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SCHEDULE 14A
(RULE 14A-101)
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[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
</TABLE>
Shoney's, Inc.
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(Name of Registrant as Specified In Its Charter)
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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 JULY 1, 1997
SUBJECT TO COMPLETION
The information included herein is as it is expected to be if and when the
definitive revocation of agent designation materials are mailed to shareholders
of Shoney's, Inc. This revocation of agent designation statement will be revised
to reflect actual facts at the time of the filing of definitive materials.
No WHITE revocation of agent designation card will accompany these
materials until definitive materials are distributed.
[SHONEY'S INC.(R) LOGO]
1727 ELM HILL PIKE
NASHVILLE, TENNESSEE 37210
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REVOCATION OF AGENT DESIGNATION STATEMENT BY THE BOARD OF
DIRECTORS OF SHONEY'S, INC. IN OPPOSITION TO THE SOLICITATION OF
AGENT DESIGNATIONS BY RAYMOND D. AND BETTY J. SCHOENBAUM TO
DEMAND A SPECIAL MEETING OF SHAREHOLDERS
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This Revocation of Agent Designation Statement and the accompanying WHITE
revocation of agent designation card are being furnished by the Board of
Directors of Shoney's, Inc., a Tennessee corporation (the "Company"), to the
holders (the "Shareholders") of the Company's shares of $1.00 par value common
stock (the "Shares") in connection with the solicitation of revocations of agent
designations ("Agent Designations") by the Board of Directors of the Company in
opposition to the solicitation by a group calling itself the "Shoney's
Shareholders' Committee" (the "Schoenbaums") of Agent Designations to demand a
special meeting (the "Special Meeting") of the shareholders of the Company for
the purpose of considering and voting upon certain shareholder proposals. Under
the Company's Bylaws, a special meeting of shareholders shall be called by the
Board of Directors if the holders of at least ten percent of all the votes
entitled to be cast on any issue proposed to be considered at the proposed
special meeting sign, date and deliver to the Company's Secretary one or more
written demands for the meeting describing the purpose or purposes for which it
is to be held. The Board of Directors has fixed the close of business on July
14, 1997 (the "Record Date") as the record date for determining shareholders
entitled to demand the Special Meeting and submit Agent Designations in
connection therewith. As of the Record Date, there were Shares
outstanding. Accordingly, the Schoenbaums would require executed and unrevoked
Agent Designations from the holders of at least Shares in addition to the
3,866,791 Shares beneficially owned by the Schoenbaums in order to demand a
Special Meeting. The first date this Revocation of Agent Designation Statement
and WHITE revocation of agent designation card with respect thereto are being
sent or given to shareholders is on or about July , 1997.
THE BOARD OF DIRECTORS OF THE COMPANY VIGOROUSLY OPPOSES THE SOLICITATION
OF AGENT DESIGNATIONS BY THE SCHOENBAUMS AND URGES YOU NOT TO SIGN
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OR RETURN ANY BLUE AGENT DESIGNATION CARD SENT TO YOU BY THE SCHOENBAUMS. IF YOU
HAVE PREVIOUSLY SIGNED AND RETURNED ANY SUCH BLUE AGENT DESIGNATION CARD, YOU
HAVE EVERY RIGHT TO CHANGE YOUR MIND AND REVOKE YOUR AGENT DESIGNATION BY
SIGNING, DATING AND RETURNING THE ENCLOSED WHITE REVOCATION OF AGENT DESIGNATION
CARD. THE BOARD URGES YOU TO COMPLETE, SIGN, DATE AND MAIL THE ENCLOSED WHITE
REVOCATION OF AGENT DESIGNATION CARD AS SOON AS POSSIBLE IN THE POSTAGE-PAID
ENVELOPE PROVIDED.
THE SCHOENBAUM PROPOSALS
The Schoenbaums are soliciting Agent Designations from the Company's
shareholders to demand the Special Meeting at which the following shareholder
proposals (the "Schoenbaum Proposals") would be considered:
i. To establish the order in which the proposals set forth in (ii)
through (vi) below would be presented to the shareholders at the Special
Meeting;
ii. To repeal any and all amendments made by the Board of Directors of
the Company to the Bylaws of the Company, as filed with the Securities and
Exchange Commission (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 of Directors 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;
iii. To amend Article III, Section 1 of the Company's Bylaws to fix
the number of directors on the Company's Board 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;
iv. To amend Article III, Section 3 of the Company's Bylaws 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;
v. To remove all of the members of the Board of Directors of the
Company, including without limitation, any of the following who are members
of the Board of Directors as of the date 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 Proposal (i), any nominees of the Schoenbaums have
been elected to the Board of Directors prior to the time this proposal is
considered, such shareholder nominees shall not be removed from the Board
of Directors; and
vi. If proposal (v) above is approved, to elect the seven director
nominees designated by the Schoenbaums and all other persons nominated by
the Schoenbaums to fill all vacancies on the Board to serve until the 1998
Annual Meeting of Shareholders or until their respective successors shall
have been duly elected and qualified. The Schoenbaum 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.
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RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors has carefully considered the Schoenbaum Proposals,
information filed by the Schoenbaums with the SEC, information delivered to the
Company by the Schoenbaums outlining their proposed plans to replace the
Company's Board of Directors and effect certain amendments to the Company's
Bylaws, and the potential effects of the removal of the current Board of
Directors and the election of the Schoenbaums' director nominees on the Company,
its shareholders, its employees, and its business operations. The Board of
Directors has determined that the Schoenbaum Proposals are contrary to the best
interests of the Company and its shareholders and urges shareholders to oppose
the solicitation of Agent Designations by the Schoenbaums.
The current members of the Company's Board of Directors have considerable
experience and expertise in overseeing the operations of publicly held companies
and are dedicated to completing the turn-around of the Company and creating
shareholder value. The Board of Directors believes that the Company's current
management team, led by C. Stephen Lynn, is the right team to lead the Company
through its current situation. Mr. Lynn joined the Company in May 1995 and has
implemented, and continues to implement, initiatives designed to improve the
over-all performance of the Company and its restaurants. In addition, the Board
of Directors believes that electing a dissident slate of nominees hand-picked by
Mr. Schoenbaum, who at this time is less familiar with the Company's operations,
together with his failure to identify his proposed changes in management, is
likely to result in uncertainty and instability that could create greater risks
for the Company and its shareholders going forward. In the Board's view, the
Schoenbaums' solicitation of Agent Designations to demand the call of the
Special Meeting is a distraction from the efforts of the Board and management on
behalf of the Company and its shareholders to improve the operations and
financial condition of the Company and reflects an opportunistic effort by
Raymond Schoenbaum to be named Chief Executive Officer.
THE BOARD OF DIRECTORS HAS DETERMINED THAT THE SCHOENBAUM PROPOSALS ARE CONTRARY
TO THE BEST INTERESTS OF THE COMPANY AND ITS SHAREHOLDERS, VIGOROUSLY OPPOSES
THE SOLICITATION OF AGENT DESIGNATIONS BY THE SCHOENBAUMS AND URGES YOU NOT TO
SIGN OR RETURN ANY BLUE AGENT DESIGNATION CARD SENT TO YOU BY THE SCHOENBAUMS.
IF YOU HAVE PREVIOUSLY SIGNED AND RETURNED ANY SUCH BLUE CARD, YOU HAVE EVERY
RIGHT TO CHANGE YOUR MIND AND REVOKE YOUR AGENT DESIGNATION BY SIGNING, DATING
AND RETURNING THE ENCLOSED WHITE REVOCATION OF AGENT DESIGNATION CARD.
