<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. 1)
Giant Group, Ltd.
---------------
(Name of Issuer)
Common Stock, par value $.01 per share
--------------------------------------
(Title of Class of Securities)
374503 1 10 0
-------------------------------------------
(CUSIP Number)
Andrew F. Puzder
Executive Vice President and General Counsel
Fidelity National Financial, Inc.
17911 Von Karman Avenue
Irvine, California 92714
Tel. (714) 622-5000
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
Copies to:
Lawrence Lederman, Esq.
Milbank, Tweed, Hadley & McCloy
One Chase Manhattan Plaza
New York, New York 10005
Tel. (212) 530-5000
December 19, 1995
-----------------
(Date of Event Which Requires Filing of this Statement)
If the filing person has previously filed a statement on
Schedule 13G to report the acquisition which is the subject of this Schedule
13D, and is filing this schedule because of Rule 13d-1(b)(3) or (4), check the
following box / /.
Check the following box if a fee is being paid with the
statement / /.
Page 1 of 41 Pages
Exhibit Index on Page 10
<PAGE> 2
SCHEDULE 13D
CUSIP NO.: 374503 1 10 0
(1) NAME OF REPORTING PERSON:
Fidelity National Financial, Inc.
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON:
IRS No. 86-0498599
(2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) / /
(b) / /
(3) SEC USE ONLY
(4) SOURCE OF FUNDS: WC
(5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEM 2(d) or 2(e) / /
(6) CITIZENSHIP OR PLACE OF ORGANIZATION: Delaware
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH:
(7) SOLE VOTING POWER: 449,089(1)
(8) SHARED VOTING POWER: 0
(9) SOLE DISPOSITIVE POWER: 449,089(1)
(10) SHARED DISPOSITIVE POWER: 0
(11) AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON:
449,089(1)
(12) CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
/X/
(13) PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11): 8.9(2)
(14) TYPE OF REPORTING PERSON: CO
____________________
(1) Fidelity disclaims beneficial ownership of 10,000 shares of Common Stock
held by William P. Foley, II. Mr. Foley owns 20.7% of the outstanding
common stock of Fidelity and he is the Chairman of the Board and Chief
Executive Officer of Fidelity. By virtue of such stock ownership and
positions, Mr. Foley may be deemed a "controlling person" of Fidelity.
(2) Based upon 5,057,735 shares of Common Stock outstanding at November 8,
1995.
Page 2 of 41 Pages
<PAGE> 3
CUSIP NO.: 374503 1 10 0
(1) NAME OF REPORTING PERSON:
William P. Foley, II
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON:
IRS No. ###-##-####
(2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) / /
(b) / /
(3) SEC USE ONLY
(4) SOURCE OF FUNDS: PF
(5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEM 2(d) or 2(e) / /
(6) CITIZENSHIP OR PLACE OF ORGANIZATION: United States of America
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH:
(7) SOLE VOTING POWER: 10,000(3)
(8) SHARED VOTING POWER: 0
(9) SOLE DISPOSITIVE POWER: 10,000(3)
(10) SHARED DISPOSITIVE POWER: 0
(11) AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON: 10,000(3)
(12) CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
/X/
(13) PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11): .24
(14) TYPE OF REPORTING PERSON: IN
____________________
(3) Mr. Foley disclaims beneficial ownership of 449,089 shares of Common Stock
held by Fidelity. Mr. Foley owns 20.7% of the outstanding common stock of
Fidelity, and he is Chairman of the Board and Chief Executive Officer of
Fidelity. By virtue of such stock ownership and positions, Mr. Foley may be
deemed a "controlling person" of Fidelity.
(4) Based upon 5,057,735 shares of Common Stock outstanding at November 8,
1995.
Page 3 of 41 Pages
<PAGE> 4
This Amendment No. 1 amends the statement on Schedule 13D
filed with the Securities and Exchange Commission on December 8, 1995 (the
"Schedule 13D"), with respect to the common stock, par value $0.01 per share,
of Giant Group, Ltd. (the "Common Stock"), a corporation having its principal
executive offices located at 150 El Camino Drive, Suite 303, Beverly Hills,
California 90212 (the "Company"). All capitalized terms not otherwise defined
herein shall have the meanings ascribed thereto in the Schedule 13D.
Other than as set forth herein, there has been no material
change in the information set forth in the Schedule 13D.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
Item 3 of the Schedule 13D is hereby amended in its entirety
to read as follows:
Of the 459,089 shares of Common Stock to which this Statement
relates, (a) 343,600 of such shares were purchased by Fidelity with general
working capital funds of Fidelity during the period between July 13, 1995 and
December 21, 1995, for an aggregate purchase price of $2,451,025.00 (net of
brokerage commissions), (b) 105,489 of such shares were purchased between
August 9, 1995 and December 13, 1995 by a wholly-owned subsidiary of Fidelity
with general working capital funds, for an aggregate purchase price of
$737,670.25 (net of brokerage commissions), and (c) 10,000 of such shares were
purchased by Mr. Foley with his personal funds on September 27, 1995 for an
aggregate purchase price of $72,500 (net of brokerage commissions).
ITEM 4. PURPOSE OF TRANSACTION.
Item 4 of the Schedule 13D is hereby amended to add the
following:
On December 19, 1995, the Company instituted an action in the
United States District Court for the Central District of California (the
"Federal Action") against Mr. Foley, Fidelity, CKE Restaurants, Inc., a
Delaware corporation ("CKE"), William Davenport ("Mr. Davenport") and Robert
Martyn ("Mr. Martyn", and together with Mr. Foley, Fidelity, CKE and Davenport,
the "Defendants"). CKE is a Delaware corporation engaged through its Carl
Karcher Enterprises subsidiary in the operation of the "Carl's Jr." chain of
fast food restaurants. A limited partnership whose general partner is
controlled by Mr. Foley owns 20.7% of the outstanding stock of CKE, a
corporation controlled by Mr. Foley owns 1.4% of the outstanding stock of CKE,
and Fidelity owns 2.7% of the outstanding stock of CKE. Although named as a
defendant in the Federal Action, CKE has not purchased and does not own any
shares of Common Stock. Mr. Davenport and Mr. Martyn acted as brokers for
Fidelity in connection with the purchase of the shares of Common Stock reported
in this Schedule 13D.
Page 4 of 41 Pages
<PAGE> 5
In summary, the Company alleges in the Federal Action that the
Defendants have engaged in various unlawful activities, including trading on
non-public confidential and/or inside information, misappropriating
confidential and proprietary information from the Company and its affiliate,
Rally's Hamburgers, Inc. ("Rally's"), and violating the disclosure requirements
of Section 13(d) of the Securities Exchange Act of 1934 by failing to identify
all of the members of their "group," by understating the true extent of their
holdings in the Company, and by failing to disclose the true purpose of their
investment in the Company, that is, to obtain control of the Company and
Rally's. Rally's owns and franchises double drive-thru hamburger restaurants.
