<PAGE>
PRELIMINARY SOLICITATION STATEMENT
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 16, 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:
[x] Preliminary Proxy Statement [_] Confidential, For Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
SHONEY'S, INC.
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(Name of Registrant as Specified in Its Charter)
RAYMOND D. SCHOENBAUM and BETTY J. SCHOENBAUM
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(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
5) Total fee paid:
------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials:
------------------------------------------------------------------------
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
1) Amount previously paid:____________________________________________________
2) Form, Schedule or Registration Statement no.:______________________________
3) Filing Party:______________________________________________________________
4) Date Filed:________________________________________________________________
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PRELIMINARY SOLICITATION MATERIALS DATED JUNE 16, 1997
SUBJECT TO COMPLETION
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The information included herein is as it is expected to be when the Definitive
Solicitation Statement is mailed to shareholders of Shoney's, Inc. This
solicitation statement will be revised to reflect actual facts at the time of
the filing of the Definitive Solicitation Statement.
No BLUE Agent Designation Card is included with these materials.
___________
SOLICITATION OF AGENT DESIGNATIONS
IN CONNECTION WITH THE
CALL OF A SPECIAL MEETING OF SHAREHOLDERS
OF
SHONEY'S, INC.
___________
PRELIMINARY SOLICITATION STATEMENT
OF
THE SHONEY'S SHAREHOLDERS' COMMITTEE
1640 Powers Ferry Road
Building Two, Suite 100
Marietta, Georgia
30067-6050
___________
We are asking you to help us call a special meeting of the shareholders of
Shoney's, Inc., a Tennessee corporation ("Shoney's" or the "Company"), for the
purpose of considering proposals to remove the current members of the Board of
Directors of the Company and to replace them with our nominees. We are providing
this Preliminary Solicitation Statement to holders (the "Shareholders") of the
common stock, $1.00 par value per share (the "Common Stock"), of the Company in
connection with the solicitation of appointments ("Agent Designations") of
Designated Agents (as defined below) from holders of the Common Stock. The Agent
Designations are being solicited by Raymond D. Schoenbaum and Betty J.
Schoenbaum (collectively, the "Shoney's Shareholders' Committee" or "we") to
provide for the call of a special meeting of the Shareholders (the "Special
Meeting") for the purpose of considering and voting upon certain proposals,
including proposals targeted at replacing the Company's current Board of
Directors. Under the Company's Bylaws, a special meeting of Shareholders may be
called "at any time 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 ______, 1997.]
THE FAILURE TO EXECUTE AND RETURN THE BLUE AGENT DESIGNATION CARD WILL HAVE THE
SAME EFFECT AS OPPOSING THE CALL OF THE SPECIAL MEETING.
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SUMMARY
This summary highlights selected information from this document, and may
not contain all of the information that is important to you. To understand
better why we are asking for your support in calling a Special Meeting, you
should read this entire document carefully.
Q: WHO ARE WE?
A: Raymond D. Schoenbaum and Betty J. Schoenbaum (the Shoney's Shareholders'
Committee) own together approximately 8.0% of Shoney's common stock. Alex
Schoenbaum, the father of Raymond D. Schoenbaum and husband of Betty J.
Schoenbaum, founded Shoney's in 1947 and served as its first Chairman of the
Board. Following Alex Schoenbaum's death late last year, the Shoney's
Shareholders' Committee became one of the two largest shareholders of Shoney's.
Raymond D. Schoenbaum has extensive experience in the family and casual
restaurant business. He has been actively involved in the restaurant industry
since 1974, and between 1985 and 1995 he developed and operated Ray's on the
River and Rio Bravo, a successful chain of casual restaurants. In 1995, he sold
his restaurant business to Applebee's International Inc. and became a director
of Applebee's following the sale.
Q: WHAT ARE WE ASKING YOU TO DO?
A: We are asking you to help us in calling a special meeting of the
shareholders of Shoney's at which the shareholders will vote on our proposals to
remove the current members of the Board of Shoney's and replace them with our
nominees. By helping us to call the special meeting you are not voting for our
proposals to remove the directors or replace them with our nominees; you are
simply voting to allow the shareholders of Shoney's to have the opportunity to
decide to support our proposals.
Q: WHY ARE WE ASKING YOU TO HELP US IN CALLING A SPECIAL MEETING?
We have been disappointed with Shoney's performance and the performance of
Shoney's stock price in recent years. Shoney's stock price declined nearly 80%
between October 29, 1993 and April 25, 1997, the day on which we filed a
Schedule 13D with the Securities and Exchange Commission indicating our
disappointment with the Company's performance and stock price in recent years
and our consideration of alternatives with respect to our investment in
Shoney's. In comparison, over the same period, the Standard & Poor's 500 Index
increased approximately 63.6% and Standard & Poor's Restaurants Index increased
approximately 66.8%. As one of the largest shareholders of Shoney's, we are
obviously concerned about the significant loss in market value that has been
suffered by all of Shoney's shareholders. Given our family's history with
Shoney's, it also has been personally very distressing to us to watch Shoney's
lose its focus on the basics of the business which has caused it to struggle in
recent years.
We believe that, under the direction of the current Board and management of
Shoney's, there has been a deterioration in the quality of many of Shoney's
restaurants and the business and reputation of Shoney's. Over the last several
years, the restaurant industry has become more competitive, and customers now
have many more choices. As a result, customers are more interested in better
price/value than in the past. In our view, the Shoney's Board and management
have failed to respond to these changing customer preferences and that, instead
of evolving to meet the preferences of today's customers, Shoney's approach is
outdated and is no longer in touch with the customers. Indeed, we believe that
the quality of the food and service provided by Shoney's has been reduced,
rather than enhanced, in recent years. After two years under the current
management, Shoney's condition has not only failed to improve, but, in fact, has
deteriorated. Accordingly, competitors are outperforming Shoney's, while
Shoney's customer base and profits have continued to decline.
Q: WHY SHOULD YOU HELP US IN CALLING A SPECIAL MEETING?
On June 5, 1997, we requested to meet with the Board at its two-day retreat in
mid-June to discuss our concerns about Shoney's continued poor performance. We
had hoped to share with the Board at such meeting our concerns about Shoney's
performance and the need for a significant change in the direction of Shoney's.
