<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_______________
SCHEDULE 13D/A
Under the Securities Exchange Act of 1934
(Amendment No. 3)
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
January 3, 1996
---------------
(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 50 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: 530,489(1)
(8) SHARED VOTING POWER: 0
(9) SOLE DISPOSITIVE POWER: 530,489(1)
(10) SHARED DISPOSITIVE POWER: 0
(11) AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON: 530,489(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): 11.5(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 4,605,912 shares of Common Stock outstanding as of
January 5, 1996, as disclosed in the Company's Current Report
on Form 8-K dated January 5, 1996.
Page 2 of 50 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): .2(4)
(14) TYPE OF REPORTING PERSON: IN
- -------------------------
3 Mr. Foley disclaims beneficial ownership of 530,489 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 4,605,912 shares of Common Stock outstanding as of
January 5, 1996, as disclosed in the Company's Current Report
on Form 8-K dated January 5, 1996.
Page 3 of 50 Pages
<PAGE> 4
This Amendment No. 3 amends the statement on Schedule 13D filed with
the Securities and Exchange Commission on December 8, 1995, as heretofore
amended (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 540,489 shares of Common Stock to which this Statement
relates, (a) 410,000 of such shares were purchased by Fidelity with general
working capital funds of Fidelity during the period between July 13, 1995 and
January 10, 1996, for an aggregate purchase price of $3,045,687.50 (net of
brokerage commissions), (b) 120,489 of such shares were purchased between
August 9, 1995 and January 4, 1996 by wholly- owned subsidiaries of Fidelity
with general working capital funds, for an aggregate purchase price of
$872,670.25 (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:
(A) On January 3, 1996, the Company filed the First Amended
Complaint to its Federal Action (the "First Amended Complaint"). A copy of
the First Amended Complaint in the Federal Action is attached as Exhibit 2
hereto and is incorporated herein by reference. In summary, the First Amended
Complaint clarifies and adds to the Company's prior allegations. The Company
allegations that the Defendants plan to gain control of Rally's assets by
forcing Rally's into bankruptcy and then "bottom feeding" off of Rally's
choice assets. The Company claims that to accomplish this, Defendants will
attempt to purchase 35% of either Rally's or the Company's stock which would
trigger a change of control provision in Rally's indenture dated as of
March 1, 1993 with respect to its 9-7/8% Senior Notes due June 15, 2000 (the
"Senior Notes"). The triggering of such change of control provision would
require Rally's to immediately offer to repurchase the Senior Notes at a price
equal to 101% of the principal amount thereof plus accrued and unpaid interest
thereon. The Company claims that if Rally's were forced to repurchase the
Senior Notes, without adequate cash reserves to meet this accelerated
obligation, Rally's would most likely be forced into Chapter 11 proceedings.
The Company alleges that if Rally's were forced into Chapter 11 proceedings it
would facilitate Mr. Foley's plan to have Carl's Jr. purchase
Page 4 of 50 Pages
<PAGE> 5
Rally's prime stores and locations at severely discounted prices. The Company
further alleges that Defendants hope to pay for the purchase of these assets by
stripping the Company of its cash reserves and any tax benefits which the
Company might receive if Rally's were to declare bankruptcy.
Additionally, the Company claims Mr. Foley attempted to expand the
alleged Fidelity group by soliciting a stockholder of another fast food
restaurant chain, the "Sizzler", to aid in the bid for the Company. The
Company alleges that when Mr. Foley spoke to the Sizzler stockholder, he
outlined a plan to acquire Sizzler by using cash stripped from the Company to
aid in the acquisition of Sizzler. Such cash would also be used to purchase
substantial assets of Rally's. The Company claims that Mr. Foley advised the
Sizzler stockholder that he had been provided with a confidential "book" on
Sizzler and that Sizzler appeared to be a ripe candidate for acquisition.
The Defendant's will be responding 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 First Amended Complaint and the Federal
Action are totally without merit and intend to defend the Federal Action
vigorously.