EFFECT OF EXECUTION AND DELIVERY OF AGENT DESIGNATIONS
Under the Company's Bylaws, a special meeting of the Company's shareholders
shall be called by the Board of Directors if the holders of at least ten percent
of all the votes entitled to be cast on any issue proposed to be considered at
the proposed special meeting sign, date and deliver to the Company's Secretary
one or more written demands for the meeting describing the purpose or purposes
for which it is to be held. As of [July 14, 1997], the Schoenbaums beneficially
owned 3,866,791 Shares, representing approximately 8.0% of the outstanding
Shares as of such date, and seek Agent Designations from the shareholders
representing approximately additional Shares to enable them to demand the
Special Meeting.
The Schoenbaums are seeking Agent Designations for the purpose of demanding
the Special Meeting to consider and vote on the Schoenbaum Proposals. See "The
Schoenbaum Proposals." The Company's Board of Directors is soliciting Agent
Designations IN OPPOSITION TO the Schoenbaums' solicitation of Agent
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Designations. By executing and returning the WHITE revocation of agent
designation card, you will be revoking your appointment of the Schoenbaums for
the purpose of demanding the Special Meeting or, if you have not previously
executed and returned a BLUE agent designation card, you will be indicating your
support for the Company's Board of Directors.
The Board of Directors urges you NOT to sign the BLUE agent designation
card sent to you by the Schoenbaums. Whether or not you have previously executed
a BLUE agent designation card, the Board urges you to show your support for the
Board of Directors by executing and dating the enclosed WHITE revocation of
agent designation card solicited by the Board and mailing it in the enclosed
postage-paid envelope as soon as possible.
REVOCATION
Either a BLUE agent designation or a WHITE revocation of agent designation
card may be revoked by filing with the Secretary of the Company a written notice
of revocation. Such written revocation may be in any form, but must be signed
and dated and must clearly express your intention to revoke your previously
executed agent designation or revocation of agent designation card. Any written
notice revoking an Agent Designation should be sent to: Shoney's, Inc., 1727 Elm
Hill Pike, P.O. Box 1260, Nashville, Tennessee 37202, Attention: F.E. McDaniel,
Jr., Senior Vice President, Secretary and Treasurer. Your latest dated card will
supersede any earlier-dated card, except that a WHITE revocation of agent
designation card that would otherwise act as a revocation will be inoperative
and of no effect if delivered after the date, if any, as of which it is
determined that the Schoenbaums effectively demanded a Special Meeting. A
shareholder's revocation of a previously executed BLUE agent designation card
will have the effect of opposing the Schoenbaum's demand for a Special Meeting.
Any revocation of an Agent Designation will not affect any action taken by the
Schoenbaums pursuant to the Agent Designation prior to such revocation.
BACKGROUND
According to materials provided to the Company and filed with the SEC, the
Schoenbaums beneficially own approximately 8.0% of the Shares outstanding.
Raymond D. Schoenbaum and Betty J. Schoenbaum are the son and wife,
respectively, of the late Alex Schoenbaum who co-founded Shoney's and are the
brother and mother, respectively, of Jeffry Schoenbaum, a current director of
the Company. On April 25, 1997, Raymond and Betty Schoenbaum, together with
affiliated entities, filed a Schedule 13D with the SEC pursuant to Rule 13d-101
of the Securities Exchange Act of 1934. In their Schedule 13D, the Schoenbaums
expressed dissatisfaction with the performance of the Company and the price of
the Shares in recent years, and stated their consideration of a number of
courses of action, including holding discussions with the Company's management
or Board of Directors regarding the future business of the Company, seeking
removal of certain members of the Board of Directors, nominating candidates to
the Board of Directors, proposing changes in the Company's management, and
acquiring additional Shares. The Schedule 13D also stated that Raymond
Schoenbaum had acquired 100,000 Shares on March 18, 1997 at a price of $5.25 per
Share and a trust for Betty Schoenbaum had acquired 60,000 Shares on April 4,
1997 at a price of $4.75 per Share. From time to
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time, including during April 1997, members of the Company's management team met
with Mr. Schoenbaum to discuss the Company, its business, Mr. Schoenbaum's
concerns and ideas concerning the Company's operations, and the current
management team's plans to improve the Company's operating performance. On May
6, 1997, following one of his meetings with management, Mr. Schoenbaum sent a
detailed request for information to the Company; however, on May 9, 1997, he
withdrew his request. Mr. Schoenbaum's last meeting with management occurred on
May 19, 1997.
On June 2, 1997, Mr. Schoenbaum sent a letter to the Company's Board of
Directors stating that he was in the process of evaluating his alternatives with
respect to his investment in the Company and requesting a meeting with the Board
of Directors of the Company during the Board's regularly scheduled June 17, 1997
meeting to present concrete alternatives for addressing the Company's current
problems. Also on June 2, 1997, the Schoenbaums filed an amendment to their
Schedule 13D which included the text of the letter to the Board of Directors.
The Board of Directors responded to Mr. Schoenbaum by letter dated June 5,
1997, and expressed its shared concerns regarding the loss of market value of
the Shares. The Board of Directors expressed its appreciation of Mr.
Schoenbaum's offer to meet with the Board of Directors, but stated that its
agenda for the June 17, 1997 meeting had been developed over many months and did
not allow for any open time to meet with Mr. Schoenbaum. Since Mr. Schoenbaum
had indicated he would have concrete alternatives to present to the Board at the
June 17, 1997 meeting, the Board of Directors encouraged Mr. Schoenbaum to
submit his alternatives in writing prior to the meeting so that they could be
considered by the Board during its discussions. The Board stated that after
reviewing those alternatives, it would consider a time in the future when Mr.
Schoenbaum personally could discuss his alternatives with the Board of Directors
or a committee thereof. Despite the Board's request, Mr. Schoenbaum did not
submit any concrete alternatives or any other information for the Board's
consideration.
On June 16, 1997, the Schoenbaums responded to the Company's June 5, 1997
letter by filing preliminary proxy materials with the SEC and sending a letter
to the Board of Directors expressing surprise and disappointment with the fact
that the Board of Directors was unable to meet with Mr. Schoenbaum. The
Schoenbaums' preliminary proxy materials seek the appointment of the Schoenbaums
as designated agents of the Company's shareholders to demand a special meeting
of such shareholders. The Schoenbaums also filed preliminary proxy materials in
order to seek proxies to vote in favor of the Schoenbaum Proposals. See "The
Schoenbaum Proposals." On such date, Raymond D. Schoenbaum also sent letters to
the Company purporting to establish a record date for the determination of
shareholders entitled to call a special meeting of shareholders, purporting to
call a special meeting of shareholders on August 19, 1997 and requesting certain
information from the Company.
Prior to their amendment on June 22, 1997, the Company's Bylaws contained a
provision stating that a special meeting could be called by the Chairman of the
Board, the Board of Directors or the holder or holders of not less than one
tenth (1/10) of the Shares entitled to vote at such a meeting. The Bylaws
contained no provisions concerning the fixing of record dates for special
meetings of shareholders or for a determination of shareholders entitled to
demand a special meeting. The Bylaws also contained no provision for the conduct
of such a meeting or for the appointment of inspectors of election.
The Company determined that the Schoenbaums' purported June 16, 1997 call
was not valid because it was not made by a holder of 10% or more of the Shares
entitled to vote at the meeting. The Company also determined that the Board had
the authority to fix the record date for a determination of shareholders
entitled to demand a special meeting, based upon Tennessee Code Annotated
sec. 48-17-107, which provides that if the
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bylaws do not fix or provide for fixing a record date, the board of directors of
the corporation may fix a future date as the record date.