Unfortunately, the Board responded in a manner which we believe demonstrates a
lack of understanding of the urgency of Shoney's situation and the lack of
leadership under current management. Rather than providing Raymond D.
Schoenbaum, as a representative of an 8% shareholder, with the opportunity to
meet with the Board for a short time at some point during the Board's two-day
retreat, the Board suggested that we submit our suggestions in writing, after
which the Board would "consider a time in the future" for us to meet with the
Board or "a committee of the Board." Because of Shoney's continued poor
performance and the Board's refusal to meet with Raymond D. Schoenbaum at the
June Board meeting despite the urgency of the situation, we have concluded that
the Board does not appreciate the need for a significant change in the direction
of Shoney's and we believe that we are left with no alternative but to present
our case directly to you, the shareholders and owners of Shoney's.
Since we are significant shareholders of Shoney's, our interests as shareholders
are aligned with yours and we have every incentive to increase shareholder
value. We believe that calling a special meeting at which the shareholders can
vote to remove the current directors and replace them with our nominees will
give the shareholders an opportunity to express their dissatisfaction with
Shoney's continued poor performance and enable them to replace the directors
with candidates who will take steps to make significant change in the direction
of Shoney's and who will be more in touch with shareholders' concerns.
Q: WHAT DOES IT TAKE TO CALL A SPECIAL MEETING?
A: Under Shoney's Bylaws and Tennessee law, a special meeting of the
shareholders may be called at any time by the holder or holders of not less than
one tenth (1/10) of all the shares entitled to vote at the meeting.
Q: WHAT IS AN AGENT DESIGNATION?
A: An Agent Designation is your appointment of Raymond D. Schoenbaum, Betty J.
Schoenbaum and ___ to take the following actions on your behalf: (i) to call the
Special Meeting; (ii) to set the place, date and time of the Special Meeting;
and to (iii) exercise any other rights you may have as a shareholder of the
Company incidental to calling and convening the Special Meeting. Agent
Designations will not give Raymond D. Schoenbaum, Betty J. Schoenbaum or ___ the
right to vote any of your shares of Common Stock in the Company at the Special
Meeting.
Q: WHEN ARE WE ASKING YOU TO SUBMIT YOUR AGENT DESIGNATION?
A: As soon as possible, and in any event, no later than July __, 1997.
Q: WHOM SHOULD YOU CALL IF YOU HAVE QUESTIONS ABOUT GIVING YOUR AGENT
DESIGNATION OR NEED ASSISTANCE?
A: Call MacKenzie Partners, Inc. at (212) 929-5500 (collect) or Toll Free
(800) 322-2885.
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REASONS FOR THE SOLICITATION
The Shoney's Shareholders' Committee beneficially owns approximately 8.0% of the
Common Stock of Shoney's. Alex Schoenbaum, the father of Raymond D. Schoenbaum
and husband of Betty J. Schoenbaum, founded Shoney's in 1947 and served as its
first Chairman of the Board. Following Alex Schoenbaum's death late last year,
the Shoney's Shareholders' Committee became one of the two largest shareholders
of Shoney's.
We have been disappointed with Shoney's performance and the performance of
Shoney's stock price in recent years. Shoney's stock price declined nearly 80%
between October 29, 1993 and April 25, 1997, the day on which we filed a
Schedule 13D with the Securities and Exchange Commission (the "SEC") indicating
our disappointment with the Company's performance and stock price in recent
years and our consideration of alternatives with respect to our
investment in Shoney's. In comparison, over the same period, the Standard &
Poor's 500 Index increased approximately 63.6% and Standard & Poor's Restaurants
Index increased approximately 66.8%. As one of the largest shareholders of
Shoney's, we are obviously concerned about the significant loss in market value
that has been suffered by all of Shoney's shareholders. Given our family's
history with Shoney's, it also has been personally very distressing to us to
watch Shoney's lose its focus on the basics of its business which has caused it
to struggle in recent years.
Alex Schoenbaum founded Shoney's 50 years ago to be a quality provider of family
dining. Shoney's has been an innovator in the restaurant industry, and its
stores historically have offered quality dining at a good price/value to the
customers. Because of the perception by customers of Shoney's good price/value,
Shoney's experienced consistent growth from its beginning until the late 1980s.
We believe that, under the direction of the current Board of Directors (the
"Board") and management of Shoney's, there has been a deterioration in the
quality of many of Shoney's restaurants and the business and reputation of
Shoney's. Over the last several years, the restaurant industry has become more
competitive, and customers now have many more choices. As a result, customers
are more interested in better price/value than in the past. In our view, the
Shoney's Board and management have failed to respond to these changing customer
preferences and that, instead of evolving to meet the preferences of today's
customers, Shoney's approach has become outdated and is no longer in touch with
the customers. Indeed, we believe that the quality of the food and service
provided by Shoney's has been reduced, rather than enhanced, in recent years.
After two years under the current management, Shoney's condition has not only
failed to improve, but, in fact, has deteriorated. Accordingly, competitors are
outperforming Shoney's, while Shoney's customer base and profits have continued
to decline.
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." Because of Shoney's continued poor
performance and the Board's refusal to meet with
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Raymond D. Schoenbaum at the June Board meeting despite the urgency of the
situation, we have concluded that the Board does not appreciate the need for a
significant change in the direction of Shoney's and we believe that we are left
with no alternative but to present our case directly to you, the shareholders
and owners of Shoney's.
Since we are significant shareholders of Shoney's, our interests as shareholders
are aligned with yours and we have every incentive to increase shareholder
value. Raymond D. Schoenbaum has been actively involved in the restaurant
industry since 1974, and he has extensive experience in the business, including
substantial experience in the full service dining industry and in the quality
fast food market. From 1974 to 1985, Raymond D. Schoenbaum successfully grew a
Wendy's franchisee (Restaurants Systems, Inc.) to in excess of 30 stores, which
he sold to Wendy's in 1985 for approximately $40 million. Between 1985 and 1995
he developed and operated Ray's on the River and Rio Bravo, a successful chain
of casual restaurants. In 1995, Raymond D. Schoenbaum sold Ray's on the River
and Rio Bravo to Applebee's International Inc. ("Applebee's") for approximately
$70 million, and became a director of Applebee's following the sale. In
addition, Raymond D. Schoenbaum has been involved with the turn-around of
companies in the restaurant and restaurant services industries, including
Squirrel Companies, Inc., a manufacturer of restaurant point-of-source computer
equipment, as the former chairman of the board, and Max & Erma's Restaurants,
Inc., as a former member of the board and the largest shareholder.
