1
Exhibit 10
AGREEMENT
THIS AGREEMENT, dated as of August 10, 1997 (this "Agreement"), by and
among Shoney's, Inc., a Tennessee corporation (the "Company"), and Xxxxxxx X.
Xxxxxxxxxx, an individual resident of the State of Georgia, and Xxxxx X.
Xxxxxxxxxx, an individual resident of the State of Florida (Xxxxxxx X.
Xxxxxxxxxx and Xxxxx X. Xxxxxxxxxx are referred to herein collectively as the
"Shareholders' Committee");
W I T N E S S E T H:
WHEREAS, on July 3, 1997, the Shareholders' Committee mailed to the
shareholders of the Company (the "Shareholders") Solicitation Statements (each,
a "Solicitation Statement") to solicit agent designations (the "Agent
Designations") to call a Special Meeting of the Shareholders (the "Special
Meeting") for the consideration of certain proposals of the Shareholders'
Committee, including, among other things, the removal and replacement of the
members of the Board of Directors of the Company (the "Board");
WHEREAS, by July 18, 1997, the Shareholders' Committee delivered to the
Company Agent Designations executed by the holders in the aggregate of
approximately 42% of the outstanding shares of Common Stock of the Company in
favor of the call of the Special Meeting;
WHEREAS, the parties intended to solicit proxies from the Shareholders
with respect to the proposals to be submitted at the Special Meeting (the
solicitation of Agent Designations and of proxies to vote at the Special Meeting
collectively are referred to herein as the "Proxy Contest");
WHEREAS, the Board is not satisfied with the Company's recent
performance and intends to monitor closely the Company's situation; and
WHEREAS, the Company and the members of the Shareholders' Committee
have determined that the interests of the Company and its Shareholders, and the
interests of the members of the Shareholders' Committee, would be served by (i)
the avoidance of the substantial expense and disruption that could be expected
to result from the continuation of the Proxy Contest, (ii) the appointment of
the persons as set forth herein as new directors of the Company, (iii) the
formation of an Operations Committee which will provide a forum for discussion
and review of the current operations of the Company, and (iv) the receipt of
other agreements, covenants, rights and benefits as provided herein.
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements and representations set forth herein, intending to be legally bound
hereby, the parties hereby agree as follows:
2
1. BOARD COMPOSITION; RELATED MATTERS
(a) The Board has adopted, effective upon the execution of
this Agreement, a resolution to amend Article III, Section 1 of the Bylaws of
the Company to provide in the Bylaws that the number of directors is fixed at
eleven.
(b) In accordance with Article III, Section 7 of the Bylaws of
the Company, the Board (i) has adopted a resolution, effective upon execution of
this Agreement, to appoint Xxxxxxx X. Xxxxxxxxxx and Xxxxxxx X. Xxxxxx to fill
two of the vacancies on the Board created by the increase in the number of
directors and to serve as directors of the Company until the next annual meeting
of Shareholders and until their successors shall have been duly elected and
qualified, and (ii) as soon as practicable after the date hereof and in any
event within fourteen days from the date hereof, shall appoint to the Board a
third person who shall be selected by the Board (after receiving the
recommendation of the Nominating Committee) from the list of nominees proposed
by the Shareholders' Committee to fill the third vacancy (such person, together
with Xxxxxxx X. Xxxxxxxxxx and Xxxxxxx X. Xxxxxx, being referred to herein as
the "Committee Nominees") to serve until the next annual meeting of Shareholders
and until his or her successor shall have been duly elected and qualified.
(c) In accordance with Article III, Section 7 of the Bylaws,
the Board shall appoint, as soon as practicable after the date hereof and in any
event within sixty days from the date hereof, one person (the "Additional
Nominee") selected by mutual agreement of the Board (after receiving the
recommendation of the Nominating Committee) and the Shareholders' Committee from
a list of four persons, two of whom are proposed by the Shareholders' Committee
and two of whom are proposed by the Nominating Committee of the Board, to fill
the fourth vacancy on the Board and to serve as a director of the Company until
the next annual meeting of the Shareholders and until his or her successor shall
have been duly elected and qualified.
(d) In connection with the election of the directors of the
Company at the annual meeting of the Company to be held in calendar year 1998
and in any election of the directors at any time prior to the annual meeting of
the Company in calendar year 1999, the Committee Nominees and the Additional
Nominee shall be included in the slate of nominees recommended by the Board to
the Shareholders for election as directors, and the Company shall use all
reasonable efforts to cause the election of each of the Committee Nominees and
such Additional Nominee at each such election. The foregoing notwithstanding,
neither the Company nor the Board shall have any obligation to recommend the
Committee Nominees or such Additional Nominee at any election which occurs after
either member of the Shareholders' Committee has taken any action described in
Section 2(b)(ii) of this Agreement (which actions shall be referred to as the
"initiation of a proxy contest").