The Company claims that the alleged confidential and proprietary information
was furnished to CKE in the course of discussions between CKE, the Company and
Rally's concerning possible transactions, and is protected by an alleged oral
confidentiality arrangement among CKE, the Company and Rally's. The Company
also claims that Fidelity and Mr. Foley have formed a group with Mr. Davenport
and Mr. Martyn and certain of their clients who have also purchased shares of
Common Stock in order to gain control of the Company and Rally's. Among other
things, the Company seeks to enjoin Fidelity and Mr. Foley from purchasing
additional shares of Common Stock or from voting the shares of Common Stock
previously purchased by them, to require that an amended Schedule 13D be filed
reflecting the facts as the Company has alleged them to be, and to recover
unspecified damages. A copy of the complaint in the Federal Action is attached
as Exhibit 1 hereto and is incorporated herein by reference.
Fidelity and Mr. Foley will be filing a formal answer to the
Company's complaint in the Federal Action in due course. Fidelity and Mr.
Foley believe that the allegations made by the Company in the Federal Action
are totally without merit and intend to defend the Federal Action vigorously.
Fidelity and Mr. Foley have not entered into any arrangements with any third
party, including Mr. Davenport and Mr. Martyn and their clients, with respect
to purchasing or voting shares of Common Stock or seeking control of either the
Company or Rally's. While the Company has in the past furnished certain
information to CKE with respect to itself and Rally's, such information was not
considered material with respect to the market value of the Common Stock and
was not relied upon in connection with Fidelity's purchases of Common Stock.
Moreover, the Company did not ask CKE to enter into a formal confidentiality
agreement with the Company or Rally's at the time with respect to such
information.
Further, when the Company contacted Mr. Foley following the
initial filing of the Schedule 13D seeking to arrange discussions between CKE
and Rally's to explore the possibility of a transaction, CKE requested
additional due diligence material concerning Rally's. In response, the Company
and Rally's proffered a written confidentiality agreement to CKE, Fidelity and
Mr. Foley that would cover any proprietary information to be
Page 5 of 41 Pages
<PAGE> 6
turned over pursuant to such due diligence request. CKE, Fidelity and Mr.
Foley declined to enter into such a confidentiality agreement and received no
further information from the Company or Rally's.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
Item 5 of the Schedule 13D is hereby amended to add the
following:
As of the close of business on December 21, 1995, Fidelity was
the beneficial owner of 449,089 shares of Common Stock, which constitute in the
aggregate 8.9% of the outstanding shares of Common Stock (based on 5,057,735
shares of Common Stock outstanding as of November 8, 1995, as disclosed in the
Company's Quarterly Report on Form 10-Q for the quarterly period ended
September 30, 1995). As of the close of business on such date, Mr. Foley was
the beneficial owner of 10,000 shares of Common Stock, which constitute in the
aggregate .2% of the outstanding shares of Common Stock. Mr. Foley disclaims
beneficial ownership of the 449,089 shares of Common Stock beneficially owned
by Fidelity and Fidelity disclaims beneficial ownership of the 10,000 shares of
Common Stock beneficially owned by Mr. Foley.
Schedule II to the Schedule 13D, a copy of which is attached
hereto and which Schedule is hereby incorporated by reference, has been amended
to reflect purchases of additional shares of Common Stock by Fidelity on
December 11, 1995, December 20, 1995 and December 21, 1995. All such
transactions were effected by Fidelity and Mr. Foley in the open market on the
New York Stock Exchange.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
99. Complaint filed by the Company on December 19, 1995
in the Federal Action.
Page 6 of 41 Pages
<PAGE> 7
SIGNATURE
After reasonable inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this statement is true,
complete and correct.
December 21, 1995
FIDELITY NATIONAL FINANCIAL, INC.
By: /s/ William P. Foley, II
------------------------------
Name: William P. Foley, II
Title: Chairman of the Board and
Chief Executive Officer
Page 7 of 41 Pages
<PAGE> 8
SIGNATURE
After reasonable inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this statement is true,
complete and correct.
December 21, 1995
/s/ William P. Foley, II
----------------------------
William P. Foley, II
Page 8 of 41 Pages
<PAGE> 9
SCHEDULE II
Schedule of Transactions in the Shares
<TABLE>
<CAPTION>
No. of Shares Price Per
Date Purchased Share(1)
---- ------------------- ---------
<S> <C> <C> <C>
FIDELITY:
- --------
07/12/95 17,000 $ 7.500
07/13/95 5,000 7.500
07/19/95 6,500 7.500
07/20/95 3,000 7.500
07/20/95 2,000 7.375
07/20/95 1,000 7.375
08/09/95 59,000(2) 6.625
09/11/95 40,000 7.125
09/18/95 5,000 7.125
09/22/95 5,000 7.375
09/26/95 1,600 7.250
09/27/95 8,000 7.250
09/28/95 3,600 7.250
10/03/95 5,000 7.375
10/04/95 5,000 7.500
10/09/95 73,000 7.500
11/28/95 10,000 6.375
11/29/95 41,000 6.375
11/30/95 6,000 6.375
11/30/95 500 6.375
12/01/95 6,000 6.625
12/01/95 50,000 6.500
12/05/95 1,000 6.875
12/05/95 13,000 7.250
12/05/95 20,489(2) 7.250
12/07/95 800 7.250
12/07/95 1,000 7.375
12/07/95 2,000 7.500
12/07/95 3,000 7.625
12/08/95 26,000(2) 7.625
12/11/95 1,000 8.375
12/11/95 16,800 8.500
12/20/95 5,000 7.875
12/21/95 1,700 8.125
MR. FOLEY:
- ---------
09/27/95 10,000 7.250
</TABLE>
_______________
(1) Net of brokerage commissions.
(2) Purchase by Fidelity's wholly-owned subisidary.
Page 9 of 41 Pages
<PAGE> 10
EXHIBIT INDEX
<TABLE>
<S> <C> <C>
99. Complaint filed by the Company on
December 19, 1995 in the Federal
Action Page 11
</TABLE>
Page 10 of 41 Pages
<PAGE> 1
EXHIBIT 99
Andrew M. White, State Bar No. 016181
Eric N. Landau, State Bar No. 138849
CHRISTENSEN, WHITE, MILLER, FINK,
JACOBS, GLASER & SHAPIRO
2121 Avenue of the Stars
18th Floor
Los Angeles, California 90067-5010
(310) 553-3000
Attorneys for plaintiff
GIANT GROUP, LTD.
