436
   Shares issued under CHUX
     Ownership Plan ......................         58           623              --           --            --           623
                                               ------     ---------           -----     --------     ---------     ---------
Balance, December 31, 2000 ...............     15,704        67,207              --         (220)       76,503       143,490
   Comprehensive income:
   2001 net earnings .....................         --            --              --           --        17,552        17,552
   Change  in  unrealized ................                                                                          loss  on
     available for sale  securities, .....         --            --              --          220            --           220
     net of tax
   Market  value of derivatives,
     net of tax ..........................         --            --              --         (490)           --          (490)
                                               ------     ---------           -----     --------     ---------     ---------
       Total comprehensive income ........                                                                            17,282
                                                                                                                   =========
   Repurchase of common stock ............       (286)       (5,153)             --           --            --        (5,153)
   Sale of Common Stock ..................      2,300        41,744              --           --            --        41,744
   Exercise of employee stock
     options including tax benefits ......        593         5,619              --           --            --         5,619
   Shares issued under CHUX
     Ownership Plan ......................         82         1,219              --           --            --         1,219
                                               ------     ---------           -----     --------     ---------     ---------
Balance, December 30, 2001 ...............     18,393     $ 110,636           $  --     $   (490)    $  94,056     $ 204,202
                                               ======     =========           =====     ========     =========     =========
</TABLE>

               See notes to the consolidated financial statements


                                      38
<PAGE>


                     CONSOLIDATED STATEMENTS OF CASH FLOWS


<TABLE>
<CAPTION>
                                                                                          YEAR ENDED
                                                                      -----------------------------------------------
                                                                      DECEMBER 30,      DECEMBER 31,     DECEMBER 26,
                                                                          2001             2000             1999
                                                                      ------------      ------------     ------------
                                                                                        (IN THOUSANDS)

<S>                                                                     <C>              <C>              <C>
Cash Flows from Operating Activities:
   Net earnings ................................................        $ 17,552         $ 19,360         $ 14,761
   Adjustments to reconcile net earnings to net cash
     provided by operating activities:
     Cumulative effect of accounting change, net of tax ........              --               --            1,348
     Depreciation and amortization - property and equipment
       and goodwill ............................................          22,135           18,202           14,060
     Amortization of debt issuance costs .......................             237              139              122
     Deferred income taxes .....................................          (1,336)           2,052            1,729
     Loss on the sale and involuntary conversion of
         assets ................................................             104               10               86
     Asset impairment and exit costs ...........................           5,798               --               --
   Changes in assets and liabilities, excluding the effects
     of the Stoney River acquisition:
     Accounts receivable .......................................            (712)          (1,441)             176
     Inventories ...............................................          (5,683)          (3,684)          (1,747)
     Other current assets and short term notes receivable ......          (2,243)            (614)               2
     Accounts payable ..........................................          (1,305)           3,321            2,377
     Deferred revenue ..........................................           1,638              762              571
     Accrued payroll and other accrued expenses ................           8,707            1,535            3,297
   Tax benefit derived from exercise of stock options ..........           1,816              368              723
                                                                        --------         --------         --------
       Net cash provided by operating activities ...............          46,708           40,010           37,505

Cash Flows from Investing Activities:
   Additions to property and equipment .........................         (73,467)         (56,796)         (49,880)
   Acquisition of company, net of cash acquired ................              --          (15,849)              --
   Proceeds from the sale and involuntary conversion of
       assets ..................................................           1,355              293               35
   Other, net ..................................................            (860)              56              532
                                                                        --------         --------         --------
       Net cash used by investing activities ...................         (72,972)         (72,296)         (49,313)
Cash Flows From Financing Activities:
   Proceeds from long-term debt ................................          38,700           38,000           19,000
   Payments on long-term debt and capitalized lease
     obligations ...............................................         (49,573)          (7,099)          (5,596)
   Debt issuance costs .........................................            (659)            (348)              --
   Net proceeds from sale of common stock ......................          41,744               --               --
   Exercise of employee incentive stock options and
     issuances under stock purchase plan .......................           5,022            1,691            1,660
   Repurchase of common stock ..................................          (5,153)            (584)          (3,146)
                                                                        --------         --------         --------
       Net cash provided by financing activities ...............          30,081           31,660           11,918
                                                                        --------         --------         --------
Increase (decrease) in cash ....................................           3,817             (626)             110
Cash at beginning of the period ................................           2,552            3,178            3,068
                                                                        --------         --------         --------
Cash at end of the period ......................................        $  6,369         $  2,552         $  3,178
                                                                        ========         ========         ========
</TABLE>

               See notes to the consolidated financial statements


                                      39
<PAGE>


                               O'CHARLEY'S INC.

                NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         O'Charley's, Inc. (the "Company") owns and operates 161 (at December
30, 2001) full-service restaurant facilities in 14 southeastern and midwestern
states under the trade name of "O'Charley's" and three full-service restaurant
facilities under the trade name of "Stoney River Legendary Steaks." The
consolidated financial statements include the accounts of the Company and its
wholly owned subsidiaries. All significant inter-company accounts and
transactions have been eliminated. The Company's fiscal year ends on the last
Sunday in December. Fiscal 2001 was comprised of 52 weeks, which ended December
30, 2001. Fiscal 2000 was comprised of 53 weeks, which ended December 31, 2000.
Fiscal year 1999 was comprised of 52 weeks, which ended December 26, 1999.

         Cash Equivalents. For purposes of the consolidated statements of cash
flows, the Company considers all highly liquid debt instruments with original
maturities of three months or less to be cash equivalents.

         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. The Company adopted SOP 98-5, "Reporting the Costs of Start-Up
Activity," in the first quarter of 1999. SOP 98-5 requires that costs incurred
during a start-up activity (including organization costs) be expensed as
incurred. Prior to the adoption of SOP 98-5, preopening costs were capitalized
and amortized over one year. Accordingly, the Company now expenses preopening
costs in the period incurred, and recognized in 1999, as a cumulative effect of
a change in accounting principle, a charge equal to the after-tax effect of the
unamortized preopening costs recorded on the accompanying consolidated balance
sheet at December 27, 1998.

         Investments. The Company owns certain marketable securities that are
accounted for in accordance with Statement of Financial Accounting Standards
No. 115. "Accounting for Certain Debt and Equity Securities". Marketable
securities are classified as available for sale securities and are carried at
fair value, with the unrealized gains and losses recorded in a separate
component of shareholders' equity, net of tax unless there is a decline in
value which is considered to be other than temporary, in which case the cost of
such security is written down to fair value and the amount of the write down is
reflected in earnings. At December 30, 2001, the fair value and cost of such
securities was $256,000.

         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 expected lease term. Equipment under capitalized leases is
amortized to its expected value to the Company at the end of the lease term.
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 that do not enhance the
value of or increase the life of the assets are expensed as incurred.

         Excess of Cost Over Fair Value of Net Assets Acquired (goodwill),
which is included in other assets, is amortized over 20 years using the
straight-line method. The Company assesses the recoverability of this
intangible asset by determining whether the amortization of the asset balance
over its remaining useful life can be recovered through undiscounted future
operating cash flows of the acquired operations. The amount of asset
impairment, if any, is measured based on projected discounted future operating
cash flows using a discount rate commensurate with the risks associated with
the acquired entity. The assessment of the recoverability of the asset will be
impacted if estimated future operating cash flows are not achieved. The
treatment of this asset will change beginning in 2002. See "Accounting Changes
and Recent Accounting Pronouncements".

         Impairment of Long-Lived Assets. 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," requires that


                                      40
<PAGE>


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. Recoverability of assets to
be held and used is measured by a comparison of the carrying amount of an asset
to future net cash flows expected to be generated by the asset. If such assets
are considered to be impaired, the impairment to be recognized is measured by
the amount by which the carrying amount of the assets exceeds the fair value of
the assets. Assets to be disposed of are reported at the lower of carrying
amount or fair value less costs to sell. See "Accounting Changes and Recent
Accounting Pronouncements".

