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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO.______)
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240.14a-12
Shoney's, Inc.
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(Name of Registrant as Specified in its Charter)
- ----------------------------------------------------------------------------
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[SHONEY'S, INC.(R) LOGO]
1727 Elm Hill Pike
Nashville, Tennessee 37210
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
DATE: Tuesday, March 28, 2000
TIME: 9:00 a.m.
PLACE: First American Center
Fifth Floor Auditorium
300 Union Street
Nashville, Tennessee 37237
ITEMS OF BUSINESS: 1) to elect directors; and
2) to conduct other business properly brought
before the meeting.
WHO MAY VOTE: You can vote if you were a shareholder of record on
January 27, 2000.
DATE OF MAILING: This Proxy Statement/Annual Report and the form of
proxy are first being mailed to shareholders on or
about February 24, 2000.
By Order of the Board of Directors,
/s/ Richard D. Schafstall
Richard D. Schafstall
Senior Vice President,
General Counsel and Secretary
Nashville, Tennessee
February 24, 2000
A LETTER TO OUR SHAREHOLDERS
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<TABLE>
<CAPTION>
Dear Shareholder,
<S> <C>
Fiscal 1999 was a year of consolidation at required to improve the operating
Shoney's, Inc. Our primary focus continued performance of the underperforming
to be the revitalization of Shoney's restaurants to acceptable standards and the
Restaurants and the improvement of Captain expected benefit from this improvement in
D's Seafood Restaurants. the near-term.
The family dining segment, which This strategic move allows us to
Shoney's pioneered more than 50 years ago, maximize our assets and concentrate our
continues to be squeezed on both ends by the resources in our top performing stores and
fast food and casual dining segments. provide an even greater focus on customer
Overall competition is fierce. In order to satisfaction.
survive, the remaining players will have to
carve out a unique niche. We remain We have designated fiscal 2000 at
committed to the viability of positioning Shoney's as the YEAR OF SERVICE. This year
Shoney's Restaurants as YOUR NEIGHBORHOOD long emphasis includes expanded training for
FAMILY RESTAURANT. all positions and the installation of a new
satellite network system. The satellite system
During the last two years, our number will strengthen and expand our training
one priority has been to upgrade our food programs through new computer-based
quality. Extensive research and development systems that include both live interactive
in our test kitchen along with customer distance learning and web-based training.
research culminated in the introduction of a
NEW MENU featuring several new entrees and This technology, which is in the forefront
the return of a variety of signature items. The of our industry, will allow us to train our
new menu features an assortment of employees quicker and more efficiently, with
Homestyle Blue Plate Specials, an expanded the ultimate goal of better customer service
sandwich menu and the addition of the and satisfaction.
popular hot vegetable bar, to our famous
Soup, Salad and Fruit Bar. These enhanced We have just completed the second year
food products made an important positive of a three to five year turnaround for
impact on comparable store sales in the Shoney's Restaurants. While we are
fourth quarter. encouraged by the progress we've made in
the areas of menu enhancement and food
To strengthen Shoney's core operations quality, we still have much to accomplish.
and drive shareholder value, we continued to We will work vigorously to continue our
take a hard look at the operating progress and momentum. We will continue
performance of our restaurants, and closed to listen to our customers because the end
underperforming stores. This performance result of our efforts must be to deliver on our
evaluation looked at anticipated resources promise of great tasting food at a reasonable
</TABLE>
<TABLE>
<S> <C>
price, served by pleasant staff in a fun and As we grow and improve our existing system
comfortable atmosphere. in 2000, we expect to remodel 54 units and
replace two to three units.
CAPTAIN D'S had its second consecutive
record year in sales and profit in 1999. The Captain D's Restaurant operations were
growth in average unit sales increased from enhanced by new technology in 1999
$780,000 in 1997 to $831,000 in 1998 and to including the introduction of the Store Waste
$857,000 in 1999. In 1999, we celebrated Attack Tool, a system designed to reduce
our first $2 million store and expect another food costs by controlling food waste in the
two or three stores to join what we now call restaurants. In 2000, we will test a new labor
our "Platinum Club" in 2000. Additionally, module and implement a customized
26.0% of Captain D's systemwide achieved interactive training program. We also plan to
the $1 million sales mark in fiscal 1999, up test a new computerized system for drive-
from 22.8% in fiscal 1998. thrus that will enhance speed and order
accuracy. We are particularly excited about
Captain D's continued its focus on the launch of D's TV, an in-store television
training. During 1999, a comprehensive system, which is designed to reinforce brand
nine-day training curriculum was developed. messages, enhance existing point of sale and
All supervisory and support staff attended feature messages aimed at our customers in
Captain D's University. This year, the the restaurants.
general managers as well as many of our
franchisees, will complete the curriculum. In 2000, we will also test table service, an
expanded sandwich menu and a new dessert
Franchising remains a strong focus for line. In addition, we will gradually convert
Captain D's. In 1999, an agreement was to new employee uniforms systemwide by
completed with the Army Air Force implementing our Calypso Casual themed
Exchange Service to franchise Captain D's attire consisting of T-shirts, jeans and khaki
on military bases. We expect this agreement baseball caps.
will result in three to four new franchise units
this year, including our first overseas In February, we announced the sale of
restaurant in Okinawa, Japan. Pargo's Restaurants to Slade's, Inc. This sale
underscores our commitment to our core
The development of Captain D's concept businesses and gives us the opportunity to
niche in fast casual is also proceeding well. more fully concentrate our resources on
In the summer of 1999, we unveiled our new growing Captain D's and revitalizing
fast casual restaurant design which Shoney's.
encompasses new interior dining room decor,
a new kitchen configuration, comfortable COMMISSARY OPERATIONS, INC. (COI),
tropical employee uniforms and select the company's distribution and
exterior finishes. manufacturing division, took several
important steps in fiscal 1999 to position
Fast casual models opened to date include itself to be an independent business unit.
two new units, three replacement stores and
four remodels. Average volume for the new COI expects to complete the installation
and replaced units of the new model stores is of a new computer system in the spring. The
well above the current average unit volume. new system will increase efficiencies in
</TABLE>
<TABLE>
<S> <C>
inventory control and distribution. The new Captain D's and Shoney's. We have
software will provide additional functionality launched a variety of tests at both concepts
in inventory management and pricing that open the door to increasing customer
flexibility that will allow COI to pursue satisfaction and creating long-term value for
customers outside of the traditional customer our shareholders.
base.
We are confident we have the strategies,
2000 - A Year of Opportunity resources and dedicated employees to
----------------------------- continue our successful drive into the new
century.
This new year brings many new
opportunities to build on our successes at
Sincerely,
/s/ Raymond D. Schoenbaum /s/ J. Michael Bodnar
Raymond D. Schoenbaum J. Michael Bodnar
Chairman of the Board President and Chief Executive Officer
Shoney's, Inc. Shoney's, Inc.
