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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
(Mark one)
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 (Fee Required)
For the Fiscal Year Ended October 30, 1994
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 (No Fee Required)
For the Transition Period to
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Commission file number 0-4377
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SHONEY'S, INC.
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(Exact name of registrant as specified in its charter)
Tennessee 62-0799798
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1727 Elm Hill Pike, Nashville, TN 37210
(Address of principal executive (Zip Code)
offices)
Registrants telephone number, including area code (615) 391-5201
Securities Registered Pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
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Common Stock, par value $1 per share New York Stock Exchange
Common Stock Purchase Rights New York Stock Exchange
Liquid Yield Option Notes, Due 2004 New York Stock Exchange
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
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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 Form 10-K. [X]
As of January 17, 1995, there were 37,559,091 shares of Shoney's,
Inc., $1 par value common stock held by non-affiliates with an
aggregate market value of $488,268,183.
As of January 17, 1995, there were 41,382,363 shares of Shoney's,
Inc. $1 par value common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
DOCUMENT Incorporated into
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Portions of the Definitive Proxy Statement for
Annual Meeting of Shareholders on April 18, 1995,
to be filed with the Securities and Exchange
Commission (the"Commission") within 120 days
after the fiscal year ended October 30, 1994
(hereinafter the "1995 Proxy Statement") Part III
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<PAGE>
PART I
ITEM 1. BUSINESS.
(a) GENERAL DEVELOPMENT OF BUSINESS.
Shoney's, Inc. operates and franchises a chain of 1,878
restaurants in 37 states and Canada. The diversified food service
chain consists of five restaurant divisions - Shoney's, Captain
D's, Lee's Famous Recipe, Pargo's and Steakhouses. Systemwide
sales for fiscal 1994 were approximately $2.07 billion. Based on
sales, Shoney's, Inc. is the 17th largest chain restaurant
operator. <F1> Shoney's Restaurants are family restaurants
offering full table service and a broad menu. Captain D's and
Lee's Famous Recipe are quick-service restaurants specializing in
seafood and chicken, respectively. The Company also operates three
casual dining restaurants, as follows: Fifth Quarter - a special
occasion steakhouse, BarbWire's - a country & western style
steakhouse and Pargo's - a contemporary casual dining restaurant
featuring fresh, made-from-scratch dishes.
The Company's commissary includes five distribution centers
that support restaurant operations by providing most of the
necessary food and supplies. In addition, the commissary includes
certain manufacturing operations for meat products and prepackaged
cole slaw.
Mike Rose Foods, Inc. is a private-label manufacturer of salad
dressings, condiments and dry blended products for the food-service
industry. This operation provides products to the Company's
restaurant concepts and to third-party customers.
The Company's fiscal year ends on the last Sunday in October.
Fiscal year 1994 included 52 weeks while fiscal year 1993 included
53 weeks. As a result, the comparisons between the most recent
fiscal years is affected due to the reduced number of days in
fiscal year 1994.
REORGANIZATION. On January 16, 1995, the Company's Board of
Directors announced a reorganization designed to improve the
performance of and grow the Shoney's Restaurant concept. The
reorganization will include divestiture of certain non-core lines
of business including Lee's Famous Recipe, Pargo's and Fifth
Quarter restaurants, as well as Mike Rose Foods. The divestiture
process is expected to be completed within 6 to 12 months from the
date of the reorganization announcement.
The discontinued lines of business had net property, plant and
equipment of $56.8 million at October 30, 1994, and had annual
revenues of $145.8 million and earnings before interest and taxes
of $20.9 million for the 1994 fiscal year. In fiscal 1994, these
discontinued lines of business represented approximately 12.6% of
net property, plant and equipment, 12.5% of
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<F1> Based on 1994 annual survey for U.S. food service revenues
published by Nation's Restaurant News (August 1, 1994).
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<PAGE>
consolidated revenues and 15% of consolidated earnings before
interest and taxes. The Company expects that these discontinued
lines of business will be disposed of for amounts in excess of
their carrying values. Certain one-time charges associated with
the reorganization and divestitures will be accrued as they are
incurred. However, the Company expects the net result will be a
gain once the sales of these lines of business are consummated.
SHONEY'S RESTAURANTS
CONCEPT. Shoney's Restaurants are full-service, family dining
restaurants that are generally open 18 hours each day, and serve
breakfast, lunch, and dinner. Shoney's menu is diversified to
appeal to a broad spectrum of customer tastes. The menu includes
traditional items such as hamburgers, sandwiches, chicken, seafood,
a variety of pasta and stir-fry dishes, and steaks as well as
desserts. Shoney's also offers its signature features of the soup,
salad and fruit bar and the all-you-care-to-eat breakfast bar.
In addition to its regular menu, Shoney's Restaurants often
feature promotional menu items offering special entrees for a
limited time. These promotional menu items are used to promote new
guest trials and generate greater frequency from existing guests.
Promotions also serve as a vehicle to test new items that, if
popular, may be added to the regular menu. The Company, in
conjunction with its franchisees, is continually modifying the menu
to adapt to new food trends, shifts in consumer demands (e.g., more
interest in health conscious dining) and to keep the menu appealing
to our guests. Management believes that the Shoney's concept
offers greater operational stability than some of its competitors
because of the wide variety offered in the menu.
Shoney's seeks to differentiate itself from competing
restaurants by offering excellent service, warm hospitality and
attractive prices to afford a high-quality overall dining
experience. Shoney's Restaurants place significant emphasis on the
quality of food ingredients, proper preparation methods and
attractive food presentation. Buildings are generally brick veneer
or dryvit exteriors which usually include exterior awnings along
with halide lighting for greater visibility at night. The
Company's franchise agreements require that all Shoney's
Restaurants conform to express standards of appearance, service,
food quality and menu content.
HISTORY. Shoney's Restaurants have been in operation since
1952. There are 922 restaurants in the system, 361 company-owned
and 561 franchised, operating in 34 states as of October 30, 1994.
During 1994, a Shoney's Restaurant was opened for the first time in
Vermont. During fiscal 1994, the Company opened 20 units with a
net increase of 15 units and franchisees opened 30 units with a net
decrease of 8 units.
Sales at company-owned units for the 52 week fiscal year 1994
were $541,446,000 compared to $533,893,000 for the 53 week fiscal
year 1993. The Shoney's concept accounted for 46% of the Company's
revenues in fiscal 1994. Pretax income for the 1994 fiscal year
was $50,906,000. Comparable store sales for fiscal 1994 decreased
.9%, including a menu price increase of 1.8%. The average unit
sales of company-owned units in 1994 were $1,548,000.
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The Company continued its aggressive capital expenditure
program for the Shoney's Restaurants in 1994. Overall capital
expenditures in 1994 for Shoney's Restaurants were $53,723,000,
with $18,429,000 for remodeling of 77 units compared to the overall
expenditure of $42,382,000 in 1993, with $4,787,000 for remodeling
of 30 units. The remodel program continues to produce acceptable
results and the Company will continue the aggressive remodel
program for Shoney's Restaurants in 1995 with another 70 units
scheduled.
The Company introduced a 120 seat building for Shoney's
Restaurants during 1994. This prototype will be used in smaller
markets and in other areas that the standard 176 seat configuration
would not be practical. The costs for the smaller unit is
approximately 25% less than the standard building.
Annualized sales of company-owned units opened during 1994
were $1,597,000. The average cost of land, buildings and equipment
for the 1994 units was $1,247,000 each. The average sales-to-
investment ratio of the 1994 units was 1.3 to 1.
The advertising program during 1994 focused on food
promotions. The marketing staff has been strengthened and
reorganized on a geographic basis to better target advertising and
promotional programs. Marketing strategies are being designed to
increase both guest frequency and new guest trials.
CAPTAIN D'S
CONCEPT. Captain D's are quick-service seafood restaurants
and offer in-store or drive-through service. They are generally
open every day from 11 a.m. until 11 p.m, serving lunch and dinner.
The typical Captain D's has 90 seats and employs 20 people,
including five management personnel.
Captain D's menu is designed to capitalize on the trend toward
increased per capita consumption of fish and seafood in the U.S.
that has developed in response to increased public awareness of the
benefits of fish and seafood in a well-balanced diet. To broaden
the menu's appeal, Captain D's also offers a variety of non-
seafood items. The menu includes fried, broiled and baked fish, a
variety of chicken and shrimp dishes, fried clams, stuffed crabs,
seafood and tossed salads, baked potatoes, french fries, hush
puppies, green beans, cole slaw, fried okra and a selection of
desserts. Captain D's is constantly striving to develop appealing
new menu items and improve the quality of existing items. New
products include a premium fried shrimp, shrimp creole, broiled
salmon, and blackened fish.
Through an aggressive worldwide purchasing operation conducted
by the Company, Captain D's has reduced its dependence on Cod fish
(for which price and supply have been uncertain in recent years) by
the introduction and use of other high quality whitefish that have
a more predictable supply and price. The Company's commissary
operation purchases bulk quantities of fish and seafood for
distribution to company-owned units along with franchised
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Captain D's who elect to purchase their food from the Company.
This combined buying power permits the Company to obtain favorable
pricing and sources of supply for fish and seafood, which are in
limited worldwide supply.
The Company's operational strategy for Captain D's is to
increase comparable store sales through the continued introduction
and promotion of distinctive, high quality menu items, emphasis on
fast and reliable service, and maintaining a strong commitment to
high food quality.
HISTORY. Captain D's began operation in 1969 when the Company
opened the first unit in Nashville, Tennessee. There are 643
Captain D's restaurants in 24 states, including 332 company-owned
and 311 franchised units as of October 30, 1994. Captain D's has
the highest average unit volume ($736,000) of any major quick-
service seafood chain.
Sales at company-owned units for the 52 week fiscal year 1994
were $244,535,000 compared to $245,360,000 for the 53 week fiscal
year 1993. The Captain D's concept accounted for 21% of the
Company's revenues in fiscal 1994. Pretax income for the 1994
fiscal year was $20,384,000. Comparable store sales for fiscal
1994 increased 3.9%, including a 2.0% menu price increase.
Captain D's outstanding performance in fiscal 1994 continued
the outstanding performance of fiscal 1993. This performance is
based on the successful operating strategy initiated late in fiscal
1992. This plan, based on extensive customer research, was
designed to increase market share and increase same store sales.
It includes advertising, store remodeling, introduction of new
products and seasonal promotions of a variety of products.
During 1994, Captain D's remodeled 51 company-owned units.
Remodeled units include more windows, enhanced interior and
exterior lighting, brighter colors, neon signs, self-serve drinks
and improved menu boards. Additional landscaping and new, more
visible signage have improved the exterior appearance and street
appeal of the stores.
During fiscal 1994, the division began installing new point-
of-sale computer systems in company-owned units. This system will
provide managers with a variety of daily management reports and
other tools to better manage store inventory, employee scheduling,
and payroll. This system also will enhance store productivity and
permit managers more time for customer service and employee
supervision and training.
OTHER RESTAURANT CONCEPTS
LEE'S FAMOUS RECIPE
CONCEPT. Lee's Famous Recipe are quick-service restaurants
specializing in chicken and offer in-store or drive-through
service. The typical Lee's restaurant seats 64 customers and
generally is open every day from 11:00 a.m. to 11:00 p.m.
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Lee's menu includes three kinds of chicken (including two
kinds of fried chicken and roast chicken), eleven vegetables and
salads, freshly baked biscuits and a variety of home-style
desserts. Lee's has continually experimented with new products and
enhancements to existing menu items to maintain the competitive
appeal of its products.
Lee's buys fresh chicken in each of its markets to ensure only
the highest quality products are served. All chicken is prepared
for cooking in the store and stringent standards for quality and
freshness are observed.
Management training is an important element of Lee's
operational success. During 1994 Lee's developed nine new training
videotapes for store level operations personnel and ten
supplemental training guides will be introduced in 1995. In
addition, a new manager certification program was introduced which
ensures all new Lee's managers meet stringent training and
experience requirements. Lee's management believes that superior
training produces stronger operational execution, more consistent
food quality and, most importantly, satisfied customers.
The Company's operational strategy for Lee's has been driven
by its consistent performance in satisfying its loyal customers.
Lee's managers are focused on operational details and delivering
quality food and service.
HISTORY. Lee's Famous Recipe was acquired by Shoney's, Inc.
in fiscal 1982, and the Company opened its first units in 1983.
Growth of company-owned units has been focused on controlled
expansion of existing core markets. This approach reduces unit
level operating costs by leveraging advertising and supervisory
costs with existing units. There are 285 Lee's restaurants in 17
states and Canada, including 60 company-owned and 225 franchised
units as of October 30, 1994.
Lee's reported record sales of $39,411,000 for the 52 week
fiscal year 1994, an increase of 7.7% from sales of $36,586,000 for
the 53 week fiscal year 1993. Pretax income for the 1994 fiscal
year was $3,027,000. After five years of consecutive increases,
Lee's pretax margin declined from 8.2% in 1993 to 7.7% in 1994 as
food and labor costs were not offset by menu price increases.
Overall, chicken prices were approximately 3% higher in 1994 than
1993 with only 2% of that cost passed through in menu prices.
Recently, chicken prices have declined as compared to the prior
year and, if they remain at current levels, could contribute to
higher margins for Lee's in 1995.
Comparable store sales increased by 2.5% in 1994, resulting in
a real sales gain of .5% after adjusting for an increase in menu
prices. The average unit sales of company-owned units in 1994 was
$661,000.
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PARGO'S
CONCEPT. Pargo's are mid-scale, casual dining restaurants
that serve fresh, made-from-scratch entrees designed to cater to a
diverse range of customer tastes. Pargo's goal is to become the
"favorite neighborhood restaurant" in each of its markets.
Management training and development efforts are focused on
achieving a "customer centered" operational approach at each unit.
Pargo's menu includes a variety of appetizers, beef, seafood
and chicken entrees, specialty burgers and sandwich platters, pasta
dishes, daily homemade soups, garden fresh salads, and fresh
breads. The menu also features a number of "Heart Healthy"
offerings to better serve our customers who are interested in lower
fat, lower cholesterol entrees. Pargo's provides a warm
environment for families by offering balloons, coloring books and
crayons for children, a special children's menu with value pricing,
and a "kids eat free" program featured one day each week. Pargo's
menu includes daily specials, a daily "fresh catch" entree, and
periodic food promotional events (featuring a regional cuisine such
as caribbean or cajun inspired dishes).
HISTORY. Pargo's was founded in 1983 and acquired by the
Company in March 1986. There are 15 Pargo's in six states,
including two franchised units. Three new units opened in 1994 in
Greenville, North Carolina; Virginia Beach, Virginia and
Chesapeake, Virginia. The management of Pargo's has reviewed the
operational strategy for the concept during the last two years to
prepare for more growth. Five of the 13 company-owned units (38%)
have been opened in the last two years and the current plans are to
open four new Pargo's in fiscal 1995.
Pargo's sales for the 52 week fiscal year 1994 increased 32%
to $29,984,000 compared to $22,758,000 in the 53 week fiscal year
1993. Pretax income for the 1994 fiscal year rose 28% to
$2,531,000 compared to $1,984,000 in 1993. Comparable store sales
for fiscal 1994 declined 1.2%, including a menu price increase of
.8%. The average unit sales of company-owned units in 1994 was
$2,532,000.
STEAKHOUSES
CONCEPT. Steakhouses include ten Fifth Quarter and three
BarbWire's restaurants. Fifth Quarters are special occasion
steakhouses and BarbWire's are country & western themed
steakhouses. BarbWire's was introduced last year as a vehicle to
convert selected, under-performing Shoney's restaurants to a new
casual dining concept. Both steakhouse concepts are open 12 hours
daily, seven days a week and serve lunch and dinner.
As part of the Company's reorganization (see page 1), the
Company will divest the Fifth Quarter division during 1995 to focus
on its core lines of business. The BarbWire's concept will be
retained because of its strategic relationship with the core
Shoney's Restaurants.
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BarbWire's offers a variety of mesquite grilled USDA choice
steaks which are cut and aged at the Company's own meat processing
facilities. In addition, BarbWire's offers mesquite grilled
chicken, seafood and burgers, soup, salads, baked potatoes,
homestyle french fries and homemade desserts. Children have a
special menu (which folds into a cowboy hat) with a beverage and
ice cream included with each entree.
The Fifth Quarter's menu includes a wide range of USDA choice
steaks and chops, a variety of chicken and seafood entrees, and
its signature slow-cooked prime rib. Fifth Quarter's also offer
burgers, sandwiches, soups, a host of appetizers and side items, an
extensive salad bar, and a full selection of desserts.
HISTORY. BarbWire's was founded in 1993 when the first unit
opened in Nashville, Tennessee as a conversion from an existing
Shoney's restaurant. Two of the three BarbWire's units are
conversions of company-owned Shoney's restaurants. The BarbWire's
conversions generally have doubled the sales volumes of the
converted Shoney's restaurants with an incremental remodeling
investment of $650,000. Additionally, since the units converted
were in existing Shoney's markets, sales of nearby Shoney's units
also increased after the conversions. The average unit sales
volume of the only unit open all year was $2.1 million. Seven
additional BarbWire's are planned for fiscal 1995.
The Fifth Quarter restaurants began operation in 1973 and
operate ten units, principally in the southeast. The units are
generally stucco exteriors with tudor-style architectural elements.
Interiors are stucco and brick and generally include memorabilia
and photos relevant to each unit's marketplace. Fifth Quarter
restaurants are converting to hickory smoked grills to produce more
flavorful steaks, chicken and grilled fish items. Sales of grilled
steaks have increased at the five units where the new grills were
installed. No new units have been built since November, 1991. The
average unit sales of Fifth Quarters in 1994 were $2,209,000.
Sales for the 52 week fiscal year 1994 of Fifth Quarter and
BarbWire's were $22,094,000 and $3,233,000, respectively. Overall
sales for the Steakhouses Division in 1994 were $25,327,000
compared to $23,383,000 for the 53 week fiscal year 1993. Pretax
income for the Fifth Quarter restaurants in the 1994 fiscal year was
$2,183,000. BarbWire's restaurants reported breakeven operating
results for fiscal year 1994 as a result of start-up costs and other
costs incurred to prepare for future concept expansion. Comparable
store sales for the Fifth Quarter concept in fiscal 1994 decreased
3.1%, including a menu price increase of .3%.
MANUFACTURING AND COMMISSARY OPERATIONS
OPERATIONS AND STRATEGY. The Manufacturing and Commissary
Operations include five distribution facilities and two
manufacturing plants. The Manufacturing Operations include the
meat processing facility and Mike Rose Foods, Inc. The objective
of the Manufacturing and Commissary Operations is to provide
company-owned and franchised restaurants with a reliable source of
quality food products at the lowest practical cost. The Company
utilizes central
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purchasing of all major food, supply and equipment items for its
restaurants to achieve consistent food quality and control costs.
The Company's ability to maintain consistent quality
throughout its restaurant systems depends in part upon the ability
to acquire food products and related items from reliable sources.
When the supply of certain products is uncertain or prices are
expected to rise significantly, the Company may enter into purchase
contracts or purchase bulk quantities for future use. There were
no material long-term contracts for any food products and adequate
alternative sources are believed to be available for most products.
Certain items, however, are purchased under agreements with vendors
based on the Company's annual expected usage. Such agreements
generally include a pricing schedule for the period covered by the
agreement(s).
Mike Rose Foods, Inc., a wholly-owned subsidiary, is a private-
label manufacturer of salad dressings, condiments and dry blended
products. Mike Rose Foods provides products to the Company's
restaurant concepts and manufactures products to specification for
third-party customers. Mike Rose Foods is a full-service custom
manufacturer with kitchens, testing laboratories and research
facilities located at its Nashville, Tennessee plant.
HISTORY. During 1994, the Company made significant
investments in its Manufacturing and Commissary Operations. A new
distribution facility in Wichita, Kansas replaced the Dallas, Texas
distribution facility. By relocating to Wichita, the Company will
reduce freight costs by $500,000 annually. The meat processing
facility was expanded to 60 million pounds of throughput capacity
and quick freezing equipment was upgraded. The new processing and
freezing equipment at this facility will also permit the Company to
add new products such as soups and vegetables.
Total revenues for Commissary Operations, including
intercompany sales, were $524,407,000 for the 52 week fiscal year
1994 compared to sales of $518,694,000 for the 53 week fiscal year
1993. Comparable store growth and new unit growth of company-owned
and franchised units provide further opportunities for revenue
growth for Commissary Operations. Since 1989, the number of
franchised restaurants that are serviced by the Company's
distribution centers has expanded from 349 to 649.
Total revenues for Mike Rose Foods, including intercompany
sales, were $77,695,000 for the 52 week fiscal year 1994 compared
to sales of $74,260,000 for the 53 week fiscal year 1993.
Intercompany sales for Mike Rose Foods were $27,770,000 and
$27,352,000 for fiscal years 1994 and 1993, respectively.
(b) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS. Note 1 of
the Notes to Consolidated Financial Statements at pages 29-30 of
Item 8 of this Annual Report on Form 10-K is incorporated herein by
this reference.
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(c) NARRATIVE DESCRIPTION OF BUSINESS.
(i)-(ii) See (a) above
(iii) Essential supplies and raw materials are available
from several sources and the Company is not dependent upon any
single source of supplies or raw materials.
(iv) The Company considers the Shoney's, Shoney's Inn,
Captain D's, Lee's Famous Recipe, Fifth Quarter, Pargo's and
BarbWire's names and designs to be of substantial economic
benefit to its business. It accordingly deems very significant
to its business the right that it holds to operate and license
restaurant and/or motel operations under these names.
(v) Minor seasonal variations are not significant to the
Company's business.
(vi) The practice of the Company and the industry with
regard to working capital items is not significant to the
Company's business.
(vii) No material part of the Company's business is
dependent upon a single customer or a few customers.
(viii) Backlog of orders is not significant to the
Company's business.
(ix) No material portion of the Company's business is
subject to renegotiation of profits or termination of
contracts or subcontracts at the election of the government.
(x) The Company's business is highly competitive
(usually by means of price, product quality and service) and
the Company competes with a number of national and regional
restaurant chains as well as locally owned restaurants that
specialize in the sale of seafood, sandwiches, fried chicken
and other prepared foods. The Company is unable to determine
its relative competitive position in the industry.
(xi) No material amount has been spent in any of the
last three (3) fiscal years on Company-sponsored research and
development activities or on customer sponsored research
activities relating to the development of new products,
services or techniques or the improvement of existing
products, services or techniques.
(xii) No material amounts were or will be required to be
spent to comply with environmental protection regulations.
(xiii) As of October 30, 1994, the Company employed
approximately 30,000 persons.
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ITEM 2. PROPERTIES.
The following table sets forth certain information regarding
the Company's restaurant and other properties, <F2> including those
under construction, as of October 30, 1994:
<TABLE>
<CAPTION>
Number of Properties <F3>
Use Total Owned Leased
--- ----- ----- ------
<S> <C> <C> <C>
Office and Commissaries <F4> 10 8 2
Shoney's Restaurants 361 243 118
Captain D's Restaurants 332 232 100
Lee's Famous Recipe Restaurants 60 48 12
Pargo's Restaurants 13 5 8
Fifth Quarter Restaurants 10 5 5
BarbWire's Restaurants 3 3 0
Restaurants Under Construction 6 4 2
--- --- ---
795 548 247
=== === ===
</TABLE>
LEASES
Most of the leases of the Company's restaurant properties are
for periods of approximately 15 years, usually with renewal options
ranging from 5 to 15 years. They provide for minimum rentals,
totalling approximately $8,886,000 in fiscal year 1994, net of
sublease rentals, plus an amount equal to a percentage of sales,
generally 3% to 6% in excess of an agreed sales volume. The Company
is also required to pay property taxes and insurance under most of
the leases. Seventy-nine (79) of the leases expire prior to
October 25, 1999; however, 64 of these leases provide for renewal
options. In fiscal 1994, aggregate rental expense for the 162
restaurant properties not capitalized was approximately $4,562,000,
net of sublease rentals. Notes 6 and 9 of the Notes to
Consolidated Financial Statements on pages 35-38 and 41-48,
respectively, of Item 8 in this Annual Report on Form 10-K are
incorporated herein by reference.
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<F2> The Company's 779 restaurant properties in operation as of
October 30, 1994 were located in 25 states.
<F3> In addition, the Company owns or leases 73 properties that
are in turn leased to others and 47 parcels of land.
<F4> The Company's principal offices and commissary at
Nashville, Tennessee comprise four buildings of approximately
171,000 square feet on twenty acres of land owned by the Company.
The Company also operates commissaries in Ripley, West Virginia;
Macon, Georgia; Atlanta, Georgia and Wichita, Kansas. The Company's
private label manufacturer of salad dressings and condiments
occupies a facility of approximately 151,000 square feet on 8 acres
of company-owned land in Nashville, Tennessee.
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ITEM 3. LEGAL PROCEEDINGS.
J&J SEAFOOD, INC. v. SHONEY'S, INC. - On December 19, 1994,
suit was instituted against the Company in the United States District
Court for the Middle District of Tennessee by J&J Seafood, Inc.
("J&J"), a franchisee of one of the Company's Captain D's restaurants.
The complaint alleges violations of Sections 1 and 2 of the Sherman
Anti-trust Act and a violation of the Tennessee Consumer Protection
Act based upon claims that the Company imposes a "tying" arrangement
by requiring franchisees to purchase food products from the
Company's commissary. The plaintiff purports to act on behalf of
a similarly situated class of plaintiffs; however, there has been
no motion filed to certify the case as a class action nor has the
case been certified as a class action. The complaint seeks damages
for the alleged class in an amount not to exceed $500 million and
treble damages.
The claims asserted in the federal court case are essentially
the same as certain claims made by the same plaintiff in a case
filed against the Company in the Chancery Court for Davidson County,
Tennessee; however, in the state court case, the claims are made
only by J&J (as distinguished from being made on behalf of a class).
On December 16, 1994 counsel for J&J advised the Company that the
federal court case described in the preceding paragraph would be
filed unless the Company settled the pending state court case by
purchasing J&J's franchised restaurant for $1.65 million, plus
assumption of certain equipment leases. The Company rejected the
demand and the federal court lawsuit was filed.
Management believes it has substantial defenses to the claims
and intends to vigorously defend both J&J's state and federal court
actions. In the opinion of management, the ultimate liability with
respect to this litigation will not materially affect the operating
results or the financial position of the Company.
RONALD COOK AND STEPHEN C. SANDERS v. SHONEY'S, INC. - On
December 30, 1994, suit was instituted against the Company in the
United States District Court for the Middle District of Tennessee by
Ronald Cook and Stephen C. Sanders, who are franchisees of six of
the Company's Shoney's Restaurants. The Company was served with the
suit on January 19, 1995. The complaint alleges causes of action
for fraud, violations of Sections 1 and 2 of the Sherman Anti-trust
Act, RICO, violations of the Tennessee Consumer Protection Act, and
breach of contract. The thrust of plaintiffs' claim is that the
Company has violated the federal anti-trust laws by imposing a
"tying" arrangement requiring Shoney's Restaurant franchisees to
purchase their food products from the Company's commissary by not
providing them with product specifications to be used in
selecting alternative vendors. They further allege that the
Company has engaged in fraud, breach of contract, and violations of
the Tennessee Consumer Protection Act regarding the establishment
and operation of the Company's Shoney's Restaurants cooperative
advertising program. Mr. Cook also asserts an individual cause of
action for breach of contract regarding a franchise territory transfer.
The plaintiffs purport to act on behalf of a similarly situated
class of plaintiffs; however, there has been no motion filed to
certify the case as a class action nor has the case been certified
-11-
<PAGE>
as a class action. The complaint does not specify the amount of
damages sought; however, the plaintiffs seek treble damages for
both their anti-trust claims and the Tennessee Consumer Protection
Act claims. They also seek punitive damages on their fraud claim.
Management believes it has substantial defenses to the claims
and intends to vigorously defend this litigation. In the opinion of
management, the ultimate liability with respect to this litigation
will not materially affect the operating results or the financial
position of the Company.
OTHER LITIGATION - The Company is a party to other legal
proceedings incidental to its business. In the opinion of
management, the ultimate liability with respect to these actions
will not materially affect the operating results or the financial
position of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
During the fourth quarter of the fiscal year covered by this
Annual Report on Form 10-K, no matter was submitted to a vote of
security holders, through the solicitation of proxies or otherwise.
ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT.
The Company, in accordance with General Instruction G(3) to
Form 10-K and Instruction 3 to Item 401(b) of Regulation S-K, 17
C.F.R. Section 229.401, furnishes the following information with regard
to its executive officers as an additional item in Part I of this
Annual Report on Form 10-K. The following officers are those that
the Company currently deems to be "executive officers", as defined
by the Securities and Exchange Commission.
<TABLE>
<CAPTION>
Name Office Age
- - ----- ------- ---
<S> <C> <C>
Taylor H. Henry Chairman of the Board and Chief Executive Officer 58
Charles E. Porter President 51
W. Craig Barber Senior Executive Vice President and 39
Chief Financial Officer
Ronald E. Walker Executive Vice President-Captain D's 44
Harry C. Klapheke, Jr. Division President-Lee's Famous Recipe 46
Kevin Henderson Division President-Steakhouses 44
Robert A. Cooper, Jr. Division President-Pargo's 45
Daniel E. Staudt Division President-Manufacturing and Distribution 45
H. Benny Ball Executive Vice President-Human Resources 46
David L. Dobbs Executive Vice President-Purchasing 43
Charles P. Vaughn, Jr. Vice President-Franchising and Development 34
F.E. McDaniel, Jr. Vice President and Secretary/Treasurer 38
V. Michael Payne Vice President and Controller 43
</TABLE>
There is no family relationship among the above or any of the
directors of the Company.
-12-
<PAGE>
Mr. Henry joined the Company in 1974 and held the position of
Vice President - Finance and Chief Financial Officer until March,
1991 when his title was changed to Senior Vice President - Finance
and Chief Financial Officer. He was elected as a member of the Board
of Directors in June, 1989. He served as Senior Vice President -
Finance and Chief Financial Officer until December, 1992, when he
was elected to his present position.
Mr. Porter was in charge of the Company's manufacturing and
distribution operations from 1982 until December, 1991, although
his title was changed to President of that division in March, 1991.
He was elected Division President - Captain D's in December, 1991.
He was elected President of the Company in January, 1995.
Mr. Barber joined the Company and was elected Assistant
Treasurer in July, 1983. He was elected Treasurer in August, 1988
and served in that position until December, 1992, when he was
elected Vice President - Finance and Chief Financial Officer. He
was elected Senior Executive Vice President and Chief Financial
Officer in January, 1995.
Mr. Walker has held various positions since joining the
Company in 1980, becoming Director of Franchise Operations for the
Captain D's Division in December 1984. He was elected Vice
President of Franchise Operations in December 1986 and promoted to
his present position in January, 1995.
Mr. Klapheke was Director of Marketing for Lee's Famous Recipe
from July 1982 to November 1990. Since November 1990, he has
served as Vice President, Marketing - Lee's Famous Recipe. In
April 1993, he became Vice President of Marketing and Franchising
and was elected to his present position in August, 1994.
Mr. Henderson joined the Company in January, 1986 and was
named Group Vice President of the dinner house division in
December, 1986. He became Division President - Steakhouses in
June, 1990.
Mr. Cooper has worked in the Pargo's concept since 1983. He
served as an area supervisor when the Company acquired that concept
in 1986 and served as director of operations from 1987 until his
election as Division President in December, 1991.
Mr. Staudt joined the Company in 1972. He served as Director
of the Nashville commissary from 1983 until November, 1988, when he
was elected Vice President. He was elected Executive Vice
President - Commissary Operations in December, 1991 and became
Division President - Manufacturing and Distribution in May, 1994.
Mr. Ball joined the Company in 1982 as Director of Personnel
Services. He was named Senior Vice President - Personnel in
December, 1989 and Executive Vice President - Human Resources in
March, 1993.
-13-
<PAGE>
Mr. Dobbs joined the Company's accounting division in 1976 and
served as controller of the Shoney's division. He was assistant
director of franchise field services for the Shoney's Division
prior to becoming director of franchise field services in 1985. He
held that position until 1986, when he became executive director of
purchasing. He was elected Vice President - Purchasing in December,
1987 and Executive Vice President - Purchasing in December, 1991.
Mr. Vaughn joined the Company in 1982 as a site analyst in the
real estate department. He was elected a Vice President in August,
1990 and he was promoted to Vice President - Franchising and
Development in February, 1994.
Mr. McDaniel has served in various accounting and financial
positions since joining the Company in 1981. He was elected
Assistant Secretary in December, 1984 and Secretary in August,
1988. He was elected to the additional position of Treasurer in
December, 1992. He was elected a Vice President of the Company in
March, 1994.
Mr. Payne joined the Company's accounting department in May
1973. He served in various accounting positions before being
appointed Corporate Controller in 1981. He was elected Vice
President and Controller of the Company in December, 1992.
-14-
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
(a) MARKET INFORMATION. The Company's common stock is traded
on the New York Stock Exchange under the symbol "SHN." The
following table sets forth the high and low trading prices of the
Company's common stock as reported by the New York Stock Exchange
during each of the fiscal quarters of the prior two fiscal years:
<TABLE>
<CAPTION>
Stock Stock
No. of Market Market
Weeks High Low
----- ------ ------
<S> <C> <C> <C>
1994
First Quarter 16 25 5/8 19 3/4
Second Quarter 12 24 5/8 17 1/8
Third Quarter 12 18 1/8 13 1/2
Fourth Quarter 12 15 7/8 13 3/8
--
52
==
1993
First Quarter 16 26 18 3/4
Second Quarter 12 25 5/8 18 3/8
Third Quarter 12 21 1/4 16 1/2
Fourth Quarter 13 23 3/4 19
--
53
==
</TABLE>
(b) HOLDERS. There were 8,334 shareholders of record as of
January 17, 1995.
(c) DIVIDENDS. The Company has not paid a dividend on its
common shares since the Company's 1988 recapitalization, at which
time, the Company paid a $19.97 per share special distribution.
The Company currently intends to retain all earnings to support the
development and growth of the Company's restaurant concepts and to
retire its outstanding debt obligations. The Company's senior debt
issues: (1) require satisfaction of certain financial ratios and
tests (which become more restrictive each year); (2) impose
limitations on capital expenditures; (3) limit the ability to incur
additional debt, leasehold obligations and contingent liabilities;
(4) prohibit dividends and distributions on common stock; (5)
prohibit mergers, consolidations or similar transactions; and (6)
include other affirmative and negative covenants.
-15-
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA.
<TABLE>
<CAPTION>
FIVE YEAR FINANCIAL SUMMARY
(in thousands except per share data)
Fiscal year ended October 1994 1993(a) 1992 1991 1990
- - -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues $1,166,224 $1,139,933 $1,062,271 $ 992,387 $ 929,498
Costs and expenses
Cost of sales 966,898 941,356 873,330 812,282 757,174
General and administrative 61,606 60,738 58,921 56,892 54,286
Litigation settlement (1,700) - 124,500
- - -----------------------------------------------------------------------------------------------------------
1,026,804 1,002,094 1,056,751 869,174 811,460
Income before interest expense,
income taxes, extraordinary charge,
and cumulative effect of change in
accounting principle 139,420 137,839 5,520 123,213 118,038
Interest expense 41,237 44,466 51,901 63,907 71,082
- - -----------------------------------------------------------------------------------------------------------
Income (loss) before income taxes,
extraordinary charge, and cumulative
effect of change in accounting
principle 98,183 93,373 (46,382) 59,306 46,956
Income taxes 35,589 35,363 (19,805) 21,279 17,374
- - -----------------------------------------------------------------------------------------------------------
Income (loss) before extraordinary
charge and cumulative effect of
change in accounting principle 62,594 58,010 (26,577) 38,027 29,582
Extraordinary charge on early
extinguishment of debt (1,037)
Cumulative effect of change in
accounting for income taxes 4,468
- - -----------------------------------------------------------------------------------------------------------
Net income (loss) $ 66,025 $ 58,010 $ (26,577)(b) $ 38,027 $ 29,582
===========================================================================================================
Weighted average shares
outstanding (fully diluted) 46,520 45,644 41,049 46,112 45,095
Per share data
Net income (loss)-fully diluted $ 1.51(c) $ 1.35 $ (.65)(b) $ .90 $ .73
Dividends -- -- -- -- --
Total assets $ 557,916 $ 528,092 $ 469,185 $ 431,806 $ 399,844
Long-term debt and obligations
under capital leases $ 414,165 $ 390,054 $ 460,717 $ 542,544 $ 579,070
Shareholders' equity (deficit) $ (136,764) $ (209,988) $ (290,497) $ (265,075) $ (320,794)
Number of restaurants at year-end
Company-owned 779 766 749 737 715
Franchised 1,099 1,099 1,054 967 928
- - -----------------------------------------------------------------------------------------------------------
Total restaurants 1,878 1,865 1,803 1,704 1,643
===========================================================================================================
</TABLE>
Notes: (a) - 53 week year.
(b) - Net income before special charge for settlement of
lawsuit was $50,663 or $1.14 per share (see Note 11
to the consolidated financial statements).
(c) - Income before extraordinary charge and cumulative effect
of change in accounting principle was $1.43 per share.
-16-
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATION.
The following discussion and analysis provides information
which management believes is relevant to an assessment and
understanding of the Company's consolidated results of operations
and financial condition. The discussion should be read in
conjunction with the consolidated financial statements and notes
thereto.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary source of liquidity is cash provided by
operating activities which totalled $138.1 million in 1994, an
increase of $30.3 million, or 28%, compared to 1993. This increase
was primarily attributable to a decrease in food inventory
(principally fish), an increase in depreciation and amortization
and an increase in cash flow from accounts receivable and deferred
income taxes, which were partially offset by a decrease in accrued
expenses. Cash provided by operating activities in 1993 decreased
$6.0 million when compared to 1992 and was primarily attributable
to an increase in food inventory (principally fish), which was
partially offset by an increase in operating income.
Cash used by investing activities increased in 1994 over 1993
principally due to an $11.9 million increase in capital
expenditures for restaurant remodelings. Cash used by investing
activities increased in 1993 over 1992 principally due to increased
capital expenditures for restaurant remodelings ($9.3 million) and
for new restaurant properties ($7.3 million).
The Company is highly leveraged and therefore seeks to
minimize its interest costs by constantly evaluating alternative
financing arrangements. In July 1993, the Company entered into a
$125 million reducing revolving credit facility expiring October
1997, with reductions in the aggregate credit facility beginning in
1995. This facility was secured by all material assets of the
Company not otherwise pledged. The Company borrowed $25 million
and repaid $10 million under this facility during 1993. This
facility had a floating interest rate, generally 2% over the London
Interbank Offered Rate ("LIBOR"), which was 5.2% at October 31, 1993.
During 1994, the Company's $125 million reducing revolving
credit facility was amended to facilitate redemption of the
Company's outstanding 12% subordinated debentures, which had been
issued in connection with the Company's 1988 recapitalization. The
credit facility was increased to a maximum of $270 million and its
term was extended from 1997 to 1999. The Company's $145.7 million
of outstanding 12% debentures were redeemed at par in July 1994.
The reducing revolving credit facility continues to have a floating
rate of interest (2% over LIBOR) and was 7% at October 30, 1994.
Based on a 7% interest rate, refinancing of the 12% subordinated
debt results in annual interest savings of approximately $7
million. The Company had $240 million outstanding under this
facility at October 30, 1994.
The Company maintains an interest rate risk management program
to limit its exposure to rising short-term interest rates on its
variable rate debt. At October 30, 1994, the Company
-17-
<PAGE>
held interest rate cap agreements for $50 million (notional amount)
for two years and at a maximum LIBOR rate of 7%. These agreements
limit the Company's maximum LIBOR interest rate to 7% on $50
million of its variable rate debt until October 1996.
Also, during 1994 the Company made scheduled payments of $100
million on its senior debt-fixed rate loan, principally from
increased borrowing under the reducing revolving credit facility.
These payments reduced the senior fixed rate debt outstanding to
$60 million, which is due April 1995. The interest rate on this
issue is fixed at 9.78%, with semiannual interest payments each
April and October. The Company has a combination of interest rate
swap agreements, which expire on various dates through April 1995,
that effectively convert the interest rate of this remaining debt
to 6.3%.
During 1993, the Company made the remaining scheduled payments
of $45 million on the original $585 million of bank borrowings
related to the Company's 1988 recapitalization. Principal payments
made on indebtedness during 1992 were $89.4 million, which included
scheduled payments of $30 million and prepayments of $55 million on
the Company's original $585 million of recapitalization bank debt.
The Company's lending agreements contain covenants that impose
limitations on capital expenditures and require satisfaction of
certain financial ratios and tests (such ratios and tests become
more restrictive each year). The covenants also prohibit the
Company from incurring additional indebtedness except under two
existing unsecured lines of credit totalling $30 million (with
$26.2 million available under the lines at October 30, 1994) or
from mortgage financing arrangements. The Company had borrowed
$61.3 million under mortgage financing arrangements at October 30,
1994 with an effective interest rate of 6.9%. On December 21, 1994,
the Company completed a mortgage financing arrangement for $28
million with a floating rate of LIBOR plus 1.25% At December 21,
1994, the effective interest rate for this financing arrangement
was 7.31%. Substantially all of the proceeds from this financing
arrangement were used to reduce the balance outstanding under the
Company's reducing revolving credit facility, and thereby improve
the Company's overall liquidity. The Company is currently
prohibited from paying dividends by its lending agreements.
Proceeds from employee stock options decreased $10.6 million
in 1994 compared with 1993 principally because many of the
outstanding options were at prices in excess of the market price of
the Company's stock during a significant portion of 1994. Proceeds
from employee stock options increased $5.2 million during 1993
principally as a result of the exercise of options granted during
the recapitalization in July 1988, which were to expire in July
1993. Litigation settlement payments of $24.9 million and $22.4
million, respectively, were made during 1994 and 1993 as required
by the consent decree approved in January 1993 (see Note 11 to the
consolidated financial statements).
The Company expects to meet its needs for debt service,
capital expenditures (excluding those for land and buildings which
are expected to be met through mortgage financings), the litigation
settlement and other general corporate purposes through cash
generated by the
-18-
<PAGE>
Company's operations, the Company's reducing revolving credit
facility and its other available lines of credit.
REVENUES
The components of the net increase in revenues during fiscal
1994 and 1993 of $26.3 million (2%) and $77.7 million (7%),
respectively, are summarized as follows:
<TABLE>
<CAPTION>
1994 1993
Amount Amount
(millions) (millions)
----------------------------------------------------------------
<S> <C> <C>
Sales from restaurants opened
or acquired during the year $ 20.6 $ 27.0
Higher sales prices 14.7 10.7
Sales at prior year prices (1.8) (3.8)
Restaurant sales for 53rd week (14.8) 14.8
Manufacturing, franchising and other sales .2 29.1
Other income 7.4 (.1)
-----------------------------------------------------------------
$ 26.3 $ 77.7
=================================================================
</TABLE>
Sales from restaurants opened or acquired during the year
resulted from the opening of 30 and 34 Company-owned units in 1994
and 1993, respectively. The Company sold ten Captain D's units in
Dallas, Texas to a franchisee during 1994, closed two other
Captain D's restaurants and closed five low-volume Shoney's units.
The Company closed 17 restaurants during 1993, including 13 Captain
D's, as a result of a decision to reduce the number of Captain D's
units in the Dallas and Fort Worth, Texas markets. Comparable
store sales of all company-owned units increased .5% for 1994 and
.1% for 1993, resulting in a real decrease of 1.2% for 1994 and
1.1% in 1993 after adjusting for menu price increases. The
Company's recently announced reorganization is designed to focus on
improvement in the performance of Shoney's Restaurants,
particularly comparable store sales.
Other income increased $7.4 million in 1994 as compared with
1993 as the result of several factors. During the first quarter of
1994, the Company sold its minority ownership interests in four
Shoney's Inns to ShoLodge, Inc. ("ShoLodge"), the majority owner,
in exchange for ShoLodge common shares, resulting in a $1.7 million
gain. In conjunction with this sale, the Company also received
prospective registration rights for shares of ShoLodge stock that
may be acquired upon the exercise of certain ShoLodge warrants that
it owns. The Company has classified as trading securities those
warrants for which the Company has registration rights that are
exercisable within one year and recorded their fair value, which
resulted in a gain of approximately $1.5 million during 1994 (see
Note 3 to the consolidated financial statements). These ShoLodge
warrants and common shares are adjusted to their fair value each
quarter with the change in value included in other income.
During 1994, the Company recorded an increase in carrying value
for these securities of $957,000. In addition,
-19-
<PAGE>
during the first quarter of 1994 the Company received $.9 million
from the settlement of certain securities litigation and during the
third quarter recorded gains of $1.6 million from various real
estate transactions.
COSTS AND EXPENSES
Cost of sales includes food and supplies, restaurant labor and
operating expenses. A summary of cost of sales as a percentage of
revenues for the last three fiscal years is shown below:
<TABLE>
<CAPTION>
1994 1993 1992
- - -----------------------------------------------------------------
<S> <C> <C> <C>
Food and supplies 41.8% 41.8% 41.2%
Restaurant labor 20.9 21.0 20.9
Operating expenses 20.2 19.8 20.1
- - -----------------------------------------------------------------
82.9% 82.6% 82.2%
=================================================================
</TABLE>
Manufacturing and commissary sales increased $2.2 million and
$27.9 million during 1994 and 1993, respectively. When compared to
restaurant sales, these sales have a higher percentage of food
cost. There is no restaurant labor associated with these sales.
Food cost as a percentage of sales was unchanged in 1994 when
compared to 1993 as higher food cost at the restaurant level
(primarily the result of implementing a new menu for Shoney's
Restaurants) was offset by lower food costs for manufacturing and
commissary sales. During 1993, the Company experienced higher
costs for meat products and lower margins in its manufacturing
division which contributed to the increase in food cost.
Restaurant labor increased slightly in 1993 as a percentage of
revenues as the Company incurred higher labor cost at the
restaurant level in a concerted effort to improve service to its
customers. Operating expenses, as a percentage of revenues,
increased in 1994 due to higher depreciation and other costs
associated with the Company's remodeling program for its Shoney's
Restaurants. This increase was partially offset by the settlement
of a lawsuit for $2.0 million against a former worker's
compensation insurance carrier, which reduced insurance expense.
The Company anticipates continued pressure on restaurant operating
margins in 1995 until improvements in comparable store sales are
achieved. Management intends to closely monitor and manage these
costs to the maximum extent practical.
A summary of general and administrative expenses and interest
expense as a percentage of revenues for the last three fiscal years
is shown below.
<TABLE>
<CAPTION>
1994 1993 1992
- - -----------------------------------------------------------------
<S> <C> <C> <C>
General and administrative 5.3% 5.3% 5.5%
Interest expense 3.5% 3.9% 4.9%
</TABLE>
General and administrative costs as a percentage of
revenue were unchanged in 1994 and declined in 1993 when compared
to 1992 due primarily to a reduction in legal costs in
1993 of approximately $3.7 million. In addition, the
Company received $3 million during the first
-20-
<PAGE>
quarter of 1993 from certain of its insurance carriers for
recovery of legal fees paid in prior years related to the
discrimination litigation, which also reduced general and
administrative expenses. The benefit from the recovery of legal
fees was partially offset by certain severance expenses associated
with the resignation or termination of certain employees during
the first quarter of 1993 which totalled $3.2 million.
Interest expense as a percentage of revenues declined during
1994 primarily due to the refinancing in July 1994 of $145.7
million of subordinated debentures issued in connection with the
Company's 1988 recapitalization. The refinancing of the debentures
in July 1994 resulted in an extraordinary charge of approximately
$1 million (net of income tax benefits of $.6 million) for the
unamortized portion of the original issue discount and unamortized
debt issue costs. The decline in interest expense during 1993 was
the result of lower average debt outstanding ($1.9 million) and
lower interest rates ($5.5 million).
On January 25, 1993, the Company received final approval of
the settlement in the three and one-half year old class action race
discrimination lawsuit in which plaintiffs had sought minimum
damages of $530 million plus litigation costs and expenses. Under
the settlement, the Company will make available $105 million to pay
potential claims, $25.5 million for litigation costs and class
counsel's expenses as well as an estimated $4.0 million for
administrative costs and payroll taxes. The Company received $2
million from one of its insurance carriers during the third quarter
of 1992 and received an additional $3 million in the first quarter
of 1993. In November 1992 the Company agreed to accept a
settlement of $10 million from another of its insurers to be paid
in three annual installments beginning in fiscal 1993 and included
this amount in the 1992 litigation settlement expense. The Company
is required to pay substantially all of the remaining litigation
settlement liability over the next 3 1/2 years.
The Company incurred a charge to net income in 1992 of $77.2
million related to the settlement (net of insurance recoveries of
$10 million and income taxes). This charge resulted in a net loss
for the year ended October 25, 1992 of $26.6 million or $.65 per
share. Excluding the special charge, net income was $50.7 million
or 33% higher than 1991 while earnings per share were $1.14
compared to $.90 in 1991 and $.73 in 1990.
During 1994, the Company obtained an IRS private letter ruling
which clarified that certain portions of the settlement payments
were not subject to federal payroll taxes that had been previously
accrued by the Company. The reserve for litigation settlement was
reduced by $1.7 million to adjust for this change in estimate for
accrued payroll taxes due on the settlement payments.
The effective income tax rates were 36.2 percent in 1994, 37.9
percent in 1993 and 42.7 percent in 1992. The lower effective tax rate
in 1994, when compared to 1993, was primarily attributable to the
reinstatement of the Targeted Jobs Tax Credit ("TJTC") in August 1993,
the effects of the new tax credit on FICA tips and lower effective
state tax rates. Effective December 31, 1994, the TJTC was suspended
by Congress. Historically, a number of the Company's restaurant
employees have qualified for TJTC, thereby reducing the Company's
-21-
<PAGE>
effective income tax rate. As a result of the repeal of the TJTC,
the Company anticipates that its effective tax rate will increase
in fiscal 1995 to approximately 37.5%. The higher effective tax
rate in 1993, as compared to 1991 (35.9%), was primarily attributable
to an increase in the statutory federal income tax rate and the
suspension of the TJTC from June 1992 through August 1993.
The high effective tax benefit for 1992 was primarily attributable
to the loss incurred due to the litigation settlement (see Note 11 to
the consolidated financial statements).
REORGANIZATION
On January 16, 1995, the Company's Board of Directors
announced a reorganization designed to improve the performance
of and grow the Shoney's Restaurant concept. The reorganization
will include divestiture of certain non-core lines of business
including Lee's Famous Recipe, Pargo's and Fifth Quarter
restaurants, as well as Mike Rose Foods, Inc. The divestiture
process is expected to be completed within 6 to 12 months from
the date of the reorganization announcement.
For the fiscal year ended October 30, 1994, these discontinued
lines of business represented 12.6% of consolidated net property,
plant and equipment, 12.5% of consolidated revenues and 15% of
consolidated earnings before interest and taxes. The Company expects
that these discontinued lines of business will be disposed of for
amounts in excess of their carrying values. Certain one-time charges
associated with the reorganization and divestitures will be accrued
as they are incurred. However, the Company expects the net result
will be a gain once the sales of these lines of business are
consummated.
Under the terms of the Company's various lending agreements,
proceeds from the divestitures of these businesses generally would
be required to be used to reduce the Company's existing senior
indebtedness. As part of the divestiture process, the Company
intends to request modifications to certain of its credit agreements
that would permit the Company to utilize the divestiture proceeds
to (1) fund the planned improvements and growth of the Shoney's
Restaurants, (2) retire existing senior indebtedness and (3)
repurchase shares of the Company's stock.
IMPACT OF ACCOUNTING CHANGES
There are no pending accounting pronouncements that when
adopted are expected to have a material effect on the Company's
results of operations or its financial position.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The consolidated financial statements of the registrant and its
subsidiaries, together with all notes thereto, are set forth
immediately following this page as pages 23 through 46 of this
Annual Report on Form 10-K.
-22-
<PAGE>
REPORT OF ERNST & YOUNG LLP
Independent Auditors
Shareholders and Board of Directors
Shoney's, Inc.
Nashville, Tennessee
We have audited the accompanying consolidated balance sheet of
Shoney's, Inc. and subsidiaries as of October 30, 1994 and October
31, 1993, and the related consolidated statements of operations,
shareholders' equity (deficit) and cash flows for each of the three
fiscal years in the period ended October 30, 1994. Our audits also
included the financial statement schedule listed in the Index of
Item 14(a). These financial statements and schedule are the
responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements and schedule
based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the consolidated
financial position of Shoney's, Inc. and subsidiaries at October
30, 1994 and October 31, 1993, and the consolidated results of
their operations and their cash flows for each of the three fiscal
years in the period ended October 30, 1994 in conformity with
generally accepted accounting principles. Also, in our opinion,
the related financial statement schedule, when considered in
relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set
forth therein.