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
GIANT GROUP, LTD., a Delaware ) Case No.
corporation, )
)
Plaintiff, ) COMPLAINT FOR FEDERAL
) SECURITIES LAW VIOLATIONS;
v. ) FRAUD; CONSPIRACY; BREACH OF
) FIDUCIARY DUTY; BREACH OF
WILLIAM P. FOLEY, II, a ) CONTRACT; INJUNCTIVE RELIEF
California citizen; CKE ) AND DAMAGES
RESTAURANTS, INC., a Delaware )
corporation; FIDELITY NATIONAL ) JURY TRIAL DEMANDED
FINANCIAL, INC., a Delaware )
corporation; WILLIAM DAVENPORT, )
a California citizen; and )
ROBERT MARTIN, a Missouri )
citizen, )
)
Defendants. )
____________________________________)
Plaintiff GIANT GROUP, LTD. ("GIANT") alleges, upon personal knowledge
as to itself and otherwise upon information and belief, as follows:
(NATURE OF THE ACTION)
1. This case arises from an attempted hostile takeover of a
Kentucky-based fast food restaurant chain, Rally's Hamburgers, Inc.
("Rally's"), and GIANT, Rally's largest shareholder, by William P. Foley, II,
who indirectly owns and/or controls
Page 11 of 41 Pages
<PAGE> 2
"Carl's Jr." Defendants have engaged in various unlawful activities in their
bid for Rally's and GIANT, including the trading on non-public confidential
and/or inside information, misappropriating confidential and proprietary
information from Rally's and GIANT, and violating the disclosure requirements
of section 13(d) of the Securities Exchange Act of 1934. In particular,
defendants have breached their most fundamental obligations under this
provision of the federal securities laws by failing to identify all of the
members of their "group," understating the true extent of their holdings of
GIANT, and by failing to disclose the true purpose of their investment in GIANT
- -- to obtain control of Rally's and GIANT. By these material
misrepresentations and omissions, defendants have misled GIANT and its
shareholders, as well as the entire investing public. GIANT asks the Court for
injunctive relief to immediately redress this problem.
2. As a remedy for the fraud and breaches of trust perpetrated by
Mr. Foley and others, GIANT does not seek to prevent this contest for corporate
control; GIANT will not run from a fair fight. Rather, GIANT asks the Court,
initially, to level the playing field by enjoining Mr. Foley's further use of
non-public confidential and/or inside information, and by preventing him from
voting the stock which he unlawfully obtained.
(PARTIES)
3. GIANT is a corporation organized and existing under the laws
of the State of Delaware, with its principal offices
Page 12 of 41 Pages
<PAGE> 3
located in Beverly Hills, California. As of March 20, 1995, GIANT (and a
subsidiary known as KCC Delaware) owned (and still owns) 7,430,302 shares (or
47.6%) of Rally's, which owns and franchises double drive-thru hamburger
restaurants. Mr. Sugarman serves as Chairman of the Board and Chief Executive
Officer ("CEO") of GIANT and Chairman of the Board of Rally's. As of March 20,
1995, Mr. Sugarman owned 1,089,470 shares (or approximately 21%) of GIANT and
had exercisable stock options for another 1,899,202 shares.
4. Mr. Foley, a California resident, serves as the Chairman of
the Board of Directors and CEO of both Fidelity National Financial, Inc.
("Fidelity") and CKE Restaurants, Inc. ("CKE"). As of March 31, 1995, Mr.
Foley controlled 2,380,093 shares (or 20.8%) of the outstanding common stock of
Fidelity and had exercisable stock options for another 335,454 shares. These
shares are actually held by (1) Mr. Foley, (2) Folco Development Corporation,
of which Mr. Foley and his wife are the sole stockholders, and (3) Mr. Foley's
father's estate. Further, as of July 25, 1995, Mr. Foley controlled 4,143,752
shares (or 22%) of the outstanding shares of common stock of CKE through the
Cannae Limited Partnership ("Cannae"). Mr. Foley is the President of Bogner
Regis, Inc., the general partner of Cannae. GIANT is informed and believes and
thereon alleges that Mr. Foley personally accumulated 10,000 shares of GIANT's
common stock based on non-public confidential and/or inside information.
Page 13 of 41 Pages
<PAGE> 4
5. Fidelity is a corporation organized and existing under the
laws of the State of Delaware, with its principal executive offices located in
Irvine, California. Fidelity is a national underwriter engaged in the business
of issuing title insurance policies and performing other title-related services
through its underwriting subsidiaries. As of May 18, 1995, Fidelity owned
497,000 shares (or 2.7%) of CKE. Fidelity claims to have purchased 424,589
shares of GIANT's common stock between July 12, 1995 and December 8, 1995. Mr.
Foley caused Fidelity to purchase most if not all of those shares based on
non-public confidential and/or inside information. Fidelity and Mr. Foley
reported that their group owned 8.6% of GIANT's stock as of December 8, 1995,
although, GIANT is informed and believes and thereon alleges that the true
extent of their holdings amounts to a much larger number.
6. CKE is a corporation organized and existing under the laws of
the State of Delaware, with its corporate headquarters located in Anaheim,
California. CKE is engaged primarily in the food service industry through its
wholly-owned subsidiary Carl Karcher Enterprises, Inc. ("Enterprises"), which
owns and franchises "Carl's Jr.," another chain of fast food restaurants. C.
Thomas Thompson is the President and Chief Operating Officer ("COO") of
Enterprises.
7. Mr. Davenport, a resident of California, is a securities
broker at PaineWebber, Inc. He acted as a broker and consultant to Mr. Foley,
and a facilitator of this scheme to force GIANT to cede control of Rally's. To
perpetrate this
Page 14 of 41 Pages
<PAGE> 5
scheme, GIANT is informed and believes and thereon alleges that Mr. Davenport
purchased GIANT's stock on behalf of, among others, himself, Mr. Foley,
Fidelity, and an undisclosed group of Mr. Davenport's investment clients, who
have all agreed to act in concert with defendants to gain control of GIANT's
holdings in Rally's. Mr. Davenport claims that he structured the defendants'
fraudulent plan, and coordinated the purchases of GIANT's stock by undisclosed
group, including himself and his investment clients so that blocks of stock
could be placed in "friendly" hands.
8. GIANT is informed and believes and thereon alleges that Mr.
Martin, a citizen of the State of Missouri, is a securities broker, formerly of
Kemper Securities, now at Burns Pauli Mahoney Co., and holds himself out to be
an investment expert in the food service industry. Mr. Martin was an
instrumental part of the group which covertly purchased GIANT's stock. Mr.
Martin also claims that he structured the defendants' fraudulent plan, and
coordinated the purchases of GIANT's stock by undisclosed group, including
himself and his investment clients so that blocks of stock could be placed in
"friendly" hands.