         Revenues consist of restaurant sales and to a lesser extent commissary
sales. Restaurant sales include food and beverage sales and are net of
applicable state and local sales taxes. Restaurant sales are recognized upon
delivery of services. Proceeds from the sale of gift certificates are deferred
and recognized as revenue as such gift certificates are redeemed. Commissary
sales represent sales to outside parties consisting primarily of sales of
O'Charley's branded food items, primarily salad dressings, to retail grocery
chains, mass merchandisers and wholesale clubs. Commissary sales are recognized
when delivery occurs, the revenue amount is determinable and when collection is
reasonably assured.

         Advertising Costs The Company expenses advertising costs as incurred,
except for certain advertising production costs that are expensed the first
time the advertising takes place. Advertising expense for fiscal years 2001,
2000, and 1999 totaled $13.3 million, $9.5 million, and $8.2 million,
respectively.

         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. The Company accounts for its stock option plans in
accordance with 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 Accounting Principle Board ("APB") Opinion
No. 25, "Accounting for Stock Issued to Employees," 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.

         Per Share Data. Basic earnings per common share have been computed by
dividing net earnings by the weighted average number of common shares
outstanding during each year presented. Diluted earnings per common share have
been computed by dividing net earnings by the weighted average number of common
shares outstanding plus the dilutive effect of options outstanding during the
applicable periods.

         Stock Repurchase. Under Tennessee law, when a corporation purchases
its common stock in the open market, such repurchased shares become authorized
but unissued. The Company reflects the purchase price of any such repurchased
shares as a reduction of additional paid-in capital and common stock.

         Fair Value of Financial Instruments. Statement of Financial Accounting
Standards No. 107 ("FAS 107"), "Disclosures about Fair Value of Financial
Instruments," 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 30, 2001. Book
value approximates fair value for substantially all of the Company's assets and
liabilities that fall under the scope of FAS 107.


                                      41
<PAGE>


         Derivative Instruments and Hedging Activities. All derivatives are
recognized on the consolidated balance sheet at their fair value. On the date
the derivative contract is entered into, the Company designates the derivative
as a hedge of the variability of cash flows to be paid related to a recognized
liability. The Company assesses, both at the hedge's inception and on an
ongoing basis, whether the derivatives that are used in hedging transactions
are highly effective in offsetting changes in cash flows of the hedged items.
The Company also determines how ineffectiveness will be measured. Changes in
the fair value of a derivative that is highly effective and that is designated
and qualifies as a cash-flow hedge are recorded in other comprehensive income,
until earnings are affected by the variability in cash flows of the designated
hedged item. If it is determined that a derivative is ineffective as a hedge,
the Company discontinues hedge accounting prospectively.

         For the year ended December 30, 2001, the Company entered into
interest rate swap agreements to reduce its exposure to market risks from
changing interest rates. These agreements were designated as cash flow hedges.
For interest rate swaps, the differential to be paid or received is accrued and
recognized in interest expense and may change as market interest rates change.
If the swaps were to be terminated prior to their maturity, the gain or loss
would be recognized over the remaining original life of the swap if the item
hedged remained outstanding, or immediately, if the item hedged did not remain
outstanding.

         Comprehensive Income. Statement of Financial Accounting Standards No.
130 ("FAS 130"), "Reporting Comprehensive Income," establishes rules for the
reporting of comprehensive income and its components. Comprehensive income,
presented in the Consolidated Statement of Shareholders' Equity and
Comprehensive Income, consists of net income and unrealized gains (losses) on
available for sale securities and interest rate swaps. Other comprehensive
loss, net of tax, for 2001 was $270,000. The other comprehensive loss is
comprised of an unrealized loss on derivative financial instruments of
$490,000, net of tax, offset by the effect of a loss of $220,000, net of tax,
recognized in earnings related to available for sale securities.

         Operating Segments. Due to similar economic characteristics, as well
as a single type of product, production process, distribution system and type
of customer, the Company reports the operations of its two concepts on an
aggregated basis and does not separately report segment information. Revenues
from external customers are derived principally from food and beverage sales.
The Company does not rely on any major customers as a source of revenue. As a
result, separate segment information is not disclosed.

         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 consolidated
financial statements in conformity with accounting principles generally
accepted in the United States of America. Actual results could differ from
these estimates.

         Accounting Changes and Recent Accounting Pronouncements. In July 2001,
the Financial Accounting Standards Board ("FASB") issued Statement of Financial
Accounting Standard ("SFAS") No. 141, "Business Combinations", and SFAS No.
142, "Goodwill and Other Intangible Assets". SFAS No. 141 requires that the
purchase method of accounting be used for all business combinations initiated
after June 30, 2001. SFAS No. 141 also specifies criteria which intangible
assets acquired in a purchase method business combination must meet to be
recognized and reported apart from goodwill. SFAS No. 142 requires that
goodwill and intangible assets with indefinite useful lives no longer be
amortized, but instead tested for impairment at least annually in accordance
with the provisions of SFAS No. 142. SFAS No. 142 also requires that intangible
assets with definite useful lives be amortized over their respective estimated
useful lives to their estimated residual values, and reviewed for impairment in
accordance with SFAS No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of".

         The Company adopted the provisions of SFAS No. 141 on July 1, 2001,
except with regard to business combinations initiated prior to July 1, 2001.
SFAS No. 142 must be adopted by the Company effective December 31, 2001.
Goodwill and intangible assets acquired in business combinations completed
before July 1, 2001 continue to be amortized prior to the adoption of SFAS No.
142.

         In connection with the transitional goodwill impairment evaluation,
SFAS No. 142 will require the Company to perform an assessment of whether there
is an indication that goodwill is impaired as of the date of adoption. To
accomplish this the Company must identify its reporting units and determine the
carrying value of each reporting unit by assigning the assets and liabilities,
including the existing goodwill and intangible assets, to those reporting units
as of the date of adoption.


                                      42
<PAGE>


The Company will then have up to six months from the date of adoption to
determine the fair value of each reporting unit and compare it to the reporting
unit's carrying amount. To the extent a reporting unit's carrying amount
exceeds its fair value, an indication exists that the reporting unit's goodwill
may be impaired and the Company must perform the second step of the
transitional impairment test. In the second step, the Company must compare the
implied fair value of the reporting unit's goodwill, determined by allocating
the reporting unit's fair value to all of it assets (recognized and
unrecognized) and liabilities in a manner similar to a purchase price
allocation in accordance with SFAS No. 141, to its carrying amount, both of
which would be measured as of the date of adoption. This second step is
required to be completed as soon as possible, but no later than the end of the
year of adoption. Any transitional impairment loss will be recognized as the
cumulative effect of a change in accounting principle in the Company's
consolidated statement of earnings.

         As of the date of adoption, the Company had unamortized goodwill in
the amount of $10.0 million, which will be subject to the transition provisions
of SFAS No. 141 and 142. Amortization expense related to goodwill was $544,000
for the year ended December 30, 2001. Because of the extensive effort needed to
comply with adopting SFAS No. 141 and 142, the Company has not completed its
analysis and, therefore, is currently unable to reasonably estimate the impact
of adopting these Statements on the Company's consolidated financial
statements, including whether any transitional impairment losses will be
required to be recognized as the cumulative effect of a change in accounting
principle.