In light of the Schoenbaums' correspondence and to provide greater clarity
with respect to the procedures to be followed for the calling of a special
meeting of shareholders, the Board adopted several bylaw amendments at a meeting
held on June 22, 1997. The amendments provide that the Board must fix a record
date for the determination of the shareholders entitled to demand a special
meeting within 15 days of receiving a request from a shareholder, and the record
date so fixed cannot exceed 30 days from the date the request was received. In
the event the Board fails to set a record date within 15 days, the record date
would automatically be the 30th day after the date the shareholder request was
received. The Bylaws were also amended to clarify that the Board must call a
meeting if demanded by the holders of at least 10% of the votes entitled to be
cast on any issue to be considered at such meeting, and that the Board must set
a record date for such a meeting within 20 days of the receipt of the requisite
demand from shareholders, and that the record date cannot be more than 30 days
from the date of such demand. Notice of the meeting must be given within one
month after the demands are delivered to the Company's Secretary and the date of
the meeting cannot be less than ten or more than 60 days from the date of the
notice.
Other amendments to the Bylaws adopted by the Board on June 22, 1997
included a provision stating that a meeting at which a quorum is not present can
be adjourned by the Chairman of the meeting or by a majority of the Shares
represented at the meeting, until the requisite quorum can be represented, and
provisions concerning inspectors of election and the opening and closing of the
polls for each matter voted on at a meeting. The prior Bylaws simply stated that
the Chairman or the "stockholders present in person or by proxy" could adjourn
the meeting, without specification as to the number of stockholders required,
and did not contain any provisions concerning inspectors of election or opening
or closing of polls.
At its June 22, 1997 meeting, in light of the fact that Jeffry Schoenbaum
is related to the Schoenbaums and also serves as Vice President and trustee of
the Schoenbaum Family Foundation, which owns Shares that are included in the
Schoenbaums' Schedule 13D, and serves as Treasurer of Schoenbaum Corporation, a
filing party under the Schoenbaums' Schedule 13D, the Board of Directors
established a special committee of the Board comprised of the entire Board other
than Jeffry Schoenbaum to consider, act on and exercise all powers of the Board
of Directors with respect to all matters in connection with the Schoenbaum proxy
contest. See "Information Regarding the Directors of the Company -- Board of
Directors Meetings and Committees."
On June 23, 1997, the Schoenbaums filed with the SEC an amendment to their
Schedule 13D, solicitation of agent designations and preliminary proxy materials
to name the Schoenbaums' director nominees. The Schoenbaums also delivered to
the Company notice of the business the Schoenbaums intend to bring before the
Special Meeting, information with respect to each of the Schoenbaums' director
nominees, and a consent executed by each of the Schoenbaum director nominees
agreeing to be named in the Schoenbaums soliciting materials and to serve on the
Board of Directors, if elected.
On June 25, 1997, the Schoenbaums filed an amendment to their Schedule 13D
with the SEC and delivered a letter to the Company threatening to commence
litigation against the Company and its Board of Directors if the Board did not
rescind the amendments to the Company's Bylaws approved at the Board's June 22,
1997 meeting. In response to the Schoenbaums' letter, the Company filed suit
against the Schoenbaums in Chancery Court in Nashville, Tennessee seeking a
declaratory judgement that (i) the Schoenbaums' purported call of a special
meeting and establishment of a record date for the determination of shareholders
entitled to call a special meeting were invalid and (ii) the amendments to the
Company's Bylaws were validly adopted by the Board and binding upon the
Company's shareholders, including the Schoenbaums.
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On June 25, 1997, Raymond Schoenbaum requested the Board of Directors to
set a record date for the determination of shareholders entitled to demand a
Special Meeting "as a precautionary matter," and stated that he continued to
believe that he had validly set a record date of June 16, 1997 when he delivered
a call for a special meeting to the Company. Mr. Schoenbaum further stated that
he did not believe any record date established by the Board would be valid,
"since it would have the effect of retroactively invalidating a record date that
had already been set." On June 29, 1997, pursuant to Article II, Section 2 of
the Bylaws, as amended, the Special Committee of the Company's Board of
Directors set July 14, 1997 as the record date for the determination of
shareholders entitled to demand a special meeting, and on June 30, 1997, the
Company provided advance notice of that record date to the New York Stock
Exchange ("NYSE") pursuant to NYSE requirements.
On June 30, 1997, the Schoenbaums announced that they had filed an action
in the United States District Court for the Middle District of Tennessee seeking
to remove the Company's state court action to federal court, and seeking a
preliminary injunction enjoining the Company from implementing the Bylaw
amendments, to declare such amendments invalid, and requiring the Company to
make certain records demanded by the Schoenbaums available to them.
EFFECT ON THE COMPANY'S OUTSTANDING INDEBTEDNESS OF THE REMOVAL OF THE CURRENT
BOARD OF DIRECTORS AND THE ELECTION OF THE SCHOENBAUM NOMINEES.
Under the terms of the Amended and Restated Reducing Revolving Credit
Agreement, as amended and restated as of May 3, 1996 (the "Revolving Credit
Agreement"), among the Company, Canadian Imperial Bank of Commerce, Inc.
("CIBC") as agent, and the financial institutions signatory thereto (the
"Revolving Credit Banks"), the removal of a majority of the current Board of
Directors and the election of a majority of the Schoenbaum nominees would
constitute a "change in control," which, if not waived, would be an "Event of
Default" as defined in the Revolving Credit Agreement. Upon such an Event of
Default, Revolving Credit Banks having more than 50% of the revolving credit
commitments may declare the full principal amount and accrued interest
outstanding due and payable. In addition, the interest rate on the amounts
outstanding under the Revolving Credit Agreement would increase by 2% above the
interest rate that would otherwise be in effect. At May 11, 1997, approximately
$135.0 million in principal amount was outstanding under the Revolving Credit
Agreement.
Under the terms of the Bridge Loan Credit Agreement (the "Bridge Loan"),
dated as of May 3, 1996, between the Company and CIBC, the removal of a majority
of the current Board of Directors and the election of a majority of the
Schoenbaum nominees would constitute a "change in control," which, if not
waived, would be an "Event of Default" as defined in the Bridge Loan. Upon such
an Event of Default, CIBC may declare the full principal amount and accrued
interest outstanding due and payable. In addition, the interest rate on the
amounts outstanding under the Bridge Loan would increase by 2% above the
interest rate that would otherwise be in effect. At May 11, 1997, approximately
$91.4 million in principal amount was outstanding under the Bridge Loan.
Under the terms of an Indenture dated as of July 15, 1992, as amended by a
First Supplemental Indenture, dated as of September 9, 1996, (the "Indenture"),
by and among the Company, as successor to TPI Enterprises, Inc. ("Enterprises"),
TPI Restaurants, Inc. ("Restaurants") and The Bank of New York, as Trustee (the
"Trustee"), with respect to $51,563,000 of 8 1/4% Convertible Subordinated
Debentures (the "Debentures"), the removal of a majority of the current Board of
Directors of the Company and the election of a majority of the Schoenbaum
nominees would give each of the Debentureholders the right to require the
Company to repurchase any and all Debentures tendered by them at 100% of the
principal amount plus
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accrued interest. The subordination provisions of the Indenture provide that the
Company cannot repurchase tendered Debentures if there is a default in payment
of senior indebtedness, including the indebtedness under the Bridge Loan and the
Revolving Credit Agreement. Repurchase of any of the Debentures also would be an
Event of Default under the Bridge Loan and the Revolving Credit Agreement. The
Company does not believe that it would have sufficient amounts under its lines
of credit and available cash from operations to fund the repurchase of a
material amount of tendered Debentures. The repurchase rights of a
Debentureholder cannot be amended or waived without such Debentureholder's
consent.
Additionally, substantially all of the Company's other senior indebtedness
contain cross-default provisions which would permit those lenders to accelerate
repayment of such debt upon the occurrence of an Event of Default under the
Bridge Loan or the Revolving Credit Agreement.
INFORMATION REGARDING THE DIRECTORS OF THE COMPANY
As of the Record Date, each of the current director's principal occupation,
age and period of service as a director of the Company are set forth below.