In order to change the direction of Shoney's in a positive manner, we now
solicit your Agent Designations to call a special meeting (the "Special
Meeting") of the shareholders of the Company (the "Shareholders") to adopt
resolutions for the purpose of removing the current Board members and replacing
them with our nominees. In addition, at the Special Meeting, the Shareholders
also would be asked to consider certain resolutions amending the Bylaws of the
Company in a manner designed to facilitate the replacement of the current Board
members. Once elected, our nominees to the Board intend to replace certain
members of the management of the Company and to appoint Raymond D. Schoenbaum as
the Chairman and Chief Executive Officer of the Company.
The proposals that would be considered at the Special Meeting (the "Special
Meeting Proposals") would include the following, in addition to other proposals
to take actions incidental to the removal and replacement of current Board
members:
1. To repeal any and all amendments made by the Board to the Bylaws of the
Company, as filed with the SEC as Exhibits 3(ii) and 4.2 to the
Company's Quarterly Report on Form 10-Q for the quarter ended February
18, 1996, other than those provisions which were duly approved by the
Shareholders and those provisions which under Tennessee law cannot be
repealed by the Shareholders, and to provide that, without the approval
of the Shareholders, the Board may not thereafter amend any section of
the Bylaws affected by such repeal or adopt any new Bylaw provision in
a manner which serves to reinstate any repealed provision or any
similar provision (the "Bylaws Repeal Resolution");
2. To amend Article III, Section 1 of the Bylaws of the Company to fix the
number of directors at seven, and provide that, without the approval of
the Shareholders, the Board may not thereafter amend or repeal such
Section or adopt any new Bylaw provision which is inconsistent in any
manner with such Section (the "Size of Board Resolution");
3. To amend Article III, Section 3 of the Bylaws of the Company to provide
that the directors may be elected by the Shareholders at annual
meetings and special meetings of
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the Shareholders of the Company, and provide that, without the approval
of the Shareholders, the Board may not thereafter amend or repeal such
Section or adopt any new Bylaw provision which is inconsistent in any
manner with such Section (the "Election Procedure Resolution");
4. To remove all of the members of the Board of Directors, including
without limitation, any of the following who are members of the Board
as of the Special Meeting: Dennis C. Bottorff, Carole F. Hoover,
Victoria B. Jackson, C. Stephen Lynn, Jeffry F. Schoenbaum, B. Franklin
Skinner and Cal Turner, Jr.; provided, however, that if,
notwithstanding the Omnibus Resolution (as defined below), any nominees
of the Shoney's Shareholders' Committee have been elected to the Board
prior to the time this Resolution is adopted, such nominees of the
Shoney's Shareholder's Committee shall not be removed from the Board
(the "Director Removal Resolution"); and
5. To elect the seven nominees of the Shoney's Shareholders' Committee,
and all other persons nominated by us (the "Nominees"), to fill all
vacancies on the Board for the balance of the terms of the present
directors and until their successors are elected and qualified (the
"Election of Directors Resolution"). The Nominees are ___________,
___________, ____________, ___________, ___________, ___________, and
_____________. 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.
EXECUTING A BLUE AGENT DESIGNATION CARD WILL ENABLE YOU -- AS AN OWNER OF THE
COMPANY -- TO SEND A CLEAR MESSAGE TO THE SHONEY'S BOARD THAT YOU ARE
DISSATISFIED WITH SHONEY'S PERFORMANCE AND WANT THE OPPORTUNITY TO ELECT THE
BOARD OF DIRECTORS THAT WILL GUIDE YOUR COMPANY IN THE FUTURE.
The Agent Designations will not give the Designated Agents the right to vote any
shares of Common Stock at the Special Meeting and no proxies for such votes are
being solicited with this Preliminary Solicitation Statement. We will send
Shareholders additional materials soliciting proxies to vote at the Special
Meeting.
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If you have any questions about the Agent Designations or need assistance in
completing the Agent Designation Cards, please call:
MACKENZIE PARTNERS
156 Fifth Avenue
New York, New York 10010
(212) 929-5500 (collect)
or call Toll Free
(800) 322-2885
BACKGROUND AND RECENT EVENTS
On April 25, 1997, we filed a Schedule 13D with the SEC indicating that we have
been disappointed with the Company's performance and the Company's stock price
in recent years. At that time we stated that we were reviewing various
alternatives with respect to our investment in the Company. These alternatives
included (i) holding discussions with third parties or with members of the
management or the Board in which we would suggest or take a position with
respect to potential changes in the operations, management or business of the
Company as a means of enhancing shareholder value, (ii) seeking the removal of
certain or all of the members of the Board, (iii) nominating our own candidates
to be elected to the Board, (iv) proposing changes in the management of the
Company and (v) acquiring additional shares in the Company. After filing the
Schedule 13D on April 25, 1997, we continued to review these alternatives. We
also met with certain members of the management of the Company and certain
members of the Board to discuss the Company's financial condition and
performance. On June 2, 1997, we amended our Schedule 13D to reflect that we
sent a letter to the Board requesting that Raymond D. Schoenbaum be permitted to
address the Board at their two-day retreat in mid-June. The letter stated in
full as follows:
June 2, 1997
Board of Directors of Shoney's, Inc.
1727 Elm Hill Pike
Nashville, Tennessee 37210
Re: Meeting of the Shoney's, Inc. Board of Directors
------------------------------------------------
Ladies and Gentlemen:
As you know from our SEC filing last month, my mother and I are
disappointed with Shoney's performance and the performance of Shoney's stock
price in recent years. As one of the largest shareholders of Shoney's, we are
obviously concerned about the significant loss in market value that has been
suffered by all of Shoney's shareholders in recent years. Moreover, we regard
Shoney's as a legacy created by my father Alex, who founded the company in 1947,
and, on a personal note, it has been very distressing to us to watch Shoney's
struggle in recent years.