</TABLE>
TABLE OF CONTENTS
Voting Matters..........................................................1
Proposal: Election of Directors.........................................3
Shoney's Board of Directors and Committees..............................6
Executive Compensation..................................................9
Human Resources and Compensation Committee Report......................13
Shareholder Return Performance Graph...................................17
Stock Ownership of Management and Certain Beneficial Owners............18
Section 16(a) Beneficial Ownership Reporting Compliance................20
Certain Transactions...................................................20
Independent Auditors...................................................21
Proxy Solicitation.....................................................21
Shareholder Proposals for 2001 Annual Meeting..........................22
Other Business.........................................................22
Availability of Form 10-K..............................................22
Appendix - Annual Report to Shareholders - 1999.......................A-1
i
VOTING MATTERS
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WHAT AM I VOTING ON?
You will be voting on the following:
- to elect directors; and
- any other matter properly brought before the annual meeting.
WHO IS ENTITLED TO VOTE?
You may vote if you owned shares of our common stock as of the close of
business on January 27, 2000. Each share of stock is entitled to one vote. As
of January 27, 2000, there were 50,515,011 shares of Shoney's common stock
outstanding.
HOW DO I VOTE?
You may vote in person at the meeting or you may complete, sign and
return the enclosed proxy card. Votes submitted by proxy will be voted by the
individuals named on the proxy card in the manner you indicate. You may vote
in favor of all nominees, withhold your votes as to all nominees or withhold
your votes as to specific nominees.
CAN I REVOKE MY PROXY?
Yes. To revoke a proxy given pursuant to this solicitation, you must:
- sign another proxy with a later date and return it to us at or
before the annual meeting;
- provide us with a written notice of revocation dated later than
the date of the proxy at or before the annual meeting; or
- attend the annual meeting and vote in person. Note, however, that
attendance at the annual meeting will not revoke a proxy if you do
not vote at the annual meeting.
WHAT IF I RETURN MY PROXY CARD BUT DO NOT PROVIDE VOTING INSTRUCTIONS?
Proxies that are signed and returned but do not contain instructions
will be voted FOR the election of all nominees as directors.
1
HOW WILL ABSTENTIONS AND BROKER NON-VOTES BE TREATED?
Abstentions and broker non-votes will be treated as shares that are
present and entitled to vote for purposes of determining whether a quorum is
present, but will not be counted as votes either in favor of or against a
particular proposal. If a broker or nominee holding shares in "street"
name indicates on the proxy that it does not have discretionary authority to
vote on a particular matter, those shares will not be voted with respect to
that matter and will be disregarded for the purpose of determining the total
number of votes cast with respect to a proposal.
HOW MANY VOTES MUST BE PRESENT TO HOLD THE ANNUAL MEETING?
A quorum of shareholders is necessary to hold a valid meeting. If
the holders of at least a majority of our shares are present in person or by
proxy, a quorum will exist.
HOW MANY VOTES ARE NEEDED TO ELECT DIRECTORS?
Directors are elected by a plurality of the votes cast by the holders
of shares entitled to vote at the annual meeting. This means that the
director nominee with the most affirmative votes for a particular slot is
elected for that slot.
DO I HAVE THE RIGHT TO CUMULATE MY VOTES?
No. Cumulative voting is not allowed.
2
PROPOSAL:
ELECTION OF DIRECTORS
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WHO ARE THE NOMINEES THIS YEAR?
The nominees for the Board of Directors consist of all current
directors. They include J. Michael Bodnar, Stephen E. Macadam, Jeffry
F. Schoenbaum, Raymond D. Schoenbaum, William A. Schwartz, Carroll D. Shanks,
Felker W. Ward, Jr., William M. Wilson and James D. Yancey. Each nominee
would hold office until the 2001 annual meeting of shareholders and until
their successor is elected and qualified.
WHAT IS THE BACKGROUND OF THIS YEAR'S NOMINEES?
- J. MICHAEL BODNAR Age - 55
President and Chief Executive Officer Director since 1997
Shoney's, Inc.
Mr. Bodnar was named President and Chief Executive Officer of the
Company in November 1997. See "Certain Transactions." Mr. Bodnar has served
as President of Bodnar Investment Group, Inc., a real estate investment company
focusing primarily on the restaurant industry, since 1984. From January 1986
through May 1996, Mr. Bodnar served as President of Triangle Management Group,
Inc., a restaurant management company. See "Executive Compensation" for a
discussion of the material terms of Mr. Bodnar's employment agreement.
- STEPHEN E. MACADAM Age - 39
Senior Vice President-Containerboard & Packaging Director since 1999
Georgia-Pacific Corporation
Mr. Macadam has served as Senior Vice President - Containerboard and
Packaging for Georgia-Pacific Corporation since March 1998. From 1988 to
February 1998, Mr. Macadam was a principal with McKinsey & Company, Inc.
- JEFFRY F. SCHOENBAUM Age - 52
Private Investor Director since 1996
Mr. Schoenbaum is a private investor and since 1987 has served as Vice
President of Nurad Investments, Inc., an investment holding company. He also
serves as a member of the board of directors of the Schoenbaum Family
Foundation. Mr. Schoenbaum is the brother of Raymond D. Schoenbaum.
3
- RAYMOND D. SCHOENBAUM Age - 53
Chairman of the Board Director since 1997
Shoney's, Inc.
Since April 1995, Mr. Schoenbaum has been President of Schoenbaum
Limited, a restaurant management company. Mr. Schoenbaum also has served since
March 1996 as the President and Chief Executive Officer of Just Having Fun
Restaurants, Inc., a restaurant company currently developing a new restaurant
concept in Atlanta, Georgia. From June 1984 to March 1995, he served as the
Chairman of the Board of Innovative Restaurant Concepts, Inc., a restaurant
management company which owned and operated Rio Bravo, Ray's on the River and
Green Hills Grille restaurants. Mr. Schoenbaum sold this company to Applebee's
International, Inc. in March 1995. Mr. Schoenbaum was a member of the board of
directors of Applebee's International, Inc. from March 1995 to August 1997. He
also serves as a member of the board of directors of the Schoenbaum Family
Foundation. In June 1998, Mr. Schoenbaum was elected Vice Chairman of the
Board and became Chairman of the Board effective January 1, 1999.
- WILLIAM A. SCHWARTZ Age - 61
President and Chief Executive Officer Director since 1997
FMB Enterprises, Inc.
Mr. Schwartz is President and Chief Executive Officer of FMB
Enterprises, Inc., which he founded in 1988. FMB Enterprises, Inc. manages a
portfolio of investments and is also a general partner in Capital Cable, L.P.,
which owns and operates several cable television systems. Since 1990, Mr.
Schwartz has been involved in the ownership and operation of television
stations, serving as Chief Executive Officer of Cannell Communications, L.P.
from February 1990 to December 1995 and as Chief Executive Officer of First
Media Television, L.P. from January 1995 through November 1997. From September
1985 to December 1987, Mr. Schwartz was President and Chief Operating Officer
of Cox Enterprises, Inc., a large diversified media company.