(JURISDICTION AND VENUE)
9. This action arises under section 13(d) of the Securities
Exchange Act of 1934 (the "Exchange Act"), 15 U.S.C. Section 78m(d), and the
common law of California, among other applicable jurisdictions.
Page 15 of 41 Pages
<PAGE> 6
10. This Court has jurisdiction over this action pursuant to
section 27 of the Exchange Act, 15 U.S.C. Section 78aa and 28 U.S.C. Section
1331, and the doctrine of supplemental jurisdiction, 18 U.S.C. Section 1367.
11. Venue is proper in this District pursuant to section 27 of the
Exchange Act, 15 U.S.C. Section 78aa and 28 U.S.C. Section 1391(b), because
the transactions which gave rise to this action occurred in substantial part in
the Central District of California, and defendants either reside, conduct or
transact business in the Central District of California.
(DEFENDANTS' UNSUCCESSFUL BID FOR US FACILITIES)
12. Mr. Foley and Fidelity are no strangers to the
acquisition game. In April 1995, they attempted an unsuccessful takeover bid
for US Facilities Corporation ("US Facilities"). However, a Delaware court
overturned the results of the contested proxy fight for US Facilities, and
Fidelity abandoned its bid for that company.
(MR. FOLEY TURNS HIS APPETITE FOR ACQUISITIONS TO GIANT AND
RALLY'S AND FRAUDULENTLY INDUCES GIANT AND RALLY'S INTO
REVEALING PROPRIETARY AND CONFIDENTIAL INFORMATION)
13. In or about late June 1995, Mr. Davenport arranged an initial
meeting at the Lakeview Cafe, in Thousand Oaks, California, between Mr. Foley
and Mr. Sugarman regarding CKE's possible purchase of a substantial portion of
GIANT's holdings in Rally's. At the time GIANT owned (and still owns)
approximately 48% of Rally's, and Mr. Foley supposedly was interested in
acquiring up to approximately 40% of GIANT's holdings, or a total of
approximately 19.9% of the outstanding
Page 16 of 41 Pages
<PAGE> 7
stock of Rally's. Mr. Foley, Fidelity and CKE purportedly were interested in
purchasing GIANT's holdings of Rally's stock to start a "Carl's Jr. Jr."
restaurant chain which would use Rally's unique dual drive-thru concept.
Although Mr. Sugarman advised Mr. Foley and Mr. Davenport that he thought CKE
should consider purchasing all of Rally's stock from both GIANT and the other
shareholders of Rally's, Mr. Sugarman was willing to discuss any transaction
which might strengthen GIANT and Rally's.
14. At this first meeting, Mr. Sugarman provided to Mr. Foley and
Mr. Davenport confidential and proprietary information regarding Rally's and
GIANT, including internal business projections, earnings and future business
plans. Mr. Sugarman also disclosed that he had discussions regarding a
potential business combination with Checkers, Inc. ("Checkers"), another fast
food hamburger, double drive-through restaurant chain. Mr. Foley, however,
affirmatively requested that Mr. Sugarman postpone pursuing the Checkers
business opportunity. Mr. Foley indicated that, if CKE and GIANT could make a
deal regarding GIANT's holdings of Rally's stock, the combined strength of
Carl's Jr. and Rally's (1150 restaurants) would almost force Checkers into a
financial transaction.
15. As part of their standard business practice, Rally's and GIANT
maintain a strict policy of non-disclosure regarding the dissemination of
confidential and proprietary information. The nature of the transactions under
discussion, however, required the exchange of this type of information to
permit the
Page 17 of 41 Pages
<PAGE> 8
parties to frankly evaluate their respective opportunities. To safeguard this
information, and to prevent its misuse, the parties agreed to keep all
non-public confidential and proprietary information strictly confidential and
to restrict its use to the sole purpose of evaluating CKE's potential
acquisition of GIANT's holdings in Rally's.
16. At the end of the first meeting, the parties also agreed that
the exchange of proprietary information created a special relationship of trust
and confidence between the parties which would prevent one side from trading in
the other side's stock while the negotiations were continuing. Mr. Davenport
specifically acknowledged at the meeting that the exchange of this sensitive
information was a "hot potato" which precluded him from participating in trades
of these companies' securities. As GIANT would later learn, Mr. Davenport
ignored his own advice almost immediately after leaving this meeting.
17. Unbeknownst to GIANT or Rally's, at the same time that Mr.
Foley was making the above promises to lure GIANT and Rally's into revealing
confidential and proprietary information, he also had formed an alliance with
Mr. Davenport and Mr. Martin to implement a secret plan to acquire GIANT's
holdings of Rally's through a hostile acquisition of GIANT.
18. Meanwhile, trusting in Mr. Foley's deceptive representations and
unaware of defendants' fraudulent scheme, Rally's and GIANT continued to pursue
negotiations with Mr. Foley and continued to disclose extremely sensitive and
confidential information. On numerous occasions, Mr. Sugarman
Page 18 of 41 Pages
<PAGE> 9
repeated what he believed to be the parties reciprocal agreement to keep all
the information confidential and refrain from trading in each other's stock.
On almost every occasion on which they spoke, Mr. Foley and Mr. Davenport
reconfirmed Mr. Sugarman's understanding.
19. On August 9, 1995, as discussions ensued, representatives of CKE,
including Mr. Foley and Mr. Thompson, met with Rally's Chief Financial Officer
("CFO"), CEO and Chairman. During this meeting, Rally's provided CKE with
extremely confidential and sensitive non-public information, including:
financial projections for the remainder of 1995, 1996 and 1997; Rally's debt
reduction strategy; assumptions regarding Rally's "Green Burrito" conversion
plan; projected costs and time-tables for new store openings; and the
time-table for the sale of stores within underperforming markets (known as
"watch markets"). Although CKE's representatives asked for this meeting and
the foregoing information purportedly to assess the viability of some as yet
unspecified transaction with Rally's, in reality, defendants used this meeting
and the information they obtained to further their secret scheme for a hostile
acquisition of GIANT and Rally's. Indeed, the Schedule 13D filed by Fidelity
and Mr. Foley reveals that they purchased their second largest block of GIANT's
stock (59,000 shares) that very day.
20. Even though GIANT and Rally's supplied Fidelity and CKE with a
steady flow of confidential and proprietary information, and despite Mr.
Sugarman's constant requests, Mr.
Page 19 of 41 Pages
<PAGE> 10
Foley would discuss only vague ideas and notions about a business transaction
involving Rally's. Finally, doubting Mr. Foley's desire to commence
negotiations in earnest, on August 30, 1995, Rally's discontinued the talks.
