<PAGE>
==================================================================
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 February 18, 1996
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period 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 (Zip Code)
offices)
Registrants 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 March 17, 1996, there were 41,624,452 shares of
Shoney's, Inc. $1 par value common stock outstanding.
==================================================================
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
SHONEY'S, INC. AND SUBSIDIARIES
Consolidated Condensed Balance Sheet
(Unaudited)
<TABLE>
<CAPTION>
February 18, October 29,
1996 1995
--------------- -------------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 8,349,727 $ 7,513,588
Notes and accounts receivable, less allowance for doubtful
accounts of $2,237,000 in 1996 and $1,645,000 in 1995 13,553,275 13,013,821
Inventories 32,272,982 33,483,964
Deferred income taxes and other current assets 32,212,935 30,716,885
Net current assets of discontinued operations 0 14,495,812
----------- -----------
Total current assets 86,388,919 99,224,070
Property, plant and equipment, at cost 737,664,362 710,544,277
Less accumulated depreciation and amortization (301,613,107) (291,057,795)
----------- -----------
Net property, plant and equipment 436,051,255 419,486,482
Other assets
Deferred charges and other intangible assets 11,240,204 7,085,784
Other assets 8,898,267 9,219,658
----------- -----------
Total other assets 20,138,471 16,305,442
----------- -----------
$ 542,578,645 $ 535,015,994
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities
Accounts payable $ 30,352,831 $ 33,099,813
Federal and state income taxes 14,031,381 7,486,210
Other accrued liabilities 66,467,630 74,312,652
Reserve for litigation settlement 23,182,539 23,372,889
Debt and capital lease obligations due within one year 33,975,666 34,448,154
----------- -----------
Total current liabilities 168,010,047 172,719,718
Long-term senior debt and capital lease obligations 304,945,645 318,251,917
Zero coupon subordinated convertible debentures 90,054,742 87,780,529
Reserve for litigation settlement 32,977,434 38,727,434
Deferred credits
Income taxes 21,473,797 19,223,797
Income and other liabilities 6,952,540 6,619,234
Shareholders' equity (deficit)
Common stock, $1 par value: authorized 100,000,000 shares;
issued 41,622,264 in 1996 and 41,510,659 in 1995 41,622,264 41,510,659
Additional paid-in capital 61,761,420 60,770,176
Unrealized gain on securities available for sale 1,261,269 0
Retained earnings (deficit) (186,480,513) (210,587,470)
----------- -----------
Total shareholders' equity (deficit) (81,835,560) (108,306,635)
----------- -----------
$ 542,578,645 $ 535,015,994
=========== ===========
</TABLE>
See notes to consolidated condensed financial statements.
(2)
<PAGE>
SHONEY'S, INC. AND SUBSIDIARIES
Consolidated Condensed Statement of Operations
(Unaudited)
<TABLE>
<CAPTION>
Sixteen Weeks Ended
February 18, February 19,
1996 1995
--------------- --------------
<S> <C> <C>
Revenues
Net sales $ 292,782,922 $ 301,670,131
Franchise fees 6,309,927 7,132,462
Other income 1,084,244 1,582,413
----------- -----------
300,177,093 310,385,006
Costs and expenses
Cost of sales 266,468,079 266,546,131
General and administrative expenses 20,139,394 18,190,909
Interest expense 10,817,854 12,166,539
Restructuring expenses 558,325
----------- -----------
Total costs and expenses 297,425,327 297,461,904
Income from continuing operations before income taxes 2,751,766 12,923,102
Provision for income taxes 1,123,000 4,911,000
----------- -----------
Income from continuing operations 1,628,766 8,012,102
Income from discontinued operations, net of income taxes 397,816 2,651,488
Gain on sale of discontinued operations, net of income taxes 22,080,375
----------- -----------
Net income $ 24,106,957 $ 10,663,590
=========== ===========
Earnings per common share
Primary:
Income from continuing operations $ 0.04 $ 0.19
Income from discontinued operations 0.01 0.06
Gain on sale of discontinued operations 0.53
---- ----
Net income $ 0.58 $ 0.26
==== ====
Fully diluted:
Income from continuing operations $ 0.06 $ 0.19
Income from discontinued operations 0.01 0.06
Gain on sale of discontinued operations 0.47
---- ----
Net income $ 0.54 $ 0.26
==== ====
Weighted average shares outstanding
Primary 41,635,639 41,401,040
Fully diluted 46,845,459 41,401,040
Common shares outstanding 41,622,264 41,405,113
Dividends per share NONE NONE
</TABLE>
See notes to consolidated condensed financial statements.
(3)
<PAGE>
SHONEY'S, INC. AND SUBSIDIARIES
Consolidated Condensed Statement of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Sixteen Weeks Ended
February 18, February 19,
1996 1995
-------------- -------------
<S> <C> <C>
Operating activities
Net income $ 24,106,957 $ 10,663,590
Adjustments to reconcile net income
to net cash provided by operating
activities:
Income from discontinued
operations, net of taxes (397,816) (2,651,488)
Gain on sale of discontinued
operations, net of taxes (22,080,375)
Depreciation and amortization 13,389,585 13,094,346
Amortization of deferred charges
and other non-cash charges 3,360,552 2,625,380
Realized and unrealized gain on marketable
securities and sale of other assets (783,950)
Change in deferred income taxes 2,250,000 1,307,000
Changes in operating assets and
liabilities (15,999,899) (2,029,710)
---------- ----------
Net cash provided by continuing
operating activities 4,629,004 22,225,168
Net cash provided by discontinued
operating activities (655,622) 3,139,035
---------- ----------
Net cash provided by operating activities 3,973,382 25,364,203
Investing activities
Cash required for property, plant and equipment (31,026,216) (26,841,580)
Cash required for assets held for sale (553,032)
Proceeds from disposal of property, plant
and equipment 2,077,441 743,490
Proceeds from disposal of discontinued operations 51,279,601
Cash required for other assets (4,971,170) (591,461)
---------- ----------
Net cash provided (used)
by investing activities 17,359,656 (27,242,583)
Financing activities
Payments on long-term debt and
capital lease obligations (51,397,209) (32,876,787)
Proceeds from long-term debt 27,000,000 28,000,000
Net proceeds from short-term borrowings 9,534,000 11,926,000
Payments on litigation settlement (5,940,350) (5,942,059)
Cash required for debt issue costs (27,742) (874,276)
Proceeds from exercise of employee stock options 334,402 1,066,918
---------- ----------
Net cash provided (used)
by financing activities (20,496,899) 1,299,796
---------- ----------
Change in cash $ 836,139 $ (578,584)
========== ==========
</TABLE>
See notes to consolidated condensed financial statements.
(4)
<PAGE>
SHONEY'S, INC. AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements
February 18, 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 sixteen week period ended February 18, 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
On January 16, 1995, the Company's Board of Directors announced a
reorganization designed to improve the performance and growth of the
Shoney's Restaurant concept. The reorganization includes the 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 units 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 of discontinued operations
of $22.1 million, net of income taxes. Under the terms of the stock
(5)
<PAGE>
purchase agreement, the Company entered into a five year supply agreement
though 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. Prior year financial statements have been reclassified
to conform to this method of presentation. The originally reported first
quarter 1995 financial statements had presented Pargo's and Fifth Quarter's
results of operations, net assets and cash flows as discontinued operations.
NOTE 3 - CHANGES IN ACCOUNTING POLICIES
Effective November 1, 1993, the Company adopted FASB Statement No. 115,
"Accounting for Certain Investments in Debt and Equity Securities". This
Statement requires that debt and equity securities be carried at fair value
unless the Company has the positive intent and ability to hold debt
securities to maturity. Debt and equity securities must be classified into
one of three categories: 1) held-to maturity, 2) available-for-sale or 3)
trading securities. Each category has different accounting treatment for
the change in fair values. There was no cumulative effect from the adoption
of Statement No. 115, since at the time of adoption, the Company held no
investments in debt or equity securities.
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 trading securities to available-for-sale. As a result, 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 quarter 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 quarter 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.
(6)
<PAGE>
The primary and fully diluted earnings per share for the first quarter of
1995 were computed using the weighted average number of shares of common
stock and common stock equivalents outstanding during the quarter. No
consideration was given to the convertible debentures for that quarter
because the effect was anti-dilutive.
NOTE 5 - INCOME TAXES
Income taxes for the sixteen week period ended February 18, 1996 and
February 19, 1995 were provided based on the Company's estimate of its
effective tax rates (39.8% and 38.0%) for the entire respective fiscal
years.