- CARROLL D. SHANKS Age - 72
Retired Vice Chairman Director since 1997
American General Life & Accident Insurance Company
Mr. Shanks retired in December 1992 as Vice Chairman of American
General Life & Accident Insurance Company. Mr. Shanks has served as a member
of the board of directors of Bank of America, a subsidiary of Bank of America,
N.A., since May 1992. From April 1993 until June 1996, Mr. Shanks was a
member of the board of directors of American Progressive Corporation, an
insurance company.
4
- FELKER W. WARD, JR. Age - 66
Chairman of the Board and Director since 1998
Chief Executive Officer
Pinnacle Investment Advisors, Inc.
Mr. Ward has served as Chairman of the Board and Chief Executive
Officer of Pinnacle Investment Advisors, Inc., an investment advisor, since
its formation in April 1994. From December 1992 to July 1996, Mr. Ward also
served as Chairman of Ward Bradford & Co., L.P., a financial services company.
Since 1979, Mr. Ward has served as the President and Vice Chairman of
Concessions International, Inc., an owner and operator of food, beverage, gift
and duty-free shops in airports. Mr. Ward has served on the board of directors
of Abrams Industries, Inc., a nonresidential construction company, fixture
manufacturer and property management company, since 1990 and on the respective
boards of directors of Fidelity National Corporation, a bank holding company,
since 1997 and AGL Resources Inc., a natural gas distributing utility, since
1988.
- WILLIAM M. WILSON Age - 51
President Director since 1997
Cherokee Equity Corporation
Mr. Wilson, since 1984, has served as President of Cherokee Equity
Corporation, an investment holding company. Since 1979, Mr. Wilson also has
served as President of Cherokee Properties, Inc., a real estate investment
company.
- JAMES D. YANCEY Age - 58
Chief Operating Officer and President Director since 1998
Synovus Financial Corp.
Mr. Yancey served as Vice Chairman of Synovus Financial Corp., a
financial services company, from March 1992 until February 1998, at which time
he became Chief Operating Officer and President. He also has served as a
director of Synovus Financial Corp. since 1978.
WHAT IF A NOMINEE IS UNWILLING OR UNABLE TO SERVE?
That is not expected to occur. If it does, proxies will be voted for
a substitute designated by the Board.
WHAT DOES THE BOARD OF DIRECTORS RECOMMEND?
The Board recommends that you vote FOR the election of these nominees.
5
SHONEY'S BOARD OF DIRECTORS
AND COMMITTEES
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WHAT IS THE STRUCTURE OF THE BOARD OF DIRECTORS?
Our Board must consist of seven to twelve directors, but the exact
number is set by the Board. Our current Board consists of nine directors,
all of which are standing for re-election. All directors are elected annually
by our shareholders.
HOW ARE DIRECTORS COMPENSATED?
Directors who also are officers do not receive additional compensation
for service on the Board. Directors who are not officers receive a quarterly
retainer of $4,000 in addition to $1,000 plus expenses for each Board or
committee meeting they attend. Pursuant to our Share Compensation Arrangement
for Non-Employee Directors, at least 35% or, at an individual director's
election, up to 100% of a director's quarterly fees is to be paid in shares of
our stock rather than in cash.
In addition, non-employee directors receive an option for 5,000 shares
upon their election to the Board pursuant to the Shoney's, Inc. Director's
Stock Option Plan. Non-employee directors are awarded an additional option for
5,000 shares on the fifth anniversary of the grant of their most recent option
under this plan. As of the end of our 1999 fiscal year, there were 7
participants under this plan who held options covering an aggregate of 35,000
shares at exercise prices ranging from $2.25 to $9.50 per share. During our
1999 fiscal year, there were no exercises of options granted under this plan.
HOW OFTEN DID THE BOARD OF DIRECTORS MEET IN FISCAL YEAR 1999?
The Board met six times during fiscal year 1999. Each director
attended more than 75% of the meetings of the Board and of committees of which
they were members.
WHAT ARE THE COMMITTEES OF THE BOARD?
Our Board has the following five standing committees:
6
<TABLE>
<CAPTION>
NUMBER OF
NAME OF FUNCTIONS OF MEETINGS IN FISCAL
COMMITTEE & MEMBERS THE COMMITTEE YEAR 1999
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<S> <C> <C>
EXECUTIVE: - Exercises the powers of the full 0
Michael Bodnar, Board between Board meetings,
Chairpeson except it may not:
Raymond Schoenbaum
William Schwartz - Authorize dividends except
Felker Ward, Jr. pursuant to a formula
James Yancey preapproved by the Board
- Submit matters to a vote of
shareholders
- Fill vacancies on the Board or
any of its committees
- Amend our charter or adopt,
amend or repeal our bylaws
- Authorize a plan of merger
- Authorize or approve
acquisitions of our stock
except pursuant to a formula
preapproved by the Board
- Authorize or approve the
issuance or sale of our stock
AUDIT:
William Schwartz, - Engages independent auditors 3
Chairperson - Reviews audit fees
Stephen Macadam - Supervises matters relating to
William Wilson internal and external audit
James Yancey functions
- Reviews and sets internal policies
and procedures regarding audits,
accounting and other financial
controls
- Reviews related party transactions
7
NUMBER OF
NAME OF FUNCTIONS OF MEETINGS IN FISCAL
COMMITTEE & MEMBERS THE COMMITTEE YEAR 1999
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<S> <C> <C>
HUMAN RESOURCES - Reviews and oversees personnel 3
AND policies
COMPENSATION: - Monitors results under our
Carroll Shanks, affirmative action plans
Chairperson - Generally oversees personnel and
Jeffry Schoenbaum human resources functions
Felker Ward, Jr. - Approves remuneration arrangements
James Yancey for executive officers
- Reviews compensation plans relating
to executive officers and directors,
including grants of stock options
and other benefits under our
compensation plans
- Generally reviews employee
compensation policies
No member of this committee has been
our employee at any time and no member
has any relationship with either us or
our officers requiring disclosure under
applicable regulations of the SEC.
