<PAGE>
PRELIMINARY SOLICITATION STATEMENT
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 30, 1997
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
[Amendment No. 2]
Filed by the Registrant [_]
Filed by a Party other than the Registrant [x]
Check the appropriate box:
[x] Preliminary Proxy Statement [_] Confidential, For Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
SHONEY'S, INC.
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(Name of Registrant as Specified in Its Charter)
RAYMOND D. SCHOENBAUM and BETTY J. SCHOENBAUM
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(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
5) Total fee paid:
------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials:
------------------------------------------------------------------------
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
1) Amount previously paid:____________________________________________________
2) Form, Schedule or Registration Statement no.:______________________________
3) Filing Party:______________________________________________________________
4) Date Filed:________________________________________________________________
<PAGE>
PRELIMINARY SOLICITATION MATERIALS DATED JUNE 30, 1997
SUBJECT TO COMPLETION
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The information included herein is as it is expected to be when the Definitive
Solicitation Statement is mailed to shareholders of Shoney's, Inc. This
solicitation statement will be revised to reflect actual facts at the time of
the filing of the Definitive Solicitation Statement.
No BLUE Agent Designation Card is included with these materials.
___________
SOLICITATION OF AGENT DESIGNATIONS
IN CONNECTION WITH THE
CALL OF A SPECIAL MEETING OF SHAREHOLDERS
OF
SHONEY'S, INC.
___________
PRELIMINARY SOLICITATION STATEMENT
OF
THE SHONEY'S SHAREHOLDERS' COMMITTEE
1640 Powers Ferry Road
Building Two, Suite 100
Marietta, Georgia
30067-6050
___________
We are asking you to help us call a special meeting of the shareholders of
Shoney's, Inc., a Tennessee corporation ("Shoney's" or the "Company"), for the
purpose of considering proposals to remove the current members of the Board of
Directors of the Company and to replace them with our nominees. We are providing
this Preliminary Solicitation Statement to holders (the "Shareholders") of the
common stock, $1.00 par value per share (the "Common Stock"), of the Company in
connection with the solicitation of appointments ("Agent Designations") of
Designated Agents (as defined below) from holders of the Common Stock. The Agent
Designations are being solicited by Raymond D. Schoenbaum and Betty J.
Schoenbaum (collectively, the "Shoney's Shareholders' Committee" or "we") to
provide for the call of a special meeting of the Shareholders (the "Special
Meeting") for the purpose of considering and voting upon certain proposals,
including proposals targeted at replacing the Company's current Board of
Directors. For the Special Meeting to be held, Agent Designations in favor of
the call and demand of the Special Meeting must be executed by the holder or
holders of not less than one tenth (1/10) of all the shares entitled to vote at
such meeting.
THIS SOLICITATION STATEMENT AND THE ACCOMPANYING BLUE AGENT DESIGNATION CARD
ARE FIRST BEING FURNISHED TO SHAREHOLDERS ON OR ABOUT JULY 2, 1997.
THE FAILURE TO EXECUTE AND RETURN THE BLUE AGENT DESIGNATION CARD WILL HAVE THE
SAME EFFECT AS OPPOSING THE CALL OF THE SPECIAL MEETING.
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SUMMARY
This summary highlights selected information from this document, and may
not contain all of the information that is important to you. To understand
better why we are asking for your support in calling a Special Meeting, you
should read this entire document carefully.
Q: WHO ARE WE?
A: Raymond D. Schoenbaum and Betty J. Schoenbaum (the Shoney's Shareholders'
Committee) own together approximately 8.0% of Shoney's common stock. Alex
Schoenbaum, the father of Raymond D. Schoenbaum and husband of Betty J.
Schoenbaum, founded Shoney's in 1947 and served as its first Chairman of the
Board. Following Alex Schoenbaum's death late last year, the Shoney's
Shareholders' Committee became one of the two largest shareholders of Shoney's.
Raymond D. Schoenbaum has extensive experience in the family and casual
restaurant business. He has been actively involved in the restaurant industry
since 1974, and between 1985 and 1995 he developed and operated Ray's on the
River and Rio Bravo, a successful chain of casual restaurants. In 1995, he sold
his restaurant business to Applebee's International Inc. and became a director
of Applebee's following the sale.
Q: WHAT ARE WE ASKING YOU TO DO?
A: We are asking you to help us in calling a special meeting of the
shareholders of Shoney's at which the shareholders will vote on our proposals to
remove the current members of the Board of Shoney's and replace them with our
nominees. By helping us to call the special meeting you are not voting for our
proposals to remove the directors or replace them with our nominees; you are
simply voting to allow the shareholders of Shoney's to have the opportunity to
decide to support our proposals. If a special meeting is called, we will send to
you additional materials soliciting proxies, including separate proxy cards, to
vote on the proposals at the special meeting.
Q: WHY ARE WE ASKING YOU TO HELP US IN CALLING A SPECIAL MEETING?
A: We have been disappointed with Shoney's performance and the performance of
Shoney's stock price in recent years. Shoney's stock price declined nearly 80%
between October 29, 1993 and April 25, 1997, the day on which we filed a
Schedule 13D with the Securities and Exchange Commission indicating our
disappointment with the Company's performance and stock price in recent years
and our consideration of alternatives with respect to our investment in
Shoney's. In comparison, over the same period, the Standard & Poor's 500 Index
increased approximately 63.6% and Standard & Poor's Restaurants Index increased
approximately 66.8%. As one of the largest shareholders of Shoney's, we are
obviously concerned about the significant loss in market value that has been
suffered by all of Shoney's shareholders. Given our family's history with
Shoney's, it also has been personally very distressing to us to watch Shoney's
lose its focus on the basics of the business which has caused it to struggle in
recent years.
We believe that, under the direction of the current Board and management of
Shoney's, there has been a deterioration in the quality of many of Shoney's
restaurants and the business and reputation of Shoney's. Over the last several
years, it has been our experience that the restaurant industry has become more
competitive, and customers now have many more choices. As a result, customers
are more interested in better price/value than in the past. In our view, the
Shoney's Board and management have failed to respond to these changing customer
preferences and that, instead of evolving to meet the preferences of today's
customers, Shoney's approach is outdated and is no longer in touch with the
customers. Indeed, we believe that the quality of the food and service provided
by Shoney's has been reduced, rather than enhanced, in recent years. After two
years under the current management, it is our view that Shoney's condition has
not only failed to improve, but, in fact, has deteriorated. In the second
quarter of 1997, during what the current Board and management consider to be a
turnaround, same store sales for all company-owned restaurants declined 4.3%,
after closing 57 under-performing restaurants during the first two quarters.
Accordingly, we believe that competitors are outperforming Shoney's, while
Shoney's customer base and profits have continued to decline. For example,
between 1990 and 1996, excluding extraordinary items and special charges,
Shoney's earnings per share declined 11.0% while, as examples, the earnings per
share of Cracker Barrel, Applebee's and IHOP, three of Shoney's competitors,
increased 271.9%, 838.5% and 267.9%, respectively.
Q: WHY SHOULD YOU HELP US IN CALLING A SPECIAL MEETING?
A: On June 5, 1997, we requested to meet with the Board at its two-day retreat
in mid-June to discuss our concerns about Shoney's continued poor performance.
We had hoped to share with the Board at such meeting our concerns about Shoney's
performance and the need for a significant change in the direction of Shoney's.
Unfortunately, the Board responded in a manner which we believe demonstrates a
lack of understanding of the urgency of Shoney's situation and the lack of
leadership under current management. Rather than providing Raymond D.
Schoenbaum, as a representative of an 8% shareholder, with the opportunity to
meet with the Board for a short time at some point during the Board's two-day
retreat, the Board suggested that we submit our suggestions in writing, after
which the Board would "consider a time in the future" for us to meet with the
Board or "a committee of the Board." We did not submit our suggestions in
writing to the Board because, as stated above, we do not believe the Board
understands the urgency of Shoney's situation and we believe the request for a
submission of our suggestions was an attempt at delay. Because of Shoney's
continued poor performance and the Board's refusal to meet with Raymond D.
Schoenbaum at the June Board meeting despite the urgency of the situation, we
have concluded that the Board does not appreciate the need for a significant
change in the direction of Shoney's and we believe that we are left with no
alternative but to present our case directly to you, the shareholders and owners
of Shoney's.
Since we are significant shareholders of Shoney's, our interests as shareholders
are aligned with yours and we have every incentive to increase shareholder
value. We believe that calling a special meeting at which the shareholders can
vote to remove the current directors and replace them with our nominees will
give the shareholders an opportunity to express their dissatisfaction with
Shoney's continued poor performance and enable them to replace the directors
with candidates who will take steps to make a significant change in the
direction of Shoney's and who will be more in touch with shareholders' concerns.
Q: WHAT DOES IT TAKE TO CALL A SPECIAL MEETING?
A: For a Special Meeting to be held, Agent Designations in favor of the call
and demand of the Special Meeting must be executed by the holder or holders of
not less than one tenth (1/10) of all the shares entitled to vote at the
meeting. Assuming Agent Designations are executed with respect to all shares of
Common Stock owned by the Shoney's Shareholders' Committee, Agent Designations
representing approximately 990,020 additional shares of Common Stock are needed
to require Shoney's to hold the Special Meeting.
Q: WHAT IS AN AGENT DESIGNATION?
A: An Agent Designation is your appointment of Raymond D. Schoenbaum, Betty J.
Schoenbaum, Daniel H. Burch, Stanley J. Kay, Jr. and Mark H. Harnett to take
the following actions on your behalf: (i) to call and demand the Special
Meeting; (ii) to set the place, date and time of the Special Meeting, if held to
be permissible; and (iii) to exercise any other rights you may have as a
shareholder of the Company incidental to calling and convening the Special
Meeting. Agent Designations will not give Raymond D. Schoenbaum, Betty J.
Schoenbaum, Daniel H. Burch, Stanley J. Kay, Jr. or Mark H. Harnett the right
to vote any of your shares of Common Stock in the Company at the Special
Meeting.
Q: WHEN ARE WE ASKING YOU TO SUBMIT YOUR AGENT DESIGNATION?
A: As soon as possible, and in any event, no later than July 14, 1997.
Q: WHOM SHOULD YOU CALL IF YOU HAVE QUESTIONS ABOUT GIVING YOUR AGENT
DESIGNATION OR NEED ASSISTANCE?
A: Call MacKenzie Partners, Inc. at (212) 929-5500 (collect) or Toll Free
(800) 322-2885.
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REASONS FOR THE SOLICITATION
The Shoney's Shareholders' Committee beneficially owns approximately 8.0% of the
Common Stock of Shoney's. Alex Schoenbaum, the father of Raymond D. Schoenbaum
and husband of Betty J. Schoenbaum, founded Shoney's in 1947 and served as its
first Chairman of the Board. Following Alex Schoenbaum's death late last year,
the Shoney's Shareholders' Committee became one of the two largest shareholders
of Shoney's.
