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Board Unanimously Declined Demand to Appoint
Biglari to Board
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Company Endeavored to Avoid Proxy Fight, Held
Numerous Discussions with Biglari and Offered Him the Opportunity to
Appoint Two New Qualified Independent Directors
LEBANON, Tenn.--(BUSINESS WIRE)--
Cracker Barrel Old Country Store, Inc. (Nasdaq: CBRL) commented today on
the announcement by Biglari Holdings Inc. (NYSE:BH) of its intention to
nominate Sardar Biglari, Chairman and CEO of Biglari Holdings, to the
Cracker Barrel Board at the Company's 2011 Annual Meeting of
Shareholders. In response to prior demands by Mr. Biglari to appoint
himself and Philip Cooley, Biglari Holdings' Vice Chairman and director,
to the Cracker Barrel Board, the Board determined that such action was
not in the best interest of the Company and its shareholders for a
variety of reasons, which are outlined below.
In an effort to avoid a proxy fight, the Company held numerous
discussions with Mr. Biglari and offered him the opportunity to appoint
two new independent directors to the Cracker Barrel Board, subject to
his nominees being qualified under Cracker Barrel's Corporate Governance
Guidelines, which he refused. The text of a letter outlining Cracker
Barrel's offer from Michael A. Woodhouse, Cracker Barrel's Chairman and
Chief Executive Officer, to Mr. Biglari is reproduced at the end of this
release.
Mr. Woodhouse said, "The Board is disappointed that Mr. Biglari refused
our good faith offer and, instead, determined to initiate a disruptive
and costly proxy contest at the expense of all of Cracker Barrel's
shareholders and his own."
Careful Consideration of Biglari Candidacy
Mr. Biglari first made his demand that the Board appoint him and Mr.
Cooley to the Cracker Barrel Board in June. After careful deliberation
and numerous discussions between Cracker Barrel and Mr. Biglari,
including a meeting between the members of Cracker Barrel's Nominating
and Corporate Governance Committee and Messrs. Biglari and Cooley at
Biglari Holdings' offices in San Antonio, Texas, the Cracker Barrel
Board and Nominating and Corporate Governance Committee unanimously
declined Mr. Biglari's demand in late July. The Board and the Committee
took into consideration many factors in deciding that the appointments
would not be in the best interests of the Company and its shareholders,
including significant business and legal concerns over conflicts of
interest and governance, the background and qualifications of the
individuals, and uncertainty over Mr. Biglari's ultimate agenda.
Offered to Add to Board Two Qualified Independent
Candidates to be Nominated by Biglari
While Cracker Barrel's Board rejected Mr. Biglari's demand to appoint
himself and Mr. Cooley to the Board, in an effort to be constructive,
the Board offered to appoint two new, qualified independent directors
not affiliated with any restaurant company who would be recommended by
Mr. Biglari. Mr. Biglari indicated on August 10th that he
would provide Cracker Barrel with proposed independent director nominees
if Cracker Barrel entered into a confidentiality agreement not to
disclose the identity of any candidates Mr. Biglari proposed if they
were ultimately not accepted by the Board. Cracker Barrel complied with
this request and provided a confidentiality agreement to Biglari
Holdings the next day. After nearly two weeks' delay, Mr. Biglari chose
not to sign the agreement.
Numerous Concerns Over Biglari's Conflicts,
Governance Practices and Undisclosed Agenda
In making its decision not to appoint Mr. Biglari to the Board, the
Board and the Nominating and Corporate Governance Committee took into
account a number of factors, including:
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Appointing the chief executive officer of a competing restaurant
chain, Steak n Shake, to the Cracker Barrel Board would create serious
and inappropriate business conflicts of interest. The Board has never
in Cracker Barrel's 42-year history included a director who was a
director or officer of another restaurant company, and such
appointments would violate the Company's Corporate Governance
Guidelines.
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Including a director of a competitor on the Cracker Barrel Board would
violate the federal antitrust laws.
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Biglari Holdings is currently seeking approval by its shareholders to
create a two-class capital structure, including Class B shares with
only 1/100th of a vote. As stated in its July 5, 2011 proxy statement,
"Biglari Holdings is in the business of acquiring other businesses,"
and it intends to issue the low-vote Class B shares in acquiring other
companies without significantly diluting the voting power of Biglari
Holdings shareholders who retain Class A shares. Although Mr. Biglari
stated to senior management and members of the Nominating and
Corporate Governance Committee on several occasions that he had a
significant agenda in seeking to join the Board, he consistently
refused to articulate that agenda. In this context, the Board is
concerned that Mr. Biglari may place the interests of Biglari Holdings
above the interests of Cracker Barrel shareholders.
