<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MAY 12, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
---------------- -----------------
COMMISSION FILE NUMBER 0-4377
----------------
SHONEY'S, INC.
(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 offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (615) 391-5201
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 .
--- ---
As of June 11, 1996, there were 41,661,967 shares of Shoney's, Inc., $1 par
value common stock outstanding.
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<PAGE> 2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
SHONEY'S, INC. AND SUBSIDIARIES
Consolidated Condensed Balance Sheet
(Unaudited)
<TABLE>
<CAPTION>
May 12, October 29,
1996 1995
----------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 5,820,242 $ 7,513,588
Notes and accounts receivable, less allowance
for doubtful accounts of $2,174,000 in 1996
and $1,645,000 in 1995 12,395,131 13,013,821
Inventories 34,005,375 33,483,964
Deferred income taxes and other current assets 34,030,680 30,716,885
Net current assets of discontinued operations 0 14,495,812
-------------- --------------
Total current assets 86,251,428 99,224,070
Property, plant and equipment, at cost 746,222,394 710,544,277
Less accumulated depreciation and amortization (306,819,543) (291,057,795)
-------------- --------------
Net property, plant and equipment 439,402,851 419,486,482
Other assets:
Deferred charges and other intangible assets 13,590,635 7,085,784
Other assets 7,847,915 9,219,658
-------------- --------------
Total other assets 21,438,550 16,305,442
-------------- --------------
$ 547,092,829 $ 535,015,994
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable $ 31,012,233 $ 33,099,813
Federal and state income taxes 6,306,108 7,486,210
Other accrued liabilities 74,609,667 74,312,652
Reserve for litigation settlement 23,154,539 23,372,889
Debt and capital lease obligations
due within one year 43,802,293 34,448,154
-------------- --------------
Total current liabilities 178,884,840 172,719,718
Long-term senior debt and
capital lease obligations 293,065,860 318,251,917
Zero coupon subordinated convertible debentures 91,787,143 87,780,529
Reserve for litigation settlement 27,385,434 38,727,434
Deferred credits:
Income taxes 23,120,797 19,223,797
Income and other liabilities 6,523,887 6,619,234
Shareholders' equity (deficit):
Common stock, $1 par value: authorized
100,000,000 shares; issued 41,650,573
in 1996 and 41,510,659 in 1995 41,650,573 41,510,659
Additional paid-in capital 61,895,691 60,770,176
Unrealized gain on securities available
for sale 2,833,310
Retained earnings (deficit) (180,054,706) (210,587,470)
-------------- --------------
Total shareholders' equity (deficit) (73,675,132) (108,306,635)
-------------- --------------
$ 547,092,829 $ 535,015,994
============== ==============
</TABLE>
See notes to consolidated condensed financial statements
(2)
<PAGE> 3
SHONEY'S, INC. AND SUBSIDIARIES
Consolidated Condensed Statement of Operations
(Unaudited)
<TABLE>
<CAPTION>
Twenty-eight Weeks Ended
May 12, May 14,
1996 1995
----------- -----------
<S> <C> <C>
Revenues
Net sales $ 544,155,710 $ 549,821,737
Franchise fees 11,755,188 12,853,920
Other income 1,977,954 904,066
-------------- --------------
557,888,852 563,579,723
Costs and expenses
Cost of sales 488,681,620 484,203,864
General and administrative expenses 36,520,442 33,149,327
Interest expense 18,965,217 21,600,374
Restructuring expenses 0 1,699,873
-------------- --------------
Total costs and expenses 544,167,279 540,653,438
-------------- --------------
Income from continuing operations before income taxes 13,721,573 22,926,285
Provision for income taxes 5,667,000 8,712,000
-------------- --------------
Income from continuing operations 8,054,573 14,214,285
Income from discontinued operations, net of
income taxes 397,816 4,942,907
Gain on sale of discontinued operations, net of
income taxes 22,080,375
-------------- --------------
Net income $ 30,532,764 $ 19,157,192
============== ==============
Earnings per common share
Primary:
Income from continuing operations $ 0.19 $ 0.34
Income from discontinued operations 0.01 0.12
Gain on sale of discontinued operations 0.53
-------------- --------------
Net income $ 0.73 $ 0.46
-------------- --------------
Fully diluted:
Income from continuing operations $ 0.22 $ 0.34
Income from discontinued operations 0.01 0.12
Gain on sale of discontinued operations 0.47
-------------- --------------
Net income $ 0.70 $ 0.46
-------------- --------------
Weighted average shares outstanding
Primary 41,673,605 41,447,375
Fully diluted 46,895,656 41,447,375
Common shares outstanding 41,650,573 41,446,671
Dividends per share NONE NONE
</TABLE>
See notes to consolidated condensed financial statements.
(3)
<PAGE> 4
SHONEY'S, INC. AND SUBSIDIARIES
Consolidated Condensed Statement of Operations
(Unaudited)
<TABLE>
<CAPTION>
Twelve Weeks Ended
May 12, May 14,
1996 1995
----------- -----------
<S> <C> <C>
Revenues
Net sales $ 251,372,788 $ 248,151,606
Franchise fees 5,445,261 5,721,458
Other income 893,710 (678,347)
-------------- --------------
257,711,759 253,194,717
Costs and expenses
Cost of sales 222,213,541 217,657,733
General and administrative expenses 16,381,048 14,958,418
Interest expense 8,147,363 9,433,835
Restructuring expenses 0 1,141,548
-------------- --------------
Total costs and expenses 246,741,952 243,191,534
-------------- --------------
Income from continuing operations before
income taxes 10,969,807 10,003,183
Provision for income taxes 4,544,000 3,801,000
-------------- --------------
Income from continuing operations 6,425,807 6,202,183
Income from discontinued operations, net of
income taxes 0 2,291,419
-------------- --------------
Net income $ 6,425,807 $ 8,493,602
============== ==============
Earnings per common share
Primary:
Income from continuing operations $ 0.15 $ 0.15
Income from discontinued operations 0.06
-------------- --------------
Net income $ 0.15 $ 0.20
-------------- --------------
Fully diluted:
Income from continuing operations $ 0.15 $ 0.15
Income from discontinued operations 0.06
-------------- --------------
Net income $ 0.15 $ 0.20
-------------- --------------
Weighted average shares outstanding
Primary 41,725,679 41,521,552
Fully diluted 41,725,679 41,521,552
Common shares outstanding 41,650,573 41,446,671
Dividends per share NONE NONE
</TABLE>
See notes to consolidated condensed financial statements.
(4)
<PAGE> 5
SHONEY'S, INC. AND SUBSIDIARIES
Consolidated Condensed Statement of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Twenty-eight Weeks Ended
May 12, May 14,
1996 1995
------------ ------------
<S> <C> <C>
Operating activities
Net income $ 30,532,764 $ 19,157,192
Adjustments to reconcile net income to net cash
provided by operating activities:
Income from discontinued operations, net of taxes (397,816) (4,942,907)
Gain on sale of discontinued operations, net of taxes (22,080,375)
Depreciation and amortization 23,587,514 23,322,279
Amortization of deferred charges and other
non-cash charges 5,922,129 3,914,231
Realized and unrealized loss on marketable
securities and sale of other assets 1,491,837
Change in deferred income taxes 3,897,000 2,348,000
Changes in operating assets and liabilities (14,394,348) 8,134,778
-------------- --------------
Net cash provided by continuing operating
activities 27,066,868 53,425,410
Net cash (used by) provided by discontinued
operating activities (655,622) 6,313,090
-------------- --------------
Net cash provided by operating activities 26,411,246 59,738,500
Investing activities
Cash required for property, plant and equipment (47,154,734) (37,399,057)
Cash required for assets held for sale (859,969)
Proceeds from disposal of property, plant
and equipment 4,128,630 2,924,131
Proceeds from disposal of discontinued operations 51,279,601
Cash required for other assets (5,012,751) (569,920)
-------------- ---------------
Net cash provided by (used by) investing activities 3,240,746 (35,904,815)
Financing activities
Payments on long-term debt and capital lease
obligations (72,060,630) (94,610,725)
Proceeds from long-term debt 47,000,000 78,000,000
Net proceeds from short-term borrowings 7,607,000 4,918,000
Payments on litigation settlement (11,560,350) (11,692,420)
Cash required for debt issue costs (2,753,171) (1,005,342)
Proceeds from exercise of employee stock options 421,813 1,355,364
-------------- --------------
Net cash used by financing activities (31,345,338) (23,035,123)
-------------- --------------
Change in cash $ (1,693,346) $ 798,562
============== ==============
</TABLE>
See notes to consolidated condensed financial statements.
(5)
<PAGE> 6
SHONEY'S, INC. AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements
May 12, 1996
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited consolidated condensed financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and the instructions to Form 10-Q. As a result,
they do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements.
The Company, in management's opinion, has included all adjustments (consisting
of normal recurring accruals) necessary for a fair presentation of the results
of operations. Certain reclassifications have been made in the consolidated
condensed financial statements to conform to the 1996 presentation.
Operating results for the twelve week and twenty-eight week periods ended
May 12, 1996 are not necessarily indicative of the results that may be expected
for all or any balance of the fiscal year ending October 27, 1996.
NOTE 2 - DISCONTINUED OPERATIONS
In January 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 included the planned 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., a private label
manufacturer of food products. In July 1996 the Company made a decision to
retain the Pargo's and Fifth Quarter restaurants and to combine them with its
BarbWire's restaurants to form a casual dining group.
Effective October 1, 1995, the Company sold its Lee's Famous Recipe division to
RTM Restaurant Group for $24.5 million cash and a $4 million promissory note.
The promissory note is due in monthly installments over five years and bears
interest at the prime rate. The transaction was effected through a sale of all
of the assets of Lee's Famous Recipe, and its sale removes the Company from the
fast food chicken line of business. The promissory note is guaranteed by RTM,
Inc., and is further secured by perfected security interests in the Lee's
Famous Recipe trademarks and in the franchise license agreements of Lee's
Famous Recipe.
On November 19, 1995, the Company sold Mike Rose Foods, Inc. (MRF) to Levmark
Capital Corporation for $55 million in cash. The transaction was effected
through the sale of all issued and outstanding capital shares of MRF. The
transaction resulted in a gain on sale
(6)
<PAGE> 7
of discontinued operations of $22.1 million, net of income taxes. Under the
terms of the stock purchase agreement, the Company entered into a five year
supply agreement through which MRF will continue to be the supplier of salad
dressings, mayonnaise, sauces, condiments, breadings, and a variety of food
products for all company-owned restaurants. The supply agreement contains
minimum purchase commitments generally equal to the actual quantities of
various products the Company purchased from MRF during fiscal 1994 for
company-owned restaurants.
For financial reporting purposes, the net assets, results of operations, and
cash flows of Lee's and MRF have been treated as discontinued operations in the
accompanying financial statements and are presented net of any related income
tax expense.
NOTE 3 - CHANGES IN ACCOUNTING POLICIES
Effective October 30, 1995, pursuant to supplemental implementation guidance
regarding FASB Statement No. 115 issued by the FASB, the Company reclassified
its investment in common stock and warrants of ShoLodge, Inc. from the category
of trading securities to that of investments "available-for-sale".
Accordingly, future changes in market value of the Company's investment in
ShoLodge will be reflected as a component of shareholder's equity rather than
included in income (See Note 9).
NOTE 4 - EARNINGS PER SHARE
Primary earnings per share have 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. The fully diluted earnings per share calculation for the first
half of 1996 includes the assumed conversion of the zero coupon subordinated
convertible debentures. This calculation adjusts earnings for the interest
that would not be paid if the debentures were converted. The fully diluted
earnings from continuing operations for the first half of 1996 are
anti-dilutive, but have been presented on a fully diluted basis because fully
diluted net income per share is less than primary earnings per share.
The primary and fully diluted earnings per share for the second quarter of
1996, and for the second quarter and first half of 1995 were computed using
the weighted average number of shares of common stock and common stock
equivalents outstanding during the period. No consideration was given to the
convertible debentures for these periods because the effect was anti-dilutive.
(7)
<PAGE> 8
NOTE 5 - INCOME TAXES
Income taxes for the twenty-eight week periods ended May 12, 1996 and May 14,
1995 were provided based on the Company's estimate of its effective tax rates
(41.3% and 35.0%, respectively) for fiscal years 1996 and 1995.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes.
Significant components of the Company's deferred tax assets and liabilities as
of October 29, 1995 are as follows:
<TABLE>
<S> <C>
Deferred tax assets:
Reserve for litigation settlement $ 23,753,374
Reserve for self insurance 13,221,079
Other - net 5,621,092
------------
Deferred tax assets 42,595,545
------------
Deferred tax liabilities:
Tax over book depreciation 14,715,011
Capital contribution 22,501,840
Other - net 53,154
------------
Deferred tax liabilities 37,270,005
------------
Net deferred tax asset $ 5,325,540
============
</TABLE>
No valuation allowance is considered necessary, as all deductible temporary
differences will be utilized primarily by carryback to prior years' taxable
income, or as charges against reversals of future taxable temporary
differences.
NOTE 6 - SENIOR DEBT
The Company has a reducing revolving credit facility ("Revolver") with a
syndicate of financial institutions which matures in October 1999 with
scheduled reductions in the aggregate credit facility that began in October
1995. The maximum amount available under the Revolver at May 12, 1996 was
$214.6 million. A scheduled reduction of $25 million will occur in October
1996, reducing the amount available under the facility to $189.6 million.
