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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): August 12, 1997
(August 10, 1997)
SHONEY'S, INC.
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(Exact name of registrant as specified in its charter)
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<S> <C> <C>
Tennessee 0-4377 62-0799798
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(State or other jurisdiction of incorporation) (Commission File Number) (I.R.S. Employer
Identification No.)
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1727 Elm Hill Pike
Nashville, Tennessee 37210
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (615) 391-5201
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(Former name or former address, if changed since last report)
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Item 5. Other Events
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On August 10, 1997, at a special meeting of the Board of Directors of
Shoney's, Inc. (the "Company"), the Board of Directors of the Company approved
the execution of an Agreement dated as of August 10, 1997, by and among the
Company, Raymond D. Schoenbaum and Betty J. Schoenbaum and, in connection
therewith, approved certain amendments to the Company's Restated Bylaws. The
Agreement is included as Exhibit 10 to this report. The Restated Bylaws, as
amended, are included as Exhibit 3 to this report.
Item 7. Financial Statements and Exhibits
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(c) Exhibit:
3 Restated Bylaws of Shoney's, Inc., as amended
10 Agreement dated as of August 10, 1997, by and
among Shoney's, Inc., Raymond D. Schoenbaum, and
Betty J. Schoenbaum.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
SHONEY'S, INC.
Date: August 12, 1997 By: /s/ F. E. McDaniel, Jr.
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F. E. McDaniel, Jr.
Senior Vice President, Secretary
and Treasurer
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EXHIBIT INDEX
NO. EXHIBIT
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3 Restated Bylaws of Shoney's, Inc., as amended
10 Agreement dated as of August 10, 1997, by and among
Shoney's, Inc., Raymond D. Schoenbaum, and Betty J.
Schoenbaum.
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Exhibit 3
RESTATED BY-LAWS
OF
SHONEY'S, INC.
ARTICLE I
OFFICES
The executive offices of the Corporation shall be in Davidson County,
Tennessee, but the Corporation may have other offices at such places as the
Board of Directors may from time to time decide or as the business of the
Corporation may require.
ARTICLE II
MEETINGS OF SHAREHOLDERS
Section 1. Annual Meeting. The annual meeting of the shareholders
shall be held at the call of the Board of Directors on a date and at a time and
place, either within or without the State of Tennessee, as may be selected by
the Board of Directors.
Section 2. Special Meeting. Special Meetings of the shareholders may be
called at any time by the Chairman of the Board or the Board of Directors, and
shall be called by the Board of Directors if the holders of at least ten percent
(10%) of all the votes entitled to be cast on any issue proposed to be
considered at the proposed special meeting sign, date and deliver to the
Corporation's Secretary one (1) or more written demands for the meeting
describing the purpose or purposes for which it is to be held. The special
meeting shall be held at such time and place, either within or without the State
of Tennessee, as is designated in the call of the meeting by the Chairman of the
Board or the Board of Directors. The Board of Directors shall fix the record
date (which shall be a future date) for a special meeting. If the meeting is to
be called by the Board of Directors pursuant to demands delivered by the holders
of at least ten percent (10%) of all votes entitled to be cast on any issue
proposed to be considered at the proposed special meeting, then, within 20 days
after the date on which such demands are received, the Board of Directors shall
fix the record date. If no record date has been fixed by the Board of Directors
within 20 days of the date on which such demands are received, the record date
for the special meeting shall be the thirtieth day after the date on which such
demands were received.
Any shareholder of record seeking to join with other shareholders in
demanding a special meeting shall, by written notice to the Secretary, request
the Board of Directors to fix a record date to determine the shareholders
entitled to demand a special meeting. The Board of
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Directors shall promptly, but in all events within 15 days after the date on
which such a request is received, adopt a resolution fixing the record date to
determine the shareholders entitled to demand a special meeting, which record
date shall not exceed 30 days from the date on which the request was received.
If no record date has been fixed by the Board of Directors within 15 days of the
date on which such a request is received, the record date for the determination
of shareholders entitled to demand a special meeting shall be the thirtieth day
after the date on which such request was received.
Section 3. Notice of Meeting. Written notice stating the place, day and
hour of annual and special meetings of shareholders shall be given to each
shareholder, either personally or by mail to his last address of record with the
Corporation, not less than ten (10) nor more than sixty (60) days before the
date of the meeting. Notice of any special meeting of shareholders shall state
the purpose or purposes for which the meeting is called and person or persons
calling the meeting, and, if the meeting is being called pursuant to demands
delivered by the holders of at least ten percent (10%) of all the votes entitled
to be cast on any issue proposed to be considered at the proposed special
meeting, that the meeting is being so called. Notice of any meeting so called
shall be given within one month after the date the demands were delivered to the
Corporation's Secretary. Only such business shall be conducted at a special
meeting of shareholders as shall have been brought before the meeting pursuant
to the notice of meeting.
Section 4. Voting. At all meetings of shareholders, all shareholders of
record shall be entitled to one vote for each share of stock standing in their
name and may vote either in person or by proxy. Proxies shall be filed with the
Secretary of the meeting before being voted or counted for the purpose of
determining the presence of a quorum.
Section 5. Quorum. At all meetings of shareholders, a majority of the
outstanding shares of stock entitled to vote, represented in person or by proxy,
shall constitute a quorum for the transaction of business. Unless a greater vote
specifically is required by the Tennessee Business Corporation Act or the
Corporation's charter or By-laws, if a quorum is present at a meeting of the
Corporation's shareholders, a matter that may come before the meeting is adopted
if the number of votes cast in favor of the matter exceeds the number of votes
cast against the proposal. If, however, such majority shall not be present or
represented by proxy at any meeting of the shareholders, the presiding officer
or a majority of the shares so represented may adjourn the meeting from time to
time, without notice other than announcement at the meeting, until the requisite
number of shares shall be represented so that any business may be transacted
which might have been transacted at the meeting as provided in the original
notice.
Section 6. Action by Consent. Whenever the shareholders of the
Corporation are required or permitted to take any action by vote, such action
may be taken without a meeting on written consent, setting forth the action so
taken, signed by all of the persons or entities entitled to vote thereon.
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Section 7. Advance Notice of Shareholder Proposals. At any annual or
special meeting of shareholders, proposals by shareholders and persons nominated
for election as Directors by shareholders shall be considered only if advance
notice thereof has been timely given as provided herein and such proposals or
nominations are otherwise proper for consideration under applicable law and the
Charter and By-Laws of the Corporation. Notice of any proposal to be presented
by any shareholder or of the name of any person to be nominated by any
shareholder for election as a Director of the Corporation at any meeting of
shareholders shall be delivered to the Secretary of the Corporation at its
principal executive office not less than 60 nor more than 90 days prior to the
date of the meeting; provided, however, that if the date of the meeting is first
publicly announced or disclosed (in a public filing or otherwise) less than 70
days prior to the date of the meeting, such notice shall be given not more than
ten days after such date is first so announced or disclosed. Public notice shall
be deemed to have been given more than 70 days in advance of the annual meeting
if the Corporation shall have previously disclosed, in these ByLaws or
otherwise, that the annual meeting in each year is to be held on a determinable
date, unless and until the Board determines to hold the meeting on a different
date. Any shareholder who gives notice of any such proposal shall deliver
therewith the text of the proposal to be presented and a brief written statement
of the reasons why such shareholder favors the proposal and setting forth such
shareholder's name and address, the number and class of all shares of each class
of stock of the Corporation beneficially owned by such shareholder and any
material interest of such shareholder in the proposal (other than as a
shareholder). Any shareholder desiring to nominate any person for election as a
Director of the Corporation shall deliver with such notice a statement in
writing setting forth the name of the person to be nominated, the number and
class of all shares of each class of stock of the Corporation beneficially owned
by such person, the information regarding such person required by paragraphs
(a), (e) and (f) of Item 401 of Regulation S-K adopted by the Securities and
Exchange Commission (or the corresponding provisions of any regulation
subsequently adopted by the Securities and Exchange Commission applicable to the
Corporation), such person's signed consent to serve as a Director of the
Corporation if elected, such shareholder's name and address and the number and
class of all shares of each class of stock of the Corporation beneficially owned
by such shareholder. As used herein, shares "beneficially owned" shall mean all
shares as to which such person, together with such person's affiliates and
associates (as defined in Rule 12b-2 under the Securities Exchange Act of 1934),
may be deemed to beneficially own pursuant to Rules 13d-3 and 13d-5 under the
Securities Exchange Act of 1934, as well as all shares as to which such person,
together with such person's affiliates and associates, has the right to become
the beneficial owner pursuant to any agreement or understanding, or upon the
exercise of warrants, options or rights to convert or exchange (whether such
rights are exercisable immediately or only after the passage of time or the
occurrence of conditions). The person presiding at the meeting, in addition to
making any other determinations that may be appropriate to the conduct of the
meeting, shall determine whether such notice has been duly given and shall
direct that proposals and nominees not be considered if such notice has not been
given.