<TABLE>
<S> <C>
DENNIS C. BOTTORFF Age -- 52
Chairman of the Board Director since 1989
and Chief Executive Officer
First American Corporation
</TABLE>
In 1991, Mr. Bottorff became President and Chief Executive Officer and a member
of the board of directors of First American Corporation and its subsidiary,
First American National Bank in Nashville, Tennessee. He was elected Chairman of
the Board of First American Corporation in 1995. Mr. Bottorff also serves on the
board of directors of Ingram Industries Inc. and is a Trustee of Vanderbilt
University.
<TABLE>
<S> <C>
CAROLE F. HOOVER Age -- 54
President Director since 1990
Concessions International of Cleveland
</TABLE>
Ms. Hoover, since 1984, has served as President of Concessions International of
Cleveland, an airport food and beverage concessionaire. She also serves as
President and Chief Executive Officer of the Greater Cleveland Growth
Association.
<TABLE>
<S> <C>
VICTORIA B. JACKSON Age -- 42
President Director since 1989
and Chief Executive Officer
DSS/ProDiesel, Inc.
</TABLE>
Ms. Jackson, since 1979, has served as President and Chief Executive Officer of
DSS/ProDiesel, Inc. (formerly Diesel Sales & Service Co., Inc.), a
remanufacturer of fuel injection components for the diesel industry, based in
Nashville, Tennessee. Ms. Jackson also serves as a member of the board of
directors of Whitman Corporation.
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<TABLE>
<S> <C>
C. STEPHEN LYNN Age -- 49
Chairman of the Board, Director since 1995
Chief Executive Officer and President
Shoney's, Inc.
</TABLE>
Mr. Lynn served as Chief Executive Officer and as a director of Sonic Corp. from
November 1983 through April 1995. He also served as Chairman of the Board of
Sonic Corp. from April 1986 to April 1995. On April 11, 1995, Mr. Lynn was
elected as a member of the Board and as the Chairman of the Board and Chief
Executive Officer of Shoney's, Inc. He was elected to the additional office of
President on January 31, 1996.
<TABLE>
<S> <C>
JEFFRY F. SCHOENBAUM Age -- 49
Private Investor Director since 1996
</TABLE>
Mr. Jeffry Schoenbaum serves as President of Nurad Investments, Inc., which was
formed in 1987 to manage the historic redevelopment of commercial properties in
Sarasota and Tampa, Florida. From 1992 through 1994, he served as Vice President
of Bay Area Capital, Inc., a provider of working capital financing. He also
serves as Vice President and a trustee of the Schoenbaum Family Foundation,which
owns Shares included in the Schoenbaums' Schedule 13D, and serves as Treasurer
of Schoenbaum Corporation, a filing party under the Schoenbaums' Schedule 13D.
He is the brother of Raymond D. Schoenbaum and the son of Betty J. Schoenbaum.
<TABLE>
<S> <C>
B. FRANKLIN SKINNER Age -- 65
Retired Chairman of the Board and Director since 1993
Chief Executive Officer
BellSouth Telecommunications
</TABLE>
Mr. Skinner served as a member of the board of directors and as Chairman of the
Board and Chief Executive Officer of Southern Bell Telephone and Telegraph Co.
from 1988 until 1991, after which time he became a member of the board of
directors and Chairman of the Board and Chief Executive Officer of BellSouth
Telecommunications, Inc., which was formed in 1991 through the consolidation of
South Central Bell, Southern Bell, and BellSouth Services. He retired from those
positions in 1992.
<TABLE>
<S> <C>
CAL TURNER, JR. Age -- 57
Chairman of the Board, President Director since 1993
and Chief Executive Officer
Dollar General Corporation
</TABLE>
Mr. Turner serves as a member of the board of directors and as Chairman of the
Board (since 1989) and Chief Executive Officer (since 1977) of Dollar General
Corporation (discount retail chain). Mr. Turner served as President of Dollar
General Corporation from 1977 to January 1997. He also serves as a member of the
boards of directors of First American Corporation and Thomas Nelson, Inc., and
serves on the boards of numerous non-profit organizations.
BOARD OF DIRECTORS MEETINGS AND COMMITTEES
During the fiscal year ended October 27, 1996 (the "1996 Fiscal Year"), the
Board held four regular and four special meetings. During the 1996 Fiscal Year,
each incumbent director attended at least 75% of the aggregate number of
meetings of the Board and the aggregate number of meetings held by all
committees on which the individual director served.
9
<PAGE> 11
The Board has standing Executive, Audit, Nominating, Franchise Relations
and Human Resources and Compensation Committees that assist it in discharging
its responsibilities. In addition, on June 22, 1997 the Board created a special
committee to consider and act on all matters relating to the Schoenbaum proxy
contest. These committees, their members and functions are discussed below.
The Executive Committee presently is composed of four directors: Lynn
(Chairperson), Bottorff, Hoover and Skinner. Between meetings of the Board, the
Executive Committee may exercise all of the powers of the Board except that it
may not: (1) authorize dividends except pursuant to a formula pre-approved by
the Board; (2) submit matters to a vote of shareholders; (3) fill vacancies on
the Board or any of its committees; (4) amend the Company's Charter or adopt,
amend or repeal its Bylaws; (5) authorize a plan of merger; (6) authorize or
approve acquisitions of Shares except pursuant to a formula pre-approved by the
Board; or (7) authorize or approve the issuance or sale of Shares. The Executive
Committee met three times during the 1996 Fiscal Year.
The Audit Committee presently is composed of three directors: Bottorff
(Chairperson), Jackson and Turner. Responsibilities of this committee include
engagement of independent auditors, review of audit fees, supervision of matters
relating to audit functions, review and setting of internal policies and
procedures regarding audits, accounting and other financial controls, and
reviewing related party transactions. The Audit Committee met three times during
the 1996 Fiscal Year.
The Human Resources and Compensation Committee (the "HRC Committee")
presently is composed of three directors: Hoover (Chairperson), Jackson and
Turner. Responsibilities of this committee include review and oversight of the
Company's personnel policies, monitoring the Company's results under affirmative
action plans adopted by the Company and general oversight of the Company's
personnel and/or human resources functions. Responsibilities of this committee
also include approval of remuneration arrangements for executive officers of the
Company, review of compensation plans relating to executive officers and
directors, including grants of stock options and other benefits under the
Company's compensation plans, and general review of the Company's employee
compensation policies. The HRC Committee met fifteen times during the 1996
Fiscal Year. No member of the HRC Committee has been an employee of the Company
at any time and no member has any relationship with either the Company or the
Company's officers requiring disclosure under applicable regulations of the SEC.
The Franchise Relations Committee presently is composed of three directors:
Turner (Chairperson), Skinner and Schoenbaum. Responsibilities of this committee
include keeping the Board apprised of the concerns and suggestions of the
Company's franchisees and acting as an issue resolution committee to mediate
disputes between franchisees and between franchisees and the Company. The
Franchise Relations Committee met four times during the 1996 Fiscal Year.
The Nominating Committee presently is composed of four directors: Skinner
(Chairperson), Bottorff, Hoover and Jackson. The Nominating Committee considers
and recommends nominees for directors for consideration by the Board. Although
the Nominating Committee does not solicit suggestions for nominees for the
Board, suggestions for nominees accompanied by biographical data will be
considered if, in accordance with the Company's Bylaws, they are received at
least ninety days prior to the next annual meeting of shareholders by the
Company's Secretary. The Nominating Committee met once during the 1996 Fiscal
Year.
On June 22, 1997, the Board of Directors established a special committee
(the "Special Committee") comprised of the entire Board of Directors other than
Jeffry Schoenbaum to consider and act on all matters in connection with the
Schoenbaum proxy contest. Mr. Skinner is the chairman of the Special Committee.