As discussed in Note 2 to the consolidated financial statements,
the Company changed its method of accounting for income taxes and
certain investments in debt and equity securities during the year
ended October 30, 1994.
Nashville, Tennessee
January 19, 1995
/S/ ERNST & YOUNG LLP
-23-
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEET
Shoney's, Inc. and Subsidiaries
October 30 October 31
1994 1993
----------- -----------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 4,229,784 $ 7,841,426
Notes and accounts receivable,
less allowance for doubtful
accounts of $1,276,000 in 1994
and $2,061,000 in 1993 20,807,028 24,857,375
Inventories, at lower of cost
(first-in, first-out method) or market 41,621,732 52,795,971
Deferred income taxes 17,821,945 16,576,977
Prepaid expenses and other current assets 10,388,429 5,056,988
----------- ------------
Total current assets 94,868,918 107,128,737
Property, plant and equipment, at cost
Land 121,587,607 115,082,120
Buildings 234,358,647 204,784,770
Buildings under capital leases 20,631,961 20,631,961
Restaurant and other equipment 286,623,835 260,782,665
Leasehold improvements 56,836,699 54,524,751
Rental properties 22,917,082 14,904,472
Construction in progress (estimated
cost to complete: $7,789,000 in
1994 and $8,406,000 in 1993) 13,888,290 13,507,350
----------- -----------
756,844,121 684,218,089
Less accumulated depreciation and
amortization (306,235,908) (280,421,156)
----------- -----------
Net property, plant and equipment 450,608,213 403,796,933
Other assets
Deferred charges and other intangible assets 6,695,862 7,950,725
Other 5,742,782 9,215,940
----------- -----------
Total other assets 12,438,644 17,166,665
----------- -----------
$ 557,915,775 $ 528,092,335
=========== ===========
</TABLE>
See notes to consolidated financial statements
-24-
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEET
Shoney's, Inc. and Subsidiaries
October 30 October 31
1994 1993
----------- -----------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities
Accounts payable $ 41,789,157 $ 36,636,478
Federal and state income taxes 3,764,329 2,303,533
Taxes other than income taxes 7,855,367 9,132,476
Employee compensation and related items 36,306,634 39,040,311
Accrued interest expense 2,079,655 7,147,733
Other accrued liabilities 14,564,212 13,658,676
Reserve for litigation settlement due
within one year 23,803,836 25,713,422
Debt and capital lease obligations due
within one year 66,709,213 111,401,224
----------- -----------
Total current liabilities 196,872,403 245,033,853
Long-term debt 402,306,073 377,209,236
Obligations under capital leases 11,859,091 12,845,094
Reserve for litigation settlement 61,673,834 86,413,339
Deferred credits
Income taxes 15,477,405 9,424,823
Income and other liabilities 6,491,210 7,153,808
----------- -----------
Total deferred credits 21,968,615 16,578,631
Commitments and contingencies
Shareholders' equity (deficit)
Common stock, $1 par value:
authorized 100,000,000 shares;
issued 41,185,290 in 1994 and
40,724,536 in 1993 41,185,290 40,724,536
Additional paid-in capital 57,509,644 50,771,605
Retained earnings (deficit) (235,459,175) (301,483,959)
------------ ------------
Total shareholders' equity (deficit) (136,764,241) (209,987,818)
------------ ------------
$ 557,915,775 $ 528,092,335
============ ============
</TABLE>
See notes to consolidated financial statements
-25-
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF OPERATIONS
Shoney's, Inc. and Subsidiaries
Years Ended
----------------------------------------------
October 30 October 31 October 25
1994 1993 1992
------------- ------------- -------------
<S> <C> <C> <C>
Revenues
Net sales $1,126,515,272 $1,107,419,048 $1,031,505,312
Franchise fees 28,832,721 29,004,086 27,170,126
Other income 10,875,688 3,509,929 3,595,350
------------- ------------- -------------
Total revenues 1,166,223,681 1,139,933,063 1,062,270,788
Costs and expenses
Cost of sales
Food and supplies 487,075,331 476,810,966 437,457,525
Restaurant labor 244,301,840 238,817,307 222,216,211
Operating expenses 235,520,531 225,727,703 213,656,416
------------- ------------- -------------
966,897,702 941,355,976 873,330,152
General and administrative expenses 61,605,878 60,737,735 58,920,887
Interest expense 41,236,895 44,466,374 51,901,382
Litigation settlement (1,700,000) 124,500,000
------------- ------------- -------------
Total costs and expenses 1,068,040,475 1,046,560,085 1,108,652,421
------------- ------------- -------------
Income (loss) before income taxes, extraordinary charge
and cumulative effect of change in accounting principle 98,183,206 93,372,978 (46,381,633)
Provision for income taxes
Current 26,313,000 29,800,000 32,887,000
Deferred 9,276,000 5,563,000 (52,692,000)
------------ ------------ ------------
Total income taxes(benefit) 35,589,000 35,363,000 (19,805,000)
Income (loss) before extraordinary charge
and cumulative effect of change in accounting principle 62,594,206 58,009,978 (26,576,633)
Extraordinary charge on early extinguishment
of debt (net of $623,000 tax benefit) (1,037,808)
Cumulative effect of change in accounting for income taxes 4,468,386
------------ ------------ ------------
Net income (loss) $ 66,024,784 $ 58,009,978 $ (26,576,633)
============ ============ ============
Earnings (loss) per common share
Primary
Income (loss) before extraordinary charge and
cumulative effect of change in accounting principle $1.52 $1.44 ($0.65)
Extraordinary charge on early extinguishment of debt (0.03)
Cumulative effect of change in accounting for income taxes 0.11
---- ---- ----
Net income (loss) $1.60 $1.44 ($0.65)
Fully diluted ==== ==== ====
Income (loss) before extraordinary charge and
cumulative effect of change in accounting principle $1.43 $1.35 ($0.65)
Extraordinary charge on early extinguishment of debt (0.02)
Cumulative effect of change in accounting for income taxes 0.10
---- ---- ----
Net income (loss) $1.51 $1.35 ($0.65)
==== ==== ====
Weighted average shares outstanding
Primary 41,299,061 40,397,906 41,048,979
Fully diluted 46,519,998 45,644,452 41,048,979
</TABLE>
See notes to consolidated financial statements
-26-
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIT)
Shoney's, Inc. and Subsidiaries
Total
Additional Retained Shareholders'
Common Paid-in Escrow Earnings Equity
Stock Capital Shares (Deficit) (Deficit)
---------- ----------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Balances at October 27, 1991 $39,975,147 $27,867,006 $(332,917,304) $(265,075,151)
Net loss (26,576,633) (26,576,633)
Tax benefits related to
compensation plans 6,009,105 6,009,105
Distributions pursuant to
employee stock option and
stock benefit plans 1,205,889 9,150,211 10,356,100
Conversions of subordinated
convertible debentures 358,493 3,992,083 4,350,576
Contribution of common shares,
net of income taxes 28,938,992 $(48,499,992) (19,561,000)
---------- ---------- ----------- ------------ -----------
Balances at October 25, 1992 41,539,529 75,957,397 (48,499,992) (359,493,937) (290,497,003)
Net income 58,009,978 58,009,978
Tax benefits related to
compensation plans 9,545,177 9,545,177
Distributions pursuant to
employee stock option and
stock benefit plans 1,878,396 14,002,324 15,880,720
Conversions of subordinated
convertible debentures 1,055 13,095 14,150
Retirement of escrow shares,
net of income taxes (2,694,444) (48,746,388) 48,499,992 (2,940,840)
---------- ----------- ---------- ------------ ------------
Balances at October 31, 1993 40,724,536 50,771,605 (301,483,959) (209,987,818)
Net income 66,024,784 66,024,784
Tax benefits related to
compensation plans 1,602,987 1,602,987
Distributions pursuant to
employee stock option and
stock benefit plans 447,708 4,881,018 5,328,726
Conversions of subordinated
convertible debentures 13,046 254,034 267,080
---------- ----------- ---------- ------------ ------------
Balances at October 30, 1994 $41,185,290 $57,509,644 $ --- $(235,459,175) $(136,764,241)
========== ========== ========== ============ ============
</TABLE>
See notes to consolidated financial statements
-27-
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF CASH FLOWS
Shoney's, Inc. and Subsidiaries
Years Ended
----------------------------------------------
October 30 October 31 October 25
1994 1993 1992
------------- ------------- -------------
<S> <C> <C> <C>
Operating activities
Net income (loss) $ 66,024,784 $ 58,009,978 $ (26,576,633)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 43,356,235 39,973,611 39,551,095
Interest on subordinated zero coupon
debt and other noncash charges 12,220,088 10,262,149 9,964,488
Deferred income taxes 9,276,000 5,563,000 (52,692,000)
Equity in earnings of affiliates (255,185) (422,225) (392,844)
Loss on disposal of property, plant and equipment 107,138 1,593,739 1,956,254
Litigation settlement (1,700,000) 124,500,000
Realized and unrealized gains on marketable
equity securities and other assets (4,117,512) (591,503) (555,555)
Cumulative effect of change in accounting
for income taxes (4,468,386)
Changes in operating assets and liabilities:
Notes and accounts receivable 5,578,633 1,302,318 (2,355,394)
Inventories 11,174,239 (19,535,720) 2,037,414
Prepaid expenses (489,992) (898,413) (1,515,558)
Accounts payable 5,209,324 3,233,108 6,096,246
Accrued expenses (6,248,379) 4,704,921 8,327,056
Federal and state income taxes 3,063,784 3,971,537 7,339,002
Deferred income and other liabilities (662,598) 620,039 (1,929,112)
----------- ----------- -----------
Net cash provided by operating activities 138,068,173 107,786,539 113,754,459
Investing activities
Purchases of property, plant and equipment (95,025,917) (76,155,511) (57,622,609)
Proceeds from disposal of property, plant
and equipment 4,816,549 2,533,769 2,618,754
(Increase) decrease in other assets 116,149 4,073,060 (4,111,052)
----------- ----------- -----------
Net cash used in investing activities (90,093,219) (69,548,682) (59,114,907)
Financing activities
Proceeds of long-term debt 245,681,800 35,000,000 20,800,000
Payments on long-term debt and capital lease
obligations (269,772,824) (58,693,802) (89,395,993)
Proceeds from line of credit and short-term debt 114,011,000 186,875,000 144,790,155
Payments on line of credit and short-term debt (118,171,000) (185,960,000) (139,363,155)
Exercise of employee stock options 3,403,776 14,027,541 8,860,065
Payments on litigation settlement (24,949,091) (22,373,239)
Payments for debt issue costs (1,790,257) (3,589,584) (680,736)
----------- ----------- -----------
Net cash used by financing activities (51,586,596) (34,714,084) (54,989,664)
----------- ----------- -----------
Increase (decrease) in cash and cash equivalents (3,611,642) 3,523,773 (350,112)
Cash and cash equivalents at beginning of year 7,841,426 4,317,653 4,667,765
----------- ----------- -----------
Cash and cash equivalents at end of year $ 4,229,784 $ 7,841,426 $ 4,317,653
=========== =========== ===========
</TABLE>
See notes to consolidated financial statements
-28-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Shoney's, Inc. and Subsidiaries
October 30, 1994, October 31, 1993 and October 25, 1992
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include accounts of the
Company and its subsidiaries. All significant intercompany accounts
and transactions have been eliminated in consolidation. Certain
reclassifications have been made in the consolidated financial
statements to conform to the 1994 basis of presentation.
Property, Plant and Equipment
Depreciation and amortization are provided principally on the
straight-line method over the following estimated useful lives:
buildings--20 to 40 years; rental properties--over the term of the
lease, generally 15 to 20 years; restaurant and other equipment--3
to 15 years; and capital leases and leasehold improvements--lesser
of life of assets or term of lease.
Cash Equivalents
The Company considers all highly liquid investments with a maturity
of three months or less when purchased to be cash equivalents.
Franchise Fees
Initial franchise fees and market development fees are recorded as
income when the restaurants begin operations and the cash payment
has been received. Franchise fees based on sales of franchisees are
accrued as earned.
Start-up Costs
Start-up costs include only direct incremental costs relating to
new store openings, such as training new employees and related
travel expenses incurred before a new store opens. These costs are
capitalized and then amortized from the opening date over a period
not to exceed one year.
Fiscal Year
The Company's fiscal year ends on the last Sunday in October.
Fiscal years 1994 and 1992 were comprised of 52 weeks as compared
to fiscal year 1993 which had 53 weeks.
Business Segments
For the years 1994, 1993, and 1992, restaurant operations
constituted a dominant segment in accordance with FASB Statement
No. 14, "Financial Reporting for Segments of a Business
Enterprise."
-29-
<PAGE>
Earnings (Loss) per Share
Primary net income per share for 1994 and 1993 has been computed
using the weighted average number of shares of common stock and
common stock equivalents outstanding during each period presented.
Common stock equivalents include all dilutive outstanding stock
options. In April 1989, the Company issued zero coupon subordinated
convertible debentures which are not considered common stock
equivalents. Fully diluted net income per share for 1994 and 1993
includes the assumed conversion of these debentures. This
calculation adjusts earnings for interest that would not be paid if
the debentures were converted. Earnings per share for 1993
accounted for the 2,694,444 shares held in escrow at October 25,
1992 as retired effective with the provisional court approval on
November 3, 1992 (see Notes 7 and 11).
The primary and fully diluted loss per share for 1992 was computed
using the average shares outstanding during the year. No
consideration was given to common stock equivalents or the
convertible debentures because these items had an anti-dilutive
effect.
Fair Values of Financial Instruments
The following methods and assumptions were used by the Company in
estimating its fair value disclosures for financial instruments:
Cash and cash equivalents: The carrying amount reported in the
balance sheet for cash and cash equivalents approximates fair
value.
Long-term debt: The carrying amounts of the Company's borrowings
under its senior debt-reducing revolving credit facility, senior
debt-taxable variable rate notes and other senior debt with
variable interest rates approximate their fair value. The fair
values of the Company's subordinated zero coupon convertible
debentures were determined based on quoted market prices. The fair
value of other long-term debt, industrial revenue bonds and notes
payable were estimated using discounted cash flow analyses
utilizing the Company's incremental borrowing rates for similar
types of borrowing arrangements.
Interest rate swap and cap agreements: The fair values for the
Company's interest rate swap and cap agreements were based on
estimates of the contracts' values obtained from commercial banks
that are counterparties to those agreements.
Stock purchase warrants of ShoLodge, Inc.: The fair value of the
Company's warrants to purchase common stock of Sholodge, Inc. was
estimated based on the difference in the quoted market price of
Sholodge, Inc. common stock and the exercise price of the related
warrants.
Reserve for litigation settlement: The fair value of the reserve
for litigation settlement was estimated using discounted cash flow
analyses utilizing an interest rate appropriate for an unsecured
loan of a similar term.
-30-
<PAGE>
NOTE 2 - CHANGES IN ACCOUNTING PRINCIPLES
Effective November 1, 1993, the Company adopted FASB Statement No.
109, "Accounting for Income Taxes," through a cumulative effect
adjustment that resulted in an increase to net income of
approximately $4.5 million or $.10 per share (fully diluted).
Statement No. 109 changed the Company's method of accounting for
income taxes from the deferred method to the liability method. The
liability method requires the recognition of deferred income tax
liabilities and assets for the expected future tax consequences of
temporary differences between the tax bases and financial reporting
bases of assets and liabilities (see Note 5).
Effective November 1, 1993, the Company also adopted FASB Statement
No. 115, "Accounting for Certain Investments in Debt and Equity
Securities". Statement No. 115 requires that debt and equity
securities be carried at fair value unless the Company has the
positive intent and ability to hold debt securities to maturity.
Debt and equity securities must be classified into one of three
categories: 1) held-to-maturity, 2) available-for-sale or 3)
trading securities. Each category has a different accounting
treatment for the change in fair values. There was no cumulative
effect from the adoption of Statement No. 115 because, at the time
of adoption, the Company held no investments in debt or equity
securities.
NOTE 3 - SALE OF SHONEY'S LODGING, INC. AND RELATED INVESTMENTS
During fiscal 1991, the Company sold its lodging division
(operating under the name Shoney's Inns) to ShoLodge, Inc.
("ShoLodge"). The Company will receive a portion of royalties
generated by both existing and future Shoney's Inns licensed by
ShoLodge through October 2001. Two executive officers of the
Company serve on the Board of Directors of ShoLodge. During 1992,
Sholodge completed an initial public offering of stock in which the
Company purchased $555,555 of common stock in ShoLodge pursuant to
its obligation under the stock purchase agreement for the sale of
the lodging division. In addition, as part of the purchase
agreement, the Company received warrants to purchase up to 5% of
the outstanding common stock of ShoLodge. During July 1993, the
Company sold its ShoLodge shares for $1,147,067.
Effective February 16, 1994, the Company sold its minority
ownership interest in four Shoney's Inns to ShoLodge in exchange
for 121,212 shares of ShoLodge. The shares received were recorded
at their fair value of approximately $2.4 million resulting in a
gain of $1.7 million. The ShoLodge shares were classified as
trading securities under FASB Statement No. 115, "Accounting for
Certain Investments in Debt and Equity Securities" (see Note 2).
Accordingly, changes in fair value of the ShoLodge shares
subsequent to the transaction are reflected in the results of
operations. During fiscal 1994, the net gain from appreciation in
the fair value of ShoLodge shares was $34,000.
-31-
<PAGE>
The Company owns certain warrants to acquire ShoLodge common stock
that were obtained in the 1992 sale of the Company's lodging
division to ShoLodge. In connection with the sale of the Company's
minority motel interest described in the preceding paragraph, the
Company was granted future registration rights for the ShoLodge
shares that may be acquired upon exercise of the warrants. Under
the provisions of FASB Statement No. 115, the Company has
classified warrants for which it has stock registration rights
exercisable within one year as trading securities. These warrants
are recorded at their fair value (the difference in the warrant
exercise price and the market price of ShoLodge common stock) at
the time they are classified as trading securities and the
resulting gain is included in the results of operations. During
1994, the Company recorded gains from such ShoLodge warrants of
$1,475,000. Once classified as a trading security, these warrants
are carried at fair value with changes in fair value also reflected
in the results of operations. The fair value of these ShoLodge
warrants increased in value by $923,000 during 1994.
At October 30, 1994, the Company held warrants to purchase 203,996
shares of ShoLodge common stock and owned 121,212 shares of
ShoLodge common stock that were classified as trading securities.
In addition, the Company holds warrants (for which it does not
currently have registration rights exercisable within one year) to
purchase 218,753 shares of ShoLodge common stock at prices ranging
from $8.40 to $13.35 per share. At October 30, 1994, these
warrants had a fair value of $2,453,000 and a carrying value of $0.
NOTE 4 - DEBT ISSUE COSTS
Debt issue costs are capitalized and amortized using the effective
interest method over the term of the related debt issues. Issue
costs of $1,790,000, $3,590,000 and $681,000 relating to various
financings during 1994, 1993 and 1992, respectively, have been paid
and deferred. Amortization of debt issue costs during 1994, 1993
and 1992 was $2,576,000, $2,062,000 and $2,203,000, respectively.
NOTE 5 - INCOME TAXES
Effective November 1, 1993, the Company adopted FASB Statement No.
109, "Accounting for Income Taxes" (see Note 2). As permitted
under the provisions of Statement No. 109, the Company elected not
to restate prior years' financial statements for the effects of
this change. The cumulative effect of adopting Statement No. 109
was to increase income by $4,468,000 or $0.10 per share (fully
diluted). Statement No. 109 changes the Company's method of
accounting for income taxes from the deferred method to the
liability method. The liability method requires the recognition of
deferred income tax liabilities and deferred tax assets for the
expected future tax consequences of temporary differences between
the tax bases and financial reporting bases of assets and
liabilities.
-32-
<PAGE>
Significant components of the Company's deferred tax assets and
liabilities as of October 30, 1994 are as follows:
<TABLE>
<CAPTION>
<S> <C>
Deferred tax assets:
Reserve for lawsuit settlement $ 31,420,209
Reserve for self insurance 9,449,874
Other - net 4,287,636
----------
Deferred tax assets - net 45,157,719
----------
Deferred tax liabilities:
Tax over book depreciation 19,244,064
Capital contribution 22,501,840
Other - net 1,067,275
----------
Deferred tax liabilities 42,813,179
----------
Net deferred tax asset $ 2,344,540
==========
</TABLE>
The balance sheet classification of the net deferred tax asset is
as follows:
<TABLE>
<CAPTION>
<S> <C>
Current deferred tax asset $ 17,821,945
Noncurrent deferred tax liability (15,477,405)
-----------
Net deferred tax asset $ 2,344,540
===========
</TABLE>
No valuation allowance is considered necessary, because management
believes that the deferred tax assets will ultimately be realized.
Management's conclusion is based, in part, on future taxable income
that will result from the reversal of existing taxable temporary
differences. Additionally, management expects to have future taxable
income from operations, excluding the reversal of temporary differences.
The significant components of the provision for income taxes are as
follows:
<TABLE>
<CAPTION>
Liability Deferred
Method Method
------------ --------------------------
1994 1993 1992
------------ ----------- -----------
<S> <C> <C> <C>
Currently payable
Federal $ 22,315,300 $ 26,037,600 $ 27,977,100
State 3,374,700 3,762,400 4,909,900
----------- ---------- ----------
25,690,000 29,800,000 32,887,000
Deferred
Federal 8,174,700 4,829,000 (44,414,900)
State 1,101,300 734,000 (8,277,100)
---------- ---------- ------------
9,276,000 5,563,000 (52,692,000)
---------- ---------- ------------
Total expense(benefit) $ 34,966,000 $ 35,363,000 $(19,805,000)
========== ========== ===========
</TABLE>
Total tax expense for 1994 includes a tax benefit of $623,000
related to the extraordinary charge on early extinguishment of
debt.
-33-<PAGE>
The components of the provision for deferred income taxes for the
years ended October 31, 1993 and October 25, 1992 are as follows:
<TABLE>
<CAPTION>
1993 1992
----------- ------------
<S> <C> <C>
Reserve for lawsuit settlement $ 7,250,091 $(47,260,200)
Accelerated depreciation for tax purposes 441,858 (780,975)
Reserves for self insurance (1,613,960) (2,684,307)
Amortization of intangibles (259,179) (258,373)
Other (255,810) (1,708,145)
----------- ------------
Total $ 5,563,000 $(52,692,000)
========== ===========
</TABLE>
The reasons for the difference between total income tax expense and
the amount computed by applying the statutory federal income tax
rates to pretax income were as follows:
<TABLE>
<CAPTION>
Liability Deferred
Method Method
------------ --------------------------
1994 1993 1992
------------ ------------ -----------
<S> <C> <C> <C>
Statutory federal income tax rate 35% 34.8% 34%
Federal income taxes (benefit)
based on statutory rate $ 33,782,839 $ 32,511,910 $(15,769,755)
Adjustments:
State and local income taxes, net
of federal tax benefit 2,909,400 2,930,756 (2,222,330)
Targeted job tax credit (983,046) (267,104) (868,819)
FICA tips credit (591,366)
Dividend exclusion (7,140)
Other (151,827) 187,438 (936,956)
---------- ---------- -----------
Total $ 34,966,000 $ 35,363,000 $(19,805,000)
========== ========== ===========
</TABLE>
The Company made income tax payments of approximately $22,483,000,
$25,784,000 and $25,609,000 during fiscal years 1994, 1993 and
1992, respectively.
-34-
<PAGE>
NOTE 6 - DEBT AND OBLIGATIONS UNDER CAPITAL LEASES
Debt and obligations under capital leases at October 30, 1994 and
October 31, 1993 consisted of the following:
<TABLE>
<CAPTION>
1994 1993
------------ -------------
<S> <C> <C>
Senior debt-reducing revolving credit facility, due in
installments to October 1999 $ 240,000,000 $ 15,000,000
Senior debt-fixed rate, due in April 1995 60,000,000 160,000,000
Senior debt-taxable variable rate notes, due in
varying installments to September 1998 31,500,000 32,200,000
Senior debt-due in installments to April 1998 9,000,000 9,666,667
Senior debt-due in September 1997 20,800,000 20,800,000
Subordinated zero coupon convertible debentures,
due April 2004 80,790,563 74,614,987
Subordinated debentures 12%, due July 2000 144,187,529
Industrial Revenue Bonds, due in varying annual
installments to May 2006 collateralized by land,
buildings, equipment and restricted cash 14,113,750 14,425,000
Notes payable to others, 7.75% to 10.25%, maturing
at varying dates to 2009 ($7,992,970 of these
notes are secured by land, buildings and equipment) 11,824,970 16,794,652
----------- -----------
468,029,283 487,688,835
Obligations under capital leases 12,845,095 13,766,719
----------- -----------
480,874,378 501,455,554
Less amount due within one year 66,709,214 111,401,224
----------- -----------
Amount due after one year $ 414,165,164 $ 390,054,330
=========== ===========
</TABLE>
Senior Debt
In July 1993, the Company entered into a $125 million reducing
revolving credit facility with a syndicate of financial
institutions. The facility had a four-year, three-month term
expiring October 22, 1997, with reductions in the aggregate credit
facility beginning in 1995. The interest rate for the facility was
at floating rates (the London Interbank Offered Rate ("LIBOR") plus
2% or the announced Alternate Base Rate of the agent bank plus 1%).
During the third quarter of fiscal 1994, the Company and the
financial institutions amended this credit facility to allow the
Company to redeem its 12% subordinated debentures issued in the
Company's 1988 recapitalization. The credit facility was increased
to a maximum of $270 million, the interest rate will remain at
LIBOR plus 2% and the maturity was extended to October 1999. The
Company redeemed the $145.7 million of 12% subordinated debentures
at par on July 2, 1994. At October 30, 1994, the Company had $240
million outstanding under this facility and the interest rate was
7.0%.
-35-
<PAGE>
Under the terms of the revolving credit facility, the Company
agreed to effect an interest rate risk management program to limit
the Company's exposure to rising short-term interest rates. As of
October 30, 1994, the Company had interest rate cap agreements for
$50 million (notional amount), which have a 7% LIBOR interest rate
cap for a two year period. Under the terms of the cap agreements,
the Company's maximum LIBOR interest rate on $50 million of its
outstanding variable rate debt is effectively capped at 7% until
October 1996. The Company is exposed to loss if one or more
counterparties to the cap agreements default, however, the Company
does not anticipate nonperformance by the counterparties. The
contract or notional amount of interest rate cap agreements do not
represent exposure to credit loss. At October 30, 1994, the
interest rate cap agreements had an estimated fair value and a
carrying value of $555,000.
The senior debt-fixed rate loan was also provided by a
syndicate of financial institutions. The interest rate on this
issue is fixed at 9.78%, with semiannual interest payments each
April and October. The Company has a combination of interest rate
swap agreements for $60 million, which expire in April 1995, that
effectively convert the interest rate of this obligation to 6.3%.
The Company is exposed to credit loss if one or more of the
counterparties default, however, the Company does not anticipate
nonperformance by the counterparties. The contract or notional
amount of interest rate swap agreements do not represent exposure
to credit loss. Interest rate swap transactions generally involve
exchanges of fixed and floating interest payment obligations
without exchange of the underlying notional principal amount.
Neither the Company nor the counterparties to these swaps are
required to collateralize their respective obligations under these
agreements. At October 30, 1994, the estimated fair market value
of the Company's interest rate swap agreements was $1.0 million and
they had no carrying value for financial reporting purposes.
The senior debt issues described in the preceding paragraphs
are collateralized by fully perfected first liens on all land,
buildings and improvements owned by the Company and its
subsidiaries not otherwise pledged. The senior debt-reducing
revolving credit facility is also secured by fully perfected
first liens on all other material assets of the Company and its
subsidiaries other than inventory (as to which there is a
negative pledge), all stock of all of the Company's subsidiaries
(including all common shares of a wholly-owned real estate
company that owns 107 of the Company's restaurant properties),
all accounts receivable, machinery and equipment, franchise
agreements, intangible property rights and all other material
tangible and intangible property of the Company and its
subsidiaries.
The senior debt-taxable variable rate notes are sold to
investors through an investment banking corporation. The notes
are secured by standby letters of credit of $33.5 million which
includes the face amount of the notes plus interest for 145 days.
The letters of credit are secured by a reimbursement agreement
and standby note which are collateralized by a fully perfected
first lien on certain land and buildings. Certain fees are
applicable to this transaction which equal 2.18% per annum on
$9.85 million and 2.06% per annum on $21.65 million. The notes
outstanding at October 30, 1994 were issued at 5.07%, which
results in an effective borrowing rate of 7.2% after inclusion of
the fees.
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<PAGE>
The senior debt of $9 million is due in installments to
April 1998 and bears interest at LIBOR plus 1.25%. The loan is
collateralized by a fully perfected first lien on certain land
and buildings. The effective interest rate on this debt at
October 30, 1994 was 6.2%.
The senior debt of $20.8 million is due September 1997 and
bears interest at LIBOR plus 1.5%. The loan is collateralized by
a fully perfected first lien on certain land and buildings. The
effective interest rate on this debt at October 30, 1994 was
6.75%.
These senior debt issues also (1) require satisfaction of
certain financial ratios and tests (which become more restrictive
each year); (2) impose limitations on capital expenditures; (3)
limit the ability to incur additional debt, leasehold obligations
and contingent liabilities; (4) prohibit dividends and
distributions on common stock; (5) prohibit mergers,
consolidations or similar transactions; and (6) include other
affirmative and negative covenants.
Subordinated Zero Coupon Convertible Debentures, Due April 2004
The subordinated zero coupon convertible debentures were
issued in April 1989 at $286.89 per $1,000 note (aggregate amount
$57.736 million). There are no periodic payments of interest. The
issue price represents a yield to maturity of 8.5% based on a
semiannual bond equivalent basis. Each note is convertible into
29.349 shares of the Company's common stock at the option of the
holder. The Company has reserved 5,205,632 shares for future
issuance pursuant to these debentures. The Company was required
to purchase the notes at the option of the holder on April 11,
1994. The Company, at its option, was permitted to pay such
purchase price with cash, shares of common stock or ten year
subordinated extension notes for debentures it was required to
purchase. The Company elected to pay for such purchases in
common stock, but no debentures were tendered for purchase on
April 11, 1994.
Subordinated Debentures 12%, Due July 2000
The 12% subordinated debentures were issued in July 1988
with a par value of $145.7 million and were callable after July
1, 1994. The debentures were redeemed at par on July 2, 1994.
Debt issue costs associated with these debentures were included
in other assets and were being amortized using the effective
interest method over the life of the debentures. As a result of
the redemption, the unamortized portion of the original issue
discount and debt issue costs of $1,661,000 was charged to
expense during the third quarter. This charge is reflected in
the Statement of Operations as an extraordinary charge of
$1,038,000, net of income tax benefits of $623,000.
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<PAGE>
Other Debt Information
The Company has an unsecured line of credit for $20,000,000
with interest payable monthly at the lending bank's index rate
(7.75% at October 30, 1994). There were borrowings of $2,582,000
under the line at October 30, 1994. The line is available
through July 31, 1995 with a three month extension each quarter
at the option of the bank. The Company also has an unsecured
revolving credit facility available through a syndicate of banks
for $10,000,000 with interest payable quarterly at rates based on
the prime lending rate (7.75% at October 30, 1994). Borrowings
under this facility, which expires June 25, 1995 if not
terminated earlier, are due on thirty days notice. As of October
30, 1994, the balance outstanding under this facility was
$1,250,000. The weighted average interest rate for these two
unsecured credit facilities were 6.2%, 5.9% and 6.3% for fiscal
years 1994, 1993, and 1992, respectively.
The Industrial Revenue Bonds include $11,833,750 at interest
rates varying from 8.5% to 11.5% and $2,280,000 at a floating
interest rate, which is the greater of 70% of the thirteen-week
United States Treasury Bill rate or 80% of the interest rate for
United States Treasury Securities with a maturity of thirty
years, subject to a floor of 7.5% and a ceiling of 15%.
Debt and obligations under capital leases maturing in each
of the next five fiscal years are as follows:
1995 1996 1997 1998 1999
- - ----------------------------------------------------------------
$66,709,000 $33,085,000 $85,737,000 $84,533,000 $77,660,000
Net interest costs of approximately $866,000, $450,000 and
$655,000 were capitalized as a part of building costs during
1994, 1993 and 1992, respectively. Interest paid during 1994,
1993 and 1992 was approximately $38,202,000, $35,975,000 and
$45,987,000, respectively.
The Company has standby letters of credit outstanding at
October 30, 1994 of $14.4 million in addition to those supporting
the taxable variable rate notes previously described.
The estimated fair value of the Company's debt at October
30, 1994, excluding capital lease obligations, was $469,664,000
compared to the carrying value of $468,029,000.
NOTE 7 - SHAREHOLDERS' EQUITY (DEFICIT)
During the 1992 fiscal year, the Company and a board member
entered into a capital contribution agreement whereby, upon court
approval of a settlement regarding certain litigation (see Note 11),
the Company received a capital contribution of 2,694,444 shares of
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<PAGE>
its common stock. The agreement with the board member was
approved by the Board of Directors without that board member's
participation.
At October 25, 1992, the Company recorded the effect of the
shares held in escrow in shareholder's equity pending
distribution to the Company. During 1993, the court approved the
settlement agreement, and the shares which had been held in
escrow at October 25, 1992 were distributed to the Company and
retired. Shareholders' equity (deficit) was charged with an
estimate of income taxes payable based upon the market price of
the contributed shares at October 25, 1992. This income tax
effect was subsequently adjusted through shareholders' equity
(deficit) in February 1993, based on the current market value of
the shares at the time they were distributed from escrow.
NOTE 8 - STOCK OPTIONS AND STOCK BENEFIT PLANS
The stock option plan originally adopted by the Company in
1969, and as subsequently amended, covered 198,184 and 306,148
shares of the common stock of the Company as of October 30, 1994
and October 31, 1993, respectively. A second stock option plan
adopted in 1981, and as subsequently amended, covered 7,728,047
and 2,967,229 shares of the common stock of the Company as of
October 30, 1994 and October 31, 1993, respectively. The 1981
Plan was amended in December 1993 (with subsequent approval by
the shareholders in March 1994) to (i) extend the date of
termination of the 1981 Plan from September 2, 1996 to September
2, 2001, (ii) increase the number of shares authorized for
issuance by the Stock Option Plan by 5,000,000 and (iii) limit
the number of shares any one employee may be granted in a given
year to 250,000.
All option prices are the same as the market price on the
date of grant. Both plans, prior to the recapitalization,
provided for the issuance of options having terms of up to 10
years which were exercisable 10% per year after one year and in
full after five years. The plan of recapitalization, however,
included an amendment modifying the vesting period for new
options under both plans which allowed options to be exercisable
at the rate of 20% per year for four years and in full after four
years and eight months. Subsequent to the recapitalization, the
1981 plan was amended further to provide that (i) all options
would be exercisable at rates to be determined by the Company's
compensation committee of the Board of Directors, not to exceed
33 1/3% per year and (ii) all options would vest in full upon
death or disability.
The shareholders authorized a stock option plan for
directors under which 200,000 shares of the Company's common
stock may be issued and sold to non-employee directors. Each non-
employee director receives an option to purchase 5,000 shares
upon their initial election to the Board and every five years
thereafter receives an option to purchase 5,000 shares. The option
price is the market price of the Company's common stock on the date
that the option is granted. Each option has a term not to exceed
ten years and is exercisable at the rate of 20% per year and/or in
full in the event of the director's death or disability. No
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<PAGE>
options were granted during 1992 or 1993. During 1994, options
for 10,000 shares were granted to two new directors at a price of
$23.375. Options for ten directors of 49,000 shares at prices
ranging from $14.875 to $23.375 per share were outstanding at
October 30, 1994.
During 1989, the right to grant options under the 1969 plan
expired. Options available for future issuance under the 1981
plan and the director's plan at the end of 1994 and 1993 covered
5,828,677 and 1,044,997 shares, respectively. A summary of
options under the plans is as follows:
<TABLE>
<CAPTION>
Options Shares Option Prices
- - ------------------------------- --------- -------------
<S> <C> <C>
Outstanding at October 25, 1992 4,035,003 $ 4.01-$25.75
Issued 1,323,395 $20.63-$25.25
Exercised (1,759,948) $ 4.01-$20.25
Expired or cancelled (1,175,070) $ 6.14-$25.75
----------
Outstanding at October 31, 1993 2,423,380 $ 5.04-$25.75
Issued 509,825 $13.88-$23.63
Exercised (346,184) $ 5.04-$19.13
Expired or cancelled (294,467) $ 5.04-$25.75
----------
Outstanding at October 30, 1994 2,292,554 $ 5.04-$25.75
==========
</TABLE>
During fiscal year 1992, options were exercised for 1,090,373
shares at prices ranging from $4.01 to $17.38. At October 30,
1994 and October 31, 1993, options for 871,750 and 799,979
shares, respectively, were exercisable.
The shareholders also authorized an Employee Stock Purchase Plan
under which 2,012,745 shares of the Company's common stock may be
issued at October 30, 1994. Under the terms of the Plan,
employees may purchase the Company's common stock through payroll
deductions. The purchase price is 85% of the lower of (i) the
average of the closing market prices on the first trading day of
each calendar month or (ii) the closing market price on the last
trading day of each calendar year. The exercise date under the
Plan is the last trading day of the Plan Year and distributions
to employees of 100,124, 96,873 and 106,936 shares were made in
fiscal years 1994, 1993 and 1992, respectively. There have been
no charges to income in connection with the Plan other than
incidental expenses in the administration of the Plan.
The shareholders authorized an Employee Stock Bonus Plan
under which 616,048 shares of the Company's stock may be issued
at October 30, 1994. The awards under the Plan consist of both a
stock and a cash bonus. The stock bonuses vest 10% per year
after one year and in full after five years and are distributed
upon vesting. On each vesting date, a cash bonus also will be
distributed that is equal to 25% of the market value of the
shares being distributed. The maximum shares awarded to any
employee are 1,000 shares on the grant date. As of October 30,
1994, grants of bonuses under this Plan of 29,600 shares were
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<PAGE>
outstanding. The shares distributed and cash bonuses paid
pursuant to this Plan during the past three fiscal years were as
follows:
<TABLE>
<CAPTION>
Year Shares Cash Bonuses
---- ------ ------------
<S> <C> <C>
1992 8,580 $ 52,016
1993 41,575 $ 241,655
1994 1,400 $ 8,094
</TABLE>
NOTE 9 - LEASES
The Company has noncancellable lease agreements for certain
restaurant land and buildings. Substantially all lease agreements
may be renewed for periods ranging from five to fifteen years,
and provide for contingent rentals based on percentages of net
sales (generally 3% to 6%) against which minimum rentals are
applied.
Buildings under capital leases of $20,631,961 at October 30,
1994 and October 31, 1993 and accumulated amortization of
$10,854,382 and $9,767,518 at October 30, 1994 and October 31,
1993, respectively, relate to the building portion of leases
involving land and buildings. Amortization of buildings under
capital leases is included in depreciation expense.
At October 30, 1994, minimum rental commitments under
capital leases and operating leases having an initial or
remaining noncancellable term of one year or more are shown in
the following table:
<TABLE>
<CAPTION>
Capital Operating Sublease
Leases Leases Amounts Total
- - ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1995 $ 2,380,970 $ 7,102,570 $ (594,404) $ 8,889,136
1996 2,376,535 7,027,933 (579,008) 8,825,460
1997 2,277,079 6,671,300 (507,956) 8,440,423
1998 2,119,430 6,248,168 (427,627) 7,939,971
1999 2,006,862 5,406,490 (415,493) 6,997,859
Thereafter 10,599,150 37,736,132 (3,560,248) 44,775,034
- - ---------------------------------------------------------------------------------------
Total minimum rentals 21,760,026 $70,192,593 $(6,084,736) $85,867,883
========================================
Amount representing interest (8,914,931)
----------
Present value of net minimum
rentals $12,845,095
==========
</TABLE>
Contingent rental expense relating to the land and building
portion of capital leases was $1,448,937, $1,463,183 and
$1,526,267 in 1994, 1993 and 1992, respectively.
-41-
<PAGE>
Total rental expense for all leases not capitalized is as
follows:
<TABLE>
<CAPTION>
1994 1993 1992
--------- --------- ---------
<S> <C> <C> <C>
Minimum rentals $7,088,510 $6,676,136 $6,854,950
Contingent rentals 434,524 434,487 433,912
---------- --------- ---------
7,523,034 7,110,623 7,288,862
Sublease rentals (683,964) (630,118) (533,297)
---------- --------- ---------
Total $6,839,070 $6,480,505 $6,755,565
========= ========= =========
</TABLE>
NOTE 10 - COMMITMENTS AND CONTINGENCIES
On October 1, 1992, the Company and Thompson Hospitality,
L.P. ("THL") entered into an agreement to purchase nine and
thirty-one restaurants, respectively, from Marriott Corporation
and Marriott Family Restaurants, Inc. ("Marriott"). All of the
restaurants purchased by the Company and most of the restaurants
purchased by THL will be converted to Shoney's Restaurants. As
part of the transaction, the Company agreed to a contingent
purchase of fifteen restaurants purchased by THL if there is a
default by THL on or before October 2, 1995 in its obligations to
Marriott. The purchase prices for these fifteen restaurants was
pre-determined and the Company's maximum obligation under this
arrangement was $8.7 million. During 1994, the Company, THL and
Marriott agreed to a modification of this contingent purchase
agreement whereby the Company agreed to extend its purchase
obligation to July 2, 1997. In addition, the Company's maximum
obligation was reduced to eleven restaurants and $5.9 million.
In the event of a default by THL, the Company is obligated
to purchase the pre-selected restaurants by paying Marriott the
pre-determined price and taking title to the properties from THL
and Marriott. Accordingly, the fair value of Shoney's, Inc.'s
guarantee of THL would be the difference (if any) between the
value of the restaurant properties acquired and the agreed upon
payments under the guarantee. The Company did not deem it
practical to appraise the underlying value of the restaurant
properties in order to estimate the fair value of this guarantee.
The Company guarantees certain twenty-year leases of
franchisees for an annual fee of approximately $45,000 and is
required to offer to purchase the properties for an amount equal
to the investor's unpaid mortgage ($431,240) at its maturity in
1999. The Company has also guaranteed certain loans totaling
$6,213,422.
NOTE 11 - SETTLEMENT OF DISCRIMINATION LAWSUIT
In April 1989, nine individuals filed suit against the Company,
one of its franchisees, and its former senior chairman alleging
discriminatory actions at certain restaurants owned by the Company
and the franchisee. Seven additional individuals were added later as
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<PAGE>
plaintiffs. On April 27, 1990 plaintiffs requested, and were granted
permission, to amend the complaint to seek back pay, compensatory
damages and equitable relief against the Company and its former
senior chairman in an amount of at least $350 million, punitive
damages against the Company in an amount of at least $100 million
and punitive damages against the former senior chairman in an amount
of at least $80 million. In addition, the plaintiffs sought recovery
of an unspecified amount of litigation costs and expenses, including
reasonable attorneys' fees.
On June 22, 1992, the court certified a class under Title
VII of the Civil Rights Act of 1964 consisting of black
restaurant employees to represent claims of alleged
discriminatory failure to hire, harassment, failure to promote,
discharge and retaliation. This class consisted only of employees
from the Company's "Shoney's" and "Captain D's" restaurant
concepts and the class period was from February 4, 1988 through
April 19, 1991.
On January 25, 1993, the court gave approval to a consent
decree settling this litigation. Under the consent decree, the
Company will make available $105 million to pay potential claims.
The settlement covers all of the Company's restaurant concepts
and the corporate offices from February 4, 1985 through November
3, 1992. In addition, the Company will pay $25.5 million in
plaintiffs' attorneys fees and an estimated $4 million in payroll
taxes and administrative costs. The settlement resulted in a
charge to earnings of $77.2 million, net of insurance recoveries
and applicable taxes, in the fourth quarter of 1992.
During 1994, the Company obtained an IRS private letter
ruling which clarified that certain portions of the settlement
payments were not subject to federal payroll taxes that had been
previously accrued by the Company. The reserve for litigation
settlement was reduced by $1.7 million to adjust for this change
in estimate for accrued payroll taxes due on the settlement.
Under the terms of the consent decree, payments will be made
on a quarterly basis, without interest, on March 1, June 1,
September 1 and December 1. Expected payment obligations (net of
insurance recoveries) under the consent decree in each of the
next five fiscal years are as follows:
1995 1996 1997 1998 1999
- - ------------------------------------------------------------------
$20,471,000 $22,992,000 $22,632,000 $15,756,000 $68,000
The Company's reserve for litigation settlement, net of
expected insurance recoveries, at October 30, 1994 had a fair value
of approximately $69.6 million and a carrying value of $82.1 million.
-43-
<PAGE>
NOTE 12 - LITIGATION
The Company is a defendant in a federal court suit filed on
December 19, 1994 by one of its Captain D's franchisees who claims
that the Company imposes a "tying" arrangement by requiring
franchisees to purchase food products from the Company's
commissary. The complaint seeks damages for an alleged class of
similarly situated plaintiffs in an amount not to exceed $500
million and treble damages. The same plaintiff
has also filed a state court suit making essentially the same
claims; however, in that suit, the plaintiff did not make a class
action claim. On December 16, 1994 counsel for the plaintiff
advised the Company that the federal court case described above
would be filed unless the Company settled the pending state court
case by purchasing the plaintiff's franchised Captain D's
restaurant for $1.65 million, plus assumption of certain equipment
leases. The Company rejected the demand and the federal court
lawsuit was filed.
The Company also is a defendant in a federal court suit filed
on December 30, 1994 by two plaintiffs who are franchisees of six
Shoney's Restaurants. The complaint alleges that the Company
imposes a "tying" arrangement by requiring Shoney's Restaurant
franchisees to purchase their food products from the Company's
commissary by not providing product specifications in order to
select alternative vendors. They further allege that the Company
has engaged in fraud, breach of contract, and violations of the
Tennessee Consumer Protection Act regarding the establishment and
operation of the Shoney's Restaurants cooperative advertising
program. One of the plaintiffs also individually asserts a breach
of contract claim regarding a franchise territory transfer. The
complaint does not specify the amount of damages sought; however,
the plaintiffs seek treble damages for both their anti-trust claims
and Tennessee Consumer Protection Act claims. They also seek
punitive damages on their fraud claim.
The plaintiffs in each of these federal court suits purport to
act on behalf of similarly situated classes of plaintiffs; however,
there has been no motion filed to certify either of the cases as a
class action nor has either case been certified as a class action.
Management believes it has substantial defenses to the claims
made in each of these cases and intends to vigorously defend both
cases. In the opinion of management, the ultimate liability with
respect to either case will not materially affect the operating
results or the financial position of the Company.
The Company is a party to other legal proceedings incidental
to its business. In the opinion of management, the ultimate
liability with respect to these actions will not materially affect
the operating results or the financial position of the Company.
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<PAGE>
NOTE 13 - QUARTERLY FINANCIAL INFORMATION (Unaudited)
(in thousands except per share data)
<TABLE>
<CAPTION>
Per Share
-------------------------
Income Income
Before Before
Extraordinary Extraordinary
Item and Item and
Cumulative Cumulative
Number Effect of Effect of Fully Stock Stock
of Gross Accounting Net Accounting Diluted Market Market
Weeks Revenues Profit Change Income Change Earnings High Low
----- --------- -------- -------- -------- -------- -------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1994
First Quarter 16 $ 339,220 $ 55,880 $ 14,203 $ 18,672(a) $ .33 $ .43 25 5/8 19 3/4
Second Quarter 12 277,540 51,521 16,865 16,865 .38 .38 24 5/8 17 1/8
Third Quarter 12 281,873 50,738 17,254 16,216 .39 .37 18 1/8 13 1/2
Fourth Quarter 12 267,591 41,187 14,272 14,272 .33 .33 15 7/8 13 3/8
-- -------- ------- ------- ------- ---- ----
52 $1,166,224 $199,326 $ 62,594 $ 66,025 $1.43 $1.51
== ======== ======= ======= ======= ==== ====
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1993
First Quarter 16 $ 317,672 $ 52,320 $ 12,111 $ 12,111 $ .29 $ .29 26 18 3/4
Second Quarter 12 262,751 47,182 15,122 15,122 .35 .35 25 5/8 18 3/8
Third Quarter 12 274,133 50,056 16,569 16,569 .38 .38 21 1/4 16 1/2
Fourth Quarter 13 285,377 49,019 14,208 14,208 .33 .33 23 3/4 19
-- -------- ------- ------- ------- ---- ----
53 $1,139,933 $198,577 $ 58,010 $ 58,010 $1.35 $1.35
== ======== ======= ======= ======= ==== ====
</TABLE>
(a) The Company's first quarter fiscal 1994 net income shown has been
restated to reflect a correction of the cumulative effect of adopting
FASB Statement No. 109, "Accounting for Income Taxes". In the first
quarter, the Company had estimated the cumulative effect of adopting
Statement No. 109 to be an increase to income of $5.4 million or $.12
per share (fully diluted), resulting in originally reported net income
for the quarter of $19.6 million or $.45 per share (fully diluted).
During the fourth quarter, the Company reassessed the cumulative
effect and found that it had been overstated by approximately $.9
million or $.02 per share. Accordingly, the first quarter results
have been restated to reflect the revised cumulative effect from the
change in accounting for income taxes of $4.5 million or $.10 per
share and such amounts have been reflected in the first quarter net
income and per share amounts in the preceding table.
NOTE 14 -- SUBSEQUENT EVENTS
On January 16, 1995, the Company's Board of Directors
announced a reorganization designed to improve the performance of
and grow the Shoney's Restaurant concept. The reorganization will
include divestiture of certain non-core lines of business including
Lee's Famous Recipe, Pargo's and Fifth Quarter restaurants, as well
as Mike Rose Foods, a private label manufacturer of salad dressings,
condiments, and dry blended products. The divestiture process is
expected to be completed within 6 to 12 months from the date of the
reorganization announcement.
The discontinued lines of business had net property, plant and
equipment of $56.8 million at October 30, 1994, and had annual
revenues of $145.8 million and earnings before interest and taxes of
$20.9 million for the fiscal year then ended. In fiscal 1994, these
-45-<PAGE>
discontinued lines of business represented approximately
12.6% of consolidated net property, plant and equipment, 12.5% of
consolidated revenues and 14.9% of consolidated earnings before
interest and taxes. The Company expects that these discontinued
lines of business will be disposed of for amounts in excess of their
carrying values. Certain one-time charges associated with the
reorganization and divestitures will be accrued as they are incurred.
However, the Company expects the net result will be a gain once the
sales of these lines of business are consummated.
======================================================================
REPORT OF MANAGEMENT
Shoney's, Inc. and Subsidiaries
The management of Shoney's, Inc. has prepared the consolidated
financial statements and related financial information included in
this annual report. Management has the primary responsibility for the
integrity of the consolidated financial statements and other financial
information. The consolidated financial statements have been prepared
in accordance with generally accepted accounting principles
consistently applied in all material respects and reflect estimates
and judgments by management where necessary. Financial information
included throughout this annual report is consistent with the
consolidated financial statements.
The consolidated financial statements have been audited by Ernst &
Young LLP, independent auditors, in accordance with generally accepted
auditing standards. The independent auditors develop and maintain an
understanding of the Company's systems and procedures and perform such
tests and other procedures, including tests of the internal accounting
controls, as they deem necessary to enable them to express an opinion
on the fairness of the consolidated financial statements.
The Company maintains a system of internal accounting control which is
adequate to provide reasonable assurance that assets are safeguarded
and transactions are executed and recorded in accordance with
management's authorization. The adequacy of the Company's internal
accounting controls are under the general oversight of the Audit
Committee of the Board of Directors, consisting of four outside
directors.
Taylor H. Henry W. Craig Barber
Chairman of the Board Senior Executive Vice President
and Chief Financial Officer and Chief Financial Officer
-46
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
There are no Company disclosures required by Item 304 of
Regulation S-K, 17 C.F.R. Section 229.304.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
"Election of Directors" and "Reports of Beneficial Ownership"
contained in the 1995 Proxy Statement is incorporated herein by
this reference. See also Item 4A, "Executive Officers of the
Registrant" in Part I of this Annual Report on Form 10-K.
Item 11. EXECUTIVE COMPENSATION.
