<PAGE>
DEFINITIVE PROXY STATEMENT
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 3, 1997
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF
1934
[AMENDMENT NO. ___].
Filed by the Registrant [_]
Filed by a Party other than the Registrant [X]
Check the appropriate box:
[ ]Preliminary Proxy Statement [_]Confidential, For Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X]Definitive Proxy Statement
[_]Definitive Additional Materials
[_]Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
SHONEY'S, INC.
- -------------------------------------------------------------------------------
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
RAYMOND D. SCHOENBAUM AND BETTY J. SCHOENBAUM
- -------------------------------------------------------------------------------
(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>
- -------------------------------------------------------------------------------
SOLICITATION OF AGENT DESIGNATIONS
IN CONNECTION WITH THE
CALL OF A SPECIAL MEETING OF SHAREHOLDERS
OF
SHONEY'S, INC.
----------------
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 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 and demand 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 3, 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.
- -------------------------------------------------------------------------------
<PAGE>
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? our disappointment with
the Company's performance
A: Raymond D. and stock price in re-
Schoenbaum and Betty J. cent years and our con-
Schoenbaum (the sideration of alterna-
Shoney's Shareholders' tives with respect to
Committee) own together our investment in
approximately 8.0% of Shoney's. In compari-
Shoney's common stock. son, over the same pe-
Alex Schoenbaum, the riod, the Standard &
father of Raymond D. Poor's 500 Index in-
Schoenbaum and husband creased approximately
of Betty J. Schoenbaum, 63.6% and Standard &
founded Shoney's in Poor's Restaurants In-
1947 and served as its dex increased approxi-
first Chairman of the mately 66.8%. As one of
Board. Following Alex the largest sharehold-
Schoenbaum's death late ers of Shoney's, we are
last year, the Shoney's obviously concerned
Shareholders' Committee about the significant
became one of the two loss in market value
largest shareholders of that has been suffered
Shoney's. by all of Shoney's
shareholders. Given our
Raymond D. Schoenbaum family's history with
has extensive experi- Shoney's, it also has
ence in the family and been personally very
casual restaurant busi- distressing to us to
ness. He has been ac- watch Shoney's lose its
tively involved in the focus on the basics of
restaurant industry the business which has
since 1974, and between caused it to struggle
1985 and 1995 he devel- in recent years.
oped and operated Ray's
on the River and Rio We believe that, under
Bravo, a successful the direction of the
chain of casual restau- current Board and man-
rants. In 1995, he sold agement of Shoney's,
his restaurant business there has been a dete-
to Applebee's Interna- rioration in the qual-
tional Inc. and became ity of many of Shoney's
a director of restaurants and the
Applebee's following business and reputation
the sale. of Shoney's. Over the
last several years, it
Q: WHAT ARE WE ASKING has been our experience
YOU TO DO? that the restaurant in-
dustry has become more
A: We are asking you to competitive, and cus-
help us in calling a tomers now have many
special meeting of the more choices. As a re-
shareholders of sult, customers are
Shoney's at which the more interested in bet-
shareholders will vote ter price/value than in
on our proposals to the past. In our view,
remove the current the Shoney's Board and
members of the Board of management have failed
Shoney's and replace to respond to these
them with our nominees. changing customer pref-
By helping us to call erences and, instead of
the special meeting you evolving to meet the
are not voting for our preferences of today's
proposals to remove the customers, Shoney's has
directors or replace taken an approach that
them with our nominees; is outdated and is no
you are simply voting longer in touch with
to allow the the customers. Indeed,
shareholders of we believe that the
Shoney's to have the quality of the food and
opportunity to decide service provided by
to support our Shoney's has been re-
proposals. If a special duced, rather than en-
meeting is called, we hanced, in recent
will send you years. After two years
additional materials under the current man-
soliciting proxies, agement, it is our view
including separate that Shoney's condition
proxy cards, to vote on has not only failed to
the proposals at the improve, but, in fact,
special meeting. has deteriorated. In
the second quarter of
Q: WHY ARE WE ASKING 1997, during what the
YOU TO HELP US IN CALL- current Board and man-
ING A SPECIAL MEETING? agement consider to be
a turnaround, same
A: We have been disap- store sales for all
pointed with Shoney's company-owned restau-
performance and the rants declined 4.3%,
performance of Shoney's after closing 57 under-
stock price in recent performing restaurants
years. Shoney's stock during the first two
price declined nearly quarters. Accordingly,
80% between October 29, we believe that compet-
1993 and April 25, itors are outperforming
1997, the day on which Shoney's, while
we filed a Schedule 13D Shoney's customer base
with the Securities and and profits have con-
Exchange Commission in- tinued to decline. For
dicating example, between 1990
and 1996, excluding ex-
traordinary items and
special charges,
Shoney's earnings per
share declined 11.0%
while, as examples, the
earnings per share of
2
<PAGE>
Cracker Barrel, Applebee's and Special Meeting must be executed by
IHOP, three of Shoney's competi- the holder or holders of not less
tors, increased 271.9%, 838.5% and than one tenth (1/10) of all the
267.9%, respectively. shares entitled to vote at the
meeting. Assuming Agent
Q: WHY SHOULD YOU HELP US IN CALL- Designations are executed with
ING A SPECIAL MEETING? respect to all shares of Common
Stock owned by the Shoney's
A: On June 5, 1997, we requested to Shareholders' Committee, Agent
meet with the Board at its two-day Designations representing
retreat in mid-June to discuss our approximately 990,020 additional
concerns about Shoney's continued shares of Common Stock are needed
poor performance. We had hoped to to require Shoney's to hold the
share with the Board at such meet- Special Meeting.