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>
<CAPTION>
<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 $270 million reducing revolving credit facility with a
syndicate of financial institutions. The facility matures in October 1999
with reductions in the aggregate credit facility which began in 1995.
Except for approximately $170 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 107
(7)
<PAGE>
of the Company's restaurant properties) have been pledged as collateral for
the facility. The interest rate for this facility is a floating rate (the
London Interbank Offered Rate ("LIBOR") plus 2%). At February 18, 1996, the
Company had borrowed $200.0 million under this facility and the interest
rate was 7.4%.
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.
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.
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 an estimated $4 million in 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. During 1994, the Company obtained an IRS private letter ruling which
clarified that certain portions of the settlement payments were not subject
to federal payroll taxes that had been previously accrued by the Company.
The reserve for litigation settlement was reduced by $1.7 million to adjust
for this change in estimate for accrued payroll taxes due on the settlement.
Under the terms of the consent decree, payments, 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 federal court suit filed on December 19,
1994 by one of its Captain D's franchisees who claims that the Company
imposes a "tying" arrangement by requiring franchisees to purchase food
products from the Company's commissary. The complaint seeks damages for an
alleged class of similarly situated plaintiffs in an amount not to
(8)
<PAGE>
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. Discovery on that motion is proceeding
and the motion is set to be argued in April 1996.
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 was filed against the Company by
five employees who claim the Company engages in conduct and actions which
are designed to circumvent the pay requirements set forth within the Fair
Labor Standards Act. The plaintiffs purport to act on behalf of similarly
situated employees or former employees and have 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 case and defined the class as all former and current salaried
general managers and assistant general managers who were employed by the
Company's Shoney's Restaurants from 1993 through 1995. Court approved
notice of the lawsuit has been sent to potential class members who must
elect whether to participate in the lawsuit on or before May 6, 1996. By
virtue of the provisional status, the court could subsequently amend its
decision and either reduce or increase the scope of those individuals who
are similarly situated or dismiss the collective aspects entirely.
On January 2, 1996, a second related federal court suit 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. In this second case, the court has
not yet reached a decision as to whether the plaintiffs will be permitted
to proceed with a collective action with court approved notice of the
lawsuit to potential plaintiffs.
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
(9)
<PAGE>
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.
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 first quarters of 1994 and 1995 and adjusted to their
fair value. The resulting gain of approximately $.8 million in the first
quarter of 1995 was 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 warrants and
the ShoLodge common stock held by the Company as of the beginning of the
first quarter of 1995 declined by approximately $81,000 during the quarter.
The fair value of the ShoLodge common stock and the ShoLodge warrants
classified as trading securities was $5.6 million at February 19, 1995.
Subsequent to February 19, 1995, the fair value of the ShoLodge common stock
(and the related warrants classified as trading securities) declined
significantly. As of March 30, 1995, the fair value of the ShoLodge common
stock and the ShoLodge warrants classified as trading securities was $3.2
million.
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 the fair value of the
Company's investment in ShoLodge will be reflected as a component of
shareholders' equity rather than included in income. During the first
quarter of 1996, the Company recorded an unrealized gain of $1.3 million on
its investment in ShoLodge common stock and warrants (See Note 3).
(10)
<PAGE>
NOTE 10 - COMMITMENTS AND CONTINGENCIES
On March 15, 1996, the Company entered into a definitive agreement with TPI
Enterprises, Inc. ("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
Enterprise's 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 common stock plus an additional $10 million of Shoney's
common stock based on the average closing market price for the ten days
immediately prior to closing. In addition, the Company will assume or
refinance certain debt 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.
The transaction is subject to the approval of the shareholders and lenders
of both companies, as well as certain regulatory approvals. In addition,
the Company has agreed to obtain a commitment for financing of $60 million
prior to April 30, 1996 to complete the transaction. The Company
anticipates that the funding needed to complete the transaction will be
obtained from senior bank debt.
On October 1, 1992, the Company and Thompson Hospitality, L.P. ("THL")
entered into an agreement to purchase nine and thirty-one restaurants,
respectively, from Marriott Corporation and Marriott Family Restaurants,
Inc. ("Marriott"). All of the restaurants purchased by the Company and most
of the restaurants purchased by THL will be converted to Shoney's
Restaurants. As part of the transaction, the Company agreed to a contingent
purchase of fifteen restaurants purchased by THL if there is a default on
or before October 2, 1995 by THL in its obligations to Marriott. The
purchase price for these fifteen restaurants was pre-determined and the
Company's maximum obligation under this arrangement was $8.7 million.
During 1994 and 1995, the Company, THL and Marriott agreed to a modification
of this contingent purchase agreement whereby the Company ultimately agreed
to extend its purchase obligation to July 2, 1997. In addition, the
Company's maximum obligation was reduced to eight restaurants and $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 entered into an agreement with Marriott to purchase five
restaurants from Marriott for $3.1 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 by the end of the second quarter.
(11)
<PAGE>
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 first quarters of fiscal 1996
and 1995 covered periods of sixteen weeks.
On January 16, 1995, the Company's Board of Directors announced a
reorganization designed to improve the performance and growth of 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
Shoney's Restaurants experienced declines in comparable store sales and
resulting lower operating margins in the first quarters of 1995 and 1996.
The Company anticipates 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 and operating margins. Management believes that these expected
improvements in operations began late in the first quarter, as evidenced by
comparable store sales increases and improvements in restaurant operating
margins.
RESULTS OF OPERATIONS
REVENUES
Revenues from continuing operations for the first quarter of 1996
decreased 3.3% ($10.2 million) to $300.2 million as compared to $310.4
million in the first quarter of 1995.
(12)
<PAGE>
The following table summarizes the components of the decrease in revenues:
<TABLE>
<CAPTION>
First Quarter
1996
-------------
<S> <C>
Restaurant revenue $ (4.9)
Commissary and other sales (4.0)
Franchise fees (0.8)
Other income (0.5)
------
$(10.2)
======
</TABLE>
The decline in restaurant revenues accounted for 48% of the overall
decrease in consolidated revenues. Restaurant revenues declined as a result
of negative comparable store sales during the first quarter and due to the
closure of approximately 41 under-performing restaurants in the fourth
quarter of 1995 (first quarter 1995 revenues for these units were $8.3
million). These decreases in restaurant revenues were partially offset by
revenues from the net addition of nineteen restaurants during the first
quarter of 1996 as compared to a net addition of eleven restaurants in the
comparable period last year. Comparable store sales of restaurants for the
Company's continuing operations decreased 2.0% during the first quarter
1996, including a menu price increase of 1.4% as compared with a comparable
store sales decline of 1.5% in first quarter of 1995, including a .7% 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
quarter of 1996 and 1995:
<TABLE>
<CAPTION>
First Quarter First Quarter
1996 1995
------------- -------------
<S> <C> <C>
Company-owned restaurants opened<F1> 23 13
Company-owned restaurants closed (4) (2)
Franchised restaurants opened 2 7
Franchised restaurants closed (32) (34)
---- ----
Net increase (decrease) in restaurants (11) (16)
==== ====
</TABLE>
<F1> Includes fourteen and six units acquired from franchisees during the
first quarter of 1996 and 1995, respectively.
Commissary sales decreased $3.9 million or 8% during the first
quarter of 1996 as compared to the first quarter of 1995. Franchise fees
declined $.8 million or 11.5% in the first quarter of 1996 compared to the
same period in the prior year. The declines in Commissary sales and
franchise fees during first quarter of 1996 are principally the result of
a net decrease in franchised restaurants and a decline in comparable store
sales at franchised Shoney's concept restaurants.
(13)
<PAGE>
Other revenues declined $.5 million in the first quarter of 1996 as
compared to the same quarter last year due to a change in the accounting
treatment of unrealized gains and losses on the Company's investments in
ShoLodge. The Company reported an unrealized gain of $.7 million in this
caption in the first quarter of 1995. Effective at the beginning of fiscal
1996, pursuant to supplemental implementation guidance on FASB Statement No.
115, the Company reclassified its investment in common stock and warrants
of ShoLodge, Inc. from trading securities to available-for-sale. As a
result, 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. The Company recorded a $1.3 million unrealized gain on ShoLodge
common stock and warrants in the first quarter of 1996.