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The Board views Mr. Biglari's actions as chairman and chief executive
officer of Biglari Holdings as shareholder-unfriendly and inconsistent
with the highest standards of corporate governance, including:
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engineering a reverse stock split in a manner that precluded many
individual investors from owning the stock (and attempting a
second reverse stock split that was abandoned only after
substantial investor criticism);
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attempting to create a two-class stock ownership system that would
permit Mr. Biglari and others owning a relatively small economic
stake to control the company's vote; and
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attempting to institute an excessive and uncapped compensation
scheme for Mr. Biglari that was only modified after substantial
investor objections.
Significant Management and Board Transition
Already Underway at Cracker Barrel
"In addition to these concerns about Mr. Biglari's track record," said
Mr. Woodhouse, "the Board also considered the fact that Cracker Barrel
has already been engaged in a long-planned significant transition to new
leadership, with several important changes that position the Company for
sustained profitable growth."
These changes include:
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the designation on August 1 of Sandra B. Cochran as the Company's new
Chief Executive Officer, effective September 12, and the announcement
that she would outline the company's 2012 business plan and key
initiatives as part of the Company's fourth quarter earnings call on
September 13;
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the hiring of a new Chief Financial Officer, Lawrence Hyatt, eight
months ago;
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the appointment of three new highly qualified independent directors to
the Board since June 2011, and the decision of two long-time directors
not to stand for re-election at the 2011 Annual Meeting.
While the Board has always been open to hearing the ideas of Mr.
Biglari, and has offered Mr. Biglari the opportunity to appoint two new
qualified independent directors, the Board, as articulated above, does
not believe it would serve the best interests of all shareholders to
bring Mr. Biglari onto the Board.
Goldman, Sachs & Co. is acting as financial advisor to Cracker Barrel,
and Wachtell, Lipton, Rosen & Katz and Bass, Berry & Sims, PLC are
acting as Cracker Barrel's legal counsel.
Text of Letter from Mr. Woodhouse to Mr. Biglari dated August 22, 2011:
August 22, 2011
Mr. Sardar Biglari
Chairman and Chief Executive Officer
Biglari
Holdings Inc.
175 East Houston Street, Suite 1300
San
Antonio, Texas 78205
RE: Settlement Offer
Dear Sardar:
I thought it might be useful for the sake of clarity to set forth in
writing the settlement offer that I first made to you by telephone on
August 1,2011, and subsequently reconfirmed to you by telephone on
August 10, 2011. As you know, this settlement offer was made in response
to your request, first communicated to us at our meeting on June
23,2011, that we appoint you and Phil Cooley to the Cracker Barrel
Board. Following that meeting, our Nominating and Corporate Governance
Committee and our Board thoroughly considered your request, a process
that included the Nominating and Corporate Governance Committee members
traveling to San Antonio to meet with you and Dr. Cooley, and concluded,
owing to conflict, legal and other issues, not to appoint you and Phil
to the Board. However, in an effort to be constructive, the Board
authorized me to make the settlement offer that we discussed on August 1
and August 10.
Under that offer, we would immediately add to our Board two mutually
agreed independent directors unaffiliated with Biglari Holdings or any
other restaurant company, to be recommended by Biglari Holdings and
approved by the Cracker Barrel Board. This offer is subject to Biglari
Holdings' agreement (1) to support the Board-recommended slate of
nominees, which will include such two mutually agreed independent
directors, and not to nominate any other candidates or present any
shareholder proposals, at Cracker Barrel's 2011 annual meeting of
shareholders and (2) not to seek to call or support the call of any
special meeting of Cracker Barrel shareholders prior to Cracker Barrel's
2012 annual meeting of shareholders.
When we spoke on August 10, 2011, you indicated that you would be
willing to provide us with your proposed director nominees in connection
with this offer if Cracker Barrel entered into a confidentiality
agreement limiting Cracker Barrel's ability to disclose the identity of
any candidates proposed by you who were ultimately not accepted by our
Board. As you requested, I instructed our outside counsel to draft such
an agreement, and they provided it to your counsel on August 11, 2011.
We were then and are now fully prepared to enter into a reasonable
confidentiality agreement immediately and to comply with its terms, as
we would with any contract that we sign. We are not, however, willing to
agree to the $1 million liquidated damages provision that we understand
your lawyers are insisting on, which our counsel advise us is unusual
and unnecessary.