(B) The Company issued a press release on January 4, 1996 (the
"Press Release"), which indicated that the Company adopted a Shareholder Rights
Plan (the "Rights Plan"). A copy of the Press Release is attached as Exhibit
3 hereto and is incorporated herein by reference. Because the Company has not
yet publicly filed the documents relating to the Rights Plan, information
contained in this paragraph is based solely on the Press Release. Pursuant to
the Rights Plan, if, from and after January 4, 1996, any person becomes the
beneficial owner of 15% or more of the Common Stock (with certain exceptions),
the Rights Plan will be triggered. Because Burt Sugarman, Chairman of the
Board and Chief Executive Officer of the Company and Chairman of the Board of
Rally's, currently is the beneficial owner of more than 15% of the Common
Stock, the rights will be triggered upon the acquisition by Mr. Sugarman of
additional shares of the Common Stock, other than acquisitions through stock
dividends, stock option plans (presently, Mr. Sugarman has exercisable stock
options to purchase 1,899,202 shares of the Common Stock), Company compensation
plans and other similar arrangements, which are exempted.
(C) As disclosed in the Company's Current Report on Form 8-K, dated
January 5, 1996, the Company purchased on such date 408,000 shares of Common
Stock for an aggregate purchase price of $4,100,400, or $10.05 per share. As
of the close of business on January 4, 1996 the closing sales price of the
Common Stock, reported by the New York Stock Exchange, was $9.00 per share.
Such shares were acquired in two blocks through unsolicited privately
negotiated transactions. According to such Form 8-K Report, as of the close of
business on January 5, 1996, 4,605,912 shares of Common Stock were outstanding.
Page 5 of 50 Pages
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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 January 10, 1996, Fidelity was the
beneficial owner of 530,489 shares of Common Stock, which constitute in the
aggregate 11.5% of the outstanding shares of Common Stock (based on 4,605,912
shares of Common Stock outstanding as of January 5, 1996, as disclosed in the
Company's Current Report on Form 8-K dated January 5, 1996). 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
530,489 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 since the
filing of Amendment No. 2 to the Schedule 13D on January 8, 1996. All such
transactions were effected by Fidelity in the open market on the New York Stock
Exchange.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
Item 7 of the Schedule 13D is hereby amended to add the following:
2. First Amended Complaint filed by the Company on January 3,
1996 in the Federal Action.
3. Press Release issued by the Company on January 4, 1996 as
reported by the PR Newswire Association, Inc.
Page 6 of 50 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.
January 10, 1996
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 50 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.
January 10, 1996
/s/ WILLIAM P. FOLEY, II
--------------------------------
William P. Foley, II
Page 8 of 50 Pages
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SCHEDULE II
Schedule of Transactions in the Shares
--------------------------------------
<TABLE>
<CAPTION>
No. of Shares Price Per
Date Purchased Share(1)
---- ------------- ---------
<S> <C> <C> <C>
FIDELITY:
- --------
01/08/96 3,500 9.625
01/10/96 5,000 8.875
</TABLE>
- --------------
(1) Net of brokerage commissions.
Page 9 of 50 Pages
<PAGE> 10
EXHIBIT INDEX
-------------
<TABLE>
<S> <C> <C>
99.1 First Amended Complaint filed by the Company on January 3, 1996 in
the Federal Action Page 11
99.2 Press Release issued by the Company on January 4, 1996 as reported by
the PR Newswire Association, Inc. Page 49
</TABLE>
Page 10 of 50 Pages
<PAGE> 1
EXHIBIT 99.1
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. 95-1095 LHM (EEx)
corporation, )
)
Plaintiff, ) FIRST AMENDED COMPLAINT FOR
) FEDERAL SECURITIES LAW
v. ) VIOLATIONS; FRAUD; CONSPIRACY;
) BREACH OF FIDUCIARY DUTY; BREACH
WILLIAM P. FOLEY, II, a ) OF 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 indireclty owns and/or controls "Carl's Jr."
Page 11 of 50 Pages
<PAGE> 2
Defendants have engaged in various unlawful activities in their bid for Rally's
and GIANT, including 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. Through a subsequent amendment of defendant's original
Schedule 13D, Mr. Foley perpetuates and dramatically compounds his original
fraud, while laying the foundation for additional deceit. 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, by preventing him from
voting the stock which he unlawfully obtained and by requiring him to make full
and accurate disclosures in his Schedule 13D.