(e) If, prior to the earlier of the date of the Company's
annual meeting in calendar year 1999 and the initiation of a proxy contest by
either member of the Shareholders' Committee, any Committee Nominee or Xxxxxx
Xxxxxxxxxx shall be unable or unwilling to serve as a nominee
-2-
3
or a director for any reason or, after appointment as a director of the Company,
shall cease to be a member of the Board by reason of his or her death,
disability or resignation, the Shareholders' Committee shall be entitled to
select a person (after receiving the recommendation of the Nominating Committee,
which recommendation shall not be unreasonably withheld; provided that if the
Nominating Committee does withhold its recommendation, then the Shareholders'
Committee shall be entitled to select another person, again subject to the
recommendation of the Nominating Committee, which shall not be unreasonably
withheld), who may or may not be one of the nominees of the Shareholders'
Committee as set forth in the Solicitation Statement, to be included on the
slate of nominees recommended by the Board to the Shareholders or to fill the
vacancy on the Board, as the case may be. If, prior to the earlier of the date
of the Company's annual meeting in calendar year 1999 and the initiation of a
proxy contest by either member of the Shareholders' Committee, the Additional
Nominee shall be unable or unwilling to serve as a nominee or a director for any
reason or, after appointment as a director of the Company, shall cease to be a
member of the Board by reason of his or her death, disability or resignation,
the Board (after receiving the recommendation of the Nominating Committee) and
the Shareholders' Committee shall select by mutual agreement a person from a
list of four persons, two of whom are proposed by the Shareholders' Committee
and two of whom are proposed by the Nominating Committee of the Board, to be
included on the slate of nominees recommended by the Board to the Shareholders
or to fill the vacancy on the Board, as the case may be. Any person selected to
be recommended to be included in the slate of nominees or on the Board in
accordance with this Section in place of a Committee Nominee or Xxxxxx
Xxxxxxxxxx shall be deemed to be a Committee Nominee for purposes of this
Agreement and any person so selected in place of the Additional Nominee shall be
deemed to be the Additional Nominee for purposes of this Agreement. Any vacancy
on the Board which is to be filled in accordance with this Section 1(e) shall be
filled by the Board as soon as practicable.
(f) Except as provided herein, if, prior to the earlier of the
date of the Company's annual meeting in calendar year 1999 and the initiation of
a proxy contest by either member of the Shareholders' Committee, any member of
the Board other than a Committee Nominee, an Additional Nominee or Xxxxxx
Xxxxxxxxxx shall cease to be a member of the Board by reason of his or her
death, disability or resignation, the Board following the recommendation of a
committee of the Board consisting of all directors other than the Committee
Nominees and Xxxxxx Xxxxxxxxxx (the "Special Nominating Committee") shall
appoint a person to fill the vacancy created and if, prior to such earlier date,
any member of the Board other than a Committee Nominee, an Additional Nominee or
Xxxxxx Xxxxxxxxxx shall be unable or unwilling to be nominated or serve as a
director of the Company, the Special Nominating Committee shall appoint a person
to be included in place of such member in the slate of nominees recommended by
the Board. Notwithstanding the foregoing, if, prior to the earlier of the date
of the Company's annual meeting in calendar year 1999 and the initiation of a
proxy contest by either member of the Shareholders' Committee, Xxxxxx X.
Xxxxxxxx or B. Xxxxxxxx Xxxxxxx shall cease to be a member of the Board by
reason of death, disability or resignation, or if Xxxxxx X. Xxxxxxxx or B.
Xxxxxxxx Xxxxxxx shall be unable or unwilling to be nominated to serve as a
director of the Company, the Board (after receiving the recommendation of the
Nominating Committee) shall appoint a person to fill the vacancy created or to
be included in place of such member in the slate of nominees recommended by the
Board; provided, however,
-3-
4
that such person shall not be, nor within the last three years shall have been,
an officer or employee of the Company or have acted as, or be employed by or
affiliated or associated with an organization serving as, a professional
advisor, legal counsel, consultant or financial advisor to the Company or any
director or officer of the Company. Any vacancy on the Board which is to be
filled in accordance with this Section 1(f) shall be filled by the Board as soon
as practicable.
(g) The Board has by resolution, effective upon the execution
of this Agreement, (i) expanded the powers of the Executive Committee of the
Board to include all of the powers which were previously granted to the Chairman
of the Board, including the power to call meetings of the Board and to set the
agenda for meetings of the Board, and (ii) reconstituted the existing Executive
Committee to consist of the following individuals: Xxxxxxx X. Xxxxxxxxxx, B.