COSTS AND EXPENSES
Cost of sales for the first quarter of 1996 decreased slightly over
the same quarter in 1995; however, these costs increased as a percentage of
revenues to 88.8% in 1996 as compared to 85.9% in 1995. The decline in
revenues from 1995 to 1996 negatively affected the comparison as a
percentage of revenues. Food and supplies decreased as a percentage of
revenues due to the decline in sales and lower cost of sales in the
Commissary operations. Commissary sales have a higher percentage food cost
and lower operating expenses, as a percentage of revenue, when compared to
the Company's restaurant operations. Restaurant labor increased as a
percentage of revenues because of the decline in Commissary sales (which
have no restaurant labor in cost of sales), the decline in comparable store
sales, and higher labor costs at the restaurant level. Restaurant labor
costs have increased over first quarter 1995 due to the higher salaries paid
to attract higher quality restaurant management personnel and due to
continued upward pressure on hourly wage rates. Operating expenses
increased as a percentage of revenues principally as a result of increased
costs of the Shoney's Restaurant improvement program and increased
advertising expenses.
General and administrative expenses increased as a percentage of
revenues from 5.8% in the first quarter of 1995 to 6.7% in the first
quarter of 1996. General and administrative expenses increased because of
higher salaries and bonuses, relocation costs, severance benefits and
associated recruiting costs resulting from the significant number of
management changes that have occurred since the second quarter of 1995.
First quarter 1996 general and administrative expenses were favorably
affected because the first quarter of 1995 included approximately $1.0
million in consulting fees associated with the Company's restructuring
efforts with no comparable expense in 1996. Restructuring charges of $ .6
million in the first quarter of 1995 were principally related to severance
pay incurred as part of the Company's overall restructuring plan.
Interest expense for the first quarter of 1996 declined $1.3
million principally due to a reduction in the average debt outstanding as
compared to first quarter 1995.
(14)
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Cash provided from continuing operations decreased $17.6 million to
$4.6 million for the first quarter of 1996 compared to $22.2 million for the
first quarter of 1995. This decrease was primarily due to a $6.4 million
decrease in income from continuing operations and a $16 million decrease in
net operating assets and liabilities. The significant decrease in operating
assets and liabilities reflects significant declines in accounts payable,
accrued expenses and federal income taxes (after excluding the effects of
the increase in income taxes payable of $14.1 million related to the gain
on sale of discontinued operations). Cash used by discontinued operations
was $ .7 million in the first quarter of 1996 as compared with cash provided
from discontinued operations of $3.1 million in the same first quarter of
1996 due primarily to a reduction in net income and a decrease in net
operating assets of the discontinued operations.
Cash provided by investing activities during the first quarter of
1996 totaled $17.4 million as compared to cash used by investing activities
of $27.2 million in the same quarter of 1995. The significant increase in
cash provided by investing activities resulted from cash proceeds of $51.3
million from the sale of Mike Rose Foods offset by an increase in capital
expenditures of $4.2 million and a $4.9 million increase in other assets
resulting from goodwill arising from the acquisition of franchised Shoney's
restaurants during the first quarter of 1996.
Significant financing activities in the first quarter of 1996
included repayment of $50 million from the proceeds of the sale of Mike Rose
Foods on the Company's Reducing Revolving Credit Facility ("Revolver"),
$12.9 million of which represents a mandatory reduction in availability
pursuant to the terms of the credit agreement, net borrowings of $9.5
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 $5.9 million during the first quarter of 1996 under the
terms of the litigation settlement (See Note 7). The debt reductions during
the first quarter of 1996 resulted in $20.4 million of cash used by
financing activities as compared with cash provided from financing
activities of $1.3 million in the same period in 1995. The Company had
borrowed $200.0 million under the Revolver at February 18, 1996.
During the last half of fiscal 1995 and the first quarter of fiscal
1996, the Company's earnings and cash flow from operating activities have
been less than the results for the same periods of the prior year. The
Company has made adjustments to its planned capital expenditures to adjust
for the shortfall in cash from operations. Following the first quarter of
1996, trends in comparable store sales and operating margins for the
Company's Shoney's and Captain D's restaurants have improved and management
believes that its sources of cash will be 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 need 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 for this fiscal year.
(15)
<PAGE>
At February 18, 1996, the Company had cash and cash equivalents of
approximately $8.3 million and unsecured lines of credit totaling $30
million under which the Company had borrowings of $18.6 million outstanding.
Capital expenditures for fiscal 1996 are expected to be $77.5 million. The
Company expects to meet its needs for debt service, capital expenditures,
the payments required by the settlement of the class action litigation and
general corporate purposes through cash generated by the Company's
operations and from the Company's Revolver.
On March 15, 1996, the Company entered into a definitive agreement
with TPI Enterprises, Inc. ("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. ("TPIR") and two
other of Enterprises' subsidiaries, which represent substantially all of the
assets of Enterprises. TPIR operates 188 Shoney's and 68 Captain D's
restaurants in eleven states.
The Enterprises subsidiaries will be acquired in exchange for
5,577,102 shares of Shoney's common stock plus an additional $10 million of
Shoney's common stock based on the average closing market price for the ten
days immediately prior to closing. Based on the average closing market
price for the ten trading days immediately prior to signing the agreement.
6,710,246 Shoney's common shares would be issued in the transaction. In
addition, Shoney's 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.
The transaction is subject to the approval of the shareholders and
lenders of Shoney's and Enterprises, as well as certain regulatory
approvals. In addition, the Company has agreed to obtain a commitment for
financing of up to $60 million prior to April 30, 1996 to complete the
transaction. The Company is involved in discussions with its lenders to
obtain their approval of the acquisition of the Enterprise assets as well
as seeking the necessary financing to close the transaction. The
acquisition will require approximately $40 million to satisfy obligations
of the acquired companies and an additional $15 million to provide for
needed capital expenditures for the remodeling of the acquired Shoney's
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.
(16)
<PAGE>
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 23, 1996 is incorporated herein by
this reference. See also Note 8 to the Notes to Consolidated Condensed
Financial Statements at pages 8-10 of this Quarterly Report on Form 10-Q.
ITEM 5. OTHER INFORMATION.
On March 15, 1996, the Company entered into an agreement with TPI
Enterprises, Inc. ("TPI") whereby 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 these properties,
the Company will issue 5,577,102 shares of its $1.00 par value common stock
plus an additional $10 million of the Company's stock based upon the average
per share price of the Company's stock for the ten trading days immediately
preceding the Closing Date. The number of shares of stock to be issued also
is subject to certain adjustments as set forth in the agreement. In
addition, certain specified liabilities of TPI will be assumed as described
in the agreement.
The agreement is subject to a number of contingencies, including
regulatory approvals, approvals of the lenders of each of the Company and
TPI and a vote of the shareholders of each of the Company and TPI.
For a further description of this event, reference is made to the
Plan of Tax-Free Reorganization Under Section 368 (a)(1)(C) of the Internal
Revenue Code and Agreement, a copy of which is incorporated herein by
reference as Exhibit 2 to this Quarterly Report on Form 10-Q. See also Note
10 to the Notes to Consolidated Condensed Financial Statements at page 11
of this Quarterly Report on Form 10-Q.
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) 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.
(17)
<PAGE>
3(i), 4.1 Charter of Shoney's, Inc., as amended, filed as Exhibit
4.1 to Post Effective Amendment No. 3 to the Company's
Registration Statement on Form S-8 (File No. 33-605) filed
with the Commission on October 31, 1988, and incorporated
herein by this reference.
3(ii), 4.2 Amended and Restated Bylaws of Shoney's, Inc.
4.3 Amended and Restated Rights Agreement, dated as of May 25,
1994, between Shoney's, Inc. (the "Company") and Harris
Trust and Savings Bank, as Rights Agent, filed as Exhibit
4 to the Company's Current Report on Form 8-K filed with
the Commission on June 9, 1994 and incorporated herein by
this reference.
4.4 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 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.
4.6 Revolving Credit Agreement dated as of July 13, 1988
between the Company and First American National Bank,
filed as Exhibit 4.1 and 19.1 to the Company's Current
Report on Form 8-K filed with the Commission on December
3, 1991, and incorporated herein by this reference.
4.7 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.
(18)
<PAGE>
4.8 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.
4.9 Note Issuance Agreement, dated as of October 1, 1989,
among the Company, Sovran Bank, N.A., as Note Agent and
Placement Agent and Sovran Bank / Central South, as Escrow
Agent, filed as Exhibit 19.3 and 28.3 to the Company's
Current Report on Form 8-K filed with the Commission on
December 3, 1991, and incorporated herein by this
reference.
4.10 Reimbursement Agreement, dated as of October 1, 1989,
together with the Standby Note relating thereto, among the
Company, Sovran Bank / Central South, Long Term Credit
Bank of Japan, Limited, New York Branch, Kredeitbank,
N.V., New York Branch and Sovran Bank / Central South, as
Agent, filed as Exhibit 19.4 and 28.4 to the Company's
Current Report on Form 8-K filed with the Commission on
December 3, 1991, and incorporated herein by this
reference.