Nevertheless, Mr. Foley contacted Mr. Sugarman in September and expressed a
renewed interest in acquiring GIANT's holdings in Rally's, apparently hoping to
distract Rally's and GIANT from discovering the defendants' ever-increasing
accumulation of GIANT's stock.
21. During this series of renewed discussions, Mr. Foley expressed
his desire to test the "Carl's Jr. Jr." concept in Bakersfield. In response to
his request, Rally's provided Mr. Foley, Fidelity and CKE with confidential and
proprietary information concerning all four Rally's stores in the Bakersfield
area. A few weeks later, after carefully considering the information provided,
and after telling Mr. Sugarman that he had just sent some of his key personnel
to Bakersfield to check those sites, Mr. Foley selected the "Ming Avenue"
store for the test.
22. During the course of these discussions, Mr. Foley emphasized to
Mr. Sugarman that CKE only wanted, at this time, to purchase 19.9% of Rally's
stock, and only wanted to make its purchase through GIANT, even though Mr.
Sugarman repeated his belief that Mr. Foley should consider a transaction which
would involve all of Rally's shareholders. Mr. Foley explained that he
expected strong third and fourth quarter earnings from CKE and did not want to
report any portion of Rally's expected losses on CKE's profit and loss
statements (which would be
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required if CKE were to acquire 20% or more of Rally's). Mr. Foley said he
wanted to keep CKE's stock price up because he and some of his partners
expected to sell some of their personal stock in January 1996. Mr. Foley
advised Mr. Sugarman that he was selling some of his personal stock because he
needed cash to help pay for a $13 million house that he was building.
23. During this time frame, Mr. Foley also requested and was given
information concerning GIANT's portfolio of securities and the impact of Rally's
losses on GIANT's earnings, as well as GIANT's present and expected cash
positions for 1995 and 1996. Similarly, the CFO of CKE obtained from Rally's CFO
confidential financial information, including Rally's third quarter earnings and
anticipated fourth quarter performance, as well as anticipated cash flows,
earnings per share and sales "comp's" for 1996 and 1997. Rally's even supplied
CKE with a draft press release on third quarter results before being publicly
released. Of course, GIANT and Rally's believed that defendants' wanted the
information solely to evaluate a business transaction involving GIANT and
Rally's. Never did GIANT suspect that defendants would trade on this
information, or that defendants' true motivation was to further their secret
hostile acquisition plan.
24. A short time later, on or about October 25, 1995, Mr. Foley asked
Mr. Sugarman to join another of his transactions, this one involving the
purchase of "Summit," and the spin-off of "Galaxy" restaurants from "Summit."
Mr. Sugarman declined to
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<PAGE> 12
become involved and wanted, instead, to focus on the business of GIANT and
Rally's.
25. Then Mr. Foley, CKE and Fidelity broke off contact with Mr.
Sugarman, Rally's and GIANT. Mr. Sugarman tried to contact Mr. Foley on three
separate occasions but never received a return telephone call. Mr. Sugarman
never imagined that Mr. Foley had simply been using this flurry of
negotiations to mask defendants' stock purchases.
26. The next conversation occurred late in the day, on December 8,
1995, when Gary Nelson, Vice President of Fidelity, placed a telephone call to
the CFO of GIANT and informed her that Mr. Foley and Fidelity had filed a
Schedule 13D pursuant to section 13(d) of the Exchange Act which disclosed an
8.6% ownership of the outstanding common stock of GIANT. In another telephone
conversation, a short time later that day, Mr. Nelson and Andrew Puzder, general
counsel of Fidelity, issued the familiar "bear hug" to the CFO of GIANT. Among
other statements, Mr. Puzder said to GIANT's CFO, "Rally's is very cheap right
now. We have a serious interest in a transaction. A joint venture would be a
very good thing." Mr. Puzder concluded the telephone call by telling GIANT's CFO
that "Bill [Foley] and Burt [Sugarman] should definitely talk this weekend."
27. During the week of December 10, Mr. Foley called Mr. Sugarman and
proposed a transaction whereby (1) Carl's Jr. would manage all of Rally's
restaurants, (2) Mr. Thompson would become President and CEO for all of Rally's
restaurants, and (3) CKE
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would purchase 14.9% of Rally's through GIANT. According to Mr. Foley, he had
arrived at that percentage for the stock purchase because his attorneys
counseled him against triggering Delaware's "anti-takeover" statute. (During
that conversation, Mr. Foley for the first time advised Mr. Sugarman that the
"Summit" transaction was not going well.)
28. On Friday, December 15, Mr. Foley advised Mr. Sugarman that he
wanted to send Mr. Thompson to Louisville, Kentucky (Rally's principal place of
business) to conduct preliminary due diligence. Mr. Foley told Mr. Sugarman
that Mr. Thompson would contact him to discuss his plans for his trip to
Louisville, which he immediately did. At the conclusion of their conversation,
Mr. Foley said that he would take a first stab at a management agreement
because Fidelity already had prepared quite a few of them. Although Mr.
Sugarman was highly skeptical of Mr. Foley's intentions and motivations, he
agreed to proceed to see if a transaction could be struck which would benefit
GIANT and Rally's. (Of course, Mr. Sugarman and GIANT were exploring all of
their available options given the parties' recent business dealings.) Based on
the foregoing conversation, GIANT and Rally's began to prepare for Mr.
Thompson's arrival.
29. In their subsequent conversation, Mr. Thompson told Mr. Sugarman
that he wanted again to meet Rally's CFO and the outgoing CEO, as well as
operations personnel, to tour Rally's headquarters and to "drive" some of
Rally's Louisville stores. The next day, Mr. Thompson told Rally's CFO that he
wanted to review Rally's most recent financial information. Rally's CFO
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reminded Mr. Thompson that Rally's already had provided his companies with that
information.
30. One of GIANT's directors, on Friday, December 15, advised
Fidelity's general counsel that GIANT wanted Fidelity and CKE to memorialize
their confidentiality agreement in writing. General counsel agreed to a written
memorialization, and told GIANT's director to send a proposed written
confidentiality agreement to him immediately, because of Mr. Thompson's expected
trip to Louisville two days later.
31. The proposed written confidentiality agreement was sent via
facsimile to Fidelity's general counsel on Friday, December 15. Rather than
complete this agreement as the parties intended, Fidelity's attorneys and Mr.
Thompson in separate conversations advised GIANT and Rally's, respectively, the
next day, that Fidelity was placing the transaction on hold for a variety of
conflicting reasons. GIANT's representatives requested that Mr. Foley contact
Mr. Sugarman immediately to discuss Fidelity's intentions. Mr. Foley never
called Mr. Sugarman on Saturday or Sunday; Mr. Foley suddenly became
unreachable for the remainder of the weekend.
