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EXHIBIT 10.35
EXCHANGE AGREEMENT
This EXCHANGE AGREEMENT (the "Agreement"), dated as of December 8, 1997, is
made by and between RALLY'S HAMBURGERS, INC., a Delaware corporation (the
"Company" or "Rally's"), on the one hand, and CKE RESTAURANTS, INC., a Delaware
corporation ("CKE"), FIDELITY NATIONAL FINANCIAL, INC., a Delaware corporation
("FNF"), GIANT GROUP, LTD., a Delaware corporation ("GIANT") and the other
parties set forth on Exhibit A attached hereto (referred to collectively herein
as the "Sellers," and individually as a "Seller"), on the other hand, with
reference to the following facts:
A. Sellers are the owners of record, as of September 19, 1997, of an
aggregate of 19,100,960 shares of Common Stock, par value $0.001 per share (the
"Checkers Common Stock"), of Checkers Drive-In Restaurants, Inc., a Delaware
corporation ("Checkers").
B. Each Seller desires to sell, and the Company desires to buy, the shares
of Checkers Common Stock owned by such Seller as set forth on Exhibit A hereto
on the terms and conditions set forth herein.
C. As consideration for the shares of Checkers Common Stock acquired by the
Company pursuant hereto, the Company will issue an aggregate of up to 3,909,336
shares of the Company's common stock, par value $0.10 per share (the "Rally's
Common Stock"), and will authorize and issue an aggregate of up to 45,667 shares
of the Company's Series A Preferred Stock, $0.10 par value per share (the
"Series A Stock"), on the terms set forth in the form of Certificate of
Designation attached hereto as Exhibit B (the "Certificate of Designation").
D. The number of shares of Rally's Common Stock and Series A Stock issued
in exchange for the Checkers Common Stock bought and sold pursuant to this
Agreement will be based on the ratio of 0.44375 shares of Rally's Common Stock
for each share of Checkers Common Stock.
NOW, THEREFORE, the parties agree as follows:
ARTICLE 1
PURCHASE AND SALE
1.1. Purchase and Sale. Subject to the provisions of this Agreement, on the
Closing Date (as defined herein), the Sellers will sell and transfer to the
Company, and the Company will purchase from the Sellers, the number of shares of
Checkers Common Stock set forth opposite the respective Seller's name on Exhibit
A hereto (collectively, the "Checkers Shares").
1.2. Consideration; Exchange of Stock. In exchange for the Checkers Shares
transferred by each of the Sellers, the Company will issue and cause to be
delivered to each Seller
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the number of shares of Rally's Common Stock and Series A Stock set forth
opposite the respective Seller's name on Exhibit A hereto (collectively, the
"Rally's Shares").
1.3. Closing; Closing Date. The purchase and sale of the Checkers Shares
pursuant to Section 1.1 (the "Closing") shall take place at the offices of
Christensen, Miller, Fink, Jacobs, Glaser, Weil & Shapiro, LLP, 2121 Avenue of
the Stars, 18th Floor, Los Angeles, California 90067, or at such other place as
may be agreed upon by the Company and Sellers, at 10:00 a.m. local time on the
third business day after the later of termination or expiration of all waiting
periods required for consummation of this Agreement under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended ("HSR"), or receipt of the
fairness opinion referred to in Section 5.1 hereof, or at such other time as may
be mutually agreed upon by the Company and the Sellers (the "Closing Date").
1.4. Transactions at Closing. At the Closing,
(a) The Company shall deliver to each Seller or such Seller's
representative:
(i) A duly executed Compliance Certificate, substantially in the
form of Exhibit C hereto;
(ii) A duly executed Certificate of Designation, stamped to show
that it has been filed with the Secretary of State of the State of Delaware;
(iii) Certificates registered in the names of the Seller
representing the number of Rally's Shares to be issued to such Seller pursuant
to Section 1.2 hereof;
(iv) A copy of the Notification of Listing of Additional Shares
to be delivered to the NASDAQ National Market with respect to the Rally's
Shares; and
(v) Such other documents and instruments as the Sellers and their
counsel may reasonably request relating to the consummation of this Agreement.
(b) Each Seller shall deliver to the Company:
(i) A duly executed Compliance Certificate, substantially in the
form of Exhibit D hereto;
(ii) Certificate(s) representing the Checkers Shares being
delivered by such Seller pursuant to Section 1.1 hereof, duly endorsed for
transfer or together with a stock power duly executed in blank, together with
any opinions of counsel required by the transfer agent for the Checkers Common
Stock in connection with the transfer of the Checkers Shares to the Company; and
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(iii) Such other documents and instruments as the Company may
reasonably request relating to the consummation of this Agreement.
(c) The conditions set forth in Articles 5 and 6 hereof shall have
been satisfied or waived as provided therein.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants that:
2.1. Organization, Standing and Qualification. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has full corporate power and authority to own, lease and
operate its property and assets and to conduct its business as presently and
proposed to be conducted by it. The Company is in good standing under the laws
of all jurisdictions in which the Company is required to qualify to do business,
except where the failure to so qualify would not result in a Company Material
Adverse Effect (as hereinafter defined).
2.2. Capitalization.
(a) Authorized Capital Stock. Immediately prior to the Closing, the
authorized capital stock of the Company will consist of:
(i) Common Stock. 50,000,000 shares of Common Stock, par value
$0.10 per share (the "Common Stock"), of which (A) 20,649,454 shares are issued
and outstanding as of the date of this Agreement; and (B) 10,989,282 shares are
initially reserved for issuance upon exercise of the warrants and options listed
in Schedule 2.2(a)(i) hereto. The Company has reserved a sufficient number of
shares of unissued Common Stock to enable it to issue the Common Stock being
issued pursuant to this Agreement, both at Closing and upon conversion of the
Series A Stock into Common Stock.
(ii) Preferred Stock. 5,000,000 shares of Preferred Stock, $0.10
par value per share, of which 45,632 shares have been designated as Series A
Stock pursuant to the Certificate of Designation and none of which will be
issued and outstanding prior to the Closing Date.
(b) Warrants, Options and Other Subscription Rights. Except as set
forth in Schedule 2.2(a)(i) hereto and as contemplated herein, there are (i) no
outstanding warrants, options, convertible securities or rights to subscribe for
or purchase any capital stock or other securities from the Company, (ii) to the
best knowledge of the Company, no voting trusts or voting agreements among, or
irrevocable proxies executed by, stockholders of the Company, (iii) no existing
rights of stockholders to require the Company to register any securities of the
Company or to participate with the Company in any registration by the Company of
its securities,
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(iv) to the best knowledge of the Company, no agreements among stockholders
providing for the purchase or sale of the Company's capital stock and (v) no
obligations (contingent or otherwise) of the Company to purchase, redeem or
otherwise acquire any shares of its capital stock or any interest therein or to
pay any dividend or make any other distribution in respect thereof.
(c) Validity of Securities. Subject only to approval by the Company's
stockholders of the matters set forth in Section 2 of the Certificate of
Designation, the Rally's Shares, when issued, sold and delivered in accordance
with the terms of this Agreement, and the Rally's Common Stock issuable upon
conversion of the Series A Stock, when issued and delivered in accordance with
the Certificate of Designation, will be duly authorized, validly issued, fully
paid and non-assessable. When the Rally's Shares are sold in accordance with
this Agreement, each Seller will have good title to the Rally's Shares sold to
such Seller, free and clear of any liens, pledges, claims, options, restrictions
or other encumbrances or rights of third parties ("Liens"), other than Liens
resulting from the actions of Sellers and restrictions on transfer imposed by
the Securities Act of 1933, as amended (the "Securities Act"), applicable state
securities laws or this Agreement. The Series A Stock, when issued, sold and
delivered in accordance with the terms of this Agreement, will have the rights,
preferences and privileges specified in the Certificate of Designation. Holders
of shares of the Company's capital stock have no preemptive rights.