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As we indicated in our SEC filing, we are in the process of evaluating
various possible alternatives with respect to our investment in Shoney's.
During this process, we have been reviewing in detail the publicly available
data regarding the business, financial condition and operating results of
Shoney's, and we have had the opportunity to discuss this publicly available
data with certain members of Shoney's management. This process is ongoing, and,
while at this time we have not decided on a course of action, we expect to make
further progress during the next two weeks.
Based on our review thus far, we believe that Shoney's is at a critical
juncture and that the actions to be taken by Shoney's Board to address the
current situation will play a crucial role in determining Shoney's future. For
this reason, I would like to meet with the Board at its meeting on June 17, 1997
to discuss Shoney's current situation and our concerns regarding the company's
future. By that time, we expect to be far enough along in our evaluation process
to present to you some concrete alternatives for addressing Shoney's current
problems.
We believe that this exchange of information and ideas will be very useful
to the Board as it gathers information and formulates a plan to address Shoney's
situation in a manner which is beneficial to all of Shoney's shareholders. In
light of the company's recent performance, the Board will be faced with some
difficult decisions in the time ahead. My successful experiences in the family
and casual restaurant industry, including most recently my founding and
development of Ray's on the River and the Rio Bravo restaurant chain which I
sold to AppleSouth, Inc.in 1995, have provided me with valuable skills which I
believe I can use to assist you as you deal with Shoney's current situation.
Please let us know as soon as possible whether you will honor our request
to meet with you at the Board's meeting. We look forward to your response.
Sincerely,
Raymond D. Schoenbaum
Although acknowledging shared concerns regarding the loss of Shoney's market
value, the Board refused Raymond D. Schoenbaum's offer to address it at its
June meeting. The Board's refusal to meet with Raymond D. Schoenbaum was
communicated by means of a letter dated June 5, 1997, which was received by
Raymond D. Schoenbaum on June 9, 1997, the text of which is set forth in full
below:
June 5, 1997
Mr. Raymond D. Schoenbaum
1640 Powers Ferry Road
Building Two, Suite 100
Marietta, Georgia 30067-6050
Dear Raymond:
On behalf of the Board of Directors, I acknowledge receipt of your letter dated
June 2, 1997. We share your concerns regarding the loss of market value that
all of us as Shoney's shareholders have
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experienced. We believe that we have the proper business strategy and
management team in place to improve the performance of the Company. As with all
business turnarounds, time and patience are needed before one can determine
whether the business judgment of the leadership is proven correct.
We appreciate your offer to present to the Board on June 17 some concrete
alternatives for addressing what you view to be Shoney's current situation.
Unfortunately, as you may know, our next Board meeting has been planned for many
months as part of a working retreat meeting and the agenda is full without any
available open time for you to make your requested presentation. However, we
encourage you to submit your concrete alternatives in writing to us before that
meeting so that your ideas may be taken into account in our discussions. After
we have had the opportunity to review your alternatives, we will consider a time
in the future when you could personally discuss those with the Board or a
committee of the Board.
Management of Shoney's has consistently welcomed discussions with you and have
talked with you on a number of occasions recently to exchange information and
ideas. We continue to believe such meetings are mutually beneficial and hope
that you will continue to provide us with the benefit of your ideas.
God bless,
C. Stephen Lynn
We were surprised and disappointed with the rejection by the Board of our
request to meet with it at its meeting in June. Because of Shoney's
continued poor performance and the Board's refusal to meet with us at the June
Board meeting despite the urgency of the situation, we feel that we were left
with no alternative but to present our case directly to you, the Shareholders
and owners of Shoney's. As a result, we determined to seek Agent Designations to
call a special meeting of the Shareholders to act on proposals that would result
in the removal of all of the members of the current Board and replace them with
our nominees. Immediately after filing with the SEC this solicitation and
preliminary proxy materials for the Special Meeting, we sent a letter to the
Board which stated in full as follows:
June 16, 1997
Board of Directors of Shoney's, Inc.
1727 Elm Hill Pike
Nashville, Tennessee 37210
Re: Meeting of the Shoney's, Inc. Board of Directors
------------------------------------------------
Ladies and Gentlemen:
My mother and I were surprised and disappointed by your letter in which you
rejected our request to address the Board at its two-day retreat in mid-June to
discuss Shoney's current situation and possible alternatives for resolving
Shoney's problems. We found it disturbing that you refused to meet with a
representative of shareholders holding approximately 8% of Shoney's stock,
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particularly one who is interested in working with, and has the experience to
help, the Board in addressing Shoney's problems.
We also were surprised by the Board's suggestion that we submit our
proposals in writing after which the Board would "consider a time in the future"
for us to meet with the Board "or a committee of the Board." We believe that
this statement demonstrates a lack of understanding of the urgency of Shoney's
situation and the lack of leadership under the current management. We had
expected that, in order to address Shoney's current problems, the Board would be
interested in obtaining as much information and as many ideas as soon as
possible. Instead, rather than taking a small amount of time during the Board's
two-day retreat to discuss our concerns, the Board's response appears designed
only to delay our requested meeting to discuss with you the crucial issues
facing Shoney's.
As we stated in our June 2 letter, we continue to believe that Shoney's is
at a critical juncture. We, as Shoney's shareholders, have endured many years
of poor financial performance. Over the last several years, Shoney's
shareholders have provided you with time and have patiently given you the
opportunity to revitalize Shoney's. The result of this patience has been a
substantial erosion in the stock price. Despite this record, the Board
continues to state that it has the "proper business strategy and management
team." After two years under the current management, however, Shoney's
condition has not only failed to improve, but, in fact, has deteriorated. As a
result, we believe that Shoney's shareholders no longer have the "time", nor
should we be asked to have the "patience", that you request.
Because of Shoney's continued poor performance and the Board's refusal to
meet with me at the June Board meeting despite the urgency of the present
situation, we feel that we are left with no alternative but to present our case
directly to the shareholders. We have filed documents today with Shoney's and
with the SEC for the purpose of calling a special meeting to remove the current
members of the Board and replace them with our nominees, who would intend to put
in place a new management team committed to addressing Shoney's condition with
the urgency it requires.