The Company's senior debt requires satisfaction of certain financial ratios and
tests; imposes limitations on capital expenditures; limits the ability to incur
additional debt, leasehold obligations and contingent liabilities; prohibits
dividends and distributions on common stock; prohibits mergers, consolidations
or similar transactions; and includes other affirmative and negative covenants.
The interest rate for this facility is a floating rate (the London Interbank
(8)
<PAGE> 9
Offered Rate ("LIBOR") plus 2%). At May 12, 1996, the Company had borrowed
$180.0 million under this facility and the interest rate was 7.5%. With the
exception of approximately $92 million (appraised value) of the property, plant
and equipment not presently encumbered, all material assets of the Company not
otherwise pledged (including all common shares of a wholly-owned real estate
company which owns 184 of the Company's restaurant properties) have been
pledged as collateral for the facility.
During the second quarter of 1996, the Company obtained a senior secured
loan for up to $100 million from a bank ("Bridge Loan"). The purpose of the
Bridge Loan is to provide working capital and a source of financing for the
Company's pending acquisition of substantially all of the assets of TPI
Enterprises, Inc. ("Enterprises") through a tax free reorganization. The
reorganization required an amendment to the Company's Revolver which (1)
approved the reorganization, (2) permitted the Company to enter into the Bridge
Loan, and (3) modified certain covenants under the Revolver, including changes
to accommodate the reorganization (See Note 10).
Concurrent with the execution of the Bridge Loan and the amendment to the
Revolver, the Company borrowed $20 million under the Bridge Loan, which was
used to reduce the outstanding balance under the Company's Revolver. The
Company may borrow up to an additional $80 million under the Bridge Loan in
conjunction with the closing of the reorganization for the purpose of
refinancing and/or repaying certain liabilities of Enterprises which are
required to be assumed or satisfied by the Company. In the event that the
reorganization is not consummated, the Company will be permitted to draw an
additional amount up to $20 million under the Bridge Loan for working capital
purposes.
The Bridge Loan bears interest at LIBOR plus 2.5% with 0.5% increases in the
interest rate effective 9, 12, and 18 months after the closing of the
reorganization. The Bridge Loan will be secured by assets acquired by the
Company in the reorganization and by a pledge of certain other unencumbered
assets of the Company. The Bridge Loan will convert to a term loan on May 3,
1998 if not repaid on or before that date and that term loan will mature
October 22, 1999. Upon conversion to a term loan, the Company will be required
to pay a fee equal to 3% of the outstanding balance of the Bridge Loan at the
conversion date.
NOTE 7 - RESERVE FOR LITIGATION SETTLEMENT
On January 25, 1993, the court gave approval to a consent decree settling
litigation against the Company and its former senior chairman. The litigation
was 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.
(9)
<PAGE> 10
Under the consent decree, the Company will pay $105 million to settle these
claims. The settlement covered all of the Company's restaurant concepts and
the corporate offices from February 4, 1985 through November 3, 1992. In
addition, the Company agreed to pay $25.5 million in plaintiffs' attorneys fees
and is obligated to pay up to $2.3 million of estimated applicable payroll
taxes and administrative costs. The settlement resulted in a charge of $77.2
million, net of insurance recoveries and applicable taxes, in the fourth
quarter of 1992. Under the terms of the consent decree, payments, without
interest, are made quarterly and substantially all payments will be completed
by March 1, 1998.
NOTE 8 - LITIGATION
The Company is a defendant in a lawsuit styled J&J Seafood, Inc., and Sunbelt
Restaurant Management, Inc. vs Shoney's, Inc., which was filed on December 19,
1994 in U.S. District Court for the Middle District of Tennessee. The suit was
filed by a franchisee of the Company's Captain D's restaurant concept 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.
On January 23, 1995, the Company filed a motion to dismiss or stay this federal
court case pending the resolution of the state case. Thereafter, the plaintiff
filed an amended complaint adding a second plaintiff, a former franchisee,
Sunbelt Restaurant Management, Inc. The motion to dismiss was denied on May
31, 1995. The plaintiff filed a motion to certify the case as a class action
on August 7, 1995. The motion was argued on May 9, 1996 and the court has
taken the motion under advisement.
Management believes it has substantial defenses to the claims made and intends
to vigorously defend the case. In the opinion of management, the ultimate
liability with respect to the case will not materially affect the operating
results or the financial position of the Company.
On December 1, 1995, a federal court suit styled Robert Belcher, et al vs
Shoney's, Inc. was filed in the U.S. District Court for the Middle District of
Tennessee. The suit against the Company was filed by five employees who claim
the Company engages in conduct and actions which are designed to circumvent the
salary requirements set forth within the Fair Labor Standards Act. The
plaintiffs purport to act on behalf of similarly situated employees or former
employees and petitioned the court to send court supervised notice of their
lawsuit to other potential plaintiffs. On March 8, 1996, the court granted
provisional class status to the plaintiffs in this
(10)
<PAGE> 11
case and ordered notice of the lawsuit to be mailed to former and current
salaried general managers and assistant general managers who were employed by
the Company's Shoney's Restaurants during the period from December 1, 1992
through November 30, 1995. Court approved notice of the lawsuit has been sent
to potential class members who had until May 6, 1996 to elect to participate in
the lawsuit. Approximately 931 current or former Shoney's concept employees had
opted to participate in the suit as of May 29, 1996. Plaintiffs mailed an
additional 719 notices to former managers, and those individuals have a cut-off
date of July 1, 1996, to join the suit. This second group of managers
represents individuals who have not worked with the Company since 1993, and
whose last known addresses were erroneous due to a computer error in
transferring their files to the Company's current payroll system. By virtue of
the provisional class status, the court could subsequently amend its decision
and either reduce or increase the scope of those individuals who are similarly
situated or determine that certification as a class is altogether unwarranted.
On January 2, 1996, a second related federal court suit styled Bonnie Belcher vs
Shoney's, Inc. was filed in the U.S. District Court for the Middle District of
Tennessee. This suit against the Company was filed by a group of plaintiffs who
purport to be present or former hourly employees of Shoney's, Inc. and claim to
bring this action on behalf of themselves and others similarly situated. The
plaintiffs claim that the Company violated the Fair Labor Standards Act by
either not paying them for all hours worked or that they were improperly paid
for overtime hours worked. In both cases, the plaintiffs claim to be entitled
to recover unpaid wages, liquidated damages, attorneys' fees and expenses. On
May 3, 1996, the court granted provisional class status to the lawsuit and
ordered that notice of the lawsuit be mailed to former Shoney's concept hourly
and fluctuating work week employees who were employed during the period from
January 2, 1993 through January 1, 1996. The court-ordered notices were mailed
in the latter part of May and individuals who wish to participate in the suit
must opt to do so by July 24, 1996. By virtue of the provisional class status,
the court could subsequently amend its decision and either reduce or increase
the scope of those individuals who are similarly situated or determine that
certification as a class is altogether unwarranted.
On May 3, 1996, the court denied the plaintiffs' motion to amend their complaint
in the December 1, 1995 lawsuit to add other Shoney's, Inc. restaurant concepts
to their complaint. However, the court granted leave for renewal of this motion
if the plaintiffs include one or more named plaintiffs from the Company's other
restaurant concepts that they seek to include. Moreover, the court denied the
plaintiffs' attempts to include the Shoney's Restaurant concept franchisees
within the provisional class.
Management believes it has substantial defenses to the claims made and intends
to vigorously defend these cases. However, neither the likelihood of an
unfavorable outcome nor the amount of ultimate liability, if any, with respect
to these cases can be determined at this time. Accordingly, no provision for
any potential liability has been made in the consolidated condensed financial
statements.
In addition to the litigation described in the preceding paragraphs, 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.
(11)
<PAGE> 12
NOTE 9 - SALE OF SHONEY'S LODGING, INC. AND RELATED INVESTMENTS
The Company owns 121,212 shares of common stock of ShoLodge, Inc. ("ShoLodge")
obtained as consideration for the 1994 sale of the Company's minority interest
in four Shoney's Inns to ShoLodge. The ShoLodge common shares were classified
as trading securities under FASB Statement No. 115 "Accounting for Certain
Investments in Debt and Equity Securities" (See Note 3). The Company also owns
certain warrants to acquire ShoLodge common stock which were obtained in the
1992 sale of the Company's lodging division to ShoLodge. The Company also
received future registration rights with respect to the shares that may be
acquired upon exercise of the warrants. Under the provisions of FASB Statement
No. 115, "Accounting for Certain Debt and Equity Securities", certain of these
warrants were classified as trading securities during the second quarter and
first half of 1995 and adjusted to their fair value. The resulting gains of
approximately $.2 million and $1.1 million in the second quarter and the first
half of 1995, respectively, were reflected in the results of operations.
During 1995, once classified as a trading security, the warrants were carried
at fair value with increases and decreases in fair value reflected in the
results of operations. The fair value of the ShoLodge common stock and the
ShoLodge warrants classified as trading securities was $3.3 million at May 14,
1995. The fair value of the ShoLodge warrants and the ShoLodge common stock
held by the Company declined by approximately $2.5 million and $2.6 million for
the second quarter and first half of 1995, respectively.
Effective October 30, 1995, pursuant to supplemental FASB implementation
guidance for FASB Statement No. 115, the Company reclassified its investment in
ShoLodge common stock and warrants from "trading securities" to
"available-for-sale". Accordingly, future changes in market value of the
Company's investment in ShoLodge will be reflected as a component of
shareholders' equity rather than included in income. During the second quarter
and first half of 1996, the Company recorded unrealized gains of $1.5 million
and $2.8 million, respectively, on its investment in ShoLodge common stock and
warrants (See Note 3).
NOTE 10 - COMMITMENTS AND CONTINGENCIES
Pending Acquisition - On March 15, 1996, the Company entered into a definitive
agreement with Enterprises, the largest franchisee of the Company's Shoney's
and Captain D's restaurants, whereby the Company, or one of its subsidiaries,
will acquire TPI Restaurants, Inc. and two other of Enterprises' subsidiaries,
which represent substantially all of the assets of Enterprises.
The Enterprises' subsidiaries will be acquired in exchange for 5,577,102 shares
of Shoney's, Inc. common stock plus an additional $10 million of Shoney's, Inc.
common stock based on the average closing market price for the ten days
immediately prior to closing, subject to certain adjustments. In addition, the
Company will assume or refinance certain debt and other
(12)
<PAGE> 13
obligations of Enterprises or its subsidiaries totaling approximately $106
million, including approximately $51.6 million of 8.25% subordinated
convertible debentures that are expected to remain outstanding following the
closing. Enterprises will dissolve and liquidate following the closing of the
acquisition.
The Company has filed a registration statement on Form S-4 with the Securities
and Exchange Commission in connection with the pending acquisition which has
not yet been declared effective. Company anticipates that this transaction
will close in August 1996, subject to the satisfaction of the conditions of
closing. The transaction is subject to, among other things, the approval of
the shareholders of both the Company and Enterprises as well as certain
regulatory approvals. During the second quarter of 1996, the Company obtained
a senior secured bridge loan for up to $100 million to provide financing for
the TPI acquisition and to provide working capital for the Company (See Note 6).
Guarantees - 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 THL defaulted in its obligations to Marriott
before October 2, 1995. These fifteen restaurants had a pre-determined
purchase price of a maximum of $8.7 million. During 1994 and 1995, the
Company, THL and Marriott agreed to a modification of this contingent purchase
agreement whereby the Company agreed to extend its contingent purchase
obligation to July 2, 1997 and the Company's purchase obligation was reduced to
eight restaurants with a maximum purchase price of $5.1 million.
During the first quarter of fiscal 1996, the Company was notified by Marriott
that THL was in default of its obligations with Marriott. The Company has
agreed to purchase four restaurants from Marriott for $3.2 million that will
satisfy all of the Company's outstanding obligations under the contingent
purchase agreement. The Company is currently in the process of purchasing
these restaurants and negotiating terms with THL to lease the restaurants to
THL. These transactions are expected to be completed during the third quarter
of 1996.
(13)
<PAGE> 14
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
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 condensed
financial statements and notes thereto. The second quarter and first half of
both fiscal 1996 and 1995 covered periods of twelve and twenty-eight weeks,
respectively.
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 included the divestiture of certain
non-core lines of business including Lee's Famous Recipe ("Lee's") and Mike
Rose Foods, Inc. ("MRF"), a private label manufacturer of food products. The
results of operations of these business units have been treated as discontinued
operations in the accompanying financial statements. The sale of Lee's was
effective in the fourth quarter of 1995 and resulted in a gain of $5.5 million,
net of income taxes. The sale of MRF was completed in the first quarter of
1996 for $55 million in cash and resulted in a gain of $22.1 million, net of
income taxes.
Since the reorganization announcement, the Company has focused on
development and implementation of a performance improvement plan for the
Shoney's Restaurant concept. The performance improvement plan includes all
aspects of restaurant operations and restaurant support functions including
commissary operations, purchasing and general corporate services. The Company's
Shoney's Restaurants have experienced declines in comparable store sales with
resulting lower operating margins in the second quarter and first half of 1996
and 1995, which coupled with additional expenses incurred related to the
Shoney's Restaurant operational improvement program has reduced overall
profitability. Shoney's Restaurants reported positive comparable store sales
at the beginning of the second quarter of 1996, but have experienced negative
comparable store sales during the latter weeks of April and throughout much of
May. The weaker performance in the latter part of the second quarter was
related to weak consumer response to a marketing promotion for Shoney's
Restaurants and an industry wide trend of sales declines which began in
mid April. Management anticipates that Shoney's Restaurant's operating margins
will continue to be lower than historical levels until the benefits of the
performance improvement plan begin to have a positive effect on comparable
store sales.