2.3. Investment Representations.
(a) The Company is acquiring the Checkers Shares for its own account,
for investment purposes and not with a view to, or for sale in connection with,
any distribution of the Checkers Shares in violation of the Securities Act or
any applicable state securities law.
(b) The Company acknowledges that the certificates representing
Checkers Shares to be issued to the Company will bear Checker's standard
restrictive legend for unregistered sales of securities.
2.4. Authorization; Enforceability. The Company has all requisite corporate
power and authority to enter into and perform its obligations under this
Agreement and to carry out the transactions contemplated by this Agreement. All
corporate action on the part of the Company necessary for the authorization,
execution, delivery and performance of all of its obligations under this
Agreement, including the approval and authorization of this Agreement by a
committee of Rally's Board of Directors comprised of persons unaffiliated with
any of the Sellers (the "Independent Committee"), has been taken; provided, that
the approval of the Independent Committee is subject to receipt of a written
opinion of L.H. Friend, Weinress, Frankson & Presson, Inc. ("L.H. Friend")
provided for in Section 5.1 hereof. This Agreement had been duly executed and
delivered by the Company and constitutes the valid and legally binding
obligation of the Company, except as the enforcement hereof may be limited by
bankruptcy, insolvency or other laws affecting the enforcement of creditors'
rights generally.
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2.5. Filing of SEC Reports. The Company has filed with the Securities and
Exchange Commission (the "Commission") all reports and registration statements
(the "Company SEC Reports") required under the Securities Act and the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and
regulations promulgated thereunder, except to the extent that the failure to
file any Company SEC Report will not have a Company Material Adverse Effect (as
hereinafter defined). As of their respective dates, the Company SEC Reports did
not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements made
therein not misleading.
2.6. No Material Adverse Effects. Except as disclosed in a Company SEC
Report or other publicly released announcement, no events have occurred since
the end of the Company's last fiscal year that, singly or in the aggregate,
would reasonably be expected to result in a material adverse change in the
condition (financial or otherwise), net assets, business or prospects of the
Company and its subsidiaries taken as a whole (a "Company Material Adverse
Effect").
2.7. Consents and Approvals. Except as set forth on Schedule 2.7 hereto,
the execution and delivery by the Company of this Agreement and any related
documents and instruments, the offer, issuance and delivery of the Rally's
Shares, and the performance by the Company of its obligations under this
Agreement and any related documents and instruments do not require the consent
of any person or entity under any material agreement to which the Company is a
party or otherwise binding on the Company.
2.8. No Conflict with Documents and Instruments. The execution and delivery
by the Company of this Agreement and any related documents and instruments do
not, and the performance by the Company of its obligations hereunder and
thereunder will not, contravene or constitute a default under (a) the charter or
by-laws of the Company, (b) any applicable law or regulation or (c) any
agreement, judgment, injunction, order, decree or other instrument to which the
Company is a party or by which the Company and its assets are otherwise bound,
which in the case of (b) or (c) would constitute a Company Material Adverse
Effect.
2.9. Full Disclosure. Neither this Agreement, nor any certificates
delivered in connection herewith by the Company contains any untrue statement of
a material fact or omits to state a material fact necessary to make the
statements herein or therein not misleading, in view of the circumstances in
which they were made.
2.10. Brokers and Finders. No person or entity has or will have any valid
claim against the Seller as a result of the transactions contemplated herein for
any commission, fee or other compensation as a broker or finder or in any
similar capacity arising out of any act of the Company.
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ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLERS.
Each Seller represents and warrants as to such Seller that:
3.1. Organization, Standing and Qualification.
(a) If a corporation or other entity, such Seller is duly organized,
validly existing and in good standing under the laws of its jurisdiction of
organization and is in good standing under the laws of all jurisdictions in
which such Seller is required to qualify to do business, except where the
failure to so qualify would not result in a Seller Material Adverse Effect (as
hereinafter defined).
(b) To Seller's knowledge, Checkers is duly organized, validly
existing and in good standing under the laws of the State of Delaware and is in
good standing under the laws of all jurisdictions in which Checkers is required
to qualify to do business, except where the failure to so qualify would not
result in a Checkers Material Adverse Effect (as hereinafter defined).
3.2. Validity of Checkers Shares. The Checkers Shares held by Seller are
duly authorized and validly issued in accordance with applicable law, fully paid
and nonassessable and, when sold in accordance with this Agreement, the Company
will have good title to the Checkers Shares, free and clear of any Liens, other
than Liens resulting from the actions of the Company and restrictions on
transfer imposed by the Securities Act, applicable state securities laws or this
Agreement.
3.3. Investment Representations.
(a) Seller is acquiring the Rally's Shares for Seller's own account,
for investment purposes and not with a view to, or for sale in connection with,
any distribution of the Rally's Shares in violation of the Securities Act or any
applicable state securities law.
(b) Seller acknowledges that the Rally's Shares, including the shares
of Rally's Common Stock issuable upon conversion of the Series A Stock, will
bear the Company's standard restrictive legend for unregistered sales of
securities.
3.4. Authorization; Enforceability. If a corporation or other entity, such
Seller has all requisite power and authority to enter into and perform its
obligations under this Agreement and to carry out the transactions contemplated
by this Agreement. If an individual, such Seller has full legal capacity to
enter into this Agreement and to perform his or her obligations under this
Agreement. All action on the part of Seller necessary for the authorization,
execution, delivery and performance of all of its, his or her obligations under
this Agreement has been taken. This Agreement has been duly executed and
delivered by Seller and constitutes the valid and legally
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binding obligation of Seller, except as the enforcement hereof may be limited by
bankruptcy, insolvency or other laws affecting the enforcement of creditors'
rights generally.
3.5. Filing of SEC Reports. To Seller's knowledge, Checkers has filed with
the Commision all reports and registration statements (the "Checkers SEC
Reports") required under the Securities Act and the Exchange Act and the rules
and regulations promulgated thereunder, except to the extent that the failure to
file any Checkers SEC Report will not have a Checkers Material Adverse Effect
(as hereinafter defined). To Seller's knowledge, as of their respective dates,
the Checkers SEC Reports did not contain any untrue statement of a material fact
or omit to state a fact required to be stated therein or necessary to make the
statements made therein not misleading.
3.6. No Material Adverse Effects. To Seller's knowledge, except as
disclosed in a Company SEC Report or other publicly released announcement, no
events have occurred since the end of Checkers' last fiscal year that, singly or
in the aggregate, would reasonably be expected to result in a material adverse
change in the condition (financial or otherwise), net assets, business or
prospects of Checkers and its subsidiaries taken as a whole (a "Checkers
Material Adverse Effect") or a material adverse effect on the ability of the
Sellers to perform their obligations under this Agreement (a "Seller Material
Adverse Effect").
3.7. Consents and Approvals. Except as set forth on Schedule 3.7 hereto,
the execution and delivery by the Seller of this Agreement and any related
documents and instruments, the sale and delivery of the Checkers Shares, and the
performance by the Seller of Seller's obligations under this Agreement and any
related documents and instruments do not require the consent of any person or
entity under any material agreement to which such Seller is a party or which is
otherwise binding on such Seller.
3.8. No Conflict with Documents and Instruments. The execution and delivery
by the Seller of this Agreement and any related documents and instruments do
not, and the performance by the Seller of Seller's obligations hereunder and
thereunder will not, contravene or constitute a default under (a) the charter or
by-laws of the Seller, if any, or, to the knowledge of Seller, of Checkers, (b)
any applicable law or regulation or (c) any agreement, judgment, injunction,
order, decree or other instrument to which the Seller or, to the knowledge of
Seller, Checkers is a party or by which the Seller and its assets or, to the
knowledge of Seller, Checkers and its assets are otherwise bound, which in the
case of (b) or (c) would constitute a Checkers Material Adverse Effect or a
Seller Material Adverse Effect.