Xxxxxxxx Xxxxxxx (who has been designated as Chairman of the Executive
Committee), Xxxxxxx X. Xxxxxx, Xxxxxx X. Xxxxxx and C. Xxxxxxx Xxxx. In
addition, the Board has by resolution, effective upon the execution of this
Agreement, amended the Bylaws of the Company to provide that (i) the Chairman of
the Executive Committee has the power to call meetings of the Board or the
Executive Committee on at least one day's notice pursuant to the Bylaws of the
Company, (ii) from and after the date that B. Xxxxxxxx Xxxxxxx is no longer the
Chairman of the Executive Committee, any two members of the Executive Committee
acting together shall have the power to call meetings of the Board or the
Executive Committee on at least one day's notice pursuant to the Bylaws of the
Company, and (iii) each member of the Executive Committee is entitled to add
items to the agenda of the Board or the Executive Committee.
(h) The Board has adopted, effective upon the execution of
this Agreement, a resolution to amend the Bylaws to create a committee,
designated as the Operations Committee, with the powers described herein. The
Board has adopted, effective upon the execution of this Agreement, a resolution
appointing Xxxxxxx X. Xxxxxxxxxx, Xxxxxxx X. Xxxxxx and C. Xxxxxxx Xxxx to serve
on the Operations Committee. Within fourteen days from the date hereof, the
Nominating Committee shall recommend and the Board shall appoint a fourth member
of the Operations Committee from among the members of the Board. The Operations
Committee shall become effective and be empowered immediately upon execution of
this Agreement and prior to the selection of a fourth member. The Operations
Committee shall have full authority to review and make recommendations to the
full Board concerning all aspects of the Company's business and its current and
future business and financial strategies, transactional opportunities and the
enhancement of shareholder value. In addition, the Operations Committee shall
have oversight responsibility with respect to all aspects of the day-to-day
operations of the Company, including the marketing, capital expenditure and
budget plans for the Company, and shall have the authority to review and make
recommendations regarding the debt structure and capital structure of the
Company. The Operations Committee shall hold meetings as often as the Operations
Committee believes necessary but in any event for the first two months after the
date hereof the Operations Committee shall meet no less than every two weeks.
The Chief Executive Officer shall attend each meeting of the Operations
Committee, unless his or her absence is approved by a majority of the members of
the Operations Committee in attendance at such meeting from which the Chief
Executive Officer is absent. Each member of the Operations Committee shall have,
and management of the Company shall ensure that
-4-
5
each member of the Operations Committee shall have, access to all such
information regarding the Company and all contacts with such employees and
franchisees as such member shall request. The Operations Committee shall make a
report to the Board on a monthly basis (or more often, if necessary or
appropriate) and the agenda of each Board meeting shall provide for the making
by the Operations Committee of such report.
(i) Any member of the Board may request that the Company
retain, on behalf of the Board or any committee thereof, consultants or advisors
that the Board determines to be appropriate and the Board shall provide for the
payment of such advisors or consultants in connection with any such approval.
If, within fourteen days after such request, the Board fails to retain
consultants or advisors proposed by Xxxxxxx X. Xxxxxxxxxx to assist the efforts
of the Operations Committee, Xxxxxxx X. Xxxxxxxxxx shall have the right to
require the Company to retain no more than two consultants or advisors to work
for the Operations Committee, who, so long as B. Xxxxxxxx Xxxxxxx is the
Chairman of the Executive Committee, must be approved by the Chairman of the
Executive Committee (which approval shall not unreasonably be withheld). In such
case, the Company shall hire such consultants or advisors for a three-month term
beginning as soon as practicable for an amount not to exceed $25,000 per month
for each consultant or advisor.
(j) Without the written consent of either of the members of
the Shareholders' Committee, the Company agrees that, prior to the annual
meeting of the Company in calendar year 1999, it shall not take any action to
(i) amend the Bylaws of the Company to increase the size of the Board, (ii)
disband or cause the Executive Committee or the Operations Committee to cease to
function, (iii) decrease, limit or alter the responsibilities or powers of the
Executive Committee (as set forth in Section 1(g) hereof) or the Operations
Committee, (iv) alter the size or composition of the Executive Committee or the
Operations Committee as provided in paragraphs (g) and (h) hereof, or (v) alter
or amend the Bylaws in any manner inconsistent with the last sentence of
paragraph (g) hereof or alter or amend the Bylaws in any manner inconsistent
with paragraphs (n), (o) or (p) hereof. The Company agrees that, until the
annual meeting of the Company in calendar year 1999, the Board shall reappoint
the members of the Executive Committee and the Operations Committee as
designated herein to such committees on an annual basis; provided that such
persons are members of the Board and; provided, further, that if a Committee
Nominee ceases to be a member of the Board, the Board shall appoint another
Committee Nominee to be a member of such committee. In addition, each member of
the Operations Committee shall be reimbursed by the Company for all expenses
reasonably incurred by such member in the performance of his or her duties as a
member of such committee. The quorum for all meetings of the Operations
Committee shall be two, at least one of whom is a Committee Nominee and one of
whom is a person other than a Committee Nominee, and the quorum for all meetings
of the Executive Committee shall be three, at least one of whom is a Committee
Nominee. The act of a majority of those present at a meeting of either the
Executive Committee or the Operations Committee at which a quorum is present
shall be the act of such Committee.