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Section 8. Inspectors of Election; Opening and Closing the Polls. The
Board of Directors by resolution shall appoint one or more inspectors, which
inspector or inspectors may include individuals who serve the Corporation in
other capacities, including, without limitation, as officers, employees, agents
or representatives, to act at the meetings of shareholders and make a written
report thereof. One or more persons may be designated as alternate inspectors to
replace any inspector who fails to act. If no inspector or alternate has been
appointed to act or is able to act at a meeting of shareholders, the Chairman of
the meeting shall appoint one or more inspectors to act at the meeting. Each
inspector, before discharging his or her duties, shall take and sign an oath
faithfully to execute the duties of inspector with strict impartiality and
according to the best of his or her ability. The inspectors shall have the
duties prescribed by law.
The Chairman of the meeting shall fix and announce at the meeting the
date and time of the opening and the closing of the polls for each matter upon
which the shareholders will vote at a meeting.
ARTICLE III
DIRECTORS
Section 1. Number and Qualifications. The business and affairs of the
Corporation shall be managed and controlled by a Board of Directors consisting
of eleven directors. Directors need not be shareholders of the Corporation. In
addition to the Directors who are elected by the shareholders, the Board of
Directors, from time to time, may appoint persons as advisory directors, to
serve such terms and perform such duties as the Board of Directors shall
determine upon appointing any person as an advisory director. Advisory directors
shall not be entitled to vote on any matter to come before the Board of
Directors. Advisory directors may be removed at any time by a vote of the Board
of Directors. The provisions of Article III, Sections 2 through 12 of these
Bylaws shall not apply to advisory directors.
Section 2. Nominations by Shareholders. Shareholders who wish to
nominate persons for election as Directors of the Corporation shall comply with
the requirements of ARTICLE II, Section 7 of these By-Laws.
Section 3. Election and Term of Office. The Directors shall be elected
at the annual meeting of shareholders; but if any such annual meeting is not
held or if the Directors are not elected at any such annual meeting, the
Directors may be elected at any special meeting of the shareholders. Directors
shall be elected by a plurality of the votes cast. The Directors shall hold
office until the next annual meeting of shareholders and thereafter until their
respective successors have been elected and qualified.
Section 4. Meetings. Regular meetings of the Directors shall be held
annually following the annual meeting of the shareholders and may be held
without notice at such other
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places and times as may be determined by the Board of Directors. In addition,
during the four month period from August 10, 1997 through and including December
10, 1997, the Board of Directors shall hold at least one regularly scheduled
meeting every month at such times as may from time to time be fixed by the Board
of Directors and the Board of Directors shall hold regular meetings every month
thereafter until such time as the Board of Directors determines that such
monthly meeting is not necessary. Special meetings of the Directors may be
called at any time by the Chairman of the Board, the Chairman of the Executive
Committee of the Board of Directors, or a majority of the Directors or by the
other persons authorized to call such a meeting pursuant to these Bylaws, on at
least one day's notice sent by any usual means of communication. Notice of any
such meeting may be waived by the person or persons entitled thereto by signing
a written waiver of notice at any time before or after the meeting is completed.
Attendance of a Director at a meeting shall constitute a waiver of notice
thereof unless such attendance is for the express purpose of objecting to such
meeting. Any meeting of the Board of Directors may be held within or without the
State of Tennessee at such place as may be determined by the person or persons
calling the meeting.
Section 5. Quorum. A majority of the total number of Directors then in
office shall constitute a quorum for the transaction of business; and the vote
or action of a majority of the Directors present at any meeting at which a
quorum is had shall decide any matter that may come before the meeting and shall
be the act of the Board unless otherwise specifically required by law or by
express provision of the charter or By-laws of the Corporation.
Section 6. Action by Consent. Any action required or permitted to be
taken by the Directors of the Corporation may be taken without a meeting on
written consent, setting forth the action so taken, signed by all the Directors
entitled to vote thereon.
Section 7. Vacancies. Vacancies in the Board of Directors occurring for
any reason, including an increase in the number of Directors, resignation, or
the removal of any Director with or without cause, may be filled by vote of a
majority of the Directors then in office although less than a quorum exists; but
if the offices of a majority of the entire Board of Directors shall be vacant at
the same time, such vacancies shall be filled only by vote of the shareholders.
A director elected to fill any vacancy shall hold office until the next annual
meeting of shareholders and thereafter until his successor has been elected and
qualified.
Section 8. Removal and Resignation. Any or all of the Directors may be
removed with or without cause, at any time, by vote of the shareholders. Any
Director may resign at any time, such resignation to be made in writing and to
take effect immediately or on such later date as may be specified therein
without acceptance.
Section 9. Committees.
(a) The Executive Committee of the Board of Directors shall
act on behalf of the Board of Directors between scheduled meetings of
the Board of Directors and
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exercise all powers of the Board of Directors and the powers granted to
the Chairman of the Board of Directors by Article IV, Section 3 of
these Bylaws, including, without limitation, the power to call meetings
of the Board of Directors and to set the agenda for meetings of the
Board of Directors; provided, however, that the Executive Committee
shall not have the authority to take any action that is prohibited by
the Tennessee Business Corporation Act. The Chairman of the Executive
Committee shall have the power to call meetings of the Board of
Directors or the Executive Committee and, from and after the date that
B. Franklin Skinner is no longer the Chairman of the Executive
Committee, any two members of the Executive Committee acting together
shall be entitled to call meetings of the Board of Directors or the
Executive Committee on at least one day's notice sent by any usual
means of communication. Each member of the Executive Committee shall
have the right to add items to the agenda of meetings of the Board of
Directors or the Executive Committee. The quorum for all meetings of
the Executive Committee shall be three, at least one of whom shall be a
Committee Nominee (as defined in the Agreement dated as of August 10,
1997 (the "Agreement"), as the same shall be amended from time to time,
among the Company, Raymond D. Schoenbaum and Betty J. Schoenbaum (the
Schoenbaums being collectively referred to as the "Shareholders
Committee")), and the act of a majority of those present at a meeting
of the Executive Committee at which a quorum is present shall be the
act of the committee.
(b) The Operations Committee of the Board of Directors shall
consist of four members and shall review and make recommendations to
the Board of Directors concerning all aspects of the Company's business
and its current and future business and financial strategies,
transactional opportunities and the enhancement of shareholder value.
In addition, the Operations Committee shall have oversight
responsibility with respect to all aspects of the day-to-day operations
of the Company, including the marketing, capital expenditure and budget
plans for the Company, and shall review and make recommendations
regarding the debt structure and capital structure of the Company. The
Operations Committee shall hold meetings as often as the Operations
Committee believes necessary but in any event for the first two months
after August 10, 1997 the Operations Committee shall meet no less than
every two weeks. Each member of the Operations Committee shall have,
and management of the Company shall ensure that each member of the
Operations Committee shall have, access to all such information
regarding the Company and all contacts with such employees and
franchisees as such member shall request. The Operations Committee
shall make a report to the Board on a monthly basis (or more often, if
necessary or appropriate) and the agenda of each Board meeting shall
provide for the making by the Operations Committee of such report. The
members of the Operations Committee shall receive the information set
forth on Annex I hereto in accordance with the time frames set forth in
such Annex I. The quorum for all meetings of the Operations Committee
shall be two members, at least one of whom shall be a Committee Nominee
and one of whom shall be a person other than a Committee Nominee. The
act of a majority of those present at
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a meeting of the Operations Committee at which a quorum is present
shall be the act of such committee.