3.9. Full Disclosure. Neither this Agreement, nor any certificates
delivered in connection herewith by the Seller contains any untrue statement of
a material fact or omits to state a material fact necessary to make the
statements herein or therein not misleading, in view of the circumstances in
which they were made, as to such Seller.
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3.10. Brokers and Finders. No person or entity has or will have any valid
claim against the Company as a result of the transactions contemplated herein
for any commission, fee or other compensation as a broker or finder or in any
similar capacity arising out of any act of the Seller.
ARTICLE 4
PRE-CLOSING COVENANTS.
4.1. Mutual Covenants. Each of the parties hereby covenants and agrees that
such party will (a) proceed forthwith, but no later than five business days from
the date hereof, to file, to the extent not already filed, all notices and
documents required under HSR to consummate this Agreement, and (b) take all
action reasonably within its power and authority to duly and timely carry out
all of its, his or her obligations hereunder, to perform and comply with all of
its, his or her covenants, agreements, representations and warranties hereunder
and to cause all conditions to the obligations of the other parties to complete
the transactions provided for herein to be satisfied as promptly as possible.
4.2. Covenants of Sellers.
(a) Each Seller hereby undertakes and agrees that, between the
effective date of this Agreement and the Closing Date, each will use its, his or
her commercially reasonable best efforts to cause Checkers to:
(i) do nothing to materially and adversely affect the prospects
or continued viability of Checker's business;
(ii) pay no extraordinary compensation to any of Checker's
officers, directors or stockholders and not incur any additional debt other than
in the ordinary course of business;
(iii) except in order to satisfy outstanding options and/or
warrants and/or other commitments, not issue or sell any of its securities or
any securities of any of its subsidiaries, or any rights to acquire such
securities;
(iv) not pay any dividends, redeem any securities or otherwise
cause any asset to be distributed to its stockholders in their capacities as
such;
(v) promptly inform the Company of any offer or proposal,
directly or indirectly, with respect to the sale or transfer of all or any
material part of Checker's stock or assets, and shall furnish such information
with respect thereto as the Company may request; provided that nothing herein
shall preclude Checkers or its Board of Directors from acting in good faith to
comply with the Board's fiduciary obligations under applicable law;
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(vi) use its best efforts to preserve intact Checker's business
organization, its goodwill and its customers, suppliers, and others having
business relations with it; and
(vii) file, to the extent not already filed, all notices and
documents required under HSR to consummate this Agreement.
(b) Each Seller hereby undertakes and agrees to vote its shares of
Rally's Common Stock in favor of the conversion provision contained in Section 9
of the Certificate of Designation.
4.3. Covenants of the Company. The Company undertakes and agrees that,
between the effective date of this Agreement and the Closing Date, it will:
(a) do nothing to materially and adversely affect the prospects or
continued viability of the Company's business;
(b) pay no extraordinary compensation to any of its officers,
directors or stockholders and shall not incur any additional debt other than in
the ordinary course of business;
(c) except in order to satisfy outstanding options and/or warrants
and/or other commitments, not issue or sell any of its securities or any
securities of any of its subsidiaries, or any rights to acquire such securities;
(d) not pay any dividends, redeem any securities or otherwise cause
any asset to be distributed to its stockholders in their capacities as such;
(e) promptly inform Sellers of any offer or proposal, directly or
indirectly, with respect to the sale or transfer of all or any material part of
the Company's stock or assets, and shall furnish such information with respect
thereto as any Seller may request; provided that nothing herein shall preclude
the Company or its Board of Directors from acting in good faith to comply with
the Board's fiduciary obligations under applicable law; and
(f) use its best efforts to preserve intact the Company's business
organization, its goodwill and its customers, suppliers, and others having
business relations with it.
ARTICLE 5
CONDITIONS TO CLOSING OF SELLERS.
The obligation of Sellers on the Closing Date to purchase the Rally's
Shares under this Agreement shall be subject to each of the following conditions
precedent, any one or more of which may be waived by each Seller as to itself,
himself or herself:
5.1 Fairness Opinion. The Independent Committee shall have received from
L.H. Friend a written opinion, satisfactory in form and substance to the
Independent Committee, to the
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effect that the transactions provided for herein and the terms and conditions of
this Agreement are fair the Company and to the stockholders of the Company
(other than the Sellers), from a financial point of view (the "Fairness
Opinion").
5.2 Representations and Warranties. The representations and warranties made
by the Company herein shall be true and accurate on and as of the Closing Date
as if made on such Closing Date.
5.3 Performance. The Company shall have performed and complied with all
agreements and conditions contained herein or in other ancillary documents
incident to the transactions contemplated by this Agreement required to be
performed or complied with by it prior to or at the Closing.
5.4 Consents.
(a) The Company and Sellers shall have secured all permits, consents
and authorizations that shall be necessary to consummate this Agreement.
(b) Any applicable waiting period under HSR, and the rules and
regulations promulgated thereunder, shall have expired or been terminated.
(c) The Certificate of Designation shall have been duly filed with the
Secretary of State of the State of Delaware.
5.5 Proceedings and Documents. All corporate and other proceedings in
connection with the transactions contemplated by this Agreement and all
documents and instruments incident to such transactions shall be reasonably
satisfactory in substance and form to Sellers and their respective counsel, and
Sellers and their counsel shall have received all such counterpart originals or
certified or other copies of such documents as any Seller or its counsel may
reasonably request.
ARTICLE 6
CONDITIONS TO CLOSING OF COMPANY.
The obligation of the Company on the Closing Date to issue and sell the
Rally's Shares to be purchased under this Agreement shall be subject each of the
following conditions precedent, any one or more of which may be waived by the
Company:
6.1. Fairness Opinion. The Independent Committee shall have received the
Fairness Opinion.
6.2 Representations and Warranties. The representations and warranties made
by each Seller herein shall be true and accurate as to such Seller on and as of
the Closing Date as if made on such Closing Date.
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6.3 Performance. Each Seller shall have performed and complied with all
agreements and conditions contained herein or in other ancillary documents
incident to the transactions contemplated by this Agreement required to be
performed or complied with by such Seller prior to or at the Closing.
6.4 Consents.
(a) The Company and Sellers shall have secured all permits, consents
and authorizations that shall be necessary to consummate this Agreement.
(b) Any applicable waiting period under HSR, and the rules and
regulations promulgated thereunder, shall have expired or been terminated.
(c) The Certificate of Designation shall have been duly filed with the
Secretary of State of the State of Delaware.
6.5 Proceedings and Documents. All corporate and other proceedings in
connection with the transactions contemplated by this Agreement and all
documents and instruments incident to such transactions shall be reasonably
satisfactory in substance and form to the Company and its counsel, and the
Company and its counsel shall have received all such counterpart originals or
certified or other copies of such documents as the Company or its counsel may
reasonably request.
6.6 Minimum Sale. The aggregate amount of Checkers Shares delivered at the
Closing pursuant to Sections 1.1 and 1.4(b)(ii) of this Agreement shall be no
less than 15,500,000 shares.
ARTICLE 7
POST CLOSING COVENANTS.
7.1. Proxy Statement. At the next annual or special meeting of the
Company's stockholders or other action of its stockholders, the Company shall
include a proposal in its proxy statement or consent solicitation statement, as
the case may be, to approve conversion of the Series A Stock to Common Stock in
accordance with the terms of the Certificate of Designation and a recommendation
for the approval thereof. The date of the stockholder approval of such proposal
is referred to as the "Approval Date." Notwithstanding the foregoing, the
Company shall not submit such proposal to its stockholders until the expiration
of 90 days after the Closing Date.
7.2. Reservation of Rally's Common Stock. From and after the effective date
of this Agreement, the Company shall continuously maintain in reserve a number
of shares of Common Stock equal to the Common Stock issuable upon the Closing of
the Agreement and upon conversion of the Series A Stock.
