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PRELIMINARY PROXY STATEMENT
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 9, 1997
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. 2)
Filed by the Registrant [_]
Filed by a Party other than the Registrant [X]
Check the appropriate box:
[X] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
SHONEY'S INC.
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(Name of Registrant as Specified In Its Charter)
RAYMOND D. SCHOENBAUM and BETTY J. SCHOENBAUM
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
......................................................................
(2) Aggregate number of securities to which transaction applies:
......................................................................
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
.....................................................................
(4) Proposed maximum aggregate value of transaction:
.....................................................................
(5) Total fee paid:
.....................................................................
[_] Fee paid previously with preliminary materials.
.....................................................................
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount previously paid: ______________________________________________
(2) Form, Schedule or Registration Statement No.: ________________________
(3) Filing Party: ________________________________________________________
(4) Date Filed: __________________________________________________________
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PRELIMINARY PROXY MATERIALS DATED JULY 9, 1997
SUBJECT TO COMPLETION
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The information included herein is as it is expected to be when the Definitive
Proxy Statement is mailed to shareholders of Shoney's, Inc. This Proxy
Statement will be revised to reflect actual facts at the time of the filing of
the Definitive Proxy Statement.
No GOLD Proxy Card is included with these materials.
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PROXY STATEMENT OF
THE
SHONEY'S SHAREHOLDERS' COMMITTEE
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SPECIAL MEETING OF THE SHAREHOLDERS
OF
SHONEY'S, INC.
----------------
We are sending this Proxy Statement to you as one of the holders (the
"Shareholders") of the common stock, $1.00 par value (the "Common Stock"), of
Shoney's, Inc., a Tennessee corporation ("Shoney's" or the "Company"). This
Proxy Statement relates to the solicitation of proxies by Raymond D.
Schoenbaum and Betty J. Schoenbaum (the "Shoney's Shareholders' Committee")
for use at a Special Meeting of the Shareholders scheduled for 10 a.m. local
time, Tuesday, August 19, 1997, in the Governor's Ballroom at the Opryland
Hotel, 2800 Opryland Drive, Nashville, Tennessee 37214, or any adjournments or
postponements thereof (the "Special Meeting"). We are soliciting proxies to
remove the current Board of Directors of the Company (the "Board"), to elect
our nominees to the Board and to adopt certain other resolutions (including
certain amendments to the Bylaws of the Company) to facilitate the replacement
of the current members of the Board.
This Proxy Statement and the accompanying GOLD Proxy Card are first being
furnished to Shareholders on or about July , 1997.
WE URGE YOU TO SIGN, DATE AND RETURN THE GOLD PROXY CARD (THE "GOLD PROXY") IN
FAVOR OF THE SPECIAL MEETING PROPOSALS DESCRIBED HEREIN.
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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 vote, you should read this entire document
carefully.
Q: WHO ARE WE?
A: Raymond D. Schoenbaum and Betty J. Schoenbaum (the Shoney's Share-holders'
Committee) own together approximately 8.0% of Shoney's com-mon stock. Alex
Schoenbaum, the fa-ther 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 Share-
holders' Committee became one of the two largest shareholders of Shoney's.
Raymond D. Schoenbaum has extensive experience in the family and casual
restaurant industry. He has been actively involved in the restaurant industry
since 1974, and between 1985 and 1995 he developed and op-erated 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 di-rector
of Applebee's following the sale.
Q: WHAT ARE WE ASKING YOU TO DO?
A: We are asking you to vote to re-move the current members of the Board of
Shoney's and replace them with our nominees and to approve certain resolutions
amending the Bylaws of Shoney's in a manner de-signed to facilitate the replace-
ment of the current Board members.
Q: WHY ARE WE ASKING YOU TO REPLACE
THE CURRENT DIRECTORS?
A: We have been disappointed with Shoney's performance and the per-formance 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 Ex-change Commission indicating our
disappointment with the Company's performance and stock price in re-cent years
and our consideration of alternatives with respect to our investment in
Shoney's. In compari-son, over the same period, the Standard & Poor's 500 Index
in-creased 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 con-cerned about the significant loss in market value that has been
suf-fered by all of Shoney's sharehold-ers. 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.
We believe that, under the direc-tion of the current Board and man-agement of
Shoney's, there has been a deterioration in the quality of many of Shoney's
restaurants and the business and reputation of Shoney's. Over the last several
years, it has been our experience that the restaurant industry has become more
competitive, and cus-tomers now have many more choices. As a result, customers
are more in-terested 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, in-stead of evolving to meet the pref-erences of today's
customers, Shoney's approach is outdated and is no longer in touch with the cus-
tomers. Indeed, we believe that the quality of the food and service provided by
Shoney's has been re-duced, rather than enhanced, in re-cent years. After two-
year's under the current management, it is our view that Shoney's condition has
not only failed to improve, but, in fact, has deteriorated. In the sec-ond
quarter of 1997, during what the current Board and management consider to be a
turnaround, same store sales for all company-owned restaurants declined 4.3%,
after closing 57 under-performing restau-rants during the first two quar-ters.
Accordingly, we believe that competitors are outperforming Shoney's, while
Shoney's customer base and profits have continued to decline. For example,
between 1990 and 1996, excluding extraordinary items and special charges,
Shoney's earnings per share declined 11.0%, while, as examples, the earnings per
share of Cracker Barrel, Applebee's and IHOP, three of Shoney's competitors,
increased 271.9%, 838.5% and 267.9%, respec-tively.
Q: WHY SHOULD YOU VOTE FOR OUR
NOMINEES?
A: Since we are significant share-holders of Shoney's, our interests as
shareholders are aligned
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with yours and we have every incentive to increase shareholder value. Raymond
D. Schoenbaum has extensive experience in the restaurant industry and intends
to use this experience to rebuild Shoney's.
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 meet ing our concerns about Shoney's
performance and a need for a sig nificant change in the direction of Shoney's.
Unfortunately, the Board responded in a manner which we be lieve demonstrates a
lack of unde standing of the urgency of Shoney's situation and the lack of
leader ship under current management. Rather than providing Raymond D.
Schoenbaum, as a representative of an 8% shareholder, with the oppor tunity to
meet with the Board 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 fu ture" for us to meet with the Board or "a committee
of the Board." We did not submit our suggestions in writing to the Board
because, as stated above, we do not believe the Board understands the urgency of
Shoney's situation and we believe the request for submission of our suggestions
was an attempt at de lay. Because of Shoney's continued poor performance and the
Board's refusal to meet with Raymond D. Schoenbaum at the June Board meet ing
despite the urgency of the sit uation, we have concluded that the Board does not
appreciate the need for a significant change in the di rection of Shoney's and
we believe that we are left with no alterna tive but to present our case di
rectly to you, the shareholders and owners of Shoney's.
Q: WHO ARE OUR NOMINEES?
A: Our 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. Information regarding their background and experience is
contained on pages 12 and 13.
Q: HOW MANY VOTES DOES IT TAKE TO ELECT THE NEW DIRECTORS?
A: Once the current directors are removed, the shareholders may elect new
directors. Directors are elected by a plurality of the votes. In other words,
the seven directors who obtain the most votes will be elected.
Q: WHOM SHOULD YOU CALL IF YOU HAVE QUESTIONS ABOUT GIVING YOUR PROXY OR NEED
ASSISTANCE IN VOTING YOUR SHARES?
A: MacKenzie Partners, Inc. at (212) 929-5500 (collect) or call Toll Free (800)
322-2885.
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IMPORTANT
Please review this document and the enclosed materials carefully. It does
not matter how many shares you own. YOUR PROXY IS VERY IMPORTANT. If you are
unable to attend the Special Meeting in person, your proxy is the ONLY means
available for you to vote. Please vote FOR each of the proposals, including
the amendments to the Bylaws, the removal of the current Board members and the
election of the nominees of Raymond D. Schoenbaum and Betty J. Schoenbaum (the
"Shoney's Shareholders' Committee" or "we") to the Board, by signing, marking,
dating and mailing the enclosed GOLD Proxy as soon as possible.
Unless you indicate otherwise, the GOLD Proxy authorizes the persons named
in the proxy to vote, and such persons will vote, properly executed and duly
returned proxies FOR the amendments to the Bylaws described in this document,
FOR the removal of the current directors, FOR the election of the Shoney's
Shareholders' Committee's nominees to the Board, and FOR the Omnibus
Resolution described in this document which requires the proposals at the
Special Meeting to be considered in a specified order. We are not presently
aware of any other matters to be brought before the Special Meeting. However,
should other matters be brought before the Special Meeting, the persons named
in the proxies will vote the shares in a manner they consider to be in the
best interests of the Shareholders and Shoney's.
If you own shares of Shoney's but your stock certificate is held for you by
a brokerage firm, bank or other institution, it is very likely that the stock
certificate is actually in the name of the brokerage firm, bank or other
institution. If so, only that brokerage firm, bank or other institution can
execute the GOLD Proxy and vote your shares of Common Stock. The brokerage
firm, bank or other institution holding the shares for you is required to
forward proxy materials to you and solicit your instructions with respect to
the granting of proxies; it cannot vote your shares unless it receives your
specific instructions.
If you have any questions about the proxy or need assistance in voting your
shares, please call:
[LOGO OF MACKENZIE PARTNERS, INC. APPEARS HERE]
156 Fifth Avenue
New York, New York 10010
(212) 929-5500 (Collect)
or call Toll Free
(800) 322-2885
YOU MAY VOTE FOR THE AMENDMENTS TO THE BYLAWS, FOR THE REMOVAL OF ALL
DIRECTORS, FOR THE ELECTION OF THE NOMINEES AND FOR THE OMNIBUS RESOLUTION BY
SIGNING THE GOLD PROXY CARD, AND MARKING, DATING AND RETURNING IT IN THE
ENCLOSED POSTAGE PAID ENVELOPE. IF YOU HAVE ALREADY SUBMITTED A PROXY TO THE
SHONEY'S BOARD, YOU MAY CHANGE YOUR VOTE BY SIGNING, MARKING, DATING AND
RETURNING THE GOLD PROXY, WHICH MUST BE DATED AFTER THE PROXY YOU SUBMITTED TO
SHONEY'S.
Only Shareholders of record at the close of business on , 1997 (the
"Record Date") are entitled to vote at the Special Meeting. We believe that as
of the close of business on the Record Date, there were shares of
Common Stock of Shoney's issued and outstanding and entitled to vote.
Shareholders have one vote for each share of Common Stock they own with
respect to all matters to be considered at the Special Meeting. Directors can
be removed from office by a vote of a majority of the votes cast. Once the
directors are removed, Shareholders can elect new directors through a
plurality of the votes cast.