(c) From time to time, a majority of the entire Board of
Directors may by resolution appoint any other committee or committees
for the purpose or purposes to the extent permitted by law, which
committee or committees shall have such powers as shall be specified in
the resolution of appointment.
Section 10. Participation in Meetings. The members of the Board of
Directors, or any committee appointed by the Board, may participate in a meeting
of the Board or of such committee by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and participation in a meeting pursuant to such
means shall constitute presence in person at such meeting. The Directors shall
be promptly furnished a copy of the minutes of the Board of Directors' meetings.
Section 11. Compensation. The Directors shall receive compensation or
salary for their services as Directors, said sum to be fixed by proper
resolution of the Board of Directors, and said salary and compensation may
include a fixed sum for expenses of attending the meetings of the Board of
Directors. A Director may serve the Corporation in a capacity other than that of
a Director and receive compensation for services rendered in such other
capacity.
Section 12. Access to Information. Each member of the Board of
Directors shall be entitled to receive promptly upon request all information
regarding the Corporation which such director requests.
ARTICLE IV
OFFICERS
Section 1. Designation. The officers of the Corporation shall be a
Chairman Emeritus of the Board (which office shall be optional with the Board of
Directors), a Chairman of the Board, a President, one or more Division
Presidents, one or more Vice Presidents, a Secretary and a Treasurer and such
other officers, agents and employees as may from time to time be elected, chosen
or appointed by the Board of Directors. Any Vice President may be designated as
Executive Vice President or Senior Vice President or such other title as the
Board may determine. Any two or more of such offices may be held by the same
person except the offices of President and Secretary.
Section 2. Chairman Emeritus. The Chairman Emeritus of the Board shall
be an honorary and optional position. The Chairman Emeritus shall be an Advisory
director of the Corporation pursuant to Article III of these Bylaws. In
addition, the Chairman Emeritus shall
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have such duties with regard to the general and active management of the
Corporation as may be prescribed from time to time by the Board of Directors or
by the By-laws.
Section 3. Chairman of the Board of Directors. The Chairman of the
Board of Directors shall preside at all meetings of the shareholders and the
Board of Directors, and he shall call regular and special meetings of the
shareholders and Board of Directors in accordance with these By-laws. He shall
perform such other duties as may be prescribed by the Board. The Board may
designate the Chairman chief executive officer of the Corporation.
Section 4. President. The President shall have general supervision of
the affairs and property of the Corporation, subject to the direction of the
Board of Directors and the Chairman of the Board. He shall manage and control
the regular business of the Corporation; and he may appoint agents and employees
of the Corporation, other than officers elected or appointed by the Board,
subject to the approval of the Board. In the absence of the Chairman of the
Board, the President shall preside at any meeting of the shareholders or the
Board of Directors. He shall perform such other duties as may from time to time
be prescribed by the Board.
Section 5. Division President. The Division President or Division
Presidents shall assist the President in the management of the Corporation,
shall have general supervision of the affairs and property of that division of
the Corporation over which he is President, and shall have such other duties as
may from time to time be prescribed by the Board, the Chairman of the Board, or
President. In the absence, disqualification or incapacity of the President, the
senior Division President, if senior to the senior Vice President, shall perform
the duties and exercise the powers of the President.
Section 6. Vice President. The Vice President or Vice Presidents shall
assist the President in the management of the Corporation and shall have such
other powers and perform such other duties as may from time to time be
prescribed by the Board, or President. In the absence, disqualification or
incapacity of the President, the senior Vice President shall perform the duties
and exercise the powers of the President.
Section 7. Secretary. The Secretary shall keep the minutes of all
meetings of the shareholders and the Board of Directors in appropriate books,
and he shall attend to the giving of all notices for the Corporation. He shall
have charge of the seal and stock books of the Corporation and such other books
and papers as the Board may direct, and he shall in general perform all duties
incident to the office of Secretary of the Corporation. He shall perform such
other duties as may from time to time be prescribed by the Board, the Chairman
of the Board, or President.
Section 8. Treasurer. The Treasurer shall have the care and custody of
all funds and securities of the Corporation, and he shall in general perform all
duties incident to the office of
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Treasurer of the Corporation. He shall perform such other duties as may from
time to time be prescribed by the Board, the Chairman of the Board, or
President.
Section 9. Other Officers. The Board of Directors may appoint, or may
authorize the Chairman of the Board or President to appoint, assistant
secretaries and assistant treasurers and such other officers as the Board may
from time to time decide, who shall have such authority and perform such duties
as may from time to time be prescribed by the Board or designated by the
President.
Section 10. Election and Term of Office. The officers shall be elected
or appointed at the regular meeting of the Board of Directors following the
annual meeting of shareholders, provided that any vacancy or newly created
office may be filled at a special meeting or other regular meeting of the Board.
Unless otherwise determined by the Board, each officer shall hold office until
the next regular meeting of the Board following the annual meeting of
shareholders and thereafter until his successor has been elected or appointed
and qualified.
Section 11. Compensation. The Board of Directors, or one of its duly
appointed committees, shall fix the salaries of the officers of the Corporation.
The compensation of other agents and employees of the Corporation may be fixed
by the Board of Directors or by an officer or officers for whom that function
has been delegated by the Board.
ARTICLE V
SHARES
Section 1. Certificates. The shares of the Corporation shall be
represented by certificates in such form as the Board of Directors may from time
to time prescribe. Such certificates shall be numbered consecutively in the
order in which they are issued, which numbering system may be separated by class
or series if there shall be more than one class or series of shares. The
certificates shall be signed by the Chairman of the Board and Secretary unless
the Board of Directors shall otherwise designate any two officers of the
Corporation for such purpose.
Section 2. Record. The name and address of all persons to whom the
shares of the Corporation are issued, the number of shares, and the date of
issue shall be entered on the books of the Corporation. It shall be the duty of
each shareholder to notify the Corporation of his address.
Section 3. Transfers. The shares of the Corporation are transferable
only on the books of the Corporation by the registered holder thereof, either in
person or by power of attorney, and upon delivery and surrender of the
certificate representing such shares properly
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endorsed for transfer. Certificates exchanged or surrendered shall be canceled
by the Secretary and placed in the corporate records.
Section 4. Loss of Certificates. In case of the loss, mutilation or
destruction of a certificate representing shares of the Corporation, a duplicate
certificate may be issued on such terms as the Board of Directors shall
prescribe.
Section 5. Transfer Agent, Registrar. The Board of Directors may
appoint a transfer agent or agents and/or a registrar, and a dividend disbursing
agent for the Corporation.
ARTICLE VI
SEAL
Section 1. Authority to Adopt. The Corporation may have a seal in such
form as the Board of Directors may adopt, and the Board of Directors may from
time to time change the form of the seal of the Corporation.
Section 2. Scroll Seal. In the event the Board shall not have adopted a
seal or if it is inconvenient to use the adopted seal at any time, an authorized
signature made in the name of and on behalf of the Corporation followed by the
word "Seal" enclosed in parentheses or scroll shall be deemed the seal of the
Corporation.
ARTICLE VII
FISCAL YEAR
The fiscal year of the Corporation shall end on the last Sunday of
October of each year, but the Board of Directors may from time to time change
the fiscal year of the Corporation.
ARTICLE VIII
DIVIDENDS, SURPLUS AND RESERVES
Section 1. Dividends. The Board of Directors may declare dividends from
the Corporation's net earnings, or from the surplus of its assets over its
liabilities, including capital, but not otherwise. The Board of Directors may
issue stock dividends, provided the Corporation has a surplus equal in value, at
a fair valuation, to such stock issued as a dividend;
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and provided, further, that the surplus of the Corporation is reduced in an
amount equal to the value of the stock issued as a stock dividend.
Section 2. Surplus and Reserves. Before making any distribution of
proceeds, there may be set aside out of the net proceeds of the Corporation such
sums for maintaining any property of the Corporation, or for any other purpose,
and any profits of any year not distributed as dividends shall be deemed to have
been thus set aside until otherwise disposed of by the Board of Directors, and
the Board of Directors may abolish any such reserve in its absolute discretion.