ing our concerns about Shoney's
performance and the need for a sig- We have mailed this Solicitation
nificant change in the direction of Statement to shareholders of record
Shoney's. Unfortunately, the Board on June 16, 1997, the date we have
responded in a manner which we be- set as the record date for
lieve demonstrates a lack of under- shareholders entitled to execute
standing of the urgency of Shoney's Agent Designations. As we describe
situation and the lack of leader- below, Shoney's has set an
ship under current management. alternate record date of July 14,
Rather than providing Raymond D. 1997, and is disputing the validity
Schoenbaum, as a representative of of our June 16, 1997 record date.
an 8% shareholder, with the oppor- Only Agent Designations executed by
tunity to meet with the Board for a persons who are shareholders on the
short time at some point during the record date, whether the record
Board's two-day retreat, the Board date is determined to be June 16,
suggested that we submit our sug- 1997, as we believe, or July 14,
gestions in writing, after which 1997, as asserted by Shoney's,
the Board would "consider a time in shall be counted in determining
the future" for us to meet with the whether a Special Meeting must be
Board or "a committee of the called. Although we believe our
Board." We did not submit our sug- June 16, 1997 record date to be
gestions in writing to the Board valid, if the record date set by
because, as stated above, we do not Shoney's of July 14, 1997 is
believe the Board understands the determined to be valid, we intend
urgency of Shoney's situation and to use the Agent Designations of
we believe the request for a sub- the shareholders who continue to be
mission of our suggestions was an shareholders on July 14, 1997 to
attempt at delay. Because of demand the Special Meeting.
Shoney's continued poor performance
and the Board's refusal to meet Q: WHAT IS AN AGENT DESIGNATION?
with Raymond D. Schoenbaum at the
June Board meeting despite the ur- A: An Agent Designation is your
gency of the situation, we have appointment of Raymond D.
concluded that the Board does not Schoenbaum, Betty J. Schoenbaum,
appreciate the need for a signifi- Daniel H. Burch, Stanley J. Kay,
cant change in the direction of Jr. and Mark H. Harnett to take the
Shoney's and we believe that we are following actions on your behalf:
left with no alternative but to (i) to call and demand the Special
present our case directly to you, Meeting; (ii) to set the place,
the shareholders and owners of date and time of the Special
Shoney's. Meeting, if held to be permissible;
and (iii) to exercise any other
Since we are significant sharehold- rights you may have as a
ers of Shoney's, our interests as shareholder of the Company
shareholders are aligned with yours incidental to the calling and
and we have every incentive to in- convening the Special Meeting.
crease shareholder value. We be- Agent Designations will not give
lieve that calling a special meet- Raymond D. Schoenbaum, Betty J.
ing at which the shareholders can Schoenbaum, Daniel H. Burch,
vote to remove the cur- rent direc- Stanley J. Kay, Jr. or Mark H.
tors and replace them with our nom- Harnett the right to vote any of
inees will give the shareholders an your shares of Common Stock of the
opportunity to express their dis- Company at the Special Meeting.
satisfaction with Shoney's contin-
ued poor performance and enable Q: WHEN ARE WE ASKING YOU TO SUBMIT
them to replace the directors with YOUR AGENT DESIGNATION?
candidates who will take steps to
make a significant change in the A: As soon as possible, and in any
direction of Shoney's and who will event, no later than July 14, 1997.
be more in touch with shareholders'
concerns. Q: WHOM SHOULD YOU CALL IF YOU HAVE
QUESTIONS ABOUT GIVING YOUR AGENT
Q: WHAT DOES IT TAKE TO CALL A DESIGNATION OR NEED ASSISTANCE?