We have been disappointed with Shoney's performance and the performance of
Shoney's stock price in recent years. Shoney's stock price declined nearly 80%
between October 29, 1993 and April 25, 1997, the day on which we filed a
Schedule 13D with the Securities and Exchange Commission (the "SEC") indicating
our disappointment with the Company's performance and stock price in recent
years and our consideration of alternatives with respect to our
investment in Shoney's. In comparison, over the same period, the Standard &
Poor's 500 Index increased approximately 63.6% and Standard & Poor's Restaurants
Index increased approximately 66.8%. As one of the largest shareholders of
Shoney's, we are obviously concerned about the significant loss in market value
that has been suffered by all of Shoney's shareholders. Given our family's
history with Shoney's, it also has been personally very distressing to us to
watch Shoney's lose its focus on the basics of its business which has caused it
to struggle in recent years.
Alex Schoenbaum founded Shoney's 50 years ago to be a quality provider of family
dining. Shoney's has been an innovator in the restaurant industry, and its
stores historically have offered quality dining at a good price/value to the
customers. Because of the perception by customers of Shoney's good price/value,
Shoney's experienced consistent growth from its beginning until the late 1980s.
We believe that, under the direction of the current Board of Directors (the
"Board") and management of Shoney's, there has been a deterioration in the
quality of many of Shoney's restaurants and the business and reputation of
Shoney's. Over the last several years, it has been our experience that the
restaurant industry has become more competitive, and customers now have many
more choices. As a result, customers are more interested in better price/value
than in the past. In our view, the Shoney's Board and management have failed to
respond to these changing customer preferences and that, instead of evolving to
meet the preferences of today's customers, Shoney's approach has become outdated
and is no longer in touch with the customers. Indeed, we believe that the
quality of the food and service provided by Shoney's has been reduced, rather it
is our view that than enhanced, in recent years.
After two years under the current management, it is our view that Shoney's
condition has not only failed to improve, but, in fact, has deteriorated. As
reported in Shoney's earnings release issued on June 18, 1997, Shoney's has
suffered a decline in comparable store sales for its core restaurants.
Comparable store sales for Shoney's core restaurants declined 2.9% in the second
quarter of 1997 and have declined 2.2% year-to-date. Comparable store sales for
franchised restaurants declined 2.1% in the second quarter of 1997, and have
declined 0.5% year-to-date. Comparable store sales for all company-owned
Shoney's restaurants declined 3.6% in the second quarter of 1997, and have
declined 3.2% year-to-date, including menu price increases of 2.3% and 2.4%,
respectively. Comparable store sales for Shoney's Captain D's restaurants
declined 4.6% in the second quarter of 1997, and have declined 1.2% year-to-
date, including a menu price increase of 1.1% for both the second quarter and
year-to-date. Comparable store sales for all company-owned restaurants declined
4.3% in the second quarter of 1997, after closing 57 under-performing
restaurants during the first two quarters and including a menu price increase of
1.8%. Accordingly, we believe that competitors are outperforming Shoney's, while
Shoney's customer base and profits have continued to decline. For example,
between 1990 and 1996, excluding extraordinary items and special charges,
Shoney's earnings per share declined 11.0% while, as examples, the earnings per
share of Cracker Barrel Old Country Store, Inc., Applebee's International, Inc.
("Applebee's") and IHOP Corp., three of Shoney's competitors, increased 271.9%,
838.5% and 267.9%, respectively.
In addition, as reported in Shoney's Quarterly Report on Form 10-Q for the
quarter ended May 11, 1997 (the "May 1997 10-Q") filed with the SEC pursuant to
the Securities Exchange Act of 1934 (the "Exchange Act"), Shoney's does not
believe its cash flow from operations, supplemental by its available lines of
credit, to be sufficient to meet these obligations and to provide cash needed
for capital expenditures. As reported in the May 1997 10-Q, Shoney's has $115
million of debt and litigation payments due in the next twelve months and
expects to incur cash interest expense of approximately $32 million in that
same time period, resulting in total cash needs before income taxes and capital
expenditures of approximately $147 million.
On June 5, 1997, we requested to meet with the Board at its two-day retreat in
mid-June to discuss our concerns about Shoney's continued poor performance. We
had hoped to share with the Board at such meeting our concerns about Shoney's
performance and the need for a significant change in the direction of Shoney's.
Unfortunately, the Board responded in a manner which we believe demonstrates a
lack of understanding of the urgency of Shoney's situation and the lack of
leadership under the current management. Rather than providing Raymond D.
Schoenbaum, as a representative of an 8% shareholder, with the opportunity to
meet with the Board for a short time at some point during the Board's two-day
retreat, the Board suggested that we submit our suggestions in writing, after
which the Board would "consider a time in the future" for us to meet with the
Board or "a committee of the Board." We did not submit our suggestions in
writing to the Board because, as stated above, we do not believe the Board
understands the urgency of Shoney's situation and we believe the request for a
submission of our suggestions was an attempt at delay. Because of Shoney's
continued poor performance and the Board's refusal to meet with
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Raymond D. Schoenbaum at the June Board meeting despite the urgency of the
situation, we have concluded that the Board does not appreciate the need for a
significant change in the direction of Shoney's and we believe that we are left
with no alternative but to present our case directly to you, the shareholders
and owners of Shoney's.
Since we are significant shareholders of Shoney's, our interests as shareholders
are aligned with yours and we have every incentive to increase shareholder
value. Raymond D. Schoenbaum has been actively involved in the restaurant
industry since 1974, and he has extensive experience in the business, including
substantial experience in the full service dining industry and in the quality
fast food market. From 1974 to 1985, Raymond D. Schoenbaum successfully grew a
Wendy's franchisee (Restaurants Systems, Inc.) to in excess of 30 stores, which
he sold to Wendy's in 1985 for approximately $40 million. Between 1985 and 1995
he developed and operated Ray's on the River and Rio Bravo, a successful chain
of casual restaurants. In 1995, Raymond D. Schoenbaum sold Ray's on the River
and Rio Bravo to Applebee's for approximately $70 million, and became a director
of Applebee's following the sale. In addition, Raymond D. Schoenbaum has been
involved with the turn-around of companies in the restaurant and restaurant
services industries, including Squirrel Companies, Inc., a manufacturer of
restaurant point-of-source computer equipment, as the former chairman of the
board, and Max & Erma's Restaurants, Inc., as a former member of the board and
the largest shareholder.
If we are successful in electing our nominees to the Board, we intend to keep
Shoney's in Nashville and work together from this home-base with Shoney's
Shareholders, employees and franchisees to restore the quality of Shoney's
restaurants and the business and reputation of Shoney's.
In order to change the direction of Shoney's in a positive manner, we now
solicit your Agent Designations to call and demand a special meeting (the
"Special Meeting") of the shareholders of the Company (the "Shareholders") to
adopt resolutions for the purpose of removing the current Board members and
replacing them with our nominees. In addition, at the Special Meeting, the
Shareholders also would be asked to consider certain resolutions amending the
Bylaws of the Company in a manner designed to facilitate the replacement of the
current Board members. Once elected, our nominees to the Board intend to replace
certain members of the management of the Company and to appoint Raymond D.
Schoenbaum as the Chairman and Chief Executive Officer of the Company.
The proposals that would be considered at the Special Meeting (the "Special
Meeting Proposals") would include the following, in addition to other proposals
to take actions incidental to the removal and replacement of current Board
members:
1. To repeal any and all amendments made by the Board to the Bylaws of the
Company, as filed with the SEC as Exhibits 3(ii) and 4.2 to the
Company's Quarterly Report on Form 10-Q for the quarter ended February
18, 1996, including the June 22 Bylaw Amendments (as defined below),
but other than those provisions which were duly approved by the
Shareholders and those provisions which under Tennessee law cannot be
repealed by the Shareholders, and to provide that, without the approval
of the Shareholders, the Board may not thereafter amend any section of
the Bylaws affected by such repeal or adopt any new Bylaw provision in
a manner which serves to reinstate any repealed provision or any
similar provision (the "Bylaws Repeal Resolution");
2. To amend Article III, Section 1 of the Bylaws of the Company to fix the
number of directors at seven, and provide that, without the approval of
the Shareholders, the Board may not thereafter amend or repeal such
Section or adopt any new Bylaw provision which is inconsistent in any
manner with such Section (the "Size of Board Resolution");
3. To amend Article III, Section 3 of the Bylaws of the Company to provide
that the directors may be elected by the Shareholders at annual
meetings and special meetings of
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the Shareholders of the Company, and provide that, without the approval
of the Shareholders, the Board may not thereafter amend or repeal such
Section or adopt any new Bylaw provision which is inconsistent in any
manner with such Section (the "Election Procedure Resolution");
4. To remove all of the members of the Board of Directors, including
without limitation, any of the following who are members of the Board
as of the Special Meeting: Dennis C. Bottorff, Carole F. Hoover,
Victoria B. Jackson, C. Stephen Lynn, Jeffry F. Schoenbaum, B. Franklin
Skinner and Cal Turner, Jr.; provided, however, that if,
notwithstanding the Omnibus Resolution (as defined below), any nominees
of the Shoney's Shareholders' Committee have been elected to the Board
prior to the time this Resolution is adopted, such nominees of the
Shoney's Shareholder's Committee shall not be removed from the Board
(the "Director Removal Resolution"); and
5. To elect the seven nominees of the Shoney's Shareholders' Committee,
and all other persons nominated by us (the "Nominees"), to fill all
vacancies on the Board for the balance of the terms of the present
directors and until their successors are elected and qualified (the
"Election of Directors Resolution"). The Nominees are J. Michael
Bodnar, Lawrence A. Cunningham, Nathaniel R. Goldston III, Michael A.
Leven, Raymond D. Schoenbaum, William A. Schwartz and Richard F.
Sherman. Biographical information on each of the Nominees is set forth
under the caption "The Special Meeting Proposals."
Further, there would be an omnibus resolution (the "Omnibus Resolution") setting
forth the following order in which the resolutions would be voted upon by the
Shareholders:
1. The Omnibus Resolution;
2. The Bylaws Repeal Resolution;
3. The Size of Board Resolution;
4. The Election Procedure Resolution;
5. The Director Removal Resolution; and
6. The Election of Directors Resolution.
After we commenced the call of the Special Meeting to adopt the resolutions
described above, on June 22, 1997 the Board took action which we believe was
designed to entrench themselves and management and to delay the Special Meeting
and your opportunity to change the direction of the Company in a positive
manner. On that day the Board adopted the amendments to the Bylaws (the "June 22
Bylaws Amendments") set forth in the Restated Bylaws of the Company (the
"Restated Bylaws"), attached as Exhibit 3 to the Company's 8-K filed with the
SEC on June 23, 1997. These June 22 Bylaws Amendments purport to eliminate
the right of Shoney's shareholders to set the date, time and place of the
Special Meeting. In addition, the June 22 Bylaw Amendments purport to establish
lengthy time frames relating to the call of the Special Meeting and the giving
of notice of the Special Meeting and to change the procedure for setting the
record date for the Shareholders entitled to call the Special Meeting, all of
which would ostensibly permit the Board to substantially delay the date of the
Special Meeting. The June 22 Bylaw Amendments also seek to permit the current
officers and employees of Shoney's to serve as inspectors of election at the
Special Meeting.
We do not believe that the June 22 Bylaw Amendments have any effect on the
action that we took in initiating our efforts to call the Special Meeting in
reliance upon the then-existing Bylaws of the Company. In fact, the attempt by
the Board, in our view, to manipulate the corporate governance process for their
benefit and the benefit of management through the adoption of the June 22 Bylaw
Amendments is yet another indication to us that Shoney's needs new leadership.