The Board of Directors formed the Special Committee in light of Jeffry
Schoenbaum's relation to Raymond
10
<PAGE> 12
Schoenbaum and Betty Schoenbaum and Jeffry Schoenbaum's positions as Vice
President and trustee of the Schoenbaum Family Foundation, which owns Shares
that are included in the Schoenbaums' Schedule 13D, and Treasurer of Schoenbaum
Corporation, a filing party under the Schoenbaums' Schedule 13D. Subject to
Tennessee law, the Special Committee is authorized to review, consider, act on,
and exercise all powers of the Board with respect to all matters relating to the
Schoenbaum proxy contest and any other party who files a Schedule 13D with the
SEC or solicits proxies in opposition to the Board of Directors, and to take any
and all actions that it may deem necessary, advisable or appropriate in
connection with the foregoing.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under the securities laws of the United States, the Company's directors,
executive officers and any persons holding more than ten percent of the Shares
are required to report their ownership of the Shares and any changes in that
ownership to the SEC and the New York Stock Exchange (the "NYSE"). These persons
also are required by SEC regulations to furnish the Company with copies of these
reports. Specific due dates for these reports have been established and the
Company is required to report in this Proxy Statement any failure to file by
these dates during the 1996 Fiscal Year. Based solely on a review of the reports
furnished to the Company or written representations from the Company's directors
and executive officers, the Company believes that all of these filing
requirements were satisfied by the Company's directors, executive officers and
ten percent holders during the 1996 Fiscal Year, with the exception of Ronald
Walker, who inadvertently failed to timely file one Form 4 reflecting a single
securities transaction.
11
<PAGE> 13
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information concerning persons,
other than officers or directors, who, as of the latest practicable date, are
the beneficial owners of more than 5% of the Shares. The Company has no other
class of equity securities outstanding.
<TABLE>
<CAPTION>
NAME AND ADDRESS SHARES PERCENT
OF BENEFICIAL OWNER BENEFICIALLY OWNED OF CLASS
------------------- ------------------ --------
<S> <C> <C>
R. L. Danner(1)............................................. 4,249,303 8.8%
2 International Drive, Suite 510
Nashville, TN 37217
Shoney's Shareholder Committee as a group(2)................ 3,866,791 8.0%
1640 Powers Ferry Road
Building Two, Suite 100
Marietta, Georgia 30067-6050
Betty J. Schoenbaum(3)...................................... 3,394,480 7.0%
5541 Gulf of Mexico Drive
Longboat Key, Florida 34228
First Union Corporation(4).................................. 2,485,675 5.1%
One First Union Center
Charlotte, NC 28288-0137
</TABLE>
- ---------------
(1) Includes 83,068 Shares owned by Mrs. Danner and 7,101 Shares held in trust
for Mr. Danner's son, over which Mrs. Danner has sole voting and investment
power. The information regarding Shares beneficially owned is based upon the
latest Schedule 13D filed by Mr. Danner.
(2) Includes 508,061 shares beneficially owned by Raymond D. Schoenbaum
(including 35,750 shares held by the Schoenbaum Family Foundation) and
3,394,480 shares beneficially owned by Betty J. Schoenbaum. See Note (3).
(3) Includes 2,703,388 Shares held by Schoenbaum Ventures Limited Partnership;
200,000 Shares held by the Alex Schoenbaum Charitable Trust; 35,750 Shares
held by the Schoenbaum Family Foundation; and 395,342 Shares held by a
revocable living trust, controlled by Mrs. Schoenbaum.
(4) First Union Corporation ("First Union") has sole voting power as to all
Shares and has sole power to dispose or to direct the disposition of
2,471,224 Shares. The information regarding Shares beneficially owned is
based upon the latest information provided to the Company by First Union as
of February 3, 1997.
12
<PAGE> 14
The following table sets forth the number of Shares held beneficially,
directly or indirectly, as of the Record Date, by all directors, by the
Company's Chief Executive Officer and the Company's four most highly compensated
executive officers during the 1996 Fiscal Year other than the Chief Executive
Officer (these five officers are hereinafter referred to as the "Named Executive
Officers") and by all directors and executive officers as a group, together with
the percentage of the outstanding Shares which such ownership represents. Unless
otherwise indicated, beneficial ownership consists of sole voting and investing
power based on Shares issued and outstanding.
<TABLE>
<CAPTION>
PERCENT OF
NAME OF SHARES CLASS (*DENOTES
BENEFICIAL OWNER BENEFICIALLY OWNED(1) LESS THAN 1%)
---------------- --------------------- ---------------
<S> <C> <C>
John W. Alderson..................................... 0 *
W. Craig Barber...................................... 94,359 *
Dennis C. Bottorff................................... 18,000 *
Carole F. Hoover..................................... 2,400 *
Victoria B. Jackson.................................. 4,094 *
Robert M. Langford................................... 15,000 *
C. Stephen Lynn...................................... 385,500 *
Jeffry Schoenbaum.................................... 583,192(2) 1.2%
B. Franklin Skinner.................................. 3,500 *
Cal Turner, Jr....................................... 28,000 *
Ronald E. Walker..................................... 26,341 *
All directors and executive officers as a group...... 1,346,193 2.8%
</TABLE>
- ---------------
(1) Includes Shares subject to options to purchase Shares which are exercisable
or become exercisable within 60 days after the Record Date, and are held by
the following persons: W. Craig Barber (85,000); Dennis C. Bottorff (2,000);
Carole F. Hoover (2,000); Victoria B. Jackson (2,000); Robert M. Langford
(15,000); C. Stephen Lynn (150,000); B. Franklin Skinner (3,000); Cal
Turner, Jr. (3,000); Ronald E. Walker (15,100); directors and executive
officers as a group (375,197). Such Shares are deemed to be outstanding for
the purpose of computing the percentage of outstanding Shares owned by such
person, but are not deemed to be outstanding for the purpose of computing
the percentage owned by any other person.
(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 Vice President and a trustee. 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, and is the brother of Raymond D. Schoenbaum and the son
of Betty J. Schoenbaum.
COMPENSATION OF DIRECTORS
Each director who is also an officer of the Company receives no additional
compensation for service on the Board. Directors who are not also officers of
the Company receive a quarterly retainer of $4,000 in addition
13
<PAGE> 15
to $1,000 plus expenses for each meeting of the Board they attend. Members of
the Board Committees receive $1,000 plus expenses for each Committee meeting
they attend.
Also, each non-employee director participates in the Shoney's, Inc.
Directors' Stock Option Plan (the "Directors' Plan"), which was approved by the
shareholders of the Company on March 19, 1991. Each non-employee director
received an option for 5,000 Shares as of June 7, 1990, the date the Board
adopted the Directors' Plan. Non-employee directors initially elected to the
Board subsequent to the adoption of the Directors' Plan receive an option for
5,000 Shares upon their election to the Board. Non-employee directors, upon the
fifth anniversary of the grant of their most recent option under the Directors'
Plan, are also awarded an additional option for 5,000 Shares. As of the end of
the 1996 Fiscal Year, there were three participants under the Directors' Plan
who held options covering 15,000 Shares at an exercise price of $10.375 per
share and two participants under the Directors' Plan who held options covering
10,000 Shares at an exercise price of $23.375 per Share and one participant
under the Director's Plan who held options covering 5,000 Shares at an exercise
price of $9.50 per share. During the 1996 Fiscal Year, there were no exercises
of options for Shares granted under the Directors' Plan.