FRANCHISE - Apprises the Board of the concerns 2
RELATIONS: and suggestions of our franchisees
William Wilson, - Acts as an issue resolution committee
Chairperson to mediate disputes among franchisees
Jeffry Schoenbaum and between franchisees and us
Carroll Shanks
NOMINATING: - Considers and recommends nominees for 1
Raymond Schoenbaum, director for consideration by the
Chairman Board
William Schwartz - Although this committee does not
Felker Ward, Jr. solicit suggestions for nominees for
the Board, suggestions for nominees
by security holders accompanied by
biographical data will be considered
if submitted to our Secretary in
accordance with our bylaws
</TABLE>
8
<PAGE>
EXECUTIVE COMPENSATION
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The following tables discuss the compensation earned by our Chief
Executive Officer and our four most highly compensated executive officers in
fiscal years 1999, 1998 and 1997. Fiscal year 1999 included 53 weeks compared
to 52 weeks for fiscal years 1998 and 1997.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------- ------------
RESTRICTED
OTHER ANNUAL STOCK SECURITIES ALL OTHER
NAME AND FISCAL SALARY BONUS COMPENSATION AWARDS UNDERLYING COMPENSATION
PRINCIPAL POSITION YEAR ($) ($) ($)(1) ($) OPTIONS ($)
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
J. Michael Bodnar(5) 1999 509,615 70,000 30,938(2) 55,000(3) ---- 44,278(4)
President and 1998 452,567 300,000 ---- ---- 1,000,000 79,117
Chief Executive Officer
Raymond D. Schoenbaum(5) 1999 305,769 ---- ---- ---- ---- ----
Chairman of the Board 1998 166,154 ---- ---- ---- ---- ----
Ronald E. Walker 1999 213,096 223,991 ---- ---- 50,000 4,658(6)
President and 1998 185,600 207,520 ---- ---- 122,500 3,934
Chief Operating Officer- 1997 153,969 49,896 ---- ---- ---- 4,505
Captain D's
Stephen C. Sanders(5) 1999 305,769 54,000 32,520(7) 57,813(8) 200,000 11,265(9)
President and 1998 57,692 34,500 ---- ---- 200,000 ----
Chief Operating Officer-
Shoney's Restaurants
Haney A. Long, Jr. 1999 203,846 82,640 ---- ---- 10,000 2,145(10)
President and 1998 196,538 172,800 ---- ---- 102,500 7,488
Chief Operating Officer- 1997 188,462 47,500 ---- ---- 25,000 53,259
Distribution and
Manufacturing
</TABLE>
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[FN]
(1) As to "Other Annual Compensation", although executive officers receive
perquisites and other personal benefits (e.g., automobiles furnished by
Shoney's), the aggregate amount of such perquisites or other personal
benefits does not exceed the lesser of $50,000 or 10% of the annual salary
and bonus for any of the persons listed in the Summary Compensation Table.
(2) Represents tax equalization bonus paid with respect to the receipt of
restricted shares. Mr. Bodnar's employment agreement is described under
"Executive Compensation".
(3) Represents the value of 40,000 shares received by Mr. Bodnar pursuant to
his employment agreement, with a fair market value on the date of
distribution of $55,000 ($1.38 per share).
(4) The amount set forth in "All Other Compensation" includes insurance
premiums paid on Mr. Bodnar's behalf pursuant to his employment agreement
($42,307), and reimbursement of certain legal and financial services
incurred by Mr. Bodnar ($1,971).
(5) The 1998 compensation amounts set forth for each of Messrs. Bodnar,
Schoenbaum and Sanders represent partial year compensation.
(6) Represents amounts paid pursuant to our restaurant group ownership plans
established in prior years, in which partnerships composed of employees
have acquired up to a 30% interest in groups of restaurants.
(7) Represents tax equalization bonus paid with respect to the receipt of
restricted shares pursuant to Mr. Sanders' employment agreement.
(8) Represents the value of 25,000 shares received by Mr. Sanders pursuant to
his employment agreement, with a fair market value on the date of
distribution of $57,813 ($2.31 per share).
(9) Represents reimbursement of certain financial services incurred by Mr.
Sanders ($5,000) and insurance premiums paid on Mr. Sanders' behalf
pursuant to his employment agreement ($6,265).
(10)Represents our matching contribution to Mr. Long's account under our 401(k)
plan ($1,725) and reimbursement of certain financial services incurred by
Mr. Long ($420).
</FN>
9
<TABLE>
<CAPTION>
OPTION GRANTS IN LAST FISCAL YEAR
POTENTIAL REALIZABLE
VALUE AT ASSUMED
% OF TOTAL ANNUAL RATES OF STOCK
NUMBER OF OPTIONS PRICE APPRECIATION FOR
SECURITIES GRANTED TO EXERCISE OPTION TERM
UNDERLYING EMPLOYEES OR BASE ----------------------
OPTIONS IN FISCAL PRICE EXPIRATION
NAME GRANTED YEAR ($/SH)(1) DATE 5%($) 10%($)
- ---- ------- ---- --------- ---- ----- ------
<S> <C> <C> <C> <C> <C> <C>
Mr. Walker 50,000 3.60% $ 2.75 02/12/2009 $ 86,473 $ 219,140
Mr. Sanders 200,000 14.42% $ 2.31 08/02/2009 $ 290,864 $ 737,106
Mr. Long 10,000 0.72% $ 2.75 02/12/2009 $ 17,295 $ 43,828
</TABLE>
- ----------------
[FN]
(1) The exercise price of the options granted is at least 100% of the
fair market value of the shares on the date of grant. The options
vest (become exercisable) at a cumulative rate of 20% per year and
in full after five years.
</FN>
<TABLE>
<CAPTION>
AGGREGATED FISCAL YEAR-END OPTION VALUES
NUMBER OF SECURITIES UNDERLYING
UNEXERCISED OPTIONS AT
FISCAL YEAR-END
-------------------------------
NAME EXERCISABLE UNEXERCISABLE
- ---- -------------------------------
<S> <C> <C>
Mr. Bodnar 249,998 750,002
Mr. Schoenbaum ---- ----
Mr. Walker 44,500 153,000
Mr. Sanders 40,000 360,000
Mr. Long 70,680 102,000
</TABLE>
We have never awarded stock appreciation rights to any employee, have
no long-term incentive plans, as that term is defined in SEC regulations, and
have no defined benefit or actuarial plans covering any of our employees. In
addition, no named executive officer held an option that had any value as of
the 1999 fiscal year-end.
10
DOES SHONEY'S HAVE ANY EMPLOYMENT CONTRACTS WITH ITS EXECUTIVE OFFICERS?
Yes. We have an employment agreement with Mr. Bodnar and we had an
employment agreement with Mr. Sanders, who resigned as President and Chief
Operating Officer of Shoney's Restaurants effective February 22, 2000.
WHAT ARE THE MATERIAL TERMS OF MR. BODNAR'S EMPLOYMENT AGREEMENT?
Mr. Bodnar's employment agreement expires on December 31, 2000.
However, if a "change in control" occurs during the employment term, the term
will be extended for two additional years. A "change in control" will occur
if:
- any person acquires more than 50% of our outstanding voting
securities;
- all or substantially all of our assets are sold;
- our shareholders approve a plan of liquidation or dissolution; or
- directors who at the beginning of the term constitute the members
of the Board cease for any reason, other than at the request or
with the concurrence of Mr. Bodnar, to constitute a majority of the
Board unless the election, or the nomination for election by our
shareholders, of each new director was approved by a majority vote
of the directors then still in office who were directors at the
beginning of the term of the agreement.
Pursuant to this agreement, Mr. Bodnar's base salary is determined
by the Human Resources and Compensation Committee. This committee, however,
may not decrease Mr. Bodnar's base salary below $500,000 per year. Bonuses
for Mr. Bodnar are based on a plan to be agreed upon by the Human Resources
and Compensation Committee and Mr. Bodnar.
The agreement also provides that on each of December 31, 1998, 1999
and 2000, Mr. Bodnar will receive 40,000 restricted shares of our stock and
will be paid a tax equalization bonus based on the value of the shares
received. The agreement also grants him options to purchase 1,000,000 shares
of our stock as follows: 500,000 shares at an exercise price of $4.69 per
share; 166,667 shares at an exercise price of $5.40 per share; 166,667 shares
at an exercise price of $6.50 per share; and 166,666 shares at an exercise
price of $7.75 per share.