ARTICLE IX
INDEMNITY
Any person who was or is a party or is threatened to be made a party to
any threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (including any action by or in the
right of the Corporation) by reason of the fact that he is or was serving as an
officer or director or employee of the Corporation or is or was serving at the
request of the Corporation as a Director or officer of the Corporation,
partnership, joint venture, trust or other enterprise, shall be indemnified by
the Corporation against expenses (including reasonable attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by him in connection with such action, suit or proceeding if he acted in good
faith for a purpose which he reasonably believed to be in the best interest of
the corporation, and, in criminal proceedings, in addition, had no reasonable
cause to believe that his conduct was unlawful, to the maximum extent permitted
by, and in the manner provided by, the Tennessee Business Corporation Act. In
the event of a settlement, however, the indemnification herein shall apply only
when the Board of Directors approves such settlement and reimbursement as being
in the best interest of the Corporation. The foregoing right of indemnification
shall be in addition to and not exclusive of all rights to which said Directors,
officers or employees may be entitled.
ARTICLE X
AMENDMENTS
The shareholders of the Corporation may adopt new Bylaws and may amend
or repeal any or all of these Bylaws at any annual or special meeting provided,
however, that notice of intention to amend shall have been contained in the
notice of any special meeting called for that purpose; and also the Board of
Directors may adopt new Bylaws and may amend or repeal these Bylaws by the vote
of a majority of the entire Board, and provided further that any bylaw adopted
by the Board may be amended or repealed by the shareholders. Notwithstanding the
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foregoing, until June 30, 1998 the Board of Directors will not amend the
provisions of the first sentence of Section 1, Sections 4, 9(a), 9(b), 9(c) or
12 of Article III, this Article X, or Article XI of these Bylaws, or adopt any
new bylaw which is inconsistent in any manner with such provisions, without the
affirmative vote of at least 75% of the members of the Board of Directors. The
Board of Directors may amend Bylaws adopted by the shareholders, provided that
shareholders may from time to time specify particular provisions of these Bylaws
which shall not be amended by the Board of Directors.
ARTICLE XI
SIGNIFICANT TRANSACTIONS
No Significant Transaction (as defined below) shall be undertaken
without the specific approval of the Board of Directors of such Significant
Transaction. Significant Transaction shall mean (i) the sale, lease, exchange or
other disposition of all or substantially all of the business operations or
assets of the Company in a single transaction or in a series of transactions,
(ii) the sale, lease or exchange or other disposition of (A) the Shoney's
division, the Captain D's division or any individual asset or group of related
assets of the Company in a single transaction or in a series of related
transactions involving more than $5 million (except that transactions shall not
be considered to be related solely because they are adopted by the Board as part
of a common plan), (B) assets in a single transaction or in a series of
transactions to a single purchaser involving more than $5 million (C) any asset
or group of related assets to any current or former officer, director, or
employee of the Company, any person who has an ongoing material business or
financial relationship with any such current or former officer, director or
employee of the Company, any Affiliate or Associate (each as defined in Rule
12b-2 under the Securities Exchange Act of 1934 and shall include persons who
become Affiliates or Associates of any person subsequent to August 10, 1997) of
the foregoing, or any entity owned in whole or in part by any of the foregoing
(other than an entity whose securities are publicly traded and in which the
foregoing own less than 5% of the outstanding equity interests of such entity),
(iii) the acquisition of (A) any restaurant or restaurants in a single
transaction or series of related transactions involving more than $5 million or
(B) business operations or assets in a single transaction or series of related
transactions involving more than $5 million other than, in the case of this
clause (B), those acquisitions contained in the capital budget plan of the
Company previously approved by the Board, (iv) the authorization of the
dissolution of the Company or the winding up or seeking of voluntary bankruptcy
or voluntary insolvency protection, (v) the consent by the Company to a
third-party seeking an order authorizing the involuntary dissolution or
involuntary bankruptcy of the Company, (vi) the authorization of any merger,
consolidation, reorganization or other business combination (other than any
merger in which both (A) the Company is the surviving ultimate parent entity and
(B) the holders of the voting securities of the Company prior to such
transaction continue to hold at least 85% of the equity interests and voting
power of the Company after the transaction), (vii) the declaration of any
dividend or authorization of any distribution in excess of regular and
12
<PAGE> 13
customary dividends, or (viii) the approval of any restructuring of indebtedness
of the Company or any of its subsidiaries involving amounts in excess of $25
million, or the material modification of the terms of any indebtedness or
obligation of the Company or any of its subsidiaries for borrowed money
involving amounts in excess of $25 million.
13
<PAGE> 14
ANNEX I
INFORMATION TO BE PROVIDED TO MEMBERS OF THE OPERATIONS COMMITTEE
Information to be provided weekly:
1. Information regarding same store sales, broken down as follows:
a. Company-owned vs. Franchised.
b. Captain D's, Shoney's and casual dining.
c. Regional (geographic divisions).
d. Sales attributable to coupons, to the extent available.
2. Information regarding labor and food costs, broken down as follows:
a. Company-owned vs., to the extent available, Franchised.
b. Captain D's, Shoney's and casual dining.
c. Regional (geographic divisions).
Information to be provided for each four-week period:
1. Financial statements, including:
a. Balance sheet and income statement.
b. Break out of Captain D's, Shoney's and casual dining segments.
c. Comparison of actual vs. prior year vs., to the extent
available, budget.
2. Shopper reports.
<PAGE> 1
Exhibit 10
AGREEMENT
THIS AGREEMENT, dated as of August 10, 1997 (this "Agreement"), by and
among Shoney's, Inc., a Tennessee corporation (the "Company"), and Raymond D.
Schoenbaum, an individual resident of the State of Georgia, and Betty J.
Schoenbaum, an individual resident of the State of Florida (Raymond D.
Schoenbaum and Betty J. Schoenbaum are referred to herein collectively as the
"Shareholders' Committee");
W I T N E S S E T H:
WHEREAS, on July 3, 1997, the Shareholders' Committee mailed to the
shareholders of the Company (the "Shareholders") Solicitation Statements (each,
a "Solicitation Statement") to solicit agent designations (the "Agent
Designations") to call a Special Meeting of the Shareholders (the "Special
Meeting") for the consideration of certain proposals of the Shareholders'
Committee, including, among other things, the removal and replacement of the
members of the Board of Directors of the Company (the "Board");
WHEREAS, by July 18, 1997, the Shareholders' Committee delivered to the
Company Agent Designations executed by the holders in the aggregate of
approximately 42% of the outstanding shares of Common Stock of the Company in
favor of the call of the Special Meeting;
WHEREAS, the parties intended to solicit proxies from the Shareholders
with respect to the proposals to be submitted at the Special Meeting (the
solicitation of Agent Designations and of proxies to vote at the Special Meeting
collectively are referred to herein as the "Proxy Contest");
WHEREAS, the Board is not satisfied with the Company's recent
performance and intends to monitor closely the Company's situation; and
WHEREAS, the Company and the members of the Shareholders' Committee
have determined that the interests of the Company and its Shareholders, and the
interests of the members of the Shareholders' Committee, would be served by (i)
the avoidance of the substantial expense and disruption that could be expected
to result from the continuation of the Proxy Contest, (ii) the appointment of
the persons as set forth herein as new directors of the Company, (iii) the
formation of an Operations Committee which will provide a forum for discussion
and review of the current operations of the Company, and (iv) the receipt of
other agreements, covenants, rights and benefits as provided herein.
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements and representations set forth herein, intending to be legally bound
hereby, the parties hereby agree as follows:
<PAGE> 2
1. BOARD COMPOSITION; RELATED MATTERS
(a) The Board has adopted, effective upon the execution of
this Agreement, a resolution to amend Article III, Section 1 of the Bylaws of
the Company to provide in the Bylaws that the number of directors is fixed at
eleven.
(b) In accordance with Article III, Section 7 of the Bylaws of
the Company, the Board (i) has adopted a resolution, effective upon execution of
this Agreement, to appoint Raymond D. Schoenbaum and Michael J. Bodnar to fill
two of the vacancies on the Board created by the increase in the number of
directors and to serve as directors of the Company until the next annual meeting
of Shareholders and until their successors shall have been duly elected and
qualified, and (ii) as soon as practicable after the date hereof and in any
event within fourteen days from the date hereof, shall appoint to the Board a
third person who shall be selected by the Board (after receiving the
recommendation of the Nominating Committee) from the list of nominees proposed
by the Shareholders' Committee to fill the third vacancy (such person, together
with Raymond D. Schoenbaum and Michael J. Bodnar, being referred to herein as
the "Committee Nominees") to serve until the next annual meeting of Shareholders
and until his or her successor shall have been duly elected and qualified.