"Executive Compensation" contained in the 1995 Proxy Statement
is incorporated herein by this reference. The matters labeled
"Compensation Committee Report" and "Shareholder Return Performance
Graph" contained in the 1995 Proxy Statement shall not be deemed
incorporated by reference into this Annual Report on Form 10-K.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
"Security Ownership of Certain Beneficial Owners and
Management" contained in the 1995 Proxy Statement is incorporated
herein by this reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
"Certain Transactions" contained in the 1995 Proxy Statement
is incorporated herein by this reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K.
(a) The following documents are filed as a part of this
Annual Report on Form 10-K:
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(1) The consolidated financial statement schedules
required to be filed by Item 14(d) of this Annual Report on Form
10-K pursuant to Item 601 of Regulation S-K, 17 C.F.R. Section
229.601, as follows:
(a) Schedule VIII-Valuation and qualifying accounts and
reserves, included as Exhibit 99.1.
All other schedules for which provision is made in the
applicable accounting regulation of the Commission are not
required under the related instructions or are inapplicable,
and therefore have been omitted.
(2) Those exhibits required to be filed as Exhibits to this
Annual Report on Form 10-K pursuant to Item 601 of Regulation
S-K, 17 C.F.R. Section 229.601, as follows:
3(i), 4.1 Charter of Shoney's, Inc., as amended, filed as
Exhibit 4.1 to Post Effective Amendment No. 3 to
the Company's Registration Statement on Form S-8
(File No. 33-605) filed with the Commission on
October 31, 1988, and incorporated herein by this
reference.
3(ii), 4.2 Amended and Restated Bylaws of Shoney's, Inc.
4.3 Amended and Restated Rights Agreement, dated as
of May 25, 1994, between Shoney's, Inc. (the
"Company") and Harris Trust and Savings Bank, as
Rights Agent, filed as Exhibit 4 to the Company's
Current Report on Form 8-K filed with the
Commission on June 9, 1994 and incorporated
herein by this reference.
4.4 Indenture dated as of April 1, 1989 between the
Company and Sovran Bank/Central South, as Trustee
relating to $201,250,000 in principal amount of
liquid yield option notes due 2004, filed as
Exhibit 4.8 to Amendment No. 1 to the Company's
Registration Statement on Form S-3 filed with the
Commission on April 3, 1989 (No. 33-27571), and
incorporated herein by this reference.
4.5 Transfer Agreement dated as of May 15, 1990 among
the Company, The Travelers Corporation, CIBC Inc.
and Canadian Imperial Bank of Commerce, New York
Agency, filed as Exhibit 4.3 and 19.3 to the
Company's Quarterly Report on Form 10-Q for the
quarter ended August 5, 1990 filed with the
Commission on September 19, 1990, and
incorporated herein by this reference.
4.6 Transfer Agreement dated as of May 15, 1990 among
the Company, Equitable Variable Life Insurance
Company, CIBC Inc. and Canadian Imperial Bank of
Commerce, New York Agency, filed as Exhibit 4.4
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and 19.4 to the Company's Quarterly Report on
Form 10-Q for the quarter ended August 5, 1990
filed with the Commission on September 19, 1990,
and incorporated herein by this reference.**
4.7 Transfer Agreement dated as of May 15, 1990 among
the Company, National Integrity Life Insurance
Company, CIBC Inc. and Canadian Imperial Bank of
Commerce, New York Agency, filed as Exhibit 4.5
and 19.5 to the Company's Quarterly Report on
Form 10-Q for the quarter ended August 5, 1990
filed with the Commission on September 19, 1990,
and incorporated herein by this reference.**
4.8 Transfer Agreement dated as of May 15, 1990 among
the Company, Integrity Life Insurance Company,
CIBC Inc. and Canadian Imperial Bank of Commerce,
New York Agency, filed as Exhibit 4.6 and 19.6 to
the Company's Quarterly Report on Form 10-Q for
the quarter ended August 5, 1990 filed with the
Commission on September 19, 1990, and
incorporated herein by this reference.**
4.9 Transfer Agreement dated as of May 15, 1990 among
the Company, The Equitable of Colorado, Inc.,
CIBC Inc. and Canadian Imperial Bank of Commerce,
New York Agency, filed as Exhibit 4.7 and 19.7 to
the Company's Quarterly Report on Form 10-Q for
the quarter ended August 5, 1990 filed with the
Commission on September 19, 1990, and
incorporated herein by this reference.**
4.10 Transfer Agreement dated as of May 15, 1990 among
the Company, The Travelers Insurance Company,
CIBC Inc. and Canadian Imperial Bank of Commerce,
New York Agency, filed as Exhibit 4.8 and 19.8 to
the Company's Quarterly Report on Form 10-Q for
the quarter ended August 5, 1990 filed with the
Commission on September 19, 1990, and
incorporated herein by this reference.**
4.11 Transfer Agreement dated as of May 15, 1990 among
the Company, The Travelers Indemnity Company,
CIBC Inc. and Canadian Imperial Bank of Commerce,
New York Agency, filed as Exhibit 4.9 and 19.9 to
the Company's Quarterly Report on Form 10-Q for
the quarter ended August 5, 1990 filed with the
Commission on September 19, 1990, and
incorporated herein by this reference.**
4.12 Transfer Agreement dated as of May 15, 1990 among
the Company, The Equitable Life Assurance Society
of the United States, CIBC Inc. and Canadian
Imperial Bank of Commerce, New York Agency, filed
as Exhibit 4.10 and 19.10 to the Company's
Quarterly Report on Form
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10-Q for the quarter ended August 5, 1990 filed
with the Commission on September 19, 1990, and
incorporated herein by this reference.**
4.13 Transfer Agreement dated as of May 15, 1990 among
the Company, Canadian Imperial Bank of Commerce,
Atlanta Agency, CIBC Inc. and Canadian Imperial
Bank of Commerce, New York Agency, filed as
Exhibit 4.11 and 19.11 to the Company's Quarterly
Report on Form 10-Q for the quarter ended August
5, 1990 filed with the Commission on September 19,
1990, and incorporated herein by this reference.**
4.14 Transfer Agreement dated as of May 15, 1990 among
the Company, LTCB Trust Company, CIBC Inc. and
Canadian Imperial Bank of Commerce, New York
Agency, filed as Exhibit 4.12 and 19.12 to the
Company's Quarterly Report on Form 10-Q for the
quarter ended August 5, 1990 filed with the
Commission on September 19, 1990, and incorporated
herein by this reference.**
4.15 Transfer Agreement dated as of May 15, 1990 among
the Company, Oesterreichische Laenderbank, AG,
Grand Cayman Branch, CIBC Inc. and Canadian
Imperial Bank of Commerce, New York Agency, filed
as Exhibit 4.13 and 19.13 to the Company's
Quarterly Report on Form 10-Q for the quarter
ended August 5, 1990 filed with the Commission on
September 19, 1990, and incorporated herein by
this reference.**
4.16 Transfer Agreement dated as of May 15, 1990 among
the Company, The Daiwa Bank, Limited, CIBC Inc.
and Canadian Imperial Bank of Commerce, New York
Agency, filed as Exhibit 4.14 and 19.14 to the
Company's Quarterly Report on Form 10-Q for the
quarter ended August 5, 1990 filed with the
Commission on September 19, 1990, and incorporated
herein by this reference.**
4.17 Transfer Agreement dated as of May 15, 1990 among
the Company, The Bank of Tokyo Trust Company, CIBC
Inc. and Canadian Imperial Bank of Commerce, New
York Agency, filed as Exhibit 4.15 and 19.15 to
the Company's Quarterly Report on Form 10-Q for
the quarter ended August 5, 1990 filed with the
Commission on September 19, 1990, and incorporated
herein by this reference.**
4.18 Transfer Agreement dated as of May 15, 1990 among
the Company, Pan-American Life Insurance Company,
CIBC Inc. and Canadian Imperial Bank of Commerce,
New York Agency, filed as Exhibit 4.16 and 19.16
to the Company's Quarterly Report on Form 10-Q for
the quarter ended August 5, 1990 filed with the
Commission on September 19, 1990, and incorporated
herein by this reference.**
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4.19 Modification and Waiver Agreement No. 1 dated as
of September 25, 1991 to Transfer Agreements,
dated as of May 15, 1990 among the Company,
various financial institutions now or hereafter
parties thereto and Canadian Imperial Bank of
Commerce, New York Agency, as agent, filed as
Exhibit 4.6 and 28.2 to the Company's Current
Report on Form 8-K filed with the Commission on
December 3, 1991, and incorporated herein by this
reference.
4.20 Modification and Waiver Agreement No. 2 dated as
of May 15, 1992 to Transfer Agreements, dated as
of May 15, 1990 among the Company, various
financial institutions now or hereafter parties
thereto and Canadian Imperial Bank of Commerce,
New York Agency, as agent, filed as Exhibit 4.32
and 10.25 to Post Effective Amendment No. 5 to the
Company's Registration Statement on Form S-8 (File
No. 2-64257) filed with Commission on January 25,
1993, and incorporated herein by this reference.
4.21 Modification and Waiver Agreement No. 3 dated as
of October 25, 1992 to Transfer Agreements, dated
as of May 15, 1990 among the Company, various
financial institutions now or hereafter parties
thereto and Canadian Imperial Bank of Commerce,
New York Agency, as agent, filed as Exhibit 4.33
and 10.26 to Post Effective Amendment No. 5 to the
Company's Registration Statement on Form S-8 (File
No. 2-64257) filed with the Commission on January
25, 1993, and incorporated herein by this
reference.
4.22 Modification and Waiver Agreement No. 4 dated as
of July 21, 1993 to Transfer Agreements, dated as
of May 15, 1990 among the Company, various
financial institutions now or hereafter parties
thereto and Canadian Imperial Bank of Commerce,
New York Agency, as agent, filed as Exhibit 4.3 to
the Company's Quarterly Report on Form 10-Q for
the quarter ended August 1, 1993 filed with the
Commission on September 15, 1993, and incorporated
herein by this reference.
4.23 Modification and Waiver Agreement No. 5 dated as
of December 31, 1993 to Transfer Agreements, dated
as of May 15, 1990 among the Company, various
financial institutions now or hereafter parties
thereto and Canadian Imperial Bank of Commerce,
New York Agency, as agent, filed as Exhibit 4.26
to the Company's Annual Report on Form 10-K for
the fiscal year ended October 31, 1993 filed with
the Commission on January 31, 1994, and
incorporated herein by this reference.
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4.24 Revolving Credit Agreement dated as of July 13,
1988 between the Company and First American
National Bank, filed as Exhibit 4.1 and 19.1 to
the Company's Current Report on Form 8-K filed
with the Commission on December 3, 1991, and
incorporated herein by this reference.
4.25 Modification Agreement No. 1 dated as of March 5,
1991 to Revolving Credit Agreement, dated as of
July 13, 1988 between the Company and First
American National Bank, filed as Exhibit 4.2 and
19.2 to the Company's Current Report on Form 8-K
filed with the Commission on December 3, 1991, and
incorporated herein by this reference.
4.26 Alternative Rate Agreement dated as of June 4,
1992 supplementing that certain Revolving Credit
Agreement dated as of July 13, 1988 between the
Company and First American National Bank, filed as
Exhibit 4.36 and 10.29 to Post Effective Amendment
No. 5 to the Company's Registration Statement on
Form S-8 (File No. 2-64257) filed with the
Commission on January 25, 1993, and incorporated
herein by this reference.
4.27 Note Issuance Agreement, dated as of October 1,
1989, among the Company, Sovran Bank, N.A., as
Note Agent and Placement Agent and Sovran Bank /
Central South, as Escrow Agent, filed as Exhibit
19.3 and 28.3 to the Company's Current Report on
Form 8-K filed with the Commission on December 3,
1991, and incorporated herein by this reference.
4.28 Reimbursement Agreement, dated as of October 1,
1989, together with the Standby Note relating
thereto, among the Company, Sovran Bank / Central
South, Long Term Credit Bank of Japan, Limited,
New York Branch, Kredeitbank, N.V., New York
Branch and Sovran Bank / Central South, as Agent,
filed as Exhibit 19.4 and 28.4 to the Company's
Current Report on Form 8-K filed with the
Commission on December 3, 1991, and incorporated
herein by this reference.
4.29 Modification Agreement No. 1 dated as of July 21,
1993 to Reimbursement Agreement, dated as of
October 1, 1989, together with the Standby Note
relating thereto, among the Company, Sovran Bank
/ Central South, Long Term Credit Bank of Japan,
Limited, New York Branch, Kredeitbank, N.V., New
York Branch and Sovran Bank / Central South, as
Agent, filed as Exhibit 4.4 to the Company's
Quarterly Report on Form 10-Q for the quarter
ended August 1, 1993 filed with the Commission on
September 15, 1993, and incorporated herein by
this reference.
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4.30 Modification Agreement No. 2 dated as of June 8,
1994 to Reimbursement Agreement, dated as of
October 1, 1989, together with the Standby Note
relating thereto, among the Company, NationsBank
of Tennessee, N.A. (formerly Sovran Bank / Central
South), Long Term Credit Bank of Japan, Limited,
New York Branch, Kredeitbank, N.V., New York
Branch and NationsBank of Tennessee, N.A., as
Agent.
4.31 Note Issuance Agreement, dated as of October 1,
1990, among the Company, Sovran Bank, N.A., as
Note Agent and Placement Agent and Sovran Bank /
Central South, as Escrow Agent, filed as Exhibit
19.5 and 28.5 to the Company's Current Report on
Form 8-K filed with the Commission on December 3,
1991, and incorporated herein by this reference.
4.32 Reimbursement Agreement, dated as of October 1,
1990, together with the Standby Note relating
thereto, between the Company and Sovran Bank /
Central South, filed as Exhibit 19.6 and 28.6 to
the Company's Current Report on Form 8-K filed
with the Commission on December 3, 1991, and
incorporated herein by this reference.
4.33 Modification Agreement No. 1 dated as of July 21,
1993 to Reimbursement Agreement, dated as of
October 1, 1990, together with the Standby Note
relating thereto, between the Company and Sovran
Bank / Central South, filed as Exhibit 4.5 to the
Company's Quarterly Report on Form 10-Q for the
quarter ended August 1, 1993 filed with the
Commission on September 15, 1993, and incorporated
herein by this reference.
4.34 Modification Agreement No. 2 dated as of April 1,
1994 to Reimbursement Agreement, dated as of
October 1, 1990, together with the Standby Note
relating thereto, between the Company and
NationsBank of Tennessee, N.A. (formerly Sovran
Bank / Central South).
4.35 Amended and Restated Note Issuance Agreement,
dated as of November 1, 1993, among the Company,
NationsBank of Virginia, N.A., as Note Agent and
Placement Agent and NationsBank of Tennessee, as
Escrow Agent, filed as Exhibit 4.36 to the
Company's Annual Report on Form 10-K for the
fiscal year ended October 31, 1993 filed with the
Commission on January 31, 1994, and incorporated
herein by this reference.
4.36 Reimbursement Agreement, dated as of October 1,
1991, together with the Standby Note relating
thereto, between the Company and National
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Bank of Canada, New York Branch, filed as Exhibit
28.10 to the Company's Current Report on Form 8-K
filed with the Commission on December 3, 1991, and
incorporated herein by this reference.
4.37 Assignment, Assumption and Modification Agreement
dated as of November 4, 1993 relating to
Reimbursement Agreement, dated as of October 1,
1991, among the Company, NationsBank of Georgia,
N.A. and National Bank of Canada, New York Branch,
filed as Exhibit 4.38 to the Company's Annual
Report on Form 10-K for the fiscal year ended
October 31, 1993 filed with the Commission on
January 31, 1994, and incorporated herein by this
reference.
4.38 Loan Agreement dated as of September 24, 1992
between the Company and CIBC, Inc., filed as
Exhibit 4.43 and 10.36 to Post Effective Amendment
No. 5 to the Company's Registration Statement on
Form S-8 (File No. 2-64257) filed with the
Commission on January 25, 1993, and incorporated
herein by this reference.
4.39 Modification Agreement No. 1 dated as of October
25, 1992 to Loan Agreement dated as of September
24, 1992 between the Company and CIBC, Inc., filed
as Exhibit 4.44 and 10.37 to Post Effective
Amendment No. 5 to the Company's Registration
Statement on Form S-8 (File No. 2-64257) filed
with the Commission on January 25, 1993, and
incorporated herein by this reference.
4.40 Modification Agreement No. 2 dated as of July 21,
1993 to Loan Agreement dated as of September 24,
1992 between the Company and CIBC, Inc., filed as
Exhibit 4.6 to the Company's Quarterly Report on
Form 10-Q for the quarter ended August 1, 1993
filed with the Commission on September 15, 1993,
and incorporated herein by this reference.
4.41 Loan Agreement dated as of April 21, 1993 between
the Company and NationsBank of Tennessee, N.A.,
filed as Exhibit 4 to the Company's Quarterly
Report on Form 10-Q for the quarter ended May 9,
1993 filed with the Commission on June 23, 1993,
and incorporated herein by this reference.
4.42 Modification Agreement No. 1 dated as of July 21,
1993 to Loan Agreement dated as of April 21, 1993
between the Company and NationsBank of Tennessee,
N.A., filed as Exhibit 4.7 to the Company's
Quarterly Report on Form 10-Q for the quarter
ended August 1, 1993 filed with the Commission on
September 15, 1993, and incorporated herein by
this reference.
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4.43 Loan Agreement dated as of December 1, 1994
between the Company and NationsBank of Tennessee,
N.A.
4.44 Reducing Revolving Credit Agreement, dated as of
July 21, 1993, among the Company, various
financial institutions now or hereafter parties
thereto and Canadian Imperial Bank of Commerce,
New York Agency, as agent, filed as Exhibit 4.1 to
the Company's Quarterly Report on Form 10-Q for
the quarter ended August 1, 1993 filed with the
Commission on September 15, 1993, and incorporated
herein by this reference.
4.45 Modification Agreement No. 1 dated as of July 21,
1993 to Reducing Revolving Credit Agreement, dated
as of July 21, 1993, among the Company, various
financial institutions now or hereafter parties
thereto and Canadian Imperial Bank of Commerce,
New York Agency, as agent, filed as Exhibit 4.8 to
the Company's Quarterly Report on Form 10-Q for
the quarter ended August 1, 1993 filed with the
Commission on September 15, 1993, and incorporated
herein by this reference.
4.46 Modification Agreement No. 2 dated as of December
21, 1993 to Reducing Revolving Credit Agreement,
dated as of July 21, 1993, among the Company,
various financial institutions now or hereafter
parties thereto and Canadian Imperial Bank of
Commerce, New York Agency. Filed as Exhibit 4.46
to the Company's Annual Report on Form 10-K for
the fiscal year ended October 31, 1993, filed with
the Commission on January 31, 1994, and
incorporated herein by this reference.
4.47 Modification Agreement No. 3 dated as of May 3,
1994 to Reducing Revolving Credit Agreement, dated
as of July 21, 1993, among the Company, various
financial institutions now or hereafter parties
thereto and Canadian Imperial Bank of Commerce,
New York Agency, filed as Exhibit 99.1 to the
Company's Quarterly Report on Form 10-Q for the
quarter ended May 15, 1994 filed with the
Commission on June 29, 1994 and incorporated
herein by this reference.
4.48 Modification Agreement No. 4 dated as of October
27, 1994 to Reducing Revolving Credit Agreement,
dated as of July 21, 1993, among the Company,
various financial institutions now or hereafter
parties thereto and Canadian Imperial Bank of
Commerce, New York Agency.
4.49 Modification Agreement No. 5 dated as of January
18, 1995 to Reducing Revolving Credit Agreement,
dated as of July 21, 1993,
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among the Company, various financial institutions
now or hereafter parties thereto and Canadian
Imperial Bank of Commerce, New York Agency.
10.1 License Agreement, dated as of October 28, 1991,
between Shoney's Investments, Inc. and Shoney's
Lodging, Inc., filed as Exhibit 28.7 to the
Company's Current Report on Form 8-K filed with
the Commission on December 3, 1991, and
incorporated herein by this reference.
10.2 Amendment No. 1 dated as of September 16, 1992 to
License Agreement, dated as of October 28, 1991,
between Shoney's Investments, Inc. and ShoLodge
Franchise Systems, Inc. (formerly Shoney's
Lodging, Inc.), filed as Exhibit 10.2 to the
Company's Annual Report on Form 10-K for the
fiscal year ended October 31, 1993 filed with the
Commission on January 31, 1994, and incorporated
herein by this reference.
10.3 Stock Purchase and Warrant Agreement, dated as of
October 28, 1991, between Shoney's Investments,
Inc. and Gulf Coast Development, Inc., filed as
Exhibit 28.8 to the Company's Current Report on
Form 8-K filed with the Commission on December 3,
1991, and incorporated herein by this reference.
10.4 Agreement dated as of September 8, 1992 between
the Company and Raymond L. Danner, filed as
Exhibit 10.41 to Post Effective Amendment No. 5 to
the Company's Registration Statement on Form S-8
(File No. 2-64257) filed with the Commission on
January 25, 1993, and incorporated herein by this
reference.
10.5 Consent Decree entered by the United States
District Court for the Northern District of
Florida on January 25, 1993 in Haynes, et. al v.
Shoney's, Inc., et. al, filed as Exhibit 28 to the
Company's Current Report on Form 8-K filed with
the Commission on February 3, 1993, and
incorporated herein by this reference.
10.6 Shoney's, Inc. 1981 Stock Option Plan, filed as
Exhibit 4.7 to Post Effective Amendment No. 3 to
the Company's Registration Statement on Form S-8
(File No. 2-84763) filed with the Commission on
January 25, 1993, and incorporated herein by this
reference.
10.7 Shoney's, Inc. Stock Option Plan, filed as Exhibit
4.7 to Post Effective Amendment No. 4 to the
Company's Registration Statement on Form
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S-8 (File No. 2-64257) filed with the Commission
on April 11, 1990, and incorporated herein by this
reference.
10.8 Shoney's, Inc. Employee Stock Purchase Plan, filed
as Exhibit 4.7 to Post Effective Amendment No. 4
to the Company's Registration Statement on Form
S-8 (File No. 33-605) filed with the Commission
on October 26, 1989, and incorporated herein by
this reference.
10.9 Shoney's, Inc. Employee Stock Bonus Plan, filed as
Exhibit 10.9 to the Company's Annual Report on
Form 10-K for the fiscal year ended October 31,
1993 filed with the Commission on January 31,
1994, and incorporated herein by this reference.
10.10 Shoney's, Inc. Directors' Stock Option Plan, filed
as Exhibit 4.38 to the Company's Registration
Statement on Form S-8 (File No. 33-45076) filed
with the Commission on January 14, 1992, and
incorporated herein by this reference.
10.11 Shoney's Ownership Plan 1977, filed as Exhibit
10.47 to Post Effective Amendment No. 5 to the
Company's Registration Statement on Form S-8 (File
No. 2-64257) filed with the Commission on January
25, 1993, and incorporated herein by this
reference.
10.12 Captain D's Ownership Plan 1976, filed as Exhibit
10.48 to Post Effective Amendment No. 5 to the
Company's Registration Statement on Form S-8 (File
No. 2-64257) filed with the Commission on January
25, 1993, and incorporated herein by this
reference.
10.13 Captain D's Ownership Plan 1978-1979, filed as
Exhibit 10.49 to Post Effective Amendment No. 5 to
the Company's Registration Statement on Form S-8
(File No. 2-64257) filed with the Commission on
January 25, 1993, and incorporated herein by this
reference.
10.14 Shoney's, Inc. Supplemental Executive Retirement
Plan.
10.15 Employment Agreement dated as of January 13, 1995
between the Company and Taylor H. Henry.
10.16 Employment Agreement dated as of January 17, 1995
between the Company and Charles E. Porter.
10.17 Employment Agreement dated as of January 1, 1993,
between the Company and W. Craig Barber, filed
as Exhibit 10.9 to the Company's Annual Report
on Form 10-K for the fiscal year ended
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October 31, 1993 filed with the Commission on
January 31, 1994, and incorporated herein by this
reference.
10.18 Severance Agreement dated as of January 13, 1995,
between the Company and James W. Arnett, Jr.
10.19 Severance Agreement dated as of January 15, 1995,
between the Company and James M. Grout.
11 Statement re: computation of earnings per share.
21 Subsidiaries of Shoney's, Inc.
23 Consent of Ernst & Young LLP, independent
auditors.
27 Financial Data Schedule.
99.1 Schedule VIII-Valuation and qualifying accounts
and reserves.
** Document not filed because substantially identical to filed
document identified as Exhibit 4.5.
(b) No reports on Form 8-K have been filed during the last
quarter of the period covered by this Annual Report on Form 10-K.
(c) Exhibits -- the response to this portion of Item 14 is
submitted as a separate section of this report. See Item 14(a).
(d) Financial Statement Schedules -- the response to this
portion of Item 14 is submitted as a separate section of this
report. See Item 14(a).
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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, on this 26th day of January, 1995.
SHONEY'S, INC.
By: /s/ W. Craig Barber
--------------------------------
W. Craig Barber
Senior Executive Vice President
and Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed by the following persons on
behalf of the registrant and in the capacities indicated on this
26th day of January, 1995.
Signature Title
/s/ Taylor H. Henry
- - ---------------------------- Chairman of the Board, Chief
(Taylor H. Henry) Executive Officer and Director
/s/ Charles E. Porter
- - ---------------------------- President
(Charles E. Porter)
/s/ W. Craig Barber
- - ---------------------------- Senior Executive Vice President
(W. Craig Barber) and Chief Financial Officer
/s/ F.E. McDaniel, Jr.
- - ---------------------------- Vice President and
(F.E. McDaniel, Jr.) Secretary/Treasurer
/s/ Van Michael Payne
- - ---------------------------- Vice President and Controller
(Van Michael Payne)
/s/ Dennis C. Bottorff
- - ---------------------------- Director
(Dennis C. Bottorff)
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/s/ Carole F. Hoover
- - ---------------------------- Director
(Carole F. Hoover)
/s/ Victoria B. Jackson
- - ---------------------------- Director
(Victoria B. Jackson)
- - ---------------------------- Director
(Dan W. Maddox)
/s/ Wallace N Rasmussen
- - ---------------------------- Director
(Wallace N. Rasmussen)
/s/ Alex Schoenbaum
- - ---------------------------- Director
(Alex Schoenbaum)
/s/ Robert T. Shircliff
- - ---------------------------- Director
(Robert T. Shircliff)
/s/ B. Franklin Skinner
- - ---------------------------- Director
(B. Franklin Skinner)
/s/ James R. Thomas, II
- - ---------------------------- Director
(James R. Thomas, II)
/s/ Cal Turner, Jr.
- - ---------------------------- Director
(Cal Turner, Jr.)
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01/12/95
RESTATED BY-LAWS
OF
SHONEY'S, INC.
ARTICLE I
OFFICES
The executive offices of the Corporation shall be in Davidson
County, Tennessee, but the Corporation may have other offices at
such places as the Board of Directors may from time to time decide
or as the business of the Corporation may require.
ARTICLE II
MEETINGS OF SHAREHOLDERS
Section 1. Annual Meeting. The annual meeting of the
shareholders shall be held at the call of the Board of Directors on
a date and at a time and place, either within or without the State
of Tennessee, as may be selected by the Board of Directors.
Section 2. Special Meeting. Special Meetings of the
shareholders may be called at any time by the Chairman of the
Board, the Board of Directors or the holder or holders of not less
than one tenth (1/10) of all the shares entitled to vote at such
meeting, to be held at such time and place, either within or
without the State of Tennessee, as may be designated in the call of
the meeting.
Section 3. Notice of Meeting. Written Notice stating the
place, day and hour of annual and special meetings of shareholders
shall be given to each shareholder, either personally or by mail to
his last address of record with the Corporation, not less than ten
(10) nor more than sixty (60) days before the date of the meeting.
Notice of any special meeting of shareholders shall state the
purpose or purposes for which the meeting is called and the person
or persons calling the meeting. Notice of any annual or special
meeting of shareholders may be waived by the person or persons
entitled thereto by signing a written waiver of notice at any time
before or after the meeting is completed, which waiver may be
signed by a shareholder or by his attorney-in-fact or proxy holder.
Section 4. Voting. At all meetings of shareholders, all
shareholders of record shall be entitled to one vote for each share
<PAGE>
of stock standing in their name and may vote either in person or by
proxy. Proxies shall be filed with the Secretary of the meeting
before being voted or counted for the purpose of determining the
presence of a quorum.
Section 5. Quorum. At all meetings of shareholders, a majority
of the outstanding shares of stock entitled to vote, represented in
person or by proxy, shall constitute a quorum for the transaction
of business; and the vote or authorization of a majority of the
shares represented at any meeting at which a quorum is present or
represented shall determine the action taken on any matter that may
come before the meeting unless otherwise specifically required by
law or by express provision of the charter or By-laws of the
Corporation. If, however, such majority shall not be present or
represented by proxy at any meeting of the stockholders, the
presiding officer or stockholders present in person or represented
by proxy shall have the power to adjourn from time to time without
notice other than announcement at the meeting, until the requisite
number of shares shall be represented when any business may be
transacted which might have been transacted at the meeting as
provided in the original notice.
Section 6. Action by Consent. Whenever the shareholders of the
Corporation are required or permitted to take any action by vote,
such action may be taken without a meeting on written consent,
setting forth the action so taken, signed by all of the persons or
entities entitled to vote thereon.
Section 7. Advance Notice of Shareholder Proposals. At any
annual or special meeting of shareholders, proposals by
shareholders and persons nominated for election as Directors by
shareholders shall be considered only if advance notice thereof has
been timely given as provided herein and such proposals or
nominations are otherwise proper for consideration under applicable
law and the Charter and By-Laws of the Corporation. Notice of any
proposal to be presented by any shareholder or of the name of any
person to be nominated by any shareholder for election as a
Director of the Corporation at any meeting of shareholders shall be
delivered to the Secretary of the Corporation at its principal
executive office not less than 60 nor more than 90 days prior to
the date of the meeting; provided, however, that if the date of the
meeting is first publicly announced or disclosed (in a public
filing or otherwise) less than 70 days prior to the date of the
meeting, such notice shall be given not more than ten days after
such date is first so announced or disclosed. Public notice shall
be deemed to have been given more than 70 days in advance of the
annual meeting if the Corporation shall have previously disclosed,
in these ByLaws or otherwise, that the annual meeting in each year
is to be held on a determinable date, unless and until the Board
determines to hold the meeting on a different date. Any shareholder
who gives notice of any such proposal shall deliver therewith the
text of the proposal to be presented and a brief written statement
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of the reasons why such shareholder favors the proposal and setting
forth such shareholder's name and address, the number and class of
all shares of each class of stock of the Corporation beneficially
owned by such shareholder and any material interest of such
shareholder in the proposal (other than as a shareholder). Any
shareholder desiring to nominate any person for election as a
Director of the Corporation shall deliver with such notice a
statement in writing setting forth the name of the person to be
nominated, the number and class of all shares of each class of
stock of the Corporation beneficially owned by such person, the
information regarding such person required by paragraphs (a), (e)
and (f) of Item 401 of Regulation S-K adopted by the Securities and
Exchange Commission (or the corresponding provisions of any
regulation subsequently adopted by the Securities and Exchange
Commission applicable to the Corporation), such person's signed
consent to serve as a Director of the Corporation if elected, such
shareholder's name and address and the number and class of all
shares of each class of stock of the Corporation beneficially owned
by such shareholder. As used herein, shares "beneficially owned"
shall mean all shares as to which such person, together with such
person's affiliates and associates (as defined in Rule 12b-2 under
the Securities Exchange Act of 1934), may be deemed to beneficially
own pursuant to Rules 13d-3 and 13d-5 under the Securities Exchange
Act of 1934, as well as all shares as to which such person,
together with such person's affiliates and associates, has the
right to become the beneficial owner pursuant to any agreement
or understanding, or upon the exercise of warrants, options or
rights to convert or exchange (whether such rights are exercisable
immediately or only after the passage of time or the occurrence of
conditions). The person presiding at the meeting, in addition to
making any other determinations that may be appropriate to the
conduct of the meeting, shall determine whether such notice has
been duly given and shall direct that proposals and nominees not be
considered if such notice has not been given.
ARTICLE III
DIRECTORS
Section 1. Number of Qualifications. The business and affairs
of the Corporation shall be managed and controlled by a Board of
Directors, of not less than three nor more than fifteen in number.
The number of Directors shall be set by the Board of Directors.
Directors need not be shareholders of the Corporation.
Section 2. Nominations by Shareholders. Shareholders who wish
to nominate persons for election as Directors of the Corporation
shall comply with the requirements of ARTICLE II, Section 7 of
these By-Laws.
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Section 3. Election and Term of Office. The Directors shall be
elected at the annual meeting of shareholders; but if any such
annual meeting is not held or if the Directors are not elected at
any such annual meeting, the Directors may be elected at any
special meeting of the shareholders. Directors shall be elected by
a plurality of the votes cast. The Directors shall hold office
until the next annual meeting of shareholders and thereafter until
their respective successors have been elected and qualified.
Section 4. Meetings. Regular meetings of the Directors shall
be held annually following the annual meeting of the shareholders
and may be held without notice at such other places and times as
may be determined by the Board of Directors. Special meetings of
the Directors may be called at any time by the Chairman of the
Board or by a majority of the Directors on at least one day's
notice sent by any usual means of communication. Notice of any such
meeting may be waived by the person or persons entitled thereto by
signing a written waiver of notice at any time before or after the
meeting is completed. Attendance of a Director at a meeting shall
constitute a waiver of notice thereof unless such attendance is for
the express purpose of objecting to such meeting. Any meeting of
the Board of Directors may be held within or without the State of
Tennessee at such place as may be determined by the person or
persons calling the meeting.
Section 5. Quorum. A majority of the total number of Directors
then in office shall constitute a quorum for the transaction of
business; and the vote or action of a majority of the Directors
present at any meeting at which a quorum is had shall decide any
matter that may come before the meeting and shall be the act of the
Board unless otherwise specifically required by law or by express
provision of the charter or By-laws of the Corporation.
Section 6. Action by Consent. Any action required or permitted
to be taken by the Directors of the Corporation may be taken
without a meeting on written consent, setting forth the action so
taken, signed by all the Directors entitled to vote thereon.
Section 7. Vacancies. Vacancies in the Board of Directors
occurring for any reason, including an increase in the number of
Directors, resignation, or the removal of any Director with or
without cause, may be filled by vote of a majority of the Directors
then in office although less than a quorum exists; but if the
offices of a majority of the entire Board of Directors shall be
vacant at the same time, such vacancies shall be filled only by
vote of the shareholders. A director elected to fill any vacancy
shall hold office until the next annual meeting of shareholders and
thereafter until his successor has been elected and qualified.
Section 8. Removal and Resignation. Any or all of the
Directors may be removed with or without cause, at any time, by
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vote of the shareholders. Any Director may resign at any time, such
resignation to be made in writing and to take effect immediately or
on such later date as may be specified therein without acceptance.
Section 9. Committees. From time to time, a majority of the
entire Board of Directors may by resolution appoint an executive
committee or any other committee or committees for the purpose or
purposes to the extent permitted by law, which committee or
committees shall have such powers as shall be specified in the
resolution of appointment.
Section 10. Participation in Meetings. The members of the
Board of Directors, or any committee appointed by the Board, may
participate in a meeting of the Board or of such committee by means
of conference telephone or similar communications equipment by
means of which all persons participating in the meeting can hear
each other, and participation in a meeting pursuant to such means
shall constitute presence in person at such meeting. The Directors
shall be promptly furnished a copy of the minutes of the Board of
Directors' meetings.
Section 11. Compensation. The Directors shall receive
compensation or salary for their services as Directors, said sum to
be fixed by proper resolution of the Board of Directors, and said
salary and compensation may include a fixed sum for expenses of
attending the meetings of the Board of Directors. A Director may
serve the Corporation in a capacity other than that of a Director
and receive compensation for services rendered in such other
capacity.
ARTICLE IV
OFFICERS
Section 1. Designation. The officers of the Corporation shall
be a Senior Chairman of the Board (which office shall be optional
with the Board of Directors), a Chairman of the Board, a President,
one or more Division Presidents, one or more Vice Presidents, a
Secretary and a Treasurer and such other officers, agents and
employees as may from time to time be elected, chosen or appointed
by the Board of Directors. Any Vice President may be designated as
Executive Vice President or Senior Vice President or such other
title as the Board may determine. Any two or more of such offices
may be held by the same person except the offices of President and
Secretary.
Section 2. Senior Chairman of the Board of Directors. The
Senior Chairman of the Board shall be an honorary and optional
position. In the absence of the Chairman, however, he shall preside
at all meetings of the shareholders and the Board of Directors and,
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in addition, shall have such duties with regard to the general and
active management of the Corporation as may be prescribed from time
to time by the Board of Directors or by the By-laws.
Section 3. Chairman of the Board of Directors. The Chairman of
the Board of Directors shall preside at all meetings of the
shareholders and the Board of Directors, and he shall call regular
and special meetings of the shareholders and Board of Directors in
accordance with these By-laws. He shall perform such other duties
as may be prescribed by the Board. The Board may designate the
Chairman chief executive officer of the Corporation.
Section 4. President. The President shall have general
supervision of the affairs and property of the Corporation, subject
to the direction of the Board of Directors and the Chairman of the
Board. He shall manage and control the regular business of the
Corporation; and he may appoint agents and employees of the
Corporation, other than officers elected or appointed by the Board,
subject to the approval of the Board. In the absence of the
Chairman of the Board, the President shall preside at any meeting
of the shareholders or the Board of Directors. He shall perform
such other duties as may from time to time be prescribed by the
Board.
Section 5. Division President. The Division President or
Division Presidents shall assist the President in the management of
the Corporation, shall have general supervision of the affairs and
property of that division of the Corporation over which he is
President, and shall have such other duties as may from time to
time be prescribed by the Board, the Chairman of the Board, or
President. In the absence, disqualification or incapacity of the
President, the senior Division President, if senior to the senior
Vice President, shall perform the duties and exercise the powers of
the President.
Section 6. Vice President. The Vice President or Vice
Presidents shall assist the President in the management of the
Corporation and shall have such other powers and perform such other
duties as may from time to time be prescribed by the Board, or
President. In the absence, disqualification or incapacity of the
President, the senior Vice President shall perform the duties and
exercise the powers of the President.
Section 7. Secretary. The Secretary shall keep the minutes of
all meetings of the shareholders and the Board of Directors in
appropriate books, and he shall attend to the giving of all notices
for the Corporation. He shall have charge of the seal and stock
books of the Corporation and such other books and papers as the
Board may direct, and he shall in general perform all duties
incident to the office of Secretary of the Corporation. He shall
perform such other duties as may from time to time be prescribed by
the Board, the Chairman of the Board, or President.
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Section 8. Treasurer. The Treasurer shall have the care and
custody of all funds and securities of the Corporation, and he
shall in general perform all duties incident to the office of
Treasurer of the Corporation. He shall perform such other duties as
may from time to time be prescribed by the Board, the Chairman of
the Board, or President.
Section 9. Other Officers. The Board of Directors may appoint,
or may authorize the Chairman of the Board or President to appoint,
assistant secretaries and assistant treasurers and such other
officers as the Board may from time to time decide, who shall have
such authority and perform such duties as may from time to time be
prescribed by the Board or designated by the President.
Section 10. Election and Term of Office. The officers shall be
elected or appointed at the regular meeting of the Board of
Directors following the annual meeting of shareholders, provided
that any vacancy or newly created office may be filled at a special
meeting or other regular meeting of the Board. Unless otherwise
determined by the Board, each officer shall hold office until the
next regular meeting of the Board following the annual meeting of
shareholders and thereafter until his successor has been elected or
appointed and qualified.
Section 11. Compensation. The Board of Directors, or one of
its duly appointed committees, shall fix the salaries of the
officers of the Corporation. The compensation of other agents and
employees of the Corporation may be fixed by the Board of Directors
or by an officer or officers for whom that function has been
delegated by the Board.
ARTICLE V
SHARES
Section 1. Certificates. The shares of the Corporation shall
be represented by certificates in such form as the Board of
Directors may from time to time prescribe. Such certificates shall
be numbered consecutively in the order in which they are issued,
which numbering system may be separated by class or series if there
shall be more than one class or series of shares. The certificates
shall be signed by the Chairman of the Board and Secretary unless
the Board of Directors shall otherwise designate any two officers
of the Corporation for such purpose.
Section 2. Record. The name and address of all persons to whom
the shares of the Corporation are issued, the number of shares, and
the date of issue shall be entered on the books of the Corporation.
It shall be the duty of each shareholder to notify the Corporation
of his address.
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Section 3. Transfers. The shares of the Corporation are
transferable only on the books of the Corporation by the registered
holder thereof, either in person or by power of attorney, and upon
delivery and surrender of the certificate representing such shares
properly endorsed for transfer. Certificates exchanged or
surrendered shall be cancelled by the Secretary and placed in the
corporate records.
Section 4. Loss of Certificates. In case of the loss,
mutilation or destruction of a certificate representing shares of
the Corporation, a duplicate certificate may be issued on such
terms as the Board of Directors shall prescribe.
Section 5. Transfer Agent, Registrar. The Board of Directors
may appoint a transfer agent or agents and/or a registrar, and a
dividend disbursing agent for the Corporation.
ARTICLE VI
SEAL
Section 1. Authority to Adopt. The Corporation may have a seal
in such form as the Board of Directors may adopt, and the Board of
Directors may from time to time change the form of the seal of the
Corporation.
Section 2. Scroll Seal. In the event the Board shall not have
adopted a seal or if it is inconvenient to use the adopted seal at
any time, an authorized signature made in the name of and on behalf
of the Corporation followed by the word "Seal" enclosed in
parentheses or scroll shall be deemed the seal of the Corporation.
ARTICLE VII
FISCAL YEAR
The fiscal year of the Corporation shall end on the last
Sunday of October of each year, but the Board of Directors may from
time to time change the fiscal year of the Corporation.
ARTICLE VIII
DIVIDENDS, SURPLUS AND RESERVES
Section 1. Dividends. The Board of Directors may declare
dividends from the Corporation's net earnings, or from the surplus
of its assets over its liabilities, including capital, but not
otherwise. The Board of Directors may issue stock dividends,
provided the Corporation has a surplus equal in value, at a fair
valuation, to such stock issued as a dividend; and provided,
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further, that the surplus of the Corporation is reduced in an
amount equal to the value of the stock issued as a stock dividend.
Section 2. Surplus and Reserves. Before making any
distribution of proceeds, there may be set aside out of the net
proceeds of the Corporation such sums for maintaining any property
of the Corporation, or for any other purpose, and any profits of
any year not distributed as dividends shall be deemed to have been
thus set aside until otherwise disposed of by the Board of
Directors, and the Board of Directors may abolish any such reserve
in its absolute discretion.
ARTICLE IX
INDEMNITY
Any person who was or is a party or is threatened to be made
a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or
investigative (including any action by or in the right of the
Corporation) by reason of the fact that he is or was serving as an
officer or director or employee of the Corporation or is or was
serving at the request of the Corporation as a Director or officer
of the Corporation, partnership, joint venture, trust or other
enterprise, shall be indemnified by the Corporation against
expenses (including reasonable attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by
him in connection with such action, suit or proceeding if he acted
in good faith for a purpose which he reasonably believed to be in
the best interest of the corporation, and, in criminal proceedings,
in addition, had no reasonable cause to believe that his conduct
was
unlawful, to the maximum extent permitted by, and in the manner
provided by, the Tennessee Business Corporation Act. In the event
of a settlement, however, the indemnification herein shall apply
only when the Board of Directors approves such settlement and
reimbursement as being in the best interest of the Corporation. The
foregoing right of indemnification shall be in addition to and not
exclusive of all rights to which said Directors, officers or
employees may be entitled.
ARTICLE X
AMENDMENTS
The shareholders of the Corporation may adopt new By-laws and
may amend or repeal any or all of these By-laws at any annual or
special meeting provided, however, that notice of intention to
amend shall have been contained in the notice of any special
meeting called for that purpose; and also the Board of Directors
may adopt new by-laws and may be amend or repeal any or all of
these By-laws by the vote of a majority of the entire Board, and
provided further that any by-law adopted by the Board may be
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<PAGE>
amended or repealed by the shareholders. The Board of Directors may
amend by-laws adopted by the shareholders, provided that
shareholders may from time to time specify particular provisions of
these By-laws which shall not be amended by the Board of Directors.
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MODIFICATION AGREEMENT NO. 2
TO REIMBURSEMENT AGREEMENT AND STANDBY NOTE
THIS MODIFICATION AGREEMENT NO. 2 TO REIMBURSEMENT AGREEMENT
AND STANDBY NOTE (the "Modification No. 21") is made as of the 8th
day of June, 1994, by and among SHONEY'S, INC. (the "Borrower"), a
Tennessee corporation and NATIONSBANK OF TENNESSEE, N.A.
("NationsBank") (formerly known as Sovran Bank/Central South), a
national banking association having its principal place of business
in the City of Nashville, Tennessee, THE LONG-TERM CREDIT BANK OF
JAPAN, LIMITED, NEW YORK BRANCH ("LTCB"), a Japanese banking
corporation acting through its New York Branch with an office in
the City of New York, New York, KREDIETBANK, N.V., NEW YORK BRANCH
("Krediet"), a Belgian banking corporation acting through its New
York Branch with an office in the City of New York, New York, and
NATIONSBANK OF TENNESSEE, N.A. as agent for NationsBank, LTCB and
Krediet (in such capacity, the "Agent").
WITNESSETH:
WHEREAS, the parties heretofore entered into a Reimbursement
Agreement dated as of October 1, 1989 (the "Agreement"), as
modified and amended by a First Amendment to Reimbursement
Agreement dated as of February 1, 1990 (the "Amendment") and
Modification Agreement No. 1 to Reimbursement Agreement and Standby
Note dated July 21, 1993 (the "Modification No. 111) (the
Agreement, as modified and amended by the Amendment and
Modification No. 1, is hereinafter referred to as the
"Reimbursement Agreement"); and
WHEREAS, pursuant to the Reimbursement Agreement, the Borrower
has issued its $13,305,555.56 Standby Promissory Note dated October
27, 1989 (the "Note"), as modified and amended by Modification No.
1 (the Note,as modified and amended by Modification No. 1, is
hereinafter referred to as the "Standby Note"); and
WHEREAS, the Borrower has requested that NationsBank, LTCB and
Krediet (collectively, the "Letter of Credit Issuers") and the
Agent amend certain provisions of the Reimbursement Agreement and
the Standby Note as set forth herein; and
WHEREAS, the Letter of Credit Issuers and the Agent Are
willing to amend such provisions, but only on the terms and condi-
tions set forth herein,
NOW, THEREFORE, in consideration of the agreements herein
contained, the parties hereto hereby agree as follows:
ARTICLE I.
DEFINITIONS
SECTION 1.1 Certain Definitions. Unless otherwise defined
herein or the context otherwise requires, capitalized terms used in
this Modification No. 2, including its preamble and recitals, have
<PAGE>
the following meanings (such meanings to be equally applicable to
the singular and plural forms thereof):
"Agent" has the meaning assigned to such term in the preamble.
"Amendment" has the meaning assigned to such term in the first
recital.
"Borrower" has the meaning assigned to such term in the
preamble.
"Krediet" has the meaning assigned to such term in the
preamble.
"LTCB" has the meaning assigned to such term in the preamble.
"Letter of Credit Issuers" has the meaning assigned to such
term in the third recital.
"Modification Effective Date" has the meaning assigned to such
term in Section 3.1.
"Modification No. 1" has the meaning assigned to such term in
the first recital.
"Modification No. 2" means this Modification Agreement No. 2
to Reimbursement Agreement and Standby Note.
"NationsBank" has the meaning assigned to such term in the
preamble.
"Reimbursement Agreement" has the meaning assigned to such
term in the first recital.
"Standby Note" has the meaning assigned to such term in the
second recital.
SECTION 1.2. Other Definitions. Unless otherwise defined
herein or the context otherwise requires, capitalized terms used in
this Modification No. 2, including its preamble and recitals, have
the meanings assigned to such terms in the Reimbursement Agreement.
ARTICLE II.
MODIFICATION OF REIMBURSEMENT AGREEMENT AND
STANDBY NOTE AS OF THE MODIFICATION EFFECTIVE DATE
Effective on (and subject to the occurrence of) the
Modification Effective Date, the provisions of the Reimbursement
Agreement and Standby Note referred to below are hereby amended and
modified in accordance with this Article II. Except as expressly so
amended the Reimbursement Agreement and Standby Note shall continue
in full force and effect in accordance with their terms, and the
Borrower hereby reaffirms its obligations under the Reimbursement
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Agreement and the Standby Note as amended and modified hereby and
under the other Note Documents.
SECTION 2.1. Modification of Reimbursement Agreement. The
Reimbursement Agreement is hereby amended in the following manner:
SECTION 2.1.1. The following definition of "First
Step-Down" is hereby added to Article I of the
Reimbursement Agreement in appropriate alphabetical
order:
"First Step-Down" shall mean the time at which
the Borrower has delivered a Compliance
Certificate (as defined in the CIBC Agreement)
pursuant to the CIBC Agreement demonstrating
that the Borrower's Funded Debt Ratio (as
defined in the CIBC Agreement) is equal to or
less than 3:1 and the Borrower's Adjusted
Interest Coverage Ratio (as defined in the
CIBC Agreement) is greater than 3:1."
SECTION 2.1.2. Section 3.02(a) of the Reimbursement
Agreement is hereby deleted and the following is inserted
in lieu therefor:
"(a) In addition to any other fees payable to
the Letter of Credit Issuers, the Borrower
will pay to the Agent for the benefit of the
Letter of Credit Issuers in advance, on the
Date of Issuance and on each Commission
Payment Date thereafter until the Termination
Date, a letter of credit fee for the period
from such Commission Payment Date (or, in the
case of the first such payment, the Date of
Issuance) to and including the day before the
next Commission Payment Date, in an amount
equal to the product of (i) one and one-half
percent (1 1/2%) per annum (the "Fee Percentage")
of the Stated Amount of the Letter of Credit
(as determined on such commission Payment
Date) multiplied by (ii) a fraction, the
numerator of which equals the actual number of
days from and including such Commission
Payment Date to and including the day before
the next Commission Payment Date and the
denominator of which equals the actual number
of days in such year, provided, however, that,
upon the occurrence of the First Step-Down,
the Fee Percentage shall be reduced to one and
one-quarter percent (l 1/4%) per annum. The
Borrower shall be entitled to a pro-rata
refund of such fee paid in advance if and to
the extent that the Stated Amount of the
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Letter of Credit is reduced during the period
for which such fee was prepaid pursuant to the
provisions of Section 5.10(b) of the Note
Issuance Agreement."
SECTION 2.2. Modification of Standby Note. The Standby Note is
hereby amended in the following manner:
SECTION 2.2.1. The date "September 1, 1994"
appearing in the fourth full paragraph of the Standby
Note is hereby deleted and the date "September 1, 1996"
is inserted in lieu therefor.
ARTICLE III.
CONDITIONS TO EFFECTIVENESS
SECTION 3.1. Modification Effective Date. This Modification
No. 2 shall become effective as of the date first above written
(the "Modification Effective Date") when the Agent shall have
received counterparts of this Modification No. 2 duly executed by
the Borrower, the Agent and each of the Letter of Credit Issuers.
ARTICLE IV.
MISCELLANEOUS
SECTION 4.1. Cross References. References in this
Modification No. 2 to any article or section are, unless otherwise
specified, to such article or section of this Modification No. 2.
SECTION 4.2. Instrument Pursuant to Reimbursement Agreement;
Limited Waiver. This Modification No. 2 is a document executed
pursuant to the Reimbursement Agreement and shall (unless otherwise
expressly indicated therein) be construed, administered, and
applied in accordance with all of the terms and provisions of the
Reimbursement Agreement. Any term or provision of and any modifica-
tion effected by this Modification No. 2 may be modified in any
manner by an instrument in writing executed by the parties hereto.
Except as expressly amended hereby, all of the representations,
warranties, terms, covenants, and conditions of the Reimbursement
Agreement, the Standby Note and the other Note Documents shall
remain unmodified and unwaived. The modifications set forth herein
shall be limited precisely as provided for herein to the provisions
expressly modified herein.
SECTION 4.3. Successors and Assigns. This Modification No.
2 shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns.
SECTION 4.4. Counterparts. This Modification No. 2 may be
executed by the parties hereto in several counterparts which shall
be executed by the Borrower, each of the Letter of Credit Issuers,
and the Agent, as the case may be, all of which shall be deemed to
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<PAGE>
be an original and which shall constitute together but one and the
same agreement
SECTION 4.5. Event of Default. It is understood and agreed
that any breach of any representation or warranty or covenant
contained herein shall constitute an Event of Default.