EXECUTIVE COMPENSATION
The following table summarizes the compensation paid or accrued by the
Company during the three fiscal years ended October 27, 1996 to those persons
who: (i) served as the Company's CEO during the 1996 Fiscal Year; (ii) were the
Company's four most highly compensated executive officers (other than the CEO)
serving as of the end of the 1996 Fiscal Year; and (iii) would have been
included under item (ii) but for the fact that they were not serving as
executive officers at the end of the 1996 Fiscal Year.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION
NAME ----------------------------------------- -----------------------
AND OTHER RESTRICTED SECURITIES
PRINCIPAL FISCAL ANNUAL STOCK UNDERLYING ALL OTHER
POSITION YEAR SALARY($) BONUS($) COMPENSATION(1)($) AWARDS($) OPTIONS(#) COMPENSATION(1)($)
--------- ------ --------- -------- ------------------ ---------- ---------- ------------------
<S> <C> <C> <C> <C> <C> <C> <C>
C. Stephen Lynn
Chairman, Chief
Executive Officer 1996 491,747 -- 94,708(3) 167,063(3) 1,250,000 42,092(3)
and President.......... 1995 226,122 300,000 -- -- 250,000 262,879(3)
Robert M. Langford
Senior Executive
Vice President and
Chief Operating 1996 247,100 40,000 -- -- 250,000 --
Officer................ 1995 9,367 50,000 -- -- 75,000 --
W. Craig Barber
Senior Executive
Vice President, Chief
Administrative 1996 253,462 -- -- -- 300,000 11,532(5)(6)
Officer and Chief 1995 239,061 90,000 2,000(7) -- 150,000 4,755(5)
Financial Officer...... 1994 185,661 50,000 -- -- -- 3,964(5)
Ronald E. Walker 1996 135,955 64,800 131(4) -- 225,000 4,648(5)
Division President -- 1995 114,437 36,079 8,860(4)(7) -- 25,000 4,755(5)
Captain D's............ 1994 90,723 60,627 -- 769(2) 2,500 3,964(5)
John W. Alderson
Division President --
Casual Dining(8)....... 1996 168,092 31,868 1,593(7) -- 250,000 101,044(9)
</TABLE>
- ---------------
(1) As to "Other Annual Compensation" and "All Other Compensation," although
executive officers receive perquisites and other personal benefits (e.g.,
Company furnished automobiles), the aggregate amount of such perquisites or
other
14
<PAGE> 16
personal benefits does not exceed the lesser of: (a) $50,000; or (b) 10% of
the annual salary and bonus for any of the persons listed in the Summary
Compensation Table with the exception of Mr. Lynn and Mr. Alderson.
(2) Awards made under the Company's Stock Bonus Plan vest and are distributed at
the rate of 10% per year for four years and in full after five years. An
employee receives no dividends and has no other rights as a shareholder with
respect to Shares awarded under the Stock Bonus Plan until the Shares vest
and are distributed to the employee. At the time Shares are distributed, the
employee also receives a cash award equal to 25% of the value of the Shares
then being distributed to reimburse the employee for certain taxes. During
the 1996 Fiscal Year, 75 Shares were distributed to Mr. Walker. At the time
of the distribution, the Shares were valued at $10.25 per share.
(3) Mr. Lynn was elected as the Company's CEO on April 11, 1995. Mr. Lynn's
employment agreement is described below under "Employment Contracts." The
amount set forth in "All Other Compensation" for Mr. Lynn for 1995
represents the following: certain expenses incurred by Mr. Lynn in
connection with his relocation ($94,764); real estate commissions and
closing costs in connection with the sale of Mr. Lynn's former residences
($133,115); and insurance premiums paid on Mr. Lynn's behalf pursuant to his
employment agreement ($35,000). The amount set forth for 1996 represents the
following: certain moving and storage expenses ($7,092) and insurance
premiums ($35,000). The amount set forth for Mr. Lynn in "Restricted Stock
Awards" represents the value of 16,500 Shares granted pursuant to Mr. Lynn's
employment agreement, with a fair market value of $167,063 ($10.125 per
share) on the date of distribution. Mr. Lynn received a tax equalization
bonus of $93,973 in connection with this grant.
(4) Includes tax equalization bonus paid with respect to the receipt of Shares
under the Company's Stock Bonus Plan. See footnote 2.
(5) Includes amounts paid pursuant to the Company's restaurant group ownership
plans established in prior years, in which partnerships composed of
employees have acquired up to a 30% interest in groups of restaurants.
During the 1996 Fiscal Year, Messrs. Barber and Walker were each paid
$4,648.
(6) Includes amounts accrued, but not paid, to provide for possible future
payments under a salary continuation plan that covers certain present and
former employees of the Company. The plan provides for payments of up to
$37,500 per year for ten years following death, disability or retirement at
age 55. During the 1996 Fiscal Year, $6,884 was accrued for Mr. Barber.
(7) Includes matching contributions by the Company under the Company's
Supplemental Executive Retirement Plan.
(8) Mr. Alderson's employment with the Company terminated effective March 17,
1997.
(9) The amount set forth in "All Other Compensation" for Mr. Alderson represents
certain relocation expenses, principally real estate commissions and closing
costs in connection with the sale of Mr. Alderson's former residence
($58,008) and moving costs ($11,863).
OPTION GRANTS IN LAST FISCAL YEAR
Shown below is information concerning stock option grants to any Named
Executive Officer who was granted a stock option during the 1996 Fiscal Year.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF STOCK PRICE
INDIVIDUAL GRANTS APPRECIATION FOR OPTION TERM
- -------------------------------------------------------------------------------------------- ----------------------------
% OF TOTAL
OPTIONS
NUMBER OF GRANTED
SECURITIES TO EXERCISE
UNDERLYING EMPLOYEES OR BASE
OPTIONS IN FISCAL PRICE EXPIRATION
NAME GRANTED YEAR ($/SHARE)(1) DATE 0% ($) 5% ($) 10% ($)
---- ---------- ---------- ------------ ---------- ------ ------ -------
<S> <C> <C> <C> <C> <C> <C> <C>
Mr. Lynn............................... 250,000 6.40% 15.25 11-01-05 0 717,750 3,401,250
Mr. Lynn............................... 1,000,000 25.59% 9.63 08-21-03 0 3,918,000 9,131,000
Mr. Langford........................... 250,000 6.40% 9.63 08-21-03 0 979,500 2,282,750
Mr. Barber............................. 300,000 7.68% 9.63 08-21-03 0 1,175,400 2,739,300
Mr. Walker............................. 225,000 5.76% 9.63 08-21-03 0 881,550 2,054,475
Mr. Alderson........................... 50,000 1.28% 11.13 11-27-05 0 349,800 886,500
Mr. Alderson........................... 200,000 5.12% 9.63 08-21-03 0 783,600 1,826,200
</TABLE>
- ---------------
(1) The exercise price of the options granted is at least 100% of the fair
market value of the Shares on the date of grant.
15
<PAGE> 17
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
Shown below is information with respect to exercises by any Named Executive
Officer during the 1996 Fiscal Year of options to purchase Shares pursuant to
the Company's stock option plans and information with respect to unexercised
options to purchase Shares held by such officers as of the end of the 1996
Fiscal Year.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS HELD AT IN-THE-MONEY OPTIONS
OCTOBER 27, 1996 AT OCTOBER 27, 1996($)
---------------------------- ----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Mr. Lynn................................... 50,000 1,450,000 0 0
Mr. Langford............................... 15,000 310,000 0 0
Mr. Barber................................. 52,900 429,600 10,374 0
Mr. Walker................................. 9,600 248,900 0 0
Mr. Alderson............................... 0 250,000 0 0
</TABLE>
The Company has not awarded stock appreciation rights to any employee, has
had no long-term incentive plans, as that term is defined in SEC regulations,
and has no defined benefit or actuarial plans covering any employees of the
Company.