(k) On or before November 15, 1997, the Board will evaluate
the performance of the Chief Executive Officer and each other member of senior
management of the Company, and
-5-
6
upon such evaluation shall make such determinations regarding the Chief
Executive Officer and the other members of senior management of the Company as
the Board decides to be appropriate. In undertaking such review, the Board will
utilize such criteria as may be determined to be appropriate by the Board, which
will include the performance of the Company. In addition, the Board shall retain
the authority, and nothing contained herein shall have the effect of limiting
the Board's authority, to review the performance of the Chief Executive Officer
and each other member of senior management of the Company at such other times
and in such manner as the Board deems to be necessary or appropriate.
(l) If the current Chairman and Chief Executive Officer
resigns or is removed, the Board agrees that Xxxxxxx X. Xxxxxxxxxx shall be
given equal consideration for the Chairman and Chief Executive Officer position.
If Xxxxxxx X. Xxxxxxxxxx chooses not to be a candidate for the position, the
Board shall create a Search Committee to retain a new Chief Executive Officer
and Xxxxxxx X. Xxxxxxxxxx shall be appointed by the Board to be a member of such
Search Committee.
(m) The Board has adopted, effective upon the execution of
this Agreement, a resolution appointing Xxxxxxx X. Xxxxxxxxxx to serve on the
Nominating Committee of the Board and shall continue to cause Xxxxxxx X.
Xxxxxxxxxx to be a member of such committee at least until the annual meeting of
the Company in calendar year 1999. The Board shall appoint either Xxxxxxx X.
Xxxxxxxxxx or one of the other Committee Nominees to serve on each other
committee of the Board and shall continue to cause such persons to be members of
such committees at least until the annual meeting of the Company in calendar
year 1999.
(n) The Board has adopted, effective upon the execution of
this Agreement, a resolution to amend the Bylaws of the Company to provide that
(i) the Board shall hold at least one regularly scheduled meeting every month
during the first four (4) months following the date of this Agreement at such
times as may from time to time be fixed by the Board, and that the Board shall
hold regular meetings every month thereafter until the Board determines that it
is not necessary, (ii) each Board member shall be entitled to receive promptly
upon request all information regarding the Company which such Board member
requests, and (iii) the information described in Annex I to this Agreement shall
be given to the members of the Operations Committee in accordance with the time
frames set forth in such Annex I.
(o) The Board has adopted, effective upon the execution of
this Agreement, a resolution to amend the Bylaws of the Company to provide that
no Significant Transaction (using clauses (iii) through (x) as the definition
thereof in Section 2(a)) shall be undertaken without the specific approval of
the Board of such Significant Transaction.
(p) The Board has adopted, effective upon the execution of
this Agreement, a resolution amending the Bylaws of the Company to provide that,
prior to June 30, 1998, it will not amend or repeal any provision of the Bylaws
contemplated herein to become effective on the date of execution of this
Agreement (including the provision described in this Section 1(p)) or adopt any
-6-
7
new Bylaw of the Company which is inconsistent in any manner with any such Bylaw
provision, in each case without the affirmative vote of at least 75% of the
members of the Board.