(c) In accordance with Article III, Section 7 of the Bylaws,
the Board shall appoint, as soon as practicable after the date hereof and in any
event within sixty days from the date hereof, one person (the "Additional
Nominee") selected by mutual agreement of the Board (after receiving the
recommendation of the Nominating Committee) and the Shareholders' Committee from
a list of four persons, two of whom are proposed by the Shareholders' Committee
and two of whom are proposed by the Nominating Committee of the Board, to fill
the fourth vacancy on the Board and to serve as a director of the Company until
the next annual meeting of the Shareholders and until his or her successor shall
have been duly elected and qualified.
(d) In connection with the election of the directors of the
Company at the annual meeting of the Company to be held in calendar year 1998
and in any election of the directors at any time prior to the annual meeting of
the Company in calendar year 1999, the Committee Nominees and the Additional
Nominee shall be included in the slate of nominees recommended by the Board to
the Shareholders for election as directors, and the Company shall use all
reasonable efforts to cause the election of each of the Committee Nominees and
such Additional Nominee at each such election. The foregoing notwithstanding,
neither the Company nor the Board shall have any obligation to recommend the
Committee Nominees or such Additional Nominee at any election which occurs after
either member of the Shareholders' Committee has taken any action described in
Section 2(b)(ii) of this Agreement (which actions shall be referred to as the
"initiation of a proxy contest").
(e) If, prior to the earlier of the date of the Company's
annual meeting in calendar year 1999 and the initiation of a proxy contest by
either member of the Shareholders' Committee, any Committee Nominee or Jeffry
Schoenbaum shall be unable or unwilling to serve as a nominee
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<PAGE> 3
or a director for any reason or, after appointment as a director of the Company,
shall cease to be a member of the Board by reason of his or her death,
disability or resignation, the Shareholders' Committee shall be entitled to
select a person (after receiving the recommendation of the Nominating Committee,
which recommendation shall not be unreasonably withheld; provided that if the
Nominating Committee does withhold its recommendation, then the Shareholders'
Committee shall be entitled to select another person, again subject to the
recommendation of the Nominating Committee, which shall not be unreasonably
withheld), who may or may not be one of the nominees of the Shareholders'
Committee as set forth in the Solicitation Statement, to be included on the
slate of nominees recommended by the Board to the Shareholders or to fill the
vacancy on the Board, as the case may be. If, prior to the earlier of the date
of the Company's annual meeting in calendar year 1999 and the initiation of a
proxy contest by either member of the Shareholders' Committee, the Additional
Nominee shall be unable or unwilling to serve as a nominee or a director for any
reason or, after appointment as a director of the Company, shall cease to be a
member of the Board by reason of his or her death, disability or resignation,
the Board (after receiving the recommendation of the Nominating Committee) and
the Shareholders' Committee shall select by mutual agreement a person from a
list of four persons, two of whom are proposed by the Shareholders' Committee
and two of whom are proposed by the Nominating Committee of the Board, to be
included on the slate of nominees recommended by the Board to the Shareholders
or to fill the vacancy on the Board, as the case may be. Any person selected to
be recommended to be included in the slate of nominees or on the Board in
accordance with this Section in place of a Committee Nominee or Jeffry
Schoenbaum shall be deemed to be a Committee Nominee for purposes of this
Agreement and any person so selected in place of the Additional Nominee shall be
deemed to be the Additional Nominee for purposes of this Agreement. Any vacancy
on the Board which is to be filled in accordance with this Section 1(e) shall be
filled by the Board as soon as practicable.
(f) Except as provided herein, if, prior to the earlier of the
date of the Company's annual meeting in calendar year 1999 and the initiation of
a proxy contest by either member of the Shareholders' Committee, any member of
the Board other than a Committee Nominee, an Additional Nominee or Jeffry
Schoenbaum shall cease to be a member of the Board by reason of his or her
death, disability or resignation, the Board following the recommendation of a
committee of the Board consisting of all directors other than the Committee
Nominees and Jeffry Schoenbaum (the "Special Nominating Committee") shall
appoint a person to fill the vacancy created and if, prior to such earlier date,
any member of the Board other than a Committee Nominee, an Additional Nominee or
Jeffry Schoenbaum shall be unable or unwilling to be nominated or serve as a
director of the Company, the Special Nominating Committee shall appoint a person
to be included in place of such member in the slate of nominees recommended by
the Board. Notwithstanding the foregoing, if, prior to the earlier of the date
of the Company's annual meeting in calendar year 1999 and the initiation of a
proxy contest by either member of the Shareholders' Committee, Dennis C.
Bottorff or B. Franklin Skinner shall cease to be a member of the Board by
reason of death, disability or resignation, or if Dennis C. Bottorff or B.
Franklin Skinner shall be unable or unwilling to be nominated to serve as a
director of the Company, the Board (after receiving the recommendation of the
Nominating Committee) shall appoint a person to fill the vacancy created or to
be included in place of such member in the slate of nominees recommended by the
Board; provided, however,
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<PAGE> 4
that such person shall not be, nor within the last three years shall have been,
an officer or employee of the Company or have acted as, or be employed by or
affiliated or associated with an organization serving as, a professional
advisor, legal counsel, consultant or financial advisor to the Company or any
director or officer of the Company. Any vacancy on the Board which is to be
filled in accordance with this Section 1(f) shall be filled by the Board as soon
as practicable.
(g) The Board has by resolution, effective upon the execution
of this Agreement, (i) expanded the powers of the Executive Committee of the
Board to include all of the powers which were previously granted to the Chairman
of the Board, including the power to call meetings of the Board and to set the
agenda for meetings of the Board, and (ii) reconstituted the existing Executive
Committee to consist of the following individuals: Raymond D. Schoenbaum, B.
Franklin Skinner (who has been designated as Chairman of the Executive
Committee), Michael J. Bodnar, Carole F. Hoover and C. Stephen Lynn. In
addition, the Board has by resolution, effective upon the execution of this
Agreement, amended the Bylaws of the Company to provide that (i) the Chairman of
the Executive Committee has the power to call meetings of the Board or the
Executive Committee on at least one day's notice pursuant to the Bylaws of the
Company, (ii) from and after the date that B. Franklin Skinner is no longer the
Chairman of the Executive Committee, any two members of the Executive Committee
acting together shall have the power to call meetings of the Board or the
Executive Committee on at least one day's notice pursuant to the Bylaws of the
Company, and (iii) each member of the Executive Committee is entitled to add
items to the agenda of the Board or the Executive Committee.
(h) The Board has adopted, effective upon the execution of
this Agreement, a resolution to amend the Bylaws to create a committee,
designated as the Operations Committee, with the powers described herein. The
Board has adopted, effective upon the execution of this Agreement, a resolution
appointing Raymond D. Schoenbaum, Michael J. Bodnar and C. Stephen Lynn to serve
on the Operations Committee. Within fourteen days from the date hereof, the
Nominating Committee shall recommend and the Board shall appoint a fourth member
of the Operations Committee from among the members of the Board. The Operations
Committee shall become effective and be empowered immediately upon execution of
this Agreement and prior to the selection of a fourth member. The Operations
Committee shall have full authority to review and make recommendations to the
full Board concerning all aspects of the Company's business and its current and
future business and financial strategies, transactional opportunities and the
enhancement of shareholder value. In addition, the Operations Committee shall
have oversight responsibility with respect to all aspects of the day-to-day
operations of the Company, including the marketing, capital expenditure and
budget plans for the Company, and shall have the authority to review and make
recommendations regarding the debt structure and capital structure of the
Company. The Operations Committee shall hold meetings as often as the Operations
Committee believes necessary but in any event for the first two months after the
date hereof the Operations Committee shall meet no less than every two weeks.
The Chief Executive Officer shall attend each meeting of the Operations
Committee, unless his or her absence is approved by a majority of the members of
the Operations Committee in attendance at such meeting from which the Chief
Executive Officer is absent. Each member of the Operations Committee shall have,
and management of the Company shall ensure that
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<PAGE> 5
each member of the Operations Committee shall have, access to all such
information regarding the Company and all contacts with such employees and
franchisees as such member shall request. The Operations Committee shall make a
report to the Board on a monthly basis (or more often, if necessary or
appropriate) and the agenda of each Board meeting shall provide for the making
by the Operations Committee of such report.
