Exhibit 10.1
LETTER OF INTENT
This Letter of Intent is entered into as of September 25,
1998 by and among Rally's Hamburgers, Inc. ("Rally's"), Checkers
Drive-In Restaurants, Inc. ("Checkers") and GIANT GROUP, LTD.
("GIANT") with respect to a series of transactions pursuant to
which Rally's would acquire Checkers and GIANT (the "Merger").
While the terms and conditions of the transactions will be set
forth in definitive documentation to be negotiated among the
parties, the principal terms of the transactions are as follows:
1. Rally's, Checkers and GIANT would enter into a merger
agreement pursuant to which Checkers and GIANT would become
wholly-owned subsidiaries of Rally's in a tax-free
reorganization, and Rally's would change its corporate name
to "Checkers Drive-In Restaurants, Inc." or a variant
thereof. The holders of Checkers' common stock would
receive in the Merger, for each share of Checkers' common
stock held, 0.5 shares of Rally's common stock (the
"Checkers Merger Consideration"), and the holders of GIANT's
common stock would receive in the Merger, for each share of
GIANT's common stock held, 10.48 shares of Rally's common
stock (the "GIANT Merger Consideration" and collectively
with the Checkers Merger Consideration, the "Merger
Consideration").
2. Outstanding options shall be treated as follows (which may
require the cancellation and re-issuance of such options):
a. Options to acquire GIANT's common stock would continue
to be exercisable in accordance with their respective
terms, except that on exercise the holder would receive
the GIANT Merger Consideration; provided however, that
the holders of not less than 90% of the GIANT options
will agree that: (i) in consideration for Rally's
agreeing to a five year extension of the options held
by the consenting option holders, the exercise price
of such options will be increased to the equivalent of
$1.50 per share of Rally's common stock to be acquired;
and (ii) such options will not be exercisable without
the consent of Rally's to the extent such exercise
would cause Section 4.14 of Rally's Indenture with
respect to its 9-7/8% Senior Notes to become
applicable.
b. Options to acquire Checkers' common stock would
continue to be exercisable in accordance with their
respective terms, except that: (i) on exercise the
holder will receive the Checkers Merger Consideration
(i.e. 0.5 share of Rally's); (ii) the exercise price
will, where above $.75, be reduced to $.75; and (iii)
there will be a five year extension of the options.
c. Options to acquire Rally's common stock would remain
unchanged except that: (i) the exercise price will,
where above $1.50, be reduced to $1.50; and (ii) there
will be a five year extension of the options.
3. Warrants to acquire Checker's common stock would continue to
be exercisable in accordance with their respective term
except that on exercise the holder will receive the Checkers
Merger Consideration (i.e., 0.5 share of Rally's).
4. Immediately following the Merger: the present management of
Rally's would remain in place; the Rally's Board of
Directors would consist of the members of the present Boards
of Directors of Rally's and GIANT plus Peter C. O'Hara; Mr.
Sugarman would become Vice Chairman of the Rally's Board and
Chairman of its Executive Committee (whose other members
would consist of Mr. Foley, Andrew Puzder and Terry
Christensen); and there would be such other changes in the
composition of the Rally's Board of Directors and Executive
Committee as Rally's, Checkers and GIANT will agree. So
long as the agreement referred to in Section 6(j) remains in
effect, Mr. Foley would be Chairman of Rally's Board of
Directors.
5. Mr. Sugarman's current employment agreement and perquisites
with GIANT would be assumed by Rally's on the same terms and
conditions as currently exist, except that: Mr. Sugarman's
title will be Vice Chairman of the Board and Chairman of the
Executive Committee; he would not be responsible for day-to-
day operations, but would focus on strategic planning,
acquisition opportunities and other responsibilities
customary for such positions; he would waive any "change of
control" provisions which might be activated by the Merger
(but such provisions would remain in full force and effect
with respect to any subsequent transactions); the agreement
would be extended for such period of time as the Rally's
Executive Committee and Mr. Sugarman will agree; the
agreement would contain other mutual modifications as are
appropriate and mutually agreeable to reflect the new
corporate structure. Among other things, following the
Merger, Rally's will maintain the current GIANT office (on a
reduced scale) in the Los Angeles area for use by Mr.
Sugarman and appropriate support staff, with Los Angeles
corporate overhead being subject to agreement with the
Executive Committee.