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ARTICLE 8
REGISTRATION OF RALLY'S SHARES
The following provisions govern the registration of the Rally's Common
Stock to be issued at the Closing and Common Stock issuable upon conversion of
the Series A Stock to be issued at the Closing:
8.1. Definitions. As used in this Article, the following terms have the
following meanings:
Form S-3: The form so designated, promulgated by the Commission for
registration of securities under the Securities Act, and any forms
succeeding to the functions of such form, whether or not bearing the
same designation.
Holder: A holder of Registrable Securities, provided that anyone who
acquires any Registrable Securities in a distribution pursuant to a
registration statement filed by the Company under the Securities Act
or in a transaction under Rule 144 under the Securities Act shall not
thereby be deemed to be a "Holder."
Register, registered and registration: A registration effected by
filing a registration statement in compliance with the Securities Act
and the declaration or ordering by the Commission of effectiveness of
such registration statement.
Registrable Securities: All shares of Rally's Common Stock sold
hereunder or issuable upon conversion of, or payment of any dividends
in shares of Common Stock on, the Series A Stock and held by the
Sellers upon consummation of the transactions contemplated herein.
8.2. Shelf Registration.
(a) Filing; Effectiveness.
(i) As soon as practicable, but in no event more than 45 days
after the date of this Agreement, the Company shall prepare and file with the
Commission a "shelf" registration statement (the "Shelf Registration Statement")
on the appropriate form for an offering by Sellers to be made on a continuous or
extended basis pursuant to Rule 415 under the Securities Act, or such successor
rule or similar provision then in effect ("Rule 415"), covering all of the
Registrable Securities issuable at the Closing Date.
(ii) As soon as practicable, but in no event more than 45 days
after the Approval Date or the date of a Dividend paid in Common Stock, the
Company shall prepare and file with the Commission a shelf registration
statement (a "Subsequent Shelf Registration Statement" and, together with the
Shelf Registration Statement, the "Registration
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Statements") on the appropriate form for an offering by the Sellers to be made
on a continuous or extended basis pursuant to Rule 415 covering all of the
Registrable Securities issued upon conversion of the Series A Stock or payment
of such Dividend, as the case may be.
(iii) The Company shall use its commercially reasonable best
efforts to have the Registration Statements declared effective within 90 days
after their respective filings are made and to keep such Registration Statements
continuously effective for the period beginning on such date and ending on the
earlier of (A) the date on which the Holders no longer hold any Registrable
Securities and (ii) the date that is two years after the effective date of the
respective Registration Statement.
(b) Effective Registration. A registration will not be deemed to have
been effective unless the Registration Statement with respect thereto has been
declared effective by the Commission and the Company has complied in all
material respects with its obligations under this Agreement with respect
thereto; provided, however, that if after it has been declared effective, the
offering of Registrable Securities pursuant to a Registration Statement is
interfered with by any stop order, injunction or other order or requirement of
the Commission or any other governmental agency or court, such Registration
Statement will be deemed not to have become effective during the period of such
interference until the offering of Registrable Securities pursuant to such
Registration Statement may legally resume. If a registration made pursuant to
this Section 8.2 is deemed not to have been effected, then the Company shall
continue to be obligated to effect a registration pursuant to this Section 8.2.
(c) Form Used for Registration. In the event that Form S-3 is not
available for use by the Company for a Registration Statement pursuant to this
Section 8.2, the Company shall prepare and file a registration statement on such
form as shall be available for use by the Company at the time the Company is
obliged to prepare and file a registration statement hereunder. In the event
that Form S-3 thereafter becomes available for use by the Company, the Company
may prepare and file such Form S-3 in order to comply with its obligations
hereunder.
8.3. Demand Registration.
(a) Request for Registration. Subject to Section 8.7 hereof, from time
to time after the Shelf Registration Statement or the Subsequent Shelf
Registration Statement, as the case may be, ceases to be effective, one or more
of the Holders may make written demand that the Company file a registration
statement (a "Demand Registration Statement") under the Securities Act with the
Commission to register shares of Registrable Securities formerly covered by the
Shelf Registration Statement or the Subsequent Shelf Registration Statement,
with an aggregate market value of at least $1,000,000, which demand shall
specify the number of Registrable Securities intended to be disposed of by each
such Holder and the intended method of distribution thereof. Within 10 days
after receipt of such request, the Company shall give written notice of such
registration request to all other Holders. Any Holder electing to participate in
such Demand Registration Statement shall deliver a written request, which
request shall specify the number of Registrable Securities intended
to be disposed of by such Holder and the intended
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14
method of distribution thereof, within 15 days after the receipt by the
applicable Holders of the notice from the Company of a request for Demand
Registration Statement. Thereupon, the Company shall prepare and file such
Demand Registration Statement and shall include therein all Registrable
Securities with respect to which the Company has received written demand or
request for registration. The Company shall use commercially reasonable efforts
to have the Demand Registration Statement declared effective on or before the
date which is 120 days after receipt by the Company of the applicable request
for filing of a Demand Registration Statement (a "Demand Registration Filing
Date").
(b) Effective Registration. The Company's obligations with respect to
a Demand Registration Statement will not be deemed to have been satisfied unless
the applicable Demand Registration Statement has been declared effective by the
Commission and the Company has complied in all material respects with its
obligations under this Agreement with respect thereto; provided, however, that
if after it has been declared effective, the offering of Registrable Securities
pursuant to a Demand Registration Statement is interfered with by any stop
order, injunction or other order or requirement of the Commission or any other
governmental agency or court, such Demand Registration Statement will be deemed
not to have become effective during the period of such interference until the
offering of Registrable Securities pursuant to such Demand Registration
Statement may legally resume. If a registration requested pursuant to this
Section 8.3 is deemed not to have been effected, then the Company shall continue
to be obligated to effect a registration pursuant to this Section 8.3.
(c) Selection of Underwriter. If the Holders elect to conduct an
offering pursuant to a Demand Registration Statement in the form of an
underwritten offering, a majority in interest of the requesting the Holders
participating in such Demand Registration Statement shall have the right to
designate and to select one or more nationally recognized firms of investment
bankers reasonably acceptable to the Company to act as the book-running managing
underwriter or underwriters in connection with such offering and shall select
any additional investment bankers and managers reasonably acceptable to the
Company to be used in connection with the offering.
8.4. Piggy-Back Registration.
(a) Request for Registration. At any time from and after the
termination of effectiveness of the Registration Statements, each time the
Company proposes to file a registration statement under the Securities Act with
respect to an offering by the Company for its own account or for the account of
its security holders of any class of equity security (other than a registration
statement (A) on Form S-4 or S-8 (or any substitute form that is adopted by the
Commission), (B) filed in connection with an exchange offer or offering of
securities solely to the Company's existing security holders) or (C) filed in
connection with an acquisition, merger or similar transaction, the Company shall
give written notice of such proposed filing to the Holders of Registrable
Securities as soon as practicable (but in no event less than ten business days
before the anticipated filing date), and such notice shall offer such Holders
the opportunity to register such number of shares of Registrable Securities as
each such Holder may request (which request shall specify the Registrable
Securities intended to be disposed of by such Holder and the intended
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15
method of distribution thereof) (a "Piggy-Back Registration"). The Company shall
use commercially reasonable best efforts to cause the managing underwriter or
underwriters of a proposed underwritten offering to permit the Registrable
Securities requested to be included in a Piggy-Back Registration to be included
on the same terms and conditions as any other similar securities of the Company
or any other security holder included therein and to permit the sale or other
disposition of such Registrable Securities in accordance with the intended
method of distribution thereof. Any Holder shall have the right to withdraw its
request for inclusion of its Registrable Securities in any registration
statement pursuant to this Section 8.4(a) by giving written notice to the
Company of such withdrawal. The Company, in its sole discretion, may withdraw a
Piggy-Back Registration at any time prior to the time it becomes effective,
provided that the Company shall give immediate notice of such withdrawal to the
Holders of Registrable Securities requested to be included in such Piggy-Back
Registration.