SECTION 4.6. Agreement of Letter of Credit Issuers. Without
limiting the generality of Section I of the Agreement of Banks made
as of October 1, 1989, by and among the Letter of Credit Issuers
and the Agent, each of the Latter of Credit Issuers represents and
warrants to each of the other Latter of Credit Issuers and to the
Agent that it has independently and without reliance upon any
representation made by either of the other Letter of Credit Issuers
or the Agent made its own decision to enter into this modification
No. 2 and that it continues to make its own independent credit
decisions with respect to the Borrower.
SECTION 4.7. Expenses. The Borrower hereby agrees that it
will pay all out-of-pocket expenses incurred by the Latter of
Credit Issuers and the Agent in connection with this Modification
No. 2, including reasonable attorneys' fees and expenses.
IN WITNESS WHEREOF, the parties hereto have caused this
Modification No. 2 to be executed by their respective officers
hereunder duly authorized as of the day and year first above
written.
SHONEY'S INC.
By:
--------------------------------
Title:
----------------------------
NATIONSBANK OF TENNESSEE, N.A.
(formerly known as Sovran
Bank/Central South)
By:
--------------------------------
Title:
----------------------------
THE LONG-TERM CREDIT BANK OF JAPAN
LIMITED, NEW YORK BRANCH
By:
--------------------------------
Title:
----------------------------
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KREDIETBANK, N.V., NEW YORK BRANCH
By:
--------------------------------
Title:
----------------------------
NATIONSBANK OF TENNESSEE, N.A.
(formerly known as Sovran
Bank/Central South), as Agent
By:
--------------------------------
Title:
----------------------------
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MODIFICATION AGREEMENT NO. 2
TO REIMBURSEMENT AGREEMENT AND STANDBY NOTE
THIS MODIFICATION AGREEMENT NO. 2 TO REIMBURSEMENT AGREEMENT
AND STANDBY NOTE (the "Modification No. 21") is made as of the 1st
day of April, 1994, by and between SHONEY'S, INC. (the
"Borrower"), a Tennessee corporation, and NATIONSBANK OF TENNESSEE,
N.A. ("NationsBank") (formerly known as Sovran Bank/ Central
South), a national banking association having its principal place
of business in the City of Nashville, Tennessee.
WITNESSETH:
WHEREAS, the parties heretofore entered into a Reimbursement
Agreement dated as of October 1, 1990 (the "Agreement"), as
modified and amended by Modification Agreement No. 1 to
Reimbursement Agreement and Standby Note dated July 21, 1993 (the
"Modification No. 1") (the Agreement, as modified by Modification
No. 1, is hereinafter referred to as the "Reimbursement
Agreement"); and
WHEREAS, pursuant to the Reimbursement Agreement, the Borrower
has issued its $9,580,000.00 Standby Promissory Note dated October
5, 1990 (the "Note"), as modified and amended by Modification No.
1 (the Note, as modified and amended by Modification No. 1, is
hereinafter referred to as the "Standby Note"); and
WHEREAS, the Borrower has requested that NationsBank amend
certain provisions of the Reimbursement Agreement and the Standby
Note as set forth herein; and
WHEREAS, NationsBank is willing to amend such provisions, but
only on the terms and conditions set forth herein,
NOW, THEREFORE, in consideration of the agreements herein
contained, the parties hereto hereby agree as follows:
ARTICLE I.
DEFINITIONS
SECTION 1.1. Certain Definitions. Unless otherwise defined
herein or the context otherwise requires, capitalized terms used in
this Modification No. 2, including its preamble and recitals, have
the following meanings (such meanings to be equally applicable to
the singular and plural forms thereof):
"Borrower" has the meaning assigned to such term in the
preamble.<PAGE>
"Modification Effective Date" has the meaning assigned to such
term in Section 3.1.
"Modification No. 1" has the meaning assigned to such term in
the first recital.
"Modification No. 2" means this Modification Agreement No. 2
to Reimbursement Agreement and Standby Note.
"NationsBank" has the meaning assigned to such term in the
preamble.
"Reimbursement Agreement" has the meaning assigned to such
term in the first recital.
"Standby Note" has the meaning assigned to such term in the
second recital.
SECTION 1.2. Other Definitions. Unless otherwise defined
herein or the context otherwise requires, capitalized terms used in
this Modification No. 2, including its preamble and recitals, have
the meanings assigned to such terms in the Reimbursement Agreement.
ARTICLE II.
MODIFICATION OF REIMBURSEMENT AGREEMENT AND
STANDBY NOTE AS OF THE MODIFICATION EFFECTIVE DATE
Effective on (and subject to the occurrence of) the
Modification Effective Date, the provisions of the Reimbursement
Agreement and Standby Note referred to below are hereby amended and
modified in accordance with this Article II. Except as expressly so
amended, the Reimbursement Agreement and Standby Note shall
continue in full force and effect in accordance with their terms,
and the Borrower hereby reaffirms its obligations under the
Reimbursement Agreement and the Standby Note as amended and
modified hereby and under the other Note Documents.
SECTION 2.1. Modification of Reimbursement Agreement.
The Reimbursement Agreement is hereby amended in the following
manner:
SECTION 2.1.1. The following definition of "First
Step-Down" is hereby added to Article I of the
Reimbursement Agreement in appropriate alphabetical
order:
"First Step-Down" shall mean the time at
which the Borrower has delivered a Compliance
Certificate (as defined in the CIBC
Agreement) pursuant to the CIBC Agreement
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<PAGE>
demonstrating that the Borrower's Funded Debt
Ratio (as defined in the CIBC Agreement) is
equal to or less than 3:1 and the Borrower's
Adjusted Interest Coverage Ratio (as defined
in the CIBC Agreement) is greater than 3:1.1"
SECTION 2.1.2. Section 3.02(a) of the
Reimbursement Agreement is hereby deleted and
the following is inserted in lieu therefor:
"(a) In addition to any other fees
payable to the Letter of Credit Issuer, the
Borrower will pay to the Letter of Credit
Issuer in advance, on the Date of Issuance and
on each Commission Payment Date thereafter
until the Termination Date, a letter of credit
fee for the period from such Commission
Payment Date (or, in the case of the first
such payment, the Date of Issuance) to and
including the day before the next Commission
Payment Date, in an amount equal to the
product of (i) one and one-half percent (1 1/2%)
per annum (the "Fee Percentage") of the Stated
Amount of the Letter of Credit (as determined
on such Commission Payment Date) multiplied by
(ii) a fraction, the numerator of which equals
the actual number of days from and including
such Commission Payment Date (or the Date of
Issuance, as the case may be) to and including
the day before the next Commission Payment
Date and the denominator of which equals the
actual number of days in such year, provided,
however, that, upon the occurrence of the
First Step-Down, the Fee Percentage shall be
reduced to one and one-quarter percent (l 1/4%)
per annum. The Borrower shall be entitled to a
pro-rata refund of such fee paid in advance if
and to the extent that the Stated Amount of
the Letter of credit is reduced during the
period for which such fee was prepaid pursuant
to the provisions of Section 5.10(b) of the
Note Issuance Agreement."
SECTION 2.2. Modification of Standby Note. The Standby Note is
hereby amended in the following manner:
SECTION 2.2.1. The date "September 1, 19951"
appearing in the fourth full paragraph of the Standby
Note is hereby deleted and the date "September 1, 1997"
is inserted in lieu therefor.
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<PAGE>
ARTICLE III.
CONDITIONS TO EFFECTIVENESS
SECTION 3.1. Modification Effective Date. This modification
No. 2 shall become effective as of the date first above written
(the "Modification Effective Date") when counterparts of this
Modification No. 2 shall have been duly executed by the Borrower
and NationsBank.
ARTICLE IV.
MISCELLANEOUS
SECTION 4.1. Cross References. References in this
Modification No. 2 to any article or section are, unless otherwise
specified, to such article or section of this Modification No. 2.
SECTION 4.2. Instrument Pursuant to Reimbursement Agreement;
Limited Waiver. This Modification No. 2 is a document executed
pursuant to the Reimbursement Agreement and shall (unless otherwise
expressly indicated therein) be construed, administered, and
applied in accordance with all of the terms and provisions of the
Reimbursement Agreement. Any term or provision of and any
modification effected by this Modification No. 2 may be modified in
any manner by an instrument in writing executed by the parties
hereto. Except as expressly amended hereby, all of the
representations, warranties, terms, covenants, and conditions of
the Reimbursement Agreement, the Standby Note and the other Note
Documents shall remain unmodified and unwaived. The modifications
set forth herein shall be limited precisely as provided for herein
to the provisions expressly modified herein.
SECTION 4.3. Successors and Assigns. This Modification No.
2 shall be binding upon and inure to the benefit of.the parties
hereto and their respective successors and assigns.
SECTION 4.4. Counterparts. This Modification No. 2 may be
executed by the parties hereto in several counterparts which shall
be executed by the Borrower and NationsBank, as the case may be,
all of which shall be deemed to be an original and which shall
constitute together but one and the same agreement.
SECTION 4.5. Event of Default. It is understood and agreed
that any breach of any representation or warranty or covenant
contained herein shall constitute an Event of Default.
SECTION 4.6. Expenses. The Borrower hereby agrees that it
will pay all out-of-pocket expenses incurred by NationsBank in
connection with this Modification No. 2, including reasonable
attorneys' fees and expenses.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Modification No. 2 to be executed by their respective officers
hereunder duly authorized as of the day and year first above
written.
SHONEY'S, INC.
By:
--------------------------------
Title:
----------------------------
NATIONSBANK OF TENNESSEE, N.A.
(formerly known as Sovran
Bank/Central South)
By:
--------------------------------
Title:
----------------------------
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<PAGE>
LOAN AGREEMENT
by and between
SHONEY'S, INC.,
as Borrower
and
NATIONSBANK OF TENNESSEE, N.A.,
as Lender
Dated as of
December 1, 1994
<PAGE>
LOAN AGREEMENT
THIS LOAN AGREEMENT is dated as of December 1, 1994, by and
between SHONEY'S, INC., a Tennessee corporation ("Borrower"), and
NATIONSBANK OF TENNESSEE, N.A., a national banking association
("Lender");
W I T N E S S E T H:
WHEREAS, Borrower has applied to Lender for financing of the
type more particularly described below; and
WHEREAS, Lender is presently willing to extend such financing
to Borrower, subject to the terms and conditions hereof;
NOW, THEREFORE, for and in consideration of the foregoing and
other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties agree as follows:
ARTICLE 1
DEFINITIONS AND ACCOUNTING MATTERS
1.1 Defined Terms. As used herein, the following terms shall
have the following meanings, unless the context otherwise requires:
"Acceleration Event" shall have the meaning assigned thereto
in the Mortgages.
"Adjusted EBITDA" shall mean for any period,
(a) Borrower's EBITDA for such period;
minus
(b) Consolidated Capital Expenditures (other than in respect
of Capitalized Leases or Franchisee Acquisitions) for such period.
"Adjusted Interest Coverage Ratio" shall mean, at any date,
the ratio of
(a) Adjusted EBITDA for the four Fiscal Quarter period ending
on or prior to such date
to
(b) Consolidated Interest Expense paid or payable in cash in
respect of the four Fiscal Quarter period ending on or prior to
such date.
<PAGE>
"Affiliate" shall mean, with respect to any Person, corpora-
tion or other entity, any Person, corporation or other entity
Controlling, Controlled by or under common Control with such
Person, corporation or entity.
"Agreement" shall mean this Loan Agreement and any future
amendments, modifications, restatements or supplements hereto or
hereof.
"Applicable Margin" shall mean (a) initially, (i) with respect
to the unpaid principal amount of each Fixed Rate Portion of the
Term Loan, one and one-quarter percent (1- 1/4%) per annum, and (ii)
with respect to the unpaid principal amount of the Floating Rate
Portion of the Term Loan, zero percent (0%) per annum, and (b)
thereafter, during the effective period of any Compliance
Certificate demonstrating that both Borrower's Funded Debt Ratio
and the Adjusted Interest Coverage Ratio (in each case determined
by reference to the applicable Compliance Certificate as set forth
below) are as set forth in the columns below entitled "Funded Debt
Ratio" and "Adjusted Interest Coverage Ratio", (i) with respect to
the unpaid principal amount of each Fixed Rate Portion of the Term
Loan, the applicable percentage set forth below in the column
entitled "Applicable Margin for Fixed Rate Portions," and (ii) with
respect to the unpaid principal amount of the Floating Rate Portion
of the Term Loan, the applicable percentage set forth below in the
column entitled "Applicable Margin for Floating Rate Portion":
Applicable Margin Applicable Margin
Funded Debt Adjusted Interest for Fixed Rate for Floating Rate
Ratio Coverage Ratio Portions Portion
Equal to or Equal to or less 1-1/4% 0%
greater than than 3:1
3:1
Less than 3:1 Greater than 3:1 1% 0%
but equal to but equal to or
or greater less than 4:1
than 2.5:1
Less than 2.5:1 Greater than 4:1 3/4% 0%
In order to be entitled to a reduction in the Applicable
Margin as set forth above, both Borrower's Funded Debt Ratio and
the Adjusted Interest Coverage Ratio must fall within the range set
forth opposite such reduced Applicable Margin.
The Funded Debt Ratio and Adjusted Interest Coverage Ratio
used to compute the Applicable Margin shall be the Funded Debt
Ratio and Adjusted Interest Coverage Ratio set forth in the
Compliance Certificate most recently delivered by Borrower to
Lender. Each Compliance Certificate delivered by Borrower shall be
in effect until the earlier of (i) (x) with respect to the first,
second and fourth Fiscal Quarters of any Fiscal Year, the 45th day
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<PAGE>
after the end of the Fiscal Quarter next following the Fiscal
Quarter in respect of which such Compliance Certificate is being
delivered, and (y) with respect to the third Fiscal Quarter of any
Fiscal Year, the 90th day after the end of the Fiscal Quarter next
following such third Fiscal Quarter in respect of which such
Compliance Certificate is being delivered, or (ii) the effective
date of delivery of the next delivered Compliance Certificate due
pursuant to Section 7.2. If Borrower shall fail to deliver a
Compliance Certificate within 45 or 90 days after the end of any
Fiscal Quarter as required pursuant to clause (a) or (b) of Section
7.2., as the case may be, the Applicable Margin from and including
the 46th or 91st day, as the case may be, after the end of such
Fiscal Quarter to but not including the date Borrower delivers to
Lender a Compliance Certificate shall conclusively be presumed to
equal the highest Applicable Margin. Changes in the Applicable
Margin resulting from a change in the Funded Debt Ratio and
Adjusted Interest Coverage Ratio shall become effective on the
second Business Day after the date of delivery by Borrower to
Lender of a new Compliance Certificate pursuant to clause (a) or
(b) of Section 7.2. Upon the occurrence and during the continuance
of an Event of Default, the entire outstanding principal balance of
the Term Loan shall bear interest at the Default Rate.
"Asbestos" shall include all the meanings therefor under any
Relevant Environmental Laws and shall include, without limitation,
asbestos fibers, friable asbestos, and friable and potentially
friable asbestos containing material, as such terms are defined
under the Relevant Environmental Laws.
"Authorized Officers" shall mean the officers of the Borrower
authorized to act with respect to this Agreement and the other Loan
Documents as set forth in a certificate dated the date hereof of
Borrower's Secretary certifying the authority, incumbency and
signatures of such officers.
"Bankruptcy Code" shall mean Title 11 of the United States
Code, as amended from time to time.
"Borrower" has the meaning assigned to such term in the
preamble to this Agreement.
"Business Day" shall mean a day on which (i) Lender is open
for the conduct of commercial banking business at its Nashville,
Tennessee offices, and (ii) for purposes of selecting a Libor Rate,
shall also mean a day on which banks are quoting rates for United
States dollar deposits in the interbank eurodollar market.
"Capitalized Leases" shall mean leases, the obligations under
which have been, or in accordance with GAAP are required to be,
recorded on the books of Borrower or any of its Subsidiaries as
capital leases.
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<PAGE>
"Change in Control" shall mean the acquisition after the date
hereof by any Person or Persons acting in concert of beneficial
ownership (within the meaning of Rule 13d-3 of the Securities and
Exchange Commission promulgated under the Securities Exchange Act
of 1934, as amended, or any successor, replacement or analogous
rule or provision of law) of twenty percent (20%) or more of the
outstanding shares of voting stock of Borrower.
"Code" shall mean the Internal Revenue Code of 1986, as
amended, or otherwise modified from time to time.
"Collateral" shall have the meaning assigned thereto in the
Mortgages.
"Compliance Certificate" shall mean a certificate duly
executed by an Authorized Officer of Borrower, substantially in the
form of Exhibit B and including therein, among other things,
calculations supporting compliance by Borrower with Section 8.5.
"Concept" shall mean a division or type of business of
Borrower or any of its Subsidiaries held out to the public with a
particular designation and, as of the date hereof, shall mean and
include the following: (a) "Shoney's" restaurants, (b) "Captain
D's", (c) "Lee's Famous Recipe", (d) "Commissary", (e) "Pargo's",
(f) "Fifth Quarter", (g) "Mike Rose Foods", and (h) BarbWire's.
"Consolidated Capital Expenditures" shall mean, for any
period, the gross amount of additions during such period to fixed
assets, property, plant, and equipment of Borrower and its
Subsidiaries, all as such additions would be reflected on a
consolidated balance sheet of Borrower and its Subsidiaries
prepared in accordance with GAAP consistently applied at the end of
such period when compared to a consolidated balance sheet of
Borrower and its Subsidiaries prepared in accordance with GAAP
consistently applied at the end of a prior applicable period.
"Consolidated Fixed Charge Coverage Ratio" shall mean, as of
the close of any Fiscal Quarter, the ratio computed for the four
consecutive Fiscal Quarters ending on the computation date, of:
(a) the sum for such Fiscal Quarters of (i) EBITDA plus (ii)
Consolidated Lease Expense
to
(b) Consolidated Fixed Charges for such Fiscal Quarters.
"Consolidated Fixed Charges" shall mean, for any period, the
sum of:
(a) Consolidated Interest Expense;
plus
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<PAGE>
(b) the amount of any scheduled payment of principal of any
Consolidated Funded Debt (including, without limitation, the amount
of scheduled payments under Capitalized Leases, other than such as
is appropriately allocable to Consolidated Interest Expense) net of
proceeds of insurance recoveries for such period received by
Borrower in respect of certain litigation against Borrower as
reflected in Borrower's Annual Report on Form 10-K for its 1992
Fiscal Year; provided, however, that for purposes of this clause
(b) only, Consolidated Funded Debt shall not include any
Indebtedness permitted under clause (b) of Section 8.4 or any
similar Indebtedness permitted under clause (c) of Section 8.4 so
long as such Indebtedness is, by its terms, renewable and the
provider of such Indebtedness has not declined to so renew such
Indebtedness;
plus
(c) all federal, state and local income taxes of Borrower and
its Subsidiaries;
plus
(d) Consolidated Lease Expense
in each case for such period.
"Consolidated Funded Debt" shall mean, at any time, the sum of
(a) all Indebtedness (including accrued interest on the
Subordinated LYONS Notes and debt incurred with respect to Mortgage
Financing Transactions) of Borrower and its Subsidiaries, other
than any Indebtedness described in clause (f) or (g) of the
definition of Indebtedness contained herein, at such time and (b)
the amount of reserve for litigation settlement, as shown on
Borrower's then most recent consolidated balance sheet delivered
pursuant to clause (a) or (b) of Section 7.2.
"Consolidated Interest Expense" shall mean, for any period,
the aggregate interest expense of Borrower and its Subsidiaries for
such period, as determined in accordance with GAAP, and in any
event including, without duplication, all commissions, discounts
and other fees and charges owed with respect to letters of credit
and banker's acceptances and net costs under Rate Swap Agreements
and the portion of any obligation under Capitalized Leases
allocable to Consolidated Interest Expense, but in any event
excluding (x) any non-cash interest charges and amortization of
transaction costs with respect to Indebtedness and (y) amortization
of bond discount relating to the Subordinated Debentures.
"Consolidated Lease Expense" shall mean, for any period, the
aggregate amount required to be paid during such period by Borrower
and its Subsidiaries, as lessee, net of sublease rentals accrued by
Borrower and its Subsidiaries in accordance with GAAP, under leases
to which Borrower or any of its Subsidiaries is a party or by which
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<PAGE>
Borrower or any of its Subsidiaries is bound, excluding amounts
required to be paid under Capitalized Leases during such period.
"Consolidated Net Income" shall mean, for any period, all
amounts which, in conformity with GAAP consistently applied, would
be included under net income on a consolidated income statement of
Borrower and its Subsidiaries for such period.
"Consolidated Net Worth" shall mean, at any time, all amounts
which, in accordance with GAAP consistently applied, would be
included under shareholders' equity on a consolidated balance sheet
of Borrower and its Subsidiaries at such time; provided that, in
any event, such amounts are to be net of amounts carried on the
books of Borrower and the Subsidiaries for (a) any treasury stock
and (b) any write-up in the book value of any assets of Borrower or
any of its Subsidiaries resulting from a revaluation thereof.
"Control" shall mean, with respect to any Person, the power to
direct the management and policies of such Person, directly or
indirectly, whether through legal or beneficial ownership. For
purposes hereof, but without limiting the foregoing, a Person shall
be deemed to Control another Person if such Person possesses,
directly or indirectly, the power to vote in excess of twenty
percent (20%) or more of the securities having ordinary voting
power for the election of directors of such Person.
"Credit Agreement" shall mean that certain $270,000,000
Reducing Revolving Credit Agreement dated as of July 21, 1993,
among Borrower, CIBC Inc., acting through its Atlanta Office,
various other financial institutions now or hereafter parties
thereto as lenders and Canadian Imperial Bank of Commerce, acting
through its New York Agency, as agent for the lenders, as amended
or modified from time to time.
"Credit Termination" shall mean the payment in full of all
Indebtedness owing under the Credit Agreement, together with the
expiration, cancellation or termination of the obligations of the
lenders thereunder to lend.
"Default Condition" shall mean the occurrence of any event
which, after satisfaction of any requirement for the giving of
notice or the lapse of time, or both, would become an Event of
Default.
"Default Rate" shall mean the Rate of Borrowings in effect
from time to time plus two percent (2%) per annum; provided,
however, that in no event shall the Default Rate be less than the
Prime Rate plus 2%.
"Dollars" or "$" shall mean United States dollars.
"EBITDA" shall mean, for any period, an amount equal to the
sum, computed for such period, of
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<PAGE>
(a) Consolidated Net Income (excluding extraordinary items of
gain and including extraordinary items of loss, in each case as
determined in accordance with GAAP consistently applied) for such
period;
plus
(b) all federal, state and local income taxes of Borrower and
its Subsidiaries for such period;
plus
(c) Consolidated Interest Expense for such period;
plus
(d) the aggregate amount deducted, in determining
Consolidated Net Income for such period, with respect to
depreciation and amortization in accordance with GAAP consistently
applied and in any event including, but without duplication, the
aggregate amount so deducted for (i) non-cash interest charges and
amortization of transaction costs with respect to Indebtedness and
(ii) amortization of bond discount relating to the Subordinated
Debentures.
"Employee Benefit Plan" shall mean any employee welfare
benefit plan or any employee pension benefit plan, as those terms
are defined in Sections 3(1) and 3(2) of ERISA (other than a
Multiemployer Plan), for the benefit of employees of Borrower or
any Subsidiary or any other entity which is a member of a
"controlled group" or under "common control" with Borrower, as such
terms are defined in Section 4001(a)(14) of ERISA.
"Environmental Complaint" shall mean any complaint, order,
citation, notice or other written communication from any Person
with respect to the existence or alleged existence of a violation
of or liability resulting from any Relevant Environmental Laws.
"Environmental Lien" shall mean a Lien in favor of any
Governmental Authority for (a) any liability under any Relevant
Environmental Laws, or (b) damages arising from, or costs incurred
by such Governmental Authority in response to, a release or
threatened release of any Hazardous Material into the environment.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended, and any successor statute of similar import,
together with the regulations thereunder, in each case as in effect
from time to time. References to sections of ERISA shall be con-
strued to also refer to any successor sections.
"Event of Default" shall mean the occurrence of any of the
events specified in Article 9.
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<PAGE>
"Federal Funds Rate" shall mean, for any day, the rate per
annum (rounded upwards, if necessary, to the nearest 1/100th of 1%)
equal to the weighted average of the rates on overnight Federal
funds transactions with members of the Federal Reserve System
arranged by the Federal Reserve Bank of New York on the Business
Day next succeeding such day as published in the Federal Reserve
Statistical Release H.15(519), as published by the Board of
Governors of the Federal Reserve System, or any successor
publication by the Board of Governors of the Federal Reserve
System, provided that (a) if such day is not a Business Day, the
Federal Funds Rate for such day shall be such rate on such
transactions on the next preceding Business Day as so published on
the next succeeding Business Day, and (b) if no such rate is so
published on such next succeeding Business Day, the Federal Funds
Rate for such day shall be the average rate charged to members of
the Federal Reserve System on such day on such transactions.
"Fiscal Quarter" shall mean any quarter of a Fiscal Year and,
in the case of Borrower's initial Fiscal Quarter of a Fiscal Year,
means a period of sixteen consecutive weeks, in the case of each of
Borrower's second and third Fiscal Quarters of a Fiscal Year, means
a period of twelve consecutive weeks and, in the case of Borrower's
final Fiscal Quarter of a Fiscal Year, means a period of twelve
consecutive weeks if the Fiscal Year is comprised of fifty-two
weeks and thirteen consecutive weeks if the Fiscal Year is
comprised of fifty-three weeks.
"Fiscal Year" shall mean any period of fifty-two or fifty-
three consecutive calendar weeks ending on the last Sunday in
October of each calendar year; references to a Fiscal Year with a
number corresponding to any calendar year (e.g. the "1994 Fiscal
Year") refer to the Fiscal Year ending on the last Sunday in
October occurring during such calendar year.
"Fixed Rate" shall mean a fixed annual percentage rate based
on a Libor Rate.
"Fixed Rate Portion" shall mean any portion of principal out-
standing under the Term Loan on which interest is accruing pursuant
hereto at a Fixed Rate.
"Floating Provisions" shall mean Sections 7.2, 8.3, 8.4, 8.5
and 8.7 and the defined terms used in those Sections which
correspond to defined terms used in the Credit Agreement.
"Floating Rate" shall mean at any time, the greater of (i) the
Prime Rate plus one-half of one percent (1/2 of 1%) per annum, or
(ii) the Federal Funds Rate plus one percent (1%) per annum
(adjusted as appropriate as of the opening of business on each day
on which the Prime Rate or the Federal Funds Rate changes).
"Floating Rate Portion" shall mean the portion of principal
outstanding under the Term Loan on which interest is accruing
pursuant hereto at a rate based on the Floating Rate.
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<PAGE>
"Franchisee Acquisitions" shall mean (a) any additions to
property, plant or equipment of Borrower or any of its Subsidiaries
constituting restaurant or related properties that are acquired
from Concept franchisees of Borrower or (b) the acquisition of
capital stock or other ownership interests in such franchisees.
"Funded Debt Ratio" shall mean, at any date, the ratio of
(a) Borrower's Consolidated Funded Debt at such time;
to
(b) Borrower's EBITDA for the four Fiscal Quarter Period
ending on or just prior to such date.
"GAAP" shall mean generally accepted accounting principles,
consistently applied for the period involved, in effect from time
to time.
"Governmental Authority" shall mean any national government,
any federal, state, local or other political subdivision or agency
thereof and any central bank thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.
"Guaranty" shall mean any agreement, undertaking, or arrange-
ment by which any Person guarantees, endorses, or otherwise becomes
or is contingently liable upon (by direct or indirect agreement,
contingent or otherwise, to provide funds for payment, to
"keep-well" or supply funds to, or otherwise to invest in, a
debtor, or otherwise to assure a creditor against loss) the debt,
obligation, or other liability of any Person (other than by
endorsements of instruments in the ordinary course of collection),
or guarantees the payment of dividends or other distributions upon
the shares of any other Person. The amount of the obligor's
obligation under any Guaranty shall (subject to any limitation set
forth therein) be deemed to be the amount of the debt, obligation,
or other liability guaranteed or supported thereby.
"Hazardous Materials" shall mean any toxic or hazardous
substances, wastes or contaminants, polychlorinated biphenyls,
paint containing lead, urea formaldehyde foam insulation, petroleum
or crude oil (or any fraction thereof), and discharges of sewage or
effluent, and solid waste associated with the exploration and
development of oil, gas and geothermal resources, as any of those
terms is defined from time to time in or for the purposes of any
Relevant Environmental Laws, and Asbestos.
"Impermissible Qualification" shall mean, relative to the
opinion or certification of any Independent Public Accountant as to
any financial statement of Borrower, any qualification or exception
to such opinion or certification
(a) which is of a "going concern" or similar nature;
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<PAGE>
(b) which relates to the limited scope of examination of
matters relevant to such financial statement; or
(c) which relates to the treatment or classification of any
item in such financial statement and which, as a condition to its
removal, would require an adjustment to such item the effect of
which would be to cause Borrower to be in default of any of its
obligations under Section 8.5.
"Improvements" shall have the meaning attributable thereto in
the Mortgages.
"Indebtedness" of any Person, at a particular time, means all
items which, in conformity with GAAP, would be classified as
liabilities on a balance sheet of such Person as at such time and
which constitute (a) indebtedness for borrowed money or the
deferred purchase price of assets or other Property (including,
without limitation, all notes payable and drafts accepted
representing extensions of credit and all obligations evidenced by
bonds, debentures, notes or other similar instruments but excluding
trade payables incurred in the ordinary course of business payable
within ninety days of the date thereof); provided, that for pur-
poses of Section 8.5 the amount of Indebtedness in respect of the
Subordinated LYONS Notes and all other Indebtedness issued on a
zero coupon basis shall be the original issue price thereof plus
the amount of accrued interest thereon, (b) obligations with
respect to any conditional sale agreement or title retention
agreement, (c) indebtedness arising under acceptance facilities, in
connection with surety or other similar bonds, and the outstanding
amount of all letters of credit issued for the account of such
Person and, without duplication, all drafts drawn thereunder, (d)
all liabilities secured by any Lien in any Property owned by such
Person even though it has not assumed or otherwise become liable
for the payment thereof, (e) obligations under Capitalized Leases,
(f) obligations with respect to Rate Swap Agreements, and (g) any
asserted withdrawal liability of such Person or a commonly
controlled entity to a Multiemployer Plan.
"Independent Public Accountant" means Ernst & Young or any
other public accounting firm of recognized national standing
selected by Borrower and consented to by Lender.
"Instrument" means any contract, agreement, indenture, mort-
gage or other document or writing (whether by formal agreement,
letter, or otherwise) under which any obligation is evidenced,
assumed, or undertaken, or any right to any Lien is granted or
perfected.
"Interest Adjustment Date" shall mean with respect to the
first Libor Interest Period, the date of the first borrowing here-
under based on a Libor Rate, and with respect to each Libor
Interest Period thereafter, (x) if such Libor Interest Period is
selected with respect to an existing Fixed Rate Portion, the last
day of the immediately preceding Libor Interest Period, and (y) if
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such Libor Interest Period is selected with respect to an existing
Floating Rate Portion, the day such Libor Interest Period is to
commence, as selected in an Interest Notice.
"Interest Notice" shall mean a written notice by Borrower for
the continuation or conversion of Rates of Borrowing pursuant to
Subsection 4.1.3, which shall be substantially in the form of
Exhibit C. The substantive terms and conditions of the form of
Interest Notice are incorporated herein as if fully set out in this
Agreement.
"Interest Payment Date" shall mean (i) with respect to any
Fixed Rate Portion, the last day of each Libor Interest Period
applicable thereto and, with respect to any Libor Interest Period
of six (6) months duration, the date which falls three (3) months
after the beginning of such Libor Interest Period, and (ii) with
respect to the Floating Rate Portion, the first Business Day of
each month.
"Investment" shall mean, when used with reference to any
investment of Borrower or any of its Subsidiaries,
(a) any loan, advance or other extension of credit made
by it to any other Person (excluding commission, travel,
salary, relocation expenses, and similar advances to officers
and employees made in the ordinary course of business);
(b) any Guaranty made by such Person; and
(c) any capital contribution by such Person to, or
purchase of stock or other securities or partnership interests
by such Person in, any other Person, or any other investment
evidencing an ownership or similar interest of such Person in
any other Person;
and the amount of any Investment shall be the original principal or
capital amount thereof less (i) all cash returns of principal or
equity thereon and (ii) in the case of any Guaranty, any reduction
in the aggregate amount of liability under such Guaranty to the
extent that such reduction is made strictly in accordance with the
terms of such Guaranty (and, in each case, without adjustment by
reason of the financial condition of such other Person).
"Lender" shall have the meaning assigned to such term in the
preamble to this Agreement.
"Lending Office" shall mean the office of Lender located at
One NationsBank Plaza, Nashville, Tennessee 37239, or such other
office or offices of Lender as Lender may from time to time specify
in writing to Borrower as its Lending Office.
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"Libor" shall mean, for any Libor Interest Period, the rate
(rounded upward, if necessary, to the next higher 1/16th of 1%)
quoted by Lender at approximately 10:00 a.m., prevailing Central
time, two (2) Business Days prior to the first day of such Libor
Interest Period, for eurodollar deposits offered to Lender for a
period comparable to such Libor Interest Period in an amount
comparable to the principal amount of the applicable Fixed Rate
Portion.
"Libor Interest Period" shall mean a period selected by
Borrower hereunder with respect to an interest rate based on a
Libor Rate, which commences on the Interest Adjustment Date for
such Libor Interest Period, and which shall be equal to one (1),
two (2), three (3) or six (6) months; provided, however, that in no
event shall any Libor Interest Period extend beyond the Termination
Date. If a Libor Interest Period would otherwise expire on a day
which is not a Business Day, such Libor Interest Period shall be
extended to the next succeeding Business Day, unless the next
succeeding Business Day shall fall in the next succeeding calendar
month, in which event the last day of such Libor Interest Period
shall be the immediately preceding Business Day. If there exists
no day in the month in which a Libor Interest Period ends
numerically corresponding to the day in the month in which such
Libor Interest Period began, such Libor Interest Period shall end
on the last Business Day of such month. Notwithstanding any
provision herein to the contrary, the Libor Rate applicable hereto
on any Interest Adjustment Date shall be the Libor Rate applicable
to the Libor Interest Period which commences on such Interest
Adjustment Date.
"Libor Rate" shall mean interest at a rate per annum equal to
Libor, as selected by Borrower pursuant and subject to the
provisions of Section 4.1.
"Lien" shall mean any deed to secure debt, deed of trust,
mortgage or similar instrument, and any lien, security interest,
preferential arrangement which has the practical effect of
constituting a security interest, security title, pledge, charge,
encumbrance or servitude of any kind, whether by consensual
agreement or by operation of statute or other law, and whether
voluntary or involuntary, including, without limitation, any
conditional sale or other title retention agreement or lease in the
nature thereof.
"Limited Partnerships" shall mean, collectively, Shoney's
Manassas Limited Partnership, Captain D's Manassas Limited
Partnership, Pargo's Manassas Limited Partnership, Shoney's of
Eufala, Ltd. and Shoney's - Captain D's Winchester Limited
Partnership, as to each of which Borrower is the general partner
and each of which owns restaurant(s) which are leased to Borrower
and/or motel(s) which are leased to ShoLodge, Inc.
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"Loan Documents" shall mean, collectively, this Agreement, the
Term Note, the Mortgages, and any and all other documents, instru-
ments, certificates and agreements executed and/or delivered by
Borrower in connection herewith or related hereto, or any one, more
or all of the foregoing as the context shall require.
"LYONS Indenture" shall mean the indenture, dated as of April
1, 1989, by Borrower in favor of NationsBank of Tennessee, N.A.
(formerly known as Sovran Bank/Central South), as Trustee, with
respect to the Subordinated LYONS Notes as in effect on the date
hereof.
"Marriott" shall mean the Marriott Corporation, a Delaware
corporation or its Affiliates.
"Materially Adverse Effect" shall mean, with respect to any
event, act, condition or occurrence of whatever nature (including
any adverse determination in any litigation, arbitration, or
governmental investigation or proceeding), whether singly or in
conjunction with any other event or events, act or acts, condition
or conditions, occurrence or occurrences, whether or not related,
a material adverse change in, or a material adverse effect upon,
any of (a) the financial condition, operations, business,
properties or prospects of Borrower and its Subsidiaries, on a
consolidated basis; (b) the rights and remedies of Lender under the
Loan Documents, or the ability of Borrower to perform its
obligations under the Loan Documents; or (c) the legality, validity
or enforceability of any Loan Document.
"Maximum Rate" shall have the meaning assigned thereto in
Subsection 4.1.7.
"Memorandum" shall mean the Confidential Information
Memorandum dated April, 1994, compiled by Canadian Imperial Bank of
Commerce based on information provided by the Borrower.
"Mortgage Financing Collateral" shall mean (a) those
properties listed on Item 1.1 of the Disclosure Schedule attached
to the Credit Agreement and on Exhibit D ("Mortgage Financing
Collateral") (including buildings placed thereon) that have been or
are to be used to collateralize the debt incurred by Borrower in
the Mortgage Financing Transactions; and (b) certain parcels of
undeveloped real property and buildings placed thereon owned or
acquired by Borrower or its Subsidiaries; provided, that at no time
shall there be Mortgage Financing Collateral properties under this
clause (b) which have a cost (excluding any construction costs
relating to such properties) in excess of $36,000,000.
"Mortgage Financing Transaction" shall mean any program of
acquiring or financing
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(a) land and buildings for restaurant facilities, either
listed on Exhibit D ("Mortgage Financing Collateral") or opened
after the date hereof, to be owned and operated by Borrower or its
Subsidiaries; and
(b) land, buildings and/or equipment for manufacturing and
distribution facilities to be owned and operated by Borrower or its
Subsidiaries,
in each case in which the lenders granting such financing will be
granted a Lien in the land and/or buildings and/or fixtures
acquired or financed on terms and conditions (which may include,
without limitation, through the issuance and guarantee by Borrower
or its Subsidiaries of industrial revenue bonds) and evidenced by
Mortgage Financing Transaction Documents.
"Mortgage Financing Transaction Document" shall mean each
agreement, mortgage, security agreement, deed of trust, indenture,
note and each other document and instrument relating to a Mortgage
Financing Transaction. "Mortgage Financing Transaction Documents"
means all such agreements, mortgages, indentures, notes and other
documents and instruments.
"Mortgages" shall mean, collectively, the counterparts of that
certain Master Mortgage Indenture, Deed of Trust and Deed to Secure
Debt with Assignment of Leases and Rents, Security Agreement and
Fixture Filing dated of even date herewith by Borrower in favor of
Lender and/or the applicable trustees named therein, as the case
may be, as amended or modified from time to time.
"Multiemployer Plan" shall have the meaning set forth in
Section 4001(a)(3) of ERISA.
"Obligations" shall mean any and all Indebtedness of Borrower
to Lender pursuant to or arising out of or related to this
Agreement or any of the other Loan Documents, including without
limiting the generality of the foregoing, any indebtedness,
liability or obligation of Borrower to Lender arising hereunder or
as a result hereof, whether evidenced by the Term Note or
otherwise, and any and all extensions or renewals thereof in whole
or in part; any indebtedness, liability or obligation of Borrower
to Lender under any later or future advances or loans made by
Lender to Borrower pursuant to this Agreement, and any and all
extensions or renewals thereof in whole or in part.
"Other Taxes" shall have the meaning assigned thereto in
Subsection 4.9.1.
"PBGC" shall mean the Pension Benefit Guaranty Corporation and
any entity succeeding to any or all of its functions under ERISA.
"Permitted Liens" shall mean, as to the Collateral, "Permitted
Exceptions", as that term is defined in the Mortgages.
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"Person" shall mean any individual, sole proprietorship, part-
nership, joint venture, trust, unincorporated organization,
association, corporation, institution, entity, party or government
(whether territorial, national, federal, state, county, city,
municipal or otherwise, including, without limitation, any
instrumentality, division, agency, body or department thereof).
"Plan" shall mean a "pension plan", as such term is defined in
ERISA, which is subject to title IV of ERISA (other than a
Multiemployer Plan) and to which Borrower or any corporation, trade
or business that is, along with Borrower, a member of a controlled
group of corporations or a controlled group of trades or businesses
(as described in Sections 414(b) and 414(c), respectively, of the
Code or Section 4001 of ERISA) may have any liability, including
any liability by reason of having been a substantial employer
within the meaning of Section 4063 of ERISA at any time during the
preceding five years, or by reason of being deemed to be a
contributing sponsor under Section 4069 of ERISA.
"Prime Rate" shall mean the fluctuating rate of interest of
Lender as established and declared as the Prime Rate of Lender at
any time and from time to time, which rate is not necessarily the
lowest rate of interest charged by Lender to borrowers.
"Property" shall mean any interest in any property or asset of
any kind, whether real, personal or mixed, or tangible or
intangible.
"Rate of Borrowing" shall mean any Rate of Borrowing estab-
lished pursuant to Section 4.1.
"Rate Swap Agreement" shall mean any interest rate swap or
cap, interest rate collar agreement or similar arrangement entered
into from time to time, by Borrower and Lender or any other bank or
financial institution.
"Realco" shall mean Shoney's Real Estate, Inc., a special
purpose corporation that is a wholly-owned Subsidiary of Borrower,
incorporated under the laws of the State of Tennessee.
"Relevant Environmental Laws" shall mean all Requirements of
Law from time to time applicable to Borrower or any of its
Subsidiaries or to any Property now or formerly owned, operated,
leased, used or affected by Borrower or any of its Subsidiaries or
any part thereof with respect to (a) the installation, existence or
removal of Asbestos; (b) the existence, discharge, generation, use,
release, treatment, storage, disposal, remediation or removal of
Hazardous Materials; (c) exposure to Hazardous Materials; (d) air
emissions, water discharges, noise emissions, solid wastes and any
other environmental, health or safety matters; (e) pollution or
other effects on the environment; and (f) state laws addressing oil
and gas exploration and production wastes.
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"Remodeling Expenses" shall mean expenses for the remodeling
of restaurant properties recorded on the books and records of
Borrower or its Subsidiaries as additions to property, plant or
equipment of Borrower or such Subsidiary in accordance with GAAP.
"Reportable Event" shall mean any of the events described in
Section 4043(b) of ERISA.
"Requirements of Law" as to any Person, shall mean the
articles of incorporation and bylaws or other organizational or
governing documents of such Person, and any applicable federal,
state or local statute, ordinance, treaty, rule or regulation,
permit, license or standard, or final determination of an
arbitrator or a court or other Governmental Authority, in each case
applicable to or binding upon such Person or any of its Property or
to which such Person or any of its Property is subject, and shall
include, without limitation, all Relevant Environmental Laws.
"Reserve Percentage" shall mean, for any day, that percentage
(expressed as a decimal) as prescribed by the Board of Governors of
the Federal Reserve System (or any other governmental body having
jurisdiction with respect thereto), that is applicable on such day
in respect of Eurocurrency liabilities, as defined in Regulation D
of such Board, including, without limitation, any basic, marginal,
emergency, supplemental, special, transitional or other reserves,
if Lender in its sole discretion determines that it is required to
maintain any such reserves on such day, and disregarding any off-
setting amounts that may be available to Lender to decrease such
requirements to the extent such offsetting amounts arose under
transactions other than those pursuant to this Agreement.
"Stated Rate" shall have the meaning assigned thereto in
Subsection 4.1.7.
"Subordinated Debentures" shall mean Borrower's 12%
subordinated debentures due July, 2000.
"Subordinated Debt" shall mean, collectively:
(a) the Subordinated Debentures;
(b) the Subordinated LYONS Notes; and
(c) any other indebtedness (other than indebtedness arising
out of Mortgage Financing Transactions) of Borrower for
borrowed money and permitted to be outstanding under
the terms of the Credit Agreement and which is
subordinated in form and substance to the Obligations,
and which has subordination provisions, terms of
payment, interest rates, covenants, remedies, defaults
and other material terms, in each case reasonably
satisfactory in form and substance to the Agent (as
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defined in the Credit Agreement), as evidenced by its
written approval thereof.
"Subordinated Indenture" shall mean the Indenture, dated as of
July 1, 1988, between Borrower and NationsBank of Georgia, N.A. (as
successor to The Citizens and Southern National Bank), as the same
may be amended, supplemented or otherwise modified from time to
time in accordance with the provisions of this Agreement.
"Subordinated LYONS Notes" shall mean those zero coupon
subordinated, liquid yield option notes due 2004 in an aggregate
face amount of $201,250,000 issued on April 11, 1989, as in effect
on the date hereof.
"Subsidiary" shall mean any corporation, partnership, business
association or other entity (including any Subsidiary of any of the
foregoing) of which Borrower owns, directly or indirectly, in
excess of 50% of the capital stock or equity interest having
ordinary power for the election of directors or others performing
similar functions.
"Taxes" shall have the meaning assigned thereto in Subsection
4.9.1.
"Term Loan" shall mean the term loan made by Lender to
Borrower in the amount of $28,000,000.00 pursuant to the provisions
of Section 2.1, which term loan is evidenced by the Term Note.
"Term Note" shall mean the term promissory note of Borrower,
as amended or supplemented from time to time, payable to the order
of Lender, in the principal amount of the Term Loan, together with
any renewals or extensions thereof, in whole or in part. The Term
Note shall be substantially in the form of Exhibit A.
"Termination Date" means December 22, 1999.
"Tranche C Agreements" shall mean those certain Transfer
Agreements dated May 15, 1990 among Borrower and the lender parties
thereto, as amended or modified from time to time.
"Tranche C Notes" shall mean, collectively, all promissory
notes in the aggregate principal amount of $160,000,000 issued from
time to time pursuant to the terms of the Tranche C Agreements.
"UCC" shall mean the Uniform Commercial Code as in effect on
the date hereof in the State of Tennessee.
"Welfare Plan" means a "welfare plan", as such term is defined
in ERISA.
1.2 Use of Defined Terms. All terms defined in this
Agreement and any exhibits hereto shall have the same defined
meanings when used in the Term Note, the Mortgages, the other Loan
Documents or any other documents, instruments, certificates and
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agreements executed and/or delivered by Borrower in connection
herewith, unless otherwise defined therein or the context shall
require otherwise.
1.3 Terminology. Except where the context clearly means
otherwise, all personal pronouns used in this Agreement, whether
used in the masculine, feminine or neuter gender, shall include all
other genders; the singular shall include the plural, and the
plural shall include the singular. The table of contents hereof
and titles of Articles and Sections in this Agreement are for
convenience only, and neither limit nor amplify the provisions of
this Agreement, and all references in this Agreement to Articles,
Sections, Subsections, paragraphs, clauses, or subclauses or
Exhibits shall refer to the corresponding Article, Section,
Subsection, paragraph, clause or subclause of, or Exhibit attached
to, this Agreement, unless specific reference is made to the
articles, sections or other subdivisions of, or exhibit to, another
document or instrument.
1.4 Accounting Matters. All accounting terms not
specifically defined herein shall have the meanings generally
attributed to such terms under GAAP. To enable the ready determi-
nation of compliance with the covenants set forth herein, Borrower
will not change its Fiscal Year (except that Borrower may change
its Fiscal Year provided (x) such change is clearly reflected in
its annual audit report, (y) such change has been concurred in by
Borrower's independent certified public accountants and (z) this
Agreement has been amended to the extent necessary, as determined
in the opinion of Lender, to reflect such changes in the financial
covenants and other terms and conditions of this Agreement).
1.5 Exhibits. All Exhibits attached hereto are by reference
made a part hereof.
1.6 UCC Terms. The terms "accounts", "chattel paper",
"instruments", "general intangibles", "inventory" and "equipment",
as and when used in the Loan Documents, shall have the same
meanings given such terms under the UCC.
ARTICLE 2
THE TERM LOAN
2.1 Term Loan. Lender agrees, subject to and upon compliance
with the terms and conditions of this Agreement, to make the Term
Loan to Borrower.
2.2 Lending Office. The Term Loan shall be made and
maintained at Lender's Lending Office.
2.3 Term Note. The Term Loan shall be evidenced by the Term
Note, which Term Note shall be executed and delivered
simultaneously herewith by Borrower to Lender. Lender shall
maintain on its books, in accordance with its usual practice,
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information relating to the Term Loan, setting forth the applicable
interest rates and the amounts of principal, interest and other
sums paid and payable by Borrower from time to time hereunder. In
the case of any dispute, action or proceeding relating to any
amount payable hereunder, the entries in such books shall be prima
facie evidence of such amount, absent manifest error.
2.4 Use of Proceeds. The proceeds of the Term Loan shall be
used by Borrower to reimburse Borrower for expenses incurred by it
in connection with the acquisition and construction of the
Collateral.
ARTICLE 3
REPAYMENTS AND PREPAYMENTS
3.1 Repayments. Subject to the mandatory prepayment
provisions of Section 3.2, the principal amount of the Term Loan
shall be due and payable in nine (9) consecutive semi-annual
installments, the first eight (8) of which shall be in the amount
of Nine Hundred Thirty-Three Thousand Three Hundred Eighty Dollars
($933,380.00) and the last of which shall be in the amount of
Twenty Million Five Hundred Thirty-Two Thousand Nine Hundred Sixty
Dollars ($20,532,960.00), the first such installment being due on
December 22, 1995, with such installments continuing to be due on
each June 22 and December 22 thereafter through and including
December 22, 1999, on which date the entire remaining unpaid
principal amount of the Term Loan together with all accrued
interest thereon shall be due and payable.
3.2 Mandatory Prepayments. (a) Upon the occurrence of any
Change in Control and at any time within six (6) months after
Lender has received written notice thereof, Lender shall have the
right, exercisable in its sole discretion, to require prepayment in
full of the Term Loan and all of the other Obligations, in which
case Borrower shall, on the fifth Business Day following the date
notice of such prepayment is given, prepay the Term Loan and all of
the other Obligations. Borrower agrees to give Lender prompt (but,
in any event, within three (3) days after the occurrence thereof)
notice of the occurrence of any Change in Control.
(b) At the request of Lender (which request shall specify the
required date of such prepayment which shall be at least thirty
(30) days after the date of such request), Borrower shall make a
prepayment of the Term Loan in an amount equal to the amount, if
any, by which the outstanding principal amount of the Term Loan
exceeds eighty percent (80%) of the aggregate value of the
Collateral, as determined by the appraisals of the Collateral or
any other reasonable method employed by Lender.
(c) Upon the sale of any portion of the Collateral, Borrower
shall prepay the Term Loan as required by Section 1.23 of the
Mortgages in the respective amounts set forth on Exhibit E.
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3.3 Optional Prepayments. Borrower shall have the right,
exercisable by giving Lender not less than three (3) Business Days
irrevocable notice by telephone (followed by prompt written confir-
mation) of the amount to be prepaid and the date on which Borrower
desires to make the prepayment, to prepay the Term Loan in whole or
in part at any time and from time to time, provided that (i) no
partial prepayment of the Term Loan shall be made in an amount less
than $1,000,000 (unless otherwise required or permitted by some
other provision of the Loan Documents), and (ii) all accrued
interest on the prepaid portion of the Term Loan shall be paid at
the time of prepayment.
3.4 Application of Payments. (a) Mandatory prepayments made
under subsections 3.2(b) and (c) and optional prepayments made
under Section 3.3 shall be applied to reduce the scheduled
principal installments of the Term Loan due under Section 3.1 in
their chronological order of maturity.
(b) All scheduled principal installments of the Term Loan due
under Section 3.1 and all other payments and prepayments of
principal of the Term Loan shall be applied first to pay or prepay
the Floating Rate Portion until the Floating Rate Portion is paid
or prepaid in full and then to pay or prepay the Fixed Rate
Portions.
(c) If any portion of any scheduled principal installment of
the Term Loan due under Section 3.1 or any portion of any other
payment or prepayment of principal of the Term Loan is applied to
pay or prepay any portion of a Fixed Rate Portion on a date other
than the last day of a Libor Interest Period or other interest
period applicable thereto, Borrower shall pay to Lender the amount
or amounts specified in Section 4.4 with respect thereto. It shall
be the sole responsibility of Borrower, to the extent it determines
to do so, to choose a Fixed Rate Portion, Fixed Rate Portions and
the Floating Rate Portion from time to time and to choose Libor
Interest Periods from time to time that will minimize the amounts
Borrower is required to pay under Section 4.4 in connection with
payments and prepayments of principal of the Term Loan.
