Second agreement

The December agreement between O'Charley's and Crescendo Partners was actually the second accord between this particular issuer and this particular hedge fund.

They entered into a settlement agreement back in March pursuant to which the restaurant company's board took on three Crescendo representatives (Arnaud Ajdler, Gregory Monahan and Douglas Benham), and agreed to declassify itself.

The company had a nine-member board at the start of 2008, but as part of the March agreement it expanded the size of that board to eleven, and one of the incumbents stepped aside, making room for the three Crescendo reps.

Now, with the renewed discontent of Crescendo, and the revised treaty, the hedge fund has taken another step toward outright control. They're going to get a fourth rep, and the board itself is going to shrink to 10 members. So they'll only need one convert from the non-Crescendo members to produce a tie vote on a given issue.

The fourth Crescendo rep is: Philip J. Hickey Jr.

Mid-market restaurant chains are often squeezed in times like these. Consumers trade down. Those who previously ate at the upper end of the market may go to the mid-market places, but that is more than compensated for by consumers who used to eat at the mid-market who go to the bottom feeder drive-through places or just stay home.

My guess is that Crescendo sees O'Charley's as a long-term play. Eventually, there will be a recovery and the customers will return, and Crescendo wants to be in a position to profit when that happens.

Be fearful when everybody else is greedy, but be greedy when everybody else is fearful.