EMPLOYMENT CONTRACTS
The Company has employment agreements with Messrs. Lynn, Langford and
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 provide for terms expiring on October 27, 1999. Upon the occurrence of a
"Change in Control," the employment terms contained in each of the employment
agreements are automatically extended for additional two-year terms. Pursuant to
the employment agreements, a Change in Control is deemed to occur if: (i) any
person acquires 50% or more of the Company's outstanding voting securities; (ii)
all or substantially all of the assets of the Company are sold; or (iii) during
the term of the employment agreements, individuals who at the beginning of the
term constitute the members of the Board of Directors cease for any reason to
constitute a majority thereof, unless the election, or the nomination for
election by the Company's shareholders, of each new director was approved by a
vote of, in the case of Mr. Lynn, at least a majority, and in the case of
Messrs. Langford and Barber, at least two-thirds, of the directors then still in
office who were directors at the beginning of the term of the applicable
employment agreement. The removal of a majority of the current Board of
Directors and the election of a majority of the Schoenbaum nominees would
constitute a Change in Control under the employment agreements.
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 in
the sole discretion of the Board. Mr. Lynn is entitled to a base salary of
$500,000 from May 1, 1996 through April 30, 1997 and $550,000 from May 1, 1997
through April 30, 1998, provided, that, Mr. Lynn and the Board of Directors 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 of Directors
through the annual bonus plan. Bonuses for Mr. Lynn are based upon a formula to
be agreed upon by Mr. Lynn and the Company each year during the term of his
employment agreement.
Under the employment agreements for Messrs. Langford and Barber, any
termination without cause results in severance pay equal to the greater of (i)
the base salary and bonus paid or accrued on the employee's behalf for the
fiscal year of the Company immediately prior to the fiscal year in which the
termination took
16
<PAGE> 18
place or (ii) the amount due the employee for base salary and target bonuses
during the balance of the employment term, including any extention thereof
resulting from the occurrence of a Change in Control. Under Mr. Lynn's
employment agreement, any termination without cause results in severance pay
equal to the greater of (i) the base salary and bonus paid or accrued on Mr.
Lynn's behalf for the fiscal year of the Company immediately prior to the fiscal
year in which the termination took place or (ii) the amount due Mr. Lynn for
base salary during the balance of the employment term, including any extension
thereof resulting from the occurrence of a Change in Control. In addition,
termination without cause results in immediate vesting of all stock options,
other than performance-based options, held by Mr. Lynn and entitles Messrs.
Langford and Barber to be paid a cash amount equal to the unrealized gain that
they have in any unvested stock options, other than performance-based options.
Mr. Lynn's agreement also provides that if his employment is terminated without
cause, certain benefits (insurance, medical and automobile) continue until
expiration of the term of the agreement or his earlier coverage through other
employment. The agreements of Messrs. Langford and Barber provide for a similar
continuation of benefits, excluding the use of an automobile. In the event of
termination for cause or the employee's resignation other than within 90 days
following a Change in Control, the employee is entitled to no severance payments
under his employment agreement and all stock options that are not vested prior
to the effective date of the termination shall lapse and be void. Cause for
termination includes personal dishonesty, willful misconduct, breach of
fiduciary duty involving personal profit, conviction of any felony or crime
involving moral turpitude, material intentional breach of any provision of the
employment agreement, or unsatisfactory performance by the employee of his
duties as a result of alcohol or drug abuse.
In addition to the two-year extension of the employment term, in the event
of a Change in Control, each of Messrs. Lynn, Langford and Barber, at his
option, may terminate his agreement within 90 days after such Change in 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 balance
of the employment term, as extended. In the event of such a termination,
participation in other benefits is treated the same as if employment had been
terminated by the Company without cause and results in immediate vesting of all
stock options, other than performance-based options, held by Mr. Lynn and
entitles Messrs. Langford and Barber to be paid a cash amount equal to the
unrealized gain that they have in any unvested stock options, other than
performance-based options. Messrs. Lynn, Langford and Barber hold
performance-based options to acquire 1,000,000, 400,000 and 400,000 Shares,
respectively. In the event of any termination of their employment within 12
months following a Change in Control, such performance-based options would vest
in accordance with a formula based on the extent to which the fair market value
of the Shares at the time of such termination exceeds $9.625. In the event a
Change in Control occurs at the Special Meeting and Messrs. Lynn, Langford and
Barber terminate their employment with the Company within 90 days thereafter,
they would be entitled to receive approximately $ , $ and $ ,
respectively, pursuant to the terms of their employment agreements. In the event
Messrs. Lynn, Langford and Barber are terminated without cause following any
such Change in Control, they would be entitled to receive approximately
$ , $ and $ , respectively.
Mr. Lynn's agreement provides that he will receive 50,000 Shares of
restricted stock as follows: 16,500 Shares on each of April 11, 1996 and April
11, 1997, and 17,000 Shares on April 11, 1998. On these dates, Mr. Lynn also
receives a tax equalization bonus based on the value of the Shares. In the event
Mr. Lynn is terminated for cause or voluntarily terminates his employment other
than within 90 days following a Change in Control, he shall not be entitled to
receive any Shares of restricted stock that are not then distributable. Pursuant
to Mr. Lynn's agreement, he received options under the Company's Stock Option
Plan on November 1, 1996 as follows: 125,000 Shares at an exercise price equal
to the market price on that date;
17
<PAGE> 19
75,000 Shares at an exercise price of $16.75 per share; and 50,000 Shares at an
exercise price of $18.50 per share.
Each employment agreement terminates upon the death or disability of the
employee and the employee is entitled to certain benefits in the event of a
termination resulting from disability. Each employment agreement also contains a
covenant by the employee not to disclose any confidential information or trade
secrets of the Company and provides that, unless the employee is terminated
without cause, the employee may not compete with the Company within the United
States for one year.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The HRC Committee is composed of Hoover (Chairperson), Jackson and Turner.
None of these persons has at any time been an officer or employee of the Company
or any of its subsidiaries. In addition, there are no relationships among the
Company's executive officers, members of the HRC Committee or entities whose
executives serve on the Board or the HRC Committee that require disclosure under
applicable SEC regulations.
CERTAIN TRANSACTIONS
Mr. Bottorff, a director of the Company, is the President and Chief
Executive Officer and a member of the board of directors of First American
Corporation and its subsidiary, First American National Bank in Nashville,
Tennessee ("First American"). The Company has a line of credit with First
American for $20 million with interest payable monthly at First American's index
rate (8.5% at May 11, 1997) and had borrowed $4.1 million under this line at May
11, 1997. The line is available through July 31, 1998 with a three month
extension each quarter at the option of First American. In addition, First
American is one of the lenders under the Revolving Credit Agreement; its
interest in the $135.0 million outstanding at May 11, 1997 under the Revolving
Credit Agreement was approximately $3.75 million.
SOLICITATION OF REVOCATIONS OF AGENT DESIGNATIONS
Revocations of Agent Designations are being solicited by and on behalf of
the Board. All expenses of this solicitation, including the cost of preparing
and mailing this Revocation of Agent Designation Statement, will be borne by the
Company. In addition to solicitation by use of the mails, revocations of Agent
Designations may be solicited by directors, certain officers, and employees of
the Company in person or by telephone, telegram, advertisement, courier service,
or other means of communication. Such directors, officers and employees will not
be additionally compensated, but may be reimbursed for out-of-pocket expenses in
connection with such solicitation.
In addition, the Company has retained Innisfree M&A Incorporated
("Innisfree") and Morrow & Co., Inc. ("Morrow") to assist in the solicitation of
revocations of Agent Designations, each of which will be paid a fee not to
exceed $125,000, plus reimbursement for their reasonable out-of-pocket expenses.
The Company has also agreed to indemnify Innisfree and Morrow against certain
liabilities and expenses, including certain liabilities and expenses under the
Federal securities laws. It is anticipated that Innisfree and Morrow will employ
approximately ten and 100 persons, respectively, to solicit shareholders.
The Company has engaged Salomon Brothers Inc ("Salomon") to act as its
financial advisor in connection with this solicitation. Salomon will assist in
the solicitation of revocations of Agent Designations,
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which will be carried out by a team of individuals consisting of officers and
employees of Salomon. See "Participants in the Solicitation."