(b) Reduction of Offering. In connection with an underwritten offering
where Piggy-Back Registration has been requested as provided in Section 9.4(a),
the Company shall use commercially reasonable efforts to cause all Registrable
Securities requested to be included in such Piggy-Back Registration to be
included as provided in Section 9.4(a). If the managing underwriter or
underwriters of any such underwritten offering have given written notice to the
Holders of Registrable Securities requesting inclusion in such offering that it
is their opinion that the total number of shares which the Company, Holders of
Registrable Securities and any other persons participating in such registration
intend to include in such offering is such as to materially and adversely affect
the success of such offering, then (i) the number of shares to be offered for
the account of all other persons (other than the Company and the Holders)
participating in such registration other than pursuant to demand registration
rights shall be reduced or limited (to zero if necessary) pro rata in proportion
to the respective number of shares requested to be registered by such persons to
the extent necessary to reduce the total number of shares requested to be
included in such offering to the number of shares, if any, recommended by the
managing underwriter or underwriters and (ii) if such managing underwriter or
underwriters recommend a further reduction in the number of shares in the
offering, then the number of shares to be offered for the account of the Holders
shall be reduced or limited (to zero if necessary) pro rata in proportion to the
respective number of shares requested to be registered by such Holders to the
extent necessary to reduce the total number of shares requested to be include in
such offering to the number of shares, if any, recommended by such managing
underwriter or underwriters.
(c) In the case of any registration initiated by the Company, the
Company shall have the right to designate the managing underwriter in any
underwritten offering.
8.5. Registration Procedures. In connection with the obligations of
the Company to effect or cause the registration of any Registrable
Securities pursuant to the terms and conditions of this Agreement, the
Company shall use its commercially reasonable best efforts to effect the
registration and sale of such Registrable Securities in accordance with the
intended method of distribution, and in connection therewith, the Company
will:
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(i) prepare and file with the Commission a registration statement
with respect to such shares and use commercially reasonable efforts to cause
such registration statement to become and remain effective as provided herein;
(ii) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective and
current and to comply with the provisions of the Securities Act with respect to
the disposition of all shares covered by such registration statement, including
such amendments and supplements as may be necessary to reflect the intended
method of disposition from time to time of the prospective seller or sellers of
such shares;
(iii) furnish to each prospective seller such number of copies of
a prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents, as such seller or
the managing underwriter may reasonably request in order to facilitate the
public sale or other disposition of the shares owned by such seller;
(iv) use commercially reasonable best efforts to register or
qualify the shares covered by such registration statement under such other
securities or blue sky or other applicable laws of such jurisdiction within the
United States as each prospective seller shall reasonably request, to enable
such seller to consummate the public sale or other disposition in such
jurisdictions of the shares owned by such seller; provided, however, that in no
event shall the Company be obligated to qualify to do business in any
jurisdiction where it is not at the time so qualified or to take any action
which would subject it to service of process in suits other than those arising
out of the offer or sale of the Registrable Securities covered by such
registration statement in any jurisdiction where it is not at the time so
subject;
(v) furnish to each prospective seller a signed counterpart,
addressed to the prospective sellers, of an opinion of counsel for the Company,
dated the effective date of the registration statement, covering substantially
the same matters with respect to the registration statement (and the prospectus
included therein) as are customarily covered (at the time of such registration)
in opinions of issuer's counsel delivered to the underwriters in underwritten
public offerings of securities;
(vi) in the event of any underwritten public offering, enter into
and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter of such offering; each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement;
(vii) notify each Holder of Registrable Securities covered by
such registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act or the happening of any event
as a result of which the prospectus included
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17
in such registration statement, as then in effect, includes an untrue statement
of a material fact or omits to state a material fact required to be stated
therein or necessary to make the statements therein not misleading in the light
of the circumstances then existing;
(viii) apply for listing and use its commercially reasonable best
efforts to list the Registrable Securities being registered on any national
securities exchange on which a class of the Company's equity securities are
listed or, if the Company does not have a class of equity securities listed on a
national securities exchange, apply for qualification and use its commercially
reasonable best efforts to qualify the Registrable Securities being registered
for inclusion on the automated quotation system of the National Association of
Securities Dealers, Inc. or on a national securities exchange; and
(ix) Provide a transfer agent and registrar for all Registrable
Securities registered hereunder and a CUSIP number for all such Registrable
Securities, in each case not later than the effective date of such registration.
8.6. Information by Holder
(a) Each Holder of Registrable Securities and each underwriter
designated by a majority in interest of the requesting Holders, will furnish to
the Company such information as the Company may reasonably require from such
seller or underwriter in connection with the registration statement (and the
prospectus included therein).
(b) Failure of a prospective seller of Registrable Securities to
furnish the information and agreements described in this Section 8.6 shall not
affect the obligations of the Company under this Article 8 to Holders who
furnish such information and agreements, unless such failure impairs or may
impair the viability of the offering or the legality of the registration
statement or the underlying offering.
8.7. Limitations on Required Registrations
(a) The Company shall not be required to effect more than one
registration in any twelve-month period, or more than an aggregate of three
registrations, pursuant to Section 8.3 hereof for all Holders on a combined
basis.
(b) If at the time of any demand to register Registrable Securities
pursuant to Section 8.3 hereof, the Company is engaged, or has fixed plans to
engage within 90 days of the time of the request, in a registered public
offering as to which the Holders may include such Stock pursuant to Section 8.4
hereof or is engaged in any other activity that, in the good faith determination
of the Company's Board of Directors, would be adversely affected by the demanded
registration to the material detriment of the Company, then the Company may at
its option direct that such demand be delayed for a period not in excess of six
months from the effective date of such offering, or the date or commencement of
such other material activity, as the case may be,
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such right to delay a demand to be exercised by the Company not more than once
in each 12 month period while the rights set forth in Section 8.3 are in effect.
(c) Notwithstanding anything to the contrary in this Agreement, the
obligation of the Company pursuant to Section 8.3 hereof shall expire on the
seventh anniversary of the Closing.
8.8. Expenses of Registration. All expenses incurred in effecting any
registration pursuant to Sections 8.2, 8.3 and 8.4 including, without
limitation, all registration and filing fees, printing expenses, expenses of
compliance with blue sky laws, fees and disbursements of counsel for the
Company, and expenses of any audits incidental to or required by any such
registration, shall be borne by the Company, except:
(a) all expenses, fees and disbursements of any counsel retained by
the Holders, and all underwriting discounts and commissions shall be borne by
the Holders of the securities registered pursuant to such registration, pro rata
according to the quantity of their securities so registered;
(b) the Company shall not be required to pay for any expenses of any
registration proceeding begun pursuant to Section 8.3 if the registration
request is subsequently withdrawn at the request of the Holders of a majority of
the Registrable Securities to be registered pursuant thereto (in which case all
participating Holders shall bear such expenses); and
(c) a Holder who withdraws from an underwritten registration pursuant
to Section 8.3 shall be required to pay the percentage of the expenses of such
registration which is equal to the percentage that the number of shares such
Holder requested to be registered bears to the total number of shares to be
registered.