We are asking you to return your completed, signed and dated GOLD Proxy Card
as soon as possible.
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REASONS FOR THE SOLICITATION
The Shoney's Shareholders' Committee beneficially own 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 historically has been an innovator in the restaurant
industry, and its stores historically have offered quality dining at a good
price/value to the customers. Because of the perception by customers of
Shoney's good price/value, Shoney's experienced consistent growth from its
beginning until the late 1980s.
We believe that, under the direction of the current Board of Directors (the
"Board") and management of Shoney's, there has been a deterioration in the
quality of many of Shoney's restaurants and the business and reputation of
Shoney's. Over the last several years, it has been our experience that the
restaurant industry has become more competitive, and customers now have many
more choices. As a result, customers are more interested in better price/value
than in the past. In our view, the Shoney's Board and management have failed
to respond to these changing customer preferences and that, instead of
evolving to meet the preferences of today's customers, Shoney's approach has
become outdated and is no longer in touch with the customers. Indeed, we
believe that the quality of the food and service provided by Shoney's has been
reduced, rather than enhanced, in recent years.
After two years under the current management, it is our view that Shoney's
condition has not only failed to improve, but, in fact, has deteriorated. As
reported in Shoney's earnings release issued on June 18, 1997, Shoney's has
suffered a decline in comparable store sales for its core restaurants.
Comparable store sales for Shoney's core restaurants declined 2.9% in the
second quarter of 1997 and have declined 2.2% year-to-date. Comparable store
sales for franchised restaurants declined 2.1% in the second quarter of 1997,
and have declined 0.5% year-to-date. Comparable store sales for all company-
owned Shoney's restaurants declined 3.6% in the second quarter of 1997, and
have declined 3.2% year-to-date, including menu price increases of 2.3% and
2.4%, respectively. Comparable store sales for Shoney's Captain D's
restaurants declined 4.6% in the second quarter of 1997, and have declined
1.2% year-to-date, including a menu price increase of 1.1% for both the second
quarter and year-to-date. Comparable store sales for all company-owned
restaurants declined 4.3% in the second quarter of 1997, after closing 57
under-performing restaurants during the first two quarters and including a
menu price increase of 1.8%. Accordingly, we believe that competitors are
outperforming Shoney's, while Shoney's customer base and profits have
continued to decline. For example, between 1990 and 1996, excluding
extraordinary items and special charges, Shoney's earnings per share declined
11.0% while, as examples, the earnings per share of Cracker Barrel Old Country
Store, Inc., Applebee's International Inc. ("Applebee's") and IHOP Corp.,
three of Shoney's competitors, increased 271.9%, 838.5% and 267.9%
respectively.
In addition, as reported in Shoney's Quarterly Report on Form 10-Q for the
quarter ended May 11, 1997 (the "May 1997 10-Q") filed with the SEC pursuant
to the Securities Exchange Act of 1934 (the "Exchange Act"), Shoney's does not
believe its cash flow from operations, supplemented by its available lines of
credit, to
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be sufficient to meet these obligations and to provide cash needed for capital
expenditures. As reported in May 1997 10-Q, Shoney's has $115 million of debt
and litigation payments due in the next twelve months and expects to incur
cash interest expense of approximately $32 million in that same time period,
resulting in total cash needs before income taxes and capital expenditures of
approximately $147 million.
On June 5, 1997, we requested to meet with the Board at its two-day retreat
in mid-June to discuss our concerns about Shoney's continued poor performance.
We had hoped to share with the Board at such meeting our concerns about
Shoney's performance and a need for a significant change in the direction of
Shoney's. Unfortunately, the Board responded in a manner which we believe
demonstrates a lack of understanding of the urgency of Shoney's situation and
the lack of leadership under the current management. Rather than providing
Raymond D. Schoenbaum, as a representative of an 8% shareholder, with the
opportunity to meet with the Board for a short time at some point during the
Board's two-day retreat, the Board suggested that we submit our suggestions in
writing, after which the Board would "consider a time in the future" for us to
meet with the Board or "a committee of the Board." We did not submit our
suggestions in writing to the Board because, as stated above, we do not
believe the Board understands the urgency of Shoney's situation and we believe
the request for a submission of our suggestions was an attempt at delay.
Because of Shoney's continued poor performance and the Board's refusal to meet
with Raymond D. Schoenbaum at the June Board meeting despite the urgency of
the situation, we have concluded that the Board does not appreciate the need
for a significant change in the direction of Shoney's and we believe that we
are left with no alternative but to present our case directly to you, the
shareholders and owners of Shoney's.
Since we are significant shareholders of Shoney's, our interests as
shareholders are aligned with yours and we have every incentive to increase
shareholder value. Raymond D. Schoenbaum has been actively involved in the
restaurant industry since 1974, and he has extensive experience in the
business, including substantial experience in the full service dining industry
and in the quality fast food market. From 1974 to 1985, Raymond D. Schoenbaum
successfully grew a Wendy's franchisee (Restaurants Systems, Inc.) to in
excess of 30 stores, which he sold to Wendy's in 1985 for approximately $40
million. Between 1985 and 1995 he developed and operated Ray's on the River
and Rio Bravo, a successful chain of casual restaurants. In 1995, Raymond D.
Schoenbaum sold Ray's on the River and Rio Bravo to Applebee's for
approximately $70 million, and became a director of Applebee's following the
sale. In addition, Raymond D. Schoenbaum has been involved with the turn-
around of companies in the restaurant and restaurant services industries,
including Squirrel Companies, Inc., a manufacturer of restaurant point-of-
source computer equipment, as the former chairman of the board, and Max &
Erma's Restaurants, Inc., as a former member of the board and the largest
shareholder.
In order to change the direction of Shoney's in a positive manner, we now
solicit your vote in favor of resolutions to be considered at the Special
Meeting removing the current Board members and replacing them with our
nominees. In addition, at the Special Meeting, the Shareholders also will be
asked to consider certain resolutions amending the Bylaws of the Company in a
manner designed to facilitate the replacement of the current Board members.
Once elected, our nominees to the Board intend to replace certain members of
the management of the Company, and to appoint Raymond D. Schoenbaum as the
Chairman and Chief Executive Officer of the Company. While we believe that in
order for us to revitalize Shoney's some members of the current management of
the Company will be replaced, we do not have any current plans to remove any
specific members of management other than C. Stephen Lynn (the current
Chairman of the Board, President and Chief Executive Officer) and W. Craig
Barber (the current Chief Administrative Officer, Chief Financial Officer and
Senior Executive Vice President).
If we are successful in electing our nominees to the Board, we intend to
keep Shoney's in Nashville and work together from this home-base with Shoney's
Shareholders, employees and franchisees to restore the quality of Shoney's
restaurants and the business and reputation of Shoney's. Our plans to
revitalize the Company focus on operating, marketing and financial solutions.
The elements of the operating strategy include: (i) focusing the corporate
culture back on the customer, (ii) reducing management turnover, (iii)
enhancing food quality and reducing menu items, (iv) repositioning Shoney's
concept so it is more contemporary, (v) enhancing information technology
systems and (vi) rationalizing the use and economics of the food bar. The
elements of the marketing
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strategy include: (i) making changes based on a thorough understanding of
customer preferences, (ii) using brand names to enhance image and expand
customer base, (iii) making all aspects of Shoney's concept internally
consistent with enhanced positioning and (iv) making franchisees partners in
the marketing effort. The elements of the financial strategy include: (i)
renewing the focus on improving same store sales volumes, (ii) improving
operating margins, (iii) addressing the current debt structure, (iv)
strengthening the financial controls and (v) using a refranchising strategy to
strengthen the entire system.
We filed a more detailed version of our action plan with the SEC on June 25,
1997, as amended on June 26, 1997. Copies of the action plan can be obtained
from the Public Reference Section of the SEC, 450 Fifth Street, N.W.,
Washington, D.C. 10549, at prescribed rates. The action plan may also be
obtained through the SEC's Internet address at "http://www.sec.gov".
The proposals to be considered at the Special Meeting (the "Special Meeting
Proposals") include the following, in addition to other proposals to take
actions incidental to the removal and replacement of current Board members:
1. To repeal any and all amendments made by the Board to the Bylaws of the
Company, as filed with the SEC as Exhibits 3(ii) and 4.2 to the
Company's Quarterly Report on Form 10-Q for the quarter ended February
18, 1996, including the June 22 Bylaw Amendments (as defined below), but
other than those provisions which were duly approved by the Shareholders
and those provisions which under Tennessee law cannot be repealed by the
Shareholders, and to provide that, without the approval of the
Shareholders, the Board may not thereafter amend any section of the
Bylaws affected by such repeal or adopt any new Bylaw provision in a
manner which serves to reinstate any repealed provision or any similar
provision (the "Bylaws Repeal Resolution");
2. To amend Article III, Section 1 of the Bylaws of the Company to fix the
number of directors at seven, and provide that, without the approval of
the Shareholders, the Board may not thereafter amend or repeal such
Section or adopt any new Bylaw provision which is inconsistent in any
manner with such Section (the "Size of Board Resolution");
3. To amend Article III, Section 3 of the Bylaws of the Company to provide
that the directors may be elected by the Shareholders at annual meetings
and special meetings of the Shareholders of the Company, and provide
that, without the approval of the Shareholders, the Board may not
thereafter amend or repeal such Section or adopt any new Bylaw provision
which is inconsistent in any manner with such Section (the "Election
Procedure Resolution");
4. To remove all of the members of the Board of Directors, including
without limitation, any of the following who are members of the Board as
of the Special Meeting: Dennis C. Bottorff, Carole F. Hoover, Victoria
B. Jackson, C. Stephen Lynn, Jeffry F. Schoenbaum, B. Franklin Skinner
and Cal Turner, Jr.; provided, however, that if, notwithstanding the
Omnibus Resolution (as defined below), any nominees of the Shoney's
Shareholders' Committee have been elected to the Board prior to the time
this Resolution is adopted, such nominees of the Shoney's Shareholder's
Committee shall not be removed from the Board (the "Director Removal
Resolution"); and
5. To elect the seven nominees of the Shoney's Shareholders' Committee, and
all other persons nominated by us (the "Nominees"), to fill all
vacancies on the Board for the balance of the terms of the present
directors and until their successors are elected and qualified (the
"Election of Directors Resolution"). The Nominees are J. Michael Bodnar,
Lawrence A. Cunningham, Nathaniel R. Goldston III, Michael A. Leven,
Raymond D. Schoenbaum, William A. Schwartz and Richard F. Sherman.