Revenues from continuing operations for the second quarter of fiscal
1996 increased 1.8% ($4.5 million) to $257.7 million as compared to the second
quarter of fiscal 1995. For the first half of fiscal 1996, revenues from
continuing operations decreased 1.0% ($5.7 million) to $557.9 million as
compared to the same period of fiscal 1995.
(14)
<PAGE> 15
An analysis of the decrease in revenues is summarized in the following table:
<TABLE>
<CAPTION>
($ in Millions)
---------------
12 Weeks 28 Weeks
Ended Ended
May 12, 1996 May 12, 1996
------------ ------------
<S> <C> <C>
Restaurant revenue $ 4.5 $(0.4)
Commissary and other sales (1.3) (5.3)
Franchise fees (0.3) (1.1)
Other income 1.6 1.1
----- -----
$ 4.5 $(5.7)
----- =====
</TABLE>
Restaurant revenues increased during the second quarter as additional
revenues from new restaurants and the effects of an overall company-wide menu
price increase exceeded the effects of a decline in comparable store sales and
the closing of 41 restaurants in the fourth quarter of 1995. During the first
half of 1996, restaurant revenues declined slightly as a result of an overall
decline in comparable store sales which offset revenue increases generated by
new restaurant sales and the effects of menu price increases. Comparable store
sales of company-owned restaurants increased 1.0% in the second quarter
(including a 1.6% menu price increase) and declined by 0.5% during the first
half of 1996 (including a 1.5% menu price increase).
The following table summarizes the change in number of restaurants
operated by the Company's continuing operations and its franchisees during the
first half of 1996 and 1995:
<TABLE>
<CAPTION>
First Half First Half
1996 1995
--------------- --------------
<S> <C> <C>
Company-owned restaurants opened(1) 30 13
Company-owned restaurants closed (4) (3)
Franchised restaurants opened 5 10
Franchised restaurants closed (48) (45)
---- ---
(17) (25)
=== ===
</TABLE>
(1) Includes seventeen and six units acquired from franchisees during the first
half of 1996 and 1995, respectively.
Commissary and other sales decreased 3.1% ($1.3 million) and 5.6%
($5.3 million), respectively, during the second quarter and first half of 1996
as compared to the corresponding periods of 1995. When compared to restaurant
sales, these sales have a higher percentage of food costs and a lower
percentage of operating expenses and there is no restaurant labor associated
with commissary sales.
Franchise fees relating to the Company's continuing operations
(Shoney's and Captain D's restaurants) also declined $0.3 million (5.4%) and
$1.1 million (8.5%) in the second quarter and first half of 1996 when compared
to the prior year. The decreases in both commissary sales and franchise fees
are primarily the result of a net decrease in the number
(15)
<PAGE> 16
of franchised restaurants and a decline in comparable store sales at franchised
Shoney's Restaurants which more than offset comparable store sales gains at
franchised Captain D's restaurants.
Other income increased $1.6 million and $1.1 million, respectively,
in the second quarter and first half of 1996 when compared with the same
periods in 1995 principally due to a change in the accounting treatment of
unrealized gains and losses on the Company's investments in ShoLodge, Inc.
("ShoLodge"). The Company reported an unrealized gain of $0.7 million in the
first quarter of 1995 and an unrealized loss of $2.3 million in the second
quarter of 1995 in this caption. Effective at the beginning of fiscal 1996,
the Company reclassified its investment in common stock and warrants of
ShoLodge from trading securities to securities available for sale. As a
result, changes in the market value of the Company's investment in ShoLodge are
now reflected as a component of shareholder's equity rather than included in
income. The Company recorded an unrealized gain of $1.5 million and $2.8
million, respectively, in the second quarter and first half of 1996. The
impact in other income from the change in accounting for ShoLodge was
partially offset by lower income from asset sales in the second quarter and
first half of 1996 as compared to the same periods last year.
Cost of sales for the second quarter of fiscal 1996 increased $4.6
million over the same quarter in fiscal 1995 and, as a percentage of revenues,
were 86.2% in 1996 as compared to 86.0% in the second quarter 1995. Cost of
sales for the first half of 1996 increased $4.5 million over the same period in
1995 and as a percentage of revenues were 87.6% in 1996 as compared to 85.9%
for the same period of 1995.
Food and supplies decreased as a percentage of total revenues
principally due to the decline in commissary sales, which have a higher food
cost as a percentage of revenue than restaurant sales. Food and supplies costs
as a percentage of sales at the restaurant level improved slightly during the
quarter (0.4%) as increased commodity costs were offset by increased attention
to loss control and minimization of waste. The Company has recently
experienced increased commodity costs for chicken, pork (bacon and sausage),
shrimp and eggs. The Company is evaluating its ability to offset these cost
increases in other areas, however, these increases could adversely affect food
costs over the remainder of 1996.
Restaurant labor increased as a percentage of revenues because of
higher labor cost at the restaurant level and the decline in commissary sales
(which have no restaurant labor in cost of sales). Operating expenses
increased approximately $1.2 million and $2.3 million for the second quarter
and first half of 1996, respectively. Operating expenses as a percentage of
revenues were unchanged for the second quarter as compared to the prior year
and increased slightly for the first half of 1996 from 21.4% in 1995 to 22.1%,
principally due to the $5.7 million decline in revenues.
(16)
<PAGE> 17
General and administrative expenses increased $1.4 million and $3.3
million in the second quarter and first half of 1996, respectively. General
and administrative expenses as a percentage of revenues increased from 5.9% in
the second quarter of 1995 to 6.4% in the second quarter of 1996 and increased
to 6.5% for the first half of 1996 as compared to 5.9% in the first half of
1995. These increased costs resulted principally from higher salary,
compensation and relocation costs related to recruiting new management
personnel and severance costs for displaced employees in the first half of
1996. These increased costs were partially offset by expense reductions in
1996 resulting from significant consulting costs in the first half of 1995
associated with the Company's restructuring. Restructuring charges of $1.1
million and $1.7 million in the second quarter and the first half of 1995,
respectively, were principally related to severance costs.
Interest expense declined approximately $1.3 million for the second
quarter and declined $2.6 million for the first half of 1996 as compared to the
same periods in the prior year. The lower interest costs were principally a
result of reduced levels of outstanding debt (due principally to application of
the proceeds from the divestitures of discontinued operations) and a decline in
interest rates.
Cash provided from continuing operations decreased $26.4 million to
$27.1 million for the first half of 1996 compared to $53.4 million for the
first half of 1995. This decrease was due primarily to a reduction in net
income, after adjustments for non-cash gains and losses and the gains on
disposal of the discontinued operations. The decline in net income is
principally the result of significantly lower profits from the Company's
Shoney's Restaurants coupled with slightly lower profits from the Company's
other restaurant concepts and commissary. Cash provided by investing
activities in 1996 was $3.2 million as compared with cash used by investing
activities of $35.9 million for the same period in 1995. Cash required for the
acquisition of property, plant and equipment and other assets (principally
intangibles associated with acquired franchised units) increased by $14.2
million in 1996 as compared with 1995 but was more than offset by $51.3 million
in proceeds from the sale of discontinued operations during 1996 with no
comparable cash flow in 1995.
Significant financing activities in the first half of 1996 included
repayment of $50 million on the Company's Reducing Revolving Credit Facility
("Revolver") from the proceeds of the sale of Mike Rose Foods, $12.9 million of
which represents a mandatory reduction in availability pursuant to the terms of
the credit agreement, net borrowings of $7.6 million on the Company's
short-term lines of credit, and borrowings of $27 million under the Revolver to
fund commitments for capital expenditures, franchise acquisitions, and other
operating cash flow requirements. The Company also paid $11.6 million during
the first half of 1996 under the terms of the litigation settlement (See Note
7).
In addition, during the second quarter of 1996, the Company obtained a
senior secured bridge loan for up to $100 million from a bank ("Bridge Loan").
The purpose of the Bridge Loan is to provide working capital and a source of
financing for the Company's pending acquisition of substantially all of the
assets of TPI Enterprises, Inc. ("Enterprises").
(17)
<PAGE> 18
Concurrent with the execution of the Bridge Loan, the Company borrowed $20
million under the Bridge Loan which was used to reduce the outstanding
principal balance under the Revolver. The Company may borrow up to $80 million
under the Bridge Loan in conjunction with the closing of the acquisition for
the purpose of refinancing and/or repaying certain liabilities of Enterprises
which are required to be assumed or satisfied by the Company. In the event
that the acquisition is not consummated, the Company will be permitted to draw
an additional amount up to $20 million for working capital under the Bridge
Loan.
The Bridge Loan bears interest at the London Interbank Offered Rate
(LIBOR) plus 2.5% with one-half percent rate escalations effective 9, 12, and
18 months after the closing of the acquisition. The Bridge Loan is structured
to convert into a term loan if not repaid by May 3, 1998 with a final maturity
of October 22, 1999. The Company will be required to pay a fee equal to 3% of
the outstanding balance of the Bridge Loan to convert to a term loan.
Management plans to retire the Bridge Loan prior to its maturity and conversion
to a term facility and anticipates that it would obtain the funds for the
retirement either from a debt or equity offering and/or the sale of assets.
At May 12, 1996, the Company had cash and cash equivalents of
approximately $5.8 million and unsecured lines of credit totalling $30.0
million under which the Company had borrowings of $16.7 million outstanding.
Capital expenditures for fiscal 1996 are expected to be approximately $77.6
million.
During the last half of fiscal 1995 and the first half of fiscal 1996,
the Company's earnings and cash flow from operating activities have been less
than reported in the same periods of the respective prior years. The Company
has been able to make adjustments to its planned capital expenditures to adjust
for the shortfall in cash from operations. Management believes that its
sources of cash are sufficient to complete its capital expenditure program for
1996 substantially as planned. However, if trends in operating results do not
continue to improve, the Company could be compelled to reduce its capital
expenditure program for remodeling in the latter half of fiscal 1996.
Management does not believe that such a curtailment of expenditures for
remodeling would have a material adverse affect on other trends in revenue
growth and profitability.
On March 15, 1996, the Company entered into a definitive agreement
with Enterprises, the largest franchisee of the Company's Shoney's and Captain
D's restaurant concepts, whereby the Company or one of its subsidiaries will
acquire TPI Restaurants, Inc. ("TPIR") and two other of Enterprises'
subsidiaries, which represent substantially all of the assets of Enterprises.
As of April 21, 1996, TPIR operated 187 Shoney's and 67 Captain D's restaurants
in eleven states. The Enterprises subsidiaries will be acquired in exchange for
5,577,102 shares of Shoney's, Inc. common stock plus
(18)
<PAGE> 19
an additional $10 million of Shoney's, Inc. common stock based on the average
closing market price for the ten days immediately prior to closing, subject to
certain adjustments. In addition, Shoney's, Inc. will assume or refinance
certain debts and other obligations of Enterprises or its subsidiaries totaling
approximately $106 million, including approximately $51.6 million of 8.25%
subordinated convertible debentures that are expected to remain outstanding
following the closing. Based on historical operating results of the acquired
restaurants, management believes that the cash flow from the acquired
restaurants will be sufficient to service the additional debt assumed or
refinanced by the Company. Savings in general and administrative costs and
commissary overhead from combining the two companies are expected to generate
an additional $10 to $15 million of cash flow and should further enhance cash
flow available to repay debt.
The transaction is subject to the approval of both the Company's and
Enterprises' shareholders, as well as certain regulatory approvals, and certain
other conditions. The Company has filed a registration statement on Form S-4
with the Securities and Exchange Commission ("SEC") relative to the
acquisition which has not yet been declared effective. The Company
anticipates that the transaction will be consummated in August 1996, subject
to the satisfaction of the conditions to closing.
(19)
<PAGE> 20
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings
Item 3 of Amendment No. 1 to the Company's Annual Report on Form 10-K,
filed with the Commission on February 27, 1995 and Item 1 of Part II of the
Company's Quarterly Report on Form 10-Q, filed with the Commission on April 3,
1996 are incorporated herein by this reference. See also Note 8 to the Notes
to Consolidated Condensed Financial Statements at pages 10-11 of this Quarterly
Report on Form 10-Q.
Item 4. Submission of Matters to a Vote of Security-Holders
(a) The annual meeting of the Company (the "Annual Meeting") was held
on April 2, 1996. At that time, there were present, in person or by proxy,
32,584,939 shares of the Company's common stock.
(b) At the Annual Meeting, one item that was submitted to a vote of
shareholders was the election of directors. Proxies for the Annual Meeting
were solicited pursuant to Regulation 14A under the Securities Exchange Act of
1934. There was no solicitation in opposition to management's nominees for
director as listed in the proxy statement and all such nominees were elected.
(c) The results of voting for the election of directors at the Annual
Meeting, the only matter voted upon, were as follow:
<TABLE>
<CAPTION>
Nominee
---------
For Against Withheld
------ ------- --------
<S> <C> <C> <C>
Dennis C. Bottorff 32,442,081 0 142,858
Carole F. Hoover 32,412,125 0 172,814
Victoria B. Jackson 32,406,238 0 178,701
C. Stephen Lynn 32,443,702 0 141,237
Jeffry F. Schoenbaum 32,442,082 0 142,857
B. Franklin Skinner 32,435,652 0 149,287
Cal Turner, Jr. 32,435,408 0 149,531
</TABLE>
There were no abstentions or broker non-votes in the election of directors.