3. Since the filing of the original complaint, GIANT has learned that
defendants also plan to gain control of the assets of
Page 12 of 50 Pages
<PAGE> 3
Rally's by first forcing that company into bankruptcy and, then, "bottom
feeding" off of Rally's choice assets. To accomplish this, GIANT understands
that defendants will attempt to purchase 35% of either Rally's or GIANT's stock
and thereby trigger a provision in Rally's indenture governing approximately
$85 million in Senior Notes which would require Rally's to immediately offer to
repurchase the Senior Notes at a premium. Without the cash reserves to meet this
accelerated obligation, Rally's most likely would be forced into Chapter 11
proceedings, thereby facilitating Mr. Foley's plan to have Carl's Jr. purchase
Rally's prime stores and locations at severely discounted prices. Defendants
hope to pay for the purchase of these assets by stripping GIANT of its cash
reserves and any tax benefits which GIANT might receive if Rally's were to
declare bankruptcy.
(PARTIES)
4. GIANT is a corporaiton organized and existing under the laws of the
State of Delaware, with its principal offices 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, 195, Mr. Sugarman owned
1,089,470 shares (or approximately 21%) of GIANT and had exercisable stock
options for another 1,899,202 shares.
5. 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
Page 13 of 50 Pages
<PAGE> 4
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.
6. 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 underwirter 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 449,089
shares of GIANT's common stock between July 12, 1995 and December 21, 1995. Mr.
Foley caused Fidelity to purchase most if not all of those shares based on
non-public condifential and/or inside information. Fidelity and Mr. Foley
reported that their group owned 9.14% of GIANT's stock as of December 21,
1995, although, GIANT is informed and believes and thereon alleges that the
true extent of their holdings amounts to a much larger number.
Page 14 of 50 Pages
<PAGE> 5
7. 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.
8. 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 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
an undisclosed group, including himself and his investment clients so that
blocks of stock could be placed in "friendly" hands.
9. 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, not 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 defendant's fraudulent plan, and coordinated
Page 15 of 50 Pages
<PAGE> 6
the purchases of GIANT's stock by an undisclosed group, including himself and
his investment clients so that blocks of stock could be placed in "friendly"
hands.
(JURISDICTION AND VENUE)
10. 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.
11. 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.
12. 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)
13. 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.
Page 16 of 50 Pages
<PAGE> 7
(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)
14. 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 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.
15. 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
Page 17 of 50 Pages
<PAGE> 8
(1150 restaurants) would almost force Checkers into a financial transaction.
16. 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 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.
17. 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 sides'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.
18. 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
Page 18 of 50 Pages
<PAGE> 9
implement a secret plan to acquire GIANT's holdings of Rally's through a
hostile acquisition of GIANT.
19. 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 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.
20. 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"). Rally's even supplied CKE with a draft press release on
second quarter results before being publicly released. Although CKE's
representatives asked for this meeting and the foregoing information purportedly
to assess the viabilitiy 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
Page 19 of 50 Pages
<PAGE> 10
and Mr. Foley reveals that they purchased their second largest block of GIANT's
stock (59,000 shares) that very day.
21. 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. 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.
22. 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.
23. 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 or Rally's shareholders. Mr. Foley explained that he
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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 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.
24. 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 second
quarter earnings and anticipated third and fourth quarter performance, as well
as anticipated cash flows, earnings per share and sales "comp's" for 1996 and
1997. 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.
25. 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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become involved and wanted, instead, to focus on the business of GIANT and
Rally's.
26. 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.
27. 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."
28. 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 would purchase 14.9% of Rally's through GIANT.
According to Mr. Foley, he had arrived at that percentage for the stock
purchase
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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.)
29. 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 dicuss 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.
30. 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
reminded Mr. Thompson that Rally's already had provided his companies with that
information.
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31. 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.
32. 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.
33. 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 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.
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(DEFENDANTS PLAN TO ATTEMPT TO FORCE RALLY'S INTO BANKRUPTCY)
34. In addition to obtaining control of GIANT and ultimately Rally's
through hostile means, such as a proxy fight or tender offer, defendants'
scheme also includes a more subtle, yet insidious element, the impact of which
most likely would cause Rally's to commence proceedings under Chapter 11 of the
Bankruptcy Code.
35. The indenture dated as of March 1, 1993 (the "Indenture") with
respect to Rally's 9 7/8% Senior Notes due June 15, 2000 (the "Notes") contains
a provision which would have the effect of requiring Rally's to offer to
repurchase $85 million in outstanding Notes at 101% of face value (plus accrued
interest) if (a) any person or group (other than Mr. Sugarman and his
affiliates) were to become the beneficial owner of in excess of 35% of GIANT's
voting stock at a time when GIANT is the beneficial owner of 25% or more of
Rally's voting stock, or (b) any person or group (other than GIANT) becomes the
beneficial owner of in excess of 35% of Rally's voting stock. If this provision
were to be triggered at this time, Rally's would lack the cash reserves to fund
the repurchase of the Notes (which trade at a substantial discount from face
value), and, most likely, would be forced to seek protection under the
Bankruptcy Code.