ARTICLE 4
INTEREST, PROTECTIONS, FEES AND PAYMENTS
4.1 Interest Rates.
4.1.1 Rates of Borrowing. Interest shall accrue and be
payable on the outstanding principal amount of the Term Loan (or
portions thereof as permitted hereunder) at a rate or rates per
annum (each, a "Rate of Borrowing"), computed on the daily out-
standing principal amount thereof, which shall be the Floating Rate
plus the Applicable Margin as it exists from time to time for the
Floating Rate Portion or, at the option of Borrower, may be any
Libor Rate selected pursuant to this Section 4.1 plus the
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Applicable Margin as it exists from time to time for each Fixed
Rate Portion.
4.1.2 Interest Payments. Accrued interest on the Term
Loan shall be due and payable on each Interest Payment Date, on the
date of repayment (whether by maturity, acceleration or otherwise)
or prepayment of any portion of the Term Loan on the amount so
repaid or prepaid and, in the case of the Floating Rate Portion, on
each date such Floating Rate Portion is converted to a Fixed Rate
Portion.
4.1.3 Selection of Interest Rates. Borrower shall
initially select an interest rate or rate(s) with respect to the
Term Loan on the second Business Day prior to the disbursement of
the proceeds of the Term Loan by delivery to Lender of an Interest
Notice by 11:00 a.m. (prevailing Central time) on the second
Business Day prior to the disbursement of such proceeds. No more
than three (3) different Rates of Borrowing shall be in effect at
any one time. Upon delivery of an Interest Notice to Lender, which
shall be irrevocable, Borrower, subject to all other conditions and
limitations set forth in this Agreement, may (x) continue any Fixed
Rate Portion on the expiration of the Libor Interest Period
applicable thereto, or (y) convert (i) any portion of the Floating
Rate Portion to a Fixed Rate Portion, (ii) any Fixed Rate Portion
to a Floating Rate Portion and (iii) any Fixed Rate Portion to some
other Fixed Rate Portion. Borrower shall deliver Interest Notices
to Lender no later than 11:00 a.m. (prevailing Central time) (x)
one (1) Business Day prior to the date of a conversion to a
Floating Rate Portion or (y) three (3) Business Days prior to the
continuation of, or conversion into, a Fixed Rate Portion. All
continuations or conversions shall occur on Business Days.
4.1.4 Amounts. The Floating Rate Portion and each Fixed
Rate Portion of the Term Loan shall be in the minimum amount of
$5,000,000.
4.1.5 Failure to Select. If, prior to 11:00 a.m.
(prevailing Central time) on the third Business Day prior to the
expiration of any Libor Interest Period relating to a Fixed Rate
Portion, Borrower shall have failed to select a new Libor Interest
Period with respect thereto, Borrower will be deemed to have
elected to convert such Fixed Rate Portion into a Floating Rate
Portion effective as of the expiration date of such Libor Interest
Period.
4.1.6 Default. During the continuation of any Default
Condition or Event of Default, Borrower shall not be allowed to
select any Libor Interest Period. From and after the occurrence of
any Event of Default, interest on the entire principal balance of
the Term Note shall accrue at the Default Rate and be payable on
demand.
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4.1.7 Usury. Notwithstanding the foregoing provisions of
this Section 4.1, if at any time the rate of interest set forth
above on any portion of the Term Loan (the "Stated Rate") exceeds
the maximum nonusurious interest rate permissible for Lender to
charge commercial borrowers such as Borrower under applicable law
(the "Maximum Rate"), the rate of interest charged hereunder shall
be limited to the Maximum Rate.
In the event the Stated Rate that has theretofore been subject
to the limitation specified in the preceding paragraph subsequently
is less than the Maximum Rate, the principal amount of each portion
of the Obligations shall bear interest at the Maximum Rate until
the total amount of interest paid or accrued on the Obligations
hereunder equals the amount of interest which would have been paid
or accrued on the Obligations hereunder if the Stated Rate had at
all times been in effect at less than the Maximum Rate.
In the event, upon payment in full of all amounts payable
under this Subsection 4.1.7, the total amount of interest paid to
Lender or accrued on the Obligations under the terms of this
Agreement is less than the total amount of interest which would
have been paid to Lender or accrued on the Obligations if the
Stated Rate had, at all times, been in effect at less than the
Maximum Rate, then Borrower shall, to the extent permitted by
applicable law, pay to Lender an amount equal to the difference
between (a) the lesser of (i) the amount of interest which could
have accrued on the Obligations if the Maximum Rate had at all
times been in effect or (ii) the amount of interest which would
have accrued on the Obligations if the Stated Rate had at all times
been in effect and (b) the amount of interest actually paid to or
accrued on the Obligations under this Agreement.
4.2 Libor Rate Protection.
4.2.1 Suspension. If, with respect to any Fixed Rate
Portion, Lender notifies Borrower that an interest rate based on a
Libor Rate for any Libor Interest Period will not adequately
reflect the cost to Lender of maintaining such Fixed Rate Portion
for such Libor Interest Period, the obligations of Lender to allow
an interest rate based on a Libor Rate as a Rate of Borrowing
hereunder shall be suspended until Lender shall notify Borrower
that the circumstances causing such suspension no longer exist.
4.2.2 Reserve Adjustment. Borrower shall pay to Lender
additional interest on the unpaid principal amount of the portion,
if any, of the Term Loan bearing interest based on a Libor Rate
until such principal amount thereof is paid in full at an interest
rate per annum equal at all times to: (i) the rate obtained by
dividing such Libor Rate by a percentage equal to 100% minus the
Reserve Percentage actually incurred by Lender for such Libor
Interest Period minus (ii) the Libor Rate for the Libor Interest
Period for such advance. Such additional interest, if any, shall
be payable on each date on which interest is payable on
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such amount or portion; provided, however, that Borrower shall not
be responsible for increased costs pursuant to this Subsection
4.2.2 until Lender shall have notified Borrower of such increased
costs; provided, further, that the failure by Lender to so notify
Borrower in any one instance shall not be deemed to be a waiver of
Lender's right to assert any claim based upon this Subsection 4.2.2
at a later date for any such other increased costs. Such
additional interest, if any, shall be determined by Lender;
provided, however, that, in making such determination, Lender shall
treat Borrower consistently with other borrowers of the same class
and type. Lender shall notify Borrower of such additional interest
which notice shall be accompanied by a certificate showing the
computation of such amount and which notice shall be final and
conclusive absent manifest error.
4.3 Increased Costs; Illegality; Capital Adequacy.
4.3.1 Increased Costs. If Lender should suffer any
increased cost in connection with maintaining any Fixed Rate
Portion as a result of the imposition or increase of any reserve,
insurance, tax or assessment requirement (other than a tax
assessable on Lender's net income) or the compliance with any
guideline or request from any Governmental Authority (whether or
not having the force of law), Lender shall promptly, upon becoming
aware of such increased costs, notify Borrower thereof (and such
notice shall be accompanied by a certificate showing the computa-
tion of such amount and which notice shall be final and conclusive
absent manifest error; provided, however, that, in determining the
amount of such costs, Lender shall treat Borrower consistently with
other borrowers of the same class and type), whereupon Borrower
shall have the option either to: (i) repay in full the Term Note
(subject to the provisions of Section 4.4); or (ii) pay Lender on
subsequent Interest Payment Dates such additional amounts
(excluding amounts paid under Section 4.2.2) as will compensate
Lender for such increased cost; provided, however, that Borrower or
Lender may terminate the right of Borrower to select interest rates
based on a Libor Rate as a Rate of Borrowing, upon the payment of
such increased costs as are suffered by Lender prior to or as a
result of the termination of such right to select interest rates
based on the Libor Rate; and provided, further that Borrower shall
not be responsible for increased costs pursuant to this Subsection
4.3.1 until Lender shall have notified Borrower of such increased
costs. The failure by Lender to so notify Borrower in any one
instance shall not be deemed to be a waiver of Lender's right to
assert any claim based upon this Subsection 4.3.1 at a later date
for any such other increased costs.
4.3.2 Illegality. If the introduction of or any
change in any applicable law, rule or regulation or in the
interpretation or administration thereof or compliance by Lender
with any request or directive (whether or not having the force of
law) of any Governmental Authority shall make it unlawful for
Lender to make, fund or maintain any Fixed Rate Portion, Lender
shall promptly notify Borrower whereupon: (i) the right of
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Borrower to select interest rates based on a Libor Rate as a Rate
of Borrowing shall immediately be terminated and all portions of
the Term Loan accruing interest at a Fixed Rate shall be converted
to portions thereof in the same principal amount accruing interest
at the Floating Rate; and (ii) Borrower shall pay in full such
amounts as will compensate Lender for any losses (not including
lost profits) or expenses which Lender shall have sustained or
incurred as a result of the applicability of such situation to the
Term Loan (and the determination of which by Lender shall be final
and conclusive absent manifest error; provided, however, that in
determining the amount of such losses, Lender shall treat Borrower
consistently with other borrowers of the same class and type);
provided, however, that Borrower shall not be responsible for such
losses until Lender shall have notified Borrower thereof.
4.3.3 Capital Adequacy. If, after the date hereof,
the adoption of any applicable law, rule or regulation regarding
capital adequacy, or any change in the interpretation or adminis-
tration thereof by any Governmental Authority, central bank or
comparable agency charged with the administration thereof, or
compliance by Lender with any request or directive regarding
capital adequacy (whether or not having the force of law) of any
such authority, central bank or comparable agency, affects or is
likely to affect the amount of capital required or expected to be
maintained by Lender or any corporation in Control of Lender and
the amount of that capital is increased by or based upon Lender's
obligations hereunder, then from time to time, within fifteen (15)
days after demand by Lender, Borrower shall pay to Lender such
additional amount or amounts as will compensate Lender in light of
such circumstances, to the extent that such increase in capital is
allocable to its obligations hereunder. Borrower shall not be
responsible for such compensation until Lender shall have notified
Borrower thereof. Any notice under this Subsection 4.3.3 shall be
accompanied by a certificate showing the computation of such amount
and which notice shall be final and conclusive absent manifest
error; provided, however, that in determining the amount of such
compensation, Lender shall treat Borrower consistently with other
borrowers of the same class and type.
4.4 Compensation. Borrower shall pay to Lender, upon the
request of Lender, such amount or amounts as are necessary (in the
reasonable opinion of Lender) to compensate Lender for any loss,
cost or expense incurred by Lender as a result of any payment or
prepayment of a Fixed Rate Portion of the Term Loan or any portion
thereof, or any conversion of the interest rate applicable to a
Fixed Rate Portion of the Term Loan, on a date other than the last
day of the Libor Interest Period or other interest period
applicable thereto, or as a result of any failure by Borrower to
borrow at a Fixed Rate after giving an Interest Notice stating that
it would do so. Such amount or amounts shall include, without
limitation, an amount equal to the greater of (A) $100, or (B) the
excess, if any, of (i) the interest that Lender would have received
on such Fixed Rate Portion or portion thereof (as reasonably
determined by Lender) if such payment, prepayment, conversion or
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failure had not occurred, for the period from the date of such
payment, prepayment, conversion or failure to the last day of the
Libor Interest Period then in effect for such Fixed Rate Portion or
portion thereof (or, in the case of a failure to borrow, the last
day of the Libor Interest Period for such Fixed Rate Portion which
would have commenced on the date of such failure to borrow), at the
Fixed Rate that would have been in effect hereunder for such Libor
Interest Period if such payment, prepayment, conversion or failure
had not occurred, over (ii) the interest that Lender would receive
with respect to such Fixed Rate Portion or portion thereof during
the same period if Lender's cost of funds (as reasonably determined
by Lender) were the applicable interest rate.
4.5 Computation of Interest.
4.5.1 Computation. All computations of interest under
this Agreement shall be made on the basis of a year of 360 days and
actual days elapsed. Interest shall accrue during each period
during which interest is computed from the first day thereof up to
(but not including) the last day thereof.
4.5.2 Determination. Each determination of an interest
rate by Lender pursuant to any provision of this Agreement shall be
conclusive and binding on Borrower in the absence of manifest
error.
4.6 Payments. Except to the extent otherwise provided
herein, all payments of principal, interest, and other amounts to
be made by Borrower hereunder and under the Term Note shall be made
in Dollars, in immediately available funds, to such account as
Lender shall designate from time to time by notice to Borrower, not
later than 12:00 p.m. (prevailing Central time) on the date on
which such payment shall become due (each such payment made after
such time on such due date to be deemed to have been made on the
next succeeding Business Day). Borrower shall, at the time of
making each payment hereunder or under the Term Note and consistent
with Section 3.4, specify to Lender the loans or other amounts
payable by Borrower hereunder to which such payment is to be
applied (and in the event that it fails to so specify, or if an
Event of Default has occurred and is continuing, Lender may apply
such payment as it may elect in its sole discretion, but subject to
the other terms and conditions of this Agreement). Except as
provided in the definitions of Interest Payment Date and Libor
Interest Period, if the due date of any payment hereunder or under
the Term Note would otherwise fall on a day which is not a Business
Day, such date shall be extended to the next succeeding Business
Day and interest shall be payable for any principal so extended for
the period of such extension. All sums payable by Borrower
hereunder or under the Term Note shall be paid without relief from
valuation and appraisement laws.
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4.7 Indemnification of Lender. At all times prior to and
after the consummation of the transactions contemplated by this
Agreement, Borrower will hold Lender, its directors, officers,
employees, agents, Affiliates, successors and assigns harmless from
and indemnify Lender, its directors, officers, employees, agents,
Affiliates, successors and assigns against all loss, damages, costs
and expenses (including, without limitation, reasonable attorneys'
fees and expenses) incurred by any of the foregoing, whether direct
or indirect, as a result of or arising from or relating to any
"Proceedings" (as defined below) by any Person, whether threatened
or initiated, asserting a claim for any legal or equitable remedy
against any Person under any statute, case or regulation,
including, without limitation, any federal or state securities laws
or under any common law or equitable case or otherwise, arising
from or in connection with this Agreement or any other Loan
Documents and any of the other transactions contemplated hereby or
thereby except to the extent such losses, damages, costs or
expenses are due to the willful misconduct or gross negligence of
Lender. As used herein, "Proceedings" shall mean actions, suits or
proceedings before any court, governmental or regulatory authority.
At the request of Lender, Borrower will indemnify any Person who is
a successor Lender hereunder or to whom Lender transfers or sells
all or any portion of its interest in the Term Note or participa-
tions therein on terms substantially similar to the terms set forth
above.
4.8 Survival. The obligations of Borrower under Sections
4.3, 4.4, 4.7 and 4.9 shall survive termination of this Agreement
and payment of the Term Note and the other Obligations.
4.9 Taxes.
4.9.1 Payments. Any and all payments by Borrower to
Lender under this Agreement or any of the other Loan Documents
shall be made free and clear of, and without deduction or with-
holding for, any and all present or future taxes, levies, imposts,
deductions, charges or withholdings, and all liabilities with
respect thereto incurred in connection with any borrowing pursuant
to this Agreement, excluding (i) such taxes (including income taxes
or franchise taxes or branch profit taxes) as are imposed on or
measured by Lender's net income and (ii) such taxes as are imposed
by a jurisdiction other than the United States of America or any
political subdivision thereof and that would not have been imposed
but for the existence of a connection between Lender and the
jurisdiction imposing such taxes (other than a connection arising
principally by reason of this Agreement) (all such nonexcluded
taxes, levies, imposts, deductions, charges, withholdings and
liabilities being herein referred to as "Taxes"). In addition,
Borrower agrees to pay any present or future stamp or documentary
taxes or any other sales, excise or property taxes, charges or
similar levies which arise from any payment made hereunder or from
the execution, delivery or registration of, or otherwise with
respect to, this Agreement or any other Loan Document (herein
referred to as "Other Taxes").
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4.9.2 Indemnity. Borrower agrees to indemnify and
hold harmless Lender for the full amount of Taxes and Other Taxes
(including any Taxes or Other Taxes imposed by any jurisdiction on
amounts payable under this Section 4.9) paid by Lender as a result
of this Agreement, any of the other Loan Documents or any of the
transactions contemplated herein or therein, and any liability
(including penalties, interest, additions to tax and expenses)
arising therefrom or with respect thereto, whether or not such
Taxes or Other Taxes were correctly or legally asserted; provided
Borrower shall have the right to contest such Taxes and Other Taxes
with the appropriate taxing authority provided no Event or Default
or Default Condition shall exist and provided further that Borrower
shall provide such indemnities to Lender and maintain such reserves
with respect thereto as Lender shall reasonably request. This
indemnification shall be made within thirty (30) days from the date
Lender makes written demand therefor.
4.9.3 Adjustment for Deduction or Withholding. If
Borrower shall be required by law to deduct or withhold any Taxes
or Other Taxes from or in respect or any sum payable hereunder to
Lender, then,
(i) the sum payable shall be increased as may be
necessary so that after making all required deductions for
Taxes and Other Taxes (including deductions applicable to
additional sums payable under this Section 4.9) Lender
receives an amount equal to the sum it would have received had
no such deductions been made; provided, however, that Borrower
shall only be responsible for any such adjustments required by
this Subsection 4.9.3 occurring after Borrower shall have
received notice of same from Lender;
(ii) Borrower shall make such deductions; and
(iii) Borrower shall pay the full amount deducted to the
relevant taxation authority or other authority in accordance
with applicable law.
4.9.4 Receipt. Within thirty (30) days after the
date of any payment by Borrower of Taxes or Other Taxes under this
Section 4.9, Borrower will furnish to Lender the original or a
certified copy of a receipt evidencing payment thereof or other
evidence of payment reasonably satisfactory to Lender.
4.9.5 Other Documents. Within sixty (60) days of the
written request of Borrower, Lender shall execute and deliver to
Borrower such certificates, forms or other documents, prepared at
Borrower's expense, which can be reasonably furnished consistent
with the facts and which are reasonably necessary to assist
Borrower in applying for refunds of Taxes and Other Taxes remitted
hereunder.
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4.9.6 Minimization. Lender shall use reasonable
efforts to avoid or minimize any amounts which might otherwise be
payable pursuant to this Section 4.9; provided, however, that such
efforts shall not include the taking of any actions by Lender that
would result in any tax, cost or other expense to Lender (other
than a tax, cost or expense for which Lender shall have been reim-
bursed or indemnified by Borrower pursuant to this Agreement or
otherwise) or any action which would in the reasonable opinion of
Lender have an adverse effect upon its financial condition,
operations, business or properties.
ARTICLE 5
CONDITIONS PRECEDENT, POST CLOSING REQUIREMENTS
5.1 Conditions Precedent. The obligation of Lender to
make the Term Loan is subject to satisfaction of the following
conditions precedent, each of which shall have been fulfilled to
the satisfaction of Lender or waived by Lender:
(a) Corporate Documents. Lender shall have received
certified copies of the charter and by-laws of Borrower and a
certificate of existence for Borrower from the Secretary of State
of the State of Tennessee and a certificate of authority to
transact business for the Borrower from the secretaries of state of
Alabama, Florida, Georgia, Illinois, Indiana, Kansas, Louisiana,
Maryland, Michigan, Mississippi, Missouri, Nebraska, Ohio,
Oklahoma, Texas, Virginia and West Virginia, in each case as of a
date reasonably close (and not more than thirty (30) days prior) to
the date of this Agreement.
(b) Board Resolutions/Incumbency Certificates. Lender
shall have received certificates of the Secretary or Assistant
Secretary of Borrower certifying the resolutions of the Board of
Directors of Borrower approving the transactions contemplated
hereby and thereby and the incumbency and signatures of the
officers authorized to act with respect to each Loan Document, upon
which certificates Lender may conclusively rely until it shall have
received written notice to the contrary from the Secretary or
Assistant Secretary of Borrower.
(c) Loan Documents. Lender shall have received each
Loan Document duly completed, executed and delivered by Borrower.
(d) Opinion of Counsel. Lender shall have received an
opinion of counsel of Borrower in substantially the form of
Exhibit F from Tuke Yopp & Sweeney.
(e) Governmental and Third Party Consents and Approvals.
Lender shall have received copies of all approvals, permits,
consents, certificates, waivers, exemptions, filings and registra-
tions from any Governmental Authority or any third party required
or appropriate in connection with the execution and delivery of any
or all of the Loan Documents or the performance thereof or the
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completion of any transaction contemplated thereby or a
certificate, dated the date hereof, that no such approvals,
permits, consents, waivers, certificates, exemptions, filings or
registrations are required.
(f) Expenses. Borrower shall have paid all costs and
expenses due under Section 11.13 (including recording costs, legal
fees and expenses) which may be then due and payable.
(g) Insurance Certificate. Lender shall have received
a certificate or certificates respecting all insurance required
under this Agreement.
(h) Lien Priority; Title Insurance. Each of the
Mortgages shall have been duly recorded in each office where such
recording is required to constitute the same as a valid first Lien
on the Collateral covered thereby in favor of Lender (or Lender
shall have received evidence satisfactory to Lender that the title
insurance company has agreed to provide "gap" title insurance
coverage acceptable to Lender); and Borrower shall have delivered
to Lender mortgagee title insurance policies duly issued by a title
insurance company satisfactory to Lender, or irrevocable
commitments or binders to issue the same, insuring Lender as
mortgagee or beneficiary in amounts satisfactory to Lender, and
which (i) contain such endorsements and affirmative coverages as
are requested by Lender, (ii) contain only such requirements to
coverage and exceptions to title as are acceptable to Lender, and
(iii) are otherwise in form and substance satisfactory to Lender.
(i) Surveys. With respect to each property constituting
a portion of the Collateral covered by the Mortgages, Lender shall
have received a survey of such property satisfactory to Lender,
showing no encroachments unacceptable to Lender, prepared by a
certified land surveyor and otherwise in form and substance
satisfactory to Lender.
(j) Environmental Reports/Information. Lender shall
have received evidence satisfactory to Lender that none of the
Collateral covered by the Mortgages is presently being used for the
handling, storage, transportation, disposal or other use of any
Hazardous Materials except in strict accordance with all Relevant
Environmental Laws and that all of the Collateral is in compliance
with all Relevant Environmental Laws. Such evidence shall include
(ii) a written report of a licensed engineer satisfactory to Lender
and in such detail as Lender may request in the case of the
Collateral described on Exhibit G, and (ii) such other environ-
mental checklists, reports and information as may be acceptable to
Lender in the case of the other Collateral.
(k) Appraisals. Intentionally Omitted.
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(l) Financing Statements. Where necessary for perfec-
tion of Lender's security interest in fixtures, Lender shall have
received Uniform Commercial Code fixture filings signed by
Borrower, otherwise in form and substance satisfactory to Lender
and receipted to show that they have been filed in the appropriate
filing and recording offices to perfect Lender's security interest.
(m) CIBC Consent. Lender shall have received evidence
satisfactory to Lender that Borrower has obtained all consents and
approvals of the transactions described herein that are required
under the Credit Agreement.
(n) Post-Closing Requirements. In addition to the
conditions precedent to the making of the Term Loan described in
Section 5.1, Borrower agrees that, on or before ninety (90) days
after the date of the Term Note, it shall satisfy each of the
additional post-closing requirements specified on Exhibit M to the
satisfaction of Lender.
ARTICLE 6
GENERAL REPRESENTATIONS AND WARRANTIES
In order to induce Lender to enter into this Agreement,
Borrower hereby represents and warrants to Lender as set forth in
this Article 6.
6.1 Corporate Existence and Qualification. Borrower is a
corporation duly organized, validly existing and in good standing
under the laws of the State of Tennessee. Borrower is duly
qualified as a foreign corporation in good standing in Alabama,
Florida, Georgia, Illinois, Indiana, Kansas, Louisiana, Maryland,
Michigan, Mississippi, Missouri, Nebraska, Ohio, Oklahoma, Texas,
Virginia and West Virginia, and in any other state wherein the
failure to so qualify would have a Materially Adverse Effect.
6.2 Corporate Authority; Validity and Binding Effect.
Borrower has the power to make, deliver and perform under the Loan
Documents, and to borrow hereunder, and has taken all necessary and
appropriate corporate action to authorize the execution, delivery
and performance of the Loan Documents. This Agreement constitutes,
and the remainder of the Loan Documents, when executed and
delivered for value received, will constitute, the valid obliga-
tions of Borrower, legally binding upon it and enforceable against
it in accordance with their respective terms, except as may be
limited by bankruptcy, insolvency, or other similar laws affecting
the enforceability of creditors' rights in general and except as
subject to general principles of equity. The undersigned officers
of Borrower are duly authorized and empowered to execute, attest
and deliver this Agreement and the remainder of the Loan Documents
for and on behalf of Borrower, and to bind Borrower accordingly
thereby.
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6.3 No Material Litigation. Except as to matters described
on Exhibit I, there are no proceedings pending or, so far as
Borrower or its officers know, threatened, before any court or
administrative agency, which, if adversely determined, might have
a Materially Adverse Effect.
6.4 Taxes. Each of Borrower and all of its Subsidiaries has
filed all tax returns and reports required by law to have been
filed by it and has paid all taxes and governmental charges thereby
showing to be owing, except any such taxes or charges which are
being contested in good faith by appropriate proceedings and for
which adequate reserves in accordance with GAAP shall have been set
aside on its books. No tax liens have been filed with respect to
Borrower or any Subsidiary and, to the knowledge of Borrower, no
claims are being asserted with respect to any such taxes or
charges.
6.5 Corporate Organization. The charter and bylaws of
Borrower are in full force and effect under the laws of the State
of Tennessee and all amendments to said charter and bylaws have
been duly and properly made under and in accordance with all
applicable laws.
6.6 Insolvency. After giving effect to the execution and
delivery of the Loan Documents and the disbursement of the proceeds
of the Term Loan under this Agreement, Borrower will not be
"insolvent" as that term is defined in Section 101 of the
Bankruptcy Code, or be unable to pay its debts generally as such
debts become due, or have an unreasonably small capital.
6.7 Margin Stock. Borrower is not engaged principally, or as
one of its important activities, in the business of purchasing or
carrying any margin stock, and no part of the proceeds of any
borrowing made pursuant hereto will be used to purchase or carry
any margin stock or to extend credit to others for the purpose of
purchasing or carrying any margin stock, or be used for any purpose
which violates, or which is inconsistent with, the provisions of
Regulation U of the Board of Governors of the Federal Reserve
System. In connection herewith, if requested by Lender, Borrower
will furnish Lender a statement in conformity with the requirements
of Federal Reserve Form U-1 referred to in Regulation U of said
Board.
6.8 No Violations. The execution, delivery and performance
by Borrower of the Loan Documents have been duly authorized by all
necessary corporate action and do not and will not require any con-
sent or approval of the shareholders of Borrower, violate any
provision of any law, rule, regulation (including, without limita-
tion, Regulation U of the Board of Governors of the Federal Reserve
System), order, writ, judgment, injunction, decree, determination
or award presently in effect having applicability to Borrower or of
the charter or bylaws of Borrower, or result in a breach of or
constitute a default under any indenture or loan or credit agree-
ment or any other agreement, lease or instrument to which Borrower
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is a party or by which it or its properties may be bound or
affected, the breach of which or default under which will have a
Materially Adverse Effect; and Borrower is not in breach of or in
default under any such law, rule, regulation, order, writ, judg-
ment, injunction, decree, determination or award or any such
indenture, agreement, lease or instrument, the breach of which or
default under which will have a Materially Adverse Effect.
6.9 ERISA. Borrower has no Plans or Employee Benefit Plans
and is not a party to any Multiemployer Plan.
6.10 Financial Statements. All balance sheets, all statements
of income, shareholders' equity, and cash flows, and all other
financial statements which have been delivered pursuant hereto or
shall hereafter be furnished by or on behalf of Borrower to Lender
for the purposes of or in connection with this Agreement or any
transaction contemplated hereby or concurrently with the filing
thereof by Borrower with the Securities and Exchange Commission,
have been prepared in accordance with GAAP throughout the periods
involved (except as disclosed therein) and present fairly (subject,
in the case of the interim unaudited financial statements, to the
ultimate outcome of normal recurring accruals) the consolidated
financial condition of the corporations covered thereby as at the
dates thereof and the results of their operations for the periods
then ended. Borrower, on the date hereof, has no contingent
liability or liabilities for taxes, long-term leases or unusual
forward or long-term commitments which are material and not
reflected in the financial statements described above or in the
notes thereto.
6.11 Environmental Matters.
(a) Except as disclosed on Exhibit J, neither Borrower nor
any of its Subsidiaries has received an Environmental Complaint
regarding (i) Borrower or its Subsidiaries or its operations, (ii)
any real Property now or formerly owned, or (iii) to the best of
Borrower's knowledge, any real Property now or formerly operated,
leased, used or affected by Borrower or its Subsidiaries, which, in
each instance, remains unresolved and could reasonably be expected
to result in liabilities which would have a Materially Adverse
Effect.
(b) Neither Borrower nor any of its Subsidiaries is or will
be liable for any costs or expenses involving the removal of
Hazardous Materials from, or remediation of any condition involving
Hazardous Materials on, any real Property now or formerly owned,
operated, leased, used or affected by Borrower or its Subsidiaries
or in connection with the transportation of any Hazardous Materials
to any site listed or proposed for listing on the National
Priorities List under the Comprehensive Environmental Response,
Compensation and Liability Act or 1980 ("CERCLA"), 42 U.S.C. Section
9601, et seq., as amended, or any similar list under any analogous
state statute, in any instance which could reasonably be expected
to have a Materially Adverse Effect.
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(c) To the best of Borrower's knowledge, there are no
Environmental Liens on or affecting any of the Collateral.
(d) Borrower and each of its Subsidiaries has all material
permits, certificates, licenses, approvals, registrations and other
authorizations which are required for the operation of their
facilities under all Relevant Environmental Laws and are in
compliance with all Relevant Environmental Laws except for
instances in which failure to have such authorizations or to so
comply has not had or will not have a Materially Adverse Effect.
(e) No consent, approval or authorization of, or registration
or filing with any environmental Governmental Authority, is
required in connection with the transactions contemplated by this
Agreement.
(f) Borrower acknowledges and agrees that Lender has not
expressed any opinion with respect to or exerted any control over
Borrower or any of its Subsidiaries with regard to any decisions
made or to be made by Borrower or any of its Subsidiaries
concerning environmental compliance or waste disposal decisions.
6.12 Possession of Franchises, Licenses. Etc. Borrower
possesses, to the extent material, all franchises, certificates,
licenses, permits and other authorizations from governmental
political subdivisions or regulatory authorities, and all patents,
trademarks, service marks, trade names, copyrights, licenses and
other rights that are necessary for the ownership, maintenance and
operation of its material Property and assets, and Borrower is not
in violation of any thereof, which might have a Materially Adverse
Effect.
6.13 No Burdensome Provisions. Neither Borrower nor any
Subsidiary is a party to any contract, agreement, lease or
licensing agreement, the performance of which has a reasonable
likelihood of having a Materially Adverse Effect.
6.14 Labor Matters. Except as to matters disclosed on Exhibit
K, there are no strikes or other labor disputes or grievances or
charges or complaints with respect to any employee or group of
employees pending or, to the best knowledge of Borrower, threatened
against Borrower which have a reasonable likelihood of having a
Materially Adverse Effect.
6.15 Investment Company Act. Borrower is not an "investment
company" or an "affiliated person" of or "promoter" or "principal
underwriter" for, an "investment company," as such terms are
defined in the Investment Company Act of 1940, as amended.
6.16 Governmental Contracts. Borrower is not a party to any
contract or agreement with a Governmental Authority, the
termination or renegotiation of which would have a Materially
Adverse Effect.
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6.17 Accuracy of Information. All factual information hereto-
fore or contemporaneously furnished by or on behalf of Borrower in
writing to Lender in connection with this Agreement or any transac-
tion contemplated hereby is and will be true and accurate in every
material respect on the date as of which such information is dated
or certified and as of the date of execution and delivery of this
Agreement by Lender and not incomplete or omitting to state any
material fact necessary to make such information not misleading.
ARTICLE 7
GENERAL AFFIRMATIVE COVENANTS
Borrower covenants to Lender that from and after the date
hereof and until the Term Note and all other Obligations are paid
in full, it will comply with the covenants set forth in this
Article 7.
7.1 Right to Inspect. Lender (or any Person or Persons
designated by it) shall, in its sole discretion, have the right to
call at any offices of Borrower at reasonable times and intervals
upon reasonable notice, and, without hindrance or delay, to
inspect, audit, check and make extracts from Borrower's books,
records, journals, orders, receipts and any correspondence and
other data relating to Borrower's business or to any other trans-
actions between the parties hereto arising out of this Agreement.
Lender agrees that any confidential information obtained by it in
the course of such inspection, audit or check or pursuant to
Section 7.2 shall not be used by it or communicated to any other
Person or entity except: (i) as required by law or by judicial or
administrative process or by appropriate regulatory authorities or
as such information is or becomes public knowledge other than by
virtue of Lender's disclosure; (ii) to Lender's attorneys and
accountants; and (iii) otherwise to the extent that Lender, in its
reasonable judgment, needs to disclose such information in order to
protect its own interests with respect to this Agreement, the other
Loan Documents or any transactions contemplated hereby or arising
in connection herewith or to collect all or any part of the
Obligations.
7.2 Financial Information, etc. Borrower will furnish, or
will cause to be furnished, to Lender copies of the following
financial statements, reports and information:
(a) promptly when available and in any event within ninety
(90) days after the close of each Fiscal Year,
(i) a copy of Borrower's Annual Report on Form 10-K
(excluding exhibits, other than financial statement schedules,
unless specifically requested by Lender, which requests may be
made at any time) and related Annual Report to Shareholders
for such Fiscal Year, including therein a consolidated balance
sheet at the close of such Fiscal Year
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then ended, and related consolidated statements of income,
shareholders' equity, and cash flows (or a statement analogous
to such a statement) for such Fiscal Year, of Borrower and its
Subsidiaries, such statements for such Fiscal Year to be
audited and accompanied by an audit report issued without
Impermissible Qualification by an Independent Public
Accountant,
(ii) a copy of the Director's Report issued by
Borrower's management to Borrower's Board of Directors for
such Fiscal Year, including therein a capital expenditure
budget for the next Fiscal Year broken down by Concept and
otherwise substantially in the form of, and covering in scope
and detail the same matters as, the Director's Report for
Borrower's 1993 Fiscal Year heretofore delivered to Lender,
accompanied by a consolidated statement of income for the last
Fiscal Quarter of such Fiscal Year, setting forth comparative
figures for the corresponding Fiscal Quarter of the prior
Fiscal Year,
(iii) a written statement of the Independent Public
Accountant, setting forth in reasonable detail a calculation
of the financial tests contained in Section 8.5 at the close
of such Fiscal Year, to the effect that it has read the
provisions of this Agreement and the Compliance Certificate
then being furnished pursuant to clause (a)(iv) immediately
below at the date of such statement and is not aware of any
miscalculation in such Compliance Certificate of such
financial tests or of any default of a financial nature in the
performance by Borrower of any obligation to be performed by
it hereunder, except such miscalculation or default, if any,
as may be disclosed in such statement, and
(iv) a Compliance Certificate calculated as of the close
of such Fiscal Year;
(b) promptly when available and in any event within
forty-five (45) days after the close of each of the first three
Fiscal Quarters of each Fiscal Year,
(i) a copy of Borrower's Quarterly Report on Form 10-Q
(excluding exhibits unless specifically requested by Lender,
which requests may be made at any time) for such Fiscal
Quarter, including therein (or accompanied by) a consolidated
balance sheet at the close of such Fiscal Quarter, and related
consolidated statements of income and cash flows (or a state-
ment analogous to such a statement) for such Fiscal Quarter,
of Borrower and its Subsidiaries executed by the principal
accounting or financial Authorized Officer of Borrower,
(ii) a copy of the Director's Report issued by
Borrower's management to Borrower's Board of Directors for
such Fiscal Quarter, substantially in the form of, and
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covering in scope and detail the same matters as, the
Director's Report dated August 7, 1994 for the Fiscal Quarter
of Borrower ended on such date heretofore delivered to Lender,
and
(iii) a Compliance Certificate calculated as of the close
of such Fiscal Quarter;
(c) promptly upon receipt thereof, copies of all detailed
financial reports, if any, submitted to Borrower by an Independent
Public Accountant in connection with each annual or interim audit
made by such Independent Public Accountant of the books of Borrower
or any of its Subsidiaries;
(d) in addition to (but without duplication of) any such
filings required to be delivered above, promptly upon any filing
thereof by Borrower with the Securities and Exchange Commission,
any annual, periodic or special report or registration statement
(without exhibits) generally available to the public;
(e) promptly upon completion or receipt thereof, a copy of
all notices, documents, or other Instruments required to be
delivered by Borrower (other than the Subordinated Debentures,
Subordinated LYONS Notes, and the Tranche C Notes), or received by
Borrower, pursuant to the Subordinated Indenture, the LYONS
Indenture or the Tranche C Agreements and not otherwise required to
be delivered hereunder;
(f) promptly but in no event later than ninety (90) days
after the close of each Fiscal Year of Borrower, a copy of updated
projections of Borrower and its Subsidiaries for the next two
Fiscal Years, all in detail comparable to those contained in the
Memorandum and reasonably satisfactory to Lender; and
(g) promptly, such additional financial and other information
with respect to Borrower and its Subsidiaries as Lender may from
time to time reasonably request.
7.3 Payment of Taxes. Borrower shall pay and discharge all
taxes, assessments and governmental charges upon it, its income,
the Collateral and, to the extent failure to make such payments
would have a Materially Adverse Effect, its other Property prior to
the date on which penalties attach thereto, unless and to the
extent only that (i) such taxes, assessments and governmental
charges are being contested in good faith and by appropriate
proceedings by Borrower and (ii) Borrower maintains reasonable
reserves on its books therefor in accordance with GAAP.
7.4 Maintenance of Insurance; Insurance and Condemnation
Proceeds. (a) Borrower will at all times maintain or cause to be
maintained on the Improvements and on all other Collateral, all
insurance reasonably required at any time or from time to time by
Lender, and in any event: (a) all-risk property insurance covering
fire, extended coverage, vandalism and malicious mischief and such
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other insurance coverage customarily obtained from time to time by
prudent owners of properties of similar character and use as the
Collateral, in an amount which is not less than the full
replacement cost from time to time (which replacement cost shall be
subject to Lender's reasonable approval) of the Collateral without
consideration for depreciation; (b) insurance against flood if
required by the Federal Flood Disaster Protection Act of 1973 and
regulations issued thereunder; (c) comprehensive general public
liability insurance protecting Borrower and Lender in an amount
reasonably acceptable to Lender; (d) during construction, builder's
completed value risk insurance against "all risks of physical loss"
(including collapse and transit coverage); and (e) all other
insurance commonly or, in the reasonable judgment of Lender,
prudently maintained by those whose business, improvement to and
use of real estate is similar to that of Borrower, including
(without limitation), if applicable, boiler explosion, sprinkler
leakage, and employer's liability insurance, all in amounts
satisfactory to Lender, but in any event with a single limit of not
less than $1,000,000.00 in respect of personal injury or death to
any one person, of not less than $1,000,000.00 in respect of any
one occurrence, of not less than $2,000,000.00 in respect of any
one location for personal injury and property damage, and an
umbrella policy or policies in an amount not less than
$20,000,000.00, each such coverage to be subject to a deductible,
if any, not to exceed $500,000.00 per occurrence, provided,
however, Borrower shall maintain adequate reserves therefor, and
all of such insurance to be maintained in such form and with such
companies as shall be reasonably approved by Lender, and to deliver
to and keep deposited with Lender original certificates and, at the
request of Lender, certified copies of all policies of such
insurance and renewals thereof with premiums paid prior to the
deadline for payment thereof and with clauses, attached thereto in
favor of Lender, and its successors and assigns, that (1) name
Lender as an additional insured party thereunder, as its interests
may appear; (2) provide for any losses to be payable notwith-
standing (i) any act, failure to act or negligence of or violation
of warranties, declarations or conditions contained in such policy
by any person other than the person claiming, (ii) the occupation
or use of the Collateral for purposes more hazardous than permitted
by the terms of the policy, or (iii) any foreclosure or other
proceedings or notice of sale relating to the Collateral, or any
change in title to or ownership of any of the Collateral; (3)
include effective waivers by the insurer of all claims for insur-
ance premiums and rights of subrogation against Lender; (4) provide
that each policy shall be primary without right of contribution
from any other insurance that may be carried; and (5) provide for
not less than thirty (30) days' prior written notice to be given to
Lender of cancellation (including, without limitation, cancellation
for non-payment or expiration of the term of such policy) or
material modification of such policies or any portion thereof.
Borrower's making any payments and deposits required by the provi-
sions of Section 1.21 of the Mortgages shall not relieve Borrower
of, or diminish in any way, its obligations as set out in this
Section 7.4. All of the above-mentioned original insurance
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policies or certified copies of such policies and certificates of
such insurance reasonably satisfactory to Lender, together with
receipts for the payment of premiums thereon, shall be delivered to
and held by Lender, which delivery shall constitute assignment to
Lender of all return premiums to be held as additional security
hereunder (subject to any prior assignment of any return premiums);
provided, however, that prior to any Event of Default any such
premiums may be retained by Borrower. Certificates (or binders
covering the time periods and with the renewal and cancellation
provisions set forth in the following sentence) evidencing all
renewal and replacement policies shall be delivered to Lender upon
the renewal or replacement of the expiring policies. All binders
provided in accordance with the provisions of the preceding
sentence shall be for a term of not less than ninety (90) days
which term shall be deemed extended until written notice of
cancellation thereof is given to Lender not less than thirty (30)
days prior to the effective date of such cancellation or
expiration; provided, however, that in no event shall any insurance
binder expire less than ninety (90) days after the issuance
thereof. If Borrower is unable to deliver to Lender the evidence
described herein of renewal or replacement insurance policies not
less than fifteen (15) days prior to the expiration date of the
expiring policies, Borrower shall, not less than fifteen (15) days
nor more than thirty (30) days prior to such expiration date,
deliver to Lender a certificate from an officer of Borrower,
stating (a) Borrower's progress in obtaining renewal or replacement
policies and the anticipated date of issuance thereof; (b) that
Borrower has received no notice of non-renewal or cancellation of
any existing policy of insurance; and (c) that Borrower has no
knowledge of the cancellation or non-renewal of such policies of
insurance or of any facts or circumstances which, if known to an
insurer, would cause it to cancel or refuse renewal or issuance of
any policy of insurance. Nothing contained in the preceding
sentence or elsewhere in this Agreement shall excuse Borrower from
continuously maintaining in full force and effect until all
Obligations are paid in full all insurance required under the
provisions hereof. Borrower shall not obtain nor permit the lessee
under any "Occupancy Lease" (as defined in the Mortgages) to obtain
or carry policies of insurance concurrent in form or contribution
in the event of loss with those required to be maintained under
this Section 7.4 unless Lender is included therein as a named
insured and otherwise in accordance with this Section 7.4.
Borrower will immediately give Lender written notice of (a)
any casualty to the Collateral reasonably anticipated to result in
damage over $250,000.00 or (b) any condemnation or eminent domain
proceedings or transfer in lieu thereof as provided in Section 1.9
of the Mortgages. Borrower agrees that any loss paid to Lender
under any of such insurance policies or in connection with any such
condemnation or eminent domain proceedings or transfer in lieu
thereof shall be applied, at the option of Lender, toward prepay-
ment of the Term Note and/or any other Obligations, or to the
rebuilding or repairing of the damaged, destroyed or affected
Improvements or other Collateral, as Lender in its sole and
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unreviewable discretion may elect (which election shall not relieve
Borrower of the duty to rebuild or repair); provided, however, that
any proceeds of insurance or of any such condemnation or eminent
domain proceedings or transfer shall be made available, if at all,
to the extent required, as determined by Lender in its reasonable
discretion, for the rebuilding or repairing of the damaged,
destroyed or affected Improvements or other Collateral only under
the following conditions:
(i) no Default Condition or Event of Default shall have
occurred or be continuing (and if such an event shall occur
during restoration, Lender may, at its election, apply any
insurance proceeds then remaining in the hands of Lender to
the prepayment of the Term Note and any other Obligations);
(ii) Borrower shall have submitted to Lender plans and
specifications for the restoration which shall be reasonably
satisfactory to Lender, which plans and specifications shall
not be substantially or materially modified, changed or
revised without Lender's prior written consent, which consent
shall not be unreasonably withheld, delayed or conditioned,
and shall be in conformity with all governmental regulations,
including, without limitation, building, zoning, land use and
environmental regulations, provided, however, that so long as
no Event of Default has occurred and is continuing, the
provisions of this clause shall not apply if the value of the
Collateral which has suffered a casualty or been otherwise
affected is less than $1,000,000.00;
(iii) Borrower, if so requested by Lender, shall have
submitted to Lender fixed price contracts with good and
responsible contractors and materialmen covering all work and
materials necessary to complete restoration and providing for
a total completion price not in excess of the amount of
insurance or other proceeds available for restoration, or, if
a deficiency shall exist, Borrower shall have deposited the
amount of such deficiency with Lender unless Borrower has made
other arrangements or furnished other evidence which is
satisfactory to Lender of Borrower's ability to pay such
deficiency in full, provided, however, that so long as no
Event of Default has occurred and is continuing, the
provisions of this clause shall not apply if the value of the
Collateral which has suffered a casualty or been otherwise
affected is less than $1,000,000.00;
(iv) any insurance or other proceeds in excess of
$250,000.00 to be released pursuant to the foregoing provi-
sions may, at the option of Lender, be disbursed from time to
time as restoration progresses to pay for restoration work
completed and in place and such disbursements may, at Lender's
option, be made directly to Borrower or to or through any
contractor or materialman to whom payment is due
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or to or through a construction escrow to be maintained by a
title insurer reasonably acceptable to Lender;
(v) Lender may impose such further conditions upon the
release of insurance or other proceeds (including the receipt
of title insurance) as are customarily imposed by prudent
construction lenders to ensure the completion of the
restoration work free and clear of all liens or claims for
lien;
(vi) all title insurance charges and other costs and
expenses paid to or for the account of Borrower in connection
with the release of such insurance or other proceeds shall
constitute so much additional Indebtedness hereby secured to
be payable in accordance with this Agreement, the Mortgages,
and the Term Note with interest thereafter at the Default
Rate, and any such costs and expenses may be deducted by
Lender from insurance or other proceeds at any time standing
in its hands; and
(vii) if Borrower fails to complete restoration as
promptly as possible under the circumstances, but in all
cases in compliance with any time period provided under
applicable requirements of governmental authorities and
insurance underwriters, Lender shall have the right, but not
the obligation, to restore or rebuild the Improvements and the
other Collateral, or any part thereof, for or on behalf
of Borrower in lieu of applying such proceeds to the Term
Note or the Obligations and for such purpose may do all
necessary acts, including using funds deposited by Borrower
as aforesaid and advancing additional funds for the purpose
of restoration, all such additional funds to constitute part
of the Obligations payable with interest at the Default
Rate. Borrower hereby empowers Lender, in its discretion,
to settle, compromise and adjust any and all claims or
rights under any insurance policy maintained by Borrower
relating to the Collateral; provided, however, that prior to
the occurrence of any Event of Default, (i) Borrower shall
have the right to settle, adjust and compromise claims which
are reasonably anticipated to result in proceeds in an
amount less than $500,000.00, and (ii) Borrower shall have the
right to settle, adjust and compromise claims which are
reasonably anticipated to result in proceeds in an amount
equal to or more than $500,000.00 jointly with Lender. In
the event of foreclosure of the Mortgages, exercise of power
of sale or other transfer of title to the Collateral in
extinguishment of the Obligations, all right, title and
interest of Borrower in and to any insurance policies then
in force shall pass to the purchaser or grantee. Nothing
contained in this Agreement shall create any responsibility or
obligation on Lender to collect any amounts owing on any
insurance policy or resulting from any condemnation, to
rebuild or replace any damaged or destroyed Improvements or
other Collateral or to perform any other act hereunder.
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Lender shall not, by the fact of approving, disapproving,
accepting, preventing, obtaining or failing to obtain any
insurance, incur any liability for or with respect to the
amount of insurance carried, the form or legal sufficiency of
insurance contracts, solvency of insurance companies, or
payment or defense of lawsuits, and Borrower hereby expressly
assumes full responsibility therefor and all liability, if
any, with respect thereto.
(b) In addition to and cumulative with any other requirements
imposed on Borrower herein or in the Mortgages with respect to
insurance, Borrower shall maintain insurance, in such amounts and
against such risks as is customarily maintained by similar
businesses (it being understood and agreed that Borrower may self-
insure for worker's compensation, group medical and physical damage
to automobiles and may self-insure public liability claims to a
maximum of $250,000 per claim), but in any event to include general
liability, workers' compensation, damage, flood, windstorm, fire,
theft and extended coverage insurance in amounts satisfactory to
management of Borrower acting in good faith. Borrower shall file
with Lender upon its request at reasonable intervals a detailed
list of such insurance then in effect stating the names of the
insurance companies, the amounts and rates of insurance, the date
of expiration thereof, the Property and risks covered thereby and
the insured with respect thereto.
7.5 Maintenance of Property and Records. Borrower shall
maintain in good working condition, reasonable wear and tear
excepted, the Collateral, and its other Property when failure to so
maintain its other Property would have a Materially Adverse Effect.
Borrower shall maintain true and accurate books and records.
7.6 Preservation of Corporate Existence. Borrower shall
preserve and maintain its respective corporate existence, rights,
franchises and privileges in the State of Tennessee, and qualify
and remain qualified as a foreign corporation in each jurisdiction
in which any of the Collateral is located and in each other
jurisdiction where failure to so qualify could have a Materially
Adverse Effect.
7.7 Compliance With Laws. Borrower shall comply with the
requirements of, and obtain and maintain all permits, licenses and
other authorizations which are required under, all applicable laws,
rules, regulations and orders of any Governmental Authority,
noncompliance with which could have a Materially Adverse Effect.
7.8 Notices. Borrower will, upon obtaining knowledge
thereof, give notice (accompanied by a reasonably detailed
explanation with respect thereto and what action Borrower
proposes to take with respect thereto) promptly to Lender of:
(a) any litigation, arbitration, or governmental investiga-
tion or proceeding not previously disclosed by Borrower to Lender
which has been instituted or, to the knowledge of Borrower, is
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threatened against Borrower or to which any of its Property is
subject which
(ii) if adversely determined, would have a Materially
Adverse Effect, provided that, for purposes of this subclause
(i), any uninsured litigation, arbitration, or governmental
investigation or proceeding which involves a damage claim of
$1,500,000 or less need not be the subject of any such notice
unless it is one of a series of claims arising out of the
same set of facts or circumstances which, in the aggregate,
exceed $10,000,000, or
(ii) relates to this Agreement, any other Loan Document
or any specific transaction financed or to be financed in
whole or in part directly or indirectly with the proceeds of
the Term Loan;
(b) any material adverse development which shall occur in any
litigation, arbitration, or governmental investigation or
proceeding previously disclosed by Borrower to Lender;
(c) any development in the business, operations, financial
condition or prospects of Borrower which, in the reasonable judg-
ment of Borrower, has reasonable likelihood of having a Materially
Adverse Effect;
(d) any Default Condition or Event or Default;
(e) the occurrence of a Reportable Event under, or the
institution of steps by Borrower to withdraw from, or the institu-
tion of any steps to terminate, any Plan or, to the best of
Borrower's knowledge, any Multiemployer Plan, or the failure to
make a required contribution to any Plan or, to the best of
Borrower's knowledge, any Multiemployer Plan if such failure is
sufficient to give rise to a lien under Section 302(f) of ERISA, or
the taking of any action with respect to a Plan or, to the best of
Borrower's knowledge, any Multiemployer Plan which could result in
the requirement that Borrower furnish a bond or other security to
the PBGC or such Plan or Multiemployer Plan, or the occurrence of
any event with respect to any Plan or, to the best of Borrower's
knowledge, any Multiemployer Plan which could result in the
incurrence by Borrower of any material liability, fine or penalty,
or the occurrence of any material increase in the contingent
liability of Borrower with respect to any post-retirement Welfare
Plan benefit, and in each case the action which Borrower proposes
to take with respect thereto; and
(f) any material damage to, loss of or other change in the
composition of the Collateral or any other event that would have a
materially adverse effect on the aggregate value of the Collateral
or the Liens created by the Loan Documents with respect thereto.
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7.9 Environmental Matters.
(a) Borrower hereby indemnifies Lender and agrees to defend
and hold Lender harmless from and against any and all losses,
damages (including, without limitation, all foreseeable and unfore-
seeable consequential damages), costs, claims, liabilities,
penalties, fees, injuries or expenses of whatever kind or nature
(including, without limitation, reasonable counsel fees and costs),
which Lender may sustain or incur in connection with: any
Environmental Complaint or any claim, demand, or complaint asserted
against Lender relating to any environmental pollution, any
Hazardous Materials release, disposal, recycling, storage,
handling, treatment or exposure, or any environmental cleanup
(including, without limitation, any remedial, removal, or response
action) in connection with or relating to (i) Borrower's premises,
including, without limitation, any real or other Property now or
formerly owned, operated, leased, used or affected by Borrower; or
(ii) Borrower's operations, whether such operations took place
before or after the date of this Agreement. The indemnification in
this Section 7.9 shall survive termination of this Agreement and
the other Loan Documents as well as the payment of all Obligations.