At this critical juncture, rather than engage in what we view as the
manipulation of the Bylaws, we believe that the appropriate course of action is
to let the real owners of Shoney's decide as soon as possible the future
direction of the Company. We, thus, responded to the Board's action with a
letter to the Board requesting that it rescind these amendments and agree to our
previously announced date for the Special Meeting, August 19, 1997.
On June 26, 1997, Shoney's filed a claim in the Chancery Court for the State of
Tennessee, Twentieth Judicial District at Nashville, seeking a declaration of
the validity of the June 22 Bylaw Amendments and the invalidity of our actions
with the respect to setting the record date for the Shareholders entitled to
call the Special Meeting. In response the Shoney's Shareholders' Committee filed
litigation papers on June 30, 1997, seeking to remove the lawsuit to the U.S.
District Court for the Middle District of Tennessee and requesting the court,
among other things, to promptly:
1. Declare invalid the June 22 Bylaw Amendments which were designed to
frustrate the Shoney's Shareholders Committee's setting of June 16,
1997 as the record date for Shareholders entitled to call and demand
a Special Meeting.
2. Declare invalid the June 22 Bylaw Amendments which were designed to
frustrate the Shoney's Shareholders' Committee's efforts to call the
Special Meeting for August 19, 1997, and
3. Require Shoney's to make available to the Shoney's Shareholders'
Committee certain documents and records relating, among other things,
to the identity of the beneficial owners of Shoney's stock which
Shoney's has refused to provide.
EXECUTING A BLUE AGENT DESIGNATION CARD WILL ENABLE YOU -- AS AN OWNER OF THE
COMPANY -- TO SEND A CLEAR MESSAGE TO THE SHONEY'S BOARD THAT YOU ARE
DISSATISFIED WITH SHONEY'S PERFORMANCE AND WANT THE OPPORTUNITY TO ELECT THE
BOARD OF DIRECTORS THAT WILL GUIDE YOUR COMPANY IN THE FUTURE.
The Agent Designations will not give the Designated Agents the right to vote any
shares of Common Stock at the Special Meeting and no proxies for such votes are
being solicited with this Preliminary Solicitation Statement. We will send
Shareholders additional materials soliciting proxies, including separate proxy
cards, to vote at the Special Meeting.
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If you have any questions about the Agent Designations or need assistance in
completing the Agent Designation Cards, please call:
MACKENZIE PARTNERS
156 Fifth Avenue
New York, New York 10010
(212) 929-5500 (collect)
or call Toll Free
(800) 322-2885
BACKGROUND AND RECENT EVENTS
On April 25, 1997, we filed a Schedule 13D with the SEC indicating that we have
been disappointed with the Company's performance and the Company's stock price
in recent years. At that time we stated that we were reviewing various
alternatives with respect to our investment in the Company. These alternatives
included (i) holding discussions with third parties or with members of the
management or the Board in which we would suggest or take a position with
respect to potential changes in the operations, management or business of the
Company as a means of enhancing shareholder value, (ii) seeking the removal of
certain or all of the members of the Board, (iii) nominating our own candidates
to be elected to the Board, (iv) proposing changes in the management of the
Company and (v) acquiring additional shares in the Company. After filing the
Schedule 13D on April 25, 1997, we continued to review these alternatives. We
also met with certain members of the management of the Company and certain
members of the Board to discuss the Company's financial condition and
performance. On June 2, 1997, we amended our Schedule 13D to reflect that we
sent a letter to the Board requesting that Raymond D. Schoenbaum be permitted to
address the Board at their two-day retreat in mid-June. The letter stated in
full as follows:
June 2, 1997
Board of Directors of Shoney's, Inc.
1727 Elm Hill Pike
Nashville, Tennessee 37210
Re: Meeting of the Shoney's, Inc. Board of Directors
------------------------------------------------
Ladies and Gentlemen:
As you know from our SEC filing last month, my mother and I are
disappointed with Shoney's performance and the performance of Shoney's stock
price in recent years. As one of the largest shareholders of Shoney's, we are
obviously concerned about the significant loss in market value that has been
suffered by all of Shoney's shareholders in recent years. Moreover, we regard
Shoney's as a legacy created by my father Alex, who founded the company in 1947,
and, on a personal note, it has been very distressing to us to watch Shoney's
struggle in recent years.
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As we indicated in our SEC filing, we are in the process of evaluating
various possible alternatives with respect to our investment in Shoney's.
During this process, we have been reviewing in detail the publicly available
data regarding the business, financial condition and operating results of
Shoney's, and we have had the opportunity to discuss this publicly available
data with certain members of Shoney's management. This process is ongoing, and,
while at this time we have not decided on a course of action, we expect to make
further progress during the next two weeks.
Based on our review thus far, we believe that Shoney's is at a critical
juncture and that the actions to be taken by Shoney's Board to address the
current situation will play a crucial role in determining Shoney's future. For
this reason, I would like to meet with the Board at its meeting on June 17, 1997
to discuss Shoney's current situation and our concerns regarding the company's
future. By that time, we expect to be far enough along in our evaluation process
to present to you some concrete alternatives for addressing Shoney's current
problems.
We believe that this exchange of information and ideas will be very useful
to the Board as it gathers information and formulates a plan to address Shoney's
situation in a manner which is beneficial to all of Shoney's shareholders. In
light of the company's recent performance, the Board will be faced with some
difficult decisions in the time ahead. My successful experiences in the family
and casual restaurant industry, including most recently my founding and
development of Ray's on the River and the Rio Bravo restaurant chain which I
sold to Applebee's International Inc. in 1995, have provided me with valuable
skills which I believe I can use to assist you as you deal with Shoney's current
situation.
Please let us know as soon as possible whether you will honor our request
to meet with you at the Board's meeting. We look forward to your response.
Sincerely,
Raymond D. Schoenbaum
Although acknowledging shared concerns regarding the loss of Shoney's market
value, the Board refused Raymond D. Schoenbaum's offer to address it at its
June meeting. The Board's refusal to meet with Raymond D. Schoenbaum was
communicated by means of a letter dated June 5, 1997, which was received by
Raymond D. Schoenbaum on June 9, 1997, the text of which is set forth in full
below:
June 5, 1997
Mr. Raymond D. Schoenbaum
1640 Powers Ferry Road
Building Two, Suite 100
Marietta, Georgia 30067-6050
Dear Raymond:
On behalf of the Board of Directors, I acknowledge receipt of your letter dated
June 2, 1997. We share your concerns regarding the loss of market value that
all of us as Shoney's shareholders have
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experienced. We believe that we have the proper business strategy and
management team in place to improve the performance of the Company. As with all
business turnarounds, time and patience are needed before one can determine
whether the business judgment of the leadership is proven correct.
We appreciate your offer to present to the Board on June 17 some concrete
alternatives for addressing what you view to be Shoney's current situation.
Unfortunately, as you may know, our next Board meeting has been planned for many
months as part of a working retreat meeting and the agenda is full without any
available open time for you to make your requested presentation. However, we
encourage you to submit your concrete alternatives in writing to us before that
meeting so that your ideas may be taken into account in our discussions. After
we have had the opportunity to review your alternatives, we will consider a time
in the future when you could personally discuss those with the Board or a
committee of the Board.
Management of Shoney's has consistently welcomed discussions with you and have
talked with you on a number of occasions recently to exchange information and
ideas. We continue to believe such meetings are mutually beneficial and hope
that you will continue to provide us with the benefit of your ideas.
God bless,
C. Stephen Lynn
We were surprised and disappointed with the rejection by the Board of our
request to meet with it at its meeting in June. Because of Shoney's
continued poor performance and the Board's refusal to meet with us at the June
Board meeting despite the urgency of the situation, we feel that we were left
with no alternative but to present our case directly to you, the Shareholders
and owners of Shoney's. As a result, we determined to seek Agent Designations to
call and demand a special meeting of the Shareholders to act on proposals that
would result in the removal of all of the members of the current Board and
replace them with our nominees. Immediately after filing with the SEC this
solicitation and preliminary proxy materials for the Special Meeting, we sent a
letter to the Board which stated in full as follows:
June 16, 1997
Board of Directors of Shoney's, Inc.
1727 Elm Hill Pike
Nashville, Tennessee 37210
Re: Meeting of the Shoney's, Inc. Board of Directors
------------------------------------------------
Ladies and Gentlemen:
My mother and I were surprised and disappointed by your letter in which you
rejected our request to address the Board at its two-day retreat in mid-June to
discuss Shoney's current situation and possible alternatives for resolving
Shoney's problems. We found it disturbing that you refused to meet with a
representative of shareholders holding approximately 8% of Shoney's stock,
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particularly one who is interested in working with, and has the experience to
help, the Board in addressing Shoney's problems.
We also were surprised by the Board's suggestion that we submit our
proposals in writing after which the Board would "consider a time in the future"
for us to meet with the Board "or a committee of the Board." We believe that
this statement demonstrates a lack of understanding of the urgency of Shoney's
situation and the lack of leadership under the current management. We had
expected that, in order to address Shoney's current problems, the Board would be
interested in obtaining as much information and as many ideas as soon as
possible. Instead, rather than taking a small amount of time during the Board's
two-day retreat to discuss our concerns, the Board's response appears designed
only to delay our requested meeting to discuss with you the crucial issues
facing Shoney's.
As we stated in our June 2 letter, we continue to believe that Shoney's is
at a critical juncture. We, as Shoney's shareholders, have endured many years
of poor financial performance. Over the last several years, Shoney's
shareholders have provided you with time and have patiently given you the
opportunity to revitalize Shoney's. The result of this patience has been a
substantial erosion in the stock price. Despite this record, the Board
continues to state that it has the "proper business strategy and management
team." After two years under the current management, however, Shoney's
condition has not only failed to improve, but, in fact, has deteriorated. As a
result, we believe that Shoney's shareholders no longer have the "time", nor
should we be asked to have the "patience", that you request.
Because of Shoney's continued poor performance and the Board's refusal to
meet with me at the June Board meeting despite the urgency of the present
situation, we feel that we are left with no alternative but to present our case
directly to the shareholders. We have filed documents today with Shoney's and
with the SEC for the purpose of calling a special meeting to remove the current
members of the Board and replace them with our nominees, who would intend to put
in place a new management team committed to addressing Shoney's condition with
the urgency it requires.
We believe Shoney's is running out of time and that its long term viability
is threatened. We need to take decisive action now to ensure the long term
survival of the company for the benefit of its shareholders.
Sincerely,
Raymond D. Schoenbaum
On June 22, 1997, in what we believe to be an attempt to delay the Special
meeting and entrench itself and management, the Board adopted the June 22 Bylaws
Amendments. (For further information concerning these amendments we refer you to
the sections entitled "Reasons for the Solicitation" and "Effect of Execution
and Delivery of Agent Designations".) The June 22 Bylaw Amendments, which were
adopted after we commenced the call of the Special Meeting, purport to eliminate
the right of Shoney's shareholders to set the date, time and place of the
Special Meeting. In addition, the June 22 Bylaw Amendments purport to establish
lengthy time frames relating to the call of the Special Meeting and giving of
the notice of the Special Meeting and to change the procedure for setting the
record date for the Shareholders entitled to call the Special Meeting, all of
which would ostensibly permit the Board to substantially delay the date of the
Special Meeting. The June 22 Bylaw Amendment also seek to permit the current
officers and employees of the Company to serve as inspectors of election at the
Special Meeting.