4.11 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.
4.12 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.
(19)
<PAGE>
4.13 Note Issuance Agreement, dated as of October 1, 1990,
among the Company, Sovran Bank, N.A., as Note Agent and
Placement Agent and Sovran Bank / Central South, as Escrow
Agent, filed as Exhibit 19.5 and 28.5 to the Company's
Current Report on Form 8-K filed with the Commission on
December 3, 1991, and incorporated herein by this
reference.
4.14 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.
4.15 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.
4.16 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.
4.17 Amended and Restated Note Issuance Agreement, dated as of
November 1, 1993, among the Company, NationsBank of
Virginia, N.A., as Note Agent and Placement Agent and
NationsBank of Tennessee, as Escrow Agent, filed as
Exhibit 4.36 to the Company's Annual Report on Form 10-K
for the fiscal year ended October 31, 1993 filed with the
Commission on January 31, 1994, and incorporated herein by
this reference.
4.18 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.
(20)
<PAGE>
4.19 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.
4.20 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.
4.21 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.
4.22 Modification Agreement No. 2 dated as of July 21, 1993 to
Loan Agreement dated as of September 24, 1992 between the
Company and CIBC, Inc., filed as Exhibit 4.6 to the
Company's Quarterly Report on Form 10-Q for the quarter
ended August 1, 1993 filed with the Commission on
September 15, 1993, and incorporated herein by this
reference.
4.23 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.
4.24 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.
(21)
<PAGE>
4.25 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.
4.26 Reducing Revolving Credit Agreement, dated as of July 21,
1993, among the Company, various financial institutions
now or hereafter parties thereto and Canadian Imperial
Bank of Commerce, New York Agency, as agent, filed as
Exhibit 4.1 to the Company's Quarterly Report on Form 10-Q
for the quarter ended August 1, 1993 filed with the
Commission on September 15, 1993, and incorporated herein
by this reference.
4.27 Modification Agreement No. 1 dated as of July 21, 1993 to
Reducing Revolving Credit Agreement, dated as of July 21,
1993, among the Company, various financial institutions
now or hereafter parties thereto and Canadian Imperial
Bank of Commerce, New York Agency, as agent, filed as
Exhibit 4.8 to the Company's Quarterly Report on Form 10-Q
for the quarter ended August 1, 1993 filed with the
Commission on September 15, 1993, and incorporated herein
by this reference.
4.28 Modification Agreement No. 2 dated as of December 21, 1993
to Reducing Revolving Credit Agreement, dated as of July
21, 1993, among the Company, various financial
institutions now or hereafter parties thereto and Canadian
Imperial Bank of Commerce, New York Agency. Filed as
Exhibit 4.46 to the Company's Annual Report on Form 10-K
for the fiscal year ended October 31, 1993, filed with the
Commission on January 31, 1994, and incorporated herein by
this reference.
4.29 Modification Agreement No. 3 dated as of May 3, 1994 to
Reducing Revolving Credit Agreement, dated as of July 21,
1993, among the Company, various financial institutions
now or hereafter parties thereto and Canadian Imperial
Bank of Commerce, New York Agency, filed as Exhibit 99.1
to the Company's Quarterly Report on Form 10-Q for the
quarter ended May 15, 1994 filed with the Commission on
June 29, 1994 and incorporated herein by this reference.
4.30 Modification Agreement No. 4 dated as of October 27, 1994
to Reducing Revolving Credit Agreement, dated as of July
21, 1993, among the Company, various financial
institutions now or
(22)
<PAGE>
hereafter parties thereto and Canadian Imperial Bank of
Commerce, New York Agency, filed as Exhibit 4.48 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.
4.31 Modification Agreement No. 5 dated as of January 18, 1995
to Reducing Revolving Credit Agreement, dated as of July
21, 1993, among the Company, various financial
institutions now or hereafter parties thereto and Canadian
Imperial Bank of Commerce, New York Agency, filed as
Exhibit 4.49 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.
4.32 Modification Agreement No. 6 dated as of April 1, 1995 to
Reducing Revolving Credit Agreement, dated as of July 21,
1993, among the Company, various financial institutions
now or hereafter parties thereto and Canadian Imperial
Bank of Commerce, New York Agency, filed as Exhibit 4.32
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.
4.33 Modification Agreement No. 7 dated as of July 28, 1995 to
Reducing Revolving Credit Agreement, dated as of July 21,
1993, among the Company, various financial institutions
now or hereafter parties thereto and Canadian Imperial
Bank of Commerce, New York Agency, filed as Exhibit 4.33
to the Company's Quarterly Report on Form 10-Q for the
quarter ended August 9, 1995 filed with the Commission on
September 20, 1995, and incorporated herein by this
reference.
4.34 Modification Agreement No. 8 dated as of February 18, 1996
to Reducing Revolving Credit Agreement, dated as of July
21, 1993, among the Company, various financial
institutions now or hereafter parties thereto and Canadian
Imperial Bank of Commerce, New York Agency.
10.1 License Agreement, dated as of October 28, 1991, between
Shoney's Investments, Inc. and Shoney's Lodging, Inc.,
filed as Exhibit 28.7 to the Company's Current Report on
Form 8-K filed with the Commission on December 3, 1991,
and incorporated herein by this reference.
(23)
<PAGE>
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
28, 1991, between Shoney's Investments, Inc. and Gulf
Coast Development, Inc., filed as Exhibit 28.8 to the
Company's Current Report on Form 8-K filed with the
Commission on December 3, 1991, and incorporated herein by
this reference.
10.6 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.
10.8 Shoney's, Inc. 1981 Stock Option Plan, filed as Exhibit
4.7 to Post Effective Amendment No. 3 to the Company's
Registration Statement on Form S-8 (File No. 2-84763)
filed with the Commission on January 25, 1993, and
incorporated herein by this reference.
(24)
<PAGE>
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 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.
10.12 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.
10.13 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.
10.14 Captain D's Ownership Plan 1976, filed as Exhibit 10.48 to
Post Effective Amendment No. 5 to the Company's
Registration Statement on Form S-8 (File No. 2-64257)
filed with the Commission on January 25, 1993, and
incorporated herein by this reference.
10.15 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.
10.16 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.
(25)
<PAGE>
10.17 Amendment No. 1 to Shoney's, Inc. Supplemental Executive
Retirement Plan
10.18 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.
10.19 Employment Agreement dated as of January 17, 1995, between
the Company and W. Craig Barber, filed as Exhibit 10.17 to
Amendment No. 1 to the Company's Annual Report on Form
10-K for the fiscal year ended October 30, 1994 filed with
the Commission on February 27, 1995, and incorporated
herein by this reference.
10.20 Employment Agreement dated as of April 11, 1995, between
the Company and C. Stephen Lynn, filed as Exhibit 4.32 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.
10.21 Amendment No. 1 to Employment Agreement dated as of April
11, 1995, between the Company and C. Stephen Lynn, 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.
(b) During the quarter ended February 18, 1996, the were no
Current Reports on Form 8-K filed by the Company.
(26)
<PAGE>
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.
SHONEY'S, INC.
Date: April 3, 1996
By: /s/ W. Craig Barber
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W. Craig Barber
Senior Executive Vice President and
Chief Financial Officer (Principal
Financial and Chief Accounting Officer)
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RESTATED BY-LAWS 2/96
OF
SHONEY'S, INC.
ARTICLE I
OFFICES
The executive offices of the Corporation shall be in Davidson County,
Tennessee, but the Corporation may have other offices at such places as
the Board of Directors may from time to time decide or as the business of
the Corporation may require.
ARTICLE II
MEETINGS OF SHAREHOLDERS
Section 1. Annual Meeting. The annual meeting of
the shareholders shall be held at the call of the Board of Directors on
a date and at a time and place, either within or without the State of
Tennessee, as may be selected by the Board of Directors.
Section 2. Special Meeting. Special Meetings of the
shareholders may be called at any time by the Chairman of the Board, the
Board of Directors or the holder or holders of not less than one tenth
(1/10) of all the shares entitled to vote at such meeting, to be held at
such time and place, either within or without the State of Tennessee, as
may be designated in the call of the meeting.