(b) Borrower agrees to notify Lender promptly of any
Environmental Complaint received by it relating to a condition or
event which has a reasonable likelihood of resulting in a liability
of Borrower of an amount in excess of $1,000,000. Such notice
shall include, without limitation, a statement of any such
Environmental Complaint's impact and expected impact, if any, on
Borrower's business, prospects and financial condition, and whether
it would or might have a Materially Adverse Effect.
(c) To the full extent permitted by applicable law, Borrower
hereby releases Lender from any claim of contribution with respect
to any environmental matter.
ARTICLE 8
NEGATIVE COVENANTS
Borrower covenants to Lender that from and after the date
hereof until the Term Note and all other Obligations are paid in
full, it will not, without the prior written consent of Lender, do
any of the things or acts set forth in this Article 8.
8.1 No Liens. Except for Permitted Liens, Borrower will not,
and will not permit its Subsidiaries to, create, assume, or suffer
to exist any Lien of any kind on any of the Collateral except:
(a) Liens in favor of Lender under the Mortgages to secure
the Term Loan and the other Obligations;
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(b) Liens of carriers, warehousemen, mechanics, materialmen
and landlords incurred in the ordinary course of business for sums
not overdue or being contested in good faith, by appropriate
proceedings and for which appropriate reserves with respect thereto
have been established and maintained on the consolidated books of
Borrower in accordance with GAAP to the extent required under GAAP;
(c) Liens incurred in the ordinary course of business in
connection with workers' compensation, unemployment insurance, or
other forms of governmental insurance or benefits, or to secure
performance of tenders, statutory obligations, leases, and
contracts (other than for borrowed money) entered into in the
ordinary course of business or to secure obligations on surety or
appeal bonds;
(d) easements, rights-of-way, zoning and similar restrictions
and other similar encumbrances or title defects which, in the
aggregate, are not substantial in amount, and which do not in any
case materially detract from the value of the property subject
thereto or interfere with the ordinary conduct of the business of
Borrower; and
(e) judgment liens securing amounts not in excess of
$1,000,000 in the aggregate in existence less than thirty (30) days
after the entry thereof or with respect to which execution has been
stayed or with respect to which the appropriate insurance carrier
has agreed in writing that there is full coverage (subject to a
customary deductible not in excess of $1,000,000) by insurance.
8.2 Merger, Acquisition or Sale. Except as otherwise
provided in the Credit Agreement, Borrower will not dissolve or
otherwise terminate its corporate status or enter into any merger,
reorganization or consolidation (except that Borrower and any
Subsidiaries may merge with each other provided that Borrower shall
be the surviving entity), or acquire any substantial businesses
(either stock or assets), or sell, assign, lease or otherwise
dispose of (whether in one transaction or in a series of
transactions) all, substantially all or any substantial part of its
Property or assets (other than sales in the ordinary course of
business), or make any substantial change in the basic type of
business conducted by Borrower as of the date hereof.
8.3 Transactions with Affiliates. Borrower will not enter
into, or cause, suffer, or permit to exist
(a) any arrangement or contract with any of its Affiliates
(other than a Subsidiary, Limited Partnership or franchisee of
Borrower) of a nature customarily entered into by Persons which are
Affiliates of each other (including management or similar contracts
or arrangements relating to the allocation of revenues, taxes, and
expenses or otherwise) requiring any payments to be made by
Borrower or any of its Subsidiaries to any Affiliate (other than a
Subsidiary of Borrower) unless such arrangement is fair and
equitable to Borrower or such Subsidiary; or
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(b) any other transaction, arrangement, or contract with any
of its Affiliates (other than a Subsidiary, Limited Partnership or
franchisee of Borrower) which would not be entered into by a
prudent Person in the position of Borrower or such Subsidiary with,
or which is on terms which are less favorable than are obtainable
from, any Person which is not one of its Affiliates.
8.4 Indebtedness. Borrower will not, and will not permit any
of its Subsidiaries to, create, incur, assume or suffer to exist or
otherwise become or be liable in respect of any Indebtedness other
than:
(a) Indebtedness of Borrower evidenced by the Term Note;
(b) unsecured revolving Indebtedness of Borrower in an
aggregate principal amount not to exceed $30,000,000 at
any one time outstanding (inclusive of the aggregate
outstanding principal amount of unsecured revolving
Indebtedness of Borrower disclosed on Exhibit L);
(c) other Indebtedness of Borrower or any of its Subsidiaries
outstanding on October 30, 1994, and either (1) reflected
in the financial statements delivered to the Lender prior
to the date hereof pursuant to Section 6.10 or (2)
disclosed on Exhibit L, so long as no such Indebtedness
is secured by any of the Collateral;
(d) Indebtedness of Borrower or any of its Subsidiaries
(other than Realco) which is an Investment permitted by
the Credit Agreement;
(e) Indebtedness in an aggregate principal amount not to
exceed $3,000,000 in the aggregate at any time out-
standing which is incurred by Borrower or any of its
Subsidiaries (other than Realco) to one or more vendors
of any assets to finance its acquisition of such assets;
(f) obligations of Borrower under Capitalized Leases;
provided that the aggregate capitalized amount payable
under all such Capitalized Leases shall not exceed
$30,000,000;
(g) Indebtedness of Borrower in respect of trade or
commercial letters of credit in an aggregate amount not
to exceed $20,000,000 at any one time outstanding and
Indebtedness in respect of standby letters of credit
(other than any standby letter of credit issued in
connection with the Mortgage Financing Transactions to
directly support Indebtedness permitted under clause (i)
below) in an aggregate amount not to exceed $20,000,000
at any one time outstanding;
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(h) Indebtedness incurred by Borrower under and in connection
with any Rate Swap Agreement; and
(i) Indebtedness incurred by Borrower under and in connection
with the Mortgage Financing Transactions and refinancings
thereof (A) made pursuant to Mortgage Financing
Transaction Documents and (B) in which the principal
amount of such Indebtedness is not increased thereby;
provided, however, that Borrower may not incur any such
new, non-refinanced Indebtedness in connection with
Mortgage Financing Transactions in any Fiscal Year in
excess of the amount of Indebtedness set forth opposite
such Fiscal Year below:
Fiscal Year Principal Amount
1993 $25,000,000
1994 $30,000,000
1995 $30,000,000
1996 $30,000,000
1997 $30,000,000
; provided, however, to the extent that the maximum amount of
Indebtedness in connection with Mortgage Financing
Transactions permitted to be incurred by Borrower, without
giving effect to this proviso, exceeds the aggregate amount
actually incurred during such Fiscal Year, one hundred percent
(100%) of the amount of such excess may be carried over to
succeeding Fiscal Years;
provided that no Indebtedness otherwise permitted to be incurred
shall be permitted to be incurred if, after giving effect to the
incurrence thereof, any Event of Default shall have occurred and be
continuing.
8.5 Financial Condition. Borrower will not permit:
(a) Consolidated Net Worth on the last day of any Fiscal
Quarter occurring during any period set forth below to be less than
the amount set forth below:
Minimum Consolidated
Period Net Worth
Fourth Fiscal Quarter of
Fiscal Year 1994 $(145,000,000)
First Three Fiscal Quarters
of Fiscal Year 1995 $(145,000,000)
Fourth Fiscal Quarter of
Fiscal Year 1995 $ (60,000,000)
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First Three Fiscal Quarters
of Fiscal Year 1996 $ (60,000,000)
Fourth Fiscal Quarter
of Fiscal Year 1996 $ 40,000,000
First Three Fiscal Quarters
of Fiscal Year 1997 $ 40,000,000
Fourth Fiscal Quarter of
Fiscal Year 1997 $ 100,000,000
First Three Fiscal Quarters
of Fiscal Year 1998 $ 100,000,000
Fourth Fiscal Quarter of
Fiscal Year 1998 and
thereafter $ 200,000,000
(b) the Funded Debt Ratio on the last day of any Fiscal
Quarter occurring during any period set forth below to be greater
than the ratio set forth below opposite such period:
Maximum Funded
Period Debt Ratio
Fourth Fiscal Quarter
of Fiscal Year 1994 3.7:1.00
First Three Fiscal Quarters
of Fiscal Year 1995 3.7:1.00
Fourth Fiscal Quarter
of Fiscal Year 1995 3.0:1.00
First Three Fiscal Quarters
of Fiscal Year 1996 3.0:1.00
Fourth Fiscal Quarter
of Fiscal Year 1996 and
thereafter 2.5:1.00
(c) Consolidated Funded Debt as of the end of any Fiscal
Quarter during any period set forth below to be more than the
amount set forth below opposite such period:
Maximum Consolidated
Period Debt
Fourth Fiscal Quarter of
Fiscal Year 1994 $660,000,000
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First Three Fiscal Quarters
of Fiscal Year 1995 $660,000,000
Fourth Fiscal Quarter of
Fiscal Year 1995 $600,000,000
First Three Fiscal Quarters
of Fiscal Year 1996 $600,000,000
Fourth Fiscal Quarter of
Fiscal Year 1996 and
thereafter $550,000,000
(d) the Adjusted Interest Coverage Ratio to be less than the
ratio set forth below as of the end of any Fiscal Quarter
during any period set forth below set forth opposite such
ratio:
Minimum Adjusted
Period Interest Coverage Ratio
Fourth Fiscal Quarter
of Fiscal Year 1994 2.0:1.00
First Three Fiscal Quarters
of Fiscal Year 1995 2.0:1.00
Fourth Fiscal Quarter
of Fiscal Year 1995 2.75:1.00
First Three Fiscal Quarters
of Fiscal Year 1996 2.75:1.00
Fourth Fiscal Quarter
of Fiscal Year 1996 and
thereafter 3.75:1.00; and
(e) the Consolidated Fixed Charge Coverage Ratio on the last
day of any Fiscal Quarter occurring during any period set forth
below to be less than the ratio set forth opposite such period
below:
Minimum Consolidated Fixed
Period Charge Coverage Ratio
Fourth Fiscal Quarter
of Fiscal Year 1994 .85:1.00
First Three Fiscal Quarters
of Fiscal Year 1995 .85:1.00
Fourth Fiscal Quarter
of Fiscal Year 1995 1.15:1.00
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First Three Fiscal Quarters
of Fiscal Year 1996 1.15:1.00
Fourth Fiscal Quarter
of Fiscal Year 1996 and
thereafter 1.30:1.00
8.6 Inconsistent Agreements. Borrower shall not enter into
any contract or other agreement which is inconsistent with the
terms of this Agreement or the other Loan Documents or which limits
or otherwise restricts the ability of Borrower to perform its obli-
gations under this Agreement or the other Loan Documents.
8.7 Consolidated Capital Expenditures, etc. Borrower will
not, and will not permit any of its Subsidiaries to, make any
Consolidated Capital Expenditures, except Borrower and its
Subsidiaries may make Consolidated Capital Expenditures during any
Fiscal Year which do not exceed, in the aggregate, the amount set
forth opposite such Fiscal year below:
Fiscal Year Maximum Amount
1994 $ 74,000,000
1995 $ 78,000,000
1996 $ 89,000,000
1997 $ 99,000,000
1998 $125,000,000
1999 $130,000,000
provided, however, that (i) to the extent that the maximum amount
of Consolidated Capital Expenditures permitted to be made by
Borrower and its Subsidiaries in any Fiscal Year, without giving
effect to this proviso, exceeds the aggregate amount actually
incurred during such Fiscal Year, the lesser of one hundred percent
(100%) of the amount of such excess or $5,000,000 may be carried
forward to the next Fiscal Year and (ii) in the Fiscal Years (but
no later than the 1997 Fiscal Year) in which Borrower is required
to acquire restaurant properties from Marriott or Thompson
Hospitality, Inc., either directly or pursuant to the Borrower's
obligations under the Restaurant Sale and Purchase Agreement dated
May 20, 1992, by and among the Borrower, Marriott Family
Restaurants, Inc., Marriott Corporation and Thompson Hospitality,
Inc., Consolidated Capital Expenditures in respect of such Fiscal
Year shall be increased by an amount not to exceed $5,000,000 in
the aggregate for all such Fiscal Years, and provided, further,
that there shall be excluded from Consolidated Capital Expenditures
(i) Franchisee Acquisitions, (ii) Remodeling Expenses and (iii)
expenses incurred in connection with undeveloped real estate
designated as Mortgage Financing Collateral prior to such time that
restaurants constructed on such real estate are open and operating.
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ARTICLE 9
EVENTS OF DEFAULT
The occurrence of any events or conditions described in this
Article 9 shall constitute an Event of Default hereunder, provided
that any requirement for the giving of notice or the lapse of time,
or both, has been satisfied.
9.1 Term Note. Borrower shall fail to make any payment or
prepayment of principal of the Term Loan when due or any payment of
interest on the Term Loan within five days of the date when due.
9.2 Obligations. Borrower or any Subsidiary shall fail to
make any payments of principal of or interest or fees on any other
Obligations (other than principal of and interest on the Term Note)
to Lender within five (5) days after the date on which due.
9.3 Misrepresentations. Borrower shall make any representa-
tions or warranties in this Agreement or any of the other Loan
Documents or in any certificate or statement furnished at any time
under or in connection herewith or therewith which was untrue or
misleading in any material respect when made or furnished or when
deemed made or furnished hereunder.
9.4 Covenants. Borrower shall (x) default in the observance
or performance of any of its obligations under Section 5.2, Section
7.8(d) or Section 8.2, 8.4, 8.5 or 8.7, or (y) default in the
observance or performance of any other covenant or agreement
contained in this Agreement or any other Loan Document, and (i)
with respect to defaults under this Agreement, such default shall
continue for a period of thirty (30) days after the Chairman of the
Board (if at the time an officer), President, Chief Financial
Officer (regardless of title), Treasurer, Corporate Controller or
Secretary of Borrower shall have knowledge thereof, or (ii) with
respect to any defaults under any of the other Loan Documents, any
grace or cure period specified therein shall have expired.
9.5 Other Debts. Any default shall occur under the terms
applicable to any Indebtedness or Guaranty of Borrower or any of
its Subsidiaries in an aggregate amount exceeding $5,000,000
representing any borrowing or financing or Guaranty or arising
under any other material agreement from, by or with any Person, and
such default shall:
(a) consist of the failure to pay monetary obligations under
such Indebtedness or Guaranty when due; or
(b) continue unremedied (and not have been waived by the
holder of such Indebtedness or Guaranty) for a period of time
sufficient to permit the acceleration of such Indebtedness.
9.6 Voluntary Bankruptcy. Borrower shall file a voluntary
petition in bankruptcy or a voluntary petition or answer seeking
liquidation, reorganization, arrangement, readjustment of its
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debts, or for any other relief under the Bankruptcy Code, or under
any other act or law pertaining to insolvency or debtor relief,
whether state, federal, or foreign, now or hereafter existing;
Borrower shall enter into any agreement indicating its consent to,
approval of, or acquiescence in, any such petition or proceeding;
Borrower shall apply for or permit the appointment by consent or
acquiescence of a receiver, custodian or trustee of Borrower for
all or a substantial part of its Property; Borrower shall make an
assignment for the benefit of creditors; Borrower shall be unable
or shall fail to pay its debts generally as such debts become due;
or Borrower shall admit, in writing, its inability or failure to
pay its debts generally as such debts become due.
9.7 Involuntary Bankruptcy. There shall have been filed
against Borrower an involuntary petition in bankruptcy or seeking
liquidation, reorganization, arrangement, readjustment of its debts
or for any other relief under the Bankruptcy Code, or under any
other act or law pertaining to insolvency or debtor relief, whether
state, federal or foreign, now or hereafter existing, and either
(x) such case or proceeding is not dismissed within sixty (60)
days, or (y) an "order for relief" is entered at any time in any
such case under the Bankruptcy Code; the involuntary appointment of
a receiver, custodian or trustee of Borrower for all or a
substantial part of the Property of Borrower, if such appointment
is not terminated within sixty (60) days; or the issuance of a
warrant of attachment, execution or similar process against all or
any substantial part of the Property of Borrower.
9.9 Judgments. A judgment or order for the payment of money
is rendered against Borrower in the amount in excess of $1,000,000
(exclusive of amounts covered by insurance), and same shall not
have been paid, stayed on appeal or otherwise contested in good
faith within thirty (30) days after the rendering thereof.
9.10 Nonmonetary Judgments. A final nonappealable nonmonetary
judgment or order is rendered against Borrower which has or has a
reasonable possibility of having a Materially Adverse Effect.
9.10 ERISA. A contribution failure shall occur with respect
to any Plan sufficient to give rise to a lien under Section 302(f)
of ERISA or any of the following events shall occur with respect to
any Plan:
(a) such Plan shall be terminated or a receiver to administer
such Plan shall have been appointed (or steps shall be instituted
to effect such termination or appointment);
(b) Borrower shall withdraw from such Plan (or shall
institute steps to effect such withdrawal); or
(c) any Reportable Event shall occur with respect to such
Plan which would present a material risk to Borrower of incurring
a liability on account of such Plan,
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and there shall exist a deficiency in the assets available to
satisfy the benefit liabilities under ERISA with respect to such
Plan, and such occurrence shall result in a liability of Borrower
in excess of $5,000,000.
9.11 Impairment. Except as expressly permitted in any Loan
Document, any Loan Document shall terminate or cease in whole or in
part to be the legally valid, binding and enforceable obligation of
Borrower, or Borrower or any Person acting for or on behalf of
Borrower contests such validity, binding effect or enforceability
or purports to revoke any Loan Document.
ARTICLE 10
REMEDIES
Upon the occurrence or existence of any Acceleration Event
(unless Lender in its sole discretion shall have accepted the cure
of such Acceleration Event or waived the same, at which time the
parties hereto shall be returned to their respective positions as
they existed prior to such Acceleration Event), or at any time
thereafter, without prejudice to the rights of Lender to enforce
its claims against Borrower for damages for failure by Borrower to
fulfill any of its obligations hereunder, subject only to prior
receipt by Lender of payment in full of all Obligations then
outstanding in a form acceptable to Lender, Lender shall have all
of the rights and remedies described in this Article 10, and Lender
may exercise any one, more, or all of such remedies, in its sole
discretion, without thereby waiving any of the others.
10.1 Acceleration of the Obligations. Lender may declare all
of the Obligations of Borrower to Lender (including, but not
limited to, that portion thereof evidenced by the Term Note) to be
immediately due and payable, and in the event a voluntary case is
commenced under the Bankruptcy Code or an involuntary case
commenced under the Bankruptcy Code is not dismissed in sixty (60)
days by or against Borrower as a debtor, all such Obligations
automatically will be due and payable without any notice or
declaration by Lender, whereupon the same shall become immediately
due and payable without any other presentment, demand, protest,
notice of demand, protest or nonpayment, notice of intent to
accelerate, notice of acceleration or any other notice required by
law relative thereto, all of which are hereby expressly waived by
Borrower to the extent permitted by law, anything contained herein
to the contrary notwithstanding. If any note of Borrower to Lender
evidencing any of the Obligations shall be a demand instrument,
however, the recitation of the right of Lender to declare any and
all such Obligations to be immediately due and payable, whether
such recitation is contained in such note or in this Agreement, as
well as the recitation of the above events permitting Lender to
declare all such Obligations due and payable, shall not constitute
an election by Lender to waive its right to demand payment under
such note under a demand at any time and in any event, as Lender in
its discretion may deem appropriate. Thereafter, Lender at its
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option, may, but shall not be obligated to, accept less than the
entire amount of such Obligations due, if tendered, provided,
however, that unless then agreed to in writing by Lender, no such
acceptance shall be or shall be deemed to constitute a waiver of
any Event of Default or a reinstatement of any commitments of
Lender hereunder.
10.2 Other Remedies. Unless and except to the extent
expressly provided for to the contrary herein, the rights of Lender
specified herein shall be in addition to, and not in limitation of,
Lender's rights under any statute or rule of law or equity, or
under the provisions of any other document, instrument or other
writing executed by Borrower or any third party in favor of Lender,
including, without limitation, the Mortgages, all of which may be
exercised successively or concurrently.
All collections of amounts due to Lender under any of the Loan
Documents (whether by payment, levy on assets, set off or
otherwise) shall be paid and applied in the following order: (i)
reimbursement of fees and expenses (including reasonable attorneys'
fees and expenses) incurred by Lender; (ii) payment of fees due to
Lender; (iii) without duplication, payment of accrued and unpaid
interest owed to Lender; (iv) payment of outstanding principal owed
to Lender and (v) to the Persons legally entitled thereto.
ARTICLE I.
MISCELLANEOUS
11.1 Waiver of Default. Any waiver hereunder shall be in
writing and shall be for such period and subject to such conditions
as shall be specified in any such notice. In the case of any
waiver, Borrower and Lender shall be restored to their former
position and rights hereunder and under the Term Note and any
Default Condition or any Event of Default so waived shall be deemed
to be cured and not continuing during the period such waiver shall
be effective; but no such waiver shall extend to any subsequent or
other Default Condition or Event of Default, or impair any right
and/or remedy consequent thereon.
11.2 Notices. All notices, requests and demands to or upon
the respective parties hereto shall be deemed to have been given or
made when personally delivered or received by facsimile or
telecopier addressed as follows or to such other address as may
hereafter be designated in writing by the respective parties
hereto:
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Borrower:
Shoney's, Inc.
1727 Elm Hill Pike
Nashville, Tennessee 37210
Attention: F. E. McDaniel, Jr.
Telecopier No.: (615) 231-2428
Confirmation No. (615) 231-2253
Lender:
NationsBank of Tennessee, N.A.
One NationsBank Plaza
Nashville, Tennessee 37239-1697
Attn: John E. Ball
Telecopier No: (615) 749-4640
Confirmation No. (615) 749-3469
Rejection or other refusal to accept or the inability to deliver
because of changed address of which no notice was given shall be
deemed to be receipt of the notice, demand or request sent. By
giving at least thirty (30) days written notice thereof, Borrower
and Lender shall have the right from time to time and at any time
to change their respective addresses and each shall have the right
to specify any other address within the continental United States
of America.
11.3 No Waiver; Cumulative Remedies. No failure to exercise
and no delay in exercising, on the part of Lender, any right,
power, or privilege hereunder, shall operate as a waiver thereof;
nor shall any single or partial exercise of any right, power or
privilege hereunder preclude any other or further exercise thereof
or the exercise of any other right, power or privilege. The rights
and remedies herein provided are cumulative and not exclusive of
any rights or remedies provided by law.
11.4 Amendments. The provisions of this Agreement may be
amended or modified by Lender and Borrower at any time and from
time to time and any such amendment or modification shall be
binding upon the parties hereto; provided, however, that no amend-
ment, waiver or consent shall be effective unless given or made in
writing by the party against whom enforcement is sought. Notwith-
standing the foregoing and notwithstanding anything to the contrary
contained in this Agreement, in the event any of the provisions of
the Credit Agreement corresponding to the Floating Provisions are
modified, amended or waived, the applicable Floating Provisions
shall be deemed to be automatically (and without the need of
further writings by the parties hereto) likewise and similarly
modified, amended or waived; provided that if the Credit Agreement
is terminated for any reason the Floating Provisions shall be
deemed to be those corresponding provisions of the Credit Agreement
as it existed on the day immediately preceding termination.
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11.5 Assignments and Participations. No assignment hereof
shall be made by Borrower without the prior written consent of
Lender. Lender may assign and sell participations in its right,
title and interest herein and in the Loan Documents at any time
hereafter; provided, however, that Borrower shall not be required
to pay any amount to Lender under Section 4.9 that is greater than
the amount which it would have been required to pay had Lender not
assigned or sold participations.
11.6 Counterparts. This Agreement may be executed in any
number of counterparts and all of said counterparts taken together
shall be deemed to constitute one and the same instrument.
11.7 Governing Law. This Agreement and the Term Note and the
rights and obligations of the parties hereunder and thereunder
shall be governed by, and construed and interpreted in accordance
with, the laws of the State of Tennessee.
11.8 Severability. In case any one or more of the provisions
contained in this Agreement or the Term Note should be invalid,
illegal or unenforceable in any respect, the validity, legality
and enforceability of the remaining provisions contained herein and
therein shall not in any way be affected or impaired thereby and
shall be enforced to the greatest extent permitted by law.
11.9 Entire Agreement. This Agreement and the other Loan
Documents constitute the entire agreement between the parties
hereto with respect to the subject matter hereof. Neither this
Agreement and the other Loan Documents nor any provision hereof or
thereof may be changed, waived, discharged, modified or terminated
orally, but only by an instrument in writing signed by the parties
hereto.
11.10 Time of the Essence. Time is of the essence in this
Agreement and the Term Note.
11.11 Interpretation. No provision of this Agreement, the
Term Note or the other Loan Documents shall be construed against or
interpreted to the disadvantage of any party hereto by any court or
other governmental or judicial authority by reason of such party
having or being deemed to have structured or dictated such
provision.
11.12 Lender Not Joint Venturer. Neither this Agreement, the
other Loan Documents nor any agreements, instruments, documents or
transactions contemplated hereby (including the Term Note) shall in
any respect be interpreted, deemed or construed as making Lender a
partner or joint venturer with Borrower or as creating any similar
relationship or entity, and Borrower agrees that it will not make
any contrary assertion, contention, claim or counterclaim in any
action, suit or other legal proceeding involving Lender and
Borrower.
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11.13 Reimbursement. Borrower shall pay to Lender on demand
all reasonable out-of-pocket costs and expenses that Lender pays or
incurs in connection with the negotiation, preparation,
consummation, enforcement and termination of this Agreement and the
other Loan Documents, including, without limitation: (a) reason-
able attorneys' fees and paralegals' fees and disbursements of
counsel, (b) reasonable costs and expenses (including reasonable
attorneys' and paralegals' fees and disbursements) for any amend-
ment, supplement, waivers, consent or subsequent closing in
connection with the Loan Documents and the transactions
contemplated thereby; (c) reasonable and actual costs and expenses
of lien and title searches; (d) actual taxes, fees and other
charges for filing financing statements and continuations, and
other actions to perfect, protect and continue the Lien of Lender
on the Collateral; (e) sums paid or incurred to be paid by Lender
to pay for any amount or take any action required of Borrower under
the Loan Documents that Borrower fails to pay or take; (f) if an
Event of Default exists, reasonable costs of appraisals,
inspections and verifications of the Collateral, including, without
limitation, reasonable costs of travel, lodging, and meals for
inspections of the Collateral and Borrower's operations by Lender;
(g) pursuant to Section 11.16, reasonable costs and expenses of
preserving and protecting the Collateral; and (h) after an Event of
Default, costs and expenses (including reasonable attorneys' and
paralegals' fees and disbursements) paid or incurred to obtain pay-
ment of the Term Note and the other Obligations, enforce the Lien
of Lender in the Collateral or any part thereof, sell or otherwise
realize on the Collateral and otherwise enforce the provisions of
the Loan Documents or to defend any claims made or threatened
against Lender arising out of the transactions contemplated hereby
(including, without limitation, preparations for and consultations
concerning any such matters). The foregoing shall not be construed
to limit any other provisions of the Loan Documents regarding costs
and expenses to be paid by Borrower. Any Person seeking
indemnification pursuant to this Section 11.13 shall submit a
statement to Borrower therefor, which Borrower shall promptly pay,
absent manifest error, and in any event, all of the foregoing costs
and expenses may, in the discretion of Lender, be charged to the
Term Note. In the event Borrower becomes a debtor under the
Bankruptcy Code, Lender's secured claims in such case shall include
interest on the Obligations and all fees, costs and charges
provided for herein (including, without limitation, reasonable
attorneys' fees paid or incurred by Lender).
11.14 Waiver of Trial by Jury. TO THE FULLEST EXTENT
PERMITTED BY LAW, EACH OF THE PARTIES HERETO HEREBY WAIVES TRIAL BY
JURY IN ANY JUDICIAL PROCEEDING TO WHICH IT IS A PARTY INVOLVING,
DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT,
CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR
CONNECTED WITH THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR THE
RELATIONSHIP ESTABLISHED HEREUNDER AND WHETHER ARISING OR ASSERTED
BEFORE OR AFTER THE DATE HEREOF OR BEFORE OR AFTER THE PAYMENT,
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OBSERVANCE AND PERFORMANCE IN FULL OF BORROWER'S OBLIGATIONS
HEREUNDER AND UNDER THE OTHER LOAN DOCUMENTS.
11.15 Termination Statements and Partial Release. Borrower
agrees that Lender shall not be required to file UCC termination
statements unless and until all Obligations have been paid in full
and Lender shall have no further commitment hereunder; provided,
however, that Lender will execute appropriate partial releases of
Collateral in connection with any sale or other transfer or convey-
ance of Collateral made prior to such time to the extent such sale
or other transfer or conveyance is expressly permitted hereunder or
under any of the other Loan Documents or is consented to in writing
by Lender.
11.16 Cure of Defaults. If Borrower hereafter defaults in the
performance of any duty or obligation to Lender hereunder, Lender
may, at its option, but without obligation, cure such default and
any costs, fees and expenses incurred by Lender in connection
therewith including, without limitation, for the purchase of
insurance, the payment of taxes and the removal or settlement of
liens and claims, shall be deemed to be advances under the Term
Loan, whether or not this creates an over-advance under the Term
Note, and shall be payable in accordance with its terms.
11.17 Attorney-in-Fact. Borrower hereby irrevocably
designates, appoints and empowers Lender as its attorney-in-fact at
Borrower's cost and expense, during the existence of any Event of
Default, to do in the name of Borrower any and all actions which
Lender may deem necessary or advisable to carry out the terms
hereof upon the failure, refusal or inability of Borrower to do so
and Borrower hereby agrees to indemnify and hold Lender harmless
from any costs, damages, expenses or liabilities arising against or
incurred by Lender in connection therewith. This power of
attorney, being coupled with an interest, shall be irrevocable,
shall continue until all Obligations have been satisfied in full or
waived by Lender and this Agreement has been terminated by Lender
in writing and shall be in addition to Lender's other rights,
powers and remedies.
IN WITNESS WHEREOF, Borrower and Lender have each caused this
Agreement to be duly executed by its duly authorized officer, as of
the day and year first above written.
"BORROWER"
SHONEY'S, INC.
By:
-------------------------------
Title:
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"LENDER"
NATIONSBANK OF TENNESSEE, N.A.
By:
-------------------------------
Title:
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EXHIBIT A
TERM NOTE
$28,000,000.00 December __, 1994
Nashville, Tennessee
FOR VALUE RECEIVED, the undersigned, SHONEY'S, INC., a
Tennessee corporation ("Borrower"), promises to pay to the order of
NATIONSBANK OF TENNESSEE, N.A., a national banking association
("Lender"), at One NationsBank Plaza, Nashville, Tennessee 37239,
or at such other place as Lender hereafter may direct in writing,
in legal tender of the United States of America, the principal sum
of TWENTY EIGHT MILLION DOLLARS ($28,000,000.00), or so much
thereof as may remain outstanding from time to time hereafter of
that certain Term Loan made by Lender to Borrower pursuant to the
terms of that certain Loan Agreement dated as of December 1, 1994,
between Borrower and Lender (as it may be amended or supplemented
from time to time, the "Agreement"), the terms and provisions of
which are hereby incorporated herein by reference and made a part
hereof (capitalized terms which are defined in the Agreement and
which are used herein and not otherwise defined herein shall have
the same meanings when used herein as assigned thereto in the
Agreement), payable on the terms and dates and in the amounts as
hereinafter provided, and to pay interest thereon from the date
hereof until paid in full at the rate or rates established from
time to time pursuant to the Agreement.
Subject to the mandatory and optional prepayment provisions
described in the Agreement, the principal amount of this Term Note
shall be due and payable in nine (9) consecutive semi-annual
installments, the first eight (8) of which shall be in the amount
of Nine Hundred Thirty-Three Thousand Three Hundred Eighty Dollars
($933,380.00) and the last of which shall be in the amount of
Twenty Million Five Hundred Thirty-Two Thousand Nine Hundred Sixty
Dollars ($20,532,960.00), the first such installment being due on
December 22, 1995, with such installments continuing to be due on
each June 22 and December 22 thereafter through and including
December 22, 1999, on which date the entire remaining unpaid
principal amount of this Term Note together with all accrued
interest thereon shall be due and payable.
Accrued interest on the unpaid principal balance hereof shall
be due and payable on each Interest Payment Date, on the
Termination Date and otherwise as provided in the Agreement.
Each payment made on account of principal, and each Rate of
Borrowing in effect from time to time, shall be recorded by Lender,
and such information so recorded shall be conclusive with respect
to such matters absent manifest error.
<PAGE>
Upon an Event of Default, the rate of interest on amounts then
outstanding hereunder shall increase automatically and without
notice to the Default Rate and such interest shall be payable on
demand.
Borrower agrees, in the event that this Term Note or any
portion hereof is collected by legal action or through an attorney
at law, to pay all costs of collection, including, without
limitation, reasonable attorneys' fees.
This Term Note evidences a borrowing under, is subject to, and
shall be paid, matured and enforced in accordance with, the terms
of the Agreement, and is the "Term Note" defined in Section 1.1
thereof. Borrower shall have the right and shall be required to
prepay this Term Note as provided in and subject to the conditions
set forth in the Agreement, and without premium or penalty except
as provided in the Agreement.
Nothing herein shall limit any right granted Lender by any
other instrument or by law.
Borrower hereby waives presentment, demand, protest, notice of
demand, protest and nonpayment, notice of intent to accelerate,
notice of acceleration and any other notice required by law
relative hereto, except to the extent as otherwise may be provided
for in the Agreement.
IN WITNESS WHEREOF, Borrower has caused this Term Note to be
executed by its duly authorized officer as of the day and year
first above written.
"BORROWER"
SHONEY'S, INC.
By:_____________________________
Title:
Attest:_________________________
Title:
<PAGE>
EXHIBIT B
COMPLIANCE CERTIFICATE
NationsBank of Tennessee, N.A.
One NationsBank Plaza
Nashville, Tennessee 37239
Attention: John E. Ball
Re: Shoney's, Inc. -- Loan Agreement
dated as of December 1, 1994
Ladies and Gentlemen:
This Compliance Certificate is being delivered pursuant to the
Loan Agreement dated as of December 1, 1994 (together with all
amendments, supplements, amendments and restatements and other
modifications, if any, from time to time made thereto, the
"Agreement"), between Shoney's, Inc., a Tennessee corporation (the
"Borrower"), and NationsBank of Tennessee, N.A., a national banking
association (the "Lender"). Capitalized terms used herein without
definition shall have the meanings assigned to such terms in
Section 1.1 of the Agreement. All computations performed herein
shall conform to the method of computation required by the
Agreement.
The Borrower hereby certifies, represents and warrants that as
of __________ __, 19__ (the "Computation Date"):
(a) Consolidated Net Worth was $________________ as computed on
Attachment I hereto.
The minimum Consolidated Net Worth required pursuant to clause
(a) of Section 8.5 of the Agreement on the Computation Date
was $_________________.
(b) The Funded Debt Ratio was _____ to 1:00, as computed on
Attachment 2 hereto.
The maximum Funded Debt Ratio required pursuant to clause (b)
of Section 8.5 of the Agreement on the Computation Date was
____:1.00.
(c) The Consolidated Funded Debt was $_____________ as computed on
Attachment 3 hereto.
The maximum Consolidated Funded Debt required pursuant to
clause (c) of Section 8.5 of the Agreement on the Computation
Date was $_________________.
(d) The Adjusted Interest Coverage Ratio was _____:1.00, as
computed on Attachment 4 hereto.
<PAGE>
The minimum Adjusted Interest Coverage Ratio required pursuant
to clause (d) of Section 8.5 of the Agreement on the
Computation Date was _____:1.00.
(e) The Consolidated Fixed Charge Coverage Ratio was ____:1.00, as
computed on Attachment 5 hereto.
The minimum Consolidated Fixed Charge Coverage Ratio required
pursuant to clause (e) of Section 8.5 of the Agreement on the
Computation Date was ____:1.00.
(f) Consolidated Capital Expenditures made thus far for the 19__
Fiscal Year were $____________.
The maximum amount of Consolidated Capital Expenditures
permitted pursuant to Section 8.7 of the Agreement (including
$____________ in carry over from prior Fiscal Years) on the
Computation Date was $____________.
(g) The aggregate amount of unsecured revolving indebtedness
outstanding on the Computation Date was $_______________.
The maximum aggregate principal amount of unsecured revolving
indebtedness permitted pursuant to clause (b) of Section 8.4
of the Agreement on the Computation Date was $_____________.
(h) Indebtedness of the Borrower and its Subsidiaries (other than
Realco) to one or more vendors of any assets to finance its
acquisition of such assets on the Computation Date was
$____________.
The maximum aggregate amount outstanding in respect of
Indebtedness of the Borrower and its Subsidiaries (other than
Realco) to a vendor of any assets to finance its acquisition
of such assets pursuant to clause (e) of Section 8.4 of the
Agreement on the Computation Date was $_____________.
(I) The aggregate capitalized amount payable under Capitalized
Leases was $______________.
The maximum aggregate capitalized amounts payable under
Capitalized Leases permitted pursuant to clause (f) of Section
8.4 of the Agreement on the Computation Date was $__________.
(J) The Indebtedness of the Borrower in respect of trade or
commercial letters of credit was $_____________.
The maximum aggregate amount outstanding in respect of trade
or commercial letters of credit permitted pursuant to
clause (g) of Section 8.4 of the Agreement on the Computation
Date was $_____________.
-2-
<PAGE>
(k) Indebtedness of the Borrower in respect of standby letters of
credit (other than any standby letters of credit issued in
connection with Mortgage Financing Transactions) was
$_____________.
The maximum aggregate amount outstanding in respect of standby
letters of credit permitted pursuant to clause (g) of Section
8.4 of the Agreement on the Computation Date was $__________.
(l) Indebtedness incurred by the Borrower under and in connection
with Mortgage Financing Transactions thus far for the 1994
Fiscal Year was $__________.
The maximum amount of Indebtedness with respect to Mortgage
Financing Transactions permitted pursuant to clause (i) of
Section 8.4 of the Agreement in respect of the current Fiscal
Year on the Computation Date was $__________.
(m) No Default Condition or Event of Default has occurred and is
continuing.
IN WITNESS WHEREOF, the Borrower has caused this Certificate
to be executed and delivered by its duly Authorized Officer on this
_____ day of ______________, 19__.
SHONEY'S, INC.
By:
---------------------------
Its
-3-
<PAGE>
COMPLIANCE CERTIFICATE
Attachment 1
CONSOLIDATED NET WORTH
1. Shareholders' equity (deficit)
per Balance Sheet $_____________
2. Adjustments
(a) Treasury stock (to the extent not
included in item 1) $_____________
(b) Write-up in book value of assets
resulting from revaluation $_____________
(c) Total Adjustments (item (a)
plus item b)) $_____________
3. Consolidated Net Worth (deficit)
(item (1) minus item 2 (c)) $_____________
MINIMUM AMOUNT ALLOWABLE PER COVENANT
Consolidated Net Worth as of __________ __, 19__ $_____________
<PAGE>
Attachment 2
FUNDED DEBT RATIO
1. Indebtedness (as computed in
accordance with the definition of
such term in the Agreement)
(including accrued interest on the
Subordinated LYONS Notes and debt
incurred with respect to Mortgage
Financing Transactions) plus the
amount of reserve for litigation
settlement $_____________
2. Adjustments
(a) Obligations with respect to
Rate Swap Agreements $_____________
(b) Any withdrawal liability to
a Multiemployer Plan $_____________
(c) Total Adjustments
(item (a) plus item (b)) $_____________
3. Consolidated Funded Debt (item 1
minus item 2 (c)) $_____________
4. Consolidated Net Income $_____________
5. Adjustments
(a) All income taxes $_____________
(b) Consolidated Interest Expense $_____________
<PAGE>
(c) Non-cash interest charges,
depreciation, amortization and
amortization of transaction costs
with respect to Indebtedness and
amortization of bond discount
relating to the Subordinated
Debentures (to the extent not
included in item 4.) $_____________
(d) Total adjustments
(item (a) plus item (b)
plus item (c)) $_____________
6. EBITDA (Item 4 plus 5(d)) $_____________
7. Item 3 divided by item 6 ____
-2-
<PAGE>
Attachment 3
CONSOLIDATED FUNDED DEBT
1. Indebtedness (as computed in
accordance with the definition of
such term in the Agreement)
(including accrued interest on the
Subordinated LYONS Notes and debt
incurred with respect to Mortgage
Financing Transactions) plus the
amount of reserve for litigation
settlement $_____________
2. Adjustments
(a) Obligations with respect to
Rate Swap Agreements $_____________
(b) Any withdrawal liability to a
Multiemployer Plan $_____________
(c) Total adjustments
(item (a) plus item (b)) $_____________
3. Consolidated Funded Debt (item 1
minus item 2(c)) $_____________
<PAGE>
Attachment 4
ADJUSTED INTEREST COVERAGE RATIO
1. Adjusted EBITDA
(EBITDA minus Consolidated Capital
Expenditures (other than in respect
of Franchisee Acquisitions)) $_____________
2. Consolidated Interest Expense
paid or payable in cash $_____________
3. Adjusted Interest Coverage Ratio
(item 1 divided by item 2) _____
<PAGE>
Attachment 5
CONSOLIDATED FIXED-CHARGE COVERAGE RATIO
1. EBITDA $_____________
2. Consolidated Lease Expense $_____________
3. Consolidated Interest Expense $_____________
4. Scheduled payments of any Consolidated
Funded Debt (including, without
limitation, the amount of scheduled
payments under Capitalized Leases,
other than such as is appropriately
allocable to Consolidated Interest
Expense) net of proceeds of insurance
recoveries for such period received
by the Borrower in respect of certain
litigation against the Borrower as
reflected in the Borrower's Annual
Report on Form 10-K for its 19__ Fiscal
Year; provided, however, that for purposes
of this clause (b) only, Consolidated
Funded Debt shall not include any
Indebtedness permitted under clause
(b) of Section 8.4 or any similar
indebtedness permitted under clause
(c) of Section 8.4 so long as such
Indebtedness is, by its terms,
renewable and the provider of such
Indebtedness has not declined to so
renew such Indebtedness $_____________
<PAGE>
5. All federal, state and local income
taxes of the Borrower and its
Subsidiaries $_____________
6. Consolidated Fixed Charges (item 2
plus item 3 plus item 4 plus item 5) $_____________
7. Item 1 plus item 2 $_____________
8. Item 7 divided by item 6 _____
-2-
<PAGE>
EXHIBIT C
INTEREST NOTICE
NationsBank of Tennessee, N.A.
One NationsBank Plaza
Nashville, Tennessee 37239
Attention: John E. Ball
Re: Shoney's, Inc. ("Borrower"); Loan Agreement
dated as of December 1, 1994
Ladies and Gentlemen:
This Interest Notice is delivered to you pursuant to Section
4.1.3 of the above referenced Loan Agreement (together with all
amendments, if any, from time to time made thereto, the
"Agreement"). Unless otherwise defined herein or the context
otherwise requires, terms used herein have the meanings provided in
the Agreement.
Borrower hereby requests that on ________________, 19____:
1. $_____________ of the presently outstanding principal
amount of the Term Loan,
2. be [converted into] [continued as],
3. [a Fixed Rate Portion bearing interest at a rate based on
a Libor Rate having an Interest Period of ___________ months] [a
Floating Rate Portion].
Borrower has caused this Interest Notice to be executed and
delivered, and the certification and warranties contained herein to
be made, by its duly authorized officer this _____ day of
___________, 19__.
SHONEY'S, INC.
By:____________________________
Title:_________________________
<PAGE>
EXHIBIT D
MORTGAGE FINANCING COLLATERAL
Omitted due to immateriality
<PAGE>
EXHIBIT E
EXHIBIT E
RELEASE AMOUNTS
LEE'S RESTAURANTS
STORE NO. LOCATION RELEASE AMOUNT
5761 Birmingham, AL $322,562
8532 Jacksonville, FL $444,459
5764 St. Charles, MO $451,472
5763 Dellwood, MO $437,488
5765 Franklin, TN $438,592
CAPTAIN D'S RESTAURANTS
STORE NO. LOCATION RELEASE AMOUNT
3533 Anniston, AL $291,788
3319 Florence, AL
Lot 1 $480,471
Lot 2 $146,206
3371 Jacksonville, FL $333,106
3528 Macon Rd., Columbus, GA
Lot 1 $254,006
Lot 2 $0
3601 Victory Dr.,
Columbus, GA $205,085
3563 Joseph, MO $396,504
3600 Jackson, MS $348,029
3411 Oklahoma City, OK $236,604
3671 Tullahoma, TN $275,371
3521 Huntington, WV $408,745
<PAGE>
SHONEY'S RESTAURANTS
STORE NO. LOCATION RELEASE AMOUNT
1439 St. Augustine, FL $834,196
1525 Fairview Heights, IL $904,100
1319 Valparaiso, IN $656,696
1320 Portage, IN $674,498
1190 Merriam, KS $868,101
1604 Hutchinson, KS $534,448
8600 Lake Charles, LA $741,328
1510 Jennings, LA $580,717
1623 Birch Run, MI $811,361
1318 Benton Harbor, MI $605,571
1361 Taylor, MI $774,473
1238 St. Louis, MO $625,723
1261 Hattiesburg, MS $522,751
1531 Omaha, NE $891,076
1454 Mansfield, OH $679,841
1463 Reynoldsburg, OH $982,233
1464 St. Clairsville, OH $760,000
1554 Ardmore, OK $644,348
1232 Hendersonville, TN $792,159
1214 Cookeville, TN $475,421
1231 Franklin, TN $660,690
1255 Manchester, TN $687,054
1386 Fry Rd., Katy, TX $815,083
<PAGE>
1385 I-810 Kirby,
Houston, TX $856,490
1384 Hillcroft Ave.,
Houston, TX $801,066
1111 Huntington, WV $725,848
PARGO'S RESTAURANTS
STORE NO. LOCATION RELEASE AMOUNT
7709 Frederick, MD $1,102,396
7712 Chesapeake, VA $1,258,586
7713 Virginia Beach, VA $1,320,992
<PAGE>
EXHIBIT F
December 21, 1994
NationsBank of Tennessee, N.A.
One NationsBank Plaza
Nashville, Tennessee 37239
Re: Loan Agreement, dated as of December 1, 1994 (the
"Agreement") between Shoney's, Inc., a Tennessee
corporation (the "Borrower"), and NationsBank of
Tennessee, N.A., a National Banking Association (the
"Lender")
Ladies and Gentlemen:
We have acted as general counsel for the Borrower in
connection with the execution and delivery of the Agreement and
counterparts of the Master Mortgage Indenture, Deed of Trust and
Deed to Secure Debt with Assignment of Leases and Rents, Security
Agreement and Fixture Filing, dated as of December 1, 1994 (the
"Mortgages"), and have participated on the Borrower's behalf in
connection with the closing of the loan contemplated by the
Agreement (the "Loan") in Nashville, Tennessee. This Opinion
Letter is provided to the Lender at the request of the Borrower
pursuant to Section 5.1(d) of the Agreement. This Opinion Letter
is governed by, and shall be interpreted in accordance with, the
Legal Opinion Accord (the "Accord") of the ABA Section of Business
Law (1991). As a consequence, all opinions set forth in this
Opinion Letter are subject to a number of qualifications,
exceptions, definitions, limitations on coverage and other
limitations, including but not limited to the General
Qualifications set forth in the Accord, all as more particularly
described in the Accord, and this Opinion Letter should be read in
conjunction therewith. Also, except as otherwise indicated herein,
capitalized terms used in this Opinion Letter and not otherwise
defined herein shall have the meanings ascribed thereto in the
Agreement or the Accord and, in the event of an inconsistency
between the definitions in the Agreement and the Accord, the
definitions in the Agreement shall govern.
In connection with the foregoing, we have examined, among
other things, the following documents:
(a) an executed copy of the Agreement;
(b) the executed Term Note;
<PAGE>
NationsBank of Tennessee, N.A.
December 21, 1994
Page 2
(c) executed counterparts of the Mortgages;
(d) all other documents furnished by the Borrower pursuant to
Section 5.1 of the Agreement and in connection with the
closing of the Loan;
(e) the Constituent Documents of the Borrower;
(f) a Certificate of Existence for the Borrower issued by the
Secretary of State of Tennessee dated December 19, 1994
(the "Certificate of Existence"); and
(g) the documents filed (including those incorporated by
reference) by the Borrower with the Securities and
Exchange Commission as exhibits to the Borrower's Annual
Report on Form 10-K for the fiscal year ended October 31,
1993 (the "Borrower Agreements") and Court Orders covered
by the opinion set forth in paragraph (6) below.
For purposes of this Opinion Letter, we have relied upon
factual information provided by others (including factual
representations by the Borrower in the Loan Documents and
certificates of officers of the Borrower) and information set forth
in Public Authority Documents. The Law covered by the opinions set
forth below is limited to the federal law of the United States of
America and the Law of the State of Tennessee.
Based upon and subject to the other provisions of this Opinion
Letter, it is our opinion that:
1. In sole reliance upon the Certificate of Existence, a
copy of which has been delivered to you, the Borrower is a
corporation validly existing and in good standing under the laws of
the State of Tennessee. In accordance with T.C.A. Section 48-11-309(c),
the Certificate of Existence is "conclusive evidence that the
corporation is in existence or is authorized to transact business"
in the State of Tennessee and "is in good standing." We have
relied upon this statute in rendering this opinion.
2. The Borrower has the corporate power and authority to
execute, deliver, and perform under the Loan Documents and has
taken all necessary and appropriate corporate action to authorize
the execution, delivery, and performance of the Loan Documents to
which the Borrower is a party.
3. Assuming the valid execution by the parties thereto, if
any, other than the Borrower, the Agreement, the Term Note, and the
Mortgages (to the extent governed by the Laws of the State
<PAGE>
NationsBank of Tennessee, N.A.
December 21, 1994
Page 3
of Tennessee) constitute valid and legally binding obligations of
the Borrower, enforceable against the Borrower in accordance with
their respective terms.
4. No consent or authorization of or notice or filing with
any of the Borrower's stockholders or any Governmental Authority of
the United States of America or the State of Tennessee is required
in connection with the execution, delivery, or performance by the
Borrower of the Loan Documents to which the Borrower is a party.
5. Those officers of Borrower listed in the resolutions of
the Board of Directors of the Borrower adopted October 13, 1994 and
the incumbency certificate from the Borrower dated as of the date
hereof, are duly authorized and empowered to execute, attest, and
deliver the Loan Documents to which the Borrower is a party for and
on behalf of the Borrower.
6. Execution and delivery by the Borrower of, and
performance of its agreements in, the Loan Documents do not: (a)
violate the Constituent Documents of the Borrower; (b) breach, or
result in a default under, any existing obligations of the Borrower
under any material contracts of the Borrower of which we have
knowledge or under the Borrower Agreements; (c) breach or otherwise
violate any existing obligation of the Borrower under any Court
Orders applicable to the Borrower of which we have knowledge; or
(d) violate any applicable provisions of statutory law or
regulations.
7. To our knowledge, except as set forth in Exhibit I to the
Agreement, there are no proceedings pending or threatened before
any court or administrative agency which might have a Materially
Adverse Effect.
The opinions expressed herein are also subject to the
following assumption and qualifications:
(a) We have assumed that the Floating Rate plus the
Applicable Margin, the Fixed Rate plus the Applicable Margin,
and the Default Rate at any time during which either the
Floating Rate plus the Applicable Margin, the Fixed Rate plus
the Applicable Margin, or the Default Rate applies, does not
exceed the greater of: (i) the "formula rate" (defined in
T.C.A. Section 47-14-102 as an "annual rate of interest four (4%)
percentage points above the average prime loan rate (or the
average short-term business loan rate, however denominated)
for the most recent week for which such an average rate has
been published by the board of governors of the Federal
Reserve System of the United States, or twenty-four percent
<PAGE>
NationsBank of Tennessee, N.A.
December 21, 1994
Page 4
(24%) per annum, whichever is less") existing on the date hereof;
or (ii) the "formula rate" existing at any such time as either the
Floating Rate plus the Applicable Margin, the Fixed Rate plus the
Applicable Margin, or the Default Rate applies.
(b) We express no opinion as to any matter not
specifically stated to be and numbered as an opinion.
(c) We express no opinion as to the enforceability of
any provision in the Agreement, the Term Note, or the
Mortgages, which purports: (i) to impose on the Lender
standards for the care of Collateral in the possession of the
Lender; or (ii) to provide for or effect a confession of
judgment on the part of the Borrower in any amount.