If Mr. Bodnar's employment is terminated without cause, he will
receive severance pay equal to the greater of an amount equal to the base
salary and bonus paid or accrued on his behalf for the 12 months immediately
prior to the month in which the termination took place or the amount due Mr.
Bodnar for base salary during the balance of the current employment term,
including any extension thereof resulting from the occurrence of a change in
control. Mr. Bodnar also will receive a formula bonus as set forth in the
agreement based upon our most recently completed 12 month period. If Mr.
Bodnar's employment is terminated without cause, all stock options held by
Mr. Bodnar will become fully vested and exercisable in accordance with their
terms for a minimum of 90 days, and his benefits under our benefit plans will
continue until the earlier of the expiration of the term of the agreement or
such time as Mr. Bodnar is covered or permitted to be covered by benefit
plans of another company.
11
If Mr. Bodnar resigns other than within 90 days of a change in
control or is terminated for cause, he will not be entitled to severance
payments under the agreement and all stock options that are not vested prior
to the effective date of the termination will lapse and be void. Cause for
termination includes:
- willful failure to carry out any material lawful duties assigned to
Mr. Bodnar by the Board which duties are commensurate with those of
similarly situated employees;
- breach of fiduciary duty involving personal profit;
- conviction of any felony, any crime involving our business or any
crime resulting in imprisonment;
- intentional breach of any material provision of the employment
agreement; or
- unsatisfactory performance by Mr. Bodnar of his duties as a result
of alcohol or drug abuse.
In addition to the two-year extension of his employment term after
a change in control, Mr. Bodnar, at his option, may terminate his employment
within 90 days after the change in control and receive the greater of an
amount equal to two times the base salary and bonus paid or accrued on his
behalf during the 12 months immediately prior to the month in which the
termination took place or the amount due as base salary during the balance of
his employment term. In the event of such a termination, all stock options
then held by Mr. Bodnar will become fully vested and exercisable in
accordance with their terms, and his benefits under our benefit plans will
continue until the earlier of the expiration of the term of the agreement or
such time as Mr. Bodnar is covered or permitted to be covered by benefit
plans of another company.
Mr. Bodnar's employment agreement terminates upon his death or
disability and he is entitled to certain benefits in the event of his
termination resulting from disability. The agreement also contains a covenant
by Mr. Bodnar not to disclose any of our confidential information or trade
secrets and provides that, in the event of his termination for cause or his
resignation, Mr. Bodnar may not compete with us within the United States for
one year.
DOES SHONEY'S HAVE ANY OTHER AGREEMENTS WITH ITS EXECUTIVE OFFICERS?
Yes. Shoney's has management retention agreements with Messrs. Long
and Walker.
WHAT ARE THE MATERIAL TERMS OF THE MANAGEMENT RETENTION AGREEMENTS?
Each management retention agreement provides for the payment of two
times the respective base salary of each of Messrs. Long and Walker in the
event of termination without good cause or resignation for a "good reason"
(as defined in the agreement) within a one-year period following a change in
control. The agreements also provide that these officers will continue to be
covered by our welfare plans for one year following termination of employment
as set forth above and, for purposes of our incentive plans, shall be deemed
to be a Shoney's employee during that one-year period and shall be given
service credit for that period.
12
HUMAN RESOURCES AND
COMPENSATION COMMITTEE REPORT
- ---------------------------------------------------------------------------
Filings made by companies with the Securities and Exchange Commission
sometimes "incorporate by reference" certain information. This means we are
referring you to information that previously has been filed with the SEC and
that this information should be considered as part of the filing you are
reading. The Human Resources and Compensation Committee Report and
Shareholder Return Performance Graph in this Proxy Statement/Annual Report
are not incorporated by reference into any other filing with the SEC.
WHAT IS SHONEY'S PHILOSOPHY OF EXECUTIVE COMPENSATION?
Our compensation philosophy seeks to link individual job performance
and support of improved restaurant operations with achievement of strategic
business objectives and creation of shareholder value. A critical component
of this philosophy is the creation of an aggressive pay-for-performance
environment that provides exceptional pay for exceptional performance. We
believe this philosophy attracts and retains highly skilled management
employees, supports our strategic goals, promotes our operating culture,
relates to value creation for our shareholders and provides competitive
rewards to employees for outstanding contributions to our overall performance
and success.
WHAT ARE THE GOALS OF THE HUMAN RESOURCES AND COMPENSATION COMMITTEE?
The committee has adopted the following goals in its selection and
design of executive compensation programs:
- set target base pay at the 50th percentile of the industry
marketplace;
- link incentive compensation to achievement of specific short-term
and long-term business objectives;
- leverage the compensation mix by emphasizing performance-based
variable pay;
- align management and shareholder interests through the use of
equity-based pay;
- reward long-term, sustainable performance improvements; and
- align incentive compensation with our key values of food quality,
excellent restaurant operations, growth in same-store sales and
corporate profitability.
13
DOES THE HUMAN RESOURCES AND COMPENSATION COMMITTEE CONSIDER SALARIES PAID BY
OTHER COMPANIES?
Yes. The committee reviews current market data and compensation
trends for comparable companies and gauges achievement of corporate, business
unit and individual performance objectives. The committee periodically
reviews the overall effectiveness of the program in measuring and rewarding
desired performance results in accordance with our short-term and long-term
strategic goals and initiatives. The committee considered, among others, the
compensation information for the companies included in the S&P Restaurants-
500 Stock Index. See "Shareholder Return Performance Graph." The selected
peer group used for compensation analysis differs from the S&P Restaurants-
500 index used for the Shareholder Return Performance Graph, however, because
the committee's intent is to identify companies that have innovative,
leading-edge practices in delivering superior compensation for superior
performance. Thus, whereas there is some overlap between the two peer
groups, the compensation peer group is broader, representing firms both
within and outside the restaurant industry.
In addition, Shoney's engages, as necessary, independent compensation
consultants to assist management and the committee in assessing and
evaluating the compensation of our officers and the overall structure of our
compensation plans. In general, the committee strives to maintain
compensation levels consistent with survey-derived medians, and our executive
compensation programs, plans and awards within conventional industry
standards of reasonableness and competitive necessity.
WHAT ARE THE COMPONENTS OF EXECUTIVE COMPENSATION?
Our compensation program for executive officers consists of three key
elements: base salary, annual incentives and other financial incentives.
BASE SALARY. The committee strives to maintain base salaries within
a range of 15% above or below the position's median base pay compared to the
peer group used for compensation analysis. Many factors are included in
determining base pay, such as the responsibilities of the officer, the scope
of the position, length of service and our ability to pay an appropriate and
competitive salary. Executives are eligible for periodic increases in their
base pay as a result of individual performance or changes in their duties and
responsibilities.
Our near-term objective is to have base salary account for one-third
to one-half of an executive's total direct compensation potential (base
salary plus annual incentives plus other financial incentives). During the
1999 fiscal year, there were no base salary increases for the named executive
officers, except for Mr. Walker who received a 6.5% increase.