SPECIAL MEETING?
A: Call MacKenzie Partners, Inc. at
A: For a Special Meeting to be (212) 929-5500 (collect) or Toll
held, Agent Designations in favor Free (800) 322-2885.
of the call and demand of the
3
<PAGE>
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, instead of evolving to
meet the preferences of today's customers, Shoney's has taken an approach that
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 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 57 under-
performing restaurants were closed 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, supplemented 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.
4
<PAGE>
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 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 largest
shareholder.
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. While we believe that in order for us to revitalize Shoney's some
members of the current management of the Company will be replaced, we do not
have any current plans to remove any specific members of management other than
C. Stephen Lynn (the current Chairman of the Board, President and Chief
Executive Officer) and W. Craig Barber (the current Chief Administrative
Officer, Chief Financial Officer and Senior Executive Vice President).
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. Our plans to
revitalize the Company focus on operating, marketing and financial solutions.
The elements of the operating strategy include: (i) focusing the corporate
culture back on the customer, (ii) reducing management turnover, (iii)
enhancing food quality and reducing menu items, (iv) repositioning Shoney's
concept so it is more contemporary, (v) enhancing information technology
systems and (vi) rationalizing the use and economics of the food bar. The
elements of the marketing strategy include: (i) making changes based on a
thorough understanding of customer preferences, (ii) using brand names to
enhance image and expand customer base, (iii) making all aspects of Shoney's
concept internally consistent with enhanced positioning and (iv) making
franchisees partners in the marketing effort. The elements of the financial
strategy include: (i) renewing the focus on improving same store sales
volumes, (ii) improving
5
<PAGE>
operating margins, (iii) addressing the current debt structure, (iv)
strengthening the financial controls and (v) using a refranchising strategy to
strengthen the entire system.
We filed a more detailed version of our action plan with the SEC on June 25,
1997, as amended on June 26, 1997. Copies of the action plan can be obtained
from the Public Reference Section of the SEC, 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. The action plan may also be
obtained through the SEC's Internet address at "http://www.sec.gov."
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 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
6
<PAGE>
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 Bylaw 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 Bylaw Amendments
purport to eliminate the right of the 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 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 the
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 SOLICITATION STATEMENT. WE WILL SEND
SHAREHOLDERS ADDITIONAL MATERIALS SOLICITING PROXIES, INCLUDING SEPARATE PROXY
CARDS, TO VOTE AT THE SPECIAL MEETING.
If you have any questions about the Agent Designations or need assistance in
completing the Agent Designation Cards, please call:
LOGO
[OF MACKENZIE PARTNERS APPEARS HERE]
156 Fifth Avenue
New York, New York 10010
(212) 929-5500 (collect)
or call Toll Free
(800) 322-2885
7
<PAGE>
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.
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.
8
<PAGE>
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
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
their replacement 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:
9
<PAGE>
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, 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
10
<PAGE>
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 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 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
11
<PAGE>
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 actions 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
proposed.
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,
1997.
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 the 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 meting. The request will be acted on
promptly.
12
<PAGE>
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 16 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.
Yours 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 the
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 ( 1/10) of all the shares entitled to vote (the
"Requisite Holders"). We have mailed this Solicitation Statement to
Shareholders of record on June 16, 1997, the date we have set as the record
date for Shareholders entitled to execute Agent Designations. As we describe
below, the Company has set an alternate record date of July 14, 1997, and is
disputing the validity of our June 16, 1997 record date. Only Agent
Designations executed by persons who are Shareholders on the record date,
whether the record date is determined to be June 16, 1997, as we believe, or
July 14, 1997, as asserted by the Company, shall be counted in determining
whether a Special Meeting must be called. Although we believe our June 16,
1997 record date to be valid, if the record date set by the Company of July
14, 1997 is determined to be valid, we intend to use the Agent Designations of
the Shareholders who continue to be Shareholders on July 14, 1997 to demand
the Special Meeting in accordance with the Restated Bylaws. According to the
May 1997 10-Q, as of June 20, 1997 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 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
13
<PAGE>
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 record date for Shareholders entitled to vote on the Special Meeting
Proposals at the Special Meeting will be set in the future.
The Company filed a complaint on June 26, 1997 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 already
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 for the
Special Meeting, 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.
14
<PAGE>
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
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 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 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. While we believe that in order for us to revitalize Shoney's some
members of the current management of the Company will be replaced, we do not
have any current plans to remove any specific members of management other than
C. Stephen Lynn (the current Chairman of the Board, President and Chief
Executive Officer) and W. Craig Barber (the current Chief Administrative
Officer, Chief Financial Officer and Senior Executive Vice President).