8.9. Indemnification
(a) Indemnification by Company. To the extent permitted by law, the
Company will indemnify each Holder requesting or joining in a registration, each
agent, officer and director of such Holder, each person controlling such Holder
and each underwriter and selling broker of the securities so registered (each,
an "Indemnitee" and collectively, "Indemnitees") against all claims, losses,
damages and liabilities, or actions in respect thereof) arising out of or based
on any untrue statement (or alleged untrue statement) of a material fact
contained in any prospectus, offering, circular or other document incident to
any registration, qualification or compliance (or in any related registration
statement, notification or the like) or any omission (or alleged omission) to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, or any violation by the Company of the
Securities Act, the Exchange Act, or state securities laws or any rule or
regulation promulgated under the Securities Act, the Exchange Act or a state
securities law, in each case applicable to the Company, and will reimburse each
Indemnitee for any legal and any other fees and expenses reasonably incurred in
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connection with investigating or defending any such claim, loss, damage,
liability or action, provided however, that the Company will not be liable to
any Indemnitee in any such case to the extent that any such claim, loss, damage
or liability is caused by any untrue statement or omission based upon written
information furnished to the Company by an instrument duly executed by such
Indemnitee for use therein and except that the foregoing indemnity agreement is
subject to the condition that, insofar as it relates to any such untrue
statement (or alleged untrue statement) or omission (or alleged omission) made
in the preliminary prospectus but eliminated or remedied in the amended
prospectus on file with the Commission at the time the registration statement
becomes effective or in the amended prospectus filed with the Commission
pursuant to Rule 424(b) (the "Final Prospectus"), such indemnity agreement shall
not inure to the benefit of any underwriter or any Indemnitee if there is no
underwriter, if a copy of the Final Prospectus was not furnished by such
underwriter of Indemnitee to the person or entity asserting the loss, liability,
claim or damage at or prior to the time such furnishing is required by the
Securities Act and such underwriter or Indemnitee was required under the
Securities Act to furnish such Final Prospectus; provided further, that this
indemnity shall not be deemed to relieve any underwriter of any of its due
diligence obligations; provided, further, that the indemnity agreement contained
in this Section 8.9(a) shall not apply to amounts paid in settlement of any such
claim, loss, damage, liability or action if such settlement is effected without
the consent of the Company, which consent shall not be unreasonably withheld.
(b) Indemnification by Holders. To the extent permitted by law, each
Holder (severally and not jointly) requesting or joining in a registration and
each underwriter and selling broker of the securities so registered will
indemnify the Company and its officers and directors and each person, if any,
who controls any thereof within the meaning of Section 15 of the Securities Act,
and their respective successors against all claims, losses, damages and
liabilities (or actions in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained in
any prospectus, offering circular or other documents incident to any
registration, qualification or compliance (or in any related registration
statement, notification or the like) or any omission (or alleged omission) to
state therein a material fact required to be so stated therein or necessary to
make the statements therein not misleading and will reimburse the Company and
each other person indemnified pursuant to this paragraph (b) for any legal and
any other fees and expenses reasonably incurred in connection with investigating
or defending any such claim, loss, damage, liability or action, provided,
however, that this paragraph (b) shall apply only if (and only to the extent
that) such statement or omission was made in reliance upon and in strict
conformity with written information (including, without limitation, written
negative responses to inquiries) furnished to the Company by an instrument duly
executed by such Holder, underwriter or selling broker and stated to be
specifically for use in such prospectus, offering circular or other document (or
related registration statement, notification or the like) or any amendment or
supplement thereto; provided, that the indemnity agreement contained in this
Section 8.9(b) shall not apply to amounts paid in settlement or any such claim,
loss, damage, liability or action if such settlement is effected without the
consent of the Holder or underwriter, as the case may be, which consent shall
not be unreasonably withheld and provided, further, that the obligation of any
such Holder shall be limited to an amount equal to the net proceeds received by
such Holder from the sale of the Registered Securities in such offering
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contemplated herein, unless such claim, loss, damage, liability or action
resulted from such Holder's fraudulent misconduct.
(c) Each party entitled to indemnification hereunder (the "Indemnified
Party") shall give notice to the party required to provide the indemnification
(the "Indemnifying Party") promptly after such Indemnified Party has actual
knowledge of any claim as to which indemnity may be sought, and shall permit the
Indemnifying Party (at its expense) to assume the defense of any claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, shall conduct the defense of such claim or litigation, shall be
reasonably satisfactory to he Indemnified Party and the Indemnified Party may
participate in such defense at such party's expense, and provided further that
the omission by any Indemnified Party to give notice as provided herein shall
not relieve the Indemnifying Party of its obligations under this Section 8.9
except to the extent that the omission results in a failure of actual notice to
the Indemnifying Party and such Indemnifying Party is damaged solely as a result
of the failure to give notice. The Indemnified Party may retain separate
counsel; provided that the fees and expenses of such separate counsel shall be
paid by the Indemnifying Party only if the Indemnified Party reasonably
concludes that there may be defenses available to it, him or her which are
different from or additional to those available to the Indemnifying Party and
the Indemnifying Party approves such conclusion, which approval shall not be
unreasonably withheld. No Indemnifying Party, in the defense of any such claim
or litigation, shall consent, except with the consent of each Indemnified Party,
to entry of any judgment or enter into any settlement which does not include as
an unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
litigation.
(d) If the indemnification provided for in this Section 8.9 is held by
a court of competent jurisdiction to be unavailable to an Indemnified Party with
respect to any loss, liability, claim, damage or expense referred to therein,
then the Indemnifying Party, in lieu of indemnifying such Indemnified Party
hereunder, shall contribute to the amount paid or payable by such Indemnified
Party as a result of such loss, liability, claim, damage or expenses in such
proportion as is appropriate to reflect the relative fault of the Indemnifying
Party on the one hand and of the Indemnified Party on the other in connection
with the statements or omissions that resulted in such loss, liability, claim,
damage or expense as well as any other relevant equitable considerations. This
relative fault of the Indemnifying Party and of the Indemnified Party shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission to state a material fact
relates to information supplied by the Indemnifying Party or by the Indemnified
Party and the parties' relative intent, knowledge, access to information, and
opportunity to correct or prevent such statement or omission.
(e) Notwithstanding the foregoing, to the extent that the provisions
on indemnification and contribution in the underwriting agreement entered into
in connection with the underwritten public offering are in conflict with the
foregoing provisions, the provisions in the underwriting agreement shall
control.
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(f) The reimbursement required by this Section 8.9 shall be made by
periodic payments during the course of the investigation or defense, as and when
bills are received or expenses incurred.
(g) The obligations of the Company under this Section 8.9 shall
survive the conversion, if any, of the Series A Stock, the completion of any
offering of Registrable Securities in a registration statement under this
Section 8, or otherwise.
8.10. Transfer of Registration Rights. The registration rights granted to
Holders under this Article 8 may be transferred but only to (i) a transferee who
shall acquire not less than the greater of 6,000 shares of Registrable
Securities or 50% of the Registrable Securities held by any Holder and (ii)
affiliates of any Holder. Any such transfer shall become effective only after
receipt by the Company of (i) a written notice of the transfer, including the
name, address and tax payer identification number of the transferee and the
number of Registrable Securities transferred, and (ii) an agreement executed by
the transferee to be bound by the terms of this Agreement.
8.11. "Stand Off" Agreement. In consideration for the Company performing
its obligations under this Section 8, Holders agree that for a period of time
(not to exceed 120 days) from the effective date of any registration of an
underwritten public offering of securities of the Company (upon request of the
Company or of the underwriters managing such underwritten offering), Holder
shall not sell, make any short sale of, loan, grant any option for the purchase
of, or otherwise dispose of any Registrable Securities or any other stock of the
Company held by Holder, other than shares of Registrable Securities included in
the registration without the prior written consent of the Company or such
underwriters, as the case may be.
8.12. Delay of Registration. A Holder shall have no right to take any
action to restrain, enjoin, or otherwise delay any registration as the result of
any controversy that might arise with respect to the interpretation or
implementation of this Article.
8.13. Reports Under the Securities Act and the Exchange Act. With a view to
making available to the Holders the benefits of any rule or regulation of the
Commission that may at any time permit a Holder to sell securities of the
Company to the public pursuant to a registration on Form S-3, the Company agrees
to file with the Commission in a timely manner all reports and other documents
required of the Company under the Securities Act and the Exchange Act.