In response to the action taken by the Board in amending the Bylaws, on June
25, 1997, Raymond D. Schoenbaum sent a letter to the Board, requesting that it
rescind these amendments and agree to our previously announced date for the
Special Meeting, August 19, 1997. The text of this letter is set forth in full
below:
June 25, 1997
Board of Directors of Shoney's, Inc.
1727 Elm Hill Pike
Nashville, Tennessee 37210
Re: Amendments to Shoney's Bylaws
-----------------------------
Ladies and Gentlemen:
We are disappointed to see that you have attempted to make changes to
Shoney's Bylaws which purport to affect the rights of the shareholders of
Shoney's to call a special meeting. We can only assume that these changes are
designed to delay the special meeting and to entrench the current Board and
management. This attempt to manipulate the corporate governance process for the
benefit of the current Board and management is yet another indication that
Shoney's needs new leadership. Shoney's is at a critical juncture, and the
long-term viability of the Company is in danger. Rather than engage in the
manipulation of the rules reflected in your decision to amend the Bylaws, we
believe (and are surprised that you do not believe) that the appropriate course
of action is to let the real owners of Shoney's decide as soon as possible the
future direction of our Company. To the extent you delay this process, we will
hold you fully accountable to the shareholders for any damages to our Company
caused by this delay, including any continued deterioration in the business of
Shoney's under current management.
Our position is that these amendments do not have any effect on the action
that we took one week earlier in reliance upon the then-existing Bylaws of the
Company. For example, your revised Bylaws contain a provision purporting to
require a shareholder seeking to call a special meeting to request that the
Board fix a record date for purposes of determining the shareholders entitled to
call the meeting. Under Section 48-17-102(b) of the Tennessee Business
Corporation Act, a record date for the purpose of determining the shareholders
entitled to call the meeting was set on June 16, 1997, the date on which I
signed and delivered a call for a special meeting to the Company. We do not read
your subsequent amendment to the Bylaws as seeking to affect this record date
which was validly set prior to the amendment. Moreover, even if the amendment
did purport to do so, it would not be valid since it would have the effect of
retroactively invalidating a record date which already has been validly
set.
We also were surprised by your attempt to seize from the shareholders of
the Company their right under Shoney's Bylaws to set the date, time and place of
the special meeting, especially since we had acted already in reliance upon the
then-existing Bylaws. We believe the only possible purpose for such an action
would be to entrench the current Board and management. Moreover, the lengthy
time frames which you purport to establish in the Bylaws relating to special
meetings, including the time frames for purposes of determining the record date
for the call of a special meeting and giving notice of the special meeting,
appear designed only to frustrate the ability of the shareholders to determine
for themselves in a timely manner whether the current Board and management
should be replaced. Finally, your amendment which seeks to permit the current
officers and employees of the Company to serve as inspectors of election at the
special meeting seems to us to be blatantly inappropriate in a contested
situation.
We will not allow the Board and the management of the Company to apply
these amendments to the action taken by us over the last week in connection with
this matter, and if necessary, we are prepared to go to court to enforce our
legitimate rights. Your stated purposes in adopting the Bylaw amendments were to
clarify the special meeting process and to provide the Company's shareholders
with the opportunity to fully consider the issues. If you are sincere in this
regard, we request that you rescind these amendments and agree today to an
August 19 special meeting date. Setting the date at this time will provide
absolute clarity as the process moves forward and the two-month time period
between now and August 19 will provide more than enough time for our
shareholders to consider the relative merits of what is being purposed.
To require us to engage in a court battle with the current Board and
management to enforce our legitimate rights would not be in anyone's interest.
Shoney's shareholders do not have the time or the patience for the type of
manipulation reflected in your adoption of the Bylaw amendments. Shoney's is
running out of time, and the shareholders must be permitted to take decisive
action as soon as possible to ensure the long term survival of the Company for
the benefit of all its constituencies. Please confirm to me that you are willing
to hold a special meeting on August 19, 1997.
In order for us to act promptly in protecting our legitimate rights and the
rights of all of Shoney's shareholders, we ask that you respond to this letter
by the close of business on Thursday, June 26, 2997.
Sincerely,
Raymond D. Schoenbaum
Also on June 25, 1997, as a precautionary matter, Raymond D. Schoenbaum sent a
written notice to the Secretary of the Company of his request that the Board fix
a record date to determine the Shareholders entitled to call the Special
Meeting, in spite of his belief that the giving of such notice and the making of
such request are not required with respect to the Special Meeting. In this
notice, Mr. Schoenbaum reserved his rights to challenge the validity of all of
the June 22 Bylaw Amendments, including the amendments purporting to require the
giving of the written notice and the making of the request that the record date
be fixed.
The Company responded to the June 25 letter from Raymond D. Schoenbaum in a
letter dated June 26, 1997 expressing the Company's disagreement with statements
made by Mr. Schoenbaum in his June 25 letter and informing Mr. Schoenbaum of the
Company's intention to litigate. The text of this letter is stated in full as
follows:
June 26,1997
Raymond D. Schoenbaum
1640 Powers Ferry Road
Building Two, Suite 100
Marietta, Georgia 30067-6050
RE: Amendments to Shoney's By-Laws
Dear Mr. Schoenbaum:
In response to your letter of June 25 to the Board, the Company does not
agree that your letter of June 16th purporting to call a special meeting of
shareholders for August 19 was valid, that the record date for determining
shareholders entitled to demand a special meeting is June 16, or that the recent
By-Law amendments are not valid and applicable to your efforts to call a special
meeting. In that connection, we have your request for a record date for
shareholders entitled to demand a special meeting. The request will be acted on
promptly.
In view of your expression of intention to litigate the matter, and in
order to proceed expeditiously to judicial determination for the benefit of all
concerned, the Company has today filed a suit in the Chancery Court seeking a
declaratory judgement of the invalidity of your purported June 15 record date
and "call" and the validity of the recent By-Law amendments.
A copy of the suit papers is enclosed. Our attorneys, Bass, Berry & Sims,
have delivered courtesy copies to your Nashville attorney, Paul Alexis, this
afternoon.
Your very truly,
F. E. McDaniel, Jr.
Senior Vice President,
Secretary and Treasurer
On June 26, 1997, the Company filed a claim in the Chancery Court for the State
of Tennessee, Twentieth Judicial District at Nashville, seeking a declaration of
the validity of the June 22 Bylaw Amendments and the invalidity of our actions
with respect to setting the record date for the Shareholders entitled to call
the Special Meeting. In response, the Shoney's Shareholders' Committee filed
litigation papers on June 30, 1997, seeking to remove the lawsuit to the U.S.
District Court for the Middle District of Tennessee and requesting the court,
among other things, to promptly:
1. Declare invalid the June 22 Bylaw Amendments which were designed to
frustrate the Shoney's Shareholders' Committee's setting of June 16,
1997 as the record date for Shareholders entitled to call and demand
a Special Meeting.
2. Declare invalid the June 22 Bylaw Amendments which were designed to
frustrate the Shoney's Shareholders Committee's efforts to call the
Special Meeting for August 19, 1997, and
3. Require Shoney's to make available to the Shoney's Shareholders'
Committee certain documents and records relating, among other things,
to the identity of the beneficial owners of Shoney's stock which
Shoney's has refused to provide.
Also on June 30, 1997, the Company announced that a record date of the close of
business on July 14, 1997 had been fixed in accordance with the Restated Bylaws.
If the Shoney's Shareholders' Committee is successful in its litigation, the
fixing by the Board of the July 14 record date would be ineffective.
EFFECT OF EXECUTION AND DELIVERY OF AGENT DESIGNATIONS
For the special meeting to be held, Agent Designations in favor of the call and
demand of the Special Meeting must be executed by the holder or holders of not
less than one tenth (1/10th) of all the shares entitled to vote at such meeting
(the "Requisite Holders"). According to the May 1997 10-Q, there were 48,568,109
shares of Common Stock outstanding. Each Shareholder is entitled to one vote on
each matter submitted to a vote of the Shareholders for each share held of
record by such Shareholder. The Shoney's Shareholders' Committee beneficially
owns 3,866,791 shares of Common Stock, representing, based on information in the
May 1997 10-Q, approximately
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8.0% of the outstanding shares of Common Stock.
On June 16, 1997, Raymond D. Schoenbaum delivered to the Company with respect to
the one hundred shares owned of record by Raymond D. Schoenbaum a letter (the
"Demand") to commence the call of the Special Meeting for Tuesday, August 19,
1997 at 10:00 a.m., local time, to be held in the Governor's Ballroom at the
Opryland Hotel, 2800 Opryland Drive, Nashville, Tennessee 37214. Under Tennessee
law, the record date for the purpose of determining Shareholders entitled to
call and demand the Special Meeting, if not otherwise set by the Board, is the
date on which the first Shareholder signs the demand for the Special Meeting.
Thus, because Raymond D. Schoenbaum signed and delivered the Demand to the
Company on June 16, 1997, we believe the record date for such determination is
June 16, 1997.
The Company filed a complaint on June 26, 1992 seeking to have the June 16
record date declared invalid and to have the June 22 Bylaw Amendments declared
valid and, on June 30, 1997, the Company announced that a record date of the
close of business on July 14, 1997 had been fixed in accordance with the
Restated Bylaws as amended by the June 22 Bylaw Amendments. One of the June 22
Bylaw Amendments purports to require a Shareholder seeking to call a special
meeting to request that the Board fix a record date for purposes of determining
the shareholders entitled to call the special meeting. The Company may assert
that this amendment to the Bylaws and the fixing of the July 14 record date in
accordance with such amendment retroactively invalidate the June 16, 1997
record date. We do not believe that the amendment or the fixing of the July 14
record date vitiate the June 16, 1997 record date which was validly set.
Furthermore, our opinion as to the effective record date is supported by the
decision of a Federal District Court interpreting a provision under Delaware
General Corporation Law governing record dates for the expression of written
consents (which provision expressly provided that, if no record date is fixed
and no prior action of the board of directors is necessary, the record date
shall be the day on which the first written consent is expressed); in that case,
the Federal District Court held that after a shareholder sets the record date by
expressing the first written consent, the board of directors may not set a
different record date.
Agent Designations with respect to shares of Common Stock will remain effective
until revoked. It is our intent that when the persons designated as the
Shareholders' agents in the Agent Designations (each a "Designated Agent") have
Agent Designations which have not been revoked from the Requisite Holders
(including the shares beneficially owned by us), we will properly call and
demand the Special Meeting, and cause notice thereof to be given to the
Shareholders entitled thereto. If the June 22 Bylaw Amendments are determined to
be valid, we intend to use the Agent Designations of the Shareholders who
continue to be Shareholders on July 14, 1997, the new record date set by the
Board, to demand the Special Meeting in accordance with the Restated Bylaws.