We believe Shoney's is running out of time and that its long term viability
is threatened. We need to take decisive action now to ensure the long term
survival of the company for the benefit of its shareholders.
Sincerely,
Raymond D. Schoenbaum
EFFECT OF EXECUTION AND DELIVERY OF AGENT DESIGNATIONS
Under the Bylaws of the Company, a special meeting of the Shareholders may be
called at any time by the holder or holders of not less than one tenth (1/10th)
of all the shares entitled to vote at such meeting (the "Requisite Holders").
According to the Company's Quarterly Report on Form 10-Q for the quarter ended
February 16, 1997 (the "February 1997 10-Q"), filed with the SEC pursuant to the
Securities Exchange Act of 1934 (the "Exchange Act"), as of March 28, 1997 there
were 48,551,609 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 February 1997 10-Q, approximately
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<PAGE>
8.0% of the outstanding shares of Common Stock. In order to establish the
record date for determining the Shareholders entitled to call the Special
Meeting, 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
demand (the "Demand") to call 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. The Shoney's
Shareholders' Committee intends to have the record owners of the remaining
shares of Common Stock owned beneficially by it execute Agent Designations for
the call of the Special Meeting. As a result, assuming no additional shares of
Common Stock have been issued since March 28, 1997 and no options or deferred
stock incentive awards outstanding as of March 28, 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 988,400
additional shares of Common Stock will constitute the requisite number of Agent
Designations that we need to require the Company to call the Special Meeting.
Under Tennessee law, the record date for determining Shareholders entitled to
call the Special Meeting 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, the record date for such
determination is June 16, 1997. 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 the Special Meeting, and cause notice thereof to be given to
the Shareholders entitled thereto.
Under the Bylaws of the Company, the Shareholders, and not the Board, have 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.
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 the Special
Meeting, (ii) set the place, date and time of the Special Meeting, and (iii)
exercise all rights of Requisite Holders incidental to calling and convening the
Special Meeting and causing the purposes of the authority expressly granted
pursuant to the Agent Designations to the Designated Agents to be carried into
effect. To vote on the matters to be brought before the Special Meeting you
must vote by proxy or in person at the Special Meeting.
The purpose of the Special Meeting is to provide Shareholders with the
opportunity to consider and vote on the Special Meeting Proposals. The record
date for determining Shareholders entitled to notice of, or to vote at, the
Special Meeting will be set by the Board in accordance with the Tennessee
Business Corporation Act. The Agent Designations grant to the Designated
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<PAGE>
Agents the full rights and authority of the Requisite Holders to take the
actions described above in connection with the Special Meeting, but the Agent
Designations will not give the Designated Agents the right to vote any shares of
Common Stock at the Special Meeting and no proxies for such votes are being
solicited with this Preliminary Solicitation Statement. We will send
Shareholders additional materials soliciting proxies to vote at the Special
Meeting.
If any of your shares of Common Stock are held in the name of a brokerage firm,
bank, bank nominee or other institution, only it can execute an Agent
Designation for such shares and will do so only upon receipt of your specific
instructions. Accordingly, you will be asked to contact the person responsible
for your account and instruct that person to execute the BLUE Agent Designation
Card.
We are asking you to return your completed, signed and dated Agent Designations
as soon as possible and, in any event, prior to July __, 1997 to MacKenzie
Partners, Inc. at 156 Fifth Avenue, New York, New York 10010.
THE SPECIAL MEETING PROPOSALS
At the Special Meeting, we intend to ask the Shareholders to consider and vote
on the Special Meeting Proposals set forth below. The details regarding the
Special Meeting Proposals, including the specific text thereof, will be set
forth in the proxy materials we will distribute in connection with the Special
Meeting.
As discussed in more detail above, we are disappointed with Shoney's
performance, and we believe that positive action needs to be taken to improve
Shoney's performance and to reestablish Shoney's as a quality provider of family
dining. The Special Meeting Proposals would remove the current members of the
Board and replace them with our Nominees. In addition, at the Special Meeting,
the Shareholders also would be asked to consider certain resolutions amending
the Bylaws of the Company in a manner designed to facilitate the replacement of
the current Board members. Once elected, our Nominees intend to replace certain
members of the management of the Company, and to appoint Raymond D. Schoenbaum
as the Chairman and Chief Executive Officer of the Company.
The Director Removal Resolution and the Election of Directors Resolution
Our goal is to replace the current Board with our Nominees who we believe will
be able to rebuild the Company's business and reputation. We will propose that
Shareholders vote at the Special Meeting on a proposal to remove the entire
Board, the members of which currently are Dennis C. Bottorff, Carole F. Hoover,
Victoria B. Jackson, C. Stephen Lynn, Jeffry F. Schoenbaum, B. Franklin Skinner
and Cal Turner, Jr. Section 48-18-108 of the Tennessee Business Corporation Act
authorizes this action, with or without cause, by a vote of a majority of the
shares cast at the Special Meeting if at least a majority of the shares of
Common Stock are represented at the meeting.
We also will propose that the Shareholders elect at the Special Meeting the
Nominees named below as directors of the Company, to serve until the next annual
meeting of Shareholders and until their successors shall have been duly elected
and qualified. Directors will be elected at the
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<PAGE>
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.
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
-----------------------------------------
____________ (age) is [Insert biographical information, including address].
____________ (age) is [Insert biographical information, including address].
____________ (age) is [Insert biographical information, including address].
____________ (age) is [Insert biographical information, including address].
____________ (age) is [Insert biographical information, including address].
____________ (age) is [Insert biographical information, including address].
____________ (age) is [Insert biographical information, including address].
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 if he does not become a director of the Company. 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. Raymond D. Schoenbaum is currently a director 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.
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
February 1997 10-Q, the Company had $147.7 million of indebtedness outstanding
under the Credit Agreement as of February 16, 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
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<PAGE>
Agreement, CIBC and the Bridge Banks could cancel the Bridge Banks' obligations
to make loans to the Company and/or declare the principal amount then
outstanding of, and the accrued interest on, the loans under the Bridge Loan
Agreement due and payable. As reported in the February 1997 10-Q, the Company
had $95.1 million of indebtedness outstanding under the Bridge Loan Agreement as
of February 16, 1997.