6. The Merger would be subject to a number of conditions,
including the following:
a. preparation and execution of a definitive merger
agreement and other necessary documentation to
implement the transactions;
b. approval of the Merger by the respective shareholders
and Boards of Directors of each of GIANT, Checkers and
Rally's, which would entail the preparation, filing and
effectiveness of a Joint Proxy Statement/Prospectus
with respect to the Merger and the issuance of the
Merger Consideration;
c. receipt by each of Rally's, Checkers and GIANT of an
opinion from an investment banking firm of its
selection, in form and substance satisfactory to
Rally's, Checkers and GIANT, as applicable, to the
effect that the Merger and related transactions are
fair to its shareholders from a financial point of
view as of the time of execution of this Letter of
Intent;
d. Rally's, Checkers and GIANT completing to their
respective satisfaction due diligence investigations
with respect to the others' business, financial
condition and other matters, including confirming to
their mutual satisfaction, that the Merger will not
constitute a change of control for purposes of Rally's
9-7/8% Senior Notes;
e. compliance with the requirements of the Hart-Scott-
Rodino Act;
f. obtaining such third party consents as are required and
are material to the operations of Rally's and its
subsidiaries following the Merger;
g. legal opinions customary for such transactions;
h. customary representations and warranties, which would
terminate at the closing of the Merger;
i. redemption or waiver prior to the closing of the Merger
of all outstanding Rights under GIANT's Stockholders
Rights Plan;
j. execution of an agreement among CKE Restaurants, Inc.
("CKE"), Fidelity National Financial, Inc. ("FNF"),
Mr. Sugarman and Rally's pursuant to which: (i) for a
three year period following the consummation of the
Merger, CKE and FNF (collectively "CKE-FNF"), on the
one hand, and Mr. Sugarman, on the other hand, each
will agree not to dispose of their Rally's shares,
without the consent of Rally's, except for
dispositions of shares of Rally's common stock (x) in
transactions pursuant to Rule 144, (y) in a tender
offer, exchange offer or similar transaction that has
been approved by Rally's, or (z) other dispositions not
to exceed an aggregate of 1,000,000 shares by Mr.
Sugarman or CKE-FNF, as applicable, in any three month
period, provided that in such event, CKE-FNF and Mr.
Sugarman, as applicable, will have a right of first
refusal on customary terms (including window periods
during which the right may be exercised) to acquire any
shares of Rally's proposed to be sold by the other; and
(ii) the parties will agree to customary registration,
"tag along" and "drag along" rights;
k. execution of the amended employment agreement with Mr.
Sugarman described in Section 5 above; and
l. the satisfaction of such other conditions as are
customary for such transactions.
7. Concurrently with the execution of the Merger Agreement:
a. Mr. Sugarman will deliver to Rally's an agreement
and/or irrevocable proxy obligating him to vote all
shares of GIANT's common stock over which he has voting
rights in favor of the Merger.
b. CKE, FNF and Mr. Foley will deliver to GIANT an
agreement and/or irrevocable proxies obligating them to
vote all shares of Rally's common stock over which they
have voting rights in favor of the Merger.
c. Rally's will deliver to Checkers an agreement and/or
irrevocable proxy obligating it to vote all shares of
Checkers' common stock over which it has voting rights
in favor of the Merger.
d. CKE and Rally's will execute an agreement providing for
joint purchasing by Rally's (for its Rally's and
Checkers restaurant operations) and CKE (for its
Carl's, Jr., Hardee's and other restaurant operations)
of all items presently being jointly purchased and
such additional items as may reasonably be added in the
future, including food, paper, beverage, signs,
building materials, kitchen equipment, construction
services, etc. CKE may terminate such agreement if Mr.
Foley or CKE's designee is not offered the position of
Chairman of the Board of Rally's.
8. The merger agreement will provide that if the Merger is
terminated by reason of any party to the Merger exercising a
"fiduciary out", the terminating party will reimburse the
non-terminating parties for their reasonable and documented
transaction costs.