32. From this about face on the part of Mr. Foley, CKE and Fidelity, as
well as the information known at the time, GIANT could only conclude that
defendants used this last round of discussions the same way they had used
similar discussions in the past - - as a ruse to distract GIANT and Mr. Sugarman
while defendants continued to use their access to non-public confidential
information regarding GIANT and Rally's to purchase
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additional GIANT stock. With this threat looming on the horizon, GIANT was left
with no option but to commence litigation and to prepare for an anticipated
contest for corporate control.
(DEFENDANTS FILE A FALSE AND MISLEADING SCHEDULE 13D)
33. Although defendants attempted to keep their initial purchases of
GIANT's stock secret, once their beneficial ownership as a group exceeded 5%,
the federal securities laws forced their hand; a Schedule 13D would have to be
filed pursuant to section 13(d) of the Exchange Act.
34. The Schedule 13D in question only identifies Fidelity, Mr. Foley
and one unidentified subsidiary of Fidelity as members of defendants' "group."
Mr. Davenport and Mr. Martin, and their respective investment clients were not
identified, even though GIANT is informed and believes and thereon alleges that
all of these individuals had acquired GIANT stock and were acting in concert
with Fidelity and Mr. Foley to acquire control of GIANT and Rally's, and, thus,
were members of the "group" under section 13(d). Defendants further attempted to
misdirect GIANT, its shareholders and the investing public about their true
designs by failing to identify their intent to obtain control of GIANT and
Rally's.
35. Defendants' failure to comply with their disclosure obligations is
especially egregious, because they publicly announced shortly after their
Schedule 13D was filed that they were interested in draining GIANT of its cash
reserves. As GIANT had no plans to distribute its cash to shareholders, to
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gain access to GIANT's cash reserves, defendants would need to change the
current dividend policy or transfer the cash reserves to Fidelity, both of which
would necessitate a change in the board of directors and management of GIANT,
which could only be done if Fidelity controlled GIANT. Yet, the Schedule 13D
states that defendants had no plans for a transfer of a material amount of
assets of GIANT or any of its subsidiaries, that they had no plans to make a
change in GIANT's board of directors, that they had no plans to make any
material change in GIANT's capitalization or dividend policy, and that they had
no plans to change GIANT's charter or bylaws.
FIRST CAUSE OF ACTION
(Violations of Section 13(d) -- Against All Defendants)
36. GIANT repeats and realleges the allegations set forth in
paragraphs 1 through 35, above.
37. Defendants' Schedule 13D was materially false and misleading,
in violation of section 13(d) of the Exchange Act and the rules and regulations
promulgated thereunder, in that, among other things, the Schedule 13D;
(a) omitted to disclose the full existence of a group of
investors acting in concert in furtherance of a plan to control GIANT and
Rally's;
(b) omitted to disclose the fact that Mr. Davenport, Mr. Martin
and certain of their investment clients had purchased GIANT's stock and were
acting in concert with Fidelity and Mr. Foley to acquire control of GIANT and
Rally's;
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<PAGE> 17
(c) omitted to disclose the amount of Mr. Davenport's, Mr.
Martin's and certain of their investment clients' interest in GIANT, and the
source of their funds; and
(d) omitted to disclose the group's true intentions with
respect to GIANT, namely to acquire control of GIANT and Rally's, to change
GIANT's dividend policy, transfer its cash reserves to Fidelity, and/or to
change GIANT's board of directors so as to obtain access to GIANT's cash
reserves.
38. Defendants' continued violations of section 13(d) have deprived the
marketplace of relevant and material information concerning the members of their
group and their true intentions with respect to GIANT and Rally's. By reason of
the foregoing wrongful acts of defendants, GIANT, its shareholders and the
investing public have sustained irreparable injury for which they have no
adequate remedy at law. Such injury will occur absent the issuance of injunctive
relief in the following manner against defendants and all others acting in
concert with them or on their behalf;
(a) compelling defendants to file a true and correct Schedule
13D with the Securities and Exchange Commission;
(b) preventing defendants from voting any of their shares of
GIANT's stock, at least until a true and correct Schedule 13D has been filed;
(c) enjoining defendants from purchasing any shares of GIANT's
stock for ninety (90) days after a true and correct Schedule 13D has been filed
to allow the shareholders to absorb
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and understand and the market to adjust to the information contained therein;
(d) enjoining defendants from voting their shares of
GIANT's at GIANT's 1996 annual shareholders meeting due to the egregious nature
of the violations of section 13(d).
SECOND CAUSE OF ACTION
(Breach of Contract -- Against All
Defendants Except Robert Martin)
39. GIANT repeats and realleges paragraphs 1 through 38, above.
40. In or about late June 1995, at a meeting orchestrated by Mr.
Davenport, GIANT and Rally's entered into an oral confidentiality agreement with
Mr. Foley, Fidelity, CKE and Mr. Davenport to supply confidential and
proprietary information of Rally's and GIANT in contemplation of discussions
between the parties regarding Mr. Foley's, Fidelity's and CKE's possible
acquisition of approximately 40% of GIANT's holdings of Rally's common stock or
a total of 19.9% of the outstanding stock of Rally's. The confidentiality
agreement was a requisite to any discussions between GIANT and Rally's, on the
one hand, and Mr. Foley, Fidelity, CKE and Mr. Davenport, on the other hand,
because of the extremely confidential and sensitive financial and business
information which GIANT and Rally's were to supply to these defendants, and
because of GIANT and Rally's strict policy of nondisclosure. To proceed with the
contemplated discussions without the projections afforded by the confidentiality
agreement would cause irreparable harm to
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<PAGE> 19
GIANT's and Rally's ability to compete in the marketplace since its most
proprietary projections and future business plans would be exposed to direct
competitors.
41. As part of their oral agreement, which was reconfirmed on a number
of occasions, these defendants expressly agreed to the following limitations on
disclosure of proprietary information:
(a) to keep all proprietary information confidential and not to
disclose or reveal any proprietary information to any person other than these
defendants' representatives who were actively and directly participating in
these defendants' evaluation of the proposed acquisition and to cause those
persons to observe the terms of the confidentiality agreement;
(b) not to use proprietary information for any purpose other
than in connection with these defendants' evaluation of the proposed acquisition
or consummation of the proposed acquisition in a manner that GIANT and Rally's
approved; and
(c) not to disclose to any person, other than the contemplated
representatives, any information about the proposed acquisition, or the terms or
conditions or any other facts relating thereto, including, without limitation,
the fact that discussions between the parties were in fact in place or to
discuss the status of such discussions, or the fact that proprietary information
had been made available to these defendants.