Biographical information on each of the Nominees is set forth under the
caption "The Special Meeting Proposals."
Further, the Shareholders will be asked at the Special Meeting to consider an
Omnibus Resolution (the "Omnibus Resolution") setting forth the following
order in which the resolutions will be voted upon by the Shareholders:
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1. The Omnibus Resolution;
2. The Bylaws Repeal Resolution;
3. The Size of Board Resolution;
4. The Election Procedure Resolution;
5. The Director Removal Resolution; and
6. The Election of Directors Resolution.
After we commenced the call of the Special Meeting to adopt the resolutions
described above, on June 22, 1997 the Board took action which we believe was
designed to entrench themselves and management and to delay the Special
Meeting and your opportunity to change the direction of the Company in a
positive manner. On that day the Board adopted the amendments to the Bylaws
(the "June 22 Bylaw Amendments") set forth in the Restated Bylaws of the
Company (the "Restated Bylaws"), attached as Exhibit 3 to the Company's 8-K
filed with the SEC on June 23, 1997. These June 22 Bylaw Amendments purported
to eliminate the right of Shoney's shareholders to set the date, time and
place of the Special Meeting. In addition, the June 22 Bylaw Amendments
purported to establish lengthy time frames relating to the call of the Special
Meeting and the giving of notice of the Special Meeting and to change the
procedure for setting the record date for the Shareholders entitled to call
the Special Meeting, all of which would have ostensibly permitted the Board to
substantially delay the date of the Special Meeting. The June 22 Bylaw
Amendments also sought to permit the current officers and employees of
Shoney's to serve as inspectors of election at the Special Meeting.
We do not believe that the June 22 Bylaw Amendments had any effect on the
action that we took in initiating our efforts to call the Special Meeting in
reliance upon the then-existing Bylaws of the Company. In fact, the attempt by
the Board, in our view, to manipulate the corporate governance process for
their benefit and the benefit of management through the adoption of the June
22 Bylaw Amendments is yet another indication to us that Shoney's needs new
leadership. At this critical juncture, rather than engage in what we view as
the manipulation of the Bylaws, we believe that the appropriate course of
action is to let the real owners of Shoney's decide as soon as possible the
future direction of the Company. We, thus, responded to the Board's action
with a letter to the Board requesting that it rescind these amendments and
agree to our previously announced date for the Special Meeting, August 19,
1997.
On June 26, 1997, Shoney's filed a claim in the Chancery Court for the State
of Tennessee, Twentieth Judicial District at Nashville, seeking a declaration
of the validity of the June 22 Bylaw Amendments and the invalidity of our
actions with respect to setting the record date for the Shareholders entitled
to call the Special Meeting. In response, the Shoney's Shareholders' Committee
filed litigation papers on June 30, 1997 seeking to remove the lawsuit to the
U.S. District Court for the Middle District of Tennessee and requesting the
court, among other things, to promptly:
1. Declare invalid the June 22 Bylaw Amendments which were designed to
frustrate the Shoney's Shareholders' Committee's setting of June 16,
1997 as the record date for Shareholders entitled to call and demand the
Special Meeting,
2. Declare invalid the June 22 Bylaw Amendments which were designed to
frustrate the Shoney's Shareholders' Committee's efforts to call the
Special Meeting for August 19, 1997, and
3. Require Shoney's to make available to the Shoney's Shareholders'
Committee certain documents and records relating, among other things, to
the identity of the beneficial owners of Shoney's stock which Shoney's
has refused to provide.
EXECUTING A GOLD PROXY CARD WILL ENABLE YOU--AS AN OWNER OF THE COMPANY--TO
SEND A CLEAR MESSAGE THAT YOU ARE DISSATISFIED WITH SHONEY'S PERFORMANCE AND
WANT TO ELECT A BOARD OF DIRECTORS THAT WILL GUIDE YOUR COMPANY IN THE FUTURE.
WE STRONGLY RECOMMEND THAT YOU VOTE TO AMEND THE BYLAWS, REMOVE THE CURRENT
DIRECTORS, ELECT THE NOMINEES AND VOTE IN FAVOR OF THE OMNIBUS RESOLUTION.
8
<PAGE>
BACKGROUND AND RECENT EVENTS
On April 25, 1997, we filed a Schedule 13D with the SEC indicating that we
have been disappointed with the Company's performance and the Company's stock
price in recent years. At that time we stated that we were reviewing various
alternatives with respect to our investment in the Company. These alternatives
included (i) holding discussions with third parties or with members of the
management or the Board in which we would suggest or take a position with
respect to potential changes in the operations, management or business of the
Company as a means of enhancing shareholder value, (ii) seeking the removal of
certain or all of the members of the Board, (iii) nominating our own
candidates to be elected to the Board, (iv) proposing changes in the
management of the Company and (v) acquiring additional shares in the Company.
After filing the Schedule 13D on April 25, 1997, we continued to review these
alternatives. We also met with certain members of the management of the
Company and certain members of the Board to discuss the Company's financial
condition and performance. On June 2, 1997, we amended our Schedule 13D to
reflect that we sent a letter to the Board requesting that Raymond D.
Schoenbaum be permitted to address the Board at their two-day retreat in mid-
June. The letter stated in full as follows:
June 2, 1997
Board of Directors of Shoney's, Inc.
1727 Elm Hill Pike
Nashville, Tennessee 37210
Re: Meeting of the Shoney's, Inc. Board of Directors
Ladies and Gentlemen:
As you know from our SEC filing last month, my mother and I are
disappointed with Shoney's performance and the performance of Shoney's
stock price in recent years. As one of the largest shareholders of
Shoney's, we are obviously concerned about the significant loss in
market value that has been suffered by all of Shoney's shareholders in
recent years. Moreover, we regard Shoney's as a legacy created by my
father Alex, who founded the company in 1947, and, on a personal note,
it has been very distressing to us to watch Shoney's struggle in
recent years.
As we indicated in our SEC filing, we are in the process of
evaluating various possible alternatives with respect to our
investment in Shoney's. During this process, we have been reviewing in
detail the publicly available data regarding the business, financial
condition and operating results of Shoney's, and we have had the
opportunity to discuss this publicly available data with certain
members of Shoney's management. This process is ongoing, and, while at
this time we have not decided on a course of action, we expect to make
further progress during the next two weeks.
Based on our review thus far, we believe that Shoney's is at a
critical juncture and that the actions to be taken by Shoney's Board
to address the current situation will play a crucial role in
determining Shoney's future. For this reason, I would like to meet
with the Board at its meeting on June 17, 1997 to discuss Shoney's
current situation and our concerns regarding the company's future. By
that time, we expect to be far enough along in our evaluation process
to present to you some concrete alternatives for addressing Shoney's
current problems.
We believe that this exchange of information and ideas will be very
useful to the Board as it gathers information and formulates a plan to
address Shoney's situation in a manner which is beneficial to all of
Shoney's shareholders. In light of the company's recent performance,
the Board will be faced with some difficult decisions in the time
ahead. My successful experiences in the family and casual restaurant
industry, including most recently my founding and development of Ray's
on the River and the Rio Bravo restaurant chain which I sold to
Applebee's International Inc. in 1995,
9
<PAGE>
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
experienced. We believe that we have the proper business strategy and
management team in place to improve the performance of the Company. As
with all business turnarounds, time and patience are needed before one
can determine whether the business judgment of the leadership is
proven correct.
We appreciate your offer to present to the Board on June 17 some
concrete alternatives for addressing what you view to be Shoney's
current situation. Unfortunately, as you may know, our next Board
meeting has been planned for many months as part of a working retreat
meeting and the agenda is full without any available open time for you
to make your requested presentation. However, we encourage you to
submit your concrete alternatives in writing to us before that meeting
so that your ideas may be taken into account in our discussions. After
we have had the opportunity to review your alternatives, we will
consider a time in the future when you could personally discuss those
with the Board or a committee of the Board.
Management of Shoney's has consistently welcomed discussions with
you and have talked with you on a number of occasions recently to
exchange information and ideas. We continue to believe such meetings
are mutually beneficial and hope that you will continue to provide us
with the benefit of your ideas.
God bless,
C. Stephen Lynn
We were surprised and disappointed with the rejection by the Board of our
request to meet with it at its meeting in June. Because of Shoney's continued
poor performance and the Board's refusal to meet with us at the June Board
meeting despite the urgency of the situation, we feel that we were left with
no alternative but to present our case directly to you, the Shareholders and
owners of Shoney's. As a result, we determined to seek agent designations to
call and demand a special meeting of the Shareholders to act on proposals that
would result
10
<PAGE>
in the removal of all of the members of the current Board and replace them
with our nominees. Immediately after filing the solicitation for agent
designations and the preliminary proxy materials with the SEC, 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, 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
11
<PAGE>
On June 22, 1997, in what we believe to be an attempt to delay the Special
Meeting and entrench itself and management, the Board adopted the June 22
Bylaws Amendments. (For further information concerning these amendments we
refer you to the sections entitled "Reasons for the Solicitation" and "Effect
of Execution and Delivery of Agent Designations".) The June 22 Bylaw
Amendments, which were adopted after we commenced the call of the Special
Meeting, purported to eliminate the right of Shoney's shareholders to set the
date, time and place of the Special Meeting. In addition, the June 22 Bylaw
Amendments purported to establish lengthy time frames relating to the call of
the Special Meeting and the giving of notice of the Special Meeting and to
change the procedure for setting the record date for the Shareholders entitled
to call the Special Meeting, all of which would have ostensibly permitted the
Board to substantially delay the date of the Special Meeting. The June 22
Bylaw Amendments also sought to permit the current officers and employees of
the Company to serve as inspectors of election at the Special Meeting.
In response to the action taken by the Board in amending the Bylaws, on June
25, 1997, Raymond D. Schoenbaum sent a letter to the Board, requesting that it
rescind these amendments and agree to our previously announced date for the
Special Meeting, August 19, 1997. The text of this letter is set forth in full
below:
June 25, 1997
Board of Directors of Shoney's, Inc.