In addition, as reported in the February 1997 10-Q, the Company had additional
debt outstanding under various notes issued under indentures and loan and credit
agreements. Cross-default and/or cross-acceleration provisions contained in some
of these agreements and repurchase rights provided in one of the indentures
would enable the lenders to declare the principal amount then outstanding of,
and the accrued interest on, the loans under such agreements or notes to be due
and payable 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,
other than those provisions which were duly approved by the Shareholders and
those provisions which under Tennessee law cannot be repealed by the
Shareholders. This resolution also would provide that, without the approval of
the Shareholders, the Board may not thereafter amend any section of the Bylaws
affected by such repeal or adopt any new Bylaw provision in a manner which
serves to reinstate any repealed provision or any similar provision. Sections
48-20-201(a)(2) and (b) of the Tennessee Business Corporation Act authorize this
action by a vote of a majority of the shares cast at the Special Meeting if at
least a majority of the shares of Common Stock are represented at the meeting.
The Bylaws Repeal Resolution is designed to repeal any Bylaw changes that the
Board may have attempted to make yet did not disclose prior to June 16, 1997 or
may attempt to make prior to the Special Meeting. Although we are currently
unaware of any specific Bylaw provisions which would be repealed by adoption of
the Bylaws Repeal Resolution, adoption of the Bylaws Repeal Resolution would
render ineffective any attempted manipulation of the Bylaws by the Board,
whether intended to frustrate the ability of the Shareholders to elect the
Nominees or adopt any of the other Special Meeting Proposals or otherwise.
- 14 -
<PAGE>
The Bylaws Repeal Resolution is intended to guarantee that any previously
undisclosed Bylaw amendment will be repealed so as to prevent the Board from
manipulatively altering the Bylaws prior to the Special Meeting without
Shareholder approval and to prevent the Board after the Special Meeting from
amending any section of the Bylaws affected by such repeal or adopting any new
Bylaw provision in a manner which serves to reinstate any repealed provision or
any similar provision.
Although adoption of the Bylaws Repeal Resolution would generally repeal
previously undisclosed Bylaw amendments without considering the beneficial
nature, if any, of such amendments to the Shareholders, it would not repeal any
such amendments which were approved by the Shareholders.
Size of Board Resolution
The Company's Bylaws provide that the size of the Board shall be fixed from time
to time by the Board and shall consist of not less than three (3) nor more than
fifteen (15) directors. According to the information made publicly available by
the Company as of the date of this Preliminary Solicitation Statement, there are
currently seven directors on the Board. Adoption of the Size of Board
Resolution would fix the number of directors at its present number of seven.
Such amendment would further provide that such Bylaw may not be amended, or any
new Bylaw provision which is in any way inconsistent therewith, be adopted,
without approval of the Shareholders. Sections 48-18-103(a) and 48-20-201(a)(2)
of the Tennessee Business Corporation Act authorize this action by a vote of a
majority of the shares cast at the Special Meeting if at least a majority of the
shares of Common Stock are represented at the meeting.
- 15 -
<PAGE>
The Size of Board Resolution is designed to prevent the current Board from
frustrating the ability of the Shareholders to elect all seven Nominees to
constitute the entire Board. 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, by fixing the number of
Board seats at seven, adoption of the Size of Board Resolution will ensure that
the election contest at the Special Meeting will take place on a level playing
field, without the incumbent Board or their nominees gaining an unfair advantage
by attempting to run for unopposed positions. We have notified the Company that
we would propose additional Nominees for election if the Company attempts to
expand the size of the Board above its existing level of seven directors prior
to the Special Meeting.
In addition, should the Shareholders choose to elect the Nominees to a minority
of the seats on the Board, adoption of the Size of Board Resolution would have
the purpose of ensuring the incumbent directors, who would continue to
constitute a majority, could not frustrate the will of the Shareholders by
increasing the size of the Board and installing hand-picked allies. 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.
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 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. 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
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<PAGE>
otherwise with a limited number of institutions, brokers or other persons who
are shareholders for the purpose of assisting in the proxy solicitation.
Montgomery Securities will not receive any fee for, or in connection with, such
solicitation activities apart from the fees they are otherwise entitled to
receive under their engagement. See "General Information" below. The principal
business address of Montgomery Securities is 600 Montgomery Street, San
Francisco, California 94111. Certain additional information regarding
Montgomery Securities is contained in Schedule I hereto and is incorporated in
this document by reference.
In addition, Howard E. Sachs, John S. Ellis and W. Douglas Benn, advisors to
Raymond D. Schoenbaum, may assist in soliciting Agent Designations, although
none of them nor the Shoney's Shareholders' Committee admits that any of them is
a "participant", as defined in Schedule 14A promulgated by the SEC under the
Exchange Act. 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 _______, 1997. Executed Agent
Designations will be solicited by mail advertisement, telephone, telecopier and
in person. Solicitation will be made by __________________________, none of
whom will receive additional compensation for such solicitation. 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. Costs
incidental to this solicitation include expenditures for printing, postage,
legal and related expenses and are expected to be approximately $_____.
We also have retained Montgomery Securities to provide certain financial
advisory services in connection with our solicitation of proxies for the Special
Meeting. Montgomery Securities engages in a full range of banking, securities
trading, market making and brokerage services for institutional and individual
clients. To date, we have paid Montgomery Securities a retainer fee of
$100,000. We have agreed to pay additional retainer fees to Montgomery
Securities up to $400,000. If we are successful in removing and replacing the
current Board members at the Special Meeting on August 19, 1997, we will be
required to pay Montgomery Securities an additional success fee of $1,000,000.
We also will reimburse Montgomery Securities for reasonable out-of-pocket costs
and expenses (including reasonable attorneys' fees and expenses), in an amount
not to exceed $25,000 per month without our prior written consent, and indemnify
Montgomery Securities against certain liabilities and expenses in connection
with our engagement of Montgomery Securities, including certain liabilities
under the federal securities laws.
The total costs incurred to date in connection with this solicitation are not in
excess of $_____. If the Nominees are elected, we will ask the Board to have
the Company reimburse us for costs and
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<PAGE>
expenses incurred in connection with this solicitation. We do not intend to
request that our reimbursement request be submitted to a vote of Shareholders.