(i) Any member of the Board may request that the Company
retain, on behalf of the Board or any committee thereof, consultants or advisors
that the Board determines to be appropriate and the Board shall provide for the
payment of such advisors or consultants in connection with any such approval.
If, within fourteen days after such request, the Board fails to retain
consultants or advisors proposed by Raymond D. Schoenbaum to assist the efforts
of the Operations Committee, Raymond D. Schoenbaum shall have the right to
require the Company to retain no more than two consultants or advisors to work
for the Operations Committee, who, so long as B. Franklin Skinner is the
Chairman of the Executive Committee, must be approved by the Chairman of the
Executive Committee (which approval shall not unreasonably be withheld). In such
case, the Company shall hire such consultants or advisors for a three-month term
beginning as soon as practicable for an amount not to exceed $25,000 per month
for each consultant or advisor.
(j) Without the written consent of either of the members of
the Shareholders' Committee, the Company agrees that, prior to the annual
meeting of the Company in calendar year 1999, it shall not take any action to
(i) amend the Bylaws of the Company to increase the size of the Board, (ii)
disband or cause the Executive Committee or the Operations Committee to cease to
function, (iii) decrease, limit or alter the responsibilities or powers of the
Executive Committee (as set forth in Section 1(g) hereof) or the Operations
Committee, (iv) alter the size or composition of the Executive Committee or the
Operations Committee as provided in paragraphs (g) and (h) hereof, or (v) alter
or amend the Bylaws in any manner inconsistent with the last sentence of
paragraph (g) hereof or alter or amend the Bylaws in any manner inconsistent
with paragraphs (n), (o) or (p) hereof. The Company agrees that, until the
annual meeting of the Company in calendar year 1999, the Board shall reappoint
the members of the Executive Committee and the Operations Committee as
designated herein to such committees on an annual basis; provided that such
persons are members of the Board and; provided, further, that if a Committee
Nominee ceases to be a member of the Board, the Board shall appoint another
Committee Nominee to be a member of such committee. In addition, each member of
the Operations Committee shall be reimbursed by the Company for all expenses
reasonably incurred by such member in the performance of his or her duties as a
member of such committee. The quorum for all meetings of the Operations
Committee shall be two, at least one of whom is a Committee Nominee and one of
whom is a person other than a Committee Nominee, and the quorum for all meetings
of the Executive Committee shall be three, at least one of whom is a Committee
Nominee. The act of a majority of those present at a meeting of either the
Executive Committee or the Operations Committee at which a quorum is present
shall be the act of such Committee.
(k) On or before November 15, 1997, the Board will evaluate
the performance of the Chief Executive Officer and each other member of senior
management of the Company, and
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<PAGE> 6
upon such evaluation shall make such determinations regarding the Chief
Executive Officer and the other members of senior management of the Company as
the Board decides to be appropriate. In undertaking such review, the Board will
utilize such criteria as may be determined to be appropriate by the Board, which
will include the performance of the Company. In addition, the Board shall retain
the authority, and nothing contained herein shall have the effect of limiting
the Board's authority, to review the performance of the Chief Executive Officer
and each other member of senior management of the Company at such other times
and in such manner as the Board deems to be necessary or appropriate.
(l) If the current Chairman and Chief Executive Officer
resigns or is removed, the Board agrees that Raymond D. Schoenbaum shall be
given equal consideration for the Chairman and Chief Executive Officer position.
If Raymond D. Schoenbaum chooses not to be a candidate for the position, the
Board shall create a Search Committee to retain a new Chief Executive Officer
and Raymond D. Schoenbaum shall be appointed by the Board to be a member of such
Search Committee.
(m) The Board has adopted, effective upon the execution of
this Agreement, a resolution appointing Raymond D. Schoenbaum to serve on the
Nominating Committee of the Board and shall continue to cause Raymond D.
Schoenbaum to be a member of such committee at least until the annual meeting of
the Company in calendar year 1999. The Board shall appoint either Raymond D.
Schoenbaum or one of the other Committee Nominees to serve on each other
committee of the Board and shall continue to cause such persons to be members of
such committees at least until the annual meeting of the Company in calendar
year 1999.
(n) The Board has adopted, effective upon the execution of
this Agreement, a resolution to amend the Bylaws of the Company to provide that
(i) the Board shall hold at least one regularly scheduled meeting every month
during the first four (4) months following the date of this Agreement at such
times as may from time to time be fixed by the Board, and that the Board shall
hold regular meetings every month thereafter until the Board determines that it
is not necessary, (ii) each Board member shall be entitled to receive promptly
upon request all information regarding the Company which such Board member
requests, and (iii) the information described in Annex I to this Agreement shall
be given to the members of the Operations Committee in accordance with the time
frames set forth in such Annex I.
(o) The Board has adopted, effective upon the execution of
this Agreement, a resolution to amend the Bylaws of the Company to provide that
no Significant Transaction (using clauses (iii) through (x) as the definition
thereof in Section 2(a)) shall be undertaken without the specific approval of
the Board of such Significant Transaction.
(p) The Board has adopted, effective upon the execution of
this Agreement, a resolution amending the Bylaws of the Company to provide that,
prior to June 30, 1998, it will not amend or repeal any provision of the Bylaws
contemplated herein to become effective on the date of execution of this
Agreement (including the provision described in this Section 1(p)) or adopt any
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<PAGE> 7
new Bylaw of the Company which is inconsistent in any manner with any such Bylaw
provision, in each case without the affirmative vote of at least 75% of the
members of the Board.
2. COVENANTS OF THE SHAREHOLDERS' COMMITTEE.
(a) The date on which the covenants and agreements contained
in this Section 2 terminate is referred to herein as the "Standstill Termination
Date." The "Standstill Termination Date" shall be the earliest of (i) April 30,
1998, (ii) the date on which the Company or the Board breaches in any material
respect any of the representations, warranties, covenants or agreements
contained in this Agreement if the Company or the Board does not cure such
breach within three business days following notice to the Company of such
breach, or the 20th day after which any determination is made by a court of
competent jurisdiction that any material provision of this Agreement is invalid
or unenforceable and such invalidity or unenforcability is not cured by
agreement of the parties pursuant to Section 7 hereof, (iii) the date on which
the Board or management enters into substantive negotiations with respect to or
determines to approve or not to oppose a Significant Transaction (as defined
below), if all of the Committee Nominees object in writing or by vote to such
Significant Transaction, or (iv) the date of the making of any proposal by the
Board or management to adopt any antitakeover measure (including the entering
into of agreements with employees containing payments contingent upon a change
in control or the modifying of any existing agreements increasing the amount of
any payments upon a change in control) other than in response to a threat from a
person other than a member of the Shareholders' Committee, provided that (A) if
the Board or management ceases negotiations described in clause (iii) or rejects
a proposal described in clause (iv), in each case on or before the thirtieth day
after such negotiations begin or such proposal is made, the provisions of
Section 2(b) shall be immediately reinstated except to the extent that they
would otherwise have expired, and (B) prior to adopting any such antitakeover
measure, the members of the Board shall be provided with at least ten days'
notice of such proposed adoption. A "Significant Transaction" shall be any of
the following actions taken by the Board: (i) a change in any of the Bylaw
amendments provided for in this Agreement or the adoption of any Bylaws
inconsistent with such Bylaw amendments, (ii) the adoption by the Board of a
resolution recommending to the stockholders of the Company a proposed amendment
to the Charter of the Company inconsistent with this Agreement or any of the
Bylaw amendments provided for in this Agreement, (iii) the sale, lease, exchange
or other disposition of all or substantially all of the business operations or
assets of the Company in a single transaction or in a series of transactions,
(iv) the sale, lease, exchange or other disposition of (A) the Shoney's
division, the Captain D's division or any individual asset or group of related
assets of the Company in a single transaction or in a series of related
transactions involving more than $5 million (except that transactions shall not
be considered to be related solely because they are adopted by the Board as part
of a common plan), (B) assets in a single transaction or in a series of
transactions to a single purchaser involving more than $5 million or (C) any
asset or group of related assets to any current or former officer, director or
employee of the Company, any person who has an ongoing material business or
financial relationship with any such current or former officer, director or
employee of the Company, any Affiliate or Associate (each as herein defined) of
the foregoing, or any entity owned in whole or in part by any of the foregoing
(other than an entity whose securities are publicly traded and in which
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<PAGE> 8
the foregoing own less than 5% of the outstanding equity interests of such
entity), (v) the acquisition of (A) any restaurant or restaurants in a single
transaction or in a series of related transactions involving more than $5
million or (B) business operations or assets in a single transaction or in a
series of related transactions involving more than $5 million other than, in the
case of this clause (B), those acquisitions contained in the capital budget plan
of the Company previously approved by the Board, (vi) the authorization of the
dissolution of the Company or the winding up or seeking of voluntary bankruptcy
or voluntary insolvency protection, (vii) the consent by the Company to a
third-party seeking an order authorizing the involuntary dissolution or
involuntary bankruptcy of the Company, (viii) the authorization of any merger,
consolidation, reorganization or other business combination (other than any
merger in which both (A) the Company is the surviving ultimate parent entity and
(B) the holders of the voting securities of the Company prior to such
transaction continue to hold at least 85% of the equity interests and voting
power of the Company after the transaction), (ix) the declaration of any
dividend or authorization of any distribution in excess of regular and customary
dividends, or (x) the approval of any restructuring of indebtedness of the
Company or any of its subsidiaries involving amounts in excess of $25 million,
or the material modification of the terms of any indebtedness or obligation of
the Company or any of its subsidiaries for borrowed money involving amounts in
excess of $25 million.