1727 Elm Hill Pike
Nashville, Tennessee 37210
Re: Amendments to Shoney's Bylaws
Ladies and Gentlemen:
We are disappointed to see that you have attempted to make changes
to Shoney's Bylaws which purport to affect the rights of the
shareholders of Shoney's to call a special meeting. We can only assume
that these changes are designed to delay the special meeting and to
entrench the current Board and management. This attempt to manipulate
the corporate governance process for the benefit of the current Board
and management is yet another indication that Shoney's needs new
leadership. Shoney's is at a critical juncture, and the long-term
viability of the Company is in danger. Rather than engage in the
manipulation of the rules reflected in your decision to amend the
Bylaws, we believe (and are surprised that you do not believe) that
the appropriate course of action is to let the real owners of Shoney's
decide as soon as possible the future direction of our Company. To the
extent you delay this process, we will hold you fully accountable to
the shareholders for any damages to our Company caused by this delay,
including any continued deterioration in the business of Shoney's
under current management.
Our position is that these amendments do not have any effect on the
action that we took one week earlier in reliance upon the then-
existing Bylaws of the Company. For example, your revised Bylaws
contain a provision purporting to require a shareholder seeking to
call a special meeting to request that the Board fix a record date for
purposes of determining the shareholders entitled to call the meeting.
Under Section 48-17-102(b) of the Tennessee Business Corporation Act,
a record date for the purpose of determining the shareholders entitled
to call the meeting was set on June 16, 1997, the date on which I
signed and delivered a call for a special meeting to the Company. We
do not read your subsequent amendment to the Bylaws as seeking to
affect this record date which was validly set prior to the amendment.
Moreover, even if the amendment did purport to do so, it would not be
valid since it would have the effect of retroactively invalidating a
record date which already has been validly set.
We also were surprised by your attempt to seize from the
shareholders of the Company their right under Shoney's Bylaws to set
the date, time and place of the special meeting, especially since
12
<PAGE>
we had acted already in reliance upon the then-existing Bylaws. We
believe the only possible purpose for such an action would be to
entrench the current Board and management. Moreover, the lengthy time
frames which you purport to establish in the Bylaws relating to
special meetings, including the time frames for purposes of
determining the record date for the call of a special meeting and
giving notice of the special meeting, appear designed only to
frustrate the ability of the shareholders to determine for themselves
in a timely manner whether the current Board and management should be
replaced. Finally, your amendment which seeks to permit the current
officers and employees of the Company to serve as inspectors of
election at the special meeting seems to us to be blatantly
inappropriate in a contested situation.
We will not allow the Board and the management of the Company to
apply these amendments to the actions taken by us over the last week
in connection with this matter, and if necessary, we are prepared to
go to court to enforce our legitimate rights. Your stated purposes in
adopting the Bylaw amendments were to clarify the special meeting
process and to provide the Company's shareholders with the opportunity
to fully consider the issues. If you are sincere in this regard, we
request that you rescind these amendments and agree today to an August
19 special meeting date. Setting the date at this time will provide
absolute clarity as the process moves forward and the two-month time
period between now and August 19 will provide more than enough time
for our shareholders to consider the relative merits of what is being
proposed.
To require us to engage in a court battle with the current Board and
management to enforce our legitimate rights would not be in anyone's
interest. Shoney's shareholders do not have the time or the patience
for the type of manipulation reflected in your adoption of the Bylaw
amendments. Shoney's is running out of time, and the shareholders must
be permitted to take decisive action as soon as possible to ensure the
long term survival of the Company for the benefit of all its
constituencies. Please confirm to me that you are willing to hold a
special meeting on August 19, 1997.
In order for us to act promptly in protecting our legitimate rights
and the rights of all of Shoney's shareholders, we ask that you
respond to this letter by the close of business on Thursday, June 26,
1997.
Sincerely,
Raymond D. Schoenbaum
Also on June 25, 1997, as a precautionary matter, Raymond D. Schoenbaum sent
a written notice to the Secretary of the Company of his request that the Board
fix a record date to determine the Shareholders entitled to call the Special
Meeting, in spite of his belief that the giving of such notice and the making
of such request are not required with respect to the Special Meeting. In this
notice, Mr. Schoenbaum reserved his rights to challenge the validity of all of
the June 22 Bylaw Amendments, including the amendments purporting to require
the giving of the written notice and the making of the request that the record
date be fixed.
13
<PAGE>
The Company responded to the June 25 letter from Raymond D. Schoenbaum in a
letter dated June 26, 1997 expressing the Company's disagreement with
statements made by Mr. Schoenbaum in his June 25 letter and informing Mr.
Schoenbaum of the Company's intention to litigate. The text of this letter is
stated in full as follows:
June 26, 1997
Raymond D. Schoenbaum
1640 Powers Ferry Road
Building Two, Suite 100
Marietta, Georgia 30067-6050
RE: Amendments to Shoney's By-Laws
Dear Mr. Schoenbaum:
In response to your letter of June 25 to the Board, the Company does
not agree that your letter of June 16th purporting to call a special
meeting of shareholders for August 19 was valid, that the record date
for determining the shareholders entitled to demand a special meeting
is June 16, or that the recent By-Law amendments are not valid and
applicable to your efforts to call a special meeting. In that
connection, we have your request for a record date for shareholders
entitled to demand a special meting. The request will be acted on
promptly.
In view of your expression of intention to litigate the matter, and
in order to proceed expeditiously to judicial determination for the
benefit of all concerned, the Company has today filed a suit in the
Chancery Court seeking a declaratory judgment of the invalidity of
your purported June 16 record date and "call" the validity of the
recent By-Law amendments.
A copy of the suit papers is enclosed. Our attorneys, Bass, Berry &
Sims, have delivered courtesy copies to your Nashville attorney, Paul
Alexis, this afternoon.
Yours very truly,
F.E. McDaniel, Jr.
Senior Vice President,
Secretary and Treasurer
On June 26, 1997, the Company filed a claim in the Chancery Court for the
State of Tennessee, Twentieth Judicial District at Nashville, seeking a
declaration of the validity of the June 22 Bylaw Amendments and the invalidity
of our actions with respect to setting the record date for the Shareholders
entitled to call the Special Meeting. In response, the Shoney's Shareholders'
Committee filed litigation papers on June 30, 1997 seeking to remove the
lawsuit to the U.S. District Court for the Middle District of Tennessee and
requesting the court, among other things, to promptly:
1. Declare invalid the June 22 Bylaw Amendments which were designed to
frustrate the Shoney's Shareholders' Committee's setting of June 16, 1997
as the record date for Shareholders entitled to call and demand the Special
Meeting,
2. Declare invalid the June 22 Bylaw Amendments which were designed to
frustrate the Shoney's Shareholders' Committee's efforts to call the
Special Meeting for August 19, 1997, and
3. Require Shoney's to make available to the Shoney's Shareholders' Committee
certain documents and records relating, among other things, to the identity
of the beneficial owners of Shoney's stock which Shoney's has refused to
provide.
14
<PAGE>
THE SPECIAL MEETING PROPOSALS
At the Special Meeting, Shareholders will be asked to consider and vote on
the Special Meeting Proposals set forth below. 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, if approved, will remove the current members of the Board
and replace them with our Nominees. In addition, at the Special Meeting,
Shareholders will be asked to consider certain resolutions amending the Bylaws
of the Company in a manner designed to facilitate the replacement of the
current Board members. Once elected, our Nominees intend to replace certain
members of the management of the Company, and to appoint Raymond D. Schoenbaum
as the Chairman and Chief Executive Officer of the Company. While we believe
that in order for us to revitalize Shoney's some members of the current
management of the Company will be replaced, we do not have any current plans
to remove any specific members of management other than C. Stephen Lynn (the
current Chairman of the Board, President and Chief Executive Officer) and W.
Craig Barber (the current Chief Administrative Officer, Chief Financial
Officer and Senior Executive Vice President).
PROPOSAL NO. 1: THE DIRECTOR REMOVAL 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 are asking
you to vote at the Special Meeting 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.
Although the terms of the current Board members expire at the 1998 Annual
Meeting, there can be no assurance that before the Special Meeting one or more
of the current Board members will not have ceased to be a director (by reason
of resignation or otherwise) and have been succeeded by another person
appointed by the incumbent directors or that the number of directors on the
Board will not have been increased. Accordingly, the GOLD Proxy provides for
the removal of the current directors and all other persons who are serving as
directors when the removal becomes effective. Section 48-18-108 of the
Tennessee Business Corporation Act authorizes these actions, 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.
The full text of the Director Removal Resolution is contained in Schedule I
to this Proxy Statement.
WE STRONGLY RECOMMEND A VOTE FOR THE
REMOVAL OF THE CURRENT BOARD MEMBERS OF SHONEY'S
PROPOSAL NO. 2: THE ELECTION OF DIRECTORS RESOLUTION
We also are asking you to elect at the Special Meeting the Nominees named
below as directors of the Company, to serve until the next annual meeting of
Shareholders and until their successors shall have been duly elected and
qualified. Directors will be elected at the Special Meeting by a vote of a
plurality of the shares of Common Stock represented at the Special Meeting if
at least a majority of the shares of Common Stock are represented at the
meeting. At the Special Meeting, except to the extent that a Shareholder
withholds votes from any or all Nominees, the persons named as proxies on the
GOLD Proxy, in their sole discretion, will vote such proxy for the election of
all the Nominees.
The Nominees have furnished us with the following information concerning
their principal occupations, business addresses and certain other matters. All
of the Nominees are citizens of the United States.
15
<PAGE>
SHONEY'S SHAREHOLDERS' COMMITTEE NOMINEES
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION AND BUSINESS
EXPERIENCE
NAME, AGE AND DURING LAST FIVE YEARS; CURRENT
PRINCIPAL BUSINESS ADDRESS DIRECTORSHIPS
----------------------------------- ------------------------------------------
<C> <S>
J. Michael Bodnar (52)............. President (January 1984--present) of
Bodnar Investment Group, Inc. Bodnar Investment Group, Inc. (a real
101 Fox Hall Road estate investment company); President
Birmingham, Alabama 35213 (January 1986--May 1996) of Triangle
Management Group, Inc. (a restaurant
management company).
Lawrence A. Cunningham (34)........ Professor of Law (May 1997--present) of
Benjamin N. Cardozo School of Law, the Benjamin N. Cardozo School of Law;
Yeshiva University Visiting Associate Professor of Law
55 Fifth Avenue (August 1996--May 1997) of the George
New York, New York 10003 Washington University School of Law;
Associate Professor of Law (August 1992--
August 1996) of the Benjamin N. Cardozo
School of Law.
Nathaniel R. Goldston III (58)..... Chairman of the Board and Chief Executive
The Gourmet Co. Officer (January 1975--present) of The
1100 Spring Street, N.E. Gourmet Co. (a food service management
Atlanta, Georgia 30309 company).