Section 3. Notice of Meeting. Written Notice
stating the place, day and hour of annual and special meetings of
shareholders shall be given to each shareholder, either personally or by
mail to his last address of record with the Corporation, not less than ten
(10) nor more than sixty (60) days before the date of the meeting. Notice
of any special meeting of shareholders shall state the purpose or purposes
for which the meeting is called and the person or persons calling the
meeting. Notice of any annual or special meeting of shareholders may be
waived by the person or persons entitled thereto by signing a written
waiver of notice at any time before or after the meeting is completed,
which waiver may be signed by a shareholder or by his attorney-in-fact or
proxy holder.
Section 4. Voting. At all meetings of shareholders,
all shareholders of record shall be entitled to one vote for each share
of stock standing in their name and may vote either
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in person or by proxy. Proxies shall be filed with the Secretary of the
meeting before being voted or counted for the purpose of determining the
presence of a quorum.
Section 5. Quorum. At all meetings of shareholders,
a majority of the outstanding shares of stock entitled to vote,
represented in person or by proxy, shall constitute a quorum for the
transaction of business. Unless a greater vote specifically is required
by the Tennessee Business Corporation Act or the Corporation's charter or
By-laws, if a quorum is present at a meeting of the Corporation's
shareholders, a matter that may come before the meeting is adopted if the
number of votes cast in favor of the matter exceeds the number of votes
cast against the proposal. If, however, such majority shall not be
present or represented by proxy at any meeting of the stockholders, the
presiding officer or stockholders present in person or represented by
proxy shall have the power to adjourn from time to time without notice
other than announcement at the meeting, until the requisite number of
shares shall be represented when any business may be transacted which
might have been transacted at the meeting as provided in the original
notice.
Section 6. Action by Consent. Whenever the
shareholders of the Corporation are required or permitted to take any
action by vote, such action may be taken without a meeting on written
consent, setting forth the action so taken, signed by all of the persons
or entities entitled to vote thereon.
Section 7. Advance Notice of Shareholder Proposals.
At any annual or special meeting of shareholders, proposals by
shareholders and persons nominated for election as Directors by
shareholders shall be considered only if advance notice thereof has been
timely given as provided herein and such proposals or nominations are
otherwise proper for consideration under applicable law and the Charter
and By-Laws of the Corporation. Notice of any proposal to be presented
by any shareholder or of the name of any person to be nominated by any
shareholder for election as a Director of the Corporation at any meeting
of shareholders shall be delivered to the Secretary of the Corporation at
its principal executive office not less than 60 nor more than 90 days
prior to the date of the meeting; provided, however, that if the date of
the meeting is first publicly announced or disclosed (in a public filing
or otherwise) less than 70 days prior to the date of the meeting, such
notice shall be given not more than ten days after such date is first so
announced or disclosed. Public notice shall be deemed to have been given
more than 70 days in advance of the annual meeting if the Corporation
shall have previously disclosed, in these ByLaws or otherwise, that the
annual meeting in each year is to be held on a determinable date, unless
and until the Board determines to hold the meeting on a different date.
Any shareholder who gives notice of any such proposal shall deliver
therewith the text of the proposal to be presented and a brief written
statement of the reasons why such shareholder favors the proposal and
setting forth such shareholder's name and address, the number and class
of all shares of each class of stock of the Corporation beneficially owned
by such shareholder and any material interest of such shareholder in the
proposal (other than as a shareholder). Any shareholder desiring to
nominate any person for election as a Director of the Corporation shall
deliver with such notice a statement in writing setting forth the name of
the person to be nominated, the number and class of all shares of each
class of stock of the Corporation beneficially owned by such person, the
information regarding such person required by paragraphs (a), (e) and (f)
of Item 401 of Regulation S-K adopted by the Securities and
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Exchange Commission (or the corresponding provisions of any regulation
subsequently adopted by the Securities and Exchange Commission applicable
to the Corporation), such person's signed consent to serve as a Director
of the Corporation if elected, such shareholder's name and address and the
number and class of all shares of each class of stock of the Corporation
beneficially owned by such shareholder. As used herein, shares
"beneficially owned" shall mean all shares as to which such person,
together with such person's affiliates and associates (as defined in Rule
12b-2 under the Securities Exchange Act of 1934), may be deemed to
beneficially own pursuant to Rules 13d-3 and 13d-5 under the Securities
Exchange Act of 1934, as well as all shares as to which such person,
together with such person's affiliates and associates, has the right to
become the beneficial owner pursuant to any agreement or understanding,
or upon the exercise of warrants, options or rights to convert or exchange
(whether such rights are exercisable immediately or only after the passage
of time or the occurrence of conditions). The person presiding at the
meeting, in addition to making any other determinations that may be
appropriate to the conduct of the meeting, shall determine whether such
notice has been duly given and shall direct that proposals and nominees
not be considered if such notice has not been given.
ARTICLE III
DIRECTORS
Section 1. Number of Qualifications. The business
and affairs of the Corporation shall be managed and controlled by a Board
of Directors, of not less than three nor more than fifteen in number. The
number of Directors shall be set by the Board of Directors. Directors
need not be shareholders of the Corporation. In addition to the Directors
who are elected by the shareholders, the Board of Directors, from time to
time, may appoint persons as advisory directors, to serve such terms and
perform such duties as the Board of Directors shall determine upon
appointing any person as an advisory director. Advisory directors shall
not be entitled to vote on any matter to come before the Board of
Directors. Advisory directors may be removed at any time by a vote of the
Board of Directors. The provisions of Article III, Sections 2 through 11
of these Bylaws shall not apply to Advisory directors.
Section 2. Nominations by Shareholders. Shareholders who wish
to nominate persons for election as Directors of the Corporation shall
comply with the requirements of ARTICLE II, Section 7 of these By-Laws.
Section 3. Election and Term of Office. The
Directors shall be elected at the annual meeting of shareholders; but if
any such annual meeting is not held or if the Directors are not elected
at any such annual meeting, the Directors may be elected at any special
meeting of the shareholders. Directors shall be elected by a plurality
of the votes cast. The Directors shall hold office until the next annual
meeting of shareholders and thereafter until their respective successors
have been elected and qualified.
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Section 4. Meetings. Regular meetings of the
Directors shall be held annually following the annual meeting of the
shareholders and may be held without notice at such other places and times
as may be determined by the Board of Directors. Special meetings of the
Directors may be called at any time by the Chairman of the Board or by a
majority of the Directors on at least one day's notice sent by any usual
means of communication. Notice of any such meeting may be waived by the
person or persons entitled thereto by signing a written waiver of notice
at any time before or after the meeting is completed. Attendance of a
Director at a meeting shall constitute a waiver of notice thereof unless
such attendance is for the express purpose of objecting to such meeting.
Any meeting of the Board of Directors may be held within or without the
State of Tennessee at such place as may be determined by the person or
persons calling the meeting.
Section 5. Quorum. A majority of the total number
of Directors then in office shall constitute a quorum for the transaction
of business; and the vote or action of a majority of the Directors present
at any meeting at which a quorum is had shall decide any matter that may
come before the meeting and shall be the act of the Board unless otherwise
specifically required by law or by express provision of the charter or
By-laws of the Corporation.
Section 6. Action by Consent. Any action required
or permitted to be taken by the Directors of the Corporation may be taken
without a meeting on written consent, setting forth the action so taken,
signed by all the Directors entitled to vote thereon.
Section 7. Vacancies. Vacancies in the Board of
Directors occurring for any reason, including an increase in the number
of Directors, resignation, or the removal of any Director with or without
cause, may be filled by vote of a majority of the Directors then in office
although less than a quorum exists; but if the offices of a majority of
the entire Board of Directors shall be vacant at the same time, such
vacancies shall be filled only by vote of the shareholders. A director
elected to fill any vacancy shall hold office until the next annual
meeting of shareholders and thereafter until his successor has been
elected and qualified.
Section 8. Removal and Resignation. Any or all of
the Directors may be removed with or without cause, at any time, by vote
of the shareholders. Any Director may resign at any time, such
resignation to be made in writing and to take effect immediately or on
such later date as may be specified therein without acceptance.
Section 9. Committees. From time to time, a
majority of the entire Board of Directors may by resolution appoint an
executive committee or any other committee or committees for the purpose
or purposes to the extent permitted by law, which committee or committees
shall have such powers as shall be specified in the resolution of
appointment.
Section 10. Participation in Meetings. The members of the Board
of Directors, or any committee appointed by the Board, may participate in
a meeting of the Board or of such committee by means of conference
telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other, and
participation in a
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meeting pursuant to such means shall constitute presence in person at such
meeting. The Directors shall be promptly furnished a copy of the minutes
of the Board of Directors' meetings.