(d) We express no opinion as to the Borrower's ability
to repay or otherwise satisfy the Loan.
The opinions expressed herein are solely for the benefit of
the Lender, its successors and any assignees and participants
permitted under the Agreement, and may not be relied upon by, and
may not be copied or distributed to, any other person or entity
without our express written consent.
Very truly yours,
TUKE YOPP & SWEENEY
<PAGE>
EXHIBIT G
PROPERTIES WITH
ENVIRONMENTAL REPORTS
(Section 5.1(j))
Location Store State Concept
Dellwood, Missouri 5763 Missouri Lee's Famous Recipe
<PAGE>
EXHIBIT H
APPRAISED PROPERTIES
(Section 5.1(k))
Location Store State Concept
Hendersonville 1232 Tennessee Shoney's
Florence 3319 Alabama Captain D's
Franklin 5765 Tennessee Lee's Famous
Recipe
Virginia Beach 7713 Virginia Pargo's
<PAGE>
EXHIBIT I
MATERIAL PENDING OR THREATENED LITIGATION
Termination of Danner Stock Purchase Agreement: On June 30,
1993, and in a Current Report on Form 8-K dated June 30, 1993 and
filed with the Securities and Exchange Commission on July 8, 1993,
Shoney's, Inc. (the "Borrower") reported the termination of the
Stock Purchase Agreement, dated March 18, 1993 (the "Stock Purchase
Agreement"), between the Borrower and R.L. Danner, who was a
director of the Borrower, and certain affiliates of Mr. Danner. In
the Stock Purchase Agreement, the Borrower had agreed to purchase
4,632,701 shares of the Borrower's common stock owned by Mr. Danner
and his affiliates at a price of Twenty-Two and 875/1000 Dollars
($22.875) per share, which amounted in the aggregate to
$105,973,035. Completion of the proposed purchase was subject to:
(i) approval of the Borrower's lenders; (ii) receipt by the
Borrower of suitable financing; (iii) receipt by the Borrower of a
favorable opinion indicating that the purchase was fair to the
Borrower and its shareholders from a financial point of view and
that, following the purchase, the Borrower would be able to pay its
debts as they became due in the usual course of business and the
value of the Borrower's assets would exceed its liabilities; and
(iv) completion of any necessary regulatory filings. The purchase
originally was expected to be concluded on or before June 30, 1993.
The Stock Purchase Agreement was terminated due to the
Borrower's inability to satisfy certain contingencies with respect
to the transaction. Mr. Danner's attorneys advised the Borrower
that they considered the Borrower's failure to close under the
Stock Purchase Agreement to be a breach of the Stock Purchase
Agreement and that they reserved all rights to pursue all
responsible parties for all damages occasioned thereby. In
addition, Mr. Danner's attorneys are reported to have stated that
an action to enforce the Stock Purchase Agreement is an option
available to them. No action has been commenced at this time.
J&J Seafood v. Shoney's, Inc.: United States District
Court, Middle District of Tennessee (No. 3:94-1116). On December
l6, l994 counsel for J&J Seafood, Inc. ("J&J"), a franchisee of one
of the Borrower's "Captain D's" restaurants, informed counsel for
the Borrower, that unless by December 19, 1994, the Borrower
settled a pending case brought in Tennessee state court by J&J by
paying J&J $1,650,000 plus assumption of equipment leases at J&J's
Mt. Juliet, Tennessee store, J&J would file a class action anti-
trust and consumer protection act case against the Borrower. The
draft complaint alleges violations of Sections 1 and 2 of the
Sherman Act and a violation of the Tennessee Consumer Protection
Act. The thrust of the allegations are that the Borrower imposes a
"tying" arrangement requiring franchisees to purchase food and food
<PAGE>
products from the Borrower's commissary. The complaint seeks up to
$500,000,000 in damages for the class and treble damages. The
claims to be asserted in this federal case are essentially the same
as certain claims made in the state court case; however, in that
earlier case the claims were made only by J&J (as distinguished
from being made on behalf of a class) and were identified as
consumer protection act claims, rather than as anti-trust claims.
The Borrower has filed a motion for summary judgment in the state
court case seeking dismissal of all claims. That motion is pending.
The Borrower rejected J&J's settlement demand and the threatened
federal case was filed on December 19, 1994.
<PAGE>
EXHIBIT J
ENVIRONMENTAL MATTERS
Arnold, Missouri Property. Shoney's, Inc. (the "Borrower")
received a letter dated October 4, 1993 from Steven J. and Sandra
J. Zimmermann, giving notice of their intent to file suit under the
citizen suit provisions of the Clean Water Act, 33 U.S.C. Section
1365(a), and the Resource Conservation and Recovery Act, 42 U.S.C.
Section 7972(a), as well as under the Oil Pollution Act of 1990 and the
common law. Their letter alleges that petroleum hydrocarbons have
been discovered on the Zimmermanns' property, and that the source
is the Borrower, which they claim has violated the Clean Water Act
and the Resource Conservation and Recovery Act by unlawfully
discharging and disposing of diesel fuel on or at the site of a
restaurant the Borrower owns and operates at 1220 Big Bill Road in
Arnold, Missouri. The property was formerly operated as a service
station prior to its purchase by the Borrower in 1992. A release
of diesel fuel from underground storage tanks was documented at the
site in 1991, but the tanks were removed and the site remediated
under the oversight of the Missouri Department of Natural
Resources. The Borrower has not maintained any sources of diesel
fuel on the property since its purchase.
No suit has yet been filed against the Borrower. If suit is
filed, however, the Borrower anticipates filing a motion for
summary judgment seeking dismissal of the claims asserted against
it. The Borrower will assert that the alleged petroleum release
cannot have its source on the Borrower's property because there are
no current diesel fuel tanks on the premises and the property was
fully remediated in 1991. In addition, there are other potential
sources of hydrocarbon contamination in the area.
The Missouri Department of Natural Resources also is
investigating the Borrower's site as well as several neighboring
properties to determine the source of the contamination. At the
present time, the Missouri Department of Natural Resources has not
initiated an enforcement action; however, such an action is an
option available to it. The Borrower and potentially responsible
parties in the area have made certain limited investigations in an
attempt to locate the source of the contamination. To date, their
investigations have not resolved the issue of the source.
<PAGE>
EXHIBIT K
Labor Matters
(Section 6.14)
NONE
<PAGE>
EXHIBIT L
Existing Indebtedness
Omitted due to immateriality
<PAGE>
EXHIBIT M
POST-CLOSING REQUIREMENTS
Borrower shall deliver each of the following to Lender:
1. As-built survey for Jackson, Mississippi store (#3600).
2. Comprehensive, access and survey endorsements for
Jackson, Mississippi store's (#3600) title policy in the
forms reasonably available from Chicago Title Insurance
Company.
3. Evidence of subdivision approval or plat revision for St.
Clairesville, Ohio store (#1464) and Houston, Texas
(Hillcroft) store (#1384) or other evidence that the lack
of such subdivision approval of plat revision will not
impair Lender's ability to foreclose on and sell those
stores upon an Acceleration Event.
4. Certification from the Borrower that a variance approves
the location of the Birmingham, Alabama store (#5761).
5. Evidence that the zoning ordinance applicable to the
Ardmore, Oklahoma store (#1554) would prohibit drilling
on the property or that drilling on the property is not
reasonably likely to occur.
6. Evidence that the loss of month-to-month leased property
adjoining the Oklahoma City, Oklahoma store (#3411) would
not cause the property to be in violation of the
applicable zoning regulations or that such violation
would not prevent the normal operation of the store.
7. Evidence that the access easement for the St. Augustine,
Florida store (#1493) is contiguous to Route 208 or that
access is otherwise available.
8. Subordination agreement relating to the Lake Charles,
Louisiana store (#8600) reasonably satisfactory to
Lender.
9. Written appraisals of the properties identified on
Exhibit H to the Loan Agreement to which this Exhibit M
is attached.
<PAGE>
MODIFICATION AGREEMENT NO. 4
TO
REDUCING REVOLVING
CREDIT AGREEMENT
This MODIFICATION AGREEMENT NO. 4 (the "Modification Agreement
No. 4"), dated as of October 27, 1994, to the Reducing Revolving
Credit Agreement, dated as of July 21, 1993, as amended by
Modification Agreement No. 1 to Reducing Revolving Credit
Agreement, dated as of July 21, 1993, by Modification Agreement No.
2 to Reducing Revolving Credit Agreement, dated as of December 21,
1993, and by Modification No. 3 to Reducing Revolving Credit
Agreement, dated as of May 3, 1994 (collectively, the "Existing
Credit Agreement"), among SHONEY'S, INC., a Tennessee corporation
(the "Borrower"), CIBC INC., acting through its Atlanta Office and
various other financial institutions, which are now, or in
accordance with Section 10.10 of the Existing Credit Agreement
hereafter become, parties thereto (collectively, the "Lenders" and,
individually, a "Lender"), and CANADIAN IMPERIAL BANK OF COMMERCE,
a Canadian chartered bank acting through its New York Agency, as
Agent and Collateral Agent (the "Agent" and the "Collateral Agent",
respectively) for the Lenders;
W I T N E S S E T H:
WHEREAS, the Borrower has requested that certain provisions of
the Existing Credit Agreement be amended in certain respects as set
forth herein; and
WHEREAS, the Lenders are willing to amend certain provisions
of the Existing Credit Agreement and to take or permit the taking
of certain actions as set forth herein, but only on the terms and
conditions set forth herein;
NOW, THEREFORE, in consideration of the agreements herein
contained, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Certain Definitions. Unless otherwise defined
herein or the context otherwise requires, capitalized terms used in
this Modification Agreement No. 4, including its preamble and
recitals, have the following meanings (such meanings to be equally
applicable to the singular and plural forms thereof):
"Agent has the meaning assigned to such term in the preamble.<PAGE>
"Borrower" has the meaning assigned to such term in the
preamble.
"Collateral Agent" has the meaning assigned to such term in
the preamble.
"Collateral Restaurants" has the meaning assigned to such term
in the Marriott Agreement.
"Existing Credit Agreement" has the meaning assigned to such
term in the preamble.
"Lenders" and "Lender" have the respective meanings assigned
to such terms in the preamble.
"Marriott Agreement" means the Restaurant Sale and Purchase
Agreement, dated May 20, 1992, as amended by the Closing Agreement,
dated October 2, 1992, and by the First Amendment to Restaurant
Sale and Purchase Agreement, dated May 18, 1994, among Host
Marriott Corporation, Marriott Family Restaurants, Inc., Thompson
Hospitality, L.P. and the Borrower.
"Modification Agreement No. 4" has the meaning assigned to
such term in the preamble.
"Modification Effective Date" has the meaning assigned to such
term in Section 4.1.
SECTION 1.2. Other Definitions. Unless otherwise defined
herein or the context otherwise requires, capitalized terms used in
this Modification Agreement No. 4, including its preamble and
recitals, have the meanings provided in the Existing Credit
Agreement.
ARTICLE II
AMENDMENT OF EXISTING CREDIT AGREEMENT
AS OF THE MODIFICATION EFFECTIVE DATE
Effective on (and subject to the occurrence of) the
Modification Effective Date, the provisions of the Existing Credit
Agreement referred to below are hereby amended in accordance with
this Article II. Except as expressly so amended, the Existing
Credit Agreement shall continue in full force and effect in
accordance with its terms.
SECTION 2.1. Modification of Article VII (Covenants).
Article VII of the Existing Credit Agreement is hereby modified as
follows:
-2-
<PAGE>
SECTION 2.1.1 Section 7.1.10 of the Existing Credit
Agreement is hereby deleted in its entirety and the following
Section 7.1.10 is substituted in lieu thereof:
"SECTION 7.1.10. Rate Protection. As of the 1994
Fiscal Year end and as of each Fiscal Year end thereafter
through and including the end of the Borrower's Fiscal
Year 1996, the Borrower shall have in effect, interest
rate swap, hedge, cap, collar or similar arrangements
satisfactory in form and substance and pursuant to
documentation satisfactory to the Agent in a notional
amount equal to $50,000,000."
SECTION 2.1.2. Section 7.2.7 of the Existing Credit
Agreement is hereby amended by deleting the phrase "1996
Fiscal Year" in the parenthetical in clause (ii) of the first
proviso to Section 7.2.7 and substituting the phrase "1997
Fiscal Year" in lieu thereof.
ARTICLE III
CONSENT TO MARRIOTT EXTENSION
SECTION 3.1. Consent to Extension. The Lenders hereby
consent to Borrower's extension of Borrower's purchase obligations
with respect to the Collateral Restaurants pursuant to Article 18
of the Marriott Agreement through and including July 2, 1997.
ARTICLE IV
CONDITIONS TO EFFECTIVENESS
SECTION 4.1. Modification Effective Date. This Modification
Agreement No. 4 shall become effective as of the date first above
written, when all of the conditions set forth in Sections 4.1.1 and
4.1.2 shall have been satisfied (the "Modification Effective
Date").
SECTION 4.1.1. Resolutions, etc. The Agent shall have
received from the Borrower, a certificate, dated the
Modification Effective Date, of its Secretary or any Assistant
Secretary as to:
(a) resolutions of its Board of Directors then in
full force and effect authorizing the execution,
delivery, and performance of this Modification Agreement
No. 4 and each other Loan Document to be executed by it;
(b) the incumbency and signatures of the officers
of the Borrower authorized to act with respect to this
Modification Agreement No. 4 and each other Loan Document
to be executed by it (upon which certificate the Agent
and each Lender may conclusively rely until the Agent
-3-
<PAGE>
shall have received a further certificate of the
Secretary of the Borrower canceling or amending such
prior certificate, which further certificate shall be
reasonably satisfactory to the Agent).
SECTION 4.1.2. Execution of Counterparts. The Agent
shall have received counterparts of this Modification
Agreement No. 4 duly executed by the Borrower, the Agent, and
the Required Lenders.
SECTION 4.1.3. Compliance with Warranties; No Default
etc. The Agent shall have received from an Authorized Officer
of the Borrower a certificate, dated the date first above
written, stating that
(a) the representations and warranties set forth in
Article VI of the Existing Credit Agreement (excluding,
however, those contained in Section 6.7 thereof) and the
representations and warranties set forth in each of the
other Loan Documents, in each case as modified in
accordance herewith, are true and correct in all material
respects with the same effect as if then made (unless
stated to relate solely to an earlier date, in which case
such representations and warranties were true and correct
as of such earlier date);
(b) except as disclosed by the Borrower to the
Agent and the Lenders pursuant to Section 6.7 of the
Existing Credit Agreement:
(i) no labor controversy, litigation,
arbitration or governmental investigation or
proceeding is pending or, to the knowledge of the
Borrower, threatened against the Borrower or any of
its Subsidiaries which might have a Materially
Adverse Effect; and
(ii) no development has occurred in any labor
controversy, litigation, arbitration or
governmental investigation or proceeding disclosed
pursuant to Section 6.7 of the Existing Credit
Agreement which might have a Materially Adverse
Effect; and
(c) no Default has occurred and is continuing, and
neither the Borrower nor any of its Subsidiaries is in
material violation of any law or government regulation or
court order or decree.
-4-
<PAGE>
ARTICLE V
MISCELLANEOUS
SECTION 5.1. Cross References. References in this
Modification Agreement No. 4 to any article or section are, unless
otherwise specified, to such article or section of this
Modification Agreement No. 4.
SECTION 5.2. Instrument Pursuant to Existing Credit
Agreement; Limited Waiver. This Modification Agreement No. 4 is a
Loan Document executed pursuant to the Existing Credit Agreement
and shall (unless otherwise expressly indicated therein) be
construed, administered, and applied in accordance with all of the
terms and provisions of the Existing Credit Agreement. Any term or
provision of and any modification effected by this Modification
Agreement No. 4 may be modified in any manner by an instrument in
writing executed by the Borrower and the Required Lenders (or the
Agent on behalf of and with the consent of the Required Lenders).
Except as expressly amended hereby, all of the representations,
warranties, terms, covenants and conditions of the Existing Credit
Agreement shall remain unmodified and unwaived. The modifications
set forth herein shall be limited precisely as provided for herein
to the provisions expressly modified herein and shall not be deemed
to be a waiver of, amendment of, consent to or modification of any
other term or provision of any other Loan Document or of any
transaction or further or future action on the part of the Borrower
which could require the consent of any of the Lenders under the
Existing Credit Agreement.
SECTION 5.3. Successors and Assigns. This Modification
Agreement No. 4 shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns.
SECTION 5.4. Counterparts. This Modification Agreement No.
4 may be executed by the parties hereto in several counterparts
which shall be executed by the Borrower, each of the Required
Lenders and the Agent, as the case may be, all of which shall be
deemed to be an original and which shall constitute together but
one and the same agreement.
SECTION 5.5. Event of Default. It is understood and agreed
that any breach of any representation or warranty or covenant
contained herein shall constitute an Event of Default.
-5-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Modification Agreement No. 4 to be executed by the respective
officers hereunder duly authorized as of the day and year first
above written.
SHONEY'S, INC.
By:
---------------------------
Title: Treasurer
CANADIAN IMPERIAL BANK OF
COMMERCE, acting through
its NEW YORK AGENCY, as
Agent
By:
---------------------------
Title: Authorized Signatory
CIBC INC., acting through
its Atlanta Office
By:
---------------------------
Title: Authorized Signatory
NATIONSBANK OF TENNESSEE, N.A.
By:
---------------------------
Title:
THE BANK OF NEW YORK
By:
---------------------------
Title:
THE LONG-TERM CREDIT BANK OF
JAPAN, LTD.
By:
---------------------------
Title:
-6-
<PAGE>
THE BANK OF NOVA SCOTIA
By:
---------------------------
Title:
THE MITSUBISHI TRUST AND BANKING
CORPORATION
By:
---------------------------
Title:
FIRST UNION NATIONAL BANK
OF NORTH CAROLINA
By:
---------------------------
Title:
THE FUJI BANK, LIMITED
By:
---------------------------
Title:
THE INDUSTRIAL BANK OF JAPAN,
LIMITED
By:
---------------------------
Title:
KREDIETBANK N.V.
By:
---------------------------
Title:
THE BANK OF TOKYO TRUST COMPANY
By:
---------------------------
Title:
-7-
<PAGE>
FIRST AMERICAN NATIONAL BANK
By:
---------------------------
Title:
ALLIED IRISH BANK
By:
---------------------------
Title:
MERCHANTILE BANK OF ST. LOUIS, N.A.
By:
---------------------------
Title:
PNC BANK, KENTUCKY, INC.
By:
---------------------------
Title:
THE ROYAL BANK OF SCOTLAND
By:
---------------------------
Title:
GIROCREDIT BANK
By:
---------------------------
Title:
-8-
<PAGE>
[EXECUTION COPY]
MODIFICATION AGREEMENT NO. 5
TO
REDUCING REVOLVING
CREDIT AGREEMENT
THIS MODIFICATION AGREEMENT NO. 5 (the "Modification
Agreement No. 5"), dated as of January 18, 1995, to the Reducing
Revolving Credit Agreement, dated as of July 21, 1993, as amended
by Modification Agreement No. 1 to Reducing Revolving Credit
Agreement, dated as of July 21, 1993, by Modification Agreement
No. 2 to Reducing Revolving Credit Agreement, dated as of
December 21, 1993, by Modification No. 3 to Reducing Revolving
Credit Agreement, dated as of May 3, 1994 and by Modification No.
4 to Reducing Revolving Credit Agreement, dated as of October 27,
1994 (collectively, the "Existing Credit Agreement"), among
SHONEY'S, INC., a Tennessee corporation (the "Borrower"), CIBC
INC., acting through its Atlanta Office and various other
financial institutions, which are now, or in accordance with
Section 10.10 of the Existing Credit Agreement hereafter become,
parties thereto (collectively, the "Lenders" and, individually, a
"Lender"), and CANADIAN IMPERIAL BANK OF COMMERCE, a Canadian
chartered bank acting through its New York Agency, as Agent and
Collateral Agent (the "Agent" and the "Collateral Agent",
respectively) for the Lenders;
W I T N E S S E T H:
WHEREAS, the Borrower has requested that certain provisions
of the Existing Credit Agreement be amended in certain respects
as set forth herein; and
WHEREAS, the Lenders are willing to amend certain provisions
of the Existing Credit Agreement and to take or permit the taking
of certain actions as set forth herein, but only on the terms and
conditions set forth herein;
NOW, THEREFORE, in consideration of the agreements herein
contained, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Certain Definitions. Unless otherwise
defined herein or the context otherwise requires,
capitalized terms used in this Modification Agreement No. 5,
<PAGE>
including its preamble and recitals, have the following
meanings (such meanings to be equally applicable to the
singular and plural forms thereof):
"Agent has the meaning assigned to such term in the
preamble.
"Borrower" has the meaning assigned to such term in the
preamble.
"Collateral Agent" has the meaning assigned to such term in
the preamble.
"Existing Credit Agreement" has the meaning assigned to such
term in the preamble.
"Lenders" and "Lender" have the respective meanings assigned
to such terms in the preamble.
"Modification Agreement No. 5" has the meaning assigned to
such term in the preamble.
"Modification Effective Date" has the meaning assigned to
such term in Section 3.1.
SECTION 1.2. Other Definitions. Unless otherwise
defined herein or the context otherwise requires,
capitalized terms used in this Modification Agreement No. 5,
including its preamble and recitals, have the meanings
provided in the Existing Credit Agreement.
ARTICLE II
AMENDMENT OF EXISTING CREDIT AGREEMENT
AS OF THE MODIFICATION EFFECTIVE DATE
Effective on (and subject to the occurrence of) the
Modification Effective Date, the provisions of the Existing
Credit Agreement referred to below are hereby amended in
accordance with this Article II. Except as expressly so amended,
the Existing Credit Agreement shall continue in full force and
effect in accordance with its terms.
SECTION 2.1. Modification of Article VII (Covenants).
Article VII of the Existing Credit Agreement is hereby
modified as follows:
SECTION 2.1.1 Clause (a) of Section 7.2.4 of the
Existing Credit Agreement is hereby amended by substituting
the figure of "($75,000,000)" for the figure of
"($60,000,000)" set forth opposite the entries for the
-2-
<PAGE>
"Fourth Fiscal Quarter of Fiscal Year 1995" and the "First Three
Fiscal Quarters of Fiscal Year 1996" therein.
SECTION 2.1.2. Clause (c) of Section 7.2.5 of the
Existing Credit Agreement is hereby amended by amending
Clause (i) thereof in its entirety to read as follows:
"(i) the aggregate amount of all such Investments made after
the Closing Date in all wholly-owned Subsidiaries (other
than Commissary Operations, Inc., Mike Rose Foods, Inc.,
Realco, a new Subsidiary to be formed that will operate
certain BarbWires's restaurants in Kansas and a new
Subsidiary to be formed that will operate certain Shoney's
restaurants in Michigan) shall not exceed $2,500,000 at any
one time.
ARTICLE III
CONDITIONS TO EFFECTIVENESS
SECTION 3.1. Modification Effective Date. This
Modification Agreement No. 5 shall become effective as of
the date first above written, when all of the conditions set
forth in Sections 3.1.1 through 3.1.3 shall have been
satisfied (the "Modification Effective Date").
SECTION 3.1.1. Resolutions, etc. The Agent shall have
received from the Borrower, a certificate, dated the
Modification Effective Date, of its Secretary or any
Assistant Secretary as to:
(a) resolutions of its Board of Directors then in
full force and effect authorizing the execution,
delivery, and performance of this Modification
Agreement No. 5 and each other Loan Document to be
executed by it;
(b) the incumbency and signatures of the officers
of the Borrower authorized to act with respect to this
Modification Agreement No. 5 and each other Loan
Document to be executed by it (upon which certificate
the Agent and each Lender may conclusively rely until
the Agent shall have received a further certificate of
the Secretary of the Borrower canceling or amending
such prior certificate, which further certificate shall
be reasonably satisfactory to the Agent).
SECTION 3.1.2. Execution of Counterparts. The Agent
shall have received counterparts of this Modification
-3-
<PAGE>
Agreement No. 5 duly executed by the Borrower, the Agent, and the
Required Lenders.
SECTION 3.1.3. Compliance with Warranties; No Default
etc. The Agent shall have received from an Authorized
Officer of the Borrower a certificate, dated the date first
above written, stating that
(a) the representations and warranties set forth
in Article VI of the Existing Credit Agreement
(excluding, however, those contained in Section 6.7
thereof) and the representations and warranties set
forth in each of the other Loan Documents, in each case
as modified in accordance herewith, are true and
correct in all material respects with the same effect
as if then made (unless stated to relate solely to an
earlier date, in which case such representations and
warranties were true and correct as of such earlier
date);
(b) except as disclosed by the Borrower to the
Agent and the Lenders pursuant to Section 6.7 of the
Existing Credit Agreement:
(i) no labor controversy, litigation,
arbitration or governmental investigation or
proceeding is pending or, to the knowledge of the
Borrower, threatened against the Borrower or any
of its Subsidiaries which might have a Materially
Adverse Effect; and
(ii) no development has occurred in any labor
controversy, litigation, arbitration or
governmental investigation or proceeding disclosed
pursuant to Section 6.7 of the Existing Credit
Agreement which might have a Materially Adverse
Effect; and
(c) no Default has occurred and is continuing, and
neither the Borrower nor any of its Subsidiaries is in
material violation of any law or government regulation
or court order or decree.
-4-
<PAGE>
ARTICLE IV
MISCELLANEOUS
SECTION 4.1. Cross References. References in this
Modification Agreement No. 5 to any article or section are,
unless otherwise specified, to such article or section of
this Modification Agreement No. 5.
SECTION 4.2. Instrument Pursuant to Existing Credit
Agreement; Limited Waiver. This Modification Agreement No.
5 is a Loan Document executed pursuant to the Existing
Credit Agreement and shall (unless otherwise expressly
indicated therein) be construed, administered, and applied
in accordance with all of the terms and provisions of the
Existing Credit Agreement. Any term or provision of and any
modification effected by this Modification Agreement No. 5
may be modified in any manner by an instrument in writing
executed by the Borrower and the Required Lenders (or the
Agent on behalf of and with the consent of the Required
Lenders). Except as expressly amended hereby, all of the
representations, warranties, terms, covenants and conditions
of the Existing Credit Agreement shall remain unmodified and
unwaived. The modifications set forth herein shall be
limited precisely as provided for herein to the provisions
expressly modified herein and shall not be deemed to be a
waiver of, amendment of, consent to or modification of any
other term or provision of any other Loan Document or of any
transaction or further or future action on the part of the
Borrower which could require the consent of any of the
Lenders under the Existing Credit Agreement.
SECTION 4.3. Successors and Assigns. This
Modification Agreement No. 5 shall be binding upon and inure
to the benefit of the parties hereto and their respective
successors and assigns.
SECTION 4.4. Counterparts. This Modification
Agreement No. 5 may be executed by the parties hereto in
several counterparts which shall be executed by the
Borrower, each of the Required Lenders and the Agent, as the
case may be, all of which shall be deemed to be an original
and which shall constitute together but one and the same
agreement.
SECTION 4.5. Event of Default. It is understood and
agreed that any breach of any representation or warranty or
covenant contained herein shall constitute an Event of
Default.
-5-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Modification Agreement No. 5 to be executed by the respective
officers hereunder duly authorized as of the day and year first
above written.
SHONEY'S, INC.
By:
-------------------------
Title: Treasurer
CANADIAN IMPERIAL BANK OF
COMMERCE, acting through
its NEW YORK AGENCY, as
Agent
By:
--------------------------
Title: Authorized Signatory
CIBC INC., acting through
its Atlanta Office
By:
---------------------------
Title: Authorized Signatory
NATIONSBANK OF TENNESSEE, N.A.
By:
---------------------------
Title:
THE BANK OF NEW YORK
By:
---------------------------
Title:
THE LONG-TERM CREDIT BANK OF
JAPAN, LTD.
By:
---------------------------
Title:
-6-
<PAGE>
THE BANK OF NOVA SCOTIA
By:
---------------------------
Title:
THE MITSUBISHI TRUST AND BANKING
CORPORATION
By:
---------------------------
Title:
FIRST UNION NATIONAL BANK
OF NORTH CAROLINA
By:
---------------------------
Title:
THE FUJI BANK, LIMITED
By:
---------------------------
Title:
THE INDUSTRIAL BANK OF JAPAN,
LIMITED
By:
---------------------------
Title:
KREDIETBANK N.V.
By:
---------------------------
Title:
THE BANK OF TOKYO TRUST COMPANY
By:
---------------------------
Title:
-7-
<PAGE>
FIRST AMERICAN NATIONAL BANK
By:
---------------------------
Title:
ALLIED IRISH BANK
By:
---------------------------
Title:
MERCANTILE BANK OF ST. LOUIS,
NATIONAL ASSOCIATION
By:
---------------------------
Title:
PNC BANK, KENTUCKY, INC.
By:
---------------------------
Title:
THE ROYAL BANK OF SCOTLAND
By:
---------------------------
Title:
GIROCREDIT BANK AG DER SPARKASSEN,
GRAND CAYMAN ISLANDS BRANCH
By:
---------------------------
Title:
THE SUMITOMO BANK, LIMITED
-8-
<PAGE>
SHONEY'S INC.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
<PAGE>
INDEX
Page
ARTICLE I - Definitions
Section 1.01. . . . . . . . . . . . . . . . . . . . . . .1
ARTICLE II - Participants
Section 2.01. . . . . . . . . . . . . . . . . . . . . . .3
Section 2.02. . . . . . . . . . . . . . . . . . . . . . .3
ARTICLE III - Accounts and Investments
Section 3.01. . . . . . . . . . . . . . . . . . . . . . .4
Section 3.02. . . . . . . . . . . . . . . . . . . . . . .4
Section 3.03. . . . . . . . . . . . . . . . . . . . . . .4
Section 3.04. . . . . . . . . . . . . . . . . . . . . . .7
Section 3.05. . . . . . . . . . . . . . . . . . . . . . .7
Section 3.06. . . . . . . . . . . . . . . . . . . . . . .8
Section 3.07. . . . . . . . . . . . . . . . . . . . . . .8
ARTICLE IV - Administration
Section 4.01. . . . . . . . . . . . . . . . . . . . . . .8
Section 4.02. . . . . . . . . . . . . . . . . . . . . . .9
Section 4.03. . . . . . . . . . . . . . . . . . . . . . .9
Section 4.04. . . . . . . . . . . . . . . . . . . . . . .9
Section 4.05. . . . . . . . . . . . . . . . . . . . . . .9
Section 4.06. . . . . . . . . . . . . . . . . . . . . . 10
Section 4.07. . . . . . . . . . . . . . . . . . . . . . 10
Section 4.08. . . . . . . . . . . . . . . . . . . . . . 10
Section 4.09. . . . . . . . . . . . . . . . . . . . . . 11
Section 4.10. . . . . . . . . . . . . . . . . . . . . . 11
Section 4.11. . . . . . . . . . . . . . . . . . . . . . 11
Section 4.12. . . . . . . . . . . . . . . . . . . . . . 11
Section 4.13. . . . . . . . . . . . . . . . . . . . . . 12
Section 4.14. . . . . . . . . . . . . . . . . . . . . . 12
Section 4.15. . . . . . . . . . . . . . . . . . . . . . 12
Section 4.16. . . . . . . . . . . . . . . . . . . . . . 12
Section 4.17. . . . . . . . . . . . . . . . . . . . . . 13
Section 4.18. . . . . . . . . . . . . . . . . . . . . . 13
Section 4.19. . . . . . . . . . . . . . . . . . . . . . 14
Section 4.20. . . . . . . . . . . . . . . . . . . . . . 14
Section 4.21. . . . . . . . . . . . . . . . . . . . . . 14
Section 4.22. . . . . . . . . . . . . . . . . . . . . . 15
Section 4.23. . . . . . . . . . . . . . . . . . . . . . 15
Section 4.24. . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE V - Amendment of the Plan
Section 5.01. . . . . . . . . . . . . . . . . . . . . . 15
Section 5.02. . . . . . . . . . . . . . . . . . . . . . 15
-i-
<PAGE>
SHONEY'S, INC.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
This Plan is an unfunded deferred compensation arrangement
for a select group of management or highly compensated
employees of Shoney's, Inc. or its Subsidiaries. All rights
under this Plan shall be governed by and construed in
accordance with the laws of the State of Tennessee.
ARTICLE I
DEFINITIONS
Section 1.01
"Board" means the Board of Directors of Shoney's, Inc.
"Committee" means the Human Resources and Compensation
Committee of the Board.
"Disability" means a mental or physical disability of at
least three (3) months duration, which, in the sole discretion
of the Committee based upon medical evidence that it deems
sufficient, prevents a Participant from engaging in the
principal duties of his or her employment and results in a
Termination of Employment from Shoney's, Inc.
"401(k) Plan" shall mean the Shoney's, Inc. 401(k) Plan
adopted by Shoney's, Inc. and its Subsidiaries effective
March 1, 1995 as the same may be amended from time to time.
"Investment Alternatives" means the investments selected
annually by the Committee in which a Participant may choose to
have his or her deferred compensation deemed to be invested.
Such Investment Alternatives may include, but are not limited to,
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various stock or bond funds or indices, or combinations thereof
which are capable of being monitored for performance regardless
of whether actual investments are made in such funds or indices.
"Participant" means an employee of Shoney's or of a
Subsidiary, either designated in Section 2.01 at the adoption
of this Plan or designated by the Committee for participation
in the Plan, or a person who was an employee at the time of his
or her Retirement, death, Disability or Termination of
Employment and who retains, or whose beneficiaries obtain,
benefits under the Plan in accordance with its terms.
"Plan" means this Supplemental Executive Retirement Plan
as it may be amended, modified or supplemented from time to time.
"Retirement" means retirement at or after obtaining age
fifty-five (55).
"Shoney's" means Shoney's, Inc., a Tennessee corporation,
and its corporate successors.
"Subsidiary" or "Subsidiaries" means a company or companies
each of which Shoney's owns, directly or indirectly, at least
80% of the shares with voting power.
"Termination of Employment" means an involuntary termination
of an individual's employment or a voluntary termination of an
individual's employment to seek another job.
"Unforeseeable Emergency" means severe financial hardship to
a Participant resulting from a sudden and unexpected illness or
accident of the Participant or of a dependant of a Participant
as defined in section 152(a) of the Internal Revenue Code of 1986,
as
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amended, loss of the Participant's property due to casualty,
or other similar extraordinary and unforeseeable circumstances
arising as a result of events beyond the control of the
Participant. In no event may payment be made from the Plan
to the extent that such hardship is or may be relieved
through reimbursement or compensation by insurance or
otherwise, by liquidation of the Participant's assets (to
the extent the liquidation of such assets would not itself
cause severe financial hardship), or by cessation of deferrals
under this Plan. Examples of what are not considered to be
Unforeseeable Emergencies include the need to send a
Participant's child to college or the desire to purchase a home.
"Year" (unless specifically defined otherwise) means the
calendar year.
ARTICLE II
PARTICIPANTS
Section 2.01 The employees eligible to participate in the
Plan are employees of Shoney's or its Subsidiaries which are
designated as employees who may participate by the Committee.
Such designation shall occur at least forty-five (45) days
before the commencement of the next Year for which a
Participant may defer his or her compensation. No employee
may participate in this Plan if he or she participates in the
401(k) Plan.
Section 2.02 For any Year, any Participant may elect in
writing to defer up to fifty percent (50%) of his or her base
salary and up to one hundred percent (100%) of any bonus, for the
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following Year. Such election must be made at least thirty
(30) days prior to the commencement of a Year.
ARTICLE III
ACCOUNTS AND INVESTMENTS
Section 3.01 The Committee shall cause an account to be
kept in the name of each Participant and each beneficiary of
a deceased Participant which shall reflect the value of the
benefits payable to such Participant or beneficiary under the
Plan.
Section 3.02 Until and except to the extent that deferred
benefits under this Plan are distributed to a Participant or
beneficiary from time to time in accordance with the
directions of the Committee, title and ownership of any
assets, whether cash or investments, which Shoney's may set
aside or earmark to meet its obligations hereunder shall at
all times remain in Shoney's and no Participant or
beneficiary shall acquire, under any circumstances, any
interest in any specific assets of Shoney's. This Plan
constitutes a mere promise by Shoney's to make benefit
payments in the future.
Section 3.03 (a) In order to meet its obligations
hereunder, Shoney's each Year shall set aside or earmark an
amount equal to the compensation deferred under Article II
plus matching contributions for such Year as set forth below.
(b) The Company shall "match" the compensation deferred
by the Participant each year in an amount equal to twenty-five
percent (25%) of the compensation actually deferred for the
Year or $10,000, whichever is less. The Participant may direct
the deemed
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investment of his or her matching contribution in the same
manner as he or she directs the deemed investment of his or
her deferred compensation. The Participant shall have such
amounts credited to his or her account under this Plan and
such amounts shall increase the benefits payable to a
Participant or his or her beneficiary under this Plan (i.e.
vest) if, and only if, the Participant has sixty (60)
consecutive months of employment with Shoney's, measured
from the Participants most recent date of hire. After a
Participant is vested, all matching contributions, either
prior to or after vesting, plus deemed investment income,
gains or losses, shall become part of his or her account
under this Plan and be subject to all other terms of this Plan.
(c) Funds set aside or earmarked to meet Shoney's
obligations under this Plan shall be deemed to be invested
in one or more Investment Alternatives in accordance with
Subsection 3.03(d).
(d) Each Participant may direct the deemed investment
of his or her deferred compensation and matching contributions
to meet Shoney's obligations under this Plan into one or more
of the Investment Alternatives selected by Committee. Each
Participant must designate, in writing, at the time of the
deferral election the percentage of his or her deferrals and
matching contributions deemed to be allocated to one or more
of the Investment Alternatives selected by the Committee.
Each Participant may direct that funds previously set aside
with respect to his or her deferrals matching contributions
and previously deemed invested in accordance with the
Participant's
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<PAGE>
designation pursuant to Subsection 3.03(d) be deemed to be
reinvested in investments different than his or her previous
designation. Each Participant may later alter his or her
deemed investment designation under this Subsection 3.03(d)
no more frequently than once each Year and such deemed
reinvestment shall be effective as of the beginning of the
Year following the Year of the deemed reinvestment designation.
(e) An amount equal to the income, gains and losses
from investments deemed to be made pursuant to Subsection
3.03(d) shall be determined annually at the close of the Year
by the Committee. An amount equal to the net income or loss
as determined shall be allocated to the accounts of the
Participants. Amounts so allocated shall increase or decrease,
as the case may be, the benefits payable to a Participant or
his or her beneficiary.
(f) Upon the Retirement, Termination of Employment,
death or Disability of a Participant, an amount equal to the
value, specially determined over an interim basis as of the
date of such event and in the same manner provided in
Subsection 3.03(e) above, of the benefits payable to such
Participant or his or her beneficiary shall be determined and
shall continue to be deemed to be invested as provided in
Subsection 3.03(d). The total amount payable to the Participant
or his or her beneficiary shall be appropriately adjusted by
an amount equal to the deemed net income or loss on such funds,
in accordance with the terms of Subsection 3.03(e) above.
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<PAGE>
(g) Notwithstanding the provisions of Subsections
3.03(c) and (d), Shoney's shall not be required to invest the
funds deferred in the investment options selected by a Participant.
Section 3.04 A Participant shall be entitled to payments
of the amounts calculated under Subsection 3.03 above in the
case of his or her Retirement, Termination of Employment,
Disability or death, or in the event of an Unforeseeable
Emergency. In the event of Termination of Employment, the
Participant shall receive an immediate lump sum distribution
within thirty (30) days of termination. In the event of death,
Disability or Retirement, the Participant or his personal
representative, shall be paid in accordance with Section
3.03(f) and in sixty (60) monthly installments commencing
within thirty (30) days after the occurrence of the event
giving rise to the payment. If the Committee shall make
payment on account of an Unforeseeable Emergency, such payment
shall be in a lump sum and shall not exceed an amount
reasonably needed, in the sole discretion of the Committee,
to satisfy the emergency.
Section 3.05 Each Participant shall have the right to
designate beneficiaries who are to succeed to his or her
right to receive benefits under the Plan in the event of his
or her death. In case a Participant fails to designate a
beneficiary or if the designated beneficiary dies without
a successor being designated, distribution shall be made to
a Participant's estate. No designation of beneficiary shall
be valid unless in writing signed by the Participant, dated,
and filed with the Committee.
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<PAGE>
Beneficiaries may be changed without the consent of any prior
beneficiaries.
Section 3.06 Nothing contained herein shall be deemed
to create a trust of any kind (except as specifically provided
herein) or create any fiduciary relationships. Funds invested
hereunder shall continue for all purposes to be part of the
general funds of Shoney's and no person other than Shoney's
shall by virtue of the provisions of this Plan have any
interest in any such funds. To the extent that any person
acquires a right to receive payments from Shoney's under this
Plan, such rights shall be no greater than the right of any
general unsecured creditor of Shoney's.
Section 3.07 The Participant and his or her
beneficiaries shall assume sole risk for any losses that are
incurred by virtue of the investment of any funds which are
deferred or invested according to the terms of the Plan and
in no event shall Shoney's, its successors or Subsidiaries
have any liability to any Participant or any beneficiary.
ARTICLE IV
ADMINISTRATION
Section 4.01 The books and records to be maintained
for the purposes of the Plan shall be maintained by the
officers and employees of Shoney's at its expense and subject
to the supervision and control of the Committee. Shoney's
shall pay all expenses of any trust. The Participants, on a
pro rata basis, shall bear all other expenses of the Plan
including but not limited to any investment advisor's fees.
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<PAGE>
Section 4.02 To the fullest extent permitted by law,
the rights of any Participant or any beneficiary in any
benefit or any payment under this Plan shall not be subject
in any manner to attachment or other legal process for the
debts of such Participant or beneficiary and any such benefit
or payment shall not be subject to anticipation, alienation,
sale, transfer, assignment, pledge, encumbrance, attachment
or garnishment.
Section 4.03 If any Participant or beneficiary under
the Plan should become bankrupt or attempt to anticipate,
alienate, sell, assign, pledge, encumber or change any right
to a benefit hereunder, then such right or benefit, in the
sole discretion of the Committee, shall cease and, in such
event, the Committee may hold or apply the same or any part
thereof for the benefit of such Participant or beneficiary,
his or her spouse, children, or other dependents, or any of
them, in any such manner and in such portion as the Committee
may deem proper.
Section 4.04 No member of the Board or of the Committee
and no officer or employee of Shoney's or its Subsidiaries
shall be liable to any person for any action taken or omitted
in connection with the administration of the Plan unless
attributable to fraud or willful misconduct. In like manner,
Shoney's and its Subsidiaries shall not be liable to any
person for any action unless attributable to the fraud or
willful misconduct on the part of any director, officer or
employee of Shoney's or a Subsidiary.
Section 4.05 If the Committee shall find that any person
to whom any payment is payable under the Plan is unable to care
for
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<PAGE>
his or her affairs because of illness or accident, or is a
minor, any payment due (unless a prior claim therefor shall
have been made by a duly appointed guardian, committee or other
legal representative) may be paid to the spouse, a child,
parent or brother or sister, or to any person deemed by the
Committee to have incurred expenses for such person otherwise
entitled to payment. Any such payment shall be a complete
discharge of Shoney's liability under the Plan.
Section 4.06 The Committee shall have full power and
authority to interpret and administer the Plan. The
Committee's interpretations and construction of any
provision or action taken under the Plan, including any
valuation of the assets earmarked for the Plan, or the amount
or recipient of any payment due under the Plan, shall be
binding and conclusive on all persons for all purposes.
Section 4.07 Shoney's intends that the Plan shall be
an unfunded deferred compensation plan for purposes of the
Internal Revenue Code of 1986, as amended, and for purposes
of Title 1 of the Employee Retirement Income Security Act of
1974, as amended.
Section 4.08 The amounts deferred by a Participant
are considered to be wages for purposes of the Federal
Insurance Contribution Act. Shoney's may withhold such
amounts from a Participant's salary or bonus as are necessary
to pay any amounts assessed against the Participant because of
the Federal Insurance Contribution Act.
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<PAGE>
Section 4.09 If the Committee has any question as to
the proper beneficiary to receive payments hereunder, the
Committee shall have the right to withhold such payments
until the matter is finally adjudicated. Any payment made
by Shoney's, in good faith and in accordance with this Plan,
shall fully discharge Shoney's from all further obligations
with respect to such payment.
Section 4.10 Shoney's shall have no obligation of
any nature whatsoever to a Participant under the Plan except
as otherwise expressly provided in the Plan.
Section 4.11 The Plan does not in any way obligate
Shoney's or any Subsidiary of Shoney's to continue the
employment of a Participant with Shoney's, nor does it limit
the right of Shoney's or any Subsidiary at any time and for
any reason to terminate a Participant's employment.
Termination of a Participant's employment with Shoney's or
any Subsidiary for any reason, whether by action of Shoney's,
a Subsidiary or a Participant, shall immediately terminate
his or her participation in the Plan and all further
obligations hereunder except for the payment of such
compensation as has been previously deferred. In no event
shall the Plan by its terms or by implication constitute
an employment contract of any nature whatsoever between
Shoney's or any Subsidiary and a Participant.
Section 4.12 The benefits provided for a Participant
and a Participant's beneficiary under the Plan are in addition
to any other benefits available to such Participant under any
other plan or program of Shoney's or its Subsidiaries for its
employees, and,
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<PAGE>
except as may otherwise be expressly provided for, the Plan
shall supplement and shall not supersede, modify or amend
any other plan or program of Shoney's or its Subsidiaries.
Section 4.13 The general administration of this Plan,
as well as construction and interpretation thereof, shall be
vested in the Committee. The Committee may delegate the
routine administration duties to the Finance Department of
Shoney's.
Section 4.14 In connection with the administration
of the plan, the Board may designate one of the members of
the Committee as Chairman and may appoint a Secretary who
need not be a member of the Committee. The Secretary shall
keep minutes of the Committee's proceedings and all data,
records and documents relating to the Committee's
administration of the Plan. In connection with the
administration of the Plan, the Committee may appoint from
its number such sub-committees with such powers as the
Committee shall determine and may authorize one or more
members of the Committee or any agent to execute or
deliver any instrument or make any payment on behalf of
the Committee.
Section 4.15 All resolutions or other actions taken
by the Committee shall be by the vote of a majority of those
present at a meeting at which a majority of the members are
present, or in writing by a majority of the members if they
act without a meeting.
Section 4.16 Subject to the Plan, the Committee shall
from time to time establish rules, forms and procedures for
the administration of the Plan. Except as herein otherwise
expressly provided, the Committee shall have the exclusive
right to interpret
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<PAGE>
the Plan and to decide any and all matters arising thereunder
or in connection with the administration of the Plan, and it
shall endeavor to act, whether by general rules or by
particular decisions, so as not to discriminate in favor of
or against any person. The Committee shall have the exclusive
right to determine (i) Disability in respect of a Participant
and (ii) the degree thereof, either or both determinations to
be made on the basis of such medical and/or other evidence as
the Committee in its sole judgment, may require. Such
decisions, actions and records of the Committee shall be
conclusive and binding upon Shoney's and all persons having
or claiming to have any right to or interest in or under the
Plan.
Section 4.17 The Committee and the officers and
directors of Shoney's shall be entitled to rely on all
certificates and reports made by any duly appointed
accountants, and on all opinions given by any duly appointed
legal counsel. Such legal counsel may be counsel for Shoney's.
Section 4.18 No member of the Committee shall be liable
for any act or omission of any other member of the Committee,
or for any act or omission on his or her own part, excepting
only his or her own willful misconduct. Shoney's shall
indemnify and save harmless each member of the Committee
against any and all expenses and liabilities arising out of
his or her membership on the Committee arising out of the
Plan, excepting only expenses and liabilities arising out of
his or her own willful misconduct. Expenses against which a
member of the Committee shall be
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indemnified hereunder shall include, without limitation,
the amount of any settlement or judgment, costs, counsel fees
and related charges reasonably incurred in connection with a
claim asserted, or a proceeding brought or settlement
thereof. The foregoing right of indemnification shall be in
addition to any other rights to which any such member may be
entitled as a matter of law.
Section 4.19 In addition to the powers hereinabove
specified, the Committee shall have the power to compute and
certify under the Plan the amount and kind of benefits from
time to time payable to Participants and their beneficiaries
and to authorize all disbursements for such purposes.
Section 4.20 To enable the Committee to perform its
functions, Shoney's shall supply full and timely information
to the Committee on all matters relating to the compensation
of all Participants, their Retirement, death, Disability or
other cause for Termination of Employment, and such other
pertinent facts as the Committee may require.
Section 4.21 Any notice which shall be or may be given
under the Plan shall be in writing and shall be mailed by
United States mail, postage prepaid. If notice is to be
given to Shoney's, such notice shall be addressed to
Shoney's, marked for the attention of the Corporate
Secretary, Finance Department; or, if notice is to a
Participant, addressed to the address shown on such
Participant's personnel records.
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Section 4.22 Any party may, from time to time, change
the address to which notices shall be mailed by giving
written notice of such new address.
Section 4.23 The Plan shall be binding upon Shoney's
and its successors and assigns, and upon a Participant, his
beneficiary, assigns, heirs, executors and administrators.
Section 4.24 Shoney's and its Subsidiaries, each on
their own behalf, may enter into a trust agreement (the
"Trust") into which each may make contributions to provide
itself with a source of funds to meet its respective
liabilities under the Plan. Such Trusts shall be on the
terms and conditions set forth in the document attached
hereto as Exhibit A.
ARTICLE V
AMENDMENT OF THE PLAN
Section 5.01 The Plan may be amended, terminated,
modified or supplemented in whole or part from time to time
by the Board.
Section 5.02 Notice of every such amendment shall be
given in writing to each Participant and beneficiary of a
deceased Participant.
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Trust Exhibit Omitted As Immaterial
<PAGE>
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (the
"Agreement") is made as of this 13th day of January, 1995, between
SHONEY'S, INC., a Tennessee corporation, whose principal place of
business is located at 1727 Elm Hill Pike, Nashville, Tennessee
37210 (the "Company"), and TAYLOR H. HENRY, a resident of Davidson
County, Tennessee, whose address is 5325 Cherry Blossom Trail,
Nashville, Tennessee 37215 (the "Executive").
W I T N E S S E T H:
WHEREAS, Company and Executive previously have entered into an
Employment Agreement, dated as of January 1, 1993 (the "Employment
Agreement"), pursuant to which Company has employed Executive as
its Chairman and Chief Executive Officer in accordance with its
terms; and
WHEREAS, Executive has indicated his desire to retire from
those positions during 1995; and
WHEREAS, Company and Executive now wish to amend and restate
the Employment Agreement and modify the terms thereof as set forth
herein;
NOW THEREFORE, in consideration of the mutual covenants and
agreements set forth herein and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, intending to be legally bound, Company and Executive
hereby agree as follows:
1. TERM OF EMPLOYMENT.
1.1. Employment. Company hereby employs Executive, and
Executive hereby accepts employment with Company, for the
Employment Term (as hereinafter defined). Notwithstanding anything
to the contrary in this Agreement and subject to the other
provisions of this Agreement, Executive's employment is at the will
of Company.
1.2. Employment Term. The "Employment Term" shall mean
the period commencing on the date of this Agreement and ending on
December 31, 1996. The Employment Term shall not be extended or
renewed.
2. DUTIES OF EXECUTIVE.
2.1. General Duties. Executive is hereby employed as
<PAGE>
Chairman of the Board of Directors and Chief Executive Officer of
Company until such time as Company's Board of Directors determines
to replace Executive as Chairman of the Board and Chief Executive
Officer by electing another person or persons to hold such
positions. During any portion of the Employment Term in which
Executive is not serving as Chairman and Chief Executive Officer of
Company, Executive shall serve as a special consultant to the
Chairman of the Board and Chief Executive Officer of Company with
such duties and responsibilities as Company's Board of Directors
may designate, subject always to the policies set forth by
Company's Board of Directors in accordance with any and all
governing rules and regulations of regulatory agencies. Executive
shall resign from Company's Board of Directors as well as the
boards of directors of any of Company's subsidiaries or affiliates
at such time as Company's Board of Directors requests that he do
so.
2.2. Devotion of Time to Company's Business.
2.2.1. Through December 31, 1995. Through
December 31, 1995 (or such later date that Executive serves as
Company's Chairman of the Board and Chief Executive Officer),
Executive (whether acting as Company's Chairman of the Board and
Chief Executive Officer or as a special consultant) will devote his
entire productive time, ability, and attention during normal
business hours to the business of Company. During this time,
Executive shall not, directly or indirectly, render any services of
a business, commercial, or professional nature to any other person
or organization, whether for compensation or otherwise, without the
prior written consent of Company's Board of Directors; provided,
however, that the foregoing shall not preclude reasonable
participation as a member in community, civic, or similar
organizations, or the pursuit of personal investments that neither
interfere nor conflict with his normal business activities for
Company.