         In August 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets", which supersedes both SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of" and the accounting and reporting provisions of APB
Opinion No. 30, "Reporting the Results of Operations--Reporting the Effects of
Disposal of a Segment of a Business, and Extraordinary, Unusual and
Infrequently Occurring Events and Transactions", for the disposal of a segment
of a business (as previously defined in that Opinion). SFAS No. 144 retains the
fundamental provisions in SFAS No. 121 for recognizing and measuring impairment
losses on long-lived assets held for use and long-lived assets to be disposed
of by sale, while also resolving significant implementation issues associated
with SFAS No. 121. The Company is required to adopt SFAS No. 144 in the first
quarter of 2002, and plans to adopt its provisions for the quarter ending April
21, 2002. Management does not expect the adoption of SFAS No. 144 for
long-lived assets held for use to have a material impact on the Company's
consolidated financial statements because the impairment assessment under SFAS
No. 144 is largely unchanged from SFAS No. 121. The provisions of the Statement
for assets held for sale or other disposal generally are required to be applied
prospectively after the adoption date to newly initiated disposal activities.
Therefore, management cannot determine the potential effects that adoption of
SFAS No. 144 will have on the Company's consolidated financial statements.


2. ACQUISITION

         On May 26, 2000, the Company purchased two existing Stoney River
Legendary Steaks restaurants and all associated trademarks and intellectual
property for approximately $15.8 million in cash. In addition, the transaction
includes an earn-out provision pursuant to which the sellers may receive up to
$1.25 million at the end of 2002, $1.25 million at the end of 2003, and $2.5
million at the end of 2004. The potential earn-out is based on the Stoney River
concept achieving certain performance thresholds (income before taxes and
preopening costs) for such year. The transaction was accounted for using the
purchase method of accounting and, accordingly, the results of operations of
Stoney River have been included in the Company's consolidated financial
statements from the date of acquisition. The Stoney River concept is being
operated as a wholly owned subsidiary of the Company. Through December 30,
2001, goodwill resulting from the acquisition was being amortized on a
straight-line basis over 20 years. The allocation of the purchase price to the
acquired net assets is as follows (in thousands):

<TABLE>
<S>                                                                       <C>
Estimated fair value of assets acquired                                   $ 5,166
Purchase price in excess of the net assets acquired (goodwill)             10,701
Non-compete agreements                                                        119
Estimated fair value of liabilities assumed                                  (131)
                                                                          -------
Cash paid                                                                  15,855
Less cash acquired                                                             (6)
                                                                          -------
Net cash paid for acquisition                                             $15,849
                                                                          =======
</TABLE>

The following unaudited proforma condensed results of operations give effect to
the acquisition of Stoney River


                                      43
<PAGE>
Legendary Steaks as if such transaction had occurred at December 28, 1998:

<TABLE>
<CAPTION>
                                                                             FISCAL YEAR
                                                                      --------------------------
                                                                        2000              1999
                                                                      --------          --------
                                                                            (IN THOUSANDS,
                                                                         EXCEPT PER SHARE DATA)
<S>                                                                   <C>               <C>
Total revenues .............................................          $381,108          $311,233
Earnings before income taxes ...............................          $ 28,930          $ 23,577
Net earnings ...............................................          $ 18,804          $ 13,977
Basic earnings per share ...................................          $   1.21          $   0.90
Basic weighted average common shares outstanding ...........            15,584            15,461
Diluted earnings per share .................................          $   1.14          $   0.84
Diluted weighted average common shares outstanding .........            16,525            16,656
</TABLE>

         The foregoing unaudited proforma amounts are based upon certain
assumptions and estimates, including, but not limited to the recognition of
interest expense on debt incurred to finance the acquisition and amortization of
goodwill over 20 years. The unaudited proforma amounts do not necessarily
represent results which would have occurred if the acquisition had taken place
on the basis assumed above, nor are they indicative of the results of future
combined operations.

3.       PROPERTY AND EQUIPMENT

         Property and equipment consist of the following at year-end:

<TABLE>
<CAPTION>
                                                                   DECEMBER 30,       DECEMBER 31,
                                                                       2001              2000
                                                                   ------------       -----------
                                                                            (IN THOUSANDS)
<S>                                                                <C>                <C>
Land and improvements ......................................          $ 81,275          $ 64,126
Buildings and improvements .................................           133,108            98,296
Furniture, fixtures and equipment ..........................            88,514            68,852
Leasehold improvements .....................................            73,074            67,979
Equipment under capitalized leases .........................            47,866            45,814
Property leased to others ..................................             1,140             2,061
                                                                      --------          --------
                                                                       424,977           347,128
Less accumulated depreciation and amortization .............           (94,424)          (72,857)
                                                                      --------          --------
                                                                      $330,553          $274,271
                                                                      ========          ========
</TABLE>

         Depreciation and amortization of property and equipment was $21.6
million, $17.9 million, and $14.0 million for the years ended December 30, 2001,
December 31, 2000, and December 26, 1999, respectively.

4.       OTHER ASSETS

Other assets consist of the following at year-end:

<TABLE>
<CAPTION>
                                                                           DECEMBER 30,        DECEMBER 31,
                                                                               2001               2000
                                                                           ------------       ------------
                                                                                   (in thousands)
<S>                                                                        <C>                 <C>
Excess of cost over fair value of net assets acquired
         (goodwill), net of accumulated amortization of
          $1,010 in 2001 and $466 in 2000                                    $ 10,013          $ 10,418
Cash surrender value of life insurance, deferred compensation                   2,588             2,351
Marketable securities available for sale                                          256               279
Notes receivable                                                                1,176               867
Other assets                                                                    2,289             1,354
                                                                             --------          --------
                                                                             $ 16,322          $ 15,269
                                                                             ========          ========
</TABLE>

         Amortization of goodwill was $544,000, $335,000, and $16,000 for the
years ended December 30, 2001,


                                       44
<PAGE>

December 31, 2000, and December 26, 1999, respectively.

5.       ACCRUED EXPENSES

         Accrued expenses include the following at year-end

<TABLE>
<CAPTION>
                                                 DECEMBER 30,      DECEMBER 31,
                                                    2001              2000
                                                 ------------      -----------
                                                       (in thousands)
<S>                                               <C>               <C>
Insurance expenses                                $  4,058          $  2,832
Employee benefits                                    1,969             1,658
Other accrued expenses                               3,463             1,726
                                                  --------------------------
                                                  $  9,490          $  6,216
                                                  ==========================
</TABLE>

6.       LONG-TERM DEBT

         Long-term debt consists of the following at year-end:

<TABLE>
<CAPTION>
                                                     DECEMBER 30,        DECEMBER 31,
                                                        2001                2000
                                                     ------------        ------------
                                                              (in thousands)
<S>                                                  <C>                 <C>
Revolving line of credit                               $ 89,000           $ 92,000
Secured mortgage note payable                               196                210
Installment note payable                                    110                232
                                                       ---------------------------
                                                         89,306             92,442
Less current portion of long-term debt                     (125)              (136)
                                                       ---------------------------
Long-term debt, net of current portion                 $ 89,181           $ 92,306
                                                       ===========================
</TABLE>

         On January 31, 2000, the Company entered into an amended and restated
revolving credit agreement (the "Third Amendment") which increased its unsecured
line of credit facility to $135.0 million from $100.0 million. However, the
maximum borrowing capacity of the credit facility is reduced by amounts
outstanding pursuant to the Company's synthetic lease facility (see Note 7). The
Third Amendment 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 facility
is based on certain financial ratios achieved by the Company and is recomputed
quarterly. At December 30, 2001, the $89.0 million outstanding balance carried
interest rates from 2.7% to 4.3%. The Third Amendment also extended the maturity
date of the facility to May 31, 2003 and allows the facility to be extended
annually by one year at the participating banks' option. The Third Amendment
also requires the Company to meet certain financial and other covenants,
including restrictions on the incurrence of indebtedness, the sale of assets,
mergers and dividend payments. On July 9, 2001, the Company entered into an
amendment to its revolving credit agreement that extended the maturity date of
the facility from May 31, 2003 to October 5, 2006. The other terms and
conditions of the credit facility were not changed. The Company is required to
pay commitment fees on the $135 million revolving line of credit. The commitment
fees in 2001 ranged from 0.125% to 0.15% depending upon the Company's
performance in meeting certain financial and other covenants. The total amount
paid in 2001 for commitment fees was approximately $188,000.