ANNUAL INCENTIVES. Our annual incentive plan for executive officers
is designed to further motivate and reward behaviors that contribute to the
achievement of business objectives while emphasizing growth in same-store
sales and corporate profit. At the beginning of each year, specific
performance goals are established for Shoney's, each business unit and
individual employees. These goals are weighted based upon the executive's
responsibilities and ability to impact performance.
14
Target award opportunities under the 1999 plan ranged from zero to
100% of base salary, depending on job level, responsibility and
accountability. The 1999 plan provided for pay-outs less than the target
amount and for maximum awards of 150% of base salary.
The 1999 plan aligned incentive bonuses with performance improvements
through the establishment of target award opportunities for Shoney's and
business unit performance. The committee and Shoney's have determined that
improvement in EBITDA (earnings before interest, taxes, depreciation and
amortization) is the appropriate value driver for performance measurement and
one that translates into earnings per share growth.
The committee also considered individual performance criteria based
upon a judgmental assessment of the achievement of individual performance
objectives in determining the 1999 fiscal year bonus payment amounts. These
individual performance objectives generally constituted 20% to 50% of the
total award opportunity available to the senior executive group and are
specifically linked to excellence in operations, profit, integrity, respect
for others and accomplishing agreed-upon individual objectives.
In accordance with the terms of the 1999 plan, the eligible named
executive officers were paid annual incentive amounts as follows: Mr.
Bodnar, $70,000; Mr. Walker, $223,991; Mr. Long, $82,640; Mr. Sanders,
$54,000. The target incentive payments to these officers for the 1999 fiscal
year were $1,213,000, while the actual incentive payments were $430,631.
Messrs. Walker, Long and Sanders received aggregate annual incentive payments
for the 1999 fiscal year of $360,631, compared to aggregate annual incentive
payments in the 1998 fiscal year for these same individuals of $414,820.
All bonus pay-outs for fiscal year 1999 were made 65% in cash and 35%
in shares of our stock.
OTHER FINANCIAL INCENTIVES. Shoney's has utilized stock options and
stock awards to motivate and reward performance that achieves long-term
business objectives. The committee believes that stock options have been and
remain an excellent vehicle for providing long-term financial incentives for
management. Because the option exercise price for employees is equal to or
greater than the fair market value of the shares on the date of grant,
employees recognize a gain only if the value of the shares increases. Thus,
employees with stock options are rewarded for their efforts that improve
shareholder value.
During the 1999 fiscal year, options for 782,150 shares of our stock
were granted to 31 officers (including options for 260,000 shares granted to
the named executive officers). Generally, option exercise prices are set at
100% of fair market value on the date of grant, options vest at 20% per year
and the options expire after 10 years. Stock options granted to Mr. Bodnar
pursuant to his employment agreement were granted at or above market value
and vest at 25% per year.
WHAT WAS THE CHIEF EXECUTIVE OFFICER'S COMPENSATION IN THE 1999 FISCAL YEAR?
Mr. Bodnar received a base salary of $509,615 in fiscal year 1999.
This base salary was approximately 92% of his total cash compensation. Mr.
Bodnar was granted an annual incentive
15
bonus of $70,000 to be paid 65% in cash and 35% in shares of our common
stock. Mr. Bodnar elected to defer payment of this bonus until calendar year
2000. Certain stock options and restricted stock granted to Mr. Bodnar were
determined previously pursuant to his employment agreement. See "Executive
Compensation".
HOW ARE THE LIMITATIONS ON DEDUCTIBILITY OF COMPENSATION HANDLED?
Section 162(m) of the Internal Revenue Code limits the deductibility
of executive compensation paid by publicly held corporations to $1 million
per employee. The $1 million limitation generally does not apply to
compensation based on performance goals if certain requirements are met.
Shoney's believes our stock incentive plans and payments of target incentive
payments are "performance-based" and satisfy Section 162(m).
The committee intends for all compensation paid to our executives to
be fully deductible under federal tax laws and intends to take such steps as
are necessary to ensure continuing deductibility.
This report on executive compensation for the 1999 fiscal year has
been furnished by the members of the Human Resources and Compensation
Committee:
- Carroll D. Shanks (Chairperson)
- Jeffry F. Schoenbaum
- Felker W. Ward, Jr.
- James D. Yancey
16
SHAREHOLDER RETURN
PERFORMANCE GRAPH
- ---------------------------------------------------------------------------
This graph compares the yearly percentage change in the return on the
shares of our common stock (assuming reinvestment of dividends) with the
Standard & Poor's 500 Stock Index and the Standard & Poor's Restaurants-500
Stock Index for the last five years.
<TABLE>
<CAPTION>
MEASUREMENT PERIOD S&P S&P
(FISCAL YEAR COVERED) SHONEY'S, INC. 500 RESTAURANTS
<S> <C> <C> <C>
1994 100 100 100
1995 66.67 125.49 141.91
1996 50.84 155.03 150.65
1997 32.92 211.94 160.87
1998 14.17 244.50 218.20
1999 9.59 315.83 257.89
</TABLE>
- --------------------
[FN]
(1) Return is measured by dividing (i) the sum of (A) the cumulative
amount of dividends for the measurement period, assuming dividend
reinvestment, and (B) the difference between the Share price at the
end and beginning of the measurement period; by (ii) the Share price
at the beginning of the measurement period. The measurement period
in the graph set forth above begins on the last trading day of
October 1994. The closing price on that date is the base amount,
with cumulative returns for each subsequent twelve-month period
measured as a change from that base. The cumulative return for each
twelve-month period is calculated in relation to the base amount as
of the last trading day of the Company's fiscal year.
</FN>
17
STOCK OWNERSHIP OF MANAGEMENT
AND CERTAIN BENEFICIAL OWNERS
- ---------------------------------------------------------------------------
This table shows how much of our common stock is owned by persons,
other than our directors and executive officers, who, as of January 27, 2000,
were known to management to be the beneficial owners of more than 5% of our
outstanding common stock. We have no other class of equity securities
outstanding.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF BENEFICIAL OWNER SHARES BENEFICIALLY OWNED PERCENT OF CLASS
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
R.L. Danner
2 International Plaza, Suite 510 4,249,303(1) 8.4%
Nashville, TN 37217
Chase Manhattan Corporation 4,243,459(2) 8.4%
270 Park Avenue
New York, NY 10017
Dimensional Fund Advisors Inc. 3,045,762(3) 6.0%
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401
Loomis, Sayles & Company, L.P. 4,698,761(4) 9.3%
One Financial Center
Boston, MA 02111
</TABLE>
- ------------------------
[FN]
(1) Includes 83,068 shares owned by Mr. Danner's wife and 7,101 shares held
in trust for Mr. Danner's son, over which Mr. Danner's wife has sole
voting and dispositive power. Mr. Danner has sole voting and
dispositive power over 4,159,134 shares and shared voting and
dispositive power over 90,169 shares. The information regarding shares
beneficially owned is based on the Schedule 13D filed by Mr. Danner
with the SEC on March 26, 1997.