Once the confidentiality agreement is signed and you provide the
names and completed questionnaires of your two proposed nominees, our
Nominating and Corporate Governance Committee will meet promptly with
each of the proposed nominees. Assuming the proposed nominees are
qualified under the criteria set forth in our corporate governance
guidelines (which are posted on our website), and subject to the terms
set forth in the second paragraph of this letter, we would then
immediately appoint your two nominees to our Board.
We would like to begin the process as soon as possible, and, to that
end, we ask that you provide us the names of your nominees this week so
that we may schedule meetings with our Nominating and Corporate
Governance Committee.
I hope that this letter gives you complete clarity with respect to
our offer and the process for appointing your nominees, but please feel
free to contact me should you have any questions. We look forward to
hearing from you.
Sincerely,
/s/ Michael A. Woodhouse
Michael A. Woodhouse
Chairman and Chief Executive Officer
About Cracker Barrel
Cracker Barrel Old Country Store restaurants provide a friendly
home-away-from-home in their old country stores and restaurants. Guests
are cared for like family while relaxing and enjoying real home-style
food and shopping that's surprisingly unique, genuinely fun and
reminiscent of America's country heritage…all at a fair price. The
restaurant serves up delicious, home-style country food such as meatloaf
and homemade chicken n' dumplins as well as its signature biscuits using
an old family recipe. The authentic old country retail store is fun to
shop and offers unique gifts and self-indulgences.
Headquartered in Lebanon, Tennessee, Cracker Barrel Old Country Store,
Inc. (Nasdaq: CBRL) was established in 1969 and operates 604
company-owned locations in 42 states. Every Cracker Barrel unit is open
seven days a week with hours Sunday through Thursday, 6 a.m. — 10 p.m.,
and Friday and Saturday, 6 a.m. - 11 p.m. For more information, visit:
crackerbarrel.com.
Important Additional Information
Cracker Barrel, its directors and certain of its executive officers may
be deemed to be participants in the solicitation of proxies from Cracker
Barrel shareholders in connection with the matters to be considered at
Cracker Barrel's 2011 Annual Meeting. Cracker Barrel intends to file a
proxy statement with the U.S. Securities and Exchange Commission (the
"SEC") in connection with any such solicitation of proxies from Cracker
Barrel shareholders. INVESTORS AND SHAREHOLDERS ARE STRONGLY
ENCOURAGED TO READ ANY SUCH PROXY STATEMENT AND ACCOMPANYING PROXY CARD
AND OTHER DOCUMENTS FILED WITH THE SEC CAREFULLY AND IN THEIR ENTIRETY
WHEN THEY BECOME AVAILABLE AS THEY WILL CONTAIN IMPORTANT INFORMATION. Detailed
information regarding the identity of potential participants, and their
direct or indirect interests, by security holdings or otherwise, will be
set forth in the proxy statement and other materials to be filed with
the SEC in connection with Cracker Barrel's 2011 Annual Meeting.
Information regarding the direct and indirect beneficial ownership of
Cracker Barrel's directors and executive officers in Cracker Barrel
securities is included in their SEC filings on Forms 3, 4 and 5, and
additional information can also be found in Cracker Barrel's Annual
Report on Form 10-K for the year ended July 30, 2010, filed with the SEC
on September 28, 2010 and its Quarterly Reports on Form 10-Q for the
first three quarters of the fiscal year ended July 29, 2011 filed on
December 6, 2010, March 4, 2011 and June 3, 2011, respectively.
Shareholders will be able to obtain any proxy statement, any amendments
or supplements to the proxy statement and other documents filed by
Cracker Barrel with the SEC for no charge at the SEC's website at www.sec.gov.
Copies will also be available at no charge at the Investor Relations
section of our corporate website at www.crackerbarrel.com.
CBRL-F
Investors:
Cracker Barrel Old Country Store, Inc.
Lawrence
E. Hyatt, 615-235-4432
Senior Vice President and Chief Financial
Officer
or
MacKenzie Partners, Inc.
Mark Harnett,
212-929-5877
or
Media:
Cracker Barrel Old Country
Store, Inc.
Julie K. Davis, 615-443-9266
Senior Director,
Corporate Communications
or
Kekst and Company
Ruth
Pachman, 212-521-4891
Source: Cracker Barrel Old Country Store, Inc.
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