(b) Each member of the Shareholders' Committee jointly and
severally agrees that during the period commencing on the date hereof and ending
on the Standstill Termination Date, without the prior written consent of the
Company, he or she will not, and will cause each of his or her Affiliates not
to, directly or indirectly, except as specifically provided for in Section 1 and
Section 2(c) hereof, (i) seek to control or direct the management or policies of
the Company or to obtain additional representation on the Board, (ii) solicit,
or participate in the solicitation of, any proxies, demands or consents with
respect to any securities of the Company with respect to any matter (or request
permission to do so), (iii) become a member of any "group" (as such term is
interpreted under the rules under the Securities Exchange Act of 1934, as
amended (the "Act")) with respect to any of the foregoing activities, (iv) make
any public disclosure or public announcement of any kind with respect to any of
the foregoing or take any other action which might reasonably be expected to
result in any such public disclosure or public announcement, or (v) enter into
any discussions, negotiations, arrangements or understandings with any third
party with respect to any of the foregoing.
(c) Nothing in Section 2(b) shall be deemed to limit, prevent
or preclude any communication among or between any of the members of the
Shareholders' Committee or to prevent the members of the Shareholders' Committee
from voting their voting securities of the Company as they see fit. In addition,
nothing contained in Section 2(b) shall be deemed in any way to prohibit or
limit a Committee Nominee during the term of his or her service as a director of
the Company from engaging in any lawful acts in his or her capacity as a
director of the Company or as a member of any committee of the Board; provided,
however, that such person shall use all reasonable efforts to structure his or
her communications as a director in such a manner as to avoid a requirement to
make separate public disclosure of any intention, plan or arrangement prohibited
by Section 2(b). Without limiting the generality of the foregoing, nothing
contained in Section 2(b) shall be deemed
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<PAGE> 9
to prohibit or limit a Committee Nominee during the term of his or her service
as a director of the Company from (i) voting on any matter submitted to the
Board or any Board committee, (ii) participating in deliberations or discussions
of the Board or any Board committee (including making suggestions and raising
issues to the Board or any Board committee) or with any advisors to such
Committee Nominee or to the Board or any Board committee, (iii) participating
consistent with the recommendation of the Board, directly or indirectly, in any
"solicitation" (as such term is used in the proxy rules under the Act) of
proxies or consents involving the Company relating to matters approved by the
Board or (iv) initiating or participating in discussions with franchisees,
employees, customers or other third parties for the sole purpose of gathering
information regarding the Company and its operations in furtherance of his or
her duties as a member of the Board or a committee thereof.
(d) If a Standstill Termination Date occurs on or after the
90th day prior to the scheduled date for the 1998 annual meeting of the Company
(or during the 20-day negotiating period described in clause (ii) of the
definition of "Standstill Termination Date," subject to the automatic withdrawal
of such request if the parties are able to agree upon a provision as described
therein), then not later than ten business days following receipt of notice by
the Shareholders' Committee of the occurrence of the Standstill Termination Date
(or an event described in the immediately preceding parenthetical), the
Shareholders' Committee shall have the option, upon written notice to the
Company, to require that the Company not hold the 1998 annual meeting of
Shareholders prior to the 90th day following the Standstill Termination Date
and, if necessary, the Company shall postpone the 1998 annual meeting of
Shareholders in order to satisfy such requirement.
(e) The Shareholders' Committee hereby (i) withdraws its
proposals to be considered at the Special Meeting as set forth in the
submissions dated June 16, 1997, June 23, 1997 and July 16, 1997 of the
Shareholders' Committee to the Company pursuant to the advance notice
requirements of the Bylaws of the Company (the "Proposals"), (ii) to the extent
permitted by applicable law, withdraws the demand for the Special Meeting and
(iii) waives any rights that it may have with respect to the calling and
convening of the Special Meeting at which the Proposals were to have been
considered.
3. COVENANTS OF THE PARTIES
(a) By Agreed Order entered on July 23, 1997 in Shoney's, Inc.
v. Schoenbaum, civil action no. 3-97-0686 in the United States District Court
for the Middle District of Tennessee (the "Civil Action"), the parties agreed to
dismiss their respective pleadings in the Civil Action without prejudice, and
the parties have not filed or commenced any other litigation arising out of or
related to the Proxy Contest. In further consideration of the agreements set
forth herein, except for the rights and obligations of the parties set forth in
this Agreement, each of the parties hereby releases and forever discharges each
of the other parties and their respective employees, officers, directors,
subsidiaries, affiliates, agents and representatives from any and all claims,
causes of action, suits, costs, damages, expenses, attorneys' fees, liabilities
and obligations of any kind or nature whatsoever, whether known or unknown,
fixed or contingent, joint or several, which such party may have against any of
the other parties or their respective employees, officers, directors,
subsidiaries,
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affiliates, agents and representatives arising out of or related to the Proxy
Contest, this Agreement or the negotiations relating to this Agreement,
including, but not limited to, claims raised in the Civil Action, claims related
to the parties' respective filings with the Securities and Exchange Commission,
and the parties' other oral and written statements related to the Proxy Contest.
(b) The Shareholders' Committee agrees to reasonably cooperate
with the Company, at the Company's own expense, in the Company's defense of the
Fisher litigation and any other shareholder or derivative action relating to the
Proxy Contest, this Agreement or the negotiations relating to this Agreement.
The Company agrees to reasonably cooperate with the Shareholders' Committee in
the defense by the Shareholders' Committee of any action against one or more of
the members of the Shareholders' Committee relating to the Proxy Contest, this
Agreement or the negotiations relating to this Agreement.
(c) As promptly as practicable after the date hereof, the
Company and the Shareholders' Committee agree to prepare, at the Company's own
expense, a form of court order reasonably acceptable to both parties for the
purpose of dismissing the Civil Action and agree to use all reasonable efforts
to obtain approval of the order from the United States District Court for the
Middle District of Tennessee or from such other court as shall have jurisdiction
over the matter. Notwithstanding the foregoing, nothing contained in this
Agreement shall be conditioned or contingent upon obtaining such approval from
the United States District Court for the Middle District of Tennessee or from
such other court as shall have jurisdiction over the matter.
(d) The Company hereby agrees to indemnify and hold harmless
the members of the Shareholders' Committee and their employees, subsidiaries,
affiliates, agents and representatives (the "Indemnified Parties") from and
against any and all claims, causes of action, suits, costs, damages, expenses,
attorneys' fees, liabilities and obligations of any kind or nature whatsoever,
whether known or unknown, fixed or contingent, joint or several, arising from
any claim, action, suit or proceeding arising out of or related to the proxy
materials, the Agent Designation materials and other materials and filings
related to the Proxy Contest filed by the Shareholders' Committee with the
Securities and Exchange Commission (collectively, the "Proxy Materials"), the
parties' oral and written statements related to the Proxy Contest, this
Agreement and the negotiation and execution of this Agreement; provided,
however, that the Company shall be required to indemnify and hold harmless the
Indemnified Parties with respect to the Shareholders' Committee's obligations
under Section 13(d) of the Act only with respect to (A) matters also described
in the Proxy Materials related to events after June 1, 1997 and (B) the
Shareholders' Committee's obligations and filings under the federal securities
laws relating to this Agreement or the negotiation and execution of this
Agreement.