         The secured mortgage note payable at December 30, 2001, bears interest
at 10.5% 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 $987,000 at December 30, 2001.

         The installment note payable at December 30, 2001, bears interest at
8.6% and are payable in monthly installments, including interest, through
October 2002. The installment note payable of $110,000 is secured by an airplane
with a depreciated cost of approximately $928,000 at December 30, 2001. This
note was paid in full in February, 2002.

         The annual maturities of long-term debt as of December 30, 2001, are:
$125,000-2002; $17,000-2003; $18,000-2004; $21,000-2005; $89.0 million-2006; and
$102,000 thereafter.


                                       45
<PAGE>

7.       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.

         The Company has a $25.0 million synthetic lease facility which matures
in October 2006. The Company will act as construction agent for the lessor for
certain of the properties. A separate operating lease agreement will be entered
into for each property upon acquisition or construction completion providing for
a term ending in October 2006. Monthly rental payments for each property lease
will be based on the total costs advanced by the lessor for such property and a
floating rate based on the bank's prime rate minus a certain percentage spread
or the LIBOR rate plus a certain percentage spread. The lease facility requires
the Company to meet certain financial and other covenants similar to the
covenants and restrictions contained in the revolving credit facility. The costs
accumulated by the lessor under the synthetic lease facility reduce the maximum
borrowing capacity under the Company's revolving credit facility as described in
Note 6 to the consolidated financial statements.

         Upon the expiration of the lease term, the Company may seek to renew
the facility. Any renewal of the facility requires the lessor's consent. If the
Company is unable to or chooses not to renew the facility, the Company has the
option to sell the properties to third parties on behalf of the lessor,
surrender the properties to the lessor or purchase the properties at their
original cost. If the properties are sold by the Company to third parties for
less than their aggregate original cost, the Company is obligated, under a
residual value guarantee, to pay the lessor an amount equal to the shortfall,
not to exceed 85% of the aggregate original cost of the properties. To the
extent the aggregate sales proceeds exceed the aggregate original cost of the
properties, the lessor will remit to the Company such excess. If the Company
surrenders the properties to the lessor, the Company is obligated, under its
residual value guarantee, to pay the lessor an amount equal to 85% of the
aggregate original cost of such properties (but if the lessor later sells such
properties to third parties, the lessor must remit the sales proceeds to the
Company to the extent the sale proceeds, plus the amount of the Company's
residual value payment, exceeds the aggregate original cost of the properties).
There can be no assurance that the Company will be able to renew the leases or
sell the properties to third parties.

         The Company currently is not leasing any assets under the synthetic
lease facility. The Company is currently evaluating whether it will utilize the
synthetic lease facility in the future.

         As of December 30, 2001, approximately $34.6 million net book value of
the Company's property and equipment is under capitalized lease obligations.
Interest rates on capitalized lease obligations range from 5.3% to 7.5%.

         Future minimum lease payments at December 30, 2001, are as follows:

<TABLE>
<CAPTION>
                                                            CAPITALIZED
                                                             EQUIPMENT              OPERATING
                                                               LEASES                LEASES
                                                            -----------             ---------
                                                                       (IN THOUSANDS)
<S>                                                         <C>                     <C>
2002                                                          $  9,626                $ 7,060
2003                                                             7,724                  6,880
2004                                                             7,246                  6,568
2005                                                             7,313                  6,341
2006                                                             4,179                  6,501
Thereafter                                                       1,611                 44,095
                                                              --------                -------
         Total minimum rentals                                $ 37,699                $77,445
                                                                                      =======
Less amount representing interest                               (5,076)
                                                              --------
Net minimum lease payments                                      32,623
Less current maturities                                         (7,799)
                                                              --------
Capitalized lease obligations, net of current portion         $ 24,824
                                                              ========
</TABLE>


                                       46
<PAGE>

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

<TABLE>
<CAPTION>
                                       2001            2000            1999
                                      ------          ------          ------
                                                (IN THOUSANDS)
<S>                                   <C>             <C>             <C>
Minimum rentals                       $7,429          $6,272          $5,224
Contingent rentals                       602             614             656
                                      --------------------------------------
                                      $8,031          $6,886          $5,880
                                      ======================================
</TABLE>

8.       DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES.

         The Company uses variable-rate debt to help finance its operations. The
debt obligations expose the Company to variability in interest payments due to
changes in interest rates. Management believes it is prudent to limit the
variability of a portion of its interest payments. To meet this objective,
management periodically enters into interest rate swap agreements to manage
fluctuations in cash flows resulting from interest rate risk. These swaps change
the variable-rate cash flow exposure on the debt obligations to fixed-rate cash
flows. Under the terms of the interest rate swaps, the Company receives variable
interest rate payments and makes fixed interest rate payments, thereby creating
the equivalent of fixed-rate debt. The swaps have been designated as cash flow
hedges.

         Changes in the fair value of interest rate swaps designated as hedging
instruments that effectively offset the variability of cash flows associated
with variable-rate, long-term debt obligations are reported in accumulated other
comprehensive income, net of tax. These amounts subsequently are reclassified
into interest expense as a yield adjustment of the hedged debt obligation in the
same period in which the related interest affects earnings.

         As of December 30, 2001, the Company had in effect $20.0 million in
swaps at an average fixed rate of 5.6%, $10.0 million of which matures in
January 2004 and $10.0 million of which matures in January 2006. As of December
30, 2001, $490,000 of deferred losses, net of tax, on the swaps were included in
accumulated other comprehensive income. The Company had no derivative
instruments at December 31, 2000.

9.       INCOME TAXES

         The total income tax expense (benefit) for each respective year is as
follows:

<TABLE>
<CAPTION>
                                                                           FISCAL YEAR
                                                       -------------------------------------------------
                                                         2001                2000                 1999
                                                       ---------           ---------           ---------
                                                                         (IN THOUSANDS)
<S>                                                    <C>                 <C>                 <C>
Earnings before cumulative effect of
  accounting change................................    $   9,347           $  10,425           $   8,674
Tax effect of cumulative effect of
  accounting change................................           --                  --                (726)
Shareholders' equity, tax benefit on
  market value loss on derivative instruments......         (260)                 --                  --
Shareholders' equity, tax benefit derived
  from non-statutory stock options exercised.......       (1,816)               (387)               (768)
                                                       ---------           ---------           ---------
                                                       $   7,271           $  10,038           $   7,180
                                                       =========           =========           =========

</TABLE>


                                       47
<PAGE>

         Income tax expense related to earnings before cumulative effect of
accounting change for each respective year is as follows:

<TABLE>
<CAPTION>
                                                                           FISCAL YEAR
                                                       ---------------------------------------------
                                                         2001               2000              1999
                                                       --------           --------          --------
                                                                         (IN THOUSANDS)
<S>                                                    <C>                <C>               <C>
Current .....................................          $ 10,683           $  8,373          $  6,945
Deferred ....................................            (1,336)             2,052             1,729
                                                       --------           --------          --------
                                                       $  9,347           $ 10,425          $  8,674
                                                       ========           ========          ========
</TABLE>

         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>
                                                                        FISCAL YEAR
                                                         ------------------------------------------
                                                          2001              2000              1999
                                                         ------            ------            ------
<S>                                                      <C>               <C>               <C>
Federal statutory rate ........................            35.0%             35.0%             35.0%
Increase (decrease) in taxes due to:
State income taxes, net of federal tax
  benefit .....................................             3.2               3.0               3.1
Tax credits and other .........................            (3.4)             (3.0)             (3.1)
                                                         ------            ------            ------
                                                           34.8%             35.0%           $ 35.0%
                                                         ======            ======            ======
</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 year ends are as follows:

<TABLE>
<CAPTION>
                                                                                FISCAL YEAR
                                                                 -----------------------------------------
                                                                   2001             2000             1999
                                                                 -------          -------          -------
                                                                              (IN THOUSANDS)
<S>                                                              <C>              <C>              <C>
Deferred tax assets:
Accrued expenses, principally due to accruals for
  workers' compensation, employee health and
  retirement benefits .................................          $ 2,606          $ 1,684          $ 1,433
Asset impairment and exit cost ........................            2,242               --               --
Other .................................................              251              219              204
                                                                 -------          -------          -------
  Total gross deferred tax assets .....................            5,099            1,903            1,637
Deferred tax liabilities:
Property and equipment, principally due to
  differences in depreciation and capitalized
  lease amortization ..................................           10,658            9,005            6,742
Other .................................................              103               37               --
                                                                 -------          -------          -------
  Total gross deferred tax liabilities ................           10,761            9,042            6,742
                                                                 -------          -------          -------
       Net deferred tax liability .....................          $ 5,662          $ 7,139          $ 5,105
                                                                 =======          =======          =======
</TABLE>

         The net deferred tax liability (asset) at year-end is recorded as
follows:

                                       48
<PAGE>

<TABLE>
<CAPTION>
                                                                            FISCAL YEAR
                                                            ----------------------------------------------
                                                              2001               2000               1999
                                                            --------           --------           --------
                                                                           (IN THOUSANDS)
<S>                                                         <C>                <C>                <C>
Deferred income taxes, long-term liability .......          $  9,576           $  8,431           $  6,243
Deferred income taxes, current asset .............            (3,914)            (1,292)            (1,138)
                                                            --------           --------           --------
                                                            $  5,662           $  7,139           $  5,105
                                                            ========           ========           --------
</TABLE>

         Based on the Company's history of taxable income and management's
projections of future taxable income, the Company believes it is more likely
than not that all of the deferred tax assets will be realized; thus, no
valuation allowance is recorded.

10.      SHAREHOLDERS' EQUITY

         On September 2, 1998, the Board of Directors of the Company approved
the repurchase of up to 750,000 shares of the Company's common stock. As of
December 30, 2001, approximately 598,000 shares have been repurchased.

         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
30, 2001, no preferred shares had been issued.

         On December 8, 2000, the Company's Board of Directors adopted a
Shareholders' Rights Plan (the "Rights Plan") to protect the interests of the
Company's shareholders if the Company is confronted with coercive or unfair
takeover tactics by third parties. Pursuant to the Rights Plan, a dividend of
one Right for each share of outstanding share of the Company's Common Stock was
issued to shareholders of record on December 27, 2000. Under certain conditions,
each Right may be exercised to purchase one-thousandth of a share of a new
Series A Junior Preferred Stock at an exercise price of $80 per Right. Each
Right will become exercisable following the tenth day after a person's or
group's acquisition of, or commencement of a tender exchange offer for 18% or
more of the Company's Common Stock. If a person or group acquires 18% or more of
the Company's Common Stock, each right will entitle its holder (other than the
person or group whose action has triggered the exercisability of the Rights) to
purchase common stock of either O'Charley's Inc. or the acquiring company
(depending on the form of the transaction) having a value of twice the exercise
price of the Rights. The Rights will also become exercisable in the event of
certain mergers or asset sales involving more than 50% of the Company's assets
or earning power. The Rights may be redeemed prior to becoming exercisable,
subject to approval by the Company's Board of Directors, for $0.001 per Right.
The Rights expire on December 8, 2010. The Company has reserved 50,000 shares of
Series A Junior Preferred Stock for issuance upon exercise of the Rights.

11.      EARNINGS PER SHARE

         The following is a reconciliation of the weighted average shares used
in the calculation of basic and diluted earnings per share.

<TABLE>
<CAPTION>
                                                                        2001             2000             1999
                                                                       ------           ------           ------
                                                                                   (IN THOUSANDS)
<S>                                                                    <C>              <C>              <C>
Weighted average shares outstanding - basic                            17,772           15,584           15,461
Incremental stock option shares outstanding                             1,101              941            1,195
                                                                       ----------------------------------------
Weighted average shares outstanding -  diluted                         18,873           16,525           16,656
                                                                       ========================================
</TABLE>

         During the first quarter of 2002, the Company issued options to
purchase 206,000 shares of Common Stock at an exercise price of $21.17 per
share. For the fiscal years 2001, 2000, and 1999, the number of anti-dilutive
shares excluded from the weighted average shares calculation were approximately
73,000, 1,016,000, and 646,300, respectively.


                                       49
<PAGE>

12.      STOCK OPTION AND PURCHASE PLANS

         The Company has various incentive stock option plans that provide for
the grant of both statutory and nonstatutory stock options to officers, key
employees, nonemployee directors and consultants of the Company. The Company has
reserved 5,963,768 shares of common stock for issuance pursuant to these plans.
Options are granted at 100% of the fair market value of common stock on the date
of the grant, expire ten years from the date of the grant and are exercisable at
various times as previously determined by the Board of Directors. The Company
adopted the O'Charley's 2000 Stock Incentive Plan (the "2000 Plan") in May 2000.
The Company has reserved 3,000,000 shares of common stock for issuance pursuant
to the 2000 Plan. At December 30, 2001, options to purchase 624,850 shares of
common stock were outstanding under the 2000 Plan. Following adoption of the
2000 Plan, no additional options may be granted pursuant to previously adopted
stock option plans. At December 30, 2001, options to purchase 2,973,368 shares
of common stock were outstanding under those previously adopted plans. The
Company applies APB Opinion No. 25 in accounting for its plan; and, accordingly,
no compensation cost has been recognized.

         A summary of stock option activity during the past three years is as
follows:

<TABLE>
<CAPTION>
                                                                 WEIGHTED-AVERAGE
                                             NUMBER OF SHARES     EXERCISE PRICE
                                             ----------------    ----------------
<S>                                          <C>                 <C>
Balance at December 27, 1998 .........           3,148,926           $  6.98
  Granted ............................             980,550             15.16
  Exercised ..........................            (328,438)             4.53
  Forfeited ..........................            (121,143)            12.33
                                               -----------           -------
Balance at December 26, 1999 .........           3,679,895              9.21
  Granted ............................             544,400             12.50
  Exercised ..........................            (195,884)             5.69
  Forfeited ..........................            (177,539)            13.08
                                               -----------           -------
Balance at December 31, 2000 .........           3,850,872              9.67
  Granted ............................             514,550             17.84
  Exercised ..........................            (593,285)             6.64
  Forfeited ..........................            (173,919)            14.49
                                               -----------           -------
Balance at December 30, 2001 .........           3,598,218           $ 11.11
                                               ===========           =======
</TABLE>

         At the end of 2001, 2000 and 1999, the number of options exercisable
was approximately 2,267,000, 2,362,000 and 2,038,000, respectively, and the
weighted average exercise price of those options was $8.82, $7.48 and $6.28,
respectively.

         The following table summarizes information about stock options
outstanding at December 30, 2001.