Section 11. Compensation. The Directors shall
receive compensation or salary for their services as Directors, said sum
to be fixed by proper resolution of the Board of Directors, and said
salary and compensation may include a fixed sum for expenses of attending
the meetings of the Board of Directors. A Director may serve the
Corporation in a capacity other than that of a Director and receive
compensation for services rendered in such other capacity.
ARTICLE IV
OFFICERS
Section 1. Designation. The officers of the
Corporation shall be a Chairman Emeritus of the Board (which office shall
be optional with the Board of Directors), a Chairman of the Board, a
President, one or more Division Presidents, one or more Vice Presidents,
a Secretary and a Treasurer and such other officers, agents and employees
as may from time to time be elected, chosen or appointed by the Board of
Directors. Any Vice President may be designated as Executive Vice
President or Senior Vice President or such other title as the Board may
determine. Any two or more of such offices may be held by the same person
except the offices of President and Secretary.
Section 2. Chairman Emeritus. The Chairman Emeritus
of the Board shall be an honorary and optional position. The Chairman
Emeritus shall be an Advisory director of the Corporation pursuant to
Article III of these Bylaws. In addition, the Chairman Emeritus shall
have such duties with regard to the general and active management of the
Corporation as may be prescribed from time to time by the Board of
Directors or by the By-laws.
Section 3. Chairman of the Board of Directors. The
Chairman of the Board of Directors shall preside at all meetings of the
shareholders and the Board of Directors, and he shall call regular and
special meetings of the shareholders and Board of Directors in accordance
with these By-laws. He shall perform such other duties as may be
prescribed by the Board. The Board may designate the Chairman chief
executive officer of the Corporation.
Section 4. President. The President shall have
general supervision of the affairs and property of the Corporation,
subject to the direction of the Board of Directors and the Chairman of the
Board. He shall manage and control the regular business of the
Corporation; and he may appoint agents and employees of the Corporation,
other than officers elected or appointed by the Board, subject to the
approval of the Board. In the absence of the Chairman of the Board, the
President shall preside at any meeting of the shareholders or the Board
of Directors. He shall perform such other duties as may from time to time
be prescribed by the Board.
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Section 5. Division President. The Division
President or Division Presidents shall assist the President in the
management of the Corporation, shall have general supervision of the
affairs and property of that division of the Corporation over which he is
President, and shall have such other duties as may from time to time be
prescribed by the Board, the Chairman of the Board, or President. In the
absence, disqualification or incapacity of the President, the senior
Division President, if senior to the senior Vice President, shall perform
the duties and exercise the powers of the President.
Section 6. Vice President. The Vice President or
Vice Presidents shall assist the President in the management of the
Corporation and shall have such other powers and perform such other duties
as may from time to time be prescribed by the Board, or President. In the
absence, disqualification or incapacity of the President, the senior Vice
President shall perform the duties and exercise the powers of the
President.
Section 7. Secretary. The Secretary shall keep the
minutes of all meetings of the shareholders and the Board of Directors in
appropriate books, and he shall attend to the giving of all notices for
the Corporation. He shall have charge of the seal and stock books of the
Corporation and such other books and papers as the Board may direct, and
he shall in general perform all duties incident to the office of Secretary
of the Corporation. He shall perform such other duties as may from time
to time be prescribed by the Board, the Chairman of the Board, or
President.
Section 8. Treasurer. The Treasurer shall have the
care and custody of all funds and securities of the Corporation, and he
shall in general perform all duties incident to the office of Treasurer
of the Corporation. He shall perform such other duties as may from time
to time be prescribed by the Board, the Chairman of the Board, or
President.
Section 9. Other Officers. The Board of Directors
may appoint, or may authorize the Chairman of the Board or President to
appoint, assistant secretaries and assistant treasurers and such other
officers as the Board may from time to time decide, who shall have such
authority and perform such duties as may from time to time be prescribed
by the Board or designated by the President.
Section 10. Election and Term of Office. The
officers shall be elected or appointed at the regular meeting of the Board
of Directors following the annual meeting of shareholders, provided that
any vacancy or newly created office may be filled at a special meeting or
other regular meeting of the Board. Unless otherwise determined by the
Board, each officer shall hold office until the next regular meeting of
the Board following the annual meeting of shareholders and thereafter
until his successor has been elected or appointed and qualified.
Section 11. Compensation. The Board of Directors,
or one of its duly appointed committees, shall fix the salaries of the
officers of the Corporation. The compensation of other agents and
employees of the Corporation may be fixed by the Board of Directors or by
an officer or officers for whom that function has been delegated by the
Board.
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ARTICLE V
SHARES
Section 1. Certificates. The shares of the
Corporation shall be represented by certificates in such form as the Board
of Directors may from time to time prescribe. Such certificates shall be
numbered consecutively in the order in which they are issued, which
numbering system may be separated by class or series if there shall be
more than one class or series of shares. The certificates shall be signed
by the Chairman of the Board and Secretary unless the Board of Directors
shall otherwise designate any two officers of the Corporation for such
purpose.
Section 2. Record. The name and address of all
persons to whom the shares of the Corporation are issued, the number of
shares, and the date of issue shall be entered on the books of the
Corporation. It shall be the duty of each shareholder to notify the
Corporation of his address.
Section 3. Transfers. The shares of the Corporation
are transferable only on the books of the Corporation by the registered
holder thereof, either in person or by power of attorney, and upon
delivery and surrender of the certificate representing such shares
properly endorsed for transfer. Certificates exchanged or surrendered
shall be cancelled by the Secretary and placed in the corporate records.
Section 4. Loss of Certificates. In case of the
loss, mutilation or destruction of a certificate representing shares of
the Corporation, a duplicate certificate may be issued on such terms as
the Board of Directors shall prescribe.
Section 5. Transfer Agent, Registrar. The Board of
Directors may appoint a transfer agent or agents and/or a registrar, and
a dividend disbursing agent for the Corporation.
ARTICLE VI
SEAL
Section 1. Authority to Adopt. The Corporation may
have a seal in such form as the Board of Directors may adopt, and the
Board of Directors may from time to time change the form of the seal of the
Corporation.
Section 2. Scroll Seal. In the event the Board
shall not have adopted a seal or if it is inconvenient to use the adopted
seal at any time, an authorized signature made in the
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name of and on behalf of the Corporation followed by the word "Seal"
enclosed in parentheses or scroll shall be deemed the seal of the
Corporation.
ARTICLE VII
FISCAL YEAR
The fiscal year of the Corporation shall end on the last Sunday
of October of each year, but the Board of Directors may from time to time
change the fiscal year of the Corporation.
ARTICLE VIII
DIVIDENDS, SURPLUS AND RESERVES
Section 1. Dividends. The Board of Directors may
declare dividends from the Corporation's net earnings, or from the surplus
of its assets over its liabilities, including capital, but not otherwise.
The Board of Directors may issue stock dividends, provided the Corporation
has a surplus equal in value, at a fair valuation, to such stock issued
as a dividend; and provided, further, that the surplus of the Corporation
is reduced in an amount equal to the value of the stock issued as a stock
dividend.
Section 2. Surplus and Reserves. Before making any
distribution of proceeds, there may be set aside out of the net proceeds
of the Corporation such sums for maintaining any property of the
Corporation, or for any other purpose, and any profits of any year not
distributed as dividends shall be deemed to have been thus set aside until
otherwise disposed of by the Board of Directors, and the Board of
Directors may abolish any such reserve in its absolute discretion.
ARTICLE IX
INDEMNITY
Any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (including any
action by or in the right of the Corporation) by reason of the fact that
he is or was serving as an officer or director or employee of the
Corporation or is or was serving at the request of the Corporation as a
Director or officer of the Corporation, partnership, joint venture, trust
or other enterprise, shall be indemnified by the Corporation against
expenses (including reasonable attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding if he acted in good faith
for a purpose which he reasonably believed to be in the best interest of the
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corporation, and, in criminal proceedings, in addition, had no reasonable
cause to believe that his conduct was unlawful, to the maximum extent
permitted by, and in the manner provided by, the Tennessee Business
Corporation Act. In the event of a settlement, however, the
indemnification herein shall apply only when the Board of Directors
approves such settlement and reimbursement as being in the best interest
of the Corporation. The foregoing right of indemnification shall be in
addition to and not exclusive of all rights to which said Directors,
officers or employees may be entitled.