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<PAGE> 20
42. These defendants further agreed and acknowledged that a breach or
threatened breach of the aforementioned agreement would cause irreparable injury
to GIANT and Rally's that could not be fully redressed through the recovery of
monetary damages, and, thus, GIANT and Rally's were entitled to equitable relief
by way of injunction or otherwise.
43. GIANT and Rally's have performed each and all conditions and
obligations on their part under the confidentiality agreement, except those
conditions and obligations which have been excused by the acts or omissions of
these defendants.
44. GIANT and Rally's repeatedly emphasized the need for
confidentiality; Mr. Foley, Fidelity, CKE and Mr. Davenport consistently
reaffirmed their agreement to keep the information confidential, and to refrain
from trading in Rally's or GIANT's stock. Despite these assurances, these
defendants have completely ignored the terms of the confidentiality agreement
and have destroyed the intent and purpose of such agreement by improperly using
the proprietary information provided by GIANT and Rally's in connection with
various purchases of GIANT's stock for these defendants' own pecuniary gain.
45. Specifically, these defendants have breached their contractual
obligations to GIANT (and Rally's) by, among other acts and omissions:
(a) failing and refusing to maintain the confidential
status of GIANT's (and Rally's) proprietary information;
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(b) failing and refusing to refrain from disclosing or
revealing GIANT's (and Rally's) proprietary information to third parties that
GIANT is informed and believes include, but are not limited to, Mr. Martin, Mr.
Davenport and their respective clients, among others; and
(c) failing and refusing to refrain from using GIANT's
proprietary information in connection with the purchase of securities of GIANT.
46. As a direct and proximate result of these defendants' breach of
their confidentiality agreement, GIANT has been damaged and will continue to be
damaged in an amount as yet unknown, but which exceeds the sum of $50,000. GIANT
will amend this complaint to allege the exact amount of such damages when known.
47. By reason of the foregoing wrongful acts of these defendants, GIANT
has sustained irreparable injury for which it has no adequate remedy at law, and
will continue to do so unless this Court issues injunctive relief. Such injury
will occur absent the issuance of injunctive relief against these defendants and
all others acting in concert with them or on their behalf, enjoining their use
or disclosure of highly sensitive and proprietary information provided to GIANT;
enjoining their purchase, sale or transfer of common stock of Rally's or GIANT;
and enjoining their voting or exercise of any rights incident to GIANT's or
Rally's stock.
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<PAGE> 22
THIRD CAUSE OF ACTION
(Fraud - Promise Without Any Intention to Perform --
Against All Defendants Except Robert Martin)
48. GIANT repeats and realleges paragraphs 1 through 47, above.
49. At the time that Mr. Foley, Fidelity, CKE and Mr. Davenport made
the promises alleged in paragraphs 15, 16 and 18, above, they had no intention
of performing those promises nor of performing the express provisions of the
parties' confidentiality agreement and the covenant of good faith and fair
dealing implied therein.
50. At the time that these defendants made the promises alleged in
paragraphs 15, 16 and 18, above, they knew them to be false and made the
promises with the intent to induce GIANT to enter into the confidentiality
agreement in order to obtain confidential information pertaining to GIANT's
business operations and financial condition as part of these defendants' overall
illicit and undisclosed scheme to take corporate control of GIANT through
removal of existing management, modification of GIANT's corporate policies and
to convert the cash reserves of GIANT. Defendants' conduct was part of an
overall scheme to damage GIANT and at the same time further these defendants'
own pecuniary gain and interests.
51. GIANT, at the time these defendants made the promises alleged in
paragraphs 15, 16 and 18, above, was ignorant of these defendants' secret
intention not to perform the promises and the covenant of good faith and fair
dealing implied in the
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<PAGE> 23
parties' confidentiality agreement, and could not, in the exercise of reasonable
diligence, have discovered these defendants' fraudulent intent.
52. GIANT reasonably and justifiably relied upon these defendants to
perform the promises alleged in paragraphs 15, 16 and 18, above, and to perform
the covenant of good faith and fair dealing implied in the confidentiality
agreement. The promises made by these defendants to GIANT as set forth in
paragraphs 15, 16 and 18, above, and these defendants' omissions regarding their
true intentions, were and are material. If GIANT had known that these defendants
did not intend to perform in good faith or undertake the actions necessary to
carry out their promises, GIANT would not have, among other things, entered into
the confidentiality agreement, provided these defendants with access to its
proprietary, trade secret and confidential information and/or participated in
discussions with these defendants concerning a possible business transaction.
53. As a direct and proximate result of these defendants' breach of
their confidentiality agreement, GIANT has been damaged and will continue to be
damaged in an amount as yet unknown, but which exceeds the sum of $50,000. GIANT
will amend this complaint to allege the exact amount of such damages when known.
54. By reason of the foregoing wrongful acts of these defendants, GIANT
has sustained irreparable injury for which it has no adequate remedy at law, and
will continue to do so unless this Court issued injunctive relief. Such injury
will occur
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<PAGE> 24
absent the issuance of injunctive relief against these defendants and all others
acting in concert with them or on their behalf, enjoining their use or
disclosure of highly sensitive and proprietary information provided to GIANT;
enjoining their purchase, sale or transfer of common stock of Rally's or GIANT;
and enjoining their voting or exercise of any rights incident to GIANT's or
Rally's stock.
55. GIANT is informed and believes and thereon alleges, that these
defendants, and each of them, in committing the aforementioned wrongful acts,
have acted with malice, oppression and willful disregard of its rights and
interests, thus entitling GIANT to an award of punitive and exemplary damages.
FOURTH CAUSE OF ACTION
(Conspiracy to Defraud -- Against All Defendants)
56. GIANT repeats and realleges paragraphs 1 through 55, above.
57. In or about June 1995, Mr. Foley, Fidelity, CKE and Mr. Davenport
falsely and fraudulently represented to GIANT that GIANT's proprietary
information, provided to defendants pursuant to the confidentiality agreement,
would be used exclusively for Mr. Foley's, Fidelity's and CKE's contemplated
acquisition of Rally's, and that GIANT's proprietary information would not be
disclosed to third parties. These defendants knew this representation was false
when made, and intended GIANT to rely thereon, as more fully alleged in
paragraphs 48 through 55, above.
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<PAGE> 25
58. In truth, defendants, and each of them, at all times herein
mentioned, knowingly and willfully pursued a conspiracy, common enterprise and
common course of conduct between themselves to accomplish the aforementioned
unlawful course of conduct for the purpose of (a) causing GIANT to rely on
defendants' knowingly false representations regarding the treatment of GIANT's
confidential information, all to GIANT's detriment and to deceive it; (b)
inducing GIANT, and GIANT was so induced, to provide highly sensitive and
confidential internal business information to defendants under the guise of
"friendly" merger discussions; (c) diverting to themselves proprietary
information which was provided to defendants exclusively for evaluation of a
contemplated acquisition of a substantial portion of, GIANT's holding of Rally's
by Mr. Foley, Fidelity and their related entities; (d) using such confidential
information to further defendants' undisclosed scheme to purchase GIANT stock in
furtherance of a hostile attempt to grab control of GIANT and Rally's in breach
of the parties' agreements to refrain from such conduct.