8.14. Affiliate Status of Holder. At any time after the second anniversary
of the issuance of any Registrable Securities, if a Holder is not, and has not
been for at least the prior three months, an affiliate of the Company for
purposes of Rule 144 under the Securities Act and delivers to the Company an
opinion to that effect from counsel reasonably acceptable to the Company, such
Holder may request the Company to remove any related restrictive legend on such
Holder's certificates representing shares of Rally's Common Stock, which request
the Company agrees to honor promptly in the normal course of business. After
such removal, the owner of any
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such shares no longer shall be a Holder and such shares no longer shall be
Registrable Securities subject to this Article 8.
ARTICLE 9
MISCELLANEOUS
9.1. Expenses. Each party to this Agreement shall bear its own expenses
relating to the preparation, execution, delivery and performance of this
Agreement and all transactions contemplated thereby.
9.2. Survival of Agreements. All agreements, presentations and warranties
and covenants contained herein or made in writing by or on behalf of any party
in connection with the transactions contemplated hereby shall survive the
execution and delivery of this Agreement (despite any investigation at any time
made by any other party or on its behalf). All statements contained in any
certificate or other instrument executed and delivered by any party or its duly
authorized officers or representatives pursuant hereto in connection with the
transactions contemplated hereby shall be deemed representations by the that
party hereunder.
9.3. Sellers' Obligations Several. Each Seller's obligations under this
Agreement are several, and no Seller is jointly obligated hereunder to render
the performance of any other Seller, nor excused from performance hereunder by
reason of any other Seller's nonperformance.
9.4. Notices. All notices, requests, consents and other communications
herein shall be in writing and shall be deemed to be delivered (i) on the date
delivered, if personally delivered or transmitted via facsimile with return
confirmation of such transmission; (ii) on the business day after the date sent,
if sent by recognized overnight courier service and (iii) on the fifth day after
the date sent, if mailed by first-class certified mail, postage prepaid and
return receipt requested, as follows:
If to the Company: Rally's Hamburgers, Inc.
10002 Shelbyville Road, Suite 150
Louisville, Kentucky 40223
Attention: James J. Gillespie
Facsimile No: (502) 245-3619
Telephone No: (502) 245-8900
with copies to: Greenebaum Doll & McDonald, PLLC
3300 First National Tower
Louisville, Kentucky 40202
Attention: Patrick Welsh, Esq.
Facsimile No.: (502) 587-3695
Telephone No.: (502) 589-4200
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Christensen, Miller, Fink, Jacobs, Glaser,
Weil & Shapiro, LLP
2121 Avenue of the Stars, Eighteenth Floor
Los Angeles, California 90067
Attention: Janet S. McCloud, Esq.
Facsimile No: (310) 556-2920
Telephone No.: (310) 553-3000
If to Sellers: To the parties at such addresses as are
listed on Exhibit A attached hereto
or other such addresses as each of the parties hereto may provide from time to
time in writing to the other parties.
9.5. Modifications; Waiver. Neither this Agreement nor any provision hereof
may be changed, waived, discharged or terminated orally or in writing, except
that any provision of this Agreement may be amended and the observance of any
such provision may be waived (either generally or in a particular instance and
either retroactively or prospectively) with (but only with) the written consent
of the Company and each of the Sellers.
9.6 Entire Agreement. This Agreement, together with the schedules and
exhibits attached hereto and made a part hereof, contains the entire agreement
between the parties with respect to the transactions contemplated hereby, and
supersedes all negations, agreements, representations, warranties, commitments,
whether in writing or oral, prior to the date hereof.
9.7 Successors and Assigns. Except as otherwise expressly provided in this
Agreement, all of the terms of this Agreement shall be binding upon and inure to
the benefit of and be enforceable by the respective successors and transferees
of the parties hereto.
9.8 Enforcement.
(a) Remedies at Law or in Equity. If any party hereto shall default in
any of its obligations under this Agreement or if any representation or warranty
made by or on behalf of it in this Agreement or in any certificate, report or
other instrument delivered by it under or pursuant to any term hereof shall be
untrue or misleading in any material respect as of the date of this Agreement or
as of the Closing Date or as of the date it was made, furnished or delivered,
any other party may proceed to protect and enforce its rights by suit in equity
or action at law, whether for the specific performance of any term contained in
this Agreement, injunction against the breach of any such term or in furtherance
of the exercise of any power granted in this Agreement, or to enforce any other
legal or equitable right of such party or to take any one of more of such
actions. In the event any party brings such an action against another, the
prevailing party in such dispute, as determined by a final non-appealable order,
shall be entitled to recover from the losing party all fees, costs and expenses
enforcing any right of such prevailing party under or with respect to
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this Agreement, including without limitation such reasonable fees and expenses
of attorneys and accountants, which shall include, without limitation, all fees,
costs and expenses of appeals.
(b) Remedies Cumulative; Waiver. No remedy referred to herein is
intended to be exclusive, but each shall be cumulative and in addition to any
other remedy referred to above or otherwise available at law or in equity. No
express or implied waiver by any party of any default shall be a waiver of any
future or subsequent default. The failure or delay of any party in exercising
any rights granted hereunder shall not constitute a waiver of any such right and
any single or partial exercise of any particular right by any party shall not
exhaust the same or constitute a waiver of any other right provided herein.
9.9 Execution and Counterparts; Facsimile Execution. This Agreement may be
executed in any number of counterparts, each of which when so executed and
delivered shall be deemed an original, and all such counterparts together shall
constitute one instrument. In addition, to the extent that receipt is confirmed,
this Agreement may be executed and sent by telecopy with the original to follow
by a nationally recognized overnight delivery service.
9.10 Governing Law; Jurisdiction; and Severability. This Agreement shall be
governed by the internal laws of the State of Delaware, without regard to
principles of conflicts of law. Each party hereto consents to the jurisdiction
of any federal court located in the State of California, County of Los Angeles
for the purpose of any action, suit or proceeding arising out of or based on
this Agreement or any provision hereof. In the event any provision of this
agreement of the application of any such provision to any party shall be held by
a court of competent jurisdiction to be contrary to law, the remaining
provisions of this agreement shall remain in full force and effect.
9.11 Headings. The descriptive headings of the Sections hereof and the
Schedules and Exhibits hereto are inserted only and do not constitute a part of
this Agreement.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK.]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement by
their duly authorized officers as of the date first written above.
THE COMPANY:
RALLY'S HAMBURGERS, INC.
By: /s/ JAMES J. GILLESPIE
-------------------------------------
Name: James J. Gillespie
-------------------------------------
Title: Chief Executive Officer
-------------------------------------
SELLERS:
CKE RESTAURANTS, INC.
By: /s/ C. THOMAS THOMPSON
-------------------------------------
Name: C. Thomas Thompson
-------------------------------------
Title: President and Chief Operating Officer
-------------------------------------
FIDELITY NATIONAL FINANCIAL, INC.
By: /s/ M'LISS JONES KANE
-------------------------------------
Name: M'Liss Jones Kane
-------------------------------------
Title: Senior Vice President, General
Counsel and Secretary
-------------------------------------
GIANT GROUP, LTD.
By: /s/ BURT SUGARMAN
-------------------------------------
Name: Burt Sugarman
-------------------------------------
Title: CEO
-------------------------------------
/s/ DAVID GOTTERER
---------------------------------
DAVID GOTTERER
/s/ BURT SUGARMAN
---------------------------------
BURT SUGARMAN
-25-
26
/s/ MARY HART SUGARMAN
--------------------------------
MARY HART SUGARMAN
AJ SUGARMAN
By: /s/ A.J. SUGARMAN
-------------------------------------
Name: A.J. Sugarman
-------------------------------------
Title: Chief Executive Officer
-------------------------------------
/s/ DAVID MALCOLM
---------------------------------
DAVID MALCOLM
/s/ TERRY CHRISTENSEN
---------------------------------
TERRY CHRISTENSEN
/s/ TERRY CHRISTENSEN
---------------------------------
TERRY CHRISTENSEN, AS
TRUSTEE FOR THE RETIRE-
MENT PLAN FOR THE EMPLOY-
EES OF TERRY CHRISTENSEN, A
PROF. CORP.