ARTICLE X
AMENDMENTS
The shareholders of the Corporation may adopt new By-laws and may
amend or repeal any or all of these By-laws at any annual or special
meeting provided, however, that notice of intention to amend shall have
been contained in the notice of any special meeting called for that
purpose; and also the Board of Directors may adopt new by-laws and may
amend or repeal any or all of these By-laws by the vote of a majority of
the entire Board, and provided further that any by-law adopted by the
Board may be amended or repealed by the shareholders. The Board of
Directors may amend by-laws adopted by the shareholders, provided that
shareholders may from time to time specify particular provisions of these
By-laws which shall not be amended by the Board of Directors.
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EXECUTION COPY
MODIFICATION AGREEMENT NO. 8
TO
REDUCING REVOLVING
CREDIT AGREEMENT
THIS MODIFICATION AGREEMENT NO. 8 (the "Modification Agreement No.
8"), dated as of February 18, 1996, to the Reducing Revolving Credit
Agreement, dated as of July 21, 1993, as amended by Modification Agreement
No. 1 to Reducing Revolving Credit Agreement, dated as of July 21, 1993, by
Modification Agreement No. 2 to Reducing Revolving Credit Agreement, dated
as of December 21,1993, by Modification Agreement No. 3 to Reducing
Revolving Credit Agreement, dated as of May 3, 1994, by Modification
Agreement No. 4 to Reducing Revolving Credit Agreement, dated as of October
27, 1994, by Modification Agreement No. 5 to Reducing Revolving Credit
Agreement, dated as of January 18, 1995, by Modification Agreement No. 6 to
Reducing Revolving Credit Agreement, dated as of April 1, 1995 and by
Modification Agreement No. 7 to Reducing Revolving Credit Agreement, dated
as of July 28, 1995 (collectively, the "Existing Credit Agreement"), among
SHONEY'S, INC., a Tennessee corporation (the "Borrower"), CIBC INC., acting
through its Atlanta Office and various other financial institutions, which
are now, or in accordance with Section 10.10 of the Existing Credit
Agreement hereafter become, parties thereto (collectively, the "Lenders"
and, individually, a "Lender"), and CANADIAN IMPERIAL BANK OF COMMERCE, a
Canadian chartered bank acting through its New York Agency, as Agent and
Collateral Agent (the "Agent" and the "Collateral Agent", respectively) for
the Lenders,
W I T N E S S E T H:
WHEREAS, the Borrower has requested that a certain financial
definition in the Existing Credit Agreement be amended as set forth herein;
and
WHEREAS, the Lenders are willing to amend such financial definition
in the Existing Credit Agreement, but only on the terms and conditions set
forth herein;
NOW, THEREFORE, in consideration of the agreements herein
contained, the parties hereto agree as follows.
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ARTICLE I
DEFINITIONS
SECTION 1.1 Certain Definitions. Unless otherwise defined
herein or the context otherwise requires, capitalized terms used in this
Modification Agreement No. 8, including its preamble and recitals, have the
following meanings (such meanings to be equally applicable to the singular
and plural forms thereof):
"Agent" has the meaning assigned to such term in the preamble.
"Borrower" has the meaning assigned to such term in the preamble.
"Collateral Agent" has the meaning assigned to such term in the
preamble.
"Existing Credit Agreement" has the meaning assigned to such term
in the preamble.
"Lenders" and "Lender" have the respective meanings assigned to
such terms in the preamble.
"Modification Agreement No. 8" has the meaning assigned to such
term in the preamble.
"Modification Effective Date" has the meaning assigned to such term
in Section 3.1.
SECTION 1.2 Other Definitions. Unless otherwise defined herein
or the context otherwise requires, capitalized terms used in this
Modification Agreement No. 8, including its preamble and recitals, have the
meanings provided in the Existing Credit Agreement.
ARTICLE II
AMENDMENT OF EXISTING CREDIT AGREEMENT
AS OF THE MODIFICATION EFFECTIVE DATE
Effective on (and subject to the occurrence of) the Modification
Effective Date, the provision of the Existing Credit Agreement referred to
below is hereby amended in accordance with this Article II. Except as
expressly so amended, the Existing Credit Agreement shall continue in full
force and effect in accordance with its terms.
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SECTION 2.1 Modification of Article I (Definitions). Article
I of the Existing Credit Agreement is hereby modified as follows:
SECTION 2.1.1 Section 1.1 of the Existing Credit Agreement is
hereby amended by adding the following clause (iv) to the parenthetical in
clause (a) of the definition of "EBITDA" to read as follows:
"and (iv) excluding the following non-cash charges relating to the
Borrower's workers' compensation obligations, a write-down in the Borrower's
investment in ShoLodge, a write-off of remodeling expenses and a write-off
investment incurred in the conversion of Shoney's concept restaurants into
BarbWire's Concept restaurants in each case during Fiscal Year 1995.
ARTICLE III
CONDITIONS TO EFFECTIVENESS
SECTION 3.1 Modification Effective Date. This Modification
Agreement No. 8 shall become effective as of the date first above written,
when all of the conditions set forth in Sections 3.1.1 through 3.1.5 shall
have been satisfied (the "Modification Effective Date").
SECTION 3.1.1 Resolutions. etc. The Agent shall have received
from the Borrower, a certificate, dated the Modification Effective Date, of
its Secretary or any Assistant Secretary as to:
(a) resolutions of its Board of Directors then in full
force and effect authorizing the execution delivery, and
performance of this Modification Agreement No. 8 and each other
Loan Document to be executed by it; and
(b) the incumbency and signatures of the officers of
the Borrower authorized to act with respect to this Modification
Agreement No. 8 and each other Loan Document to be executed by it
(upon which certificate the Agent and each Lender may conclusively
rely until the Agent shall have received a further certificate of
the Secretary of the Borrower canceling or amending such prior
certificate, which further certificate shall be reasonably
satisfactory to the Agent).
SECTION 3.1.2 Compliance Certificate. The Agent shall have
received, with a counterpart for each Lender, a duly
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executed and completed Compliance Certificate (based upon the Borrower's
first Fiscal Quarter of Fiscal Year 1996 financial statements), dated the
Modification Effective Date and giving effect to this Modification Agreement
NO. 8.
SECTION 3.1.3 No Materially Adverse Effect. No events shall have
occurred which, individually or in the aggregate, comprise a Materially
Adverse Effect since October 31, 1995.
SECTION 3.1.4 Execution of Counterparts. The Agent shall have
received counterparts of this Modification Agreement No. 8 duly executed by
the Borrower, the Agent, and the Required Lenders.
SECTION 3.1.5 Compliance with Warranties; No Default etc. The
Agent shall have received from an Authorized Officer of the Borrower a
Certificate, dated the date first above written, stating that
(a) the representations and warranties set forth in
Article VI of the Existing Credit Agreement (excluding, however,
those contained in Section 6.7 thereof) and the representations and
warranties set forth in each of the other Loan Documents, in each
case as modified in accordance herewith, are true and correct in
all material respects with the same effect as if then made (unless
stated to relate solely to an earlier date, in which case such
representations and warranties were true and correct as of such
earlier date);
(b) except as disclosed by the Borrower to the Agent
and the Lenders pursuant to Section 6.7 of the Existing Credit
Agreement:
(i) no labor controversy, litigation,
arbitration or governmental investigation or proceeding is
pending or, to the knowledge of the Borrower, threatened
against the Borrower or any of its Subsidiaries which
might have a Materially Adverse Effect; and
(ii no development has occurred in any labor
controversy, litigation, arbitration or governmental
investigation or proceeding disclosed pursuant to Section
6.7 of the Existing Credit Agreement which might have a
Materially Adverse Effect; and
(c) after giving effect to this Modification Agreement
No. 8, no Default has occurred and is continuing, and neither the
Borrower nor any of its Subsidiaries is in material violation of
any law or government regulation or court order or decree.
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ARTICLE IV
MISCELLANEOUS
SECTION 4.1 Cross References. References in this Modification
Agreement No. 8 to any article or section are, unless otherwise specified,
to such article or section of this Modification Agreement No. 8.
SECTION 4.2 Instrument Pursuant to Existing Credit Agreement;
Limited Waiver. This Modification Agreement No. 8 is a Loan Document
executed pursuant to the Existing Credit Agreement and shall (unless
otherwise expressly indicated therein) be construed, administered, and
applied in accordance with all of the terms and provisions of the Existing
Credit Agreement. Any term or provision of and any modification effected by
this Modification Agreement No. 8 may be modified in any manner by an
instrument in writing executed by the Borrower and the Required Lenders (or
the Agent on behalf of and with the consent of the Required Lenders). Except
as expressly amended hereby, all of the representations, warranties, terms,
covenants and conditions of the Existing Credit Agreement shall remain
unmodified and unwaived. The modifications set forth herein shall be limited
precisely as provided for herein to the provisions expressly modified herein
and shall not be deemed to be a waiver of, amendment of, consent to or
modification of any other term or provision of any other Loan Document or
of any transaction or further or future action on the part of the Borrower
which could require the consent of any of the Lenders under the Existing
Credit Agreement.