Michael A. Leven (59).............. President and Chief Executive Officer
U.S. Franchise Systems (October 1995--present) of U.S. Franchise
13 Corporate Square Systems (a hotel franchising company);
Atlanta, Georgia 30329 Director (August 1995--present) of
Starwood Lodging Corporation; President
and Chief Operating Officer (October
1990--September 1995) of Holiday Inn
Worldwide; President and Chief Operating
Officer (April 1985--May 1990) of Days Inn
of America, Inc.
Raymond D. Schoenbaum (51)......... Private investor; Director (March 1995--
1640 Powers Ferry Road present) of Applebee's International,
Building Two, Suite 100 Inc.; Consultant (March 1995--March 1996)
Marietta, Georgia 30067 of Applebee's International, Inc.;
Chairman of the Board of Directors (June
1984--March 1995) of Innovative Restaurant
Concepts, Inc. (a restaurant management
company); Vice Chairman of the Board of
Directors (January 1974--January 1986) of
Restaurants Systems, Inc. (Wendy's
International, Inc. franchisee);
Franchisee (January 1974--January 1986) of
Wendy's International, Inc.
William A. Schwartz (58)........... Chief Executive Officer (January 1995--
FMB Enterprises present) of First Media Television, L.P.
400 Perimeter Center Terrace (an operator of television stations);
Suite 650 Chief Executive Officer (February 1990--
Atlanta, Georgia 30346 present) of Cannell Communications, L.P.
(an operator of television stations);
Chief Executive Officer (March 1988--
present) of FMB Enterprises (an operator
of cable television systems); President
and Chief Operating Officer (1985--1987)
of Cox Enterprises.
Richard F. Sherman (53)............ Private investor and consultant (January
11492 Bluegrass Parkway 1991--present); Director (June 1993--
Suite 175 present) of Papa John's International,
Louisville, Kentucky 40299 Inc.; Director (October 1996--present) of
P.J. America, Inc. (a franchisee of Papa
John's International, Inc.); Director
(January 1991-present) of Reed's Jewelers,
Inc.; Director (October 1992--present) of
Taco Cabana, Inc.
</TABLE>
Each of the Nominees has consented to serve as a director of the Company, if
elected. Each of the Nominees (other than Raymond D. Schoenbaum) has entered
into an agreement with us in which we have agreed to pay each Nominee a fee of
$10,000. Additionally, we have agreed to (i) reimburse each Nominee for any
reasonable out-of-pocket expenses incurred in the performance of his service
as a Nominee and (ii) indemnify each Nominee with respect to any liabilities
relating to or arising out of such service. If any of the Nominees are elected
as
16
<PAGE>
directors, we expect they will receive compensation for their services as
directors of the Company. According to the 1997 Proxy Statement of the Company
(the "1997 Proxy Statement"), each director who is also an officer of the
Company receives no additional compensation for service on the Board and
directors who are not also officers of the Company receive a quarterly
retainer of $4,000 in addition to $1,000 plus expenses for each meeting of the
Board they attend. Members of Board committees receive $1,000 plus expenses
for each committee meeting they attend. In addition, according to the 1997
Proxy Statement, each non-employee director participates in the Shoney's, Inc.
Directors' Stock Option Plan (the "Directors' Plan"), which was approved by
the Shareholders on March 19, 1991. Each non-employee director elected to the
Board receives an option for 5,000 shares of Common Stock upon election to the
Board. Non-employee directors, upon the fifth anniversary of the grant of
their most recent options under the Directors' Plan, are also awarded an
additional option for 5,000 shares of Common Stock.
Raymond D. Schoenbaum is currently on a leave of absence from his
directorship of Applebee's. In order to devote his full time and attention to
the management of Shoney's, Mr. Schoenbaum intends to resign from the board of
Applebee's if the Nominees are elected to the Board of Shoney's.
According to publicly available information, Shoney's currently has seven
Directors, all of whose terms will expire at the next Annual Meeting of
Shareholders of Shoney's in 1998 (the "1998 Annual Meeting"). Each of the
Nominees, if elected, would hold office until the 1998 Annual Meeting and
until a successor has been elected and qualified or until his earlier death,
resignation or removal. Although we have no reason to believe that any of the
Nominees will be unable to serve as directors, if any one or more of the
Nominees is not available for election, the persons named as proxies on the
GOLD Proxy will vote for the election of such other Nominees as we may
propose. Should the Board purport to increase the number of directors to be
elected at the Special Meeting, we currently intend to propose additional
Nominees for such directorships. If this happens, we will use your proxy to
vote for our Nominees to fill these directorships. However, we have proposed
an amendment to the Bylaws that would limit the number of Directors to seven.
If this is approved by the Shareholders, it will not be necessary to increase
the number of Nominees.
The Company has employment agreements with Messrs. C. Stephen Lynn, Robert
M. Langford and W. Craig Barber. Mr. Lynn's employment agreement provides for
a term from May 1, 1995 through April 30, 1998. The employment agreements with
Messrs. Langford and Barber presently provide for initial terms which
terminate on October 27, 1999. Under the terms of the employment agreements,
Messrs. Langford and Barber are each entitled to base salaries in the amount
of $288,900, with increases to be in the sole discretion of the Board. Mr.
Lynn was entitled to a base salary of $500,000 from May 1, 1996 through April
30, 1997 and is entitled to a base salary of $550,000 from May 1, 1997 through
April 30, 1998. However, Mr. Lynn and the Board have agreed that Mr. Lynn's
base salary will remain at $500,000 until fiscal year 1998. In addition, the
employment agreements provide that Messrs. Langford and Barber are eligible
for an annual bonus as established by the Board through the annual bonus plan.
Bonuses for Mr. Lynn are based upon a formula to be agreed upon by the
employee and the Company.
The Director Removal Resolution and the Election of Directors Resolution, if
adopted by the Shareholders together with the other Special Meeting Proposals,
would constitute a "change of control" for purposes of these employment
agreements. If a change of control under such agreements occurs, the
employment terms contained in the agreements are automatically extended for an
additional two-year term. Also, in the event of a change of control under such
agreements, each of Messrs. Lynn, Langford and Barber, at his option, may
terminate his agreement within 90 days after such change of control, in which
case he will receive the greater of: (i) two times the base salary and bonus
paid during the fiscal year immediately prior to that in which the termination
took place; or (ii) the amount due as base salary during the then remaining
employment term. Assuming salaries are equal to the base salaries reported in
the 1997 Proxy Statement and that the employment agreements are extended for
two years due to the change of control, Mr. Lynn would be entitled to receive
approximately $1.3 million and Messrs. Langford and Barber would each be
entitled to receive approximately $1.2 million for the remainder of their
respective employment terms. In addition, if these employees are terminated
without cause following the adoption of the Special Meeting Proposals in their
entirety, all stock options held by Mr. Lynn will vest
17
<PAGE>
immediately and Messrs. Langford and Barber will be entitled to be paid a cash
amount equal to the unrealized gain that they have in any unvested stock
options. According to the 1997 Proxy Statement, Mr. Barber has exercisable in-
the-money options valued at $10,374, while neither Messrs. Lynn or Langford
have any unexercised in-the-money options.
Pursuant to Section 8.1.10 of the Amended and Restated Reducing Revolving
Credit Agreement (the "Credit Agreement"), as amended and restated as of May
3, 1996, among the Company, as borrower, Canadian Imperial Bank of Commerce,
Inc. ("CIBC"), as agent, and the lenders signatory thereto (the "Credit
Banks"), the Director Removal Resolution and the Election of Directors
Resolution, if adopted by the Shareholders together with the other Special
Meeting Proposals, would result in a "change of control" causing an "Event of
Default" as defined in the Credit Agreement. Pursuant to the Credit Agreement,
CIBC and the Credit Banks could cancel the Credit Banks' obligations to make
loans to the Company and/or declare the principal amount then outstanding of,
and the accrued interest on, the loans under the Credit Agreement due and
payable. As reported in the May 1997 10-Q, the Company had $147.7 million of
indebtedness outstanding under the Credit Agreement as of May 11, 1997.
The Director Removal Resolution and the Election of Directors Resolution, if
adopted by the Shareholders together with the other Special Meeting Proposals,
also would result in a "change of control" causing an "Event of Default" under
Section 8.1.10 of the Bridge Loan Credit Agreement (the "Bridge Loan
Agreement"), dated as of May 3, 1996, among the Company, as borrower, CIBC, as
agent, and the lenders signatory thereto (the "Bridge Banks"). Pursuant to the
Bridge Loan Agreement, CIBC and the Bridge Banks could cancel the Bridge
Banks' obligations to make loans to the Company and/or declare the principal
amount then outstanding of, and the accrued interest on, the loans under the
Bridge Loan Agreement due and payable. As reported in the May 1997 10-Q, the
Company had $91.4 million of indebtedness outstanding under the Bridge Loan
Agreement as of May 11, 1997.
In addition, the holders of approximately $51.6 million principal amount of
convertible subordinated debentures would be entitled to tender these
debentures for repayment if the Director Removal Resolution and the Election
of Directors Resolution were adopted together with the other Special Meeting
Proposals. Moreover, as reported in the May 1997 10-Q, the Company had
additional debt outstanding under various notes issued under indentures and
loan and credit agreements and substantially all of the Company's other senior
indebtedness have cross-default provisions which could also allow the lenders
to accelerate payment of debt if the Director Removal Resolution and the
Election of Directors Resolution were adopted together with the other Special
Meeting Proposals.
Although the Shoney's Shareholders' Committee has not had discussions with
Shoney's lenders, the Shoney's Shareholders' Committee believes it is unlikely
that, if the Director Removal Resolution and the Election of Directors
Resolution were adopted together with the other Special Meeting Proposals,
such lenders would exercise their repurchase rights or rights to accelerate
loans made to the Company. While there can be no assurances that the loans
would not be accelerated or that any repurchase rights would not be exercised,
the Shoney's Shareholders' Committee's belief that the acceleration of such
loans and the exercise of such rights would be unlikely if the Director
Removal Resolution and the Election of Directors Resolution were adopted
together with the other Special Meeting Proposals, is based on its view that
the Nominees are qualified to oversee the business of the Company, and that
the Company's business is not dependent on Mr. C. Stephen Lynn or any of the
Company's other officers or directors.
The full text of the Election of Directors Resolution is contained in
Schedule II to this Proxy Statement.
WE STRONGLY RECOMMEND A VOTE FOR THE ELECTION OF THE NOMINEES OF THE SHONEY'S
SHAREHOLDERS' COMMITTEE
PROPOSAL NO. 3: THE 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
18
<PAGE>
ended February 18, 1996, including the June 22 Bylaw Amendments, but other
than those provisions which were duly approved by the Shareholders and those
provisions which under Tennessee law cannot be repealed by the Shareholders.