The Company estimates that its total expenditures relating to the
solicitation of revocation of Agent Designations (excluding costs representing
salaries and wages of regular employees and officers of the Company), will be
approximately $ . The Company to date has incurred estimated total
expenses of approximately $ .
PARTICIPANTS IN THE SOLICITATION
In addition to the directors of the Company, the following executive
officers of the Company may solicit revocations of Agent Designations in
opposition to the Schoenbaums. With the exception of Jeffry F. Schoenbaum, none
of the Company's directors or executive officers owns in excess of 1% of the
Shares outstanding. As of June 1, 1997, the executive officers owned the number
of Shares indicated: C. Stephen Lynn, Chairman of the Board, Chief Executive
Officer, and President, 385,500 Shares; Robert M. Langford, Senior Executive
Vice President and Chief Operating Officer, 15,000 Shares; W. Craig Barber,
Senior Executive Vice President, Chief Administrative Officer and Chief
Financial Officer, 92,859 Shares; F.E. McDaniel, Jr., Senior Vice President,
Secretary and Treasurer, 11,761 Shares; Gregory A. Hayes, Senior Vice President
and Corporate Controller, 8,565 Shares; Betty J. Marshall, Senior Vice
President -- Corporate Communications and Community Relations, 11,864 Shares;
and David A. Jordan, Senior Vice President -- Business Development, 6,000
Shares. The business address for each of the executive officers named above is
1727 Elm Hill Pike, Nashville, Tennessee 37210. The business address and number
of Shares owned by each director of the Company is as follows: Dennis C.
Bottorff, First American Corporation, First American Center, 4th & Union,
Nashville, TN 37237, 18,000 Shares; Carole F. Hoover, Greater Cleveland Growth
Association, 200 Tower City Center, 50 Public Square, Cleveland, OH 44113, 2,400
Shares; Victoria B. Jackson, DSS/ProDiesel, Inc., 922 Main Street, Nashville, TN
37206, 4,094 Shares; Jeffry F. Schoenbaum, 402 S. Westshore Blvd., Tampa, FL
33609, 583,192 Shares; B. Franklin Skinner, Southern Bell Center, 675 West
Peachtree Street, N.E., Suite 533, Atlanta, GA 30375, 3,500 Shares; and Cal
Turner, Jr., Dollar General Corporation, 104 Woodmont Blvd., Suite 500,
Nashville, TN 37205, 28,000 Shares.
In addition, the Company has engaged Salomon to act as its financial
advisor in connection with this solicitation. In connection with this
engagement, the Company (i) paid to Salomon an initial fee of $250,000, (ii) has
agreed to pay an additional $250,000 on the earlier of 30 days from the date of
the agreement or the Company's filing of final proxy materials and (iii) has
agreed to pay Salomon an additional fee of up to $1,250,000 (a substantial
portion of which is conditioned upon a successful resolution of the proxy
contest). The Company has agreed to reimburse Salomon for reasonable fees and
expenses (including those of Salomon's counsel) and to indemnify Salomon against
certain liabilities. Salomon is an investment banking firm that provides a full
range of financial services for institutional and individual clients. Salomon
does not admit that it or any of its directors, officers, or employees is a
"Participant" as defined in Schedule 14A promulgated under the Securities
Exchange Act of 1934 in the solicitation, or that Schedule 14A requires the
disclosure of certain information concerning Salomon. In connection with
Salomon's role as financial advisor to the Company, Salomon and certain
investment banking employees of Salomon may communicate by telephone, in person
or otherwise with a limited number of institutions, brokers or other persons who
are shareholders of the Company. In the normal course of its business, Salomon
regularly buys and sells the Shares for its own account and for the accounts of
its customers, which transactions may result from time to time in Salomon and
its associates having a net "long" or net "short" position in the Shares or
option contracts with other derivatives in or relating to the Company's
securities. As of June 25, 1997, Salomon had no
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<PAGE> 21
positions in the Company's securities. Salomon will assist in the solicitation
of revocations of Agent Designations, which will be carried out by a team of
individuals consisting of officers and employees of Salomon numbering
approximately ten persons.
SHARE TRANSACTIONS BY PARTICIPANTS
The following table sets forth all purchases and sales of the Company's
Shares during the past two years by the directors of the Company and those
executive officers that are participants in the solicitation of proxies:
<TABLE>
<CAPTION>
NAME SHARES BOUGHT SHARES SOLD DATE
- ---- ------------- ----------- --------
<S> <C> <C> <C>
W. Craig Barber.................................... 0 0 N/A
Dennis C. Bottorff................................. 8,000 0 05/08/97
Gregory A. Hayes................................... 413 0 12/29/95
820 0 12/31/95
Carole F. Hoover................................... 0 0 N/A
Victoria B. Jackson................................ 0 0 N/A
David Jordan....................................... 1,000 0 03/01/96
Robert M. Langford................................. 0 0 N/A
C. Stephen Lynn.................................... 100,000 0 04/08/97
2,500 0 12/31/96
100,000 0 10/20/95
50,000 0 04/11/95
Betty Marshall..................................... 100 0 12/31/96
664 0 12/31/95
100 0 12/29/95
E.F. McDaniel, Jr.................................. 5,250 8,250 01/30/97
150 0 12/31/96
886 0 12/31/95
150 0 12/29/95
Jeffry F. Schoenbaum............................... 0 0 N/A
B. Franklin Skinner................................ 0 0 N/A
Cal Turner, Jr..................................... 10,000 0 11/04/96
</TABLE>
SHAREHOLDER PROPOSALS FOR 1998 PROXY MATERIALS
The Board will make provision for presentation of proposals by shareholders
at the 1998 annual meeting of shareholders provided such proposals are submitted
in accordance with the Company's Bylaws by eligible shareholders. In order for
any such proposals to be included in the proxy materials for consideration at
the 1998 annual meeting, the proposals, which must comply with relevant SEC
regulations, should be mailed to F.E. McDaniel, Jr., Senior Vice President,
Secretary and Treasurer, Shoney's, Inc., 1727 Elm Hill Pike, P.O. Box 1260,
Nashville, Tennessee 37202, and must be received no later than November 26,
1997.
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APPENDIX A
SHONEY'S, INC.
THIS REVOCATION CARD IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
SHONEY'S, INC. IN OPPOSITION TO THE SOLICITATION OF AGENT DESIGNATIONS BY
RAYMOND D. SCHOENBAUM AND BETTY J. SCHOENBAUM.
The undersigned shareholder, acting with regard to all shares of common
stock, par value $1.00 per share, of Shoney's, Inc. entitled to vote by such
shareholder, hereby REVOKES any previously executed Agent Designation requesting
the demand for a special meeting of shareholders (the "Special Meeting")
described in the definitive Solicitation Statement of Raymond D. Schoenbaum and
Betty J. Schoenbaum. THE BOARD OF DIRECTORS STRONGLY RECOMMENDS THAT YOU REVOKE
ANY PREVIOUSLY EXECUTED AGENT DESIGNATION REQUESTING THE DEMAND FOR THE SPECIAL
MEETING BY PROPERLY SIGNING, DATING AND RETURNING THIS REVOCATION CARD IN THE
POSTAGE-PAID ENVELOPE PROVIDED.
PLEASE SIGN THIS REVOCATION CARD EXACTLY AS YOUR NAME APPEARS HEREON. IF SIGNING
AS ATTORNEY, ADMINISTRATOR, EXECUTOR, GUARDIAN, OR TRUSTEE, PLEASE GIVE TITLE AS
SUCH. IF A CORPORATION, THIS SIGNATURE SHOULD BE THAT OF AN AUTHORIZED OFFICER
WHO SHOULD STATE HIS OR HER TITLE. IF A PARTNERSHIP, SIGN IN PARTNERSHIP NAME BY
AUTHORIZED PERSON.
--------------------------------
Signature
--------------------------------
Signature (if held jointly)
Dated: , 1997
--------------------