2. COVENANTS OF THE SHAREHOLDERS' COMMITTEE.
(a) The date on which the covenants and agreements contained
in this Section 2 terminate is referred to herein as the "Standstill Termination
Date." The "Standstill Termination Date" shall be the earliest of (i) Xxxxx 00,
0000, (xx) the date on which the Company or the Board breaches in any material
respect any of the representations, warranties, covenants or agreements
contained in this Agreement if the Company or the Board does not cure such
breach within three business days following notice to the Company of such
breach, or the 20th day after which any determination is made by a court of
competent jurisdiction that any material provision of this Agreement is invalid
or unenforceable and such invalidity or unenforcability is not cured by
agreement of the parties pursuant to Section 7 hereof, (iii) the date on which
the Board or management enters into substantive negotiations with respect to or
determines to approve or not to oppose a Significant Transaction (as defined
below), if all of the Committee Nominees object in writing or by vote to such
Significant Transaction, or (iv) the date of the making of any proposal by the
Board or management to adopt any antitakeover measure (including the entering
into of agreements with employees containing payments contingent upon a change
in control or the modifying of any existing agreements increasing the amount of
any payments upon a change in control) other than in response to a threat from a
person other than a member of the Shareholders' Committee, provided that (A) if
the Board or management ceases negotiations described in clause (iii) or rejects
a proposal described in clause (iv), in each case on or before the thirtieth day
after such negotiations begin or such proposal is made, the provisions of
Section 2(b) shall be immediately reinstated except to the extent that they
would otherwise have expired, and (B) prior to adopting any such antitakeover
measure, the members of the Board shall be provided with at least ten days'
notice of such proposed adoption. A "Significant Transaction" shall be any of
the following actions taken by the Board: (i) a change in any of the Bylaw
amendments provided for in this Agreement or the adoption of any Bylaws
inconsistent with such Bylaw amendments, (ii) the adoption by the Board of a
resolution recommending to the stockholders of the Company a proposed amendment
to the Charter of the Company inconsistent with this Agreement or any of the
Bylaw amendments provided for in this Agreement, (iii) the sale, lease, exchange
or other disposition of all or substantially all of the business operations or
assets of the Company in a single transaction or in a series of transactions,
(iv) the sale, lease, exchange or other disposition of (A) the Shoney's
division, the Captain D's division or any individual asset or group of related
assets of the Company in a single transaction or in a series of related
transactions involving more than $5 million (except that transactions shall not
be considered to be related solely because they are adopted by the Board as part
of a common plan), (B) assets in a single transaction or in a series of
transactions to a single purchaser involving more than $5 million or (C) any
asset or group of related assets to any current or former officer, director or
employee of the Company, any person who has an ongoing material business or
financial relationship with any such current or former officer, director or
employee of the Company, any Affiliate or Associate (each as herein defined) of
the foregoing, or any entity owned in whole or in part by any of the foregoing
(other than an entity whose securities are publicly traded and in which
-7-
8
the foregoing own less than 5% of the outstanding equity interests of such
entity), (v) the acquisition of (A) any restaurant or restaurants in a single
transaction or in a series of related transactions involving more than $5
million or (B) business operations or assets in a single transaction or in a
series of related transactions involving more than $5 million other than, in the
case of this clause (B), those acquisitions contained in the capital budget plan
of the Company previously approved by the Board, (vi) the authorization of the
dissolution of the Company or the winding up or seeking of voluntary bankruptcy
or voluntary insolvency protection, (vii) the consent by the Company to a
third-party seeking an order authorizing the involuntary dissolution or
involuntary bankruptcy of the Company, (viii) the authorization of any merger,
consolidation, reorganization or other business combination (other than any
merger in which both (A) the Company is the surviving ultimate parent entity and
(B) the holders of the voting securities of the Company prior to such
transaction continue to hold at least 85% of the equity interests and voting
power of the Company after the transaction), (ix) the declaration of any
dividend or authorization of any distribution in excess of regular and customary
dividends, or (x) the approval of any restructuring of indebtedness of the
Company or any of its subsidiaries involving amounts in excess of $25 million,
or the material modification of the terms of any indebtedness or obligation of
the Company or any of its subsidiaries for borrowed money involving amounts in
excess of $25 million.
(b) Each member of the Shareholders' Committee jointly and
severally agrees that during the period commencing on the date hereof and ending
on the Standstill Termination Date, without the prior written consent of the
Company, he or she will not, and will cause each of his or her Affiliates not
to, directly or indirectly, except as specifically provided for in Section 1 and
Section 2(c) hereof, (i) seek to control or direct the management or policies of
the Company or to obtain additional representation on the Board, (ii) solicit,
or participate in the solicitation of, any proxies, demands or consents with
respect to any securities of the Company with respect to any matter (or request
permission to do so), (iii) become a member of any "group" (as such term is
interpreted under the rules under the Securities Exchange Act of 1934, as
amended (the "Act")) with respect to any of the foregoing activities, (iv) make
any public disclosure or public announcement of any kind with respect to any of
the foregoing or take any other action which might reasonably be expected to
result in any such public disclosure or public announcement, or (v) enter into
any discussions, negotiations, arrangements or understandings with any third
party with respect to any of the foregoing.