This resolution also will provide that, without the approval of the
Shareholders, the Board may not thereafter amend any section of the Bylaws
affected by such repeal or adopt any new Bylaw provision in a manner which
serves to reinstate any repealed provision or any similar provision. Sections
48-20-201(a)(2) and (b) of the Tennessee Business Corporation Act authorize
this action by a vote of a majority of the shares cast at the Special Meeting
if at least a majority of the shares of Common Stock are represented at the
meeting.
The Bylaws Repeal Resolution is designed to repeal any Bylaw changes that
the Board may have attempted to make yet did not disclose prior to June 16,
1997 or may attempt to make prior to the Special Meeting. Adoption of the
Bylaws Repeal Resolution would render ineffective any amendments adopted by
the Board as a means of manipulation of the Bylaws by the Board, including the
June 22 Bylaw Amendments, whether intended to frustrate the ability of the
Shareholders to elect the Nominees or adopt any of the other Special Meeting
Proposals or otherwise. We are not currently aware of any amendments to the
Bylaws, other than the June 22 Bylaw Amendments, which would be rendered
ineffective by the adoption of the Bylaws Repeal Resolution. The Bylaws Repeal
Resolution is intended to guarantee that any previously undisclosed Bylaw
amendment will be repealed so as to prevent the Board from manipulatively
altering the Bylaws prior to the Special Meeting without Shareholder approval
and to prevent the Board after the Special Meeting from amending any section
of the Bylaws affected by such repeal or adopting any new Bylaw provision in a
manner which serves to reinstate any repealed provision or any similar
provision.
Although adoption of the Bylaws Repeal Resolution would generally repeal
previously undisclosed Bylaw amendments without considering the beneficial
nature, if any, of such amendments to the Shareholders, it would not repeal
any such amendments which were approved by the Shareholders. The full text of
the Bylaws Repeal Resolution is contained in Schedule III to this Proxy
Statement.
Although the impact of the adoption at the Special Meeting of the Bylaws
Repeal Resolution on the acquisition by a third party of the Company will
depend on the substance of amendments to the Bylaws adopted by the Board, we
do not currently foresee any potential future anti-takeover effects from the
adoption of the Bylaws Repeal Resolution.
WE STRONGLY RECOMMEND A VOTE FOR THE BYLAWS REPEAL RESOLUTION
PROPOSAL NO. 4: THE 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 Proxy Statement,
there are currently seven directors on the Board. Adoption of the Size of
Board Resolution would fix the number of directors at its present number of
seven. Such amendment would further provide that such Bylaw may not be
amended, or any new Bylaw provision which is in any way inconsistent
therewith, be adopted, without approval of the Shareholders. Sections 48-18-
103(a) and 48-20-201(a)(2) of the Tennessee Business Corporation Act authorize
this action by a vote of a majority of the shares cast at the Special Meeting
if at least a majority of the shares of Common Stock are represented at the
meeting.
The Size of Board Resolution is designed to prevent the current Board from
frustrating the ability of the Shareholders to constitute the entire Board if
they elect all seven Nominees. We are concerned that, prior to the Special
Meeting, the current Board might attempt to expand the size of the Board
beyond the current seven seats, whether by resolution, amendment of the Bylaws
or otherwise, and might attempt to do so in a manner intended to prevent us
from proposing additional Nominees.
We believe that the Board's ability to attempt to manipulate the size of the
Board is limited by its fiduciary duties. However, we believe that by fixing
the number of Board seats at seven, the adoption of the Size of Board
19
<PAGE>
Resolution will ensure that the election contest at the Special Meeting will
take place on a level playing field, without the incumbent Board or their
nominees gaining an unfair advantage by attempting to run for unopposed
positions. We have notified the Company that we would propose additional
Nominees for election if the Company attempts to expand the size of the Board
above its existing level of seven directors prior to the Special Meeting.
In addition, should the Shareholders choose to elect the Nominees to a
minority of the seats on the Board, adoption of the Size of Board Resolution
would have the purpose of ensuring the incumbent directors, who would continue
to constitute a majority, could not frustrate the will of the Shareholders by
increasing the size of the Board and installing hand-picked allies. We believe
that the adoption of the Size of Board Resolution would thereby prevent an
incumbent majority, if re-elected, from unilaterally "packing" the Board
without Shareholder approval and upsetting the percentage of the Nominees on
the Board desired by the Shareholders. The Size of the Board Resolution only
fixes the number of directors and, as a result, all of the directors will
continue to be elected at the annual meeting of the Shareholders and shall
serve until the next annual meeting unless sooner succeeded or removed in
accordance with the Bylaws. According to Article III, Section 8 of the Bylaws,
directors may be removed with or without cause, at any time, by a vote of the
Shareholders. In addition, any director may resign at any time, if such
resignation is made in writing.
The full text of the Size of the Board Resolution is contained in Schedule
IV to this Proxy Statement.
WE STRONGLY RECOMMEND A VOTE FOR THE SIZE OF THE BOARD RESOLUTION
PROPOSAL NO. 5: THE 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 will provide that, without the approval of the Shareholders,
the Board may not thereafter amend or repeal such Section or adopt any new
Bylaw provision in a manner which is inconsistent in any manner with such
Section. Sections 48-20-201(a)(2) and (b) of the Tennessee Business
Corporation Act authorize this action by a vote of a majority of the shares
cast at the Special Meeting if at least a majority of the shares of Common
Stock are represented at the meeting. While we believe that the current Bylaws
provide that the Shareholders can already elect directors at a special meeting
and that this Resolution is unnecessary, we are proposing this Resolution out
of an abundance of caution.
The full text of The Election Procedure Resolution is contained in Schedule
V to this Proxy Statement.
WE STRONGLY RECOMMENDA VOTE FOR THE ELECTION PROCEDURE RESOLUTION
PROPOSAL NO. 6: THE OMNIBUS RESOLUTION
In addition, the Shareholders will be asked at the Special Meeting to
consider the Omnibus Resolution which sets forth the following order in which
the resolutions will 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.
The full text of the Omnibus Resolution is contained in Schedule VI to this
Proxy Statement.
WE STRONGLY RECOMMEND
A VOTE FOR THE OMNIBUS RESOLUTION
20
<PAGE>
INFORMATION ON THE SPECIAL MEETING
Based on currently available public information, a quorum will exist at the
Special Meeting if holders of not less than a majority of the shares of Common
Stock outstanding and entitled to vote at the Special Meeting are present in
person or by proxy. If a quorum is present at the Special Meeting, the
Shareholders may remove members of the Board by a majority of the votes cast
at the Special Meeting. Once the current directors are removed, Shareholders
may elect new directors to fill vacancies on the Board.
If the Shareholders are entitled to vote to elect new directors, directors
will be elected by a vote of a plurality of the shares of the Common Stock
represented by holders present at the meeting in person or by proxy. Once
elected to the Board, each director will serve until the next annual meeting
and thereafter until his or her successor has been elected and qualified or
until his or her earlier death, resignation, retirement, disqualification or
removal.
The GOLD Proxy will be voted at the Special Meeting in accordance with your
instructions. You may vote FOR the Bylaw amendments, FOR the removal of the
current directors, FOR the election of the Nominees as directors of Shoney's,
and FOR the Omnibus Resolution or withhold authority to vote for the Bylaw
amendments, for the removal of the current directors, for the election of the
Nominees, and for the Omnibus Resolution by marking the proper boxes on the
GOLD Proxy. You also may withhold your vote from any of the Nominees by
writing the name of such nominee in the space provided on the GOLD Proxy Card.
IF NO MARKING IS MADE, YOU WILL BE DEEMED TO HAVE GIVEN A DIRECTION TO VOTE
THE SHARES REPRESENTED BY THE GOLD PROXY FOR THE SPECIAL MEETING PROPOSALS IN
THEIR ENTIRETY PROVIDED THAT YOU HAVE SIGNED AND DATED THE SHONEY'S
SHAREHOLDERS' PROXY CARD.
We also are requesting 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 in any substantial 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.
PROXY PROCEDURES
In order for your views on the proposals to be represented at the Special
Meeting, please mark, sign and date the enclosed GOLD Proxy and return it to
MacKenzie Partners, Inc. at 156 Fifth Avenue, New York, New York 10010, in the
enclosed postage paid envelope in time to be voted at the Special Meeting.
Execution of the GOLD Proxy will not affect your right to attend the Special
Meeting and to vote in person.
You are eligible to execute a GOLD Proxy only if you owned the Common Stock
on the Record Date. If you own your shares of Common Stock "beneficially"
(i.e., deriving the economic benefits of ownership thereof or having the power
to vote or dispose of such shares), but not "of record" (i.e., having one's
name recorded on the stock transfer records of the Company), or if your
ownership of shares is through a broker, bank, other financial institution or
other record holder, you should contact your broker, bank, other financial
institution or other record holder and instruct such person or entity to
execute the GOLD Proxy on your behalf. If you acquired shares after the Record
Date without a proxy, you may not execute a GOLD Proxy to vote at the Special
Meeting with respect to such shares. You will retain the right to execute a
proxy card in connection with this proxy solicitation even if you sell your
shares after the Record Date.
If you execute and deliver a proxy, it may subsequently be revoked by
written notice of revocation to MacKenzie Partners, Inc. at 156 Fifth Avenue,
New York, New York 10010 or the Company or by your vote at the Special
Meeting. A revocation may be in any written form validly signed and dated by
you as long as it clearly states that your prior proxy is no longer effective.
Any validly signed and dated revocation will supersede any previously dated or
undated GOLD Proxy. To be effective, your written notice of revocation must be
signed, dated and delivered prior to the Special Meeting.
21
<PAGE>
If you sign, date and deliver a GOLD Proxy and thereafter, on one or more
occasions, sign, date and deliver a later-dated proxy, the latest-dated proxy
will be controlling as to your vote and will replace your prior proxy or
proxies. However, any later-dated proxy will be of no effect if it is
delivered after the Special Meeting. ONLY YOUR LATEST DATED PROXY FOR THE
SPECIAL MEETING WILL COUNT AT THE SPECIAL MEETING.
If the Board chooses to oppose our proposals and if, in such instance, you
sign a proxy revocation card sent to you by the Board, you may override that
revocation by returning to MacKenzie Partners, Inc. at 156 Fifth Avenue, New
York, New York 10010 a subsequently dated and signed GOLD Proxy.