/s/ AL SUGARMAN
---------------------------------
AL SUGARMAN
THE TRAVELERS INDEMNITY COMPANY
By: /s/ EMIL MOLINARO
-------------------------------------
Name: Emil Molinaro
-------------------------------------
Title:
-------------------------------------
-26-
27
/s/ WILLIAM P. FOLEY II
--------------------------------
WILLIAM P. FOLEY II
/s/ FRANK WILLEY
--------------------------------
FRANK WILLEY
/s/ CARL STRUNK
--------------------------------
CARL STRUNK
/s/ ANDREW PUZDER
---------------------------------
ANDREW PUZDER
WEDBUSH MORGAN, AS CUSTODIAN
FOR THE PATRICK F. STONE IRA,
ACCOUNT # 78785255
By: /s/ R. MARKS
-------------------------------------
Name: Richard Marks
-------------------------------------
Title: Supervisor
-------------------------------------
/s/ WILLIAM IMPARATO
---------------------------------
WILLIAM IMPARATO
/s/ DANIEL D. LANE
----------------------------------
DANIEL D. LANE
/s/ DANNY LANE
----------------------------------
DANNY LANE
-27-
28
/s/ CARY H. THOMPSON
----------------------------------
CARY H. THOMPSON
/s/ STEPHEN C. MAHOOD
----------------------------------
STEPHEN C. MAHOOD
/s/ CARL L. KARCHER
----------------------------------
CARL L. KARCHER
/s/ CARL N. KARCHER
----------------------------------
CARL N. KARCHER
/s/ W. HOWARD LESTER
---------------------------------
W. HOWARD LESTER
/s/ C. THOMAS THOMPSON
---------------------------------
C. THOMAS THOMPSON
BYRON E. AND SHARON K. ALLUMBAUGH,
TRUSTEES OF THE BYRON AND SHARON
ALLUMBAUGH REVOCABLE TRUST
DTD 1/2/91
By: /s/ BYRON E. ALLUMBAUGH
-------------------------------------
Name: B&S Allumbaugh Trust
-------------------------------------
Title: Trustee
-------------------------------------
-28-
29
MERRILL LYNCH, AS TRUSTEE FOR
THE ERNIE SMITH IRA, ACCOUNT
# 223-86756
By: /s/ MARY KAUANUI
-------------------------------------
Name: Mary Kauanui
-------------------------------------
Title: Administrative Manager
-------------------------------------
/s/ RON MAUDSLEY
----------------------------------
RON MAUDSLEY
MERRILL LYNCH, AS TRUSTEE FOR THE
PAUL DEFALCO IRA, ACCOUNT #223-8301
By: /s/ MARY KAUANUI
-------------------------------------
Name: Mary Kauanui
-------------------------------------
Title: Administrative Manager
-------------------------------------
-29-
30
CKE Restaurants
1200 N. Harbor Boulevard
Anaheim, CA 92803
Fidelity National Financial, Inc.
17911 Von Karman Avenue
Suite 300
Irvine, CA 92614
GIANT GROUP, LTD.
9000 Sunset Boulevard
16th Floor
Los Angeles, CA 90069
David Gotterer
425 E. 58th Street
New York, NY 10022
Burt Sugarman
c/o GIANT GROUP, LTD.
9000 Sunset Boulevard
16th Floor
Los Angeles, CA 90069
Mary Hart Sugarman
c/o GIANT GROUP, LTD.
9000 Sunset Boulevard
16th Floor
Los Angeles, CA 90069
A J Sugarman
c/o GIANT GROUP, LTD.
9000 Sunset Boulevard
16th Floor
Los Angeles, CA 90069
David Malcolm
509 Beacon Place
Chula Vista, CA 91910
Terry N. Christensen
A-1
31
2121 Avenue of the Stars, 1800
Los Angeles, CA 90067
Terry N. Christensen, as Trustee for the
Retirement Plan for the Employees of
Terry Christensen, a Prof. Corp.
2121 Avenue of the Stars, 1800
Los Angeles, CA 90067
Al Sugarman
c/o GIANT GROUP, LTD.
9000 Sunset Boulevard
16th Floor
Los Angeles, CA 90069
The Travelers Indemnity Company
388 Greenwich Street
36th Floor
New York, NY 10013
William P. Foley II
3916 State Street
Suite 300
Santa Barbara, CA 93105
Frank P. Willey
3916 State Street
Suite 300
Santa Barbara, CA 93105
Carl A. Strunk
3916 State Street
Suite 300
Santa Barbara, CA 93105
Andrew F. Puzder
3916 State Street
Suite 300
Santa Barbara, CA 93105
Wedbush Morgan, as Custodian for the
Patrick F. Stone IRA, Account # 78785255
A-2
32
3916 State Street
Suite 300
Santa Barbara, CA 93105
William A. Imparato
1515 East Missouri
Building A
Phoenix, AZ 85015
Daniel D. Lane
14 Corporate Plaza
Newport Beach, CA 92660
Danny Lane
14 Corporate Plaza
Newport Beach, cA 92660
Cary H. Thompson
c/o Aames Financial
350 So. Grand
52nd Floor
Los Angeles, CA 90070
Stephen C. Mahood
500 Crescent Court
Suite 270
Dallas, TX 75201
Carl L. Karcher
72-875 Fred Waring Drive
Suite C
Palm Desert, CA 92660
Carl Nicholas Karcher
1200 N. Harbor Blvd.
Anaheim, CA 92803
C. Howard Lester
3250 Van Ness
San Francisco, CA 94109
A-3
33
C. Thomas Thompson
1200 N. Harbor Blvd.
Anaheim, CA 92803
Byron E. and Sharon K. Allumbaugh, Trustees of the
Byron and Sharon Allumbaugh Revocable Trust DTD 1/2/91
33 Ridgeline Drive
Newport Beach, CA 92660
Merrill Lynch, as Trustee for the Ernie Smith IRA, Account #223-86756
3916 State Street
Suite 300
Santa Barbara, CA 93105
Ron Maudsley
3916 State Street
Suite 300
Santa Barbara, CA 93105
Merrill Lynch, as Trustee for the Paul De Falco IRA, Account #223-83014
3916 State Street
Suite 300
Santa Barbara, CA 93105
A-4
34
EXHIBIT A
Rally's
Common --------------------------
Shares Common Preferred
to be Shares Shares
Converted Issued Issued
---------- --------- ------
CKE Restaurants, Inc. 12,754,885 2,798,080 28,619
Fidelity National Financial, Inc. 1,680,616 368,673 3,771
GIANT GROUP, LTD. 200,045 43,869 449
David Gotterer 113,438 24,838 255
Burt Sugarman 113,438 24,838 255
Mary Hart Sugarman 272,230 59,702 611
A J Sugarman 27,168 5,955 61
David Malcolm 272,230 59,702 611
Terry Christensen 55,353 12,162 124
Al Sugarman 45,353 9,925 102
Travelers 1,270,769 -- 5,639
William P. Foley II 453,754 99,553 1,018
Frank Willey 226,877 49,776 509
Carl Strunk 64,353 14,156 144
Andrew Puzder 45,353 9,925 102
Pat Stone 45,353 9,925 102
William Imparato 226,877 49,776 509
Daniel D. Lane 181,522 39,850 407
Danny Lane 45,353 9,925 102
Cary H. Thompson 45,353 9,925 102
Stephen C. Mahood 90,707 19,851 204
Carl L. Karcher 226,877 49,776 509
Carl N. Karcher 90,707 19,851 204
C. Howard Lester 272,230 59,702 611
C. Thomas Thompson 45,353 9,925 102
Byron Allumbaugh 90,707 19,851 204
Ernie Smith 45,353 9,925 102
Ron Maudsley 45,353 9,925 102
Paul De Falco 53,353 9,975 137
---------- --------- ------
Total 19,100,960 3,909,336 45,667
========== ========= ======