(c) Nothing in Section 2(b) shall be deemed to limit, prevent
or preclude any communication among or between any of the members of the
Shareholders' Committee or to prevent the members of the Shareholders' Committee
from voting their voting securities of the Company as they see fit. In addition,
nothing contained in Section 2(b) shall be deemed in any way to prohibit or
limit a Committee Nominee during the term of his or her service as a director of
the Company from engaging in any lawful acts in his or her capacity as a
director of the Company or as a member of any committee of the Board; provided,
however, that such person shall use all reasonable efforts to structure his or
her communications as a director in such a manner as to avoid a requirement to
make separate public disclosure of any intention, plan or arrangement prohibited
by Section 2(b). Without limiting the generality of the foregoing, nothing
contained in Section 2(b) shall be deemed
-8-
9
to prohibit or limit a Committee Nominee during the term of his or her service
as a director of the Company from (i) voting on any matter submitted to the
Board or any Board committee, (ii) participating in deliberations or discussions
of the Board or any Board committee (including making suggestions and raising
issues to the Board or any Board committee) or with any advisors to such
Committee Nominee or to the Board or any Board committee, (iii) participating
consistent with the recommendation of the Board, directly or indirectly, in any
"solicitation" (as such term is used in the proxy rules under the Act) of
proxies or consents involving the Company relating to matters approved by the
Board or (iv) initiating or participating in discussions with franchisees,
employees, customers or other third parties for the sole purpose of gathering
information regarding the Company and its operations in furtherance of his or
her duties as a member of the Board or a committee thereof.
(d) If a Standstill Termination Date occurs on or after the
90th day prior to the scheduled date for the 1998 annual meeting of the Company
(or during the 20-day negotiating period described in clause (ii) of the
definition of "Standstill Termination Date," subject to the automatic withdrawal
of such request if the parties are able to agree upon a provision as described
therein), then not later than ten business days following receipt of notice by
the Shareholders' Committee of the occurrence of the Standstill Termination Date
(or an event described in the immediately preceding parenthetical), the
Shareholders' Committee shall have the option, upon written notice to the
Company, to require that the Company not hold the 1998 annual meeting of
Shareholders prior to the 90th day following the Standstill Termination Date
and, if necessary, the Company shall postpone the 1998 annual meeting of
Shareholders in order to satisfy such requirement.
(e) The Shareholders' Committee hereby (i) withdraws its
proposals to be considered at the Special Meeting as set forth in the
submissions dated June 16, 1997, June 23, 1997 and July 16, 1997 of the
Shareholders' Committee to the Company pursuant to the advance notice
requirements of the Bylaws of the Company (the "Proposals"), (ii) to the extent
permitted by applicable law, withdraws the demand for the Special Meeting and
(iii) waives any rights that it may have with respect to the calling and
convening of the Special Meeting at which the Proposals were to have been
considered.
3. COVENANTS OF THE PARTIES
(a) By Agreed Order entered on July 23, 1997 in Shoney's, Inc.
x. Xxxxxxxxxx, civil action no. 3-97-0686 in the United States District Court
for the Middle District of Tennessee (the "Civil Action"), the parties agreed to
dismiss their respective pleadings in the Civil Action without prejudice, and
the parties have not filed or commenced any other litigation arising out of or
related to the Proxy Contest. In further consideration of the agreements set
forth herein, except for the rights and obligations of the parties set forth in
this Agreement, each of the parties hereby releases and forever discharges each
of the other parties and their respective employees, officers, directors,
subsidiaries, affiliates, agents and representatives from any and all claims,
causes of action, suits, costs, damages, expenses, attorneys' fees, liabilities
and obligations of any kind or nature whatsoever, whether known or unknown,
fixed or contingent, joint or several, which such party may have against any of
the other parties or their respective employees, officers, directors,
subsidiaries,
-9-
10
affiliates, agents and representatives arising out of or related to the Proxy
Contest, this Agreement or the negotiations relating to this Agreement,
including, but not limited to, claims raised in the Civil Action, claims related
to the parties' respective filings with the Securities and Exchange Commission,
and the parties' other oral and written statements related to the Proxy Contest.
(b) The Shareholders' Committee agrees to reasonably cooperate
with the Company, at the Company's own expense, in the Company's defense of the
Xxxxxx litigation and any other shareholder or derivative action relating to the
Proxy Contest, this Agreement or the negotiations relating to this Agreement.
The Company agrees to reasonably cooperate with the Shareholders' Committee in
the defense by the Shareholders' Committee of any action against one or more of
the members of the Shareholders' Committee relating to the Proxy Contest, this
Agreement or the negotiations relating to this Agreement.
(c) As promptly as practicable after the date hereof, the
Company and the Shareholders' Committee agree to prepare, at the Company's own
expense, a form of court order reasonably acceptable to both parties for the
purpose of dismissing the Civil Action and agree to use all reasonable efforts
to obtain approval of the order from the United States District Court for the
Middle District of Tennessee or from such other court as shall have jurisdiction
over the matter. Notwithstanding the foregoing, nothing contained in this
Agreement shall be conditioned or contingent upon obtaining such approval from
the United States District Court for the Middle District of Tennessee or from
such other court as shall have jurisdiction over the matter.