SECTION 4.3 Successors and Assigns. This Modification Agreement
No. 8 shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns.
SECTION 4.4 Counterparts. This Modification Agreement No. 8 may
be executed by the parties hereto in several counterparts which shall be
executed by the Borrower, each of the Required Lenders and the Agent, as the
case may be, all of which shall be deemed to be an original and which shall
constitute together but one and the same agreement.
SECTION 4.5 Event of Default. It is understood and agreed that
any breach of any representation or warranty or covenant contained herein
shall constitute an Event of Default.
5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Modification Agreement No. 8 to be executed by their respective officers
hereunder duly authorized as of the day and year first above written.
SHONEY'S, INC.
By:
Title: Treasurer
CANADIAN IMPERIAL BANK OF COMMERCE,
acting through its NEW YORK AGENCY,
as Agent
By:
Title: Authorized Signatory
CIBC INC., acting through its
Atlanta Office
By:
Title: Authorized Signatory
NATIONSBANK OF TENNESSEE, N.A.
By:
Title:
THE BANK OF NEW YORK
By:
Title:
THE LONG-TERM CREDIT BANK OF JAPAN,
LTD.
By:
Title:
6
<PAGE>
THE BANK OF NOVA SCOTIA
By:
Title:
THE MITSUBISHI TRUST AND BANKING
CORPORATION
By:
Title:
FIRST UNION NATIONAL BANK OF NORTH
CAROLINA
By:
Title:
THE FUJI BANK, LIMITED
By:
Title:
THE INDUSTRIAL BANK OF JAPAN,
LIMITED
By:
Title:
KREDIETBANK N.V.
By:
Title:
THE BANK OF TOKYO TRUST COMPANY
By:
Title:
7
<PAGE>
FIRST AMERICAN NATIONAL BANK
By:
Title:
ALLIED IRISH BANK
By:
Title:
MERCANTILE BANK OF ST. LOUIS,
NATIONAL ASSOCIATION
By:
Title:
PNC BANK, KENTUCKY, INC.
By:
Title:
THE ROYAL BANK OF SCOTLAND
By:
Title:
GIROCREDIT BANK AG DER SPARKASSEN,
GRAND CAYMAN ISLANDS BRANCH
By:
Title:
THE SUMITOMO BANK, LIMITED
By:
Title:
8
<PAGE>
AMENDMENT NUMBER ONE
SHONEY'S, INC.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
This Amendment Number One (the "Amendment") is dated February 26,
1996, and amends the Shoney's, Inc. Supplemental Executive Retirement Plan,
as amended through October 31, 1995 (the "Plan").
1. Incorporation of prior terms. Capitalized terms used in this
Amendment and not defined in it shall have the same meanings as those terms
were given in the Plan.
2. Amendment of Plan. Article II is hereby amended by striking
that article in its entirety and substituting in place thereof the
following:
ARTICLE II
PARTICIPANTS
2.01 Eligibility to Participate. The employees
eligible to participate in the Plan are employees of
Shoney's or its Subsidiaries which are designated as
employees who may participate by the Committee as
specified in subsections (a) and (b). No employee may
participate in this Plan if he or she participates in the
401(k) Plan.
(a) General Rule. Unless subsection
(b) applies, designation shall occur at least forty-five
(45) days before the commencement of the next Year for
which a Participant may defer his or her compensation.
(b) First Year Exception.If an
employee has not previously been designated as an employee
who may participate in the Plan, then the Committee may
designate the employee to be eligible to participate in
the Plan for the remainder of the current Year. Such
designation shall occur at least forty-five (45) days
prior to the end of the current Year.
2.02 Amount of Deferral by Participants.
(a) General Rule. Unless the
employee was designated pursuant to Section 2.01(b), for
any Year any Participant may elect in writing to defer up
to fifty percent (50%) of his or her base salary and up to
one hundred percent (100%) of any cash bonus, for the
<PAGE>
following Year. Such election must be made at least thirty (30)
days prior to the commencement of a Year.
(b) First Year Exception.If the
employee was designated pursuant to Section 2.01(b), then
he or she may elect, in the Year in which such employee
was designated, in writing to defer up to fifty percent
(50%) of his or her base salary and up to one hundred
percent (100%) of any cash bonus, for the remainder of
that Year. Such election must be made within the thirty-
day period following his or her becoming eligible after
designation by the Committee.
3. Restatement of Other Terms. All other terms and provisions of
the Plan not modified hereby shall remain in full force and effect.
<PAGE>
<TABLE>
<CAPTION>
STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE - EXHIBIT 11
Sixteen Weeks Ended
February 18, February 19,
1996 1995
------------ ------------
<S> <C> <C>
Earnings per Common Share - Primary
Average Shares outstanding 41,555,557 41,289,203
Net effect of dilutive stock options-based on the treasury
stock method using average market price 80,082 111,837
---------- ----------
Totals 41,635,639 41,401,040
========== ==========
Income from continuing operations $ 1,628,766 $ 8,012,102
Income from discontinued operations 397,816 2,651,488
Gain on sale of discontinued operations, net of income taxes 22,080,375
---------- ----------
Net income $24,106,957 $10,663,590
========== ==========
Per Share amount:
Income from continuing operations $ .04 $ .19
Income from discontinued operations .01 .06
Gain on sale of discontinued operations, net of income taxes .53
---------- ----------
Net income $ .58 $ .26
========== ==========
Earnings per Common Share - Fully Diluted:
Average shares outstanding 41,555,557 41,289,203
Net effect of dilutive stock options-based on the treasury
stock method using the average market price 84,270 111,837
Assumed conversion of 8.5% zero coupon convertible debentures 5,205,632 (A)
---------- ----------
Totals 46,845,459 41,401,040
========== ==========
Income from continuing operations $ 1,628,766 $ 8,012,102
Add 8.5% zero coupon convertible debentures interest,
net of income tax 1,385,329 (A)
---------- ----------
Total from continuing operations 3,014,095 8,012,102
Income from discontinued operations 397,816 2,651,488
Gain on sale of discontinued operations, net of income taxes 22,080,375
---------- ----------
Net income $25,492,286 $10,663,590
========== ==========
Per Share amount:
Income from continuing operations $ .06 $ .19
Income from discontinued operations .01 .06
Gain on sale of discontinued operations, net of income taxes .47
---------- ----------
Net income $ .54 $ .26
========== ==========
(A) For the first quarter of 1996, fully diluted earnings per share for continuing operations were
required to be presented giving effect to the assumed conversion of the convertible debentures although
the effect was anti-dilutive. This presentation was required because fully diluted net income per share
was diluted by more than 3%. For the first quarter of fiscal 1995, both primary and fully diluted
earnings per share utilized average shares outstanding and common stock equivalents. No consideration
was given to the convertible debentures as they had an anti-dilutive effect.
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS
SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE FINANCIAL
STATEMENTS OF SHONEY'S, INC.
FOR THE PERIOD ENDED FEBRUARY
18, 1996 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS
</LEGEND>
<MULTIPLIER> 1
<S> <S>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> OCT-27-1996
<PERIOD-START> OCT-30-1995
<PERIOD-END> FEB-18-1996
<CASH> 8,349,727
<SECURITIES> 0
<RECEIVABLES> 15,790,275
<ALLOWANCES> 2,237,084
<INVENTORY> 32,272,982
<CURRENT-ASSETS> 86,388,919
<PP&E> 737,664,362
<DEPRECIATION> 301,613,107
<TOTAL-ASSETS> 542,578,645
<CURRENT-LIABILITIES> 168,010,047
<BONDS> 0
<COMMON> 41,622,264
0
0
<OTHER-SE> (123,457,824)
<TOTAL-LIABILITY-AND-EQUITY> 542,578,645
<SALES> 292,782,922
<TOTAL-REVENUES> 300,177,093
<CGS> 266,468,079
<TOTAL-COSTS> 297,425,327
<OTHER-EXPENSES> 20,139,394
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,817,854
<INCOME-PRETAX> 2,751,766
<INCOME-TAX> 1,123,000
<INCOME-CONTINUING> 1,628,766
<DISCONTINUED> 22,478,191
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 24,106,957
<EPS-PRIMARY> 0.58
<EPS-DILUTED> 0.54
</TABLE>