Under the Bylaws of the Company, as in effect on June 16, 1997, the date on
which Raymond D. Schoenbaum delivered to the Company the Demand, the
Shareholders, and not the Board, had the right to fix the date, time and place
of the Special Meeting. In our Demand, we have indicated that the Special
Meeting will take place on Tuesday, August 19, 1997 at 10:00 a.m., local time,
in the Governor's Ballroom at the Opryland Hotel, 2800 Opryland Drive,
Nashville, Tennessee 37214. Although it is currently anticipated that the
Special Meeting would take place on such date and at such time and place, the
Agent Designations provide the Designated Agents in their discretion with the
authority to change the date, time and place of the Special Meeting. The June 22
Bylaw Amendments purport to seize from the Shareholders their right under the
Bylaws as in effect on June 16, 1997 to set the date, time and place of the
Special Meeting. If it is determined that, in spite of the fact that these
amendments were adopted after Raymond D. Schoenbaum delivered the Demand to the
Company, the amendments are effective in transferring the right to set the date,
time and place of the Special Meeting to the Chairman of the Board or to the
Board, we intend to use the Agent Designations of the Shareholders who continue
to be Shareholders on the record date to request that the Board set the date,
time and place of the Special Meeting so that the Special Meeting may be held on
or about August 19, 1997 or as soon thereafter as possible. Although we suspect
that if given the authority to set the date, time and place of the Special
Meeting, the Board would seek to delay the Special Meeting well beyond August
19, 1997, we do not at this time know the date the Board would set for holding
the Special Meeting, if it were determined to have the authority to do so.
By executing and returning the BLUE Agent Designation Card to MacKenzie
Partners, Inc. at 156 Fifth Avenue, New York, New York 10010, you will not be
committing to vote in favor of or against the Special Meeting Proposals or any
other matter to be brought before the Special Meeting, nor will you be granting
any proxies to vote on such matters. A validly executed and unrevoked Agent
Designation will authorize the Designated Agents to (i) call and demand the
Special Meeting, (ii) set the place, date and time of the Special Meeting, if
held to be permissible, and (iii) exercise all rights of Requisite Holders
incidental to calling and convening the Special Meeting and causing the purposes
of the authority expressly granted pursuant to the Agent Designations to the
Designated Agents to be carried into effect. To vote on the matters to be
brought before the Special Meeting you must vote by proxy or in person at the
Special Meeting.
The Shoney's Shareholders' Committee intends to execute Agent Designations with
respect to shares of Common Stock owned of record by it and to have the record
owners of the remaining shares of Common Stock owned beneficially by it execute
Agent Designations for the call and demand of the Special Meeting. As a result,
assuming no additional shares of Common Stock have been issued since June 20,
1997 and no options or deferred stock incentive awards outstanding as of June
20, 1997 or issued thereafter have been exercised or vested (by acceleration or
otherwise), as the case may be, and assuming that Agent Designations have been
executed by the record holders of shares owned beneficially, but not of record,
by the Shoney's Shareholders' Committee, Agent Designations representing
approximately 990,020 additional shares of Common Stock will constitute the
requisite number of Agent Designations that we need to require the Company to
hold the Special Meeting.
The purpose of the Special Meeting is to provide Shareholders with the
opportunity to consider and vote on the Special Meeting Proposals. The record
date for determining Shareholders entitled to notice of, or to vote at, the
Special Meeting will be set by the Board in accordance with the Tennessee
Business Corporation Act. The Agent Designations grant to the Designated
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Agents the full rights and authority of the Requisite Holders to take the
actions described above in connection with the Special Meeting, but the Agent
Designations will not give the Designated Agents the right to vote any shares of
Common Stock at the Special Meeting and no proxies for such votes are being
solicited with this Preliminary Solicitation Statement. We will send
Shareholders additional materials soliciting proxies, including separate proxy
cards, to vote at the Special Meeting.
If any of your shares of Common Stock are held in the name of a brokerage firm,
bank, bank nominee or other institution, only it can execute an Agent
Designation for such shares and will do so only upon receipt of your specific
instructions. Accordingly, you will be asked to contact the person responsible
for your account and instruct that person to execute the BLUE Agent Designation
Card.
We are asking you to return your completed, signed and dated Agent Designations
as soon as possible and, in any event, prior to July 14, 1997 to MacKenzie
Partners, Inc. at 156 Fifth Avenue, New York, New York 10010.
THE SPECIAL MEETING PROPOSALS
At the Special Meeting, we intend to ask the Shareholders to consider and vote
on the Special Meeting Proposals set forth below. The details regarding the
Special Meeting Proposals, including the specific text thereof, will be set
forth in the proxy materials we will distribute in connection with the Special
Meeting.
As discussed in more detail above, we are disappointed with Shoney's
performance, and we believe that positive action needs to be taken to improve
Shoney's performance and to reestablish Shoney's as a quality provider of family
dining. The Special Meeting Proposals would remove the current members of the
Board and replace them with our Nominees. In addition, at the Special Meeting,
the Shareholders also would be asked to consider certain resolutions amending
the Bylaws of the Company in a manner designed to facilitate the replacement of
the current Board members. Once elected, our Nominees intend to replace certain
members of the management of the Company, and to appoint Raymond D. Schoenbaum
as the Chairman and Chief Executive Officer of the Company.
The Director Removal Resolution and the Election of Directors Resolution
Our goal is to replace the current Board with our Nominees who we believe will
be able to rebuild the Company's business and reputation. We will propose that
Shareholders vote at the Special Meeting on a proposal to remove the entire
Board, the members of which currently are Dennis C. Bottorff, Carole F. Hoover,
Victoria B. Jackson, C. Stephen Lynn, Jeffry F. Schoenbaum, B. Franklin Skinner
and Cal Turner, Jr. Section 48-18-108 of the Tennessee Business Corporation Act
authorizes this action, with or without cause, by a vote of a majority of the
shares cast at the Special Meeting if at least a majority of the shares of
Common Stock are represented at the meeting.
We also will propose that the Shareholders elect at the Special Meeting the
Nominees named below as directors of the Company, to serve until the next annual
meeting of Shareholders and until their successors shall have been duly elected
and qualified. Directors will be elected at the
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Special Meeting by a vote of a plurality of the shares of Common Stock
represented at the Special Meeting if at least a majority of the shares of
Common Stock are represented at the meeting. At the Special Meeting, except to
the extent that a Shareholder withholds votes from any or all Nominees, the
persons named as proxies in the form of proxy accompanying the proxy statement
of the Shoney's Shareholders' Committee with respect to the Special Meeting, in
their sole discretion, will vote such proxy for the election of all the
Nominees.
The Nominees have furnished us with the following information concerning their
principal occupations, business addresses and certain other matters. All of the
Nominees are citizens of the United States.
Shoney's Shareholders' Committee Nominees
-----------------------------------------
Name, Age and Principal Occupation and Business Experience
Principal Business Address During Last Five Years;Current Directorships
- -------------------------- --------------------------------------------
J. Michael Bodnar (52).......... President (January 1984-Present) of Bodnar
Bodnar Investment Group, Inc. Investment Group, Inc. (a real estate
101 Fox Hall Road investment company); President
Birmingham, Alabama 35213 (January 1986-May 1996) of Triangle
Management Group, Inc. (a restaurant
management company).
Lawrence A. Cunningham (34)..... Professor of Law (May 1997-present) of the
Benjamin N. Cardozo School of Benjamin N. Cardozo School of Law; Visiting
Law, Yeshiva University Associate Professor of Law (August 1996-
55 Fifth Avenue May 1997) of the George Washington University
New York, New York 10003 School of Law; Associate Professor of Law
(August 1992-August 1996) of the Benjamin N.
Cardozo School of Law.
Nathaniel R. Goldston III (58).. Chairman of the Board and Chief Executive
The Gourmet Co. Officer (January 1975-present) of The
1100 Spring Street, N.E. Gourmet Co. (a food service management
Atlanta, Georgia 30309 company).
Michael A. Leven (59)........... President and Chief Executive Officer
U.S. Franchise Systems (October 1995-present) of U.S. Franchise
13 Corporate Square Systems (a hotel franchising company);
Atlanta, Georgia 30329 Director (August 1995-present) of Starwood
Lodging Corporation; President and Chief
Operating Officer (October 1990-September
1995) of Holiday Inn Worldwide; President and
Chief Operating Officer (April 1985-May 1990)
of Days Inn of America, Inc.
Raymond D. Schoenbaum (51)...... Private investor; Director (March 1995-
1640 Powers Ferry Road present) of Applebee's International, Inc.;
Building Two, Suite 100 Consultant (March 1995-March 1996) of
Marietta, Georgia 30067 Applebee's International, Inc.; Chairman of
the Board of Directors (June 1984-March 1995)
of Innovative Restaurant Concepts, Inc. (a
restaurant management company); Vice Chairman
of the Board of Directors (January 1974-
January 1986) of Restaurants Systems, Inc.
(Wendy's International, Inc. franchisee);
Franchisee (January 1974-January 1986) of
Wendy's International, Inc.
William A. Schwartz (58)........ Chief Executive Officer (January 1995-
FMB Enterprises present) of First Media Television, L.P. (an
400 Perimeter Center Terrace operator of television stations); Chief
Suite 650 Executive Officer (February 1990-present) of
Atlanta, Georgia 30346 Cannell Communications, L.P. (an operator of
television stations); Chief Executive Officer
(March 1988-present) of FMB Enterprises (an
operator of cable television systems);
President and Chief Operating Officer (1985-
1987) of Cox Enterprises.
<PAGE>
Richard F. Sherman (53)......... Private investor and consultant (January
11492 Bluegrass Parkway 1991-present); Director (June 1993-present)
Suite 175 of Papa John's International, Inc.; Director
Louisville, Kentucky 40299 (October 1996-present) of P.J. America, Inc.
(a franchisee of Papa John's International,
Inc.); Director (January 1991-present) of
Reed's Jewelers, Inc.; Director (October
1992-present) of Taco Cabana, Inc.
Each of the Nominees has consented to serve as a director of the Company, if
elected. Each of the Nominees (other than Raymond D. Schoenbaum) has entered
into an agreement with us in which we have agreed to pay each Nominee a fee of
$10,000. Additionally, we have agreed to (i) reimburse each Nominee for any
reasonable out-of-pocket expenses incurred in the performance of his service as
a Nominee and (ii) indemnify each Nominee with respect to any liabilities
relating to or arising out of such service. If any of the Nominees are elected
as directors, we expect they will receive compensation for their services as
directors of the Company. According to the 1997 Proxy Statement of the Company
(the "1997 Proxy Statement"), each director who is also an officer of the
Company receives no additional compensation for service on the Board and
directors who are not also officers of the Company receive a quarterly retainer
of $4,000 in addition to $1,000 plus expenses for each meeting of the Board they
attend. Members of Board committees receive $1,000 plus expenses for each
committee meeting they attend. In addition, according to the 1997 Proxy
Statement, each non-employee director participates in the Shoney's, Inc.
Directors' Stock Option Plan (the "Directors' Plan"), which was approved by the
Shareholders on March 19, 1991. Each non-employee director elected to the Board
receives an option for 5,000 shares of Common Stock upon election to the Board.
Non-employee directors, upon the fifth anniversary of the grant of their most
recent options under the Directors' Plan, are also awarded an additional option
for 5,000 shares of Common Stock.
