Risk & Compliance

AFC Settles, Makes Governance Changes

Derivative lawsuits were related to the company's restatement for fiscal years 2000, 2001, and the first three quarters of 2002.
Stephen TaubJune 15, 2005

AFC Enterprises Inc. has closed the books on its accounting problems.

The company — known its for Popeyes, Chicken & Biscuits, Church’s Chicken, and Cinnabon franchises — announced that it has settled the final derivative lawsuits relating to the company’s restatement for fiscal years 2000, 2001, and the first three quarters of 2002.

Under the latest settlement, which concerns a suit filed against certain current and former AFC board members, the company agreed to make changes to certain corporate governance policies and practices, most of which have already been instituted.

In addition, AFC agreed to pay about $517,000 in attorneys’ fees and expenses to the plaintiffs’ lawyer, which will be charged against second-quarter results; no damages will be paid by officers or directors.

In a statement, the company stressed that the settlement does not reflect any admission of liability by AFC or its current or former officers or directors.

AFC is the second company in recent weeks to agree to governance changes as part of a lawsuit settlement.

Lone Star Steakhouse & Saloon Inc., which settled a lawsuit filed by the California Public Employees Retirement System, agreed to add three independent directors. Lone Star also agreed to the expiration of certain change-of-control contracts for senior executives, the elimination of the company’s poison pill, and the requirement for stockholder approval to reprice stock options.

As part of the settlement, certain current and former Lone Star directors agreed to reprice certain stock options or personally make payments to the company which, upon the exercise of the stock options, would result in additional proceeds to the company of roughly $4.7 million.