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 proxy solicitation. Certain information relating to
the beneficial ownership of Common Stock by participants in the solicitation
and certain other information is contained in Schedule VII 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 PROXIES
In connection with Montgomery Securities' engagement as financial advisor,
we anticipate that certain employees of Montgomery Securities may communicate
in person, by telephone or otherwise with a limited number of institutions,
brokers or other persons who are shareholders for the purpose of assisting in
the proxy solicitation. Montgomery Securities will not receive any fee for, or
in connection with, such solicitation activities apart from the fees they are
otherwise entitled to receive under their engagement. See "General
Information" below. The principal business address of Montgomery Securities is
600 Montgomery Street, San Francisco, California 94111. Certain additional
information regarding Montgomery Securities is contained in Schedule VII
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 proxies, although none of them
nor the Shoney's Shareholders' Committee admits that any of them is a
"participant", as defined in Schedule 14A promulgated by the SEC under the
Exchange Act. Mr. Sachs will receive fees of up to $100,000 for his assistance
in the solicitations. Mr. Ellis is a paid advisor to Raymond D. Schoenbaum. He
will not receive additional or extraordinary compensation for assistance in
the solicitations. Mr. Benn will receive fees of $500 per day for his
assistance in the solicitations. Certain additional information regarding such
persons is contained in Schedule VIII hereto and is incorporated in this
document by reference.
GENERAL INFORMATION
This Proxy Statement and the accompanying GOLD Proxy Card are first being
furnished to Shareholders on or about , 1997. Executed proxies will
be solicited by mail advertisement, telephone, telecopier and in person.
Solicitation will be made by the "participants" and the other persons
indicated in this Solicitation Statement. Proxies will be solicited from
individuals, brokers, banks, bank nominees and other institutional holders. We
have requested banks, brokerage houses and other custodians, nominees and
fiduciaries to forward all solicitation materials to the beneficial owners of
the shares they hold of record. We will reimburse these record holders for
their reasonable out-of-pocket expenses.
In addition, we have retained MacKenzie Partners, Inc. as our information
agent and to solicit proxies in connection with 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 $120,000. MacKenzie
Partners, Inc. will employ approximately 40 people in its efforts.
22
<PAGE>
We also have retained Montgomery Securities to provide certain financial
advisory services in connection with our solicitation of proxies for the
Special Meeting. Montgomery Securities engages in a full range of banking,
securities trading, market making and brokerage services for institutional and
individual clients. To date, we have paid Montgomery Securities a retainer fee
of $100,000. We have agreed to pay additional retainer fees to Montgomery
Securities up to $400,000. If we are successful in removing and replacing the
current Board members at the Special Meeting on August 19, 1997, we will be
required to pay Montgomery Securities an additional success fee of $1,000,000.
We also will reimburse Montgomery Securities for reasonable out-of-pocket
costs and expenses (including reasonable attorneys' fees and expenses), in an
amount not to exceed $25,000 per month without our prior written consent, and
indemnify Montgomery Securities against certain liabilities and expenses in
connection with our engagement of Montgomery Securities, including certain
liabilities under the federal securities laws.
Costs incidental to this solicitation, which include expenditures for
printing, postage, legal and related expenses and fees paid to Montgomery
Securities and MacKenzie Partners, Inc. are expected to be approximately
$ . 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 expenses
incurred in connection with this solicitation. We do not intend to request
that our reimbursement request be submitted to a vote of Shareholders.
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 Shoney's, see Schedule VIII.
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 A PROXY WITH RESPECT TO
YOUR COMMON STOCK. ACCORDINGLY, PLEASE CONTACT THE PERSON RESPONSIBLE FOR YOUR
ACCOUNT AND GIVE INSTRUCTIONS FOR A GOLD PROXY TO BE SIGNED REPRESENTING YOUR
SHARES OF COMMON STOCK.
IF YOU HAVE ANY QUESTIONS ABOUT GIVING YOUR PROXY OR REQUIRE ASSISTANCE,
PLEASE CONTACT MACKENZIE PARTNERS, INC. TOLL-FREE AT (800) 322-2885.
23
<PAGE>
SCHEDULE I
DIRECTOR REMOVAL RESOLUTION
RESOLVED: That all of the members of the Board be removed, 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, 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.
<PAGE>
SCHEDULE II
ELECTION OF DIRECTORS RESOLUTION
RESOLVED: That each of J. Michael Bodnar, Lawrence A. Cunningham, Nathaniel
R. Goldston III, Michael A. Leven, Raymond D. Schoenbaum, William
A. Schwartz and Richard F. Sherman as the nominees of the Shoney's
Shareholders' Committee, and all other persons nominated by the
Shoney's Shareholders' Committee, be elected 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.
<PAGE>
SCHEDULE III
BYLAWS REPEAL RESOLUTION
RESOLVED: That any and all amendments made by the Board to the Bylaws, as
filed with the Securities and Exchange Commission as Exhibits
3(ii) and 4.2 to the Company's Quarterly Report on Form 10-Q for
the quarter ended February 18, 1996 be repealed, 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 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.
<PAGE>
SCHEDULE IV
SIZE OF BOARD RESOLUTION
RESOLVED: That the Bylaws of the Company be and they hereby are amended,
effective at the time this resolution is approved by the
Shareholders, by (i) deleting the first two sentences of Article
III, Section 1 in their entirety and replacing them with the
following sentence:
The business and affairs of the Corporation shall be managed
and controlled by a Board of Directors, which shall be fixed
at seven (7) members.
and, (ii) adding the following after the last sentence of Article
III, Section 1 of the Bylaws:
The Board of Directors may not amend or repeal this Section or
adopt any new Bylaw provision which is inconsistent in any
manner with this Section.
<PAGE>
SCHEDULE V
ELECTION PROCEDURES RESOLUTION
RESOLVED: That the Bylaws of the Company be and they hereby are amended,
effective at the time this resolution is approved by the
Shareholders, by (i) deleting the first sentence of Article III,
Section 3 in its entirety and replacing it with the following
sentence:
The Directors shall be elected at the annual meeting of
shareholders or at a special meeting of shareholders.
and, (ii) adding the following after the last sentence of Article
III, Section 3 of the Bylaws:
The Board of Directors may not amend or repeal this Section or
adopt any new Bylaw provision which is inconsistent in any
manner with this Section.
<PAGE>
SCHEDULE VI
OMNIBUS RESOLUTION
RESOLVED: That each of the resolutions of the Shoney's Shareholders'
Committee be voted upon by the Shareholders in the following
order:
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.
<PAGE>
SCHEDULE VII
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 Preliminary Proxy Statement, Raymond D. Schoenbaum is
deemed to own beneficially (as that term is defined in Rule 13d-3 under the
Exchange Act, as amended) 508,061 shares of Common Stock, which constitutes
approximately 1.0% of the outstanding shares of Common Stock (based on
information provided by the Company in its quarterly report on Form 10-Q for
the quarter ended May 11, 1997). As of the date of this Preliminary Proxy
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 May 11, 1997). As of the date of
this Preliminary Proxy 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 May 11, 1997).
As of the date of this Preliminary Proxy Statement, J. Michael Bodnar is
deemed to own beneficially (as that term is defined in Rule 13d-3 under the
Exchange Act, as amended) 5,000 shares of Common Stock, which constitutes less
than one percent of the outstanding shares of Common Stock. Except as set
forth herein, none of the Nominees is the beneficial or record owner of shares
of Common Stock.
Raymond D. Schoenbaum and Betty J. Schoenbaum have purchased or sold the
following shares of Common Stock within the last two years:
<TABLE>
<CAPTION>
SHARES OF
COMMON STOCK PRICE
PARTICIPANT TRANSACTION DATE PURCHASED/SOLD PER SHARE
- --------------------- ----------------- -------------- ---------
<S> <C> <C> <C>
Betty J. Schoenbaum April 4, 1997 60,000* $ 4.75
purchased
Raymond D. Schoenbaum November 22, 1996 25,000 $7.75
purchased
25,000 $7.875
purchased
11,000 $7.75
purchased
December 31, 1996 50,000 $6.875
purchased
50,000 $7.00
purchased
March 18, 1997 100,000 $5.25
purchased
Total: 321,000
---------
</TABLE>
- --------
* Shares purchased by the Betty Schoenbaum Revocable Trust over which Betty
J. Schoenbaum shares voting and dispositive power.
<PAGE>
Except as otherwise set forth in this Schedule I, neither Raymond D.
Schoenbaum or Betty J. Schoenbaum or any associate of any of the foregoing
persons or any other person who may be deemed a "participant" in this
solicitation has purchased or sold any shares of Common Stock within the past
two years, borrowed any funds for the purpose of acquiring or holding any
shares of Common Stock, or is or was within the past year a party to any
contract, arrangement or understanding with any person with respect to any
shares of Common Stock. There have not been any transactions since the
beginning of the Company's last fiscal year and there is not any currently
proposed transaction to which the Company or any of its subsidiaries was or is
to be a party, in which Raymond D. Schoenbaum or Betty J. Schoenbaum or any
associate or immediate family member of any of the foregoing persons or any
other person who may be deemed a "participant" in this solicitation had or
will have a direct or indirect material interest. Other than the directorships
contemplated by the Special Meeting Proposals and other than Raymond D.
Schoenbaum becoming Chairman and Chief Executive Officer of Shoney's, neither
Raymond D. Schoenbaum or Betty J. Schoenbaum or any associate of any of the
foregoing persons or any other person who may be deemed a "participant" in
this solicitation has any arrangement or understanding with any person with
respect to any future employment by the Company or its affiliates, or with
respect to any future transactions to which the Company or its affiliates may
or will be a party.
Jeffry F. Schoenbaum, the brother of Raymond D. Schoenbaum and the son of
Betty J. Schoenbaum, currently is a member of the Board and would be removed
as a member of the Board if the Special Meeting Proposals were adopted in
their entirety at the Special Meeting.
In the ordinary course of its business, Montgomery Securities maintains
customary arrangements and may effect transactions in the securities of the
Company for the accounts of its customers. As a result of its engagement by
the Shoney's Shareholders' Committee, Montgomery Securities restricted its
proprietary trading in the securities of the Company as of June 16, 1997
(although it may still execute trades for customers on an unsolicited agency
basis). As of June 12, 1997, Montgomery Securities did not beneficially own
any Common Stock, and held of record 10,312 shares of Common Stock for
customer accounts. Montgomery Securities bought and sold 50,500 shares of
Common Stock of the Company for its own account over the last two years.