(2) Chase Manhattan Bank Delaware, Chase Manhattan Private Bank, National
Association, and Chase Manhattan Bank are subsidiaries of Chase
Manhattan Corporation, a holding company. Chase Manhattan Corporation
has disclaimed beneficial ownership of all 4,243,459 shares. Chase
Manhattan Bank Delaware has sole voting power over 3,098,730 shares,
shared voting power over 308,508 shares, sole dispositive power over
3,116,338 shares and shared dispositive power over 290,900 shares.
Chase Manhattan Private Bank, National Association, has shared voting
and dispositive power over 432,902 shares and sole dispositive power
over 343,319 shares. Chase Manhattan Bank has shared dispositive
power over 60,000 shares. The information regarding shares
beneficially owned is based upon the Schedule 13G jointly filed by
Chase Manhattan Corporation, Chase Manhattan Bank Delaware, Chase
Manhattan Private Bank, National Association, and Chase Manhattan Bank
with the SEC on February 14, 2000.
(3) Dimensional Fund Advisors Inc. is a registered investment advisor which
has sole voting power and sole dispositive power with respect to all
3,045,762 shares. The information regarding shares beneficially owned
is based upon the Schedule 13G filed by Dimensional Fund Advisors with
the SEC on February 3, 2000.
(4) Loomis, Sayles & Company, L.P. is a registered investment advisor.
Loomis, Sayles & Company's beneficial ownership is based upon its
ownership of securities that are convertible into shares. Loomis,
Sayles & Company has sole voting power with respect to 4,009,528 shares
and shared voting power with respect to 383,619 shares. Loomis, Sayles
& Company has shared dispositive power with respect to all 4,698,761
shares. The information regarding shares beneficially owned is based
upon the Schedule 13G filed by Loomis, Sayles & Company with the SEC on
February 3, 2000.
</FN>
18
The following table sets forth the number of shares of our common
stock directly or indirectly beneficially owned, as of January 27, 2000, by
all directors and nominees for director, our chief executive officer and our
four most highly compensated executive officers other than the chief
executive officer who were serving as executive officers at the end of the
1999 fiscal year, and by all current directors and executive officers as a
group, together with the percentage of the outstanding shares of our common
stock which such ownership represents. Unless otherwise indicated,
beneficial ownership consists of sole voting and dispositive power based on
50,515,011 shares of common stock issued and outstanding as of January 27,
2000.
<TABLE>
<CAPTION>
PERCENT OF
NAME OF BENEFICIAL OWNER SHARES BENEFICIALLY OWNED(1) CLASS
- ------------------------------------------------------------------------------
<S> <C> <C>
J. Michael Bodnar 1,046,843(2) 2.05%
Haney A. Long, Jr. 117,395 *
Stephen E. Macadam 6,360 *
Stephen C. Sanders 121,672 *
Jeffry F. Schoenbaum 591,375(3) 1.17%
Raymond D. Schoenbaum 923,637(4) 1.83%
William A. Schwartz 26,306 *
Carroll D. Shanks 25,570 *
Ronald E. Walker 219,984 *
Felker W. Ward, Jr. 33,183 *
William M. Wilson 24,751 *
James D. Yancey 107,649(5) *
All current directors and 3,820,210 7.41%
executive officers as a group
(22 persons)
</TABLE>
- ------------------
[FN]
* Less than 1%.
(1) Includes shares subject to options to purchase shares which are
exercisable or become exercisable within 60 days of the date hereof,
and are held by the following persons: J. Michael Bodnar (499,999),
Haney A. Long, Jr. (90,173), Stephen C. Sanders (40,000), Jeffry F.
Schoenbaum (3,000), William A. Schwartz (2,000), Carroll D. Shanks
(2,000), Ronald E. Walker (79,000), Felker W. Ward, Jr. (2,000),
William M. Wilson (2,000) and James D. Yancey (2,000). Such shares
are deemed to be outstanding for the purpose of computing the
percentage of outstanding shares owned by such person, but are not
deemed to be outstanding for the purpose of computing the percentage
owned by any other person.
(2) Includes 446,844 shares owned directly and 100,000 shares owned
indirectly by Mr. Bodnar.
(3) Includes 17,340 shares held by Chase Manhattan Bank as custodian for
Mr. Schoenbaum's children, 2,953 shares held by Mr. Schoenbaum's
wife, 432,902 shares held in a trust for the benefit of Mr.
Schoenbaum, 2,823 held in a revocable trust with Mr. Schoenbaum and
his wife as co-trustees, and 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.
(4) Includes 290,900 shares held in a trust for the benefit of Mr.
Schoenbaum, 10,267 shares owned by Mr. Schoenbaum's wife, 50,100
shares held by Mr. Schoenbaum as custodian for his son, an aggregate
of 7,569 shares held in trusts for the benefit of Mr. Schoenbaum's
sons and 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.
(5) Includes 5,649 shares owned by Mr. Yancey's wife.
</FN>
19
SECTION 16(a) BENEFICIAL
OWNERSHIP REPORTING COMPLIANCE
- ---------------------------------------------------------------------------
Section 16(a) of the Securities Exchange Act of 1934 requires our
directors and executive officers and persons who own more than 10% of a
registered class of our equity securities to file with the SEC and the New
York Stock Exchange reports of ownership and changes in ownership of our
common stock. Directors, executive officers and greater than 10%
shareholders are required by SEC regulations to furnish us with copies of all
Section 16(a) forms they file. Based solely on a review of the copies of
these reports furnished to us or written representations that no other
reports were required, we believe that during fiscal year 1999 all of our
directors, executive officers and greater than 10% beneficial owners complied
with these requirements.
CERTAIN TRANSACTIONS
- ---------------------------------------------------------------------------
Except as disclosed under "Executive Compensation," and except as set
forth below, our executive officers, directors and director nominees did not
have significant business relationships with us which would require
disclosure under applicable SEC regulations and no such transactions are
anticipated during the 2000 fiscal year.
We lease real estate for the operation of one of our Shoney's
restaurants in Charlotte, North Carolina from SSI, a joint venture, of which
Mr. Bodnar is a 12.5% owner. The lease provides for annual rental of
$60,000, plus additional rent equal to 6.0% of the restaurant's gross sales
over $1.0 million. The lease expires on October 31, 2002, but we have the
option to extend the term of the lease for an additional five-year period.
During the 1999 fiscal year, we paid SSI aggregate rent of $66,353. We
consider this lease to be comparable in terms to other leases with
unaffiliated third parties.
We lease real estate for the operation of our Texarkana, Arkansas
Shoney's restaurant from PAB Realty, of which Mr. Bodnar is a 50% owner. The
lease provides for annual rental of $70,800, plus additional rent equal to
5.5% of the restaurant's gross sales over a level determined in accordance
with the lease. The lease expires on April 30, 2007, but we have the option
to extend the lease term for up to two additional five-year periods. During
the 1999 fiscal year, we paid PAB Realty aggregate rent of $70,800. We
consider this lease to be comparable in terms to other leases with
unaffiliated third parties.