2.2.2. After December 31, 1995. After December
31, 1995 (or such later date through which Executive is serving as
Company's Chairman of the Board and Chief Executive Officer) and
continuing through the remainder of the Employment Term: (a)
Executive will be available to provide advice to Company and to
work on such special assignments as are designated by either the
Board of Directors or the Chairman of the Board of Company; and (b)
Executive may accept employment with another company so long as
such employment (i) does not interfere with Executive's obligations
to provide advice and to work on special assignments; and (ii) does
not violate the provisions of either Section 2.3 or Section 4.3
hereof.
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2.3. Disclosure of Information. Executive recognizes and
acknowledges that, as a result of his employment by Company, he
will become familiar with and acquire knowledge of confidential
information and certain trade secrets that are valuable, special,
and unique assets of Company. Executive agrees that any such
confidential information and trade secrets are the property of
Company. Therefore, Executive agrees that, for and during the
entire Employment Term, any such confidential information and trade
secrets shall be considered to be proprietary to Company and kept
as the private records of Company and will not be divulged to any
firm, individual, or institution except pursuant to and within the
course and scope of Executive's employment hereunder. Further,
upon termination of this Agreement for any reason whatsoever,
Executive agrees that he will continue to treat as private and
proprietary to Company any such confidential information and trade
secrets and will not release any such confidential information and
trade secrets to any person, firm, or institution, or use them to
the detriment of Company. The parties agree that nothing in this
Agreement shall be construed as prohibiting Company from pursuing
any remedies available to it for any breach or threatened breach of
this Section 2.3, including, without limitation, the recovery of
damages from Executive or any person or entity acting in concert
with Executive.
3. COMPENSATION OF EXECUTIVE.
3.1. Salary. As compensation for his services hereunder,
Executive shall receive a base salary (the "Base Salary") per annum
of $500,000, which shall be payable in accordance with the general
payroll practices of Company.
3.2. Other Benefit Programs. During such time as
Executive is serving as Company's Chairman and Chief Executive
Officer, Executive shall be entitled to participate in all employee
benefit, bonus, and similar programs, including, without
limitation, programs of insurance, automobile plans, deferred
compensation arrangements, and all other benefits made available by
Company to senior management personnel. When Executive ceases to
serve as Company's Chairman of the Board and Chief Executive
Officer, Executive's participation in all such benefit plans also
shall cease.
4. TERMINATION; SEVERANCE; NONCOMPETE.
4.1 By Company.
4.1.1 Termination Without Cause. Company's Board of
Directors may terminate Executive's employment, with or without
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cause, at any time by giving written notice of such termination to
Executive, such termination of employment to be effective on a date
specified in such notice; provided, however, that only in the event
of such a termination without cause, Executive shall be entitled to
receive the amount due Executive for salary during the balance of
the Employment Term. Payments shall be made over the balance of
the Employment Term at the same time as current wages are normally
payable. If, at the time of termination, Executive is then serving
as Chairman of the Board and Chief Executive Officer of Company,
Executive's participation in all other benefit programs shall cease
as of the date of termination.
4.1.2 Termination for Cause. If Executive is
terminated for cause, Company shall have no further obligation
whatsoever to Executive hereunder, and Executive's participation in
all benefit programs shall cease as of the date of termination. For
purposes of this Agreement, "cause" shall mean any one of the
following:
(i) Executive's personal dishonesty;
(ii) Executive's willful misconduct;
(iii) breach of fiduciary duty involving personal profit by
Executive;
(iv) conviction of Executive for any felony or crime involving
moral turpitude;
(v) material intentional breach by Executive of any provision
of this Agreement (including, without limitation, Section
2.3 and Section 4.3); or
(vi) unsatisfactory performance by Executive of the duties
designated for Executive by Company's Board of Directors
as a result of alcohol or drug abuse by Executive.
4.2 Termination by Executive. Executive may terminate
his employment with Company at any time without further obligation
whatsoever by either party hereunder (except for the obligations
and covenants of Executive pursuant to Section 2.3 and Section 4.3,
which shall survive termination as specified therein) by giving not
less than sixty nor more than ninety days' notice of such
termination to Company.
4.3. Covenant Not to Compete. Executive acknowledges
that Company's business is built upon the confidence of its
customers, suppliers, employees, and the general public, and that
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Executive will acquire confidential knowledge that should not be
divulged or used for his own benefit. Executive covenants and
agrees that during the Employment Term and for a period of one year
following the expiration of the Employment Term, he will not engage
in, own, manage, operate, control, or participate in any food
service business that conducts or franchises activities which are
the same as or similar to any of the restaurant concepts and
operations of Company as an employer, employee, principal, partner,
director, agent, consultant, or otherwise, directly or indirectly,
anywhere in the United States of America. Executive understands
and acknowledges that his violation of this covenant not to compete
would cause irreparable harm to Company and Company would be
entitled to seek an injunction by any court of competent
jurisdiction enjoining and restraining Executive and each and every
other person concerned from any employment, service, or other act
prohibited by this Agreement. Executive and Company recognize and
acknowledge that the area and time limitations contained in this
Agreement are reasonable. In addition, Executive and Company
recognize and acknowledge that the area and time limitations are
properly required for the protection of the business interests of
Company due to Executive's status and reputation in the industry
and the knowledge to be acquired by Executive through his
association with Company's business and the public's close
identification of Executive with Company and Company with
Executive. The parties agree that nothing in this Agreement shall
be construed as prohibiting Company from pursuing any other
remedies available to it for any breach or threatened breach of
this covenant not to compete, including, without limitation, the
recovery of damages from Executive or any other person or entity
acting in concert with Executive. Executive also agrees that, in
the event he breaches this covenant not to compete, Executive will
pay reasonable attorney's fees and expenses incurred by Company in
enforcing this covenant not to compete. Executive acknowledges and
understands that, as consideration for his execution of this
Agreement and his agreement with the terms of this covenant not to
compete, Executive will receive employment by Company in accordance
with this Agreement as well as the Company's agreement to be bound
by the terms of this Agreement. Company acknowledges that
Executive's execution of this Agreement and agreement with the
terms of this covenant not to compete is consideration for
Company's agreement to employ Executive pursuant to this Agreement.
If any part of this covenant not to compete is found to be
unreasonable, then it may be amended by appropriate order of a
court of competent jurisdiction to the extent deemed reasonable.
Company shall receive injunctive relief without the necessity of
posting bond or other security, such bond or other security being
hereby waived by Executive. In addition to any other remedies that
the parties may have at law or in equity, Executive and Company
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<PAGE>
agree that, in the event of a breach by Executive of the provisions
of either Section 2.3 or Section 4.3 hereof, damages to Company
would be difficult to determine and, in the event of such breach by
Executive, Company shall be released from its obligation to make
any further payments to Executive under Section 3.1 hereof.
5. DEATH OR DISABILITY OF EXECUTIVE.
5.1. Death of Executive. In the event Executive dies
during the Employment Term, this Agreement and the Employment Term
shall terminate upon Executive's death. Executive's estate shall be
entitled only to any salary earned but not paid through the date of
death.
5.2. Disability of Executive. Company has disability
insurance insuring its officers, and Executive, for so long as
Executive is serving as Company's Chairman of the Board and Chief
Executive Officer, shall be included under such disability
insurance. In the event of the Disability (as hereinafter defined)
of Executive, this Agreement and the Employment Term shall
terminate. Upon a termination resulting from the Disability of
Executive, Executive shall be entitled to receive the amount due
Executive for salary during the balance of the Employment Term.
Payments shall be made over the balance of the Employment Term at
the same time as current wages are normally payable; provided,
however, that Executive shall not be entitled to any payments under
this Section 5.2 in the event this Agreement is terminated pursuant
to Section 4.1.2 hereof regardless of whether the "cause" for which
this Agreement is terminated pursuant to Section 4.1.2 also may
constitute a Disability. For purposes of this Agreement, a
"Disability" of Executive shall occur if (i) Executive suffers any
mental or physical condition that impairs Executive's ability to
perform the essential functions of his duties hereunder and (ii)
Executive, within thirty (30) days after Executive receives written
notice from Company requesting that Executive resume his duties
hereunder, is unable or refuses to do so.
6. GENERAL PROVISIONS.
6.1. Expenses. During such time as Executive is serving
as Company's Chairman of the Board and Chief Executive Officer,
Company shall reimburse Executive for all reasonable and necessary
business expenses of Executive incurred in the conduct of his
duties hereunder. Executive shall comply with all applicable
policies of Company with respect to documentation and approval of
such expenses.
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6.2. Notices. Any notices to be given hereunder by either
party to the other may be effected by personal delivery in writing
or by mail, registered or certified, postage prepaid with return
receipt requested. Mailed notices shall be addressed to the parties
at the addresses appearing in the introductory paragraph of this
Agreement (to the attention of the Secretary in the case of notices
to Company), but each party may change such address by written
notice in accordance with this Section 6.2. Notices delivered
personally shall be deemed communicated as of actual receipt;
mailed notices shall be deemed communicated as of the second day
following deposit in the United States Mail.
6.3. Entire Agreement. This Agreement supersedes any and
all other agreements (including, without limitation, the Employment
Agreement, which is hereby wholly terminated and cancelled upon
execution of this Agreement), either oral or in writing, between
the parties hereto with respect to the employment of Executive by
Company and contains all of the covenants and agreements between
the parties with respect to such employment in any manner
whatsoever. Each party to this Agreement acknowledges that no
representations, inducements, promises, or agreements, orally or
otherwise, have been made by any party, or anyone acting on behalf
of any party, which are not embodied herein and that no other
agreement shall be valid or binding unless in writing and signed by
the party against whom enforcement of such agreement is sought. Any
modification of this Agreement will be effective only if it is in
writing signed by the party against whom enforcement of such
modification is sought.
6.4. Partial Invalidity. If any provision in this
Agreement is held by a court of competent jurisdiction to be
invalid, void, or unenforceable, the remaining provisions shall
nevertheless continue in full force without being impaired or
invalidated in any way.
6.5. Law Governing Agreement. This Agreement shall be
governed by and construed in accordance with the laws of the State
of Tennessee.
6.6. Waiver of Jury Trial. Company and Executive hereby
expressly waive any right to a trial by jury in any action or
proceeding to enforce or defend any rights under this Agreement,
and agree that any such action or proceeding shall be tried before
a court and not a jury. Executive and Company hereby agree that
any action or proceeding to enforce any claim arising out of this
Agreement shall be brought and maintained in any state or federal
court having subject matter jurisdiction and located in Nashville,
Tennessee. Executive irrevocably waives, to the fullest extent
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permitted by law, any objection that he may have or hereafter have
to the laying of the venue of any such action or proceeding brought
in any court located in Nashville, Tennessee, and any claim that
any such action or proceeding brought in such a court has been
brought in an inconvenient forum.
6.7. Miscellaneous. Failure or delay of either party to
insist upon compliance with any provision hereof will not operate
as and is not to be construed to be a waiver or amendment of the
provision or the right of the aggrieved party to insist upon
compliance with such provision or to take remedial steps to recover
damages or other relief for noncompliance. Any express waiver of
any provision of this Agreement will not operate and is not to be
construed as a waiver of any subsequent breach, irrespective of
whether occurring under similar or dissimilar circumstances.
Executive acknowledges and represents that the services to be
rendered by him are unique and personal. Accordingly, Executive
may not assign any of his rights or delegate any of his duties or
obligations under this Agreement. The rights and obligations of
Company under this Agreement shall inure to the benefit of and
shall be binding upon the successors and assigns of Company.
IN WITNESS WHEREOF, Executive has hereunto affixed his hand
and Company has caused this Agreement to be executed by its duly
authorized officer or representative as of the day and year first
above written.
SHONEY'S, INC.
By: /s/ F.E. McDaniel, Jr.
---------------------------
Title: Secretary
------------------------
/s/ Taylor H. Henry
------------------------------
TAYLOR H. HENRY
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<PAGE>
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made as of this
17th day of January, 1995, between SHONEY'S, INC., a Tennessee
corporation, whose principal place of business is located at 1727
Elm Hill Pike, Nashville, Tennessee 37210 (the "Employer"), and
CHARLES E. PORTER, a resident of Davidson County, Tennessee, whose
address is 12212 Old Hickory Boulevard, Hermitage, 37076, Tennessee
(the "Employee").
1. TERM OF EMPLOYMENT.
1.1 EMPLOYMENT. Employer hereby employs Employee, and
Employee hereby accepts employment with Employer, for the
Employment Term (as hereinafter defined). Notwithstanding anything
to the contrary in this Agreement and subject to the other
provisions of this Agreement, Employee's employment is at the will
of Employer.
1.2 EMPLOYMENT TERM. The term of this Agreement and the
Employment Term shall be two (2) years, commencing on January 17,
1995, and terminating on January 16, 1997, unless sooner terminated
as herein provided or extended pursuant to Section 1.3 hereof.
1.3 EXTENSION BECAUSE OF CHANGE IN CONTROL. In the event
of a Change in Control (as hereinafter defined), the Employment
Term shall automatically be extended for one calendar year from the
date of the Change in Control. For purposes of this Agreement, a
"Change in Control" of Employer shall mean a change in control of
a nature that would be required to be reported in response to Item
6(e) of Schedule 14A of Regulation 14A promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act");
provided, however, that, without limitation, such a Change in
Control shall be deemed to have occurred if (a) any "person" (as
such term is used in Sections 13(d) and 14(d) of the Exchange Act)
is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of
Employer representing 20% or more of the combined voting power of
Employer's then outstanding voting securities; or (b) during the
Employment Term, individuals who at the beginning of the Employment
Term constitute members of the Board of Directors of Employer cease
for any reason to constitute a majority thereof unless the
election, or the nomination for election by Employer's
shareholders, of each new director was approved by a vote of at
least two-thirds of the directors then still in office who were
directors at the beginning of the Employment Term.
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<PAGE>
2. DUTIES OF EMPLOYEE.
2.1 GENERAL DUTIES. Employee is hereby employed as
President of Employer with such duties and responsibilities as
Employer's Board of Directors shall designate. He shall do and
perform all services, acts, or things necessary or advisable to
manage and conduct the business of Employer, subject always to the
policies set forth by Employer's Board of Directors, in accordance
with any and all governing rules and regulations of regulatory
agencies.
2.2 DEVOTION OF ENTIRE TIME TO EMPLOYER'S BUSINESS.
Employee will devote his entire productive time, ability, and
attention during normal business hours to the business of Employer
during the Employment Term. Employee shall not, directly or
indirectly, render any services of a business, commercial, or
professional nature to any other person or organization, whether
for compensation or otherwise, without the prior written consent of
Employer's Board of Directors; provided, however, that the
foregoing shall not preclude reasonable participation as a member
in community, civic, or similar organizations, or the pursuit of
personal investments that neither interfere nor conflict with his
normal business activities for Employer.
2.3 DISCLOSURE OF INFORMATION. Employee recognizes and
acknowledges that, as a result of his employment by Employer, he
will become familiar with and acquire knowledge of confidential
information and certain trade secrets that are valuable, special,
and unique assets of Employer. Employee agrees that any such
confidential information and trade secrets are the property of
Employer. Therefore, Employee agrees that, for and during the
entire Employment Term, any such confidential information and trade
secrets shall be considered to be proprietary to Employer and kept
as the private records of Employer and will not be divulged to any
firm, individual, or institution except pursuant to and within the
course and scope of Employee's employment hereunder. Further, upon
termination of this Agreement for any reason whatsoever, Employee
agrees that he will continue to treat as private and proprietary to
Employer any such confidential information and trade secrets and
will not release any such confidential information and trade
secrets to any person, firm, or institution, or use them to the
detriment of Employer. The parties agree that nothing in this
Agreement shall be construed as prohibiting Employer from pursuing
any remedies available to it for any breach or threatened breach of
this Section 2.3, including, without limitation, the recovery of
damages from Employee or any person or entity acting in concert
with Employee.
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<PAGE>
3. COMPENSATION OF EMPLOYEE.
3.1 SALARY. As compensation for his services hereunder,
Employee shall receive a base salary (the "Base Salary") per annum
of $300,000, which shall be payable in accordance with the general
payroll practices of Employer. Increases in the Base Salary may be
made in the sole discretion of Employer's Board of Directors.
3.2 BONUSES. Employee shall be entitled to an annual
bonus. The amount of such bonus during the first year of the
Employment Term shall be determined by the Human Resources and
Compensation Committee of Employer's Board of Directors; provided,
however, that the bonus during the first year of the Employment
Term shall not be less than $100,000. The amount of such bonus
during the second year of the Employment Term shall be determined
in accordance with a formula to be agreed upon by Employer and
Employee and approved by the Human Resources and Compensation
Committee of Employer's Board of Directors; provided, however, that
the bonus during the second year of the Employment Term shall not
be less than $50,000.
3.3 OTHER BENEFIT PROGRAMS. Employee shall be entitled
to participate in all employee benefit, bonus, and similar
programs, including, without limitation, programs of insurance,
automobile plans, deferred compensation arrangements, and all other
benefits made available by Employer to senior management personnel.
During the Employment Term, so long as any additional benefit is
made available to senior management personnel of Employer, such
benefit shall be provided to Employee. By way of explanation, and
not by way of limitation, Employee shall be entitled to the use of
an automobile of make, model, and year of manufacture commensurate
with the position of Employee.
4. TERMINATION OF EMPLOYMENT; SEVERANCE.
4.1 BY EMPLOYER.
4.1.1 TERMINATION WITHOUT CAUSE. Employer's Board of
Directors may terminate Employee's employment, with or without
cause, at any time by giving written notice of such termination to
Employee, such termination of employment to be effective on a date
specified in such notice; provided, however, that only in the event
of such a termination without cause, Employee shall be entitled to
receive the greater of: (a) the Base Salary and bonus paid or
accrued on Employee's behalf for the fiscal year of Employer
immediately prior to the fiscal year in which the termination took
place; or (b) the amount due Employee for Base Salary and bonus
during the balance of the then current Employment Term. Payments
shall be made, at the option of Employer, in cash, or, in the case
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<PAGE>
of the preceding item (a), in twenty-six equal bi-weekly payments
using Employer's regular payroll periods or, in the case of the
preceding item (b), over the balance of the Employment Term at the
same time as current wages and bonuses are normally payable.
Employee's participation in all other benefit programs shall cease
as of the date of termination.
4.1.2 TERMINATION FOR CAUSE. If Employee is
terminated for cause, Employer shall have no further obligation
whatsoever to Employee hereunder, and Employee's participation in
all benefit programs shall cease as of the date of termination. For
purposes of this Agreement, "cause" shall mean any one of the
following:
(i) Employee's personal dishonesty;
(ii) Employee's willful misconduct;
(iii) breach of fiduciary duty involving personal profit by
Employee;
(iv) conviction of Employee for any felony or crime involving
moral turpitude;
(v) material intentional breach by Employee of any provision
of this Agreement; or
(vi) unsatisfactory performance by Employee of the duties
designated for Employee by Employer's Board of Directors
as a result of alcohol or drug abuse by Employee.
4.2 TERMINATION BY EMPLOYEE. Employee may terminate his
employment with Employer at any time without further obligation
whatsoever by either party hereunder (except for the obligations
and covenants of Employee pursuant to Sections 2.3 and 4.4, which
shall survive termination as specified therein) by giving not less
than sixty (60) nor more than ninety (90) days' prior written
notice of such termination to Employer.
4.3 EFFECT OF TERMINATION ON STOCK OPTIONS. In the event
of any termination of this Agreement and the Employment Term, all
stock options held by Employee that are vested prior to the
effective date of the termination shall be exercisable in
accordance with their terms, and all stock options held by Employee
that are not vested prior to the effective date of the termination
shall lapse and be void. Also, in the event of any termination of
Employee's employment pursuant to Section 4.1.1, then, in addition
to any other rights of Employee hereunder, Employee shall receive,
within thirty (30) days after such termination, a lump sum cash
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<PAGE>
distribution equal to: (a) the number of shares of Employer's
common stock that is subject to options held by Employee which are
not vested on the date of termination of employment; multiplied by
(b) the difference between: (i) the closing price of a share of
Employer's common stock on the New York Stock Exchange as reported
by THE WALL STREET JOURNAL as of the day prior to the effective
date of termination of employment (or, if the New York Stock
Exchange is closed on that date, on the last preceding date on
which the New York Stock Exchange was open for trading), and (ii)
the applicable exercise price(s) of such non-vested shares.
4.4 COVENANT NOT TO COMPETE. Employee acknowledges that
Employer's business is built upon the confidence of its customers,
suppliers, employees, and the general public, and that Employee
will acquire confidential knowledge that should not be divulged or
used for his own benefit. In the event of any termination of
Employee's employment pursuant to Sections 4.1.2 or 4.2, Employee
covenants and agrees that, for a period of one year following the
termination of his employment under this Agreement, he will not
engage in, own, manage, operate, control, or participate in any
food service business that conducts or franchises activities which
are the same as or similar to the restaurant concepts and
operations of Employer as an employer, employee, principal,
partner, director, agent, or otherwise, directly or indirectly,
anywhere in the United States of America. Employee understands and
acknowledges that his violation of this covenant not to compete
would cause irreparable harm to Employer and Employer would be
entitled to seek an injunction by any court of competent
jurisdiction enjoining and restraining Employee and each and every
other person concerned from any employment, service, or other act
prohibited by this Agreement. Employee and Employer recognize and
acknowledge that the area and time limitations contained in this
Agreement are reasonable. In addition, Employee and Employer
recognize and acknowledge that the area and time limitations are
properly required for the protection of the business interests of
Employer due to Employee's status and reputation in the industry
and the knowledge to be acquired by Employee through his
association with Employer's business and the public's close
identification of Employee with Employer and Employer with
Employee. The parties agree that nothing in this Agreement shall
be construed as prohibiting Employer from pursuing any other
remedies available to it for any breach or threatened breach of
this covenant not to compete, including, without limitation, the
recovery of damages from Employee or any other person or entity
acting in concert with Employee. Employee also agrees that, in the
event he breaches this covenant not to compete, Employee will pay
reasonable attorneys fees and expenses incurred by Employer in
enforcing this covenant not to compete. Employee acknowledges and
understands that, as consideration for his execution of this
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<PAGE>
Agreement and his agreement with the terms of this covenant not to
compete, Employee will receive employment by Employer in accordance
with this Agreement. Employer acknowledges that Employee's
execution of this Agreement and agreement with the terms of this
covenant not to compete is consideration for Employer's agreement
to employ Employee pursuant to this Agreement. If any part of this
covenant not to compete is found to be unreasonable, then it may be
amended by appropriate order of a court of competent jurisdiction
to the extent deemed reasonable. Employer shall receive injunctive
relief without the necessity of posting bond or other security,
such bond or other security being hereby waived by Employee.
5. DEATH OR DISABILITY OF EMPLOYEE.
5.1 DEATH OF EMPLOYEE. In the event Employee dies during
the Employment Term, this Agreement and the Employment Term shall
terminate upon Employee's death. Employee's estate shall be
entitled only to any Base Salary earned but not paid plus any bonus
accrued by Employer for Employee through the date of death.
5.2 DISABILITY OF EMPLOYEE. Employer has disability
insurance insuring its officers, and Employee is included under
such disability insurance. In the event of the Disability (as
hereinafter defined) of Employee, this Agreement and the Employment
Term shall terminate. Upon a termination resulting from the
Disability of Employee, Employee shall be entitled to receive (i)
any Base Salary earned but not paid through the date that Employee
becomes eligible for disability payments under such disability
insurance, and (ii) an amount equal to the Base Salary and bonus
received by Employee in the last full fiscal year of Employer
immediately prior to the Disability of Employee, which amount shall
be payable, at the option of Employee, in a lump sum payment or in
equal installments paid in accordance with the general payroll
policies of Employer over a period not to exceed three (3) years
from the effective date of a termination due to the Disability of
Employee; provided, however, that Employee shall not be entitled to
any payments under this Section 5.2 in the event this Agreement is
terminated pursuant to Section 4.1.2 hereof regardless of whether
the "cause" for which this Agreement is terminated pursuant to
Section 4.1.2 also may constitute a Disability. For purposes of
this Agreement, a "Disability" of Employee shall occur if (i)
Employee suffers any mental or physical condition that impairs
Employee's ability to perform the essential functions of his duties
hereunder and (ii) Employee, within thirty (30) days after Employee
receives written notice from Employer requesting that Employee
resume his duties hereunder, is unable or refuses to do so.
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6. GENERAL PROVISIONS.
6.1 EXPENSES. Employer shall reimburse Employee for all
reasonable and necessary business expenses of Employee incurred in
the conduct of his duties hereunder. Employee shall comply with all
applicable policies of Employer with respect to documentation and
approval of such expenses.
6.2 NOTICES. Any notices to be given hereunder by either
party to the other may be effected by personal delivery in writing
or by mail, registered or certified, postage prepaid with return
receipt requested. Mailed notices shall be addressed to the parties
at the addresses appearing in the introductory paragraph of this
Agreement (to the attention of the Secretary in the case of notices
to Employer), but each party may change such address by written
notice in accordance with this Section 6.2. Notices delivered
personally shall be deemed communicated at the time of actual
receipt; mailed notices shall be deemed communicated as of the
second day following deposit in the United States Mail.
6.3 ENTIRE AGREEMENT. This Agreement supersedes any and
all other agreements, either oral or in writing, between the
parties hereto with respect to the employment of Employee by
Employer and contains all of the covenants and agreements between
the parties with respect to such employment in any manner
whatsoever. Each party to this Agreement acknowledges that no
representations, inducements, promises, or agreements, orally or
otherwise, have been made by any party, or anyone acting on behalf
of any party, which are not embodied herein and that no other
agreement shall be valid or binding unless in writing and signed by
the party against whom enforcement of such agreement is sought. Any
modification of this Agreement will be effective only if it is in
writing signed by the party against whom enforcement of such
modification is sought.
6.4 PARTIAL INVALIDITY. If any provision in this
Agreement is held by a court of competent jurisdiction to be
invalid, void, or unenforceable, the remaining provisions shall
nevertheless continue in full force without being impaired or
invalidated in any way.
6.5 LAW GOVERNING AGREEMENT. This Agreement shall be
governed by and construed in accordance with the laws of the State
of Tennessee.
6.6 WAIVER OF JURY TRIAL. Employer and Employee hereby
expressly waive any right to a trial by jury in any action or
proceeding to enforce or defend any rights under this Agreement,
and agree that any such action or proceeding shall be tried before
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<PAGE>
a court and not a jury. Employee and Employer hereby agree that any
action or proceeding to enforce any claim arising out of this
Agreement shall be brought and maintained in any state or federal
court having subject matter jurisdiction and located in Nashville,
Tennessee. Employee irrevocably waives, to the fullest extent
permitted by law, any objection that he may have or hereafter have
to the laying of the venue of any such action or proceeding brought
in any court located in Nashville, Tennessee, and any claim that
any such action or proceeding brought in such a court has been
brought in an inconvenient forum.
6.7 MISCELLANEOUS. Failure or delay of either party to
insist upon compliance with any provision hereof will not operate
as and is not to be construed to be a waiver or amendment of the
provision or the right of the aggrieved party to insist upon
compliance with such provision or to take remedial steps to recover
damages or other relief for noncompliance. Any express waiver of
any provision of this Agreement will not operate and is not to be
construed as a waiver of any subsequent breach, irrespective of
whether occurring under similar or dissimilar circumstances.
Employee acknowledges and represents that the services to be
rendered by him are unique and personal. Accordingly, Employee may
not assign any of his rights or delegate any of his duties or
obligations under this Agreement. The rights and obligations of
Employer under this Agreement shall inure to the benefit of and
shall be binding upon the successors and assigns of Employer.
IN WITNESS WHEREOF, Employee has hereunto affixed his hand and
Employer has caused this Agreement to be executed by its duly
authorized officer as of the day and year first above written.
EMPLOYER:
SHONEY'S, INC.
By: /s/ Taylor H. Henry
--------------------------------
Title: Chairman and CEO
EMPLOYEE:
/s/ Charles E. Porter
-----------------------------------
CHARLES E. PORTER
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SEVERANCE AGREEMENT
THIS SEVERANCE AGREEMENT (the "Agreement") is entered into as
of the 13th day of January, 1995, by and between JAMES W. ARNETT,
JR. (hereinafter "Arnett") and SHONEY'S, INC., a Tennessee
corporation (hereinafter the "Company").
W I T N E S S E T H:
WHEREAS, Arnett has been employed by the Company pursuant to
an Employment Agreement dated July 1, 1992 (hereinafter the
"Employment Agreement") and has rendered valuable services to the
Company; and
WHEREAS, on January 13, 1995, Arnett submitted his resignation
to the Company, which resignation was accepted by the Board of
Directors of the Company on that same date; and
WHEREAS, it is the desire of Arnett and the Company to enter
into this Agreement to formally terminate the Employment Agreement
and to resolve all matters arising out of or related to Arnett's
employment with the Company and the termination of his employment
with the Company;
NOW, THEREFORE, for and in consideration of the mutual
covenants and promises contained herein, the parties hereby agree
as follows:
1. Termination of Employment Agreement. Except as expressly
set forth herein, this Agreement supersedes the Employment
Agreement, which is hereby wholly terminated and cancelled as of
the date of this Agreement. The respective rights and obligations
of the parties shall be governed hereafter by the terms of this
Agreement.
2. Severance Pay. The Company will pay Arnett one year's
severance pay of Three Hundred Thirty-Five Thousand and 00/100
Dollars ($335,000.00) (equalling fiscal 1994 salary of $255,000 and
fiscal 1994 bonus of $80,000), which shall be payable at the rate
of $6,442.31 per week, effective the week ending January 20, 1995,
in accordance with Employer's regular payroll policies.
3. Stock Options. As of the date of Arnett's resignation,
Arnett had vested options remaining to purchase 15,000 shares of
the Company's common stock at an exercise prices of $24.00 per
share (10,000 shares) and $20.625 per share (5,000 shares). Arnett
hereby relinquishes any right to exercise these options or any
other rights or options that he has to purchase the Company's
<PAGE>
common stock. The terms and provisions of this Agreement shall
supersede and control over any of the terms and provisions of any
agreement between Arnett and the Company with respect to any
options to purchase the Company's common stock.
4. Benefits and Other Matters.
4.1. Upon payment of the appropriate premiums, Arnett
will have the right to continue his participation in the Company's
group health coverage plan under the applicable COBRA regulations.
4.2. Arnett will receive the stock distribution for the
1994 plan year as a result of his participation in the Company's
Employee Stock Purchase Plan (the "Plan"). Any balance remaining
on account for him will be returned with the stock certificate.
Arnett may not participate in the Plan after the 1994 plan year.
4.3. Arnett will be reimbursed for any out-of-pocket
expenses incurred through January 13, 1995 in accordance with the
Company's travel and entertainment reimbursement guidelines,
provided, however, that request for reimbursement is made by
February 28, 1995.
5. Survival of Employment Agreement Covenants.
Notwithstanding Section 1 of this Agreement, Arnett agrees to
continue to be bound by and observe the requirements of Section 2.3
of the Employment Agreement as fully as if the Employment Agreement
was in full force and effect. In addition, because the Employment
Agreement is terminated, Arnett also agrees to be bound by and
observe the requirements of Section 4.4 of the Employment Agreement
that are effective upon termination of the Employment Agreement.
6. Publicity.
6.1. At any time following the date hereof, Arnett shall
not make any statements, comments or take any actions detrimental
to the interests of the Company, its officers or directors. To the
extent that the foregoing prohibition might be applicable, it is
not intended to prevent Arnett from giving testimony pursuant to
compulsory process of law.
6.2. At any time following the date hereof, the Company
shall not make any public statements, announcements or disclosures,
except as may be required by law, of any information detrimental to
Arnett. The determination whether any disclosure is required by
law shall be made by the Company in its sole discretion.
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<PAGE>
7. Certain Remedies. In addition to any other remedies
that the parties may have at law or in equity, Arnett and the
Company agree that, in the event of a breach by Arnett of the
provisions of Section 5 hereof (incorporating Sections 2.3 and 4.4
of the Employment Agreement) or Section 6.1 hereof, damages to the
Company would be difficult to determine and, in the event of such
breach by Arnett, the Company shall be released from its obligation
to make any further payments to Arnett under Section 2 hereof and
its obligations under Section 6.2 hereof.
8. Release. Arnett hereby releases and forever discharges
the Company, each of its subsidiary corporations and each of their
respective directors, officers, agents and employees from all
claims, demands, rights and causes of action of any kind that
Arnett has or hereafter may have on account of or in any way
arising out of or related to the Employment Agreement, Arnett's
employment with the Company or the termination of Arnett's
employment with the Company. The release set forth in this Section
8 shall not release any claim, demand, right or cause of action of
any kind that Arnett may have on account of or in any way arising
out of or related to a breach of the terms and provisions of this
Agreement nor shall it release any rights that Arnett may have for
indemnification under the Company's by-laws for any claim that
might be made against Arnett by a third party arising out of the
course and scope of Arnett's employment with the Company.
9. Nonassignability. The rights of Arnett under this
Agreement are not transferable otherwise than by will or the laws
of descent and distribution. No assignment, pledge, anticipation
or attachment of any of the benefits under this Agreement shall be
valid or recognized by the Company.
10. Company Property/Correspondence. Arnett shall
immediately return the following to the Company:
(a) Any company credit card in his possession;
(b) Any coupons or discount cards for use at any of the
Company's facilities that are in his possession;
and
(c) Any other company property in his possession.
11. Withholding. All cash payments and issuance of stock to
Arnett shall be subject to any applicable federal, state or local
withholding tax or information reporting requirements. Any such
withholding shall be at the minimum rate required. In the event
that Arnett and the Company do not agree on the amount or method of
any required withholding, such matter shall be referred to the
Company's independent public accountants for resolution. The
-3-
<PAGE>
decision of such independent public accountants shall be binding on
all parties unless Arnett, at his sole expense, shall obtain an
appropriate ruling from the Internal Revenue Service.
12. Validity of Provisions. Whenever possible, each provision
and term of this Agreement shall be interpreted in such manner as
to be valid and enforceable, provided, however, that in the event
any provision or term of this Agreement should be determined to be
invalid or unenforceable, all other provisions and terms of this
Agreement and the application thereof to all persons and
circumstances subject thereto shall remain unaffected to the extent
permitted by law. If any application of any provision or term of
this Agreement to any person or circumstances should be determined
to be invalid or unenforceable, the application of such provision
or term to other persons and circumstances shall remain unaffected
to the extent permitted by law.
13. Construction. This Agreement shall be governed by the
laws of the State of Tennessee. As herein used, the singular
number shall include the plural, and the plural the singular,
unless the context would fairly not admit of such construction.
Section or paragraph headings are employed herein solely for
convenience of reference, and such headings shall not be used in
construing any term or provisions of this instrument. References
herein to a "section" shall refer to the appropriately numbered
section of this Agreement unless specific reference is made to
another instrument or document.
14. Entire Agreement/Binding Effect. This Agreement contains
the entire agreement between the parties hereto and there are no
representations, inducements, promises, agreements, arrangements or
undertakings, oral or written, between the parties other than those
set forth herein. No agreement of any kind relating to the matters
covered by this Agreement shall be binding upon either party unless
and until the same is made in writing and executed by both parties.
This Agreement shall be binding upon the Company, its successors
and assigns, and upon Arnett, his heirs, representatives,
successors and assigns.
15. Counterparts. This Agreement may be executed in any
number of counterparts, each of which when executed and delivered
shall be an original, but all such counterparts shall constitute
one and the same instrument.
-4-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement,
the corporate party by its duly authorized officer as of the day
and year first above written.
SHONEY'S, INC.
By: /s/ Taylor H. Henry
-------------------------------------
Title: Chairman and CEO
----------------------------------
/s/ James W. Arnett, Jr.
----------------------------------------
JAMES W. ARNETT, JR.
-5-
<PAGE>
SEVERANCE AGREEMENT
THIS SEVERANCE AGREEMENT (the "Agreement") is entered into as
of the 15th day of January, 1995, by and between JAMES M. GROUT
(hereinafter "Grout") and SHONEY'S, INC., a Tennessee corporation
(hereinafter the "Company").
W I T N E S S E T H:
WHEREAS, Grout has been employed by the Company as President
of the Company's Shoney's Division and has rendered valuable
services to the Company; and
WHEREAS, on January 15, 1995, Grout submitted his resignation
to the Company, which resignation was accepted that same day; and
WHEREAS, it is the desire of Grout and the Company to enter
into this Agreement to resolve all matters arising out of or
related to Grout's employment with the Company and the termination
of his employment with the Company;
NOW, THEREFORE, for and in consideration of the mutual
covenants and promises contained herein, the parties hereby agree
as follows:
1. Termination of Employment. Grout's employment with the
Company is hereby terminated, effective immediately. This
Agreement supersedes all prior understandings or agreements
relating to the employment of Grout by the Company. The respective
rights and obligations of the parties shall be governed hereafter
by the terms of this Agreement.
2. Severance Pay. Subject to Section 7 hereof, the Company
will pay Grout severance pay of Four Thousand Four Hundred Forty-
Two and 31/100 Dollars ($4,442.31) per week (the "Weekly Severance
Payment"), in accordance with Employer's regular payroll policies,
for twenty-six (26) weeks, effective the week ending January 20,
1995. If, at the end of such initial twenty-six (26) week period,
Grout has been unable to obtain other employment or means of
income, the Weekly Severance Payments, subject to Section 7 hereof,
shall be extended for an additional period ending the earlier of:
(a) such time as Grout has obtained other employment or means of
income; or (b) at the end of twenty-six (26) additional weeks.
3. Stock Options.
3.1. As of the date of Grout's resignation, Grout had
vested options remaining to purchase 19,250 shares of the Company's
<PAGE>
common stock at exercise prices of $6.714 per share (8,750 shares),
$7.286 per share (3,500 shares) and $6.143 per share (7,000
shares). Grout may exercise these options on or before February 1,
1995.
3.2. As of the date of Grout's resignation, Grout also
had (or would have had within one year of his resignation) vested
options remaining to purchase 5,100 shares of the Company's common
stock at exercise prices of $14.875 per share (1,500 shares),
$20.625 per share (2,400 shares) and $23.625 per share (1,200
shares) and unvested options remaining to purchase 8,400 shares of
the Company's common stock at exercise prices of $20.625 per share
(3,600 shares) and $23.625 per share (4,800 shares). Grout hereby
relinquishes any right to exercise these options or any other
rights or options that he has to purchase the Company's common
stock. The terms and provisions of this Agreement shall supersede
and control over any of the terms and provisions of any agreement
between Grout and the Company with respect to any options to
purchase the Company's common stock.
4. Benefits and Other Matters.
4.1. Upon payment of the appropriate premiums, Grout will
have the right to continue his participation in the Company's group
health coverage plan under the applicable COBRA regulations.
4.2. Grout will receive the stock distribution for the
1994 plan year as a result of his participation in the Company's
Employee Stock Purchase Plan (the "Stock Purchase Plan"). Any
balance remaining on account for him will be returned with the
stock certificate. Grout may not participate in the Stock Purchase
Plan after the 1994 plan year.
4.3. Grout will receive the stock distribution of 100
shares of the Company's common stock for the 1995 plan year as a
result of his participation in the Company's Employee Stock Bonus
Plan (the "Stock Bonus Plan"). Grout also shall receive the cash
component related to such distribution at the time the distribution
is made in accordance with the terms and conditions of the Stock
Bonus Plan. Grout will receive no further distributions from the
Stock Bonus Plan after the 1995 plan year.
4.4. Grout will be reimbursed for any out-of-pocket
expenses incurred through January 16, 1995 in accordance with the
Company's travel and entertainment reimbursement guidelines,
provided, however, that request for reimbursement is made by
February 28, 1995.
-2-
<PAGE>
5. Nondisclosure. Grout recognizes and acknowledges that, as
a result of his employment by the Company, he has become familiar
with and has acquired knowledge of confidential information and
certain trade secrets that are valuable, special, and unique assets
of the Company. Grout agrees that any such confidential
information and trade secrets are the property of the Company.
Therefore, Grout agrees that any such confidential information and
trade secrets shall be considered to be proprietary to the Company
and will not be divulged by him to any firm, individual, or
institution nor will it be used by him to the detriment of the
Company. The parties agree that nothing in this Agreement shall be
construed as prohibiting the Company from pursuing any remedies
available to it for any breach or threatened breach of this Section
5, including, without limitation, the recovery of damages from
Grout or any person or entity acting in concert with Grout.
6. Publicity.
6.1. At any time following the date hereof, Grout shall
not make any statements, comments or take any actions detrimental
to the interests of the Company, its officers or directors. To the
extent that the foregoing prohibition might be applicable, it is
not intended to prevent Grout from giving testimony pursuant to
compulsory process of law.
6.2. At any time following the date hereof, the Company
shall not make any public statements, announcements or disclosures,
except as may be required by law, of any information detrimental to
Grout. The determination whether any disclosure is required by law
shall be made by the Company in its sole discretion.
7. Certain Remedies.
In addition to any other remedies that the parties may
have at law or in equity, Grout and the Company agree that, in the
event of a breach by Grout of the provisions of either Section 5
or Section 6.1 hereof, damages to the Company would be difficult to
determine and, in the event of such breach by Grout, the Company
shall be released from its obligation to make any further payments
to Grout under Section 2 hereof or any distributions to Grout under
Section 4.3 hereof.
8. Release. Grout hereby releases and forever discharges
the Company, each of its subsidiary corporations and each of their
respective directors, officers, agents and employees from all
claims, demands, rights and causes of action of any kind that Grout
has or hereafter may have on account of or in any way arising out
of or related to Grout's employment with the Company or the
-3-
<PAGE>
termination of Grout's employment with the Company. The release
set forth in this Section 8 shall not release any claim, demand,
right or cause of action of any kind that Grout may have on account
of or in any way arising out of or related to a breach of the terms
and provisions of this Agreement nor shall it release any rights
that Grout may have for indemnification under the Company's by-laws
for any claim that might be made against Grout by a third party
arising out of the course and scope of Grout's employment with the
Company.
9. Nonassignability. The rights of Grout under this
Agreement are not transferable otherwise than by will or the laws
of descent and distribution. No assignment, pledge, anticipation
or attachment of any of the benefits under this Agreement shall be
valid or recognized by the Company.
10. Company Property/Correspondence. Grout shall immediately
return the following to the Company:
(a) Any company credit card in his possession;
(b) Any coupons or discount cards for use at any of the
Company's facilities that are in his possession;
and
(c) Any other company property in his possession.
11. Withholding. All cash payments and issuance of stock to
Grout shall be subject to any applicable federal, state or local
withholding tax or information reporting requirements. Any such
withholding shall be at the minimum rate required. In the event
that Grout and the Company do not agree on the amount or method of
any required withholding, such matter shall be referred to the
Company's independent public accountants for resolution. The
decision of such independent public accountants shall be binding on
all parties unless Grout, at his sole expense, shall obtain an
appropriate ruling from the Internal Revenue Service.
12. Validity of Provisions. Whenever possible, each provision
and term of this Agreement shall be interpreted in such manner as
to be valid and enforceable, provided, however, that in the event
any provision or term of this Agreement should be determined to be
invalid or unenforceable, all other provisions and terms of this
Agreement and the application thereof to all persons and
circumstances subject thereto shall remain unaffected to the extent
permitted by law. If any application of any provision or term of
this Agreement to any person or circumstances should be determined
to be invalid or unenforceable, the application of such provision
or term to other persons and circumstances shall remain unaffected
to the extent permitted by law.
-4-
<PAGE>
13. Construction. This Agreement shall be governed by the
laws of the State of Tennessee. As herein used, the singular
number shall include the plural, and the plural the singular,
unless the context would fairly not admit of such construction.
Section or paragraph headings are employed herein solely for
convenience of reference, and such headings shall not be used in
construing any term or provisions of this instrument. References
herein to a "section" shall refer to the appropriately numbered
section of this Agreement unless specific reference is made to
another instrument or document.
14. Entire Agreement/Binding Effect. This Agreement contains
the entire agreement between the parties hereto and there are no
representations, inducements, promises, agreements, arrangements or
undertakings, oral or written, between the parties other than those
set forth herein. No agreement of any kind relating to the matters
covered by this Agreement shall be binding upon either party unless
and until the same is made in writing and executed by both parties.
This Agreement shall be binding upon the Company, its successors
and assigns, and upon Grout, his heirs, representatives, successors
and assigns.
15. Counterparts. This Agreement may be executed in any
number of counterparts, each of which when executed and delivered
shall be an original, but all such counterparts shall constitute
one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement,
the corporate party by its duly authorized officer as of the day
and year first above written.
SHONEY'S, INC.
By: /s/ Taylor H. Henry
-------------------------------------
Title: Chairman and CEO
---------------------------------
/s/ James M. Grout
----------------------------------------
JAMES M. GROUT
-5-
<PAGE>
<TABLE>
<CAPTION>
Years Ended
-----------
October 30, October 31, October 25,
1994 1993 1992
------------ ------------ -----------
<S> <C> <C> <C>
Earnings per Common Share - Primary:
Average shares outstanding 41,042,134 39,868,386 41,048,979
Net effect of dilutive stock options --based on
the treasury stock method using average market price 256,927 529,520 (A)
---------- ---------- ----------
Totals 41,299,061 40,397,906 41,048,979
========== ========== ==========
Income before extraordinary charge and cumulative
effect of change in accounting principle $ 62,594,206 $ 58,009,978 $(26,576,633)
Extraordinary charge on early extinguishment of debt (1,037,808)
Cumulative effect of change in accounting for
income taxes 4,468,386
---------- ---------- ----------
Net income $ 66,024,784 $ 58,009,978 $(26,576,633)
========== ========== ==========
Per share amount:
Income before extraordinary charge and cumulative
effect of change in accounting principle $ 1.52 $ 1.44 $(.65)
Extraordinary charge on early extinguishment of debt (.03)
Cumulative effect of change in accounting for
income taxes .11
---- ---- ----
Net income $ 1.60 $ 1.44 $(.65)
==== ==== ====
Earnings per Common Share - Fully diluted:
Average shares outstanding 41,042,134 39,868,386 41,048,979
Net effect of dilutive stock options --based on
the treasury stock method using the quarter-end
market price, if higher than average market price 264,408 551,553 (A)
Assumed conversion of 8.5% zero coupon
convertible debentures 5,213,456 5,224,513 (A)
---------- ---------- ----------
Totals 46,519,998 45,644,452 41,048,979
========== ========== ==========
Income before extraordinary charge and cumulative
effect of change in accounting principle $ 62,594,206 $ 58,009,978 $(26,576,633)
Add 8.5% zero coupon convertible debentures interest,
net of income taxes 4,110,057 3,762,551 (A)
---------- ---------- ----------
Total before extraordinary charge and cumulative
effect of change in accounting principle 66,704,263 61,772,529 (26,576,633)
Extraordinary charge on early extinguishment of debt (1,037,808)
Cumulative effect of change in accounting
for income taxes 4,468,386
---------- ---------- ----------
Net income $ 70,134,841 $ 61,772,529 $(26,576,633)
========== ========== ==========
Per share amount:
Income before extraordinary charge and cumulative
effect of change in accounting principle $ 1.43 $ 1.35 $(.65)
Extraordinary charge on early extinguishment of debt (.02)
Cumulative effect of change in accounting
for income taxes .10
---- ---- ----
Net income $ 1.51 $ 1.35 $(.65)
==== ==== ====
</TABLE>
(A) Due to the net loss of the Company for the 1994 fiscal year, both
primary and fully diluted earnings per share utilized average shares
outstanding as both the common stock equivalents and convertible
debentures have an anti-dilutive effect.
/TEXT
<PAGE>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-21
<SEQUENCE>14
<DESCRIPTION>SUBSIDIARIES OF SHONEY'S, INC.
<PAGE>
SUBSIDIARIES OF SHONEY'S, INC.
State (or other
jurisdiction) of
Name incorporation
---- ----------------
Commissary Operations, Inc. Tennessee
Corporate Benefit Services,
Incorporated of Nashville Tennessee
Evadon Corporation Tennessee
Mike Rose Foods, Inc. Tennessee
Pargo's of Frederick, Inc. Tennessee
Pargo's of York, Inc. Tennessee
RJR Investments, Inc. Nevada
Shoney's of Canada, Inc. Canada
Shoney's Equipment Corporation Tennessee
Shoney's International, Inc. Nevada
Shoney's Investments, Inc. Nevada
Shoney's Real Estate, Inc. Tennessee
<PAGE>
EXHIBIT 23
CONSENT OF ERNST & YOUNG, INDEPENDENT AUDITORS
We consent to the incorporation by reference in Post-Effective
Amendment No. 5 to the Registration Statement on Form S-8 (File No.
2-64257) and related Prospectus pertaining to the Shoney's, Inc.
Stock Option Plan; Post-Effective Amendment No. 4 to the
Registration Statement on Form S-8 (File No. 33-605) and related
Prospectus pertaining to the Shoney's, Inc. Employee Stock Purchase
Plan; Post-Effective Amendment No. 3 to the Registration Statement
on Form S-8 (File No. 2-84763) and related Prospectus pertaining to
the Shoney's, Inc. 1981 Stock Option Plan; Post-Effective Amendment
No. 2 to the Registration Statement on Form S-8 (File No. 33-25725)
and related Prospectus pertaining to the Shoney's, Inc. 1981 Stock
Option Plan; and the Registration Statement on Form S-8 (File No.
33-45076) and related Prospectus pertaining to the Shoney's, Inc.
Directors' Stock Option Plan; of our report dated January 19, 1995,
with respect to the consolidated financial statements and schedule
of Shoney's, Inc. included in the Annual Report (Form 10-K) for the
year ended October 30, 1994.
Ernst & Young LLP
Nashville, Tennessee
January 26, 1995
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS
SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE FINANCIAL
STATEMENTS OF SHONEY'S, INC.
FOR THE PERIOD ENDED OCTOBER
30, 1994 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS
</LEGEND>
<MULTIPLIER> 1
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-30-1994
<PERIOD-START> NOV-01-1993
<PERIOD-END> AUG-07-1994
<CASH> 4,229,784
<SECURITIES> 0
<RECEIVABLES> 22,082,930
<ALLOWANCES> 1,275,902
<INVENTORY> 41,621,732
<CURRENT-ASSETS> 94,868,918
<PP&E> 756,844,121
<DEPRECIATION> 306,235,908
<TOTAL-ASSETS> 557,915,775
<CURRENT-LIABILITIES> 196,872,403
<BONDS> 0
<COMMON> 41,185,290
0
0
<OTHER-SE> (177,949,531)
<TOTAL-LIABILITY-AND-EQUITY> 557,915,775
<SALES> 1,126,515,272
<TOTAL-REVENUES> 1,166,223,681
<CGS> 966,897,702
<TOTAL-COSTS> 1,068,040,475
<OTHER-EXPENSES> 61,605,878
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 41,236,895
<INCOME-PRETAX> 98,183,206
<INCOME-TAX> 35,589,000
<INCOME-CONTINUING> 62,594,206
<DISCONTINUED> 0
<EXTRAORDINARY> (1,037,808)
<CHANGES> 4,468,386
<NET-INCOME> 66,024,784
<EPS-PRIMARY> 1.60
<EPS-DILUTED> 1.51
</TABLE>
<PAGE>
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
SHONEY'S, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
Col. A Col. B Col. C Col. D Col. E
- - ---------------------- ---------- ---------------------------- ------------ ----------
Additions
----------------------------
Charged Charged
Balance at to Costs to Other Balance at
Beginning and Acounts - Deductions - End of
of Period Expenses Describe Describe Period
- - ---------------------- ---------- ---------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C>
Fiscal year ended
October 30, 1994:
Reserves and
allowances deducted
from asset accounts:
Allowance for
doubtful accounts $2,061,000 $1,414,000 $ 59,000(B) $2,258,000(A) $1,276,000
========= ========= ======= ========= =========
Fiscal year ended
October 31, 1993:
Reserves and
allowances deducted
from asset accounts:
Allowance for
doubtful accounts $1,562,000 $ 698,000 $ 28,000(B) $ 227,000(A) $2,061,000
========= ========= ======= ========= =========
Fiscal year ended
October 25, 1992:
Reserves and
allowances deducted
from asset accounts:
Allowance for
doubtful accounts $1,143,000 $ 577,000 $ 12,000(B) $ 170,000(A) $1,562,000
========= ========= ======= ========= =========
</TABLE>
(A) Accounts written off.
(B) Recoveries from accounts written off in prior year.