Howard E. Sachs has his principal business address at 1901 Powers Ferry
Road, Suite 260, Atlanta, Georgia 30339. As of the date of this Preliminary
Proxy Statement, Mr. Sachs was the beneficial owner of 5,250 shares of Common
Stock. Except for 4,000 shares purchased on behalf of his children, Mr. Sachs
neither bought nor sold any securities of the Company over the last two years.
John S. Ellis has his principal business address at 1640 Powers Ferry Road,
Building Two, Suite 100, Marietta, Georgia 30067. As of the date of this
Preliminary Proxy Statement, Mr. Ellis did not own beneficially or of record
any shares of Common Stock. Mr. Ellis neither bought nor sold any securities
of the Company over the last two years.
W. Douglas Benn has his principal business address at 1640 Powers Ferry
Road, Building Two, Suite 100, Marietta, Georgia 30067. As of the date of this
Preliminary Proxy Statement, Mr. Benn did not own beneficially or of record
any shares of Common Stock. Mr. Benn neither bought nor sold any securities of
the Company over the last two years.
2
<PAGE>
SCHEDULE VIII
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth share ownership information with respect to
persons known at such date to the Company to be beneficial owners of more than
5% of the shares of Common Stock, as such information was set forth in the
1997 Proxy Statement, and as of the date of this Preliminary Proxy Statement
with respect to the beneficial ownership of the Shoney's Shareholders'
Committee. Unless otherwise indicated, each of the shareholders has sole
voting and investment power with respect to the shares of Common Stock
beneficially owned.
<TABLE>
<CAPTION>
NUMBER OF SHARES
NAME AND ADDRESS BENEFICIALLY
OF BENEFICIAL OWNER OWNED(1) PERCENT OF CLASS
------------------- ---------------- ----------------
<S> <C> <C>
Shoney's Shareholders' Committee as a Group
(2) 3,866,791 7.96%(3)
1640 Powers Ferry Road
Building Two, Suite 100
Marietta, Georgia 30067
R. L. Danner (4) 4,249,303 8.76%
2 International Drive, Suite 510
Nashville, Tennessee 37217
First Union Corporation (5) 2,485,675 5.12%
One First Union Center
Charlotte, North Carolina 28288-0137
</TABLE>
- --------
(1) For purposes of this table, a person is deemed to have "beneficial
ownership" of any security that such person (i) has or shares "voting
power", which includes the power to dispose of, or to direct the
disposition of, such security or (ii) has the right to acquire within 60
days after the date such information was set forth in the 1997 Proxy
Statement, and the date of this Preliminary Proxy Statement with respect
to the beneficial ownership of the Shoney's Shareholders' Committee. More
than one person may be deemed to be a beneficial owner of the same
securities, and a person may be deemed to be a beneficial owner of
securities as to which he has no beneficial interest.
(2) Includes shares held by these individuals as a "group" as such term is
used in Section 13(d)(3) of the Securities Exchange Act of 1934 (the
"Exchange Act").
(3) Based on 48,568,109 shares outstanding on June 20, 1997 as disclosed by
the Company in its Quarterly Report on Form 10-Q for the quarter ended May
11, 1997.
(4) Includes 83,068 shares of Common Stock owned by Mrs. Danner and 7,101
shares of Common Stock held in trust for Mr. Danner's son, over which Mrs.
Danner has sole voting and investment power.
(5) First Union Corporation ("First Union") has sole voting power as to all
shares of Common Stock and has sole power to dispose or to direct the
disposition of 2,471,224 shares of Common Stock.
The following table sets forth, according to the 1997 Proxy Statement
(except as otherwise noted below), the name of, and the total number of shares
of Common Stock (if any) beneficially owned (as defined in Rule 13d-3 under
the Exchange Act) and the percentage of outstanding shares of Common Stock
beneficially owned by, (i) each director of the Company, (ii) the Company's
Chief Executive Officer and each of its executive officers and (iii) all
directors and executive officers as a group. The information presented below
has been taken from or is based upon documents and records on file with the
Commission and other publicly available information. Since the 1997 Proxy
Statement, the total outstanding number of shares of Common Stock has
increased from 48,531,075 to 48,568,109 (based on information provided by
Company in its Quarterly Report on Form 10-Q for the quarter ended May 11,
1997). Although we do not have any knowledge that would indicate that any
statement contained herein based upon such documents and records is untrue, we
do not take any responsibility for the accuracy or completeness of the
information contained in such documents and records, or for any failure by the
Company to disclose events that may affect the significance or accuracy of
such information.
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF PERCENTAGE
NAME AND ADDRESS OF BENEFICIAL OWNER SHARES(1) OF CLASS
- ------------------------------------ --------- ----------
<S> <C> <C>
John W. Alderson......................................... 10,000 *
W. Craig Barber.......................................... 65,859 *
Dennis C. Bottorff....................................... 9,000 *
Carole F. Hoover......................................... 1,400 *
Victoria B. Jackson...................................... 3,094 *
Robert M. Langford....................................... 15,000 *
C. Stephen Lynn.......................................... 219,000 *
Jeffry Schoenbaum (2).................................... 582,192 1.19%
B. Franklin Skinner...................................... 3,500 *
Cal Turner, Jr........................................... 28,000 *
Ronald E. Walker......................................... 21,341 *
All directors and executive officers as a group(11
persons)................................................ 1,110,065 2.27%
</TABLE>
- --------
* Less than 1%.
(1) Includes shares subject to options to purchase shares which are
exercisable or become exercisable within 60 days after January 23, 1997,
and are held by the following persons: John W. Alderson(10,000);W. Craig
Barber (56,500); Dennis C. Bottorff (1,000); Carole F. Hoover (1,000);
Victoria B. Jackson (1,000); Robert M. Langford (15,000); C. Stephen Lynn
(100,000); Jeffry Schoenbaum (0); B. Franklin Skinner (3,000); Cal Turner,
Jr. (3,000); Ronald E. Walker (10,100); Directors and Executive Officers
as a Group (287,047).
(2) Includes 17,340 shares held by Chase Manhattan Bank as custodian for Mr.
Schoenbaum's children, 2,953 shares held by his wife, Sue Schoenbaum, and
432,902 shares held in an irrevocable trust for the benefit of Mr.
Schoenbaum. Also includes 35,750 shares owned by the Schoenbaum Family
Foundation, of which Mr. Schoenbaum is a director. Mr. Schoenbaum
disclaims beneficial ownership of the shares owned by the Schoenbaum
Family Foundation. Mr. Schoenbaum is the son of Alex Schoenbaum, who until
his death in December 1996 was Chairman Emeritus of the Company's Board of
Directors.
2
<PAGE>
PRELIMINARY COPY
SHONEY'S, INC.
GOLD CARD
THIS REVOCABLE PROXY IS SOLICITED BY THE SHONEY'S SHAREHOLDERS' COMMITTEE
The undersigned shareholder of Shoney's, Inc. (the "Company") hereby appoints
Raymond D. Schoenbaum, Betty J. Schoenbaum, Daniel H. Burch, Stanley J. Kay,
Jr. and Mark H. Harnett, and each of them, proxies with full power of
substitution and resubstitution, the proxies of each of the undersigned (said
proxies, together with each substitute appointed by any of them, if any,
collectively the "Proxies"), to vote all shares of Common Stock of the Company,
$1.00 par value per share, that the undersigned is entitled to vote if
personally present at the Special Meeting of 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
and at any adjournment or postponement thereof. The undersigned hereby revokes
any previous proxies with respect to the matters covered by this Proxy.
THE SHONEY'S SHAREHOLDERS' COMMITTEE RECOMMENDS A VOTE "FOR" EACH OF THE
PROPOSALS SET FORTH BELOW.
(Please mark each proposal with an "X" in the appropriate box)
1. 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").
[_] FOR [_] AGAINST [_] ABSTAIN
2. To elect J. Michael Bodnar, Lawrence A. Cunningham, Nathaniel R. Goldston
III, Michael A. Leven, Raymond D. Schoenbaum, William A. Schwartz and
Richard F. Sherman (the "Nominees"), and all other persons nominated by the
Shoney's Shareholders' Committee as of the date of the Special Meeting 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").
[_]FOR ALL NOMINEES [_]WITHHOLD
AUTHORITY FOR
ALL NOMINEES
<PAGE>
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ONE OR MORE NOMINEES, MARK FOR
ABOVE AND PRINT THE NAME(S) OF THE PERSON(S) WITH RESPECT TO WHOM YOU WISH TO
WITHHOLD AUTHORITY IN THE SPACE PROVIDED BELOW.)
3. To repeal any and all amendments made by the Board of Directors (the
"Board") to the Bylaws of the Company, as filed with the Securities and
Exchange Commission 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").
[_] FOR [_] AGAINST [_] ABSTAIN
4. 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 (the "Size of Board
Resolution").
[_] FOR [_] AGAINST [_] ABSTAIN
5. To amend Article III, Section 3 of the Company's Bylaws to provide that
directors shall be elected by the Shareholders at annual meetings and
special meetings of the Shareholders of the Company, and provide that,
without the approval of the Shareholders, the Board may not thereafter amend
or repeal such Section or adopt any new Bylaw provision which is
inconsistent in any manner with such Section (the "Election Procedure
Resolution").
[_] FOR [_] AGAINST [_] ABSTAIN
6. To set forth the following order in which the resolutions would be voted
upon by the Shareholders (the "Omnibus Resolution"):
1. The Omnibus Resolution; 4. The Election Procedure Resolution;
2. The Bylaws Repeal Resolution; 5. The Director Removal Resolution; and
3. The Size of Board Resolution; 6. The Election of Directors Resolution.
7. To authorize the proxies in their discretion to vote upon any and all
actions proposed by the Shoney's Shareholders' Committee incidental to the
removal and replacement of the current directors of the Company.
[_] FOR [_] AGAINST [_] ABSTAIN
This proxy, when properly executed, will be voted in the manner marked herein
by the undersigned shareholder. IF NO MARKING IS MADE, THIS PROXY WILL BE
DEEMED TO BE A DIRECTION TO VOTE FOR THE FOREGOING PROPOSALS IN THEIR ENTIRETY.
THE SHONEY'S SHAREHOLDERS' COMMITTEE STRONGLY RECOMMENDS THAT YOU VOTE "FOR"
THE PRECEDING ACTIONS.
<PAGE>
Dated ______________________, 1997
----------------------------------
Signature
----------------------------------
Signature, if jointly held
----------------------------------
Title
Please sign exactly as your name
appears on your stock certificate.
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 authorized person.
PLEASE SIGN, DATE AND MAIL
PROMPTLY IN THE POSTAGE-PAID EN-
CLOSED ENVELOPE.