Stephen C. Sanders, who was an executive officer during fiscal year
1999, indirectly operates three franchised Shoney's restaurants. When Mr.
Sanders was employed by us in 1998, his retention of these franchises was
reviewed and approved by our Audit Committee. The restaurants are operated
20
pursuant to our standard franchise agreements that would be entered into with
unaffiliated third parties. In addition, these units purchase goods and
equipment from us at the same prices and upon the same terms as those given
to other unaffiliated franchisees. During the 1999 fiscal year, Mr. Sanders'
restaurants paid royalties to us in the amount of $159,965 and made purchases
from us in the amount of $1,673,666. It is anticipated that such payments
and purchases will continue throughout the terms of the franchise agreements
which expire (with the option of the franchisee to renew for an additional
20-year term) in 2008, 2014 and 2015, respectively.
INDEPENDENT AUDITORS
- ---------------------------------------------------------------------------
Ernst & Young LLP has served as our independent auditors since 1970.
The Board normally engages independent auditors for the year at its March
meeting. For that reason, at this time, no independent auditors have been
engaged for the current fiscal year. It is expected, however, that Ernst &
Young LLP will be retained as our independent auditors for the current fiscal
year.
Representatives of Ernst & Young LLP have been requested to attend
the annual meeting. These representatives will have the opportunity to make
a statement if they so desire and are expected to be available to respond to
appropriate questions.
PROXY SOLICITATION
- ----------------------------------------------------------------------------
Proxies are being solicited by and on behalf of the Board of
Directors of Shoney's, Inc. All expenses of this solicitation, including the
cost of preparing and mailing this Proxy Statement, will be borne by us. In
addition to solicitation by use of the mails, proxies may be solicited by our
directors, officers and employees in person or by telephone, telegram or
other means of communication. Our directors, officers and employees will not
be additionally compensated, but may be reimbursed for out-of-pocket expenses
in connection with any solicitation. Arrangements also will be made with
custodians, nominees and fiduciaries for forwarding of proxy solicitation
material to beneficial owners of shares held of record by such persons, and
we may reimburse those custodians, nominees and fiduciaries for reasonable
expenses incurred in connection therewith.
21
SHAREHOLDER PROPOSALS
FOR 2001 ANNUAL MEETING
- ---------------------------------------------------------------------------
To be considered for inclusion in our proxy materials relating to the
2001 annual meeting of shareholders, shareholder proposals must be submitted
by eligible shareholders who have complied with the relevant regulations of
the SEC and must be received no later than October 27, 2000. In addition, if
we are not notified of a shareholder proposal by January 10, 2001, then the
proxies held by our management may provide the discretion to vote against
such shareholder proposal, even though the proposal is not discussed in the
proxy materials sent in connection with the 2001 annual meeting of
shareholders. Shareholder proposals should be mailed to Richard D.
Schafstall, Senior Vice President, General Counsel and Secretary, Shoney's,
Inc., 1727 Elm Hill Pike, Nashville, Tennessee 37210.
OTHER BUSINESS
- --------------------------------------------------------------------------
Our management is not aware of any other matters to be brought before
the annual meeting. However, if any other matters are properly brought
before the annual meeting, the persons named in the enclosed form of proxy
will have discretionary authority to vote all proxies with respect to such
matters in accordance with their best judgment.
AVAILABILITY OF FORM 10-K
- -------------------------------------------------------------------------
UPON THE WRITTEN REQUEST OF ANY RECORD HOLDER OR BENEFICIAL OWNER OF
THE SHARES OF OUR COMMON STOCK ENTITLED TO VOTE AT THE ANNUAL MEETING, WE
WILL PROVIDE, WITHOUT CHARGE, A COPY OF OUR ANNUAL REPORT ON FORM 10-K FOR
THE FISCAL YEAR ENDED OCTOBER 31, 1999, TOGETHER WITH FINANCIAL STATEMENTS
AND SCHEDULES, AS FILED WITH THE SEC. REQUESTS SHOULD BE MAILED TO RICHARD
D. SCHAFSTALL, SENIOR VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY,
SHONEY'S, INC., 1727 ELM HILL PIKE, NASHVILLE, TENNESSEE 37210.
22
The Annual Report to Shareholders that accompanied the proxy materials is
omitted from this filing as it does not constitute "soliciting material."
Copies of the Annual Report to Shareholders have been mailed to the Commission
pursuant to Rule 14a-3(c).
APPENDIX A
PROXY PROXY
SHONEY'S, INC.
FOR USE AT THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MARCH 28, 2000
THIS PROXY IS SOLICITED BY AND ON BEHALF OF
THE BOARD OF DIRECTORS OF THE COMPANY
The undersigned holder of Common Stock, $1.00 par value per share,
("Common Stock") of Shoney's, Inc. (the "Company") hereby appoints J. Michael
Bodnar and David L. Gilbert as proxy for the undersigned to attend, vote and
act for and on behalf of the undersigned at the annual meeting of
shareholders of the Company to be held AT THE FIRST AMERICAN CENTER FIFTH
FLOOR AUDITORIUM, 300 UNION STREET, NASHVILLE, TENNESSEE ON TUESDAY, MARCH
28, 2000 (THE "MEETING") AT 9:00 A.M. (LOCAL TIME), and at any adjournments
thereof, and hereby revokes any proxy previously given by the undersigned.
The Common Stock represented by this proxy will be voted in accordance with
any choice specified in this proxy. IF NO SPECIFICATION IS MADE, THE PERSONS
NAMED ON THE REVERSE SIDE WILL VOTE SUCH COMMON STOCK FOR THE ELECTION OF THE
DIRECTORS NAMED IN THIS PROXY.
If this proxy is not dated, it shall be deemed to be dated on the date on
which this proxy was mailed by the Company.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
SHONEY'S, INC.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. [ ]
<TABLE>
<CAPTION>
1. ELECTION OF DIRECTORS - For Withhold For All
NOMINEES: All All (Except*)
<S> <C> <C> <C> <C> <C>
01 J. Michael Bodnar, 02 Stephen E. Macadam, [ ] [ ] [ ] 2. In their discretion, the
03 Jeffry F. Schoenbaum, 04 Raymond D. Schoenbaum Proxies are authorized
05 William A. Schwartz 06 Carroll D. Shanks, to vote on any variation
07 Felker W. Ward, Jr. 08 William M. Wilson, of or amendments to the
09 James D. Yancey foregoing matter proposed
at the Meeting or any
adjournment thereof; and
on any other matters that
may properly come before
the Meeting or any
adjournment thereof.
</TABLE>
- ---------------------
[FN]
(*Instructions: Strike a line through the nominee's name in the list above
and write the nominee's name on the line above.)
Dated:________________, 2000
----------------------------------
Name of Shareholder (please print)
---------------------------------
Signature of Shareholder
This proxy must be signed by the shareholder or such shareholder's attorney,
duly authorized in writing, or if the shareholder is a corporation, by an
officer or attorney thereof duly authorized. Signatures should correspond
with the name printed hereon. Where two or more persons are named, all
should sign.