<TABLE>
<CAPTION>
                        OPTIONS OUTSTANDING                                 OPTIONS EXERCISABLE
----------------------------------------------------------------------  ----------------------------------
                                      WEIGHTED-AVG.
                                        REMAINING         WEIGHTED-                          WEIGHTED-
                                        CONTRACTUAL       AVERAGE                            AVERAGE
    EXERCISE PRICE       NUMBER            LIFE         EXERCISE PRICE    NUMBER          EXERCISE PRICE
--------------------  -----------    ---------------    --------------  ----------        ---------------
<S>                   <C>            <C>                <C>             <C>               <C>
   $ 1.00 to  4.99       137,325           0.7 years        $ 3.57         137,325            $ 3.57
   $ 5.00 to  5.99       777,727           1.8                5.61         777,727              5.61
   $ 6.00 to  7.99       343,814           3.1                7.53         341,109              7.53
   $ 8.00 to 10.99       339,912           4.6                8.95         305,958              8.88
</TABLE>


                                       50
<PAGE>

<TABLE>
   <S>                 <C>                 <C>             <C>          <C>                   <C>
   $11.00 to 13.99       670,962           7.1               12.18         298,611             12.16
   $14.00 to 15.99       866,128           7.2               15.08         372,896             15.08
   $16.00 to 18.99       462,350           9.1               17.84          33,750             18.06
   ---------------     ---------           ---             -------       ---------            ------
   $ 1.00 to 18.99     3,598,218           5.4             $ 11.11       2,267,376            $ 8.82
   ===============     =========           ===             =======       =========            ======
</TABLE>

         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 675,000 common shares for
this plan. The CHUX Ownership Plan is intended to be an employee stock purchase
plan, which qualifies for favorable tax treatment under Section 423 of the
Internal Revenue Code. The Plan allows participants to purchase common shares at
85% of the lower of 1) the closing market price per share of the Company's
Common Stock on the last trading date of the plan period or 2) the average of
the closing market price of the Company's Common Stock on the first and the last
trading day of the plan period. Contributions of up to 15% of base salary are
made by each participant through payroll deductions. As of December 30, 2001,
287,895 shares have been issued under this plan.

         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>
                                                                        FISCAL YEAR
                                                            --------------------------------------------
                                                              2001             2000                1999
                                                            --------          --------            ------
                                                               (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                                         <C>               <C>                 <C>
Net Earnings:
    As reported ..................................          $ 17,552          $ 19,360            14,761
    Pro forma, as adjusted under FAS 123 .........            15,980            17,749            13,391

Basic Earnings Per common Share:
    As reported ..................................          $   0.99          $   1.24          $   0.95
    Pro forma, as adjusted under FAS 123 .........              0.89              1.14              0.87

Diluted Earnings Per common Share:
    As reported ..................................          $   0.93          $   1.17          $   0.89
    Pro forma, as adjusted under FAS 123 .........              0.84              1.07              0.80
</TABLE>

         Because the FAS 123 method of accounting has not been applied to
options granted prior to January 1, 1996, the resulting pro forma compensation
cost may not be representative of that to be expected in future years. The fair
value of each option grant is estimated on the date of grant using the
Black-Scholes option-pricing model. The weighted average assumptions used for
grants in each respective year is as follows:

<TABLE>
<CAPTION>
                                                                          FISCAL YEAR
                                                            --------------------------------------------
                                                              2001              2000               1999
                                                            --------           ------             -------
<S>                                                         <C>                <C>                <C>
Risk-free investment interest ....................              5.5%              5.6%              6.4%
Expected life in years ...........................              6.1               6.8               7.0
Expected volatility ..............................             49.6%             50.8%             51.5%
Fair value of options granted (per share) ........            $9.78             $7.32             $9.30
</TABLE>

         The Company has a 401(k) salary reduction and profit-sharing plan
called the CHUX Savings Plan (the "Plan"). Under the Plan, employees can make
contributions up to 15% of their annual compensation. The Company contributes
annually to the Plan an amount equal to 50% 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


                                       51
<PAGE>

year beginning after the employee's initial year of employment. Company
contributions were approximately $550,000 in 2001, $439,000 in 2000, and
$356,000 in 1999.

         The Company maintains a deferred compensation plan for a select group
of management employees to provide supplemental retirement income benefits
through deferrals of salary, bonus and deferral of contributions which cannot be
made to the Company's 401(k) Plan due to Internal Revenue Code limitations.
Participants in this plan can contribute, on a pre-tax basis, up to 50% of their
base pay and 100% of their bonuses. The Company contributes annually to this
plan an amount equal to a matching formula of each participant's deferrals.
Company contributions were $248,000 in 2001, $214,000 in 2000, and $205,000 in
1999. The amount of the deferred compensation liability payable to the
participants is recorded as "other liabilities" on the consolidated balance
sheets.

14.      RELATED-PARTY TRANSACTIONS

         At the beginning of 1999, the Company leased three of its restaurants
from CWF Associates, Inc., an entity that was controlled by certain directors
and the chief executive officer of the Company. During 1999, the Company
terminated one of the leases for a fee of $116,000 paid to CWF Associates, Inc.
During 2000, the Company purchased the remaining two leased properties for an
aggregate of $1.9 million.

         At the beginning of 1999, the Company leased the land and building of
four of its restaurants from Two Mile Partners, a partnership whose partners
were David K. Wachtel, Jr., who owned 75% and was the managing partner of the
partnership and a former director and executive officer of the Company, and
Gregory L. Burns, the Company's Chairman of the Board and Chief Executive
Officer, who owns 25% of the partnership. During 2000, the Company terminated
one of the leases. The three remaining leases were to expire at various times
through 2007, with options to renew for a term of 10 years. Also refer to Note
17.

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

<TABLE>
<CAPTION>
                                                                        FISCAL YEAR
                                                           -------------------------------------
                                                            2001           2000            1999
                                                           ------        -------          ------
                                                                        (IN THOUSANDS)
<S>                                                        <C>           <C>              <C>
Consolidated Statements of Operations
Restaurant operating costs:
  Rent expense                                              $ 330          $ 448          $ 599
  Contingent rentals                                          160            327            410
</TABLE>

15.      CONSOLIDATED STATEMENTS OF CASH FLOWS

         Supplemental disclosure of cash flow information is as follows:

<TABLE>
<CAPTION>
                                                                            FISCAL YEAR
                                                            -----------------------------------------
                                                              2001             2000            1999
                                                            -------          -------          -------
                                                                       (IN THOUSANDS)
<S>                                                         <C>              <C>              <C>
Cash paid for interest                                      $ 7,552          $ 8,003          $ 4,154
Additions to capitalized lease obligations                   10,559           10,871            9,787
Income taxes paid                                             7,242           10,203            5,254
</TABLE>

16.      ASSET IMPAIRMENT AND EXIT COSTS

         During the 2001 third quarter, management made the decision to close
five stores at various specific dates over the next twelve months. This decision
followed a review of historical and projected cash flows of the Company's stores
in view of the difficult economic environment in which the Company is operating.
As a result of this decision, the Company recognized a charge during the third
quarter for asset impairment and exit costs totaling $5.8 million. This amount
includes an asset impairment charge of approximately $5.0 million related to
building, leasehold improvement and equipment write-downs, and an exit cost
accrual of approximately $800,000 relating primarily to minimum property


                                       52
<PAGE>

lease payments from the post-closure date to the projected sublease date, if
applicable, otherwise to the end of the lease term. With respect to the asset
impairment charge, fair value was determined by discounting projected cash flow
for each location, which is the lowest level of identifiable cash flows largely
independent of the cash flows of other groups of assets, over its remaining
operating period, including the estimated proceeds from the disposition of such
assets. The exit cost accrual is reflected in accrued expenses on the
accompanying consolidated balance sheet at December 30, 2001. There had been no
significant payments related to the exit costs as of December 30, 2001.

17.      COMMITMENTS AND CONTINGENCIES

         In November 2000, the Company was sued by Two Mile Partners in the
circuit court for Montgomery County, Tennessee. Two Mile Partners is a Tennessee
general partnership whose partners were the late David K. Wachtel, Jr., who
owned 75% and was the managing partner of the partnership and a former director
and executive officer of the Company, and Gregory L. Burns, who owns 25% of the
partnership and is Chairman of the Board and Chief Executive Officer of the
Company. Prior to Mr. Wachtel's death in November 2001, all decisions regarding
the prosecution of this suit by Two Mile Partners were made by Mr. Wachtel in
his capacity as managing partner. In the complaint, Two Mile Partners sought
$1.5 million in damages, plus interest, attorneys' fees and costs as a result of
our alleged breach of a lease entered into in 1985 for a restaurant property
owned by the partnership and located in Clarksville, Tennessee. Two Mile
Partners alleged that the Company breached a continuous operation provision in
the lease by vacating the property in July 2000 and opening another O'Charley's
restaurant in Clarksville, Tennessee.