(20)
<PAGE> 21
Item 5 - Other Information
The Company is party to a Plan of Tax-Free Reorganization and
Agreement under Section 368(a)(1)(C) of the Internal Revenue Code dated as
of March 15, 1996 (the "Reorganization Agreement"), among the Company, a
wholly-owned subsidiary of the Company and TPI Enterprises, Inc.
("Enterprises"), providing for the acquisition by the Company of substantially
all of the assets of Enterprises in exchange for the issuance of shares of
common stock of the Company ("Common Stock") and the Company's assumption of
certain liabilities of Enterprises. By amendment No. 1 to the Reorganization
Agreement, dated as of June 14, 1996, the Termination Date of the
Reorganization Agreement, being the date after which either party would have
the right to terminate the Reorganization Agreement if the transactions
contemplated thereby have not been consummated, was extended from June 30, 1996
to August 30, 1996.
In anticipation of the closing of the Reorganization Agreement, the
Company has amended the Amended and Restated Rights Agreement dated as of May
25, 1994 between the Company and Harris Trust and Savings Bank, as Rights
Agent, and as amended by Amendment No. 1 dated as of April 18, 1995 (as
amended, the "Shareholder Rights Plan"), relating to the rights issued in
respect of the Company's common stock. The purpose of the amendment is to
prevent Enterprises and its Affiliates and Associates (as defined in the
Shareholder Rights Plan) from being treated as an "Acquiring Person" under the
Shareholder Rights Plan as a result of Enterprises' temporary beneficial
ownership of 10% or more of the outstanding Common Stock following the
completion of the transactions contemplated by the Reorganization Agreement,
subject to certain conditions. Reference is made to Amendment No. 2 dated June
14, 1996 to the Amended and Restated Rights Agreement, dated May 25, 1994,
between the Company and Harris Trust and Savings Bank, which is filed as
Exhibit 4.5 to this Report and incorporated herein by reference.
Item 6 - Exhibits and Reports on Form 8-K
(a) In accordance with the provisions of Item 601 of Regulation
S-K, the following have been furnished as Exhibits to this Quarterly Report on
Form 10-Q:
2.1 Plan of Tax-Free Reorganization Under Section 368
(a)(1)(C) of the Internal Revenue Code and Agreement,
filed as Exhibit 2 to the Company's Current Report on
Form 8-K filed with the Commission on March 20, 1996, and
incorporated herein by this reference.
2.2 Amendment No. 1 dated as of June 14, 1996 to Plan of
Tax-Free Reorganization Under Section 368 (a)(1)(C) of
the Internal Revenue Code and Agreement.
(21)
<PAGE> 22
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., filed as
Exhibits 3(ii) and 4.2 to the Company's Quarterly Report
on Form 10-Q for the quarter ended February 18, 1996 and
incorporated herein by this reference.
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 Amendment No. 1 dated as of April 18, 1995 to 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 May 4, 1995 and incorporated herein by this
reference.
4.5 Amendment No. 2 dated as of June 14, 1996 to 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.
4.6 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.
4.7 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.
(22)
<PAGE> 23
4.8 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.
4.9 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.
4.10 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 19.5 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.
4.11 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 19.6 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.
4.12 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.
(23)
<PAGE> 24
4.13 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,
filed as Exhibit 4.30 to the Company's Annual Report on
Form 10-K for the fiscal year ended October 30, 1994
filed with the Commission on January 30, 1995, and
incorporated herein by this reference.
4.14 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 19.7 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.
4.15 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.
4.16 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.
4.17 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), filed as Exhibit 4.34 to
the Company's Annual Report on Form 10-K for the fiscal
year ended October 30, 1994 filed with the Commission on
January 30, 1995, and incorporated herein by this
reference.
4.18 Amended and Restated Note Issuance Agreement, dated as of
November 1, 1993, among the Company, NationsBank of
(24)
<PAGE> 25
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.
4.19 Reimbursement Agreement, dated as of October 1, 1991,
together with the Standby Note relating thereto, between
the Company and National 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.
4.20 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.
4.21 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.
4.22 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.
4.23 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.
(25)
<PAGE> 26
4.24 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.
4.25 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.
4.26 Loan Agreement dated as of December 1, 1994 between the
Company and NationsBank of Tennessee, N.A., filed as
Exhibit 4.43 to the Company's Annual Report on Form 10-K
for the fiscal year ended October 30, 1994 filed with the
Commission on January 30, 1995, and incorporated herein
by this reference.
4.27 U.S. $270,000,000 Amended and Restated Reducing Revolving
Credit Agreement, dated as of July 21, 1993, as amended
and restated as of May 3, 1996, among Shoney's, Inc., as
the Borrower, CIBC Inc., acting through its Atlanta
Office and various other financial institutions now or
hereafter parties hereto, as the Lenders, and Canadian
Imperial Bank of Commerce acting through its New York
Agency, as the Agent for the Lenders, filed as Exhibit
4.2 to the Company's Current Report on Form 8-K filed
with the Commission on May 15, 1996, and incorporated
herein by this reference.
4.28 U.S. $100,000,000 Bridge Loan Credit Agreement, dated as
of May 3, 1996, among Shoney's, Inc., as the Borrower,
Canadian Imperial Bank of Commerce, and various other
financial institutions now or hereafter parties hereto,
as the Lenders, and Canadian Imperial Bank of Commerce
acting through its New York Agency, as the Agent for the
Lenders, filed as Exhibit 4.1 to the Company's Current
Report on Form 8-K filed with the Commission on May 15,
1996, and incorporated herein by this reference.
10.1 License Agreement, dated as of October 25, 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.
(26)
<PAGE> 27
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 Amendment No. 2 dated as of March 18, 1994 to License
Agreement, dated as of October 28, 1991, between Shoney's
Investments, Inc. and ShoLodge Franchise Systems, Inc.,
filed as Exhibit 10.3 to the Company's Quarterly Report
on Form 10-Q for the quarter ended May 14, 1995 filed
with the Commission on June 28, 1995, and incorporated
herein by this reference.
10.4 Amendment No. 3 dated as of March 13, 1995 to License
Agreement, dated as of October 28, 1991, between Shoney's
Investments, Inc. and ShoLodge Franchise Systems, Inc.,
filed as Exhibit 10.4 to the Company's Quarterly Report
on Form 10-Q for the quarter ended May 14, 1995 filed
with the Commission on June 28, 1995, and incorporated
herein by this reference.
10.5 Stock Purchase and Warrant Agreement, dated as of October
25, 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.
10.6 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.
10.7 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.
(27)
<PAGE> 28
10.8 Shoney's, Inc. 1981 Stock Option Plan, as amended and
restated through March 17, 1994.
10.9 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 S-8 (File No. 2-64257)
filed with the Commission on April 11, 1990, and
incorporated herein by this reference.
10.10 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.
10.11 Shoney's, Inc. Employee Stock Purchase Plan, as amended
through May 1, 1991.
10.12 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.
10.13 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.
10.14 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.
10.15 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.
(28)
<PAGE> 29
10.16 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.
10.17 Shoney's, Inc. Supplemental Executive Retirement Plan,
filed as Exhibit 10.16 to the Company's Annual Report on
Form 10-K for the fiscal year ended October 29, 1995
filed with the Commission on January 28, 1996, and
incorporated herein by this reference, as amended by
Amendment No. 1 to the Shoney's, Inc. Supplemental
Executive Retirement Plan, filed as Exhibit 10.17 to the
Company's Quarterly Report on Form 10-Q for the quarter
ended February 18, 1996 and incorporated herein by this
reference.
10.18 Employment Agreement dated as of January 13, 1995 between
the Company and Taylor H. Henry, filed as Exhibit 10.15
to the Company's Annual Report on Form 10-K for the
fiscal year ended October 30, 1994 filed with the
Commission on January 30, 1995, and incorporated herein
by this reference.
10.19 Employment Agreement dated as of January 17, 1995 between
the Company and Charles E. Porter, filed as Exhibit 10.16
to the Company's Annual Report on Form 10-K for the
fiscal year ended October 30, 1994 filed with the
Commission on January 30, 1995, and incorporated herein
by this reference.
10.20 Employment Agreement dated as of June 17, 1996, between
the Company and W. Craig Barber.
10.21 Employment Agreement dated as of April 11, 1995, between
the Company and C. Stephen Lynn, filed as Exhibit 10.20
to the Company's Quarterly Report on Form 10-Q for the
quarter ended May 14, 1995 filed with the Commission on
June 28, 1995, and incorporated herein by this reference,
as amended by the Addendum filed as Exhibit 10.21
to the Company's Annual Report on Form 10-K for the
fiscal year ended October 29, 1995, filed with the
Commission on January 28, 1996, and incorporated herein
by this reference.
11 Statement regarding computation of per share earnings.
27 Financial Data Schedule (for SEC use only).
(29)
<PAGE> 30
(b) On March 20, 1996, the Company filed a report on Form 8-K to
report under item 5 of that form that on March 15, 1996, the
Company entered into an agreement with TPI Enterprises, Inc.
("TPI") whereby, subject to the terms and conditions of the
agreement, the Company agreed to acquire substantially all of the
properties of TPI (including the outstanding common stock of
certain of TPI's subsidiaries) in exchange for the Company's
issuance of shares of its $1.00 par value common stock and
assumption of certain specified liabilities of TPI.
On May 15, 1996, the Company filed a report on Form 8-K to report
under Item 5 of that form that the Company had obtained a senior
secured bridge loan in the aggregate principal amount of up to
$100 million to provide working capital and a source of financing
for the pending transaction with TPI, and, concurrently
therewith, had amended the reducing revolving credit facility of
the Company.
SIGNATURES
Pursuant to the requirements 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 both on behalf of the registrant and in
his capacity as principal financial officer of the registrant.
Date: June 25, 1996 By: /s/ W. Craig Barber
------------------------------------
W. Craig Barber
Senior Executive Vice President and
Chief Financial Officer
(30)
<PAGE> 1
EXHIBIT 2.2
AMENDMENT NO. 1 TO
PLAN OF TAX-FREE ORGANIZATION UNDER
SECTION 368(a)(1)(C)
OF THE INTERNAL REVENUE CODE
AND AGREEMENT
This Amendment No. 1 ("Amendment"), dated June 14, 1996, amends the Plan
of Tax-Free Reorganization under Section 368(a)(1)(C) of the Internal Revenue
Code and Agreement ("Agreement") made and entered into as of the 15th day of
March, 1996, by and among Shoney's, Inc., a Tennessee corporation, ("Shoney's"),
TPI Restaurants Acquisition Corporation, a Tennessee corporation ("TPAC"), and
TPI Enterprises, Inc., a New Jersey corporation ("Enterprises").
WHEREAS, the parties mutually desire to extend the Termination Date, as
that term is used in the Agreement, from June 30, 1996 to August 30, 1996;
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, Shoney's, TPAC and Enterprises agree as follows:
Amendment to ARTICLE 1. The definition of "Termination Date" appearing
in ARTICLE 1 of the Agreement is hereby amended to read in its entirety as
follows:
"Termination Date" means August 30, 1996.
Reaffirmation of Other Terms and Conditions. Except as modified by this
Agreement, all other terms and conditions of the Agreement, as in effect prior
to the execution of this Amendment, shall remain in full force and effect and
the same are hereby reaffirmed and ratified as if fully set forth herein.
IN WITNESS WHEREOF, Shoney's, Enterprises and TPAC have caused this
Amendment No. 1 to the Agreement to be signed by their respective officers
thereunto duly authorized, on this 14th day of June, 1996.
TPI ENTERPRISES, INC.
By: /s/ J. Gary Sharp
-----------------------------------
J. Gary Sharp, President and CEO
SHONEY'S INC.
By: /s/ W. Craig Barber
-----------------------------------
W. Craig Barber, Senior Executive
Vice President and Chief Financial
Officer
TPI RESTAURANTS ACQUISITION CORP.
By: W. Craig Barber
-----------------------------------
W. Craig Barber, Vice President
<PAGE> 1
EXHIBIT 4.5
AMENDMENT NO. 2
Amendment No. 2, dated as of June 14, 1996, to the Amended and
Restated Rights Agreement, dated as of May 25, 1994 (the "Rights Agreement"),
between Shoney's, Inc., a Tennessee corporation (the "Company"), and Harris
Trust and Savings Bank, an Illinois banking corporation, as Rights Agent (the
"Rights Agent," which term shall include any successor Rights Agent under the
Rights Agreement).