(d) The Company hereby agrees to indemnify and hold harmless
the members of the Shareholders' Committee and their employees, subsidiaries,
affiliates, agents and representatives (the "Indemnified Parties") from and
against any and all claims, causes of action, suits, costs, damages, expenses,
attorneys' fees, liabilities and obligations of any kind or nature whatsoever,
whether known or unknown, fixed or contingent, joint or several, arising from
any claim, action, suit or proceeding arising out of or related to the proxy
materials, the Agent Designation materials and other materials and filings
related to the Proxy Contest filed by the Shareholders' Committee with the
Securities and Exchange Commission (collectively, the "Proxy Materials"), the
parties' oral and written statements related to the Proxy Contest, this
Agreement and the negotiation and execution of this Agreement; provided,
however, that the Company shall be required to indemnify and hold harmless the
Indemnified Parties with respect to the Shareholders' Committee's obligations
under Section 13(d) of the Act only with respect to (A) matters also described
in the Proxy Materials related to events after June 1, 1997 and (B) the
Shareholders' Committee's obligations and filings under the federal securities
laws relating to this Agreement or the negotiation and execution of this
Agreement.
4. NO IMPAIRMENT. Each of the parties agrees that it will not avoid or
seek to avoid the observance or performance of any of the terms hereof (whether
by alleging in any court that one or more of the provisions of this Agreement is
invalid or unenforceable, or otherwise), but will act at all times in good faith
to assist in the carrying out of all such terms, and each of the parties hereby
irrevocably waives any claim that any provision hereunder may be invalid or
unenforceable and agrees not to contend to the contrary. In addition, each of
the parties agrees that it will use all
-10-
11
reasonable efforts to defend against any claim by a third party that any of the
provisions of this Agreement is invalid or unenforceable.
5. PRESS RELEASE. Upon execution of this Agreement, the Company and the
Shareholders' Committee shall issue a joint press release in the form attached
as Annex II hereto. None of the parties hereto will make any public statements
(including any statements in any filing with the SEC or any other governmental
agency), including statements to shareholders, franchisees, employees and
lenders of the Company, that are inconsistent with, or are otherwise contrary
to, the statements in the press release.
6. EXPENSES. The Company hereby agrees to pay to the members of the
Shareholders' Committee an aggregate amount equal to $2.5 million for their
expenses arising out of, relating to, or incurred in connection with, the
Shareholders' Committee's review and consideration of issues leading to the
initiation of the Proxy Contest, the Proxy Contest, the litigation relating to
the validity of the Bylaw amendments and certain other matters which was settled
by agreement on July 22, 1997, and the negotiation of this Agreement, which
amount shall be allocated by the Shareholders' Committee among its advisors as
the Shareholders' Committee deems appropriate in its sole discretion. The
Company agrees to pay such expenses by wire transfer within two business days
after the date on which the Shareholders' Committee provides the Company with
the account information needed to effect such wire transfer. The Shareholders'
Committee will provide the Company with reasonable documentation regarding such
expenses.
7. SPECIFIC PERFORMANCE. Each of the members of the Shareholders'
Committee, on the one hand, and the Company on the other, acknowledges and
agrees that irreparable injury to the other party or parties (as the case may
be) hereto would occur if any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached and
that such injury would not be compensable in money damages. It is accordingly
agreed that each party hereto (the "Moving Party") shall be entitled to specific
enforcement of, the terms hereof and injunctive or other equitable relief as a
remedy for such nonperformance or breach, and each party further waives any
requirement for the securing or posting of any bond in connection with such
remedy. The other parties hereto will not take action, directly or indirectly,
in opposition to the Moving Party seeking such relief on the grounds that any
other remedy or relief is available at law or in equity. The remedies for which
this Section provides shall not be deemed to be the exclusive remedies for
breach of this Agreement, but shall be in addition to all other remedies
available at law or equity. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction to be illegal,
invalid, void or unenforceable, the parties agree that such provision, covenant
or restriction will be enforced to the maximum extent permissible so as to
effect the intent of the parties, and the legality, validity and enforceability
of the remaining provisions of this Agreement shall not in any way be affected
or impaired thereby. The parties will negotiate in good faith to amend this
Agreement to replace the unenforceable language with enforceable language which
as closely as possible reflects such intent.
8. SHAREHOLDERS' COMMITTEE REPRESENTATIVE. In the event of the death or
incapacity of Xxxxx X. Xxxxxxxxxx, Xxxxx X. Xxxxxxxxxx hereby assigns all of her
rights and privileges under
-11-
12
this Agreement to Xxxxxxx X. Xxxxxxxxxx and Xxxxxxx X. Xxxxxxxxxx shall have the
power and authority to exercise all of such rights and privileges of Xxxxx X.