9. In order to facilitate the Merger, from and after the date
hereof through and including the date the transactions are
consummated or abandoned, each of GIANT, Checkers and
Rally's (the "Constituent Corporations") shall afford the
others and their respective representatives with full access
to its books, records and personnel for the purpose of
conducting due diligence. The Constituent Corporations
acknowledge that in the course of such due diligence, each
will be providing the others and their representatives with
information which is proprietary and confidential. The
Constituent Corporations, each on behalf of itself and its
representatives, agrees that it will treat as confidential
all information provided to it by the others which the
others designate as such in writing ("Confidential
Information), and that it will use such Confidential
Information solely in connection with the transactions. In
the event the transactions are abandoned, the Constituent
Corporations, as applicable, will return and/or destroy
without retaining any copies thereof, as requested by the
party which provided the Confidential Information to it, all
such Confidential Information. The foregoing restrictions
shall not apply to any information which: (a) has not been
designated as Confidential Information; (b) which the
recipient has obtained from sources other than the
Constituent Corporations, which sources, to the best of the
recipient's knowledge and belief, are not subject to any
confidentiality undertaking and did not acquire such
information from sources which are subject to such an
undertaking; or (c) has become known to the public other
than through a violation of this Section 9. The parties
acknowledge that the foregoing provisions shall not apply to
information received by directors of any Constituent
Corporation who are also directors of any other Constituent
Corporation received by them in their capacities as
directors of a Constituent Corporation, all of which
information is subject to customary standards of
confidentiality.
10. Subject to their respective Board of Directors complying
with their fiduciary obligations under applicable law on
advice of counsel, in order to induce the others to proceed
with their due diligence and negotiation of the definitive
agreements necessary to implement the transactions, without
consent of the other Constituent Corporations, each
Constituent Corporation agrees not to solicit or negotiate
with any party other than the other Constituent Corporations
and their respective representatives with respect to a
merger or business combination for a thirty (30) day period
from and after the date hereof (the "Exclusivity Period").
Upon termination of this letter of intent during the
Exclusivity Period by reason of application of the
introductory clause of the prior sentence, the terminating
party will reimburse the non-terminating parties for their
reasonable and documented transaction costs. Upon
termination of the Exclusivity Period, any party may, on
written notice to the other, terminate this letter of
intent.
11. Rally's, Checkers and GIANT agree to issue a joint press
release concurrently with the execution of this letter of
intent, and thereafter to cooperate with each other with
respect to such further public disclosure as may be required
or appropriate in connection with applicable securities
laws. Unless required in order to comply with applicable
law, neither GIANT, Checkers nor Rally's will make any
public announcements concerning the Merger and related
transactions without the consent of the other, not to be
unreasonably withheld.
12. Except for their respective financial advisors to be engaged
in connection with the fairness opinions contemplated by
this Letter of Intent, each of GIANT, Checkers and Rally's
represents and warrants that it has not engaged any finders
or brokers in connection with the transactions described
herein.
13. GIANT, Checkers and Rally's each agree to conduct their
respective businesses only in the ordinary course consistent
with past practice until earlier of the execution of a
definitive merger agreement or the termination of this
Letter of Intent.
14. Subject to Sections 8 and 10, GIANT, Checkers and Rally's
will bear their own expenses in connection with the
transactions described in this Letter of Intent.
15. This Letter of Intent shall be governed by the laws of the
state of Delaware.
The foregoing is an expression of mutual intent only, and
except for Sections 9, 10, 11, 12, 13, 14 and 15, does not
constitute a binding agreement among the parties. Upon execution
of this letter of intent by Rally's, Checkers and GIANT, each
party shall work diligently and in good faith to complete the due
diligence and negotiate the definitive agreements necessary and
appropriate to implement the transactions as promptly as is
practicable.
RALLY'S HAMBURGERS, INC.
By /s/ William P. Foley, II
------------------------
Chairman
CHECKERS DRIVE-IN RESTAURANTS, INC.
By /s/ William P. Foley, II
------------------------
Chairman
GIANT GROUP, LTD.
By /s/ Burt Sugarman
-----------------------
Chairman
By their respective signatures below:
a. Fidelity National Financial, Inc. and CKE Restaurants,
Inc. each acknowledge its intent to enter into the
agreements referred to in Sections 6 and 7 above; and
b. Burt Sugarman acknowledges his consent to the changes
in his GIANT options, as described in Section 2(a)
above and his intent to enter into the agreements
referred to in Sections 6 and 7 above.
c. William P. Foley, II, acknowledges his intent to enter
into the agreements referred to in Section 7 above.
CKE RESTAURANTS, INC.
By /s/ Andrew Puzder
----------------------------------------
Executive Vice President, General
Counsel and Secretary
FIDELITY NATIONAL FINANCIAL, INC.
By /s/ Andrew Puzder
----------------------------------------
Executive Vice President
/s/ William P. Foley, II
--------------------------------------------
WILLIAM P. FOLEY, II
/s/ Burt Sugarman
--------------------------------------------
BURT SUGARMAN