WITNESSETH:
WHEREAS, on May 25, 1994, the Company and the Rights Agent entered
into the Rights Agreement;
WHEREAS, Section 5.4 of the Rights Agreement provides that the
Company may amend the Rights Agreement without the approval of any holders of
Rights Certificates with respect to matters which shall not adversely affect
the interests of such holders; and
WHEREAS, the Company and the Rights Agent wish to amend the Rights
Agreement;
NOW, THEREFORE, for and in consideration of the premises, the Rights
Agreement is amended to read as follows:
1. The definition of "Acquiring Person" is amended to read as
follows:
"Acquiring Person" shall mean any person who is a Beneficial Owner
of 10% or more of the outstanding shares of Common Stock; provided, however,
that the term "Acquiring Person" shall not include (i) any Person who is the
Beneficial Owner of 10% or more of the outstanding shares of Common Stock on
the date of this Agreement or who shall become the Beneficial Owner of 10% or
more of the outstanding shares of Common Stock solely as a result of an
acquisition by the Company of shares of Common Stock, until such time hereafter
or thereafter as such Person shall become the Beneficial Owner (other than by
means of a stock dividend or stock split) of any additional shares of Common
Stock, (ii) any Person who is the Beneficial Owner of 10% or more of the
outstanding shares of Common Stock but who acquired Beneficial Ownership of
shares of Common Stock without any plan or intention to seek or affect
<PAGE> 2
control of the Company, if such Person promptly enters into an irrevocable
commitment promptly to divest, and thereafter promptly divests (without
exercising or retaining any power, including voting, with respect to such
shares), sufficient shares of Common Stock (or securities convertible into,
exchangeable into or exercisable for Common Stock) so that such Person ceases
to be the Beneficial Owner of 10% or more of the outstanding shares of Common
Stock, (iii) any Person who Beneficially Owns shares of the Common Stock
consisting solely of one or more of (A) shares of Common Stock Beneficially
Owned pursuant to the grant or exercise of an option granted to such Person by
the Company in connection with an agreement to merge with, or acquire, the
Company at a time at which there is no Acquiring Person, (B) shares of Common
Stock (or securities convertible into, exchangeable into or exercisable for
Common Stock), Beneficially Owned by such Person or its Affiliates or
Associates at the time of grant of such option or (C) shares of Common Stock
(or securities convertible into, exchangeable into or exercisable for Common
Stock) acquired by Affiliates or Associates of such Person after the time of
such grant which, in the aggregate, amount to less than 1% of the outstanding
shares of Common Stock or (iv) TPI Enterprises, Inc. ("Enterprises") or any
Person who is an Affiliate or Associate of Enterprises following the date on
which Enterprises becomes the Beneficial Owner of Common Stock pursuant to the
Plan of Tax-Free Reorganization under Section 368(a)(1)(C) of the Internal
Revenue Code and Agreement, dated as of March 15, 1996, among the Company, a
wholly-owned subsidiary of the Company and Enterprises (the "Agreement"),
provided that such exception shall cease to apply on and after the date on
which any of the following shall have occurred: (I) any person or group (other
than a Person who was an Affiliate or Associate of Enterprises on March 15,
1996) Beneficially Owns in excess of 10% of the voting securities of
Enterprises, or the individuals who, as of March 15, 1996, were members of the
board of directors of Enterprises, cease for any reason to constitute at least
the majority of the board of directors of Enterprises; (II) after March 15,
1996, any Affiliate or Associate of Enterprises increases the percentage of the
voting securities of Enterprises that it Beneficially Owns; (III) after March
15, 1996, Enterprises or any Affiliate or Associate of Enterprises becomes the
Beneficial Owner of any shares of Common Stock other than the shares of Common
Stock acquired pursuant to the Agreement; (IV) after March 15, 1996,
Enterprises or any Associate or Affiliate of Enterprises acquires or makes any
proposal or enters into any agreement to acquire any assets or securities of
the Company, except as contemplated by the Agreement, or announces, commences
or participates in a proxy or consent solicitation with respect to the Company,
(V) the Board of Directors of the Company determines that Enterprises shall not
have distributed the shares of Common Stock in accordance with the Plan of
Complete Liquidation, a copy of which was attached as Appendix D to the Joint
Proxy Statement/Prospectus included in the Registration Statement on Form S-4
of the Company (Registration No. 333-4201), and the terms of the Agreement; or
(VI) the ninetieth (90th) day following the Closing Date, as defined in the
Agreement, or such other date the Board of Directors of the Company determines
to be reasonable and consistent with the interests of the Company.
IN WITNESS THEREOF, the parties hereto have caused this Amendment
No. 2 to be duly executed as of the date first above written.
2
<PAGE> 3
SHONEY'S, INC.
By: /s/ W. Craig Barber
----------------------------------------
Name: W. Craig Barber
Title: Senior Executive Vice President
and Chief Financial Officer
HARRIS TRUST AND SAVINGS BANK
By: /s/ Keith A. Bradley
----------------------------------------
Name: Keith A. Bradley
Title: Assistant Vice President
3
<PAGE> 1
EXHIBIT 10.8
SHONEY'S, INC.
1981 STOCK OPTION PLAN
(As Amended Through 3/17/94)
PURPOSE OF THE PLAN
This Stock Option Plan (the "Plan") is intended to promote the
interests of Shoney's, Inc. (the "Company") and its shareholders by encouraging
those key employees who will be responsible for the future growth and continued
development of the Company and its Subsidiaries, as hereinafter defined, to
own, and to increase their ownership of, the Company's stock, thereby giving
them, as shareholders, an increased personal interest in, and a greater concern
for, the Company's continued success and progress.
STATEMENT OF THE PLAN
1. NAME. The Plan shall be known as the Shoney's, Inc. 1981 Stock
Option Plan.
2. DEFINITION OF TERMS. In addition to words and terms that may
be defined elsewhere in the Plan, the following words and terms as used in the
Plan shall have the following meanings unless the context or use fairly
indicates another or different meaning or intent, which definitions shall be
equally applicable to both the singular and plural forms of such words and
terms:
"Board" shall mean the Board of Directors of the Company.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
"Common Stock" shall mean the common stock of the Company having a par
value of $1.00 per share.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
"Incentive Option" shall mean an option which qualifies as an incentive
stock option within the meaning of section 422A of the Code.
"Nonqualified Option" shall mean an option which does not qualify as an
incentive stock option under section 422A of the Code or as a qualified stock
option under section 422 of the Code.
"Participant" shall mean an employee of the Company or any of its
Subsidiaries to whom an option is granted under the Plan.
<PAGE> 2
"Prior Plan" shall mean the Stock Option Plan originally approved by
the shareholders of the Company on January 16, 1969, as amended.
"Subsidiary" shall mean any corporation which at the time qualifies as
a subsidiary of the Company under the definition of "subsidiary corporation"
contained in section 425(f) of the Code.
3. ADMINISTRATION. The Plan shall be administered by the Human
Resources and Compensation Committee (the "Committee"), which shall consist of
not less than three members. The Committee shall be appointed by the Board
from its membership. Members of the Committee shall not be eligible to
participate in the Plan.
The Committee may interpret the Plan, prescribe, amend, and rescind any
rules and regulations necessary or appropriate for the administration of the
Plan, and make such other determinations and take such other action as it deems
necessary or desirable for the administration of the Plan and the protection of
the Company except as otherwise reserved to the Board or the shareholders of
the Company. Without limiting the generality of the foregoing, the Committee,
in its discretion, may treat all or any part of any period during which a
Participant is on military duty or on an approved leave of absence from the
Company or a Subsidiary as a period of employment of such Participant by the
Company or Subsidiary, as the case may be, for purposes of accrual of the
Participant's rights under the option. Any interpretation, determination, or
other action made or taken by the Committee shall be final, binding, and
conclusive.
No member of the Committee shall be liable for any action taken or
omitted or determination made in good faith with respect to the Plan or any
option granted under the Plan.
4. SHARES SUBJECT TO PLAN. Options may be granted by the Company
from time to time to purchase an aggregate of 19,338,785* shares of Common
Stock, subject to adjustment as provided in section 9. The shares issued upon
exercise of options granted under the Plan may be authorized and unissued
shares or shares held by the Company in its treasury. If any option granted
under the Plan shall terminate, expire, or, with the consent of the
Participant, be cancelled as to any shares, new options may thereafter be
granted covering any such shares.
- --------------------
*Adjusted to reflect the stock splits, additional shares allocated to
the Plan and recapitalization of the Company on July 25, 1988.
-2-
<PAGE> 3
5. ELIGIBILITY. Options may be granted to those employees of the
Company (including officers, whether or not they are directors) who have and
exercise key management functions and responsibilities for the Company or any
Subsidiary. The granting of an option to any employee shall neither entitle
such employee to, nor disqualify such employee from, participation in any other
grant of options.
6. GRANT OF OPTIONS. The Committee shall have the authority,
subject to the terms of the Plan, to: (a) determine and designate from time to
time those employees of the Company or any Subsidiary to whom options are to be
granted and the number of shares to be optioned to each such employee, provided
that no director of the Company who is not also an employee of the Company or
of a Subsidiary shall be entitled to receive any option under the Plan; (b)
authorize the granting of Incentive Options, Nonqualified Options, or
combinations of Incentive Options and Nonqualified Options; and to require, if
it so determines, that if an Incentive Option and a Nonqualified Option are
granted to the same Participant, then to the extent one option is exercised the
other option shall not be exercised and shall terminate; (c) determine the
number of shares subject to each option; and (d) determine the schedule and
duration of the exercise period for any option. The date of grant of an option
under the Plan will be the date on which the option is awarded by the
Committee.
7. TERMS AND CONDITIONS OF OPTIONS. Each option granted under
the Plan shall be evidenced by an agreement, in a form approved by the
Committee, and shall be subject to the terms and conditions contained in
sections 7.1 through 7.8 and to such other terms and conditions as the
Committee may deem appropriate; provided, however, that no Incentive Option
shall be subject to any condition that is inconsistent with the provisions of
subsection (b) of section 422A of the Code. In the event that any condition
imposed hereunder on an Incentive Option is at any time determined by the
Internal Revenue Service or a court of competent jurisdiction to be
inconsistent with section 422A of the Code, then each Incentive Option shall be
deemed to have been granted without such condition but shall continue in effect
under such remaining terms and conditions as may be applicable as if the
invalid condition had not been included.
7.1 OPTION PERIOD. Each option agreement shall specify the period
during which the option thereunder is exercisable (which shall not exceed ten
(10) years from the date of grant) and shall provide that the option shall
expire at the end of such period.
7.2 OPTION PRICE. The option price per share shall be determined by
the Committee at the time any option is granted, and shall not be less than one
hundred percent (100%) of the fair market value (and in no event less than par
value) of a share of
-3-
<PAGE> 4
Common Stock on the day that the option is granted. Such price shall be
subject to adjustment as provided in section 9.
7.3 NONTRANSFERABILITY.The options granted hereunder shall not be
transferable by the Participant otherwise than by will or the laws of descent
and distribution, or pursuant to a qualified domestic relations order as
defined by the Code or Title I of ERISA.
7.4 TEN PERCENT SHAREHOLDERS. Incentive Options shall not be
granted to any employee who, immediately before the option is granted, owns
stock possessing more than ten percent (10%) of the total combined voting power
of all classes of stock of the Company or of its parent or Subsidiaries;
provided, however, that this prohibition shall not apply if at the time such
option is granted the option price is at least one hundred ten percent (110%)
of the fair market value of the Common Stock and such option is not exercisable
after the expiration of five (5) years from the date such option is granted.
7.5 SUCCESSIVE OPTIONS. Notwithstanding anything herein contained
to the contrary, no Incentive Option granted hereunder to a Participant shall
be exercisable while there is outstanding, within the meaning of section
422A(c)(7) of the Code, any Incentive Option theretofore granted to such
Participant to purchase stock in the Company or in a corporation which (at the
time of the granting of this option) is a parent or Subsidiary of the Company,
or is a predecessor corporation of any such corporations.
7.6 ANNUAL LIMITATION. The aggregate fair market value (determined
as of the time the option is granted) of the stock for which any employee may
be granted Incentive Options during any calendar year (under the Plan as well
as any other plan of the Company and any parent and Subsidiary of the Company)
shall not exceed One Hundred Thousand Dollars ($100,000.00) plus any unused
limit carryover to such year, determined according to section 422A(c)(4) of the
Code. Notwithstanding the limitation set forth in the preceding sentence, no
employee may be granted options for more than Two Hundred Fifty Thousand
(250,000) shares of Common Stock during any fiscal year of the Company.
7.7 TERMINATION OF EMPLOYMENT. If any Participant shall cease to
be an employee of either the Company, a parent, or Subsidiary of the Company,
or a corporation or a parent or subsidiary corporation of such corporation
issuing or assuming a stock option in a transaction to which section 425(a) of
the Code applies, except when such cessation of employment is caused by the
death or disability of the Participant, the Participant may, within ten (10)
business days of such cessation of employment, exercise the option granted to
such Participant to the same extent that the Participant might have exercised
such option on the date of
-4-
<PAGE> 5
cessation of employment. To the extent that any option is not exercisable at
the date of cessation of employment or is not exercised within such ten (10)
business day period thereafter, it shall terminate. The personal
representative of the Participant in the event of the Participant's death, or
the Participant in the event of the Participant's disability, may, subject to
the provisions hereof and before the earlier of the option's expiration date or
the expiration of three (3) months after the date of such death or disability,
exercise the option granted to such Participant up to the total number of
shares covered by the option less any previous exercises. To the extent that
any option is not exercised in accordance herewith, it shall terminate at the
earlier of the option's expiration date or the expiration of the three (3)
month period following such death or disability. For purposes of this section,
a Participant shall be considered to be subject to a disability when such
Participant is disabled within the meaning of section 105(d)(4) of the Code.
Nothing in the Plan shall be construed as imposing any obligation on the
Company to continue the employment of any Participant.