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.
15
<PAGE>
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 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
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION AND BUSINESS
EXPERIENCE
NAME, AGE AND DURING LAST FIVE YEARS; CURRENT
PRINCIPAL BUSINESS ADDRESS DIRECTORSHIPS
----------------------------------- -----------------------------------------
<C> <S>
J. Michael Bodnar (52)............. President (January 1984-present) of
Bodnar Investment Group, Inc. Bodnar Investment Group, Inc.
101 Fox Hall Road (a real estate investment company);
Birmingham, Alabama 35213 President (January 1986-May 1996) of
Triangle Management Group, Inc. (a
restaurant management company).
Lawrence A. Cunningham (34)........ Professor of Law (May 1997-present) of
Benjamin N. Cardozo School of Law, the Benjamin N. Cardozo
Yeshiva University School of Law; Visiting Associate
55 Fifth Avenue Professor of Law (August 1996-May 1997)
New York, New York 10003 of the George Washington University
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-
1100 Spring Street, N.E. present) of The Gourmet Co. (a food
Atlanta, Georgia 30309 service management company).
Michael A. Leven (59).............. President and Chief Executive Officer
U.S. Franchise Systems (October 1995-present)
13 Corporate Square of U.S. Franchise Systems (a hotel
Atlanta, Georgia 30329 franchising company); 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
Building Two, Suite 100 International, Inc.; Consultant (March
Marietta, Georgia 30067 1995-March 1996) of 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
400 Perimeter Center Terrace Television, L.P. (an operator of
Suite 650 television stations); Chief Executive
Atlanta, Georgia 30346 Officer (February 1990-present) of
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.
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION AND BUSINESS
EXPERIENCE
NAME, AGE AND DURING LAST FIVE YEARS; CURRENT
PRINCIPAL BUSINESS ADDRESS DIRECTORSHIPS
---------------------------------- -----------------------------------------
<C> <S>
Richard F. Sherman (53)........... Private investor and Consultant (January
11492 Bluegrass Parkway 1991-present); Director
Suite 175 (June 1993-present) of Papa John's
Louisville, Kentucky 40299 International, Inc.; Director (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.
</TABLE>
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
17
<PAGE>
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 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
18
<PAGE>
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 the June 22 Bylaw Amendments, which would be rendered
ineffective by the adoption of the Bylaws Repeal Resolution. 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.
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.
19
<PAGE>
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 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.
20
<PAGE>
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 3, 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 this solicitation and 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 $350,000 in connection with this solicitation and
our solicitation of proxies for the Special Meeting. We have agreed to pay
additional retainer fees to Montgomery Securities up to $150,000 in connection
with this solicitation and our solicitation of proxies for the Special
Meeting. 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.
The total costs of this solicitation, which include expenditures for
printing, postage, legal and related expenses, fees paid to MacKenzie
Partners, Inc., and the fees to be paid to Montgomery Securities allocable to
this solicitation are expected to be approximately $500,000. The total costs
incurred 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 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.
21
<PAGE>
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.
22
<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 this 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 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 this 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. Schoenbaum April 4, 1997 60,000* $4.75
purchased
Raymond D. Schoenbaum November 22, 1996 25,000 $7.75
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.
<PAGE>
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 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 this 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 this
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 this
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 this 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' Committee as a 3,866,791 7.96%(3)
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 this 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 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
<PAGE>
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>
NUMBER OF PERCENTAGE
NAME AND ADDRESS OF BENEFICIAL OWNER SHARES(1) 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 executive officers as a group(11
persons)................................................. 1,110,065 2.27%
</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
BLUE 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 AND DEMAND 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, $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 later 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.
Please sign and date on the reverse side.
<PAGE>
PLEASE PROMPTLY SIGN, DATE AND MAIL IN THE ENCLOSED ENVELOPE.
Date _______________________, 1997
----------------------------------
Signature
----------------------------------
Signature, if held jointly
----------------------------------
Title
Please sign exactly as name ap-
pears hereon. When shares are
held by joint tenants, both
should sign. When signing as an
attorney, executor, administra-
tor, trustee or guardian, give
full title as such. If a corpora-
tion, sign in full corporate name
by President or other authorized
officer. If a partnership, sign
in partnership name by any part-
ners.
PLEASE SIGN, DATE AND MAIL
PROMPTLY IN THE POSTAGE-PAID EN-
CLOSED ENVELOPE.