Raymond D. Schoenbaum is currently on a leave of absence from his directorship
of Applebee's. In order to devote his full time and attention to the management
of Shoney's, Mr. Schoenbaum intends to resign from the board of Applebee's if
the Nominees are elected to the Board of Shoney's.
The Company has employment agreements with Messrs. C. Stephen Lynn, Robert M.
Langford and W. Craig Barber. Mr. Lynn's employment agreement provides for a
term from May 1, 1995 through April 30, 1998. The employment agreements with
Messrs. Langford and Barber presently provide for initial terms which terminate
on October 27, 1999. Under the terms of the employment agreements, Messrs.
Langford and Barber are each entitled to base salaries in the amount of
$288,900, with increases to be in the sole discretion of the Board. Mr. Lynn was
entitled to a base salary of $500,000 from May 1, 1996 through April 30, 1997
and is entitled to a base salary of $550,000 from May 1, 1997 through April 30,
1998. However, Mr. Lynn and the Board have agreed that Mr. Lynn's base salary
will remain at $500,000 until fiscal year 1998. In addition, the employment
agreements provide that Messrs. Langford and Barber are eligible for an annual
bonus as established by the Board through the annual bonus plan. Bonuses for Mr.
Lynn are based upon a formula to be agreed upon by the employee and the Company.
The Director Removal Resolution and the Election of Directors Resolution, if
adopted by the Shareholders together with the other Special Meeting Proposals,
would constitute a "change of control" for purposes of these employment
agreements. If a change of control under such agreements occurs, the employment
terms contained in the agreements are automatically extended for an additional
two-year term. Also, in the event of a change of control under such agreements,
each of Messrs. Lynn, Langford and Barber, at his option, may terminate his
agreement within 90 days after such change of control, in which case he will
receive the greater of: (i) two times the base salary and bonus paid during the
fiscal year immediately prior to that in which the termination took place; or
(ii) the amount due as base salary during the then remaining employment term.
Assuming salaries are equal to the base salaries reported in the 1997 Proxy
Statement and that the employment agreements are extended for two years due to
the change of control, Mr, Lynn would be entitled to receive approximately $1.3
million and Messrs. Langford and Barber would each be entitled to receive
approximately $1.2 million for the remainder of their respective employment
terms. In addition, if these employees are terminated without cause following
the adoption of the Special Meeting Proposals in their entirety, all stock
options held by Mr. Lynn will vest immediately and Messrs. Langford and Barber
will be entitled to be paid a cash amount equal to the unrealized gain that they
have in any unvested stock options. According to the 1997 Proxy Statement, Mr.
Barber has exercisable in-the-money options valued at $10,374, while neither
Messrs. Lynn or Langford have any unexercised in-the-money options.
Pursuant to Section 8.1.10 of the Amended and Restated Reducing Revolving Credit
Agreement (the "Credit Agreement"), as amended and restated as of May 3, 1996,
among the Company, as borrower, Canadian Imperial Bank of Commerce, Inc.
("CIBC"), as agent, and the lenders signatory thereto (the "Credit Banks"), the
Director Removal Resolution and the Election of Directors Resolution, if adopted
by the Shareholders together with the other Special Meeting Proposals, would
result in a "change of control" causing an "Event of Default" as defined in the
Credit Agreement. Pursuant to the Credit Agreement, CIBC and the Credit Banks
could cancel the Credit Banks' obligations to make loans to the Company and/or
declare the principal amount then outstanding of, and the accrued interest on,
the loans under the Credit Agreement due and payable. As reported in the
May 1997 10-Q, the Company had $147.7 million of indebtedness outstanding under
the Credit Agreement as of May 11, 1997.
The Director Removal Resolution and the Election of Directors Resolution, if
adopted by the Shareholders together with the other Special Meeting Proposals,
also would result in a "change of control" causing an "Event of Default" under
Section 8.1.10 of the Bridge Loan Credit Agreement (the "Bridge Loan
Agreement"), dated as of May 3, 1996, among the Company, as borrower, CIBC, as
agent, and the lenders signatory thereto (the "Bridge Banks"). Pursuant to the
Bridge Loan
- 13 -
<PAGE>
Agreement, CIBC and the Bridge Banks could cancel the Bridge Banks' obligations
to make loans to the Company and/or declare the principal amount then
outstanding of, and the accrued interest on, the loans under the Bridge Loan
Agreement due and payable. As reported in the May 1997 10-Q, the Company
had $91.4 million of indebtedness outstanding under the Bridge Loan Agreement as
of May 11, 1997.
In addition, the holders of approximately $51.6 million principal amount of
convertible subordinated debentures would be entitled to tender these debentures
for repayment if the Director Removal Resolution and the Election of Directors
Resolution were adopted together with the other Special Meeting Proposals.
Moreover, as reported in the May 1997 10-Q, the Company had additional debt
outstanding under various notes issued under indentures and loan and credit
agreements and substantially all of the Company's other senior indebtedness have
cross-default provisions which could also allow the lenders to accelerate
payment of debt if the Director Removal Resolution and the Election of Directors
Resolution were adopted together with the other Special Meeting Proposals.
Although the Shoney's Shareholders' Committee has not had discussions with
Shoney's lenders, the Shoney's Shareholders' Committee believes it is unlikely
that, if the Director Removal Resolution and the Election of Directors
Resolution were adopted together with the other Special Meeting Proposals, such
lenders would exercise their repurchase rights or rights to accelerate loans
made to the Company.
While there can be no assurances that the loans would not be accelerated or that
any repurchase rights would not be exercised, the Shoney's Shareholders'
Committee's belief that the acceleration of such loans and the exercise of such
rights would be unlikely if the Director Removal Resolution and the Election of
Directors Resolution were adopted together with the other Special Meeting
Proposals, is based on its view that the Nominees are qualified to oversee the
business of the Company, and that the Company's business is not dependent on Mr.
C. Stephen Lynn or any of the Company's other officers or directors.
Bylaws Repeal Resolution
The Bylaws Repeal Resolution would repeal any and all amendments made by the
Board to the Bylaws, as filed with the SEC as Exhibits 3(ii) and 4.2 to the
Company's Quarterly Report on Form 10-Q for the quarter ended February 18, 1996,
including the June 22 Bylaw Amendments, but other than those provisions which
were duly approved by the Shareholders and those provisions which under
Tennessee law cannot be repealed by the Shareholders. This resolution also would
provide that, without the approval of the Shareholders, the Board may not
thereafter amend any section of the Bylaws affected by such repeal or adopt any
new Bylaw provision in a manner which serves to reinstate any repealed provision
or any similar provision. Sections 48-20-201(a)(2) and (b) of the Tennessee
Business Corporation Act authorize this action by a vote of a majority of the
shares cast at the Special Meeting if at least a majority of the shares of
Common Stock are represented at the meeting.
The Bylaws Repeal Resolution is designed to repeal any Bylaw changes that the
Board may have attempted to make yet did not disclose prior to June 16, 1997 or
may attempt to make prior to the Special Meeting. Adoption of the Bylaws Repeal
Resolution would render ineffective any amendments adopted by the Board as a
means of manipulation of the Bylaws by the Board, including the June 22 Bylaw
Amendments, whether intended to frustrate the ability of the Shareholders to
elect the Nominees or adopt any of the other Special Meeting Proposals or
otherwise. We are not currently aware of any amendments to the Bylaws, other
than June 22 Bylaw Amendments, which would be rendered ineffective by the
adoption of the Bylaws Repeal Resolution.
- 14 -
<PAGE>
The Bylaws Repeal Resolution is intended to guarantee that any previously
undisclosed Bylaw amendment will be repealed so as to prevent the Board from
manipulatively altering the Bylaws prior to the Special Meeting without
Shareholder approval and to prevent the Board after the Special Meeting from
amending any section of the Bylaws affected by such repeal or adopting any new
Bylaw provision in a manner which serves to reinstate any repealed provision or
any similar provision.
Although adoption of the Bylaws Repeal Resolution would generally repeal
previously undisclosed Bylaw amendments without considering the beneficial
nature, if any, of such amendments to the Shareholders, it would not repeal any
such amendments which were approved by the Shareholders.
Although the impact of the adoption at the Special Meeting of the Bylaws Repeal
Resolution on the acquisition by a third party of the Company will depend on the
substance of amendments to the Bylaws adopted by the Board, we do not currently
foresee any potential future anti-takeover effects from the adoption of the
Bylaws Repeal Resolution.
Size of Board Resolution
The Company's Bylaws provide that the size of the Board shall be fixed from time
to time by the Board and shall consist of not less than three (3) nor more than
fifteen (15) directors. According to the information made publicly available by
the Company as of the date of this Preliminary Solicitation Statement, there are
currently seven directors on the Board. Adoption of the Size of Board Resolution
would fix the number of directors at its present number of seven. Such amendment
would further provide that such Bylaw may not be amended, or any new Bylaw
provision which is in any way inconsistent therewith, be adopted, without
approval of the Shareholders. Sections 48-18-103(a) and 48-20-201(a)(2) of the
Tennessee Business Corporation Act authorize this action by a vote of a majority
of the shares cast at the Special Meeting if at least a majority of the shares
of Common Stock are represented at the meeting.
- 15 -
<PAGE>
The Size of Board Resolution is designed to prevent the current Board from
frustrating the ability of the Shareholders to constitute the entire Board if
they elect all seven Nominees. We are concerned that, prior to the Special
Meeting, the current Board might attempt to expand the size of the Board beyond
the current seven seats, whether by resolution, amendment of the Bylaws or
otherwise, and might attempt to do so in a manner intended to prevent us from
proposing additional Nominees.
We believe that the Board's ability to attempt to manipulate the size of the
Board is limited by its fiduciary duties. However, we believe that by fixing the
number of Board seats at seven, the adoption of the Size of Board Resolution
will ensure that the election contest at the Special Meeting will take place on
a level playing field, without the incumbent Board or their nominees gaining an
unfair advantage by attempting to run for unopposed positions. We have notified
the Company that we would propose additional Nominees for election if the
Company attempts to expand the size of the Board above its existing level of
seven directors prior to the Special Meeting.
In addition, should the Shareholders choose to elect the Nominees to a minority
of the seats on the Board, adoption of the Size of Board Resolution would have
the purpose of ensuring the incumbent directors, who would continue to
constitute a majority, could not frustrate the will of the Shareholders by
increasing the size of the Board and installing hand-picked allies. We believe
that the adoption of the Size of Board Resolution would thereby prevent an
incumbent majority, if re-elected, from unilaterally "packing" the Board without
Shareholder approval and upsetting the percentage of the Nominees on the Board
desired by the Shareholders. The Size of the Board Resolution only fixes the
number of directors and, as a result, all of the directors will continue to be
elected at the annual meeting of the Shareholders and shall serve until the next
annual meeting unless sooner succeeded or removed in accordance with the Bylaws.
According to Article III, Section 8 of the Bylaws, directors may be removed with
or without cause, at any time, by a vote of the Shareholders. In addition, any
director may resign at any time, if such resignation is made in writing.
Election Procedure Resolution
The Election Procedure Resolution provides that directors may be elected by
Shareholders at annual meetings and special meetings of the Shareholders. This
resolution also would provide that, without the approval of the Shareholders,
the Board may not thereafter amend or repeal such Section or adopt any new Bylaw
provision in a manner which is inconsistent in any manner with such Section.