7.8 PERIOD OF EXERCISE OF OPTIONS. Any option granted hereunder,
may, prior to its expiration or termination, be exercised from time to time, in
whole or in part, up to the total number of shares with respect to which it
shall have then become exercisable. An option granted hereunder shall become
exercisable in such installments as are specified in the option agreement, the
rate of which shall not be at a rate exceeding the following schedule:
(a) After one year from the date the option is granted, it may
be exercised as to not more than 33 1/3% of the shares covered
thereunder.
(b) After two years from the date the option is granted, it
may be exercised as to not more than an additional 33 1/3%, or a total
of 66 2/3%, of the shares covered thereunder.
(c) After three years from the date the option is granted, it
may be exercised as to all of the shares covered thereunder.
8. EXERCISE OF OPTIONS. The exercise of any option under the Plan
shall be subject to the provisions of sections 8.1 through 8.3.
8.1 METHOD OF EXERCISING OPTION. Any option granted hereunder may
be exercised by the Participant by delivering to the Company at its main office
(attention of its Secretary) written notice of the number of shares with
respect to which the option rights are being exercised and by paying the
purchase price of the shares purchased in full, in exchange for the issuance
and delivery
-5-
<PAGE> 6
of a certificate therefore to or on the order of the Participant, subject to
the provisions of section 7.5 when applicable.
8.2 PAYMENT OF PURCHASE PRICE. The purchase price of the shares as
to which an option is exercised shall be paid in full to the Company at the
time of exercise. The payment may be made either in cash or its equivalent, by
withholding shares to be obtained through exercise of the option as described
below, or with stock of the Company previously acquired by the Participant;
provided, however, that the Committee, in its discretion, may suspend or
terminate the right of Participants to pay with stock of the Company should the
Committee deem such action to be in the best interests of the Company.
8.3 WITHHOLDING. The Company's obligation to deliver shares on the
exercise of any option shall be subject to satisfaction of any applicable
federal, state, and local tax withholding requirements.
9. CAPITAL ADJUSTMENTS. The number and price of shares of Common
Stock covered by each option and the total number of shares that may be
optioned and sold under the Plan shall be proportionately adjusted to reflect
any stock dividend, stock split or share combination of the Common Stock or any
recapitalization of the Company. In the event of any merger, consolidation,
reorganization, liquidation or dissolution of the Company, or any exchange of
shares involving the Common Stock, any option granted under the Plan shall
automatically be deemed to pertain to the securities and other property to
which a holder of the number of shares of Common Stock covered by the option
would have been entitled to receive in connection with any such event. The
Committee shall have the sole discretion to make all interpretations and
determinations required under this section to the extent it deems equitable and
appropriate.
10. RESERVATION AND DELIVERY OF SHARES. The Company, during the
term of any options granted hereunder, will at all times reserve and keep
available, and will seek to obtain from any regulatory body having jurisdiction
any requisite authority in order to issue and sell, such number of shares of
Common Stock as shall be sufficient to satisfy the requirements of the options
granted under the Plan. If in the opinion of its counsel, the issuance or sale
of any shares of its stock hereunder shall not be lawful for any reason,
including the inability of the Company to obtain from any regulatory body
having jurisdiction authority deemed by such counsel to be necessary for such
issuance or sale, the Company shall not be obligated to issue or sell any such
shares.
11. EVENT OF DEFEASANCE. Any options granted hereunder are
specifically made subject to defeasance by the failure of the
-6-
<PAGE> 7
shareholders of the Company to approve the Plan within a period of twelve
months from the date the Plan is adopted by the Board.
12. SECURITIES LAWS. Upon the exercise of an option at a time when
there is not in effect under the Securities Act of 1933, a current registration
statement relating to the shares of Common Stock to be received upon such
exercise, the Participant shall represent and warrant in writing to the Company
that the shares purchased are being acquired for investment and not with a view
to the distribution thereof and shall agree to the imposition of a legend on
the certificate or certificates representing said shares evidencing the
restrictions on transfer under the Securities Act of 1933 and the issuance of
stop-transfer instructions by the Company to its transfer agent with respect
thereto. No shares of Common Stock shall be issued or sold upon the exercise
of any option unless and until the then applicable requirements of the
Securities Act of 1933, as any of the same may be amended, the rules and
regulations of the Securities and Exchange Commission and any other regulatory
agencies and laws having jurisdiction over or applicability to the Company, and
the rules and regulations of any securities exchange on which the Common Stock
may be listed, shall have been fully complied with and satisfied.
13. NO RIGHTS AS SHAREHOLDER. A Participant shall not have any
rights as a shareholder with respect to any shares covered by any option
granted hereunder until the issuance of a stock certificate for such shares.
No adjustment shall be made on the issuance of a stock certificate to a
Participant as to any dividends or other rights for which the record date
occurred prior to the issuance of such certificate.
14. INDEMNIFICATION AND EXCULPATION. Each person who is or shall
have been a member of the Board or of the Committee shall be indemnified and
held harmless by the Company against and from any and all loss, cost,
liability, or expense that may be imposed upon or reasonably incurred by
him/her in connection with or resulting from any claim, action, suit, or
proceeding to which he/she may be or become involved by reason of any action
taken or failure to act under the Plan and against and from any and all amounts
paid by him/her in settlement thereof (with the Company's written approval) or
paid by him/her in satisfaction of a judgment in any such action, suit, or
proceeding, except a judgment in favor of the Company based upon a finding of
his lack of good faith; subject, however, to the condition that upon the
institution of any claim, action, suit, or proceeding against him/her, he/she
shall in writing give the Company an opportunity, at its expense, to handle and
defend the same before he/she undertakes to handle and defend it on his/her own
behalf. The foregoing right of indemnification shall not be exclusive or any
other right to which such person may be entitled as a matter of law or
otherwise, or any power that the Company may have to indemnify him/her or hold
him/her harmless.
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<PAGE> 8
Each member of the Board or of the Committee, and each officer and employee of
the Company shall be fully justified in relying or acting in good faith upon
any information furnished in connection with the administration of the Plan by
any appropriate person or persons other than himself/herself. In no event
shall any person who is or shall have been a member of the Board or of the
Committee, or an officer or employee of the Company, be held liable for any
determination made, or other action taken, or any omission to act in reliance
upon any such information as referred to in the preceding sentence, or for any
action (including the furnishing of information) taken or any omission to act,
when any such determination, action, or omission is made in good faith.
15. USE OF PROCEEDS. Proceeds from the sale of stock pursuant to
options granted under the Plan shall constitute general funds of the Company.
16. AMENDMENT AND DISCONTINUANCE. The Board or the shareholders of
the Company may terminate or amend the Plan in any respect at any time, except
that (a) no action of the Board or the shareholders may alter or impair a
Participant's rights under any outstanding option without the Participant's
consent, and (b) without the approval of the shareholders, the total number of
shares that may be optioned and sold under the Plan may not be increased
(except by adjustment pursuant to section 9), the provisions of section 5
regarding eligibility may not be modified, the price at which shares may be
purchased pursuant to options granted hereunder may not be reduced (except by
adjustment pursuant to section 9), the expiration date of the Plan may not be
extended, and the provisions of this section 16 may not be changed.
17. TERM OF PLAN. Subject to the provisions of section 11, the
Plan shall be effective as of the date of the adoption of the Plan by the Board
and shall expire on September 2, 2001 (except as to options outstanding on that
date), and no option shall be granted under the Plan on or after such
expiration date.
18. PRIOR STOCK OPTION PLAN. The Prior Plan, together with all
options granted thereunder, shall continue in full force and effect with such
rights and obligations thereunder as were applicable prior to the adoption of
the Shoney's, Inc. 1981 Stock Option Plan, except that pursuant to section 251
of the Economic Recovery Tax Act of 1981, the Company has elected to have the
amendments made by that section (governing incentive stock options under
section 422A of the Code) apply to any qualified stock options (governed by
section 422 of the Code) that were granted under Part I of the Prior Plan on or
after January 1, 1976 and before January 1, 1981, and which were exercised on
or after January 1, 1981 or were outstanding on such date, to the extent
permitted by said section 251.
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<PAGE> 9
19. GENERAL. Except as the same may be governed by the Code and
any applicable federal securities laws, the Plan and any options granted
hereunder shall be governed by and construed in accordance with the laws of the
State of Tennessee. As herein used, the singular number shall include the
plural, the plural the singular, and the use of any gender shall be applicable
to all genders, unless the context or use shall fairly require a different
construction. Section or paragraph headings are employed herein solely for
convenience of reference, and such headings shall not affect the validity,
meaning, or enforceability of any provision of the Plan. All references herein
to "section" or "paragraph" shall mean the appropriately numbered section or
paragraph of the Plan except where reference is made to the Code of any other
specified law or instrument.
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<PAGE> 1
EXHIBIT 10.11
SHONEY'S, INC.
STOCK PURCHASE PLAN
(As Amended Through 05/01/91)
PURPOSE OF THE PLAN
The Shoney's, Inc. Employee Stock Purchase Plan (the "Plan") is intended
to promote the interests of Shoney's, Inc. (the "Company") and its shareholders
by encouraging employees of the Company and its Subsidiaries, as hereinafter
defined, to own, and to increase their ownership of, the Company's stock,
thereby giving them, as shareholders, an increased personal interest in, and a
greater concern for, the Company's continued success and progress. The Plan is
intended to be administered as a qualified "employee stock purchase plan" under
Section 423 of the Internal Revenue Code, and provisions of the Plan will
therefore be construed in a manner that will comport with Section 423 of the
Code.
STATEMENT OF THE PLAN
1. NAME. The Plan shall be known as the Shoney's, Inc. Employee Stock
Purchase Plan.
2. DEFINITION OF TERMS. In addition to words and terms that may be
defined elsewhere in the Plan, the following words and terms as used in the
Plan shall have the following meanings unless the context or use fairly
indicates another or different meaning or intent, which definitions shall be
equally applicable to both the singular and plural forms of such words and
terms:
"Anniversary Date" shall mean each January 1 on and after January 1,
1986.
"Board" shall mean the Board of Directors of the Company.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
"Closing Market Price" shall mean the price of the last trade of the
Company's Common Stock as reported by the New York Stock Exchange
("NYSE"); provided that, if there shall be any material alteration in the
present system of reporting sales prices of such stock, or if such stock
shall no longer be listed on the NYSE, the market value of the stock as of
a particular date shall be determined in such a method as shall be
determined by the Compensation Committee of the Board.
"Committee" shall mean the Compensation Committee of the Board.
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<PAGE> 2
"Common Stock" shall mean the common stock of the Company, having a
par value of $1.00 per share.
"Contribution Account" shall mean the account established on behalf
of a Member to which shall be credited the amount of the Member's
contribution, pursuant to section 6.
"Effective Date" shall mean January 1, 1986.
"Employee" shall mean each current or future employee of an Employer.
"Employer" shall mean the Sponsoring Employer, its successors and
assigns, any majority owned Subsidiary of the Sponsoring Employer, and any
corporation into which an Employer may be merged or consolidated or to
which all or substantially all of its assets may be transferred, provided
such corporation does not affirmatively disavow this Plan.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"Exercise Date" shall mean the last trading date of any Plan Year on
the NYSE.
"Grant Date" shall mean the first trading date of any Plan Year on
the NYSE.
"Issue Price" shall mean the price of the stock to be charged to
participating members at the Exercise Date. The "Issue Price" shall be
subject to a minimum as outlined in section 7.
"Member" shall mean any Employee of an Employer who has met the
conditions and provisions for becoming a Member as provided in section 5.
"Member's Contribution Rate" shall be an exact number of dollars
elected by the member to contribute by regular payroll deduction to his or
her Contribution Account as outlined in section 6.
"Officer" shall have that meaning set forth in Title 17 of the Code
of Federal Regulations, Sec. 240.16a-1(f).
"Plan Year" shall mean a twelve (12) month period beginning on the
first day of January and ending on the last day of December.
"Plan Year Average Price" shall mean the arithmetic average of the
Closing Market Price on the first trading day of each of the twelve (12)
months of the Plan Year.
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<PAGE> 3
"Request for Participation" shall mean the form that must be filed
with such officer of the Sponsoring Employer as is designated by the
Committee. The Request for Participation shall request and include such
information as may be prescribed from time to time by the Committee.
"Sponsoring Employer" shall mean the Company.
"Sponsoring Employer Stock" shall mean those shares of Sponsoring
Employer's Common Stock which pursuant to Section 4 are reserved for
issuance under the Plan.
"Subsidiary" shall mean any corporation that at the time qualifies as
a subsidiary of the Company under the definition of "subsidiary
corporation" contained in Section 425(f) of the Code.
3. ADMINISTRATION. The Plan shall be administered by the Committee,
which shall consist of not less than three members. The Committee shall be
appointed by the Board from its membership. Members of the Committee shall not
be eligible to participate in the Plan.
The Committee may interpret the Plan, prescribe, amend, and rescind any
rules and regulations necessary or appropriate for the administration of the
Plan, and make such other determinations and take such other action as it deems
necessary or desirable for the administration of the Plan and the protection of
the Company except as otherwise reserved to the Board or the shareholders of
the Company. Any interpretation, determination or other action made or taken by
the Committee shall be final, binding and conclusive.
No member of the Committee shall be liable for any action taken or omitted
or determination made in good faith with respect to the Plan or any option
granted under the Plan.
4. SHARES SUBJECT TO PLAN. The Company, from time to time, may issue an
aggregate of 2,918,730* shares of Common Stock pursuant to the Plan, subject to
adjustment as provided in section 10. The shares issued under the Plan may be
authorized and unissued shares or shares held by the Company in its treasury.