59. Defendants, and each of them, encouraged and rendered substantial
assistance to each other in accomplishing the aforementioned wrongful course of
conduct. In so doing, each defendant acted with full awareness of his primary
wrongdoing and realized that such conduct would substantially assist the
accomplishment of the wrongdoing by the other.
60. As a direct and proximate result of defendants' breach of their
confidentiality agreement, GIANT has been damaged and
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will continue to be damaged in an amount as yet unknown, which exceeds the sum
of $50,000. GIANT will amend this complaint to allege the exact amount of such
damages when known.
61. By reason of the foregoing wrongful acts of defendants, GIANT has
sustained irreparable injury for which it has no adequate remedy at law, and
will continue to do so unless this Court issues injunctive relief. Such injury
will occur absent the issuance of injunctive relief against defendants and all
others acting in concert with them or on their behalf, enjoining their use or
disclosure of highly sensitive and proprietary information provided to GIANT;
enjoining their purchase, sale or transfer of common stock of Rally's or GIANT;
and enjoining their voting or exercise of any rights incident to GIANT's or
Rally's stock.
62. GIANT is informed and believes and thereon alleges, that
defendants, and each of them, in committing the aforementioned wrongful acts,
have acted with malice, oppression, wrongful and willful disregard of GIANT's
rights and interests, thus entitling GIANT to an award of punitive and exemplary
damages.
FIFTH CAUSE OF ACTION
(Breach of Fiduciary Duty --
Against All Defendants Except Robert Martin)
63. GIANT repeats and realleges paragraphs 1 through 62,
above.
64. By entering into an agreement whereby GIANT provided
Mr. Foley, Fidelity, CKE and Mr. Davenport with the
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foregoing confidential and proprietary information, a relationship of trust and
confidence was created, imposing upon these defendants the concomitant fiduciary
duties which arise from such a confidential relationship.
65. These defendants have breached their fiduciary duties
by, among other wrongful conduct:
(a) failing and refusing to maintain the
confidential status of GIANT's and Rally's proprietary information;
(b) failing and refusing to refrain from
disclosing or revealing proprietary information to third parties and to use such
information in connection with the parties' contemplated acquisition rather than
for improper open market trades; and
(c) disclosing confidential information
pertaining to GIANT's and Rally's business operations that was obtained pursuant
to the parties' confidential and trust relationship to third parties, such as
Mr. Martin, who, in turn, disseminated the information to certain of his
respective clients.
66. As a direct and proximate result of these defendants'
breach of their fiduciary duties, GIANT has been damaged and will continue to be
damaged in an amount as yet unknown, but which exceeds the sum of $50,000. GIANT
will amend this complaint to allege the exact amount of such damages when known.
Page 37 of 41 Pages
<PAGE> 28
67. By reason of the foregoing wrongful acts of these
defendants, GIANT has sustained irreparable injury for which it has no adequate
remedy at law, and will continue to do so unless this Court issues injunctive
relief. Such injury will occur absent the issuance of injunctive relief against
these defendants and all others acting in concert with or on their behalf,
enjoining their use or disclosure of highly sensitive and proprietary
information provided to GIANT; enjoining their purchase, sale or transfer of
common stock of Rally's or GIANT; and enjoining their voting or exercise of any
rights incident to GIANT's or Rally's stock.
68. GIANT is informed and believes and thereon alleges, that
these defendants, and each of them, in committing the aforementioned wrongful
acts, have acted with malice, oppression and willful disregard of GIANT's rights
and interests, thus entitling GIANT to an award of punitive and exemplary
damages.
WHEREFORE, GIANT prays for judgment against defendants as
follows:
ON THE FIRST CAUSE OF ACTION
1. Entering a preliminary and permanent injunction
(a) compelling defendants to file a true and
correct Schedule 13D with the Securities and Exchange Commission;
(b) preventing defendants from voting any of
their shares of GIANT's stock, at least until a true and correct Schedule 13D
has been filed;
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(c) enjoining defendants from purchasing any
shares of GIANT's stock for ninety (90) days after a true and correct Schedule
13D has been filed to allow GIANT's shareholders and the investing public to
absorb and understand and the market to adjust to the information contained
therein; and
(d) enjoining defendants from voting their shares
of GIANT's stock at GIANT's 1996 annual shareholders meeting due to the
egregious nature of their violations of section 13(d).
ON THE SECOND CAUSE OF ACTION
2. For general, incidental and consequential damages
according to proof at trial.
ON THE THIRD, FOURTH AND FIFTH CAUSE OF ACTION
3. For general, incidental and consequential damages
according to proof at trial; and
4. For punitive and exemplary damages in an amount to be
determined at trial.
ON THE SECOND THROUGH FIFTH CAUSES OF ACTION
5. For an injunction, temporarily, preliminarily and
permanently enjoining defendants and all others acting in concert with them
from:
(a) trading in the stock of GIANT or Rally's and
further enjoining defendants from taking the following actions:
(b) using in any manner the proprietary
information provided by GIANT; disclosing in any manner the proprietary
information provided by GIANT; and
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(c) purchasing, selling or otherwise transferring
the legal or beneficial ownership of the securities of Rally's or GIANT; and
voting or exercising any of the rights of ownership of the common stock of GIANT
or Rally's.
ON ALL CAUSES OF ACTION
6. For interest at the statutory rate and all costs
incurred herein; and
7. For such other further relief as the Court may deem
just and proper.
Dated: December 19, 1995 Respectively submitted,
CHRISTENSEN, WHITE, MILLER, FINK,
JACOBS, GLASER & SHAPIRO
Andrew M. White
Eric N. Landau
By:
----------------------------------
Eric N. Landau
Attorneys for plaintiff
GIANT GROUP, LTD.
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DEMAND FOR JURY TRIAL
GIANT hereby demands a jury trial as provided by Rule 38 of the
Federal Rule of Civil Procedure and pursuant to Local Rule 3.4.10 of the United
States District Court for the Central District of California.
Dated: December 19, 1995 Respectively submitted,
CHRISTENSEN, WHITE, MILLER, FINK,
JACOBS, GLASER & SHAPIRO
Andrew M. White
Eric N. Landau
By: /s/ Eric N. Landau
----------------------------------
Eric N. Landau
Attorneys for plaintiff
GIANT GROUP, LTD.
Page 41 of 41 Pages