Xxxxxxxxxx under this Agreement. In the event of the death or incapacity of
Xxxxxxx X. Xxxxxxxxxx, Xxxxxxx X. Xxxxxxxxxx hereby assigns all of his rights
and privileges under this Agreement to Xxxxx X. Xxxxxxxxxx and Xxxxx X.
Xxxxxxxxxx shall have the power and authority to exercise all of such rights and
privileges of Xxxxxxx X. Xxxxxxxxxx under this Agreement. Except to the extent
specified herein, the rights and privileges of the members of the Shareholders'
Committee are not assignable.
9. NO WAIVER. Any waiver by any party hereto of a breach of any
provision of this Agreement shall not operate as or be construed to be a waiver
of any other breach of such provision or of any breach of any other provision of
this Agreement. The failure of a party hereto to insist upon strict adherence to
any term of this Agreement on one or more occasions shall not be considered a
waiver or deprive that party of the right thereafter to insist upon strict
adherence to that term or any other term of this Agreement.
10. CERTAIN DEFINITIONS. As used in this Agreement, the terms
"Affiliates" and "Associates" shall have the respective meanings set forth in
Rule 12b-2 under the Exchange Act and shall include persons who become
Affiliates or Associates of any person subsequent to the date hereof.
11. ENTIRE AGREEMENT; AMENDMENTS. This Agreement contains the entire
understanding of the parties hereto with respect to its subject matter. There
are no restrictions, agreements, promises, representations, warranties,
covenants or undertakings other than those expressly set forth herein. This
Agreement may be amended only by a written instrument duly executed by the
parties hereto.
12. HEADINGS. The section headings contained in this Agreement are for
reference purposes only and shall not effect in any way the meaning or
interpretation of this Agreement.
13. NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given if so given) by hand delivery, cable, telecopy
(confirmed in writing) or telex, or by mail (registered or certified, postage
prepaid, return receipt requested) to the respective parties hereto as follows:
If to the Company:
Shoney's, Inc.
0000 Xxx Xxxx Xxxx
Xxxxxxxxx, Xxxxxxxxx 00000
Attention: Chief Executive Officer
Telecopy: 615/231-2531
with copies to:
-12-
13
Bass, Xxxxx & Xxxx
0000 Xxxxx Xxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxx 00000
Attention: Xxxxx Xxxxx, III
Telecopy: 000-000-0000
and
Wachtell, Lipton, Xxxxx & Xxxx
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxx
Telecopy: 212/403-2000
If to the Shareholders' Committee:
Xxxxxxx X. Xxxxxxxxxx
0000 Xxxxxx Xxxxx Xxxx
Xxxxxxxx Xxx, Xxxxx 000
Xxxxxxxx, Xxxxxxx 00000-0000
Telecopy: 770/612-2459
with a copy to:
King & Spalding
000 Xxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000-0000
Attention: Xxxx X. Xxxxxx, Xx.
Telecopy: 404/572-5145
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
14. GOVERNING LAW. This Agreement shall be governed by and construed
and enforced in accordance with the laws of Tennessee, without reference to the
conflict of laws principles thereof.
15. COUNTERPARTS. This Agreement may be executed in counterparts, each
of which shall be an original, but each of which together shall constitute one
and the same Agreement.
-13-
14
IN WITNESS WHEREOF, and intending to be legally bound hereby, each of
the undersigned parties has executed or caused this Agreement to be executed on
the date first above written.
SHONEY'S, INC.
By: /s/ C. Xxxxxxx Xxxx
-----------------------------------------
Name: C. Xxxxxxx Xxxx
-------------------------------------
Title: Chairman and Chief Executive Officer
------------------------------------
/s/ Xxxxxxx X. Xxxxxxxxxx
-------------------------------------------
Xxxxxxx X. Xxxxxxxxxx
/s/ Xxxxx X. Xxxxxxxxxx
-------------------------------------------
Xxxxx X. Xxxxxxxxxx
-14-
15
ANNEX I
INFORMATION TO BE PROVIDED TO MEMBERS OF THE OPERATIONS COMMITTEE
Information to be provided weekly:
1. Information regarding same store sales, broken down as follows:
a. Company-owned vs. Franchised.
b. Captain D's, Shoney's and casual dining.
c. Regional (geographic divisions).
d. Sales attributable to coupons, to the extent available.
2. Information regarding labor and food costs, broken down as follows:
a. Company-owned vs., to the extent available, Franchised.
b. Captain D's, Shoney's and casual dining.
c. Regional (geographic divisions).
Information to be provided for each four-week period:
1. Financial statements, including:
a. Balance sheet and income statement.
b. Break out of Captain D's, Shoney's and casual dining segments.
c. Comparison of actual vs. prior year vs., to the extent
available, budget.
2. Shopper reports.