5. ELIGIBILITY. Each Employee shall become eligible to be a Member if
employed on or before November 30 immediately preceding the next Anniversary
Date; provided, however, that an Employee shall not be eligible to be a Member
who, on the Grant Date or immediately thereafter in the Plan Year, owns,
directly or indirectly (within the meaning of Section 423(b)(3) of the Code) 5
percent or more of the total combined voting power or value of all
*Adjusted for stock splits and 1988 recapitalization.
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<PAGE> 4
classes of stock of the Company, its parent corporation or its subsidiaries.
Each Employee who is eligible to become a Member shall be furnished a
summary of the Plan and a Request for Participation. If such Employee elects to
become a Member hereunder, the Employee shall complete such form and submit it
to his/her Employer, to be received no later than November 30 prior to the next
Anniversary Date. If any Employee does not elect to become a Member in any
given Plan Year the Employee may elect to participate on any future Anniversary
Date so long as the Employee continues to meet the eligibility requirements.
Upon becoming a Member, said Member shall be bound by the terms of this Plan,
including any amendments hereto.
This Plan will not be deemed to constitute a contract between an Employer
and any Member or to be a consideration of an inducement for the employment of
any Member or Employee. Nothing contained in this Plan shall be deemed to give
any Member or Employee the right to be retained in the service of an Employer
or to interfere with the right of an Employer to discharge any Member or
Employee at any time regardless of the effect which such discharge shall have
upon the Employee as a Member of the Plan.
6. CONTRIBUTIONS. In order to participate in this Plan, an Employee must
authorize his/her Employer to deduct through a payroll deduction an exact
number of whole dollars per week. The minimum deduction shall be $10.00 per
week and the maximum deduction shall be $440 per week. This weekly amount is
the Member's Contribution Rate. Such authorization shall be in writing and on
such forms as provided by the Sponsoring Employer. Such deductions shall begin
as of the first pay period on or after the first day of the Plan Year and
continue for forty-eight weeks (48) weeks. No further payroll deductions shall
be made during any Plan Year after such forty-eight (48) week period. For all
purposes of this Plan, such contributions shall be deemed a part of the
Member's Contribution Account. Employee contributions will not be permitted to
begin at any time other than the beginning of a Plan Year. No interest shall
accrue on any amounts withheld under this Plan.
The Member's Contribution Rate, once established, shall remain in effect
for all Plan Years unless changed by the member in writing on such forms as
provided by the Sponsoring Employer and filed with the Sponsoring Employer at
least thirty-one (31) days prior to the next Anniversary Date; provided,
however, that a Member's Contribution Rate may not be increased or decreased
during a Plan Year.
At any time during the Plan Year, a member may notify the Sponsoring
Employer he wishes to discontinue his contributions. This notice shall be in
writing and on such forms as provided by
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<PAGE> 5
the Sponsoring Employer and shall become effective as of a date not more than
thirty (30) days following its receipt by the Sponsoring Employer. Any Officer
that discontinues his/her contributions during any Plan Year may not again
become a Member until the next Plan Year that is at least six (6) months from
the date that such Officer discontinued his/her contributions.
Members may elect to withdraw their contributions, in full, at any time
during the Plan Year. However, if contributions are withdrawn during the Plan
Year no further contributions will be permitted during the Plan Year and, in
the case of Officers, any Officer withdrawing his/her contributions during any
Plan Year may not again become a Member until the next Plan Year that is at
least six (6) months from the date of withdrawal of such Officer.
In the event an Employee resides in a jurisdiction in which payroll
deductions are prohibited, the Committee may provide alternative methods for an
Employee to make contributions and to participate in the Plan.
7. DETERMINATION OF PRICE. The Issue Price of the Sponsoring Employer
Stock under this Plan shall be 85% of the lower of: (i) the Closing Market
Price on the Exercise Date (including any Special Exercise Date); or (ii) the
Plan Year Average Price. If, however, the Plan Year Average Price is less than
both the Closing Market Prices on the Grant Date and Exercise Date, the Issue
Price shall be 85% of the lower of the Closing Market Prices on: (i) the Grant
Date; or (ii) the Exercise Date. The Issue Price is further subject to a
"Minimum Issue Price" for any Plan Year, which is the book value of Common
Stock at the close of the most recent four-week accounting period preceding the
first day of the Plan Year. In the event the Issue Price on the Exercise Date
of the Plan Year is equal to or less than the Minimum Issue Price, the payroll
deductions for that year credited to a Member's Contribution Account shall be
returned unless the Member notifies the Employer to leave said deductions in
the Member's Contribution Account.
8. PURCHASE OF SHARES. On each Exercise Date, the Member's Contribution
Account shall be used to purchase the maximum number of whole shares of
Sponsoring Employer Stock, determined by dividing the Issue Price defined in
Section 7 into the Member's Contribution Account. The Sponsoring Employer
Stock certificates purchased hereunder shall be issued as soon as practicable
after the date of such purchase. Any money remaining in a Member's Contribution
Account may be returned to the employee if requested. If such return is not
requested the balance will remain in the Contribution Account to be used in the
next Plan Year along with new contributions in the new Plan Year. If the total
number of shares to be purchased by all Members at any time exceeds the number
of shares authorized under this Plan, a pro-rata allocation of the available
shares will be made among all Members based on the amount of their respective
Contribution Accounts as of the Exercise
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<PAGE> 6
Date. In no event may any member, during a Plan Year, purchase Sponsoring
Employer Stock (under this Plan and all other employee stock purchase plans
established by the company, its parent or its subsidiaries) having a fair
market value (determined at Grant Date) of more than twenty-five thousand
dollars ($25,000). If a Member or former Member disposes of a share of
Sponsoring Employer Stock obtained under the Plan (i) prior to two (2) years
after the Grant Date of such share, or (ii) prior to six months (one year for
stock purchased on Exercise Dates commencing December 31, 1988) after the
Exercise Date of such share, then that Member or former Member must notify the
Sponsoring Employer immediately of such disposition in writing.
9. TERMINATION OF EMPLOYMENT. The rights of any Member who shall cease
to be an employee of either the Company or Subsidiary of the Company, shall
immediately terminate upon such cessation of employment, except when such
cessation of employment is caused by the death or disability of the Member. In
the event of cessation other than by reason of death or disability, the balance
of the Member's Contribution Account shall be paid immediately to such Member,
without interest, and the Member shall have no right to have shares purchased
for the Member's account on the Exercise Date of such Plan Year. In the event
of cessation by reason of a Member's death or disability, no further
contributions on behalf of the Member shall be made. The personal
representative of the Member, in the event of the Member's death, or the
Member, in the event of the Member's disability, may elect to withdraw the
balance in said Member's Contribution Account by notifying the Employer in
writing prior to the last day of the Plan Year. In the event no election to
withdraw is made, the balance accumulated in the deceased or disabled Member's
Contribution Account shall be used to purchase shares of the Sponsoring
Employer Stock in accordance with Section 8, provided that any money remaining
in a deceased or disabled Member's Contribution Account shall be returned to
the Member or that Member's personal representative. For purposes of this
section, a Member shall be considered to be subject to a disability when such
Member is disabled within the meaning of Section 105(d)(4) of the Code.
10. CAPITAL ADJUSTMENTS. The Issue Price of shares of Common Stock and
the total number of shares that may be sold under the Plan shall be
proportionately adjusted to reflect any stock dividend, stock split or share
combination of the Common Stock or any recapitalization of the Company.
11. REORGANIZATION OF THE COMPANY. In the event of the dissolution or
liquidation of the Company or in the event of a Reorganization (as hereinafter
defined) in which the Company is not a surviving corporation or in which the
Company is or will thereby become a subsidiary of another corporation, the
following shall apply:
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<PAGE> 7
(a) There shall be a Special Exercise Date as of the date which
shall be fifteen (15) days prior to the scheduled dissolution, liquidation
or Reorganization; provided, that if the use of such date is not feasible
for any reason, then the Special Exercise Date shall be such reasonably
proximate date as may be designated by the Committee as being practicable
in the circumstances.
(b) On any Special Exercise Date, the Member's Contribution Account
shall be used to purchase the maximum number of whole shares of Sponsoring
Employer Stock, determined by dividing the Issue Price defined in Section
7 into the Member's Contribution Account. The Sponsoring Employer Stock
certificates purchased hereunder shall be issued as soon as practicable
after the date of such purchase. Any money remaining in a Member's
Contribution Account after a Special Exercise Date shall be returned to
the Employee.
(c) As herein used, the term "Reorganization" shall mean any merger,
consolidation, sale of all or substantially all of the assets of the
Company, or the sale of securities of the Company pursuant to an
agreement, to which the Company is a party, under which the Company is or
will thereby become a subsidiary of another corporation.
(d) This Plan shall terminate on the occurrence of any dissolution,
liquidation or Reorganization of the Company, and, in any such event,
there shall be no further contributions and the Members shall have no
further rights hereunder except to receive any Common Stock (or any other
securities or property into which the same may have been converted) which
remain to be distributed to them in accordance with the provisions hereof.
12. RESERVATION AND DELIVERY OF SHARES. The Company, during the term of
any options granted hereunder, will at all times reserve and keep available,
and will seek to obtain from any regulatory body having jurisdiction any
requisite authority in order to issue and sell, such number of shares of Common
Stock as shall be sufficient to satisfy the requirements of the options granted
under the Plan. If in the opinion of its counsel, the issuance or sale of any
shares of its stock hereunder shall not be lawful for any reason, including the
inability of the Company to obtain from any regulatory body having jurisdiction
authority deemed by such counsel to be necessary for such issuance or sale, the
Company shall not be obligated to issue or sell any such shares.
13. EVENT OF DEFEASANCE. Any rights granted hereunder are specifically
made subject to defeasance by the failure of the shareholders of the Company to
approve the Plan within a period of twelve months from the date the Plan is
adopted by the Board.
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<PAGE> 8
14. SECURITIES LAWS. Upon any sale of Common Stock hereunder at a time
when there is not in effect under the Securities Act of 1933, as amended, a
current registration statement relating to the shares of Common Stock to be
received upon such exercise, the Member shall represent and warrant in writing
to the Company that the shares purchased are being acquired for investment and
not with a view to the distribution thereof and shall agree to the imposition
of a legend on the certificate or certificates representing said shares
evidencing the restrictions on transfer under said Act and the issuance of
stop-transfer instructions by the Company to its transfer agent with respect
thereto. No shares of Common Stock shall be issued or sold upon the exercise of
any option unless and until the then applicable requirements of the Securities
Act of 1933, the Tennessee Business Corporation Act, the Tennessee Securities
Act of 1933, the Tennessee General Corporation Act, the Tennessee Securities
Act of 1980, as any of the same may be amended, the rules and regulations of
the Securities Exchange Commission and any other regulatory agencies and laws
having jurisdiction over or applicability to the Company, and the rules and
regulations of any securities exchange on which the Common Stock may be listed,
shall have been fully complied with and satisfied.
15. NO RIGHTS AS SHAREHOLDER. A Member shall not have any rights as a
shareholder with respect to any shares hereunder until on or after the Exercise
Date for such shares. No adjustment shall be made on the issuance of a stock
certificate to a Member as to any dividends or other rights for which the
record date occurred prior to such Exercise Date.
16. NONTRANSFERABILITY OF RIGHT TO PURCHASE. The right of an Employee
electing to become a Member hereunder to purchase shares of the Company's
Common Stock under the Plan shall be exercisable during the Member's lifetime
only by the Member, and shall not be assignable or transferable by the Member
other than by will or the laws of descent and distribution or pursuant to a
qualified domestic relations order as defined by the Code or Title I of ERISA.
17. INDEMNIFICATION AND EXCULPATION. Each person who is or shall have
been a member of the Board or of the Committee shall be indemnified and held
harmless by the Company against and from any and all loss, cost, liability or
expense that may be imposed upon or reasonably incurred by him/her in
connection with or resulting from any claim, action, suit, or proceeding to
which he/she may be or become involved by reason of any action taken or failure
to act under the Plan and against and from any and all amounts paid by him/her
in satisfaction of a judgment in any such action, suit, or proceeding, except a
judgment in favor of the Company based upon a finding of his/her lack of good
faith; subject, however, to the condition that upon the institution of any
claim, action, suit, or proceeding against him/her, he/she shall in writing
give the
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<PAGE> 9
Company an opportunity, at its expense, to handle and defend the same before
he/she undertakes to handle and defend it on his/her own behalf. The foregoing
right of indemnification shall not be exclusive of any other right to which
such person may be entitled as a matter of law or otherwise, or any power that
the Company may have to indemnify him/her or hold him/her harmless. Each member
of the Board or of the Committee, and each officer and employee of the Company
shall be fully justified in relying or acting in good faith upon any
information furnished in connection with the administration of the Plan by any
appropriate person or persons other than himself/herself. In no event shall any
person who is or shall have been a member of the Board or of the Committee, or
an officer or employee of the Company, be held liable for any determination
made, or other action taken, or any omission to act in reliance upon any such
information as referred to in the preceding sentence, or for any action
(including the furnishing of information) taken, or any omission to act, when
any such determination, action or omission is made in good faith. No liability
whatever shall attach to or be incurred by any past, present or future
shareholders, officers or directors, as such, of the Employer, under or by
reason of any of the terms, conditions or agreements contained in this Plan or
implied therefrom, and any and all liabilities of and any and all rights and
claims against the Employer, or any shareholder, officer or director as such,
whether arising at common law or in equity or created by statute or
constitution or otherwise, pertaining to this Plan, are hereby expressly waived
and released by every Member, as a part of the consideration for any benefits
by the Employers under this Plan.
