EXHIBIT 2
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:
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 or a director for any reason or, after
appointment as a director of the Company, shall cease to be a
2
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, 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
3
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 each member of the
Operations Committee shall have, access to all such information regarding the
Company and all
4
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 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.
5
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 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.
6
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 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
7
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 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
8
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. v.
-----------------
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, 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.
9
(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 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
10
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 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
11
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:
Bass, Xxxxx & Xxxx
0000 Xxxxx Xxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxx 00000
Attention: Xxxxx Xxxxx, III
Telecopy: 000-000-0000
12
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-
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, CEO
/s/ Xxxxxxx X. Xxxxxxxxxx
-----------------------------------------
Xxxxxxx X. Xxxxxxxxxx
/s/ Xxxxx X. Xxxxxxxxxx
-----------------------------------------
Xxxxx X. Xxxxxxxxxx
-14-
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.