REVOCABILITY OF SIGNED AGENT DESIGNATIONS
You may revoke your Agent Designation at any time by executing and delivering a
written revocation to MacKenzie Partners, Inc. at 156 Fifth Avenue, New York,
New York 10010 or to the Company, at 1727 Elm Hill Pike, Nashville, Tennessee
37210 (please send a copy of any revocation sent to the Company to MacKenzie
Partners, Inc., so that we are aware of the revocation). Such a revocation must
clearly state that your Agent Designation is no longer effective. Any
revocation of an Agent Designation will not effect any action taken by the
Designated Agents pursuant to the Agent Designation prior to such revocation.
ADDITIONAL INFORMATION
The principal executive offices of the Company are at 1727 Elm Hill Pike,
Nashville, Tennessee 37210. Except as otherwise noted herein, the information
concerning the Company has been taken from or is based upon documents and
records on file with the SEC and other publicly available information. Although
we do not have any knowledge that would indicate that any statement contained
herein based upon such documents and records is untrue, we do not take any
responsibility for the accuracy or completeness of the information contained in
such documents and records, or for any failure by the Company to disclose events
that may affect the significance or accuracy of such information.
For information regarding the security ownership of certain beneficial owners
and the management of the Company, see Schedule II.
Raymond D. Schoenbaum
Betty J. Schoenbaum
IF YOUR SHARES OF COMMON STOCK ARE HELD IN THE NAME OF A BROKERAGE FIRM, BANK,
BANK NOMINEE OR OTHER INSTITUTION, ONLY IT CAN SIGN AN AGENT DESIGNATION WITH
RESPECT TO YOUR COMMON STOCK. ACCORDINGLY, PLEASE CONTACT THE PERSON
RESPONSIBLE FOR YOUR ACCOUNT AND GIVE INSTRUCTIONS FOR AN AGENT DESIGNATION TO
BE SIGNED REPRESENTING YOUR SHARES OF COMMON STOCK.
IF YOU HAVE ANY QUESTIONS ABOUT GIVING YOUR AGENT DESIGNATION OR REQUIRE
ASSISTANCE, PLEASE CONTACT MACKENZIE PARTNERS, INC. TOLL-FREE AT (800) 322-2885.
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<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 Consent 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 February 16, 1997). As of the date of this Consent 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 in information provided by the Company in its quarterly
report on Form 10-Q for the quarter ended February 16, 1997). As of the date of
this Consent Solicitation Statement, Raymond D. Schoenbaum and Betty J.
Schoenbaum, as a group, are deemed to own beneficially (as that term is defined
in Rule 13d-3 under the Exchange Act, as amended) 3,866,791 shares of Common
Stock, which constitutes approximately 8.0% of the outstanding shares of Common
Stock (based in information provided by the Company in its quarterly report on
Form 10-Q for the quarter ended February 16, 1997).
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>
Raymond D. April 4, 1997 60,000 $4.75
Schoenbaum purchased
Betty J. March 18, 1997 100,000* $5.25
Schoenbaum purchased
Total: 160,000
-------
</TABLE>
* Shares purchased by the Betty Schoenbaum Revocable Trust over which Betty J.
Schoenbaum shares voting and dispositive power.
Except as otherwise set forth in this Schedule I, neither Raymond D. Schoenbaum
or Betty J. Schoenbaum or any associate of any of the foregoing persons or any
other person who may be deemed a "participant" in this solicitation has
purchased or sold any shares of Common Stock within the past two years, borrowed
any funds for the purpose of acquiring or holding any shares of Common Stock, or
is or was within the past year a party to any contract, arrangement or
<PAGE>
understanding with any person with respect to any shares of Common Stock. There
have not been any transactions since the beginning of the Company's last fiscal
year and there is not any currently proposed transaction to which the Company or
any of its subsidiaries was or is to be a party, in which Raymond D. Schoenbaum
or Betty J. Schoenbaum or any associate or immediate family member of any of the
foregoing persons or any other person who may be deemed a "participant" in this
solicitation had or will have a direct or indirect material interest. Other than
the directorships contemplated by the Special Meeting Proposals and other than
Raymond D. Schoenbaum becoming Chairman and Chief Executive Officer of Shoney's,
neither Raymond D. Schoenbaum or Betty J. Schoenbaum or any associate of any of
the foregoing persons or any other person who may be deemed a "participant" in
this solicitation has any arrangement or understanding with any person with
respect to any future employment by the Company or its affiliates, or with
respect to any future transactions to which the Company or its affiliates may or
will be a party.
Jeffry F. Schoenbaum, the brother of Raymond D. Schoenbaum and the son of Betty
J. Schoenbaum, currently is a member of the Board and would be removed as a
member of the Board if the Special Meeting Proposals were adopted in their
entirety at the Special Meeting.
In the ordinary course of its business, Montgomery Securities maintains
customary arrangements and may effect transactions in the securities of the
Company for the accounts of its customers. As a result of its engagement by the
Shoney's Shareholders' Committee, Montgomery Securities restricted its
proprietary trading in the securities of the Company as of June 16, 1997
(although it may still execute trades for customers on an unsolicited agency
basis). As of June 12, 1997, Montgomery Securities did not beneficially own any
Common Stock, and held of record 10,312 shares of Common Stock for customer
accounts. Montgomery Securities bought and sold 50,500 shares of Common Stock of
the Company for its own account over the last two years.
Howard E. Sachs has his principal business address at 1901 Powers Ferry Road,
Suite 260, Atlanta, Georgia 30339. As of June 12, 1997, 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 June 13, 1997, 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 June 11, 1997, 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 June 16, 1997 with respect to the beneficial
ownership of the Shoney's Shareholders' Committee. Unless otherwise indicated,
each of the shareholders has sole voting and investment power with respect to
the shares of Common Stock beneficially owned.