Sections 48-20-201(a)(2) and (b) of the Tennessee Business Corporation Act
authorize this action by a vote of a majority of the shares cast at the Special
Meeting if at least a majority of the shares of Common Stock are represented at
the meeting. While we believe that the current Bylaws provide that the
Shareholders can already elect directors at a special meeting and that this
Resolution is unnecessary, we are proposing this Resolution out of an abundance
of caution.
RECESS OR ADJOURNMENT OF MEETING AND OTHER MATTERS
We also anticipate requesting, in the proxy solicitation relating to the Special
Meeting, authority to initiate and vote for proposals to recess or adjourn the
Special Meeting for any reason, including to allow inspectors of the election to
certify the outcome of the election of directors, or to allow the solicitation
of additional votes, if necessary, to approve the Special Meeting Proposals. We
do not currently anticipate additional Special Meeting Proposals on any
substantive matters. Nevertheless, we may elect to cause additional Special
Meeting Proposals to be identified in the notice of, and in the proxy materials
for, the Special Meeting.
CERTAIN INFORMATION CONCERNING THE PARTICIPANTS
Raymond D. Schoenbaum, Betty J. Schoenbaum, and the Nominees may be deemed to be
"participants" (as defined in Instruction 3 to Item 4 of Rule 14a-101 of the
Exchange Act) in this solicitation. Certain information relating to the
beneficial ownership of shares of Common Stock by participants in the
solicitation and certain other information is contained in Schedule I hereto and
is incorporated in this document by reference.
OTHER REPRESENTATIVES OF THE SHONEY'S SHAREHOLDERS' COMMITTEE
WHO ALSO MAY ASSIST IN THE SOLICITATION OF AGENT DESIGNATIONS
In connection with Montgomery Securities' engagement as financial advisor, we
anticipate that certain employees of Montgomery Securities may communicate in
person, by telephone or
- 16 -
<PAGE>
otherwise with a limited number of institutions, brokers or other persons who
are shareholders for the purpose of assisting in the proxy solicitation.
Montgomery Securities will not receive any fee for, or in connection with, such
solicitation activities apart from the fees they are otherwise entitled to
receive under their engagement. See "General Information" below. The principal
business address of Montgomery Securities is 600 Montgomery Street, San
Francisco, California 94111. Certain additional information regarding
Montgomery Securities is contained in Schedule I hereto and is incorporated in
this document by reference.
In addition, Howard E. Sachs, John S. Ellis and W. Douglas Benn, advisors to
Raymond D. Schoenbaum, may assist in soliciting Agent Designations, although
none of them nor the Shoney's Shareholders' Committee admits that any of them is
a "participant", as defined in Schedule 14A promulgated by the SEC under the
Exchange Act. Mr. Sachs will receive fees of up to $100,000 for his assistance
in the solicitations. Mr. Ellis is a paid advisor to Raymond D. Schoenbaum. He
will not receive additional or extraordinary compensation for assistance in the
solicitations. Mr. Benn will receive fees of $500 per day for his assistance in
the solicitations. Certain additional information regarding such persons is
contained in Schedule I hereto and is incorporated in this document by
reference.
GENERAL INFORMATION
This Solicitation Statement and the accompanying BLUE Agent Designation Card are
first being furnished to Shareholders on or about July 2, 1997. Executed Agent
Designations will be solicited by mail advertisement, telephone, telecopier and
in person. Solicitation will be made by the "participants" and the other persons
indicated in this Solicitation Statement. Proxies will be solicited from
individuals, brokers, banks, bank nominees and other institutional holders. We
have requested banks, brokerage houses and other custodians, nominees and
fiduciaries to forward all solicitation materials to the beneficial owners of
the shares they hold of record. We will reimburse these record holders for their
reasonable out-of-pocket expenses.
In addition, we have retained MacKenzie Partners, Inc. as our information agent
and to solicit Agent Designations in connection with calling the Special
Meeting. We have agreed to reimburse MacKenzie Partners, Inc. for its
reasonable expenses and to pay to MacKenzie Partners, Inc. fees not to exceed
$20,000 in connection with the solicitation of Agent Designations. MacKenzie
Partners, Inc. will employ approximately 40 people in its efforts.
We also have retained Montgomery Securities to provide certain financial
advisory services in connection with our solicitation of proxies for the Special
Meeting. Montgomery Securities engages in a full range of banking, securities
trading, market making and brokerage services for institutional and individual
clients. To date, we have paid Montgomery Securities a retainer fee of
$100,000. We have agreed to pay additional retainer fees to Montgomery
Securities up to $400,000. If we are successful in removing and replacing the
current Board members at the Special Meeting on August 19, 1997, we will be
required to pay Montgomery Securities an additional success fee of $1,000,000.
We also will reimburse Montgomery Securities for reasonable out-of-pocket costs
and expenses (including reasonable attorneys' fees and expenses), in an amount
not to exceed $25,000 per month without our prior written consent, and indemnify
Montgomery Securities against certain liabilities and expenses in connection
with our engagement of Montgomery Securities, including certain liabilities
under the federal securities laws.
Costs incidental to this solicitation, which include expenditures for printing,
postage, legal and related expenses and fees paid to Montgomery Securities and
MacKenzie Partners, Inc., are expected to be approximately $500,000. The total
costs included to date in connection with this solicitation are not in excess of
$425,000. If the Nominees are elected, we will ask the Board to have the Company
reimburse us for costs and
- 17 -
<PAGE>
expenses incurred in connection with this solicitation. We do not intend to
request that our reimbursement request be submitted to a vote of Shareholders.
REVOCABILITY OF SIGNED AGENT DESIGNATIONS
You may revoke your Agent Designation at any time by executing and delivering a
written revocation to MacKenzie Partners, Inc. at 156 Fifth Avenue, New York,
New York 10010 or to the Company, at 1727 Elm Hill Pike, Nashville, Tennessee
37210 (please send a copy of any revocation sent to the Company to MacKenzie
Partners, Inc., so that we are aware of the revocation). Such a revocation must
clearly state that your Agent Designation is no longer effective. Any
revocation of an Agent Designation will not effect any action taken by the
Designated Agents pursuant to the Agent Designation prior to such revocation.
ADDITIONAL INFORMATION
The principal executive offices of the Company are at 1727 Elm Hill Pike,
Nashville, Tennessee 37210. Except as otherwise noted herein, the information
concerning the Company has been taken from or is based upon documents and
records on file with the SEC and other publicly available information. Although
we do not have any knowledge that would indicate that any statement contained
herein based upon such documents and records is untrue, we do not take any
responsibility for the accuracy or completeness of the information contained in
such documents and records, or for any failure by the Company to disclose events
that may affect the significance or accuracy of such information.
For information regarding the security ownership of certain beneficial owners
and the management of the Company, see Schedule II.
Raymond D. Schoenbaum
Betty J. Schoenbaum
IF YOUR SHARES OF COMMON STOCK ARE HELD IN THE NAME OF A BROKERAGE FIRM, BANK,
BANK NOMINEE OR OTHER INSTITUTION, ONLY IT CAN SIGN AN AGENT DESIGNATION WITH
RESPECT TO YOUR COMMON STOCK. ACCORDINGLY, PLEASE CONTACT THE PERSON
RESPONSIBLE FOR YOUR ACCOUNT AND GIVE INSTRUCTIONS FOR AN AGENT DESIGNATION TO
BE SIGNED REPRESENTING YOUR SHARES OF COMMON STOCK.
IF YOU HAVE ANY QUESTIONS ABOUT GIVING YOUR AGENT DESIGNATION OR REQUIRE
ASSISTANCE, PLEASE CONTACT MACKENZIE PARTNERS, INC. TOLL-FREE AT (800) 322-2885.
- 18 -
<PAGE>
SCHEDULE I
BENEFICIAL OWNERSHIP OF
SHARES BY PARTICIPANTS IN THE SOLICITATION
AND CERTAIN OTHER PERSONS
Raymond D. Schoenbaum has his principal business address at 1640 Powers Ferry
Road, Building Two, Suite 100, Marietta, Georgia 30067-6050. Betty J. Schoenbaum
has her principal residential address at 5541 Gulf of Mexico Drive, Longboat
Key, Florida 34228. Raymond D. Schoenbaum is a private investor. Betty J.
Schoenbaum is not employed.
As of the date of the Solicitation Statement, Raymond D. Schoenbaum is deemed to
own beneficially (as that term is defined in Rule 13d-3 under the Exchange Act,
as amended) 508,061 shares of Common Stock, which constitutes approximately 1.0%
of the outstanding shares of Common Stock (based on information provided by the
Company in its quarterly report on Form 10-Q for the quarter ended May 11,
1997). As of the date of this Solicitation Statement, Betty J. Schoenbaum is
deemed to own beneficially (as that term is defined in Rule 13d-3 under the
Exchange Act, as amended) 3,394,480 shares of Common Stock, which constitutes
approximately 7.0% of the outstanding shares of Common Stock (based on
information provided by the Company in its quarterly report on Form 10-Q for the
quarter ended May 11, 1997). As of the date of this Consent Solicitation
Statement, Raymond D. Schoenbaum and Betty J. Schoenbaum, as a group, are deemed
to own beneficially (as that term is defined in Rule 13d-3 under the Exchange
Act, as amended) 3,866,791 shares of Common Stock, which constitutes
approximately 8.0% of the outstanding shares of Common Stock (based on
information provided by the Company in its quarterly report on Form 10-Q for the
quarter ended May 11, 1997).
As of the date of the Solicitation Statement, J. Michael Bodnar is deemed to own
beneficially (as that term is defined in Rule 13d-3 under the Exchange Act, as
amended) 5,000 shares of Common Stock, which constitutes less than one percent
of the outstanding shares of Common Stock. Except as set forth herein, none of
the Nominees is the beneficial or record owner of shares of Common Stock.
Raymond D. Schoenbaum and Betty J. Schoenbaum have purchased or sold the
following shares of Common Stock within the last two years:
<TABLE>
<CAPTION>
Shares of
Common Stock Price
Participant Transaction Date Purchased/Sold per Share
----------- ---------------- -------------- ---------
<S> <C> <C> <C>
Betty J. April 4, 1997 60,000* $4.75
Schoenbaum purchased
Raymond D. November 22, 1996 25,000 $7.75
Schoenbaum purchased
25,000 $7.875
purchased
11,000 $7.75
purchased
December 31, 1996 50,000 $6.875
purchased
50,000 $7.00
purchased
March 18, 1997 100,000 $5.25
purchased
Total: 321,000
-------
</TABLE>
* Shares purchased by the Betty Schoenbaum Revocable Trust over which Betty J.
Schoenbaum shares voting and dispositive power.