         In January 2002, the Company entered into a comprehensive settlement
agreement with Two Mile Partners settling all litigation and business matters
between the Company and Two Mile Partners. As a result of the settlement, (i)
the Company purchased restaurant properties located in Goodlettsville,
Murfreesboro and Clarksville, Tennessee that were leased from Two Mile Partners
for $1.7 million, $1.6 million and $1.0 million, respectively, (ii) the Company
terminated a lease with Two Mile Partners for a restaurant property located in
Bowling Green, Kentucky on which we formerly operated the Bowling Green
restaurant and sold Two Mile Partners an adjoining parcel of property used for
parking for a payment of $300,000, and (iii) Two Mile Partners dismissed with
prejudice the litigation pending against the Company in consideration of a
payment by the Company of $200,000. The $200,000 cash settlement has been
accrued in the accompanying consolidated financial statements.

         Mr. Burns recused himself from the discussions and considerations by
the Company of any matters relating to the settlement. The Company believes that
it terminated the Clarksville lease in accordance with its terms and denies the
allegations contained in the complaint filed by Two Mile Partners. Nevertheless,
a special committee of the Board of Directors comprised of disinterested
directors approved the settlement and believed it was in the Company's best
interest to settle the litigation to avoid the expense, uncertainty and
distraction of this litigation.

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


                                       53
<PAGE>
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 9, 2002, 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 9, 2002, 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 9, 2002, 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 9, 2002, 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.

                                     PART IV

ITEM 14.   EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.

(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. 1990 Employee Stock Plan (included
                           as Exhibit 10.19)

                  -        First Amendment to O'Charley's Inc. 1990 Employee
                           Stock Plan (included as Exhibit 10.20)

                  -        Second Amendment to O'Charley's Inc. 1990 Employee
                           Stock Plan (included as Exhibit 10.21)

                  -        Third Amendment to O'Charley's Inc. 1990 Employee
                           Stock Plan (included as Exhibit 10.22)

                  -        Fourth Amendment to O'Charley's Inc. 1990 Employee
                           Stock Plan (included as Exhibit 10.23)

                  -        O'Charley's 1991 Stock Option Plan for Outside
                           Directors, as amended (included as Exhibit 10.24)


                                       54
<PAGE>

                  -        CHUX Ownership Plan, as amended (included as Exhibit
                           10.25)

                  -        O'Charley's 2000 Stock Incentive Plan (included as
                           Exhibit 10.26)

                  -        Severance Compensation Agreement, dated February 16,
                           2000, by and between O'Charley's Inc. and Gregory L.
                           Burns (included as Exhibit 10.27)

                  -        Severance Compensation Agreement, dated as of April
                           5, 2001, by and between O'Charley's Inc. and A. Chad
                           Fitzhugh (included as Exhibit 10.28)

                  -        Severance Compensation Agreement, dated as of April
                           5, 2001, by and between O'Charley's Inc. and Steven
                           J. Hislop (included as Exhibit 10.29)

                  -        Severance Compensation Agreement, dated as of August
                           30, 2000, by and between O'Charley's Inc. and William
                           E. Hall, Jr. (included as Exhibit 10.30)

         4.       Exhibits:

<TABLE>
<CAPTION>
Exhibit
Number                                               Description

<S>               <C>      <C>
3.1               ----     Restated Charter of the Company  (restated  electronically  for SEC filing purposes only
                           and  incorporated by reference to Exhibit 3 to the Company's  Current Report on Form 8-K
                           filed with the Securities and Exchange Commission on December 27, 2000)

3.2               ----     Amended and Restated  Bylaws of the Company  (incorporated  by reference to Exhibit 3 of
                           the Company's Quarterly Report on Form 10-Q for the quarter ended April 22, 2001)

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

4.2               ----     Rights Agreement,  dated December 8, 2000,  between the Company and First Union National
                           Bank, as Rights Agent  (incorporated by reference to Exhibit 4 to the Company's  Current
                           Report on Form 8-K filed with the  Securities  and Exchange  Commission  on December 27,
                           2000)

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

10.2              ----     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)

10.3              ----     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)

10.4              ----     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)

10.5              ----     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)
</TABLE>

                                       55
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number                                               Description

<S>               <C>      <C>
10.6              ----     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)

10.7              ----     Amended and Restated  Revolving  Credit  Agreement,  dated as of December 8, 1997, among
                           O'Charley's Inc. and Mercantile Bank National  Association,  Bank One, N.A., First Union
                           National  Bank,  NationsBank  of  Tennessee,  N.A.,  as  Co-Agent,  and  First  American
                           National  Bank,  as Agent  (incorporated  by reference to Exhibit 10.18 of the Company's
                           Annual Report on Form 10-K for the year ended December 28, 1997)

10.8              ----     Assumption  Agreement and Amendment to Amended and Restated  Revolving Credit Agreement,
                           dated December 7, 1998,  among  O'Charley's  Inc.,  OCI, Inc.,  O'Charley's  Sports Bar,
                           Inc., Air Travel  Services,  Inc.,  O'Charley's  Management  Company,  Inc.,  DFI, Inc.,
                           O'Charley's  Restaurant  Properties,  LLC,  Mercantile Bank National  Association,  Bank
                           One, N.A., First Union National Bank,  NationsBank of Tennessee,  N.A., as Co-Agent, and
                           First American  National Bank, as Agent  (incorporated  by reference to  Exhibit 10.9 of
                           the Company's Annual Report on Form 10-K for the year ended December 27, 1998)

10.9              ----     Assumption  and Second  Amendment to Amended and Restated  Revolving  Credit  Agreement,
                           dated  December 8,  1999, among  O'Charley's  Inc., OCI, Inc.,  O'Charley's  Sports Bar,
                           Inc., Air Travel  Services,  Inc.,  O'Charley's  Management  Company,  Inc.,  DFI, Inc.,
                           O'Charley's  Restaurant  Properties,  LLC, O'Charley's Service Company, Inc., Mercantile
                           Bank  National  Association,  First  Union  National  Bank,  Bank of America,  N.A.,  as
                           Co-Agent,  and First  American  National  Bank, as Agent  (incorporated  by reference to
                           Exhibit 10.10  of the Company's  Annual Report on Form 10-K for the year ended  December
                           26, 1999)

10.10             ----     Third Amendment to Amended and Restated  Revolving Credit  Agreement,  dated January 31,
                           2000, by and among  O'Charley's  Inc.,  OCI,  Inc.,  O'Charley's  Sports Bar,  Inc., Air
                           Travel Services,  Inc.,  O'Charley's  Management Company,  Inc., DFI, INC.,  O'Charley's
                           Restaurant  Properties,   LLC,  O'Charley's  Service  Company,  Inc.,  Mercantile  Bank,
                           National Association,  First Union National Bank, SunTrust Bank, Bank of America,  N.A.,
                           as Co-Agent,  and AmSouth Bank, as Agent  (incorporated by reference to Exhibit 10.11 of
                           the Company's Annual Report on Form 10-K for the year ended December 26, 1999)