18. USE OF PROCEEDS. Proceeds from the sale of stock pursuant to options
granted under the Plan shall constitute general funds of the Company.
19. AMENDMENT AND DISCONTINUANCE. The Board or the shareholders of the
Company may terminate or amend the Plan in any respect at any time, except that
without the approval of the shareholders, the total number of shares that may
be sold under the Plan may not be increased (except by adjustment pursuant to
section 10), the provisions of section 5 regarding eligibility may not be
modified, the price at which shares may be purchased hereunder may not be
reduced (except by adjustment pursuant to section 10), and the provisions of
this section 19 may not be changed.
20. GENERAL. Except as the same may be governed by the Code and any
applicable federal securities laws, the Plan and any options granted hereunder
shall be governed by and construed in accordance with the laws of the State of
Tennessee. As herein used, the singular number shall include the plural, the
plural, the singular, and the use of any gender shall be applicable to all
genders, unless the context or use shall fairly require a different
construction. Section or paragraph headings are employed herein solely for
convenience of reference, and such headings shall not
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<PAGE> 10
affect the validity, meaning or enforceability of any provision of the Plan.
All references herein to "section" or "paragraph" shall mean the appropriately
numbered section or paragraph of the Plan except where reference is made to the
Code or any other specified law or instrument.
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<PAGE> 1
EXHIBIT 10.20
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made as of this 17th day of
June, 1996, 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 W. CRAIG BARBER, a resident of Williamson County,
Tennessee, whose address is 807 Stuart Lane, Brentwood, Tennessee 37027 (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 three years, commencing on June 17, 1996, and
terminating on June 16, 1999, unless sooner terminated as herein provided or
extended pursuant to Section 1.3.1 hereof. Unless either party to this
Agreement notifies the other in writing not less than 180 days prior to the
termination date provided for herein of an intent to terminate this Agreement,
the terms of this Agreement shall automatically be extended for an additional
term of three (3) years and shall be so extended in future years subject to the
same notification requirements set forth above.
1.3 CHANGE IN CONTROL.
1.3.1 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 two (2) calendar years on 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 50% or more of the combined voting power of
Employer's then outstanding voting securities; (b) all or substantially all of
the assets of the Employer are sold, exchanged or otherwise transferred (other
than to secure debt owed
Employer ___________ (Initial Here)
Employee ___________
<PAGE> 2
by Employer); (c) the Employer's shareholders approve a plan of liquidation or
dissolution; or (d) 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.
1.3.2 POTENTIAL CHANGE IN CONTROL. In the event of a
Potential Change in Control (as hereinafter defined), Employee agrees to remain
employed by Employer from the time period beginning with the Potential Change
in Control and continuing through the earlier of two (2) months after a Change
in control occurs (as defined in Section 1.3.1) or the one year anniversary of
the commencement of the Potential Change in Control period. If Employee chooses
to terminate his employment after a Change in Control occurs, the provisions
set forth at Section 4.2.1 of this Agreement control such action. For purposes
of this Agreement, a "Potential Change in Control" shall occur upon the
execution of any agreement or memorandum of understanding the completion of
which would result in a "Change in Control" as defined in Section 1.3.1 of this
Agreement or the commencement of a proxy contest that has the potential of
causing a "Change in Control" as defined in Section 1.3.1 of this Agreement.
2. DUTIES OF EMPLOYEE.
2.1 GENERAL DUTIES. Employee is hereby employed as Senior
Executive Vice President and Chief Financial Officer 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
Employer ___________ (Initial Here)
Employee ___________
<PAGE> 3
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 this 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
to any person, firm, or institution, and will not use such information 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 of 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.
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 $255,000, 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, except that Employee shall be entitled to an annual minimum
increase each year consistent with the performance merit matrix as established
by the Board of Directors.
3.2 BONUSES. Employee shall be eligible for an annual bonus as
established by the Board of Directors through the annual bonus plan.
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
Executive Vice Presidents/Division Presidents and above. During the Employment
Term, so long as any additional benefit is made available to Executive Vice
Presidents/Division Presidents and above by Employer, such benefit shall be
provided to Employee. By way of
Employer ___________ (Initial Here)
Employee ___________
<PAGE> 4
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.
3.4 VACATION. Employee shall be entitled annually to four (4)
weeks of paid vacation.
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 target bonus during the balance of then
current Employment Term. Payments shall be made, at the option of Employer, in
cash, or in the case of the preceding item (a), in equal 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 benefit programs
other than life, medical and disability insurance shall cease as of the date of
termination. Employee's participation in the life, medical and disability
insurance programs shall continue until the earlier of: (a) such time as
Employee is employed by another employer and is covered or permitted to be
covered by benefit plans of another employer without regard to the extent of
such coverage; (b) the Employer no longer provides such benefit plans to
individuals holding the position of Executive Vice President/Division President
and above; or (c) the expiration of the Employment Term in effect at the time
of termination. This provision supersedes any other severance program or policy
that may be offered by Employer and is in lieu of such plan rather than in
addition to other severance plans that may be in place except with regard to
any rights Employee may have pursuant to COBRA.
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
Employer ___________ (Initial Here)
Employee ___________
<PAGE> 5
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 use by Employee.
4.2 TERMINATION BY EMPLOYEE.
4.2.1 TERMINATION AFTER CHANGE IN CONTROL. In the event a
change in control occurs, Employee, at any time within ninety (90) days after
such change in control, may terminate his employment with Employer by giving
not less than sixty (60) nor more than ninety (90) days' prior written notice
of such termination to Employer. In the event that Employee terminates his
employment pursuant to this Section 4.2.1, he shall be entitled to receive the
greater of: (A) an amount equal to two (2) times 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 during the balance of the then current employment
term. Payments shall be made in the case of the preceding item (A) in equal
weekly payments using Employer's regular payroll periods or, in the case of the
preceding term (B), over the balance of the employment term at the same time as
current wages and bonuses normally are payable. Employee's participation in all
benefit programs other than life, medical and disability insurance shall cease
as of the date of termination from active employment with Employer. Employee's
participation in the life, medical and disability insurance programs shall
continue until the earlier of: (a) such time as Employee is employed by another
employer and is covered or permitted to be covered by benefit plans of another
employer without regard to the extent of such coverage; (b) the Employer no
longer provides such benefit plans to individuals holding the position of
Executive Vice President/Division President and above; or (c) the expiration of
the Employment Term then in effect. Nothing contained herein is intended to in
any way limit Employee's rights under COBRA.
Employer ___________ (Initial Here)
Employee ___________
<PAGE> 6
4.2.2 TERMINATION OTHER THAN AFTER CHANGE IN CONTROL. Except
as limited by Section 1.3.2 of this Agreement, 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
herein) 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 or Section 4.2.1, then, in addition to any
other rights of Employee hereunder, Employee shall receive, within thirty (30)
days after such termination, a lump sum cash 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,
4.2.1 or 4.2.2 of this Agreement, Employee covenants and agrees that, for a
period of one year from the effective date of his termination from active
employment with the Employer, 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
Employer ___________ (Initial Here)
Employee ___________
<PAGE> 7
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 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. Such payment shall be paid in lump sum to the Employee's estate
within ninety (90) days after Employer is given notice of Employee's death.
5.2 DISABILITY OF EMPLOYEE. Employer has disability insurance
insuring those individuals holding the position of Executive Vice
President/Division President and above, 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
Employer ___________ (Initial Here)
Employee ___________
<PAGE> 8
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 years 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.
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 the 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, that certain employment agreement
between Employer and Employee dated as of January 17, 1995), 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
Employer ___________ (Initial Here)
Employee ___________
<PAGE> 9
party to this Agreement acknowledges that no representations, inducements,
promises, of 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 nonetheless continue in full force without being
impaired or invalid 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 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 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.
Employer ___________ (Initial Here)
Employee ___________
<PAGE> 10
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/ C. Stephen Lynn
------------------------------------
Title: Chairman of the Board, Chief
Executive Officer and President
EMPLOYEE:
/s/ W. Craig Barber
---------------------------------------
W. CRAIG BARBER
Employer ___________ (Initial Here)
Employee ___________
<PAGE> 1
STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE - EXHIBIT 11
<TABLE>
<CAPTION>
Twenty-eight Weeks Ended
May 12, May 14,
1996 1995
------------ ------------
<S> <C> <C>
Earnings per Common Share - Primary
Average Shares outstanding 41,586,857 41,342,515
Net effect of dilutive stock options-based on the treasury
stock method using average market price 86,748 104,860
----------- -----------
Totals 41,673,605 41,447,375
=========== ===========
Income from continuing operations $ 8,054,573 $14,214,285
Income from discontinued operations 397,816 4,942,907
Gain on sale of discontinued operations, net of income taxes 22,080,375
----------- -----------
Net income $30,532,764 $19,157,192
=========== ===========
Per Share amount:
Income from continuing operations $ .19 $ .34
Income from discontinued operations .01 .12
Gain on sale of discontinued operations, net of income taxes .53
----------- -----------
Net income $ .73 $ .46
=========== ===========
Earnings per Common Share - Fully Diluted:
Average shares outstanding 41,586,857 41,342,515
Net effect of dilutive stock options-based on the treasury
stock method using the average market price 103,167 104,860
Assumed conversion of 8.5% zero coupon convertible debentures 5,205,632 (A)
----------- -----------
Totals 46,895,656 41,447,375
=========== ===========
Income from continuing operations $ 8,054,573 $14,214,285
Add 8.5% zero coupon convertible debentures interest,
net of income tax 2,420,289 (A)
----------- -----------
Total from continuing operations 10,474,862 14,214,285
Income from discontinued operations 397,816 4,942,907
Gain on sale of discontinued operations, net of income taxes 22,080,375
----------- -----------
Net income $32,953,053 $19,157,192
=========== ===========
Per Share amount:
Income from continuing operations $ .22 $ .34
Income from discontinued operations .01 .12
Gain on sale of discontinued operations, net of income taxes .47
----------- -----------
Net income $ .70 $ .46
=========== ===========
</TABLE>
<PAGE> 2
STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE - EXHIBIT 11
<TABLE>
<CAPTION>
Twelve Weeks Ended
May 12, May 14,
1996 1995
------------ ------------
<S> <C> <C>
Earnings per Common Share - Primary
Average Shares outstanding 41,634,833 41,424,805
Net effect of dilutive stock options-based on the treasury
stock method using average market price 90,846 96,747
----------- -----------
Totals 41,725,679 41,521,552
=========== ===========
Income from continuing operations $ 6,425,807 $ 6,202,183
Income from discontinued operations 2,291,419
----------- -----------
Net income $ 6,425,807 $ 8,493,602
=========== ===========
Per Share amount:
Income from continuing operations $ .15 $ .15
Income from discontinued operations .06
----------- -----------
Net income $ .15 $ .20
=========== ===========
Earnings per Common Share - Fully Diluted:
Average shares outstanding 41,634,833 41,424,805
Net effect of dilutive stock options-based on the treasury
stock method using the average market price 90,846 96,747
Assumed conversion of 8.5% zero coupon convertible debentures (A) (A)
----------- -----------
Totals 41,725,679 41,521,552
=========== ===========
Income from continuing operations $ 6,425,807 $ 6,202,183
Add 8.5% zero coupon convertible debentures interest,
net of income tax (A) (A)
----------- -----------
Total from continuing operations 6,425,807 6,202,183
Income from discontinued operations 2,291,419
----------- -----------
Net income $ 6,425,807 $ 8,493,602
=========== ===========
Per Share amount:
Income from continuing operations $ .15 $ .15
Income from discontinued operations .06
----------- -----------
Net income $ .15 $ .20
=========== ===========
</TABLE>
(A) For the first half of 1995 and second quarters of fiscal 1995 and 1996,
both primary and fully diluted earnings per share were calculated utilizing the
average shares outstanding plus common stock equivalents. No consideration was
given to the assumed conversion of the zero coupon convertible debentures as
their assumed conversion would have an anti-dilutive effect.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF SHONEY'S, INC. FOR THE PERIOD ENDED MAY 12, 1996 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> OCT-27-1996
<PERIOD-START> OCT-30-1995
<PERIOD-END> MAY-12-1996
<CASH> 5,820,242
<SECURITIES> 0
<RECEIVABLES> 14,569,300
<ALLOWANCES> 2,174,169
<INVENTORY> 34,005,375
<CURRENT-ASSETS> 86,251,428
<PP&E> 746,222,394
<DEPRECIATION> 306,819,543
<TOTAL-ASSETS> 547,092,829
<CURRENT-LIABILITIES> 178,884,840
<BONDS> 0
0
0
<COMMON> 41,650,573
<OTHER-SE> (115,325,705)
<TOTAL-LIABILITY-AND-EQUITY> 547,092,829
<SALES> 544,155,710
<TOTAL-REVENUES> 557,888,852
<CGS> 488,681,620
<TOTAL-COSTS> 544,167,279
<OTHER-EXPENSES> 36,520,442
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 18,965,217
<INCOME-PRETAX> 13,721,573
<INCOME-TAX> 5,667,000
<INCOME-CONTINUING> 8,054,573
<DISCONTINUED> 397,816
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 30,532,764
<EPS-PRIMARY> 0.73
<EPS-DILUTED> 0.70
</TABLE>