<TABLE>
<CAPTION>
Number of
Shares
Name and Address Beneficially
of Beneficial Owner Owned(1) Percent of Class
- ------------------- -------- ----------------
<S> <C> <C>
Shoney's Shareholders' 3,866,791 8.0% (3)
Committee as a Group(2)
1640 Powers Ferry Road
Building Two, Suite 100
Marietta, Georgia 30067
R. L. Danner (4) 4,249,303 8.76%
2 International Drive,
Suite 510
Nashville, Tennessee 37217
First Union Corporation (5) 2,485,675 5.12%
One First Union Center
Charlotte, North Carolina
28288-0137
- ---------------------
</TABLE>
(1) For purposes of this table, a person is deemed to have "beneficial
ownership" of any security that such person (i) has or shares "voting
power", which includes the power to dispose of, or to direct the disposition
of, such security or (ii) has the right to acquire within 60 days after the
date such information was set forth in the 1997 Proxy Statement, and June
16, 1997 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 48,551,609 shares outstanding on March 28, 1997 as disclosed by the
Company in its Quarterly Report on Form 10-Q for the quarter ended February
16, 1997.
(4) Includes 83,068 shares of Common Stock owned by Mrs. Danner and 7,101
shares of Common Stock held in trust for Mr. Danner's son, over which Mrs.
Danner has sole voting and investment power.
(5) First Union Corporation ("First Union") has sole voting power as to all
shares of Common Stock and has sole power to dispose or to direct the
disposition of 2,471,224 shares of Common Stock.
The following table sets forth, according to the 1997 Proxy Statement (except as
otherwise noted below), the name of, and the total number of shares of Common
Stock (if any) beneficially owned (as defined in Rule 13d-3 under the Exchange
Act) and the percentage of outstanding shares of
<PAGE>
Common Stock beneficially owned by, (i) each director of the Company, (ii) the
Company's Chief Executive Officer and each of its executive officers and (iii)
all directors and executive officers as a group. The information presented below
has been taken from or is based upon documents and records on file with the
Commission and other publicly available information. Since the 1997 Proxy
Statement, the total outstanding number of shares of Common Stock has increased
from 48,531,075 to 48,551,609 (based on information provided by Company in its
Quarterly Report on Form 10-Q for the quarter ended February 16, 1997). Although
we do not have any knowledge that would indicate that any statement contained
herein based upon such documents and records is untrue, we do not take any
responsibility for the accuracy or completeness of the information contained in
such documents and records, or for any failure by the Company to disclose events
that may affect the significance or accuracy of such information.
<TABLE>
<CAPTION>
Name and Address of Number of
Beneficial Owner Shares(1) Percentage of Class
- ---------------- --------- -------------------
<S> <C> <C>
John W. Alderson 10,000 *
W. Craig Barber 65,859 *
Dennis C. Bottorff 9,000 *
Carole F. Hoover 1,400 *
Victoria B. Jackson 3,094 *
Robert M. Langford 15,000 *
C. Stephen Lynn 219,000 *
Jeffry Schoenbaum (2) 582,192 1.19%
B. Franklin Skinner 3,500 *
Cal Turner, Jr. 28,000 *
Ronald E. Walker 21,341 *
All directors and 1,110,065 2.27%
executive officers as a
group (11 persons)
- --------------------
</TABLE>
* Less than 1%.
(1) Includes shares subject to options to purchase shares which are exercisable
or become exercisable within 60 days after January 23, 1997, and are held
by the following persons: John W. Alderson(10,000);W. Craig Barber
(56,500); Dennis C. Bottorff (1,000); Carole F. Hoover (1,000);Victoria B.
Jackson (1,000); Robert M. Langford (15,000);C. Stephen Lynn
(100,000);Jeffry Schoenbaum (0);B. Franklin Skinner (3,000); Cal Turner,
Jr. (3,000); Ronald E. Walker (10,100); Directors and Executive Officers as
a Group (287,047).
(2) Includes 17,340 shares held by Chase Manhattan Bank as custodian for Mr.
Schoenbaum's children, 2,953 shares held by his wife,Sue Schoenbaum, and
432,902 shares held in an irrevocable trust for the benefit of Mr.
Schoenbaum. Also includes 35,750 shares owned by the Schoenbaum Family
Foundation, of which Mr. Schoenbaum is a director. Mr. Schoenbaum disclaims
beneficial ownership of the shares owned by the Schoenbaum Family
Foundation. Mr. Schoenbaum is the son of Alex Schoenbaum, who until his
death in December 1996 was Chairman Emeritus of the Company's Board of
Directors.
- 2 -
<PAGE>
PRELIMINARY COPY
APPENDIX A
[BLUE AGENT DESIGNATION CARD]
AGENT DESIGNATION
THIS AGENT DESIGNATION IS SOLICITED BY [RDS] AND [BJS] (THE "ALAMO
SHAREHOLDERS' COMMITTEE") FOR THE APPOINTMENT OF DESIGNEES TO CALL A SPECIAL
MEETING OF SHAREHOLDERS OF ALAMO (THE "COMPANY").
Each of the undersigned hereby constitutes and appoints [RDS], [BJS] and
______________, and each of them, with full power of substitution and
resubstitution, the proxies and agents of each of the undersigned (said proxies
and agents, together with each substitute appointed by any of them, if any,
collectively, the "Designated Agents") in respect of all shares of Common Stock
of the Company, $1.00 par value per share (the "Common Stock"), of the Company
owned by the undersigned to do any or all of the following, to which each of the
undersigned hereby consents:
1. To take all such action as shall be necessary or appropriate (i) to
call (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") for the purpose of
considering and voting upon the "Special Meeting Proposals" as described in
the Solicitation Statement of the Alamo 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.
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 PROMPTLY COMPLETE, SIGN, DATE AND MAIL IN THE ENCLOSED ENVELOPE.
DATE _____________________, 1997 SIGNATURE ___________________
SIGNATURE, IF HELD JOINTLY __________________ TITLE _______________________
<PAGE>
Please sign exactly as name appears hereon. When shares are held by joint
tenants, both should sign. When signing as an attorney, executor,
administrator, trustee or guardian, give full title as such. If a corporation,
sign in full corporate name by President or other authorized officer. If a
partnership, sign in partnership name by any partners.
PLEASE SIGN, DATE AND MAIL PROMPTLY IN THE POSTAGE-PAID ENCLOSED ENVELOPE.
-2-