Except as otherwise set forth in this Schedule I, neither Raymond D. Schoenbaum
or Betty J. Schoenbaum or any associate of any of the foregoing persons or any
other person who may be deemed a "participant" in this solicitation has
purchased or sold any shares of Common Stock within the past two years, borrowed
any funds for the purpose of acquiring or holding any shares of Common Stock, or
is or was within the past year a party to any contract, arrangement or
<PAGE>
understanding with any person with respect to any shares of Common Stock. There
have not been any transactions since the beginning of the Company's last fiscal
year and there is not any currently proposed transaction to which the Company or
any of its subsidiaries was or is to be a party, in which Raymond D. Schoenbaum
or Betty J. Schoenbaum or any associate or immediate family member of any of the
foregoing persons or any other person who may be deemed a "participant" in this
solicitation had or will have a direct or indirect material interest. Other than
the directorships contemplated by the Special Meeting Proposals and other than
Raymond D. Schoenbaum becoming Chairman and Chief Executive Officer of Shoney's,
neither Raymond D. Schoenbaum or Betty J. Schoenbaum or any associate of any of
the foregoing persons or any other person who may be deemed a "participant" in
this solicitation has any arrangement or understanding with any person with
respect to any future employment by the Company or its affiliates, or with
respect to any future transactions to which the Company or its affiliates may or
will be a party.
Jeffry F. Schoenbaum, the brother of Raymond D. Schoenbaum and the son of Betty
J. Schoenbaum, currently is a member of the Board and would be removed as a
member of the Board if the Special Meeting Proposals were adopted in their
entirety at the Special Meeting.
In the ordinary course of its business, Montgomery Securities maintains
customary arrangements and may effect transactions in the securities of the
Company for the accounts of its customers. As a result of its engagement by the
Shoney's Shareholders' Committee, Montgomery Securities restricted its
proprietary trading in the securities of the Company as of June 16, 1997
(although it may still execute trades for customers on an unsolicited agency
basis). As of June 12, 1997, Montgomery Securities did not beneficially own any
Common Stock, and held of record 10,312 shares of Common Stock for customer
accounts. Montgomery Securities bought and sold 50,500 shares of Common Stock of
the Company for its own account over the last two years.
Howard E. Sachs has his principal business address at 1901 Powers Ferry Road,
Suite 260, Atlanta, Georgia 30339. As of the date of the Solicitation Statement,
Mr. Sachs was the beneficial owner of 5,250 shares of Common Stock. Except for
4,000 shares purchased on behalf of his children, Mr. Sachs neither bought nor
sold any securities of the Company over the last two years.
John S. Ellis has his principal business address at 1640 Powers Ferry Road,
Building Two, Suite 100, Marietta, Georgia 30067. As of the date of the
Solicitation Statement, Mr. Ellis did not own beneficially or of record any
shares of Common Stock. Mr. Ellis neither bought nor sold any securities of the
Company over the last two years.
W. Douglas Benn has his principal business address at 1640 Powers Ferry Road,
Building Two, Suite 100, Marietta, Georgia 30067. As of the date of the
Solicitation Statement, Mr. Benn did not own beneficially or of record any
shares of Common Stock. Mr. Benn neither bought nor sold any securities of the
Company over the last two years.
- 2 -
<PAGE>
SCHEDULE II
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth share ownership information with respect to
persons known at such date to the Company to be beneficial owners of more than
5% of the shares of Common Stock, as such information was set forth in the 1997
Proxy Statement, and as of the date of the Solicitation Statement with respect
to the beneficial ownership of the Shoney's Shareholders' Committee. Unless
otherwise indicated, each of the shareholders has sole voting and investment
power with respect to the shares of Common Stock beneficially owned.
<TABLE>
<CAPTION>
Number of
Shares
Name and Address Beneficially
of Beneficial Owner Owned(1) Percent of Class
- ------------------- -------- ----------------
<S> <C> <C>
Shoney's Shareholders' 3,866,791 7.96% (3)
Committee as a Group(2)
1640 Powers Ferry Road
Building Two, Suite 100
Marietta, Georgia 30067
R. L. Danner (4) 4,249,303 8.76%
2 International Drive,
Suite 510
Nashville, Tennessee 37217
First Union Corporation (5) 2,485,675 5.12%
One First Union Center
Charlotte, North Carolina
28288-0137
- ---------------------
</TABLE>
(1) For purposes of this table, a person is deemed to have "beneficial
ownership" of any security that such person (i) has or shares "voting
power", which includes the power to dispose of, or to direct the disposition
of, such security or (ii) has the right to acquire within 60 days after the
date such information was set forth in the 1997 Proxy Statement, and the
date of the Solicitation Statement with respect to the beneficial ownership
of the Shoney's Shareholders' Committee. More than one person may be deemed
to be a beneficial owner of the same securities, and a person may be deemed
to be a beneficial owner of securities as to which he has no beneficial
interest.
(2) Includes shares held by these individuals as a "group" as such term is used
in Section 13(d)(3) of the Securities Exchange Act of 1934 (the "Exchange
Act").
(3) Based on 48,568,109 shares outstanding on June 20, 1997 as disclosed by the
Company in its Quarterly Report on Form 10-Q for the quarter ended May 11,
1997.
(4) Includes 83,068 shares of Common Stock owned by Mrs. Danner and 7,101
shares of Common Stock held in trust for Mr. Danner's son, over which Mrs.
Danner has sole voting and investment power.
(5) First Union Corporation ("First Union") has sole voting power as to all
shares of Common Stock and has sole power to dispose or to direct the
disposition of 2,471,224 shares of Common Stock.
The following table sets forth, according to the 1997 Proxy Statement (except as
otherwise noted below), the name of, and the total number of shares of Common
Stock (if any) beneficially owned (as defined in Rule 13d-3 under the Exchange
Act) and the percentage of outstanding shares of
<PAGE>
Common Stock beneficially owned by, (i) each director of the Company, (ii) the
Company's Chief Executive Officer and each of its executive officers and (iii)
all directors and executive officers as a group. The information presented below
has been taken from or is based upon documents and records on file with the
Commission and other publicly available information. Since the 1997 Proxy
Statement, the total outstanding number of shares of Common Stock has increased
from 48,531,075 to 48,568,109 (based on information provided by Company in its
Quarterly Report on Form 10-Q for the quarter ended May 11, 1997). Although
we do not have any knowledge that would indicate that any statement contained
herein based upon such documents and records is untrue, we do not take any
responsibility for the accuracy or completeness of the information contained in
such documents and records, or for any failure by the Company to disclose events
that may affect the significance or accuracy of such information.
<TABLE>
<CAPTION>
Name and Address of Number of
Beneficial Owner Shares(1) Percentage of Class
- ---------------- --------- -------------------
<S> <C> <C>
John W. Alderson 10,000 *
W. Craig Barber 65,859 *
Dennis C. Bottorff 9,000 *
Carole F. Hoover 1,400 *
Victoria B. Jackson 3,094 *
Robert M. Langford 15,000 *
C. Stephen Lynn 219,000 *
Jeffry Schoenbaum (2) 582,192 1.19%
B. Franklin Skinner 3,500 *
Cal Turner, Jr. 28,000 *
Ronald E. Walker 21,341 *
All directors and 1,110,065 2.27%
executive officers as a
group (11 persons)
- --------------------
</TABLE>
* Less than 1%.
(1) Includes shares subject to options to purchase shares which are exercisable
or become exercisable within 60 days after January 23, 1997, and are held
by the following persons: John W. Alderson(10,000);W. Craig Barber
(56,500); Dennis C. Bottorff (1,000); Carole F. Hoover (1,000);Victoria B.
Jackson (1,000); Robert M. Langford (15,000);C. Stephen Lynn
(100,000);Jeffry Schoenbaum (0);B. Franklin Skinner (3,000); Cal Turner,
Jr. (3,000); Ronald E. Walker (10,100); Directors and Executive Officers as
a Group (287,047).
(2) Includes 17,340 shares held by Chase Manhattan Bank as custodian for Mr.
Schoenbaum's children, 2,953 shares held by his wife,Sue Schoenbaum, and
432,902 shares held in an irrevocable trust for the benefit of Mr.
Schoenbaum. Also includes 35,750 shares owned by the Schoenbaum Family
Foundation, of which Mr. Schoenbaum is a director. Mr. Schoenbaum disclaims
beneficial ownership of the shares owned by the Schoenbaum Family
Foundation. Mr. Schoenbaum is the son of Alex Schoenbaum, who until his
death in December 1996 was Chairman Emeritus of the Company's Board of
Directors.
- 2 -
<PAGE>
LOGO
PRELIMINARY COPY
APPENDIX A
[BLUE AGENT DESIGNATION CARD]
AGENT DESIGNATION
THIS AGENT DESIGNATION IS SOLICITED BY RAYMOND D. SCHOENBAUM AND BETTY J.
SCHOENBAUM (THE "SHONEY'S SHAREHOLDERS' COMMITTEE") FOR THE APPOINTMENT OF
DESIGNEES TO CALL A SPECIAL MEETING OF SHAREHOLDERS OF SHONEY'S, INC. (THE
"COMPANY").
Each of the undersigned hereby constitutes and appoints Raymond D. Schoenbaum,
Betty J. Schoenbaum, Daniel H. Burch, Stanley J. Kay, Jr. and Mark H. Harnett,
and each of them, with full power of substitution and resubstitution, the
proxies and agents of each of the undersigned (said proxies and agents,
together with each substitute appointed by any of them, if any, collectively,
the "Designated Agents") in respect of all shares of Common Stock of the
Company, $1.00 par value per share (the "Common Stock"), of the Company owned
by the undersigned to do any or all of the following, to which each of the
undersigned hereby consents:
1. To take all such action as shall be necessary or appropriate (i) to call and
demand (BUT NOT TO VOTE AT) a special meeting of the shareholders of the
Company to be held on Tuesday, August 19, 1997 at 10:00 a.m. local time in
the Governor's Ballroom at the Opryland Hotel, 2800 Opryland Drive,
Nashville, Tennessee 37214 (the "Special Meeting"), or on such other date
and at such other place as set by the Board of Directors if it is determined
to have the authority to do so, for the purpose of considering and voting
upon the "Special Meeting Proposals" as described in the Solicitation
Statement of the Shoney's Shareholders' Committee and (ii) to change the
place, date and time of the Special Meeting, if the Designated Agents deem
such change to be appropriate, in their sole discretion and the Designated
Agents are determined to have the authority to set and change the place,
date and time of the Special Meeting.
2. To exercise any and all of the other rights of each of the undersigned
incidental to (i) calling and convening the Special Meeting and (ii) causing
the purposes of the authority expressly granted hereinabove to the
Designated Agents to be carried into effect; provided, however, that NOTHING
CONTAINED IN THIS INSTRUMENT SHALL BE CONSTRUED TO GRANT TO THE DESIGNATED
AGENTS THE RIGHT, POWER OR AUTHORITY TO VOTE ANY SHARES OWNED BY THE
UNDERSIGNED AT THE SPECIAL MEETING OR TO BE AN AGREEMENT OF THE UNDERSIGNED
TO JOIN IN THE SOLICITATION OF ADDITIONAL AGENT DESIGNATIONS OR PROXIES.
<PAGE>
Please sign exactly as name appears hereon. When shares are held by joint
tenants, both should sign. When signing as an attorney, executor,
administrator, trustee or guardian, give full title as such. If a corporation,
sign in full corporate name by President or other authorized officer. If a
partnership, sign in partnership name by any partners.
PLEASE SIGN, DATE AND MAIL PROMPTLY IN THE POSTAGE-PAID ENCLOSED ENVELOPE.
-2-