4. NO IMPAIRMENT. Each of the parties agrees that it will not avoid or
seek to avoid the observance or performance of any of the terms hereof (whether
by alleging in any court that one or more of the provisions of this Agreement is
invalid or unenforceable, or otherwise), but will act at all times in good faith
to assist in the carrying out of all such terms, and each of the parties hereby
irrevocably waives any claim that any provision hereunder may be invalid or
unenforceable and agrees not to contend to the contrary. In addition, each of
the parties agrees that it will use all
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reasonable efforts to defend against any claim by a third party that any of the
provisions of this Agreement is invalid or unenforceable.
5. PRESS RELEASE. Upon execution of this Agreement, the Company and the
Shareholders' Committee shall issue a joint press release in the form attached
as Annex II hereto. None of the parties hereto will make any public statements
(including any statements in any filing with the SEC or any other governmental
agency), including statements to shareholders, franchisees, employees and
lenders of the Company, that are inconsistent with, or are otherwise contrary
to, the statements in the press release.
6. EXPENSES. The Company hereby agrees to pay to the members of the
Shareholders' Committee an aggregate amount equal to $2.5 million for their
expenses arising out of, relating to, or incurred in connection with, the
Shareholders' Committee's review and consideration of issues leading to the
initiation of the Proxy Contest, the Proxy Contest, the litigation relating to
the validity of the Bylaw amendments and certain other matters which was settled
by agreement on July 22, 1997, and the negotiation of this Agreement, which
amount shall be allocated by the Shareholders' Committee among its advisors as
the Shareholders' Committee deems appropriate in its sole discretion. The
Company agrees to pay such expenses by wire transfer within two business days
after the date on which the Shareholders' Committee provides the Company with
the account information needed to effect such wire transfer. The Shareholders'
Committee will provide the Company with reasonable documentation regarding such
expenses.
7. SPECIFIC PERFORMANCE. Each of the members of the Shareholders'
Committee, on the one hand, and the Company on the other, acknowledges and
agrees that irreparable injury to the other party or parties (as the case may
be) hereto would occur if any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached and
that such injury would not be compensable in money damages. It is accordingly
agreed that each party hereto (the "Moving Party") shall be entitled to specific
enforcement of, the terms hereof and injunctive or other equitable relief as a
remedy for such nonperformance or breach, and each party further waives any
requirement for the securing or posting of any bond in connection with such
remedy. The other parties hereto will not take action, directly or indirectly,
in opposition to the Moving Party seeking such relief on the grounds that any
other remedy or relief is available at law or in equity. The remedies for which
this Section provides shall not be deemed to be the exclusive remedies for
breach of this Agreement, but shall be in addition to all other remedies
available at law or equity. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction to be illegal,
invalid, void or unenforceable, the parties agree that such provision, covenant
or restriction will be enforced to the maximum extent permissible so as to
effect the intent of the parties, and the legality, validity and enforceability
of the remaining provisions of this Agreement shall not in any way be affected
or impaired thereby. The parties will negotiate in good faith to amend this
Agreement to replace the unenforceable language with enforceable language which
as closely as possible reflects such intent.
8. SHAREHOLDERS' COMMITTEE REPRESENTATIVE. In the event of the death or
incapacity of Betty J. Schoenbaum, Betty J. Schoenbaum hereby assigns all of her
rights and privileges under
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<PAGE> 12
this Agreement to Raymond D. Schoenbaum and Raymond D. Schoenbaum shall have the
power and authority to exercise all of such rights and privileges of Betty J.
Schoenbaum under this Agreement. In the event of the death or incapacity of
Raymond D. Schoenbaum, Raymond D. Schoenbaum hereby assigns all of his rights
and privileges under this Agreement to Betty J. Schoenbaum and Betty J.
Schoenbaum shall have the power and authority to exercise all of such rights and
privileges of Raymond D. Schoenbaum under this Agreement. Except to the extent
specified herein, the rights and privileges of the members of the Shareholders'
Committee are not assignable.
9. NO WAIVER. Any waiver by any party hereto of a breach of any
provision of this Agreement shall not operate as or be construed to be a waiver
of any other breach of such provision or of any breach of any other provision of
this Agreement. The failure of a party hereto to insist upon strict adherence to
any term of this Agreement on one or more occasions shall not be considered a
waiver or deprive that party of the right thereafter to insist upon strict
adherence to that term or any other term of this Agreement.
10. CERTAIN DEFINITIONS. As used in this Agreement, the terms
"Affiliates" and "Associates" shall have the respective meanings set forth in
Rule 12b-2 under the Exchange Act and shall include persons who become
Affiliates or Associates of any person subsequent to the date hereof.
11. ENTIRE AGREEMENT; AMENDMENTS. This Agreement contains the entire
understanding of the parties hereto with respect to its subject matter. There
are no restrictions, agreements, promises, representations, warranties,
covenants or undertakings other than those expressly set forth herein. This
Agreement may be amended only by a written instrument duly executed by the
parties hereto.
12. HEADINGS. The section headings contained in this Agreement are for
reference purposes only and shall not effect in any way the meaning or
interpretation of this Agreement.
13. NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given if so given) by hand delivery, cable, telecopy
(confirmed in writing) or telex, or by mail (registered or certified, postage
prepaid, return receipt requested) to the respective parties hereto as follows:
If to the Company:
Shoney's, Inc.
1727 Elm Hill Pike
Nashville, Tennessee 37210
Attention: Chief Executive Officer
Telecopy: 615/231-2531
with copies to:
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Bass, Berry & Sims
2700 First American Center
Nashville, Tennessee 37238
Attention: James Cheek, III
Telecopy: 615-742-6298
and
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attention: David A. Katz
Telecopy: 212/403-2000
If to the Shareholders' Committee:
Raymond D. Schoenbaum
1640 Powers Ferry Road
Building Two, Suite 100
Marietta, Georgia 30067-6050
Telecopy: 770/612-2459
with a copy to:
King & Spalding
191 Peachtree Street
Atlanta, Georgia 30303-1763
Attention: John D. Capers, Jr.
Telecopy: 404/572-5145
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
14. GOVERNING LAW. This Agreement shall be governed by and construed
and enforced in accordance with the laws of Tennessee, without reference to the
conflict of laws principles thereof.
15. COUNTERPARTS. This Agreement may be executed in counterparts, each
of which shall be an original, but each of which together shall constitute one
and the same Agreement.
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IN WITNESS WHEREOF, and intending to be legally bound hereby, each of
the undersigned parties has executed or caused this Agreement to be executed on
the date first above written.
SHONEY'S, INC.
By: /s/ C. Stephen Lynn
-----------------------------------------
Name: C. Stephen Lynn
-------------------------------------
Title: Chairman and Chief Executive Officer
------------------------------------
/s/ Raymond D. Schoenbaum
-------------------------------------------
Raymond D. Schoenbaum
/s/ Betty J. Schoenbaum
-------------------------------------------
Betty J. Schoenbaum
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<PAGE> 15
ANNEX I
INFORMATION TO BE PROVIDED TO MEMBERS OF THE OPERATIONS COMMITTEE
Information to be provided weekly:
1. Information regarding same store sales, broken down as follows:
a. Company-owned vs. Franchised.
b. Captain D's, Shoney's and casual dining.
c. Regional (geographic divisions).
d. Sales attributable to coupons, to the extent available.
2. Information regarding labor and food costs, broken down as follows:
a. Company-owned vs., to the extent available, Franchised.
b. Captain D's, Shoney's and casual dining.
c. Regional (geographic divisions).
Information to be provided for each four-week period:
1. Financial statements, including:
a. Balance sheet and income statement.
b. Break out of Captain D's, Shoney's and casual dining segments.
c. Comparison of actual vs. prior year vs., to the extent
available, budget.
2. Shopper reports.