10.11             ----     Assumption  and Fourth  Amendment to Amended and Restated  Revolving  Credit  Agreement,
                           dated October 10, 2000, by and among  O'Charley's  Inc., OCI, Inc.,  O'Charley's  Sports
                           Bar, Inc., Air Travel Services,  Inc.,  O'Charley's Management Company, Inc., DFI, INC.,
                           O'Charley's  Restaurant  Properties,  LLC,  O'Charley's  Service Company,  Inc.,  Stoney
                           River Legendary  Management,  L.P., Stoney River Management  Company,  Inc., First Union
                           National Bank,  SunTrust Bank,  Firstar Bank, N.A., Bank of America,  N.A., as Co-Agent,
                           and AmSouth Bank, as Agent (incorporated by reference to Exhibit 10.12 of the Company's
                           Annual Report on Form 10-K for the year ended December 31, 2000)

10.12             ----     Assumption  Agreement  and Fifth  Amendment  to Amended and  Restated  Revolving  Credit
                           Agreement,  dated July 9, 2001, by and among  O'Charley's  Inc., OCI, Inc.,  O'Charley's
                           Sports Bar, Inc., Air Travel Service,  Inc.,  O'Charley's Management Company, Inc., DFI,
                           Inc.,  O'Charley's  Restaurant  Properties,  LLC,  O'Charley's  Service  Company,  Inc.,
                           Stoney River Legendary Management, L.P. and Stoney River Management Company, Inc.
                           (incorporated by reference to Exhibit 10.1 of the Company's Quarterly Report on Form 10-Q
                           for the quarter ended July 15, 2001)

10.13             ----     Participation Agreement, dated as of October 10, 2000, among O'Charley's Inc., as Lessee,
                           First American Business Capital, Inc., as Lessor, AmSouth Bank, as Agent, Bank of America,
                           Firstar Bank, N.A., First Union National Bank and SunTrust Bank (incorporated by reference
                           to Exhibit 10.13 of the Company's Annual Report on Form 10-K for the year ended
                           December 31, 2000)

10.14             ----     First  Amendment  to  Participation  Agreement,  dated July 9, 2001,  among  O'Charley's
                           Inc., as lessee,  First American  Business  Capital,  Inc., as lessor,  AmSouth Bank, as
                           agent,  Bank of  America,  N.A.,  Firstar  Bank,  N.A.,  First Union  National  Bank and
                           SunTrust  Bank  (incorporated  by  reference  to Exhibit 10.2 of the Company's Quarterly
                           Report on Form 10-Q for the quarter ended July 15, 2001)
</TABLE>

                                       56
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number                                               Description

<S>               <C>      <C>

10.15             ----     Lease,  dated as of October 10, 2000, by and between First  American  Business  Capital,
                           Inc., as Lessor, and O'Charley's Inc., as Lessee (incorporated by reference to  Exhibit
                           10.14 of the Company's Annual Report on Form 10-K for the year ended December 31, 2000)

10.16             ----     Lease,  dated October 10, 2000, by and between First American  Business  Capital,  Inc.,
                           as Lessor, and O'Charley's Inc., as Lessee (incorporated by reference to  Exhibit  10.15
                           of the Company's Annual Report on Form 10-K for the year ended December 31, 2000)

10.17             ----     First  Amendment to Lease,  dated July 9, 2001, by and between First  American  Business
                           Capital, Inc., as lessor, and O'Charley's Inc., as lessee (incorporated by reference to
                           Exhibit 10.3 of the Company's Quarterly Report on Form 10-Q for the quarter ended July
                           15, 2001)

10.18             ----     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)

10.19             ----     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)

10.20             ----     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)

10.21             ----     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)

10.22             ----     Third  Amendment  to  O'Charley's  Inc.  1990  Employee  Stock  Plan   (incorporated  by
                           reference to  Exhibit 10.14  of the  Company's  Annual  Report on Form 10-K for the year
                           ended December 27, 1998)

10.23             ----     Fourth  Amendment  to  O'Charley's  Inc.  1990  Employee  Stock  Plan  (incorporated  by
                           reference  to  Exhibit 10.1  of the  Company's  Quarterly  Report on  Form 10-Q  for the
                           quarter ended October 1, 2000)

10.24             ----     O'Charley's   Inc.   1991  Stock   Option  Plan  for  Outside   Directors,   as  amended
                           (incorporated  by  reference  to  Exhibit  10.2 of the  Company's  Quarterly  Report  on
                           Form 10-Q for the quarter ended October 1, 2000)

10.25             ----     CHUX  Ownership  Plan,  as amended  (incorporated  by  reference  to Exhibit 10.2 of the
                           Company's Quarterly Report on Form 10-Q for the quarter ended July 9, 2000)

10.26             ----     O'Charley's  2000 Stock  Incentive  Plan  (incorporated  by reference to Exhibit 10.1 of
                           the Company's Quarterly Report on Form 10-Q for the quarter ended July 9, 2000)

10.27             ----     Severance  Compensation  Agreement,  dated February 16, 2000, by and between O'Charley's
                           Inc. and Gregory L. Burns  (incorporated  by reference to the Company's Annual Report on
                           Form 10-K for the year ended December 26, 1999)

10.28             ----     Severance Compensation  Agreement,  dated April 5, 2001, by and between O'Charley's Inc.
                           and A. Chad  Fitzhugh  (incorporated  by  reference  to  Exhibit  10.2 of the  Company's
                           Quarterly Report on Form 10-Q for the quarter ended April 22, 2001)

10.29             ----     Severance Compensation  Agreement,  dated April 5, 2001, by and between O'Charley's Inc.
                           and  Steven J.  Hislop  (incorporated  by  reference  to Exhibit  10.1 of the  Company's
                           Quarterly Report on Form 10-Q for the quarter ended April 22, 2001)
</TABLE>

                                       57
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number                                               Description

<S>               <C>      <C>

10.30             ----     Severance  Compensation  Agreement,  dated August 30, 2000,  by and between  O'Charley's
                           Inc.  and  William  E. Hall,  Jr.  (incorporated  by  reference  to Exhibit  10.3 of the
                           Company's Quarterly Report on Form 10-Q for the quarter ended October 1, 2000)

21                ----     Subsidiaries of the Company

23                ----     Consent of KPMG LLP
</TABLE>

(b) No reports on Form 8-K were filed by the Company during the twelve weeks
ended December 30, 2001.



                                       58
<PAGE>


                                   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 29, 2002                   By:   /s/ Gregory L. Burns
                                             ----------------------------
                                             Gregory L. Burns
                                             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                             Chief Executive Officer and Chairman of            March 29, 2002
----------------------------------------------   the Board (Principal Executive Officer)
(Gregory L. Burns)


/s/ Steven J. Hislop                             President, Chief Operating Officer and             March 29, 2002
----------------------------------------------   Director
(Steven J. Hislop)


/s/ A. Chad Fitzhugh                             Chief Financial Officer, Secretary, and            March 29, 2002
----------------------------------------------   Treasurer (Principal Financial and
(A. Chad Fitzhugh)                               Accounting Officer)


/s/ John W. Stokes, Jr.                          Director                                           March 29, 2002
----------------------------------------------
(John W. Stokes, Jr.)

/s/ Richard Reiss, Jr.                           Director                                           March 29, 2002
----------------------------------------------
(Richard Reiss, Jr.)

/s/ G. Nicholas Spiva                            Director                                           March 29, 2002
----------------------------------------------
(G. Nicholas Spiva)

/s/ H. Steve Tidwell                             Director                                           March 29, 2002
----------------------------------------------
(H. Steve Tidwell)

/s/ Samuel H. Howard                             Director                                           March 29, 2002
----------------------------------------------
(Samuel H. Howard)

/s/ Shirley A. Zeitlin                           Director                                           March 29, 2002
----------------------------------------------
(Shirley A. Zeitlin)

/s/ Dale W. Polley                               Director                                           March 29, 2002
----------------------------------------------
(Dale W. Polley)

/s/ Robert J. Walker                             Director                                           March 29, 2002
----------------------------------------------
(Robert J. Walker)
</TABLE>


                                       59