36. With full knowledge of the aforementioned provision, GIANT is
informed and believes and thereon alleges that Mr. Foley, CKE and Fidelity,
aided by Messrs. Davenport and Martin, seek to acquire at least 35% of GIANT's
and/or Rally's voting stock, thus triggering the mandatory repurchase offer for
the Rally's Notes and the likely initiation of Rally's seeking protection under
the
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Bankruptcy Code. By this maneuver, which would work to the detriment of
Rally's, GIANT and their respective stockholders, CKE would be in a position to
acquire Rally's stores and locations at severely discounted prices through the
bankruptcy process.
37. GIANT is informed and believes and thereon alleges that Mr. Foley
has shared certain aspects of this scheme with others. Recently, Mr. Foley
spoke with a shareholder of "Sizzler," another fast food restaurant chain, and
solicited him to join his group in the takeover of GIANT. The "bait" used by
Mr. Foley was a plan to acquire Sizzler by using the cash stripped from GIANT.
Mr. Foley advised this shareholder that he had been provided with a
confidential "book" on Sizzler and that Sizzler appeared to be a ripe candidate
for acquisition. Mr. Foley said that he could loot GIANT, purchase substantial
assets of Rally's and use the remaining cash to aid in the acquisition of
Sizzler.
(DEFENDANT'S SCHEME VIOLATES FIDELITY'S CREDIT AGREEMENT)
38. Not only does defendants' plan run afoul of federal and state law,
but on its face it would violate Fidelity's Credit Agreement dated as of
September 21, 1995 (the "Credit Agreement") pursuant to which Fidelity has
borrowed $35 million from a syndicate of banks. Section 8.08 of the Credit
Agreement bars Fidelity from making investments in excess of $5 million, and
Section 8.17 of the Credit Agreement prohibits investments in "Affiliates" and
"any other transaction directly or indirectly with or for the benefit of an
Affiliate." Such plan, if implemented, would of necessity involve an investment
in excess of $5 million and would be and has been undertaken at the behest of
and for the benefit of Fidelity's affiliate, CKE. Neither defendants' Schedule
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13D nor any amendment thereto has disclosed (a) the existence of the foregoing
limitations on Fidelity's ability to consummate a transaction involving Rally's
or GIANT, (b) Fidelity's breach of the Credit Agreement by purchasing stock for
the benefit of CKE, and (c) Fidelity's inability to participate in any
transaction with Rally's or GIANT in excess of the $5 million "cap."
(DEFENDANTS FILE A FALSE AND MISLEADING SCHEDULE 13D)
39. 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.
40. 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 Rallys', and, thus,
were members of the "group" under section 13(d). Defendants further attempted
to misdirect GIANT, ist shareholders and the investing public about their true
designs by failing to identify their intent to obtain control of GIANT and
Rally's.
41. 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
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plans to distribute its cash to shareholders, to 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.
(DEFENDANTS AMEND THEIR SCHEDULE 13D)
42. On December 21, 1995, Mr. Foley filed Amendment No. 1 to
defendants' Schedule 13D. Mr. Foley purportedly did so because of the filing of
GIANT's original complaint herein. Mr. Foley not only fails to cure
defendants' past misrepresentations and omissions, he compounds their fraud.
43. By Amendment No. 1, Mr. Foley claims that Messrs. Davenport and
Martin have only acted as brokers. In truth, these individual defendants helped
to orchestrate his plan to acquire GIANT and Rally's by knowingly placing
GIANT's and Rally's stock in "friendly" hands, including their own.
44. By Amendment No. 1, Mr. Foley admits that he did obtain
information from GIANT and Rally's, but claims that this detailed non-public
financial information was not considered material and was not relied upon with
regard to Fidelity's stock purchases. (Mr. Foley did not deny that he relied
upon this informaiton for his purchases of GIANT's stock.) In truth, Mr. Foley,
among
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others, was supplied with material "inside" information, including financial
projections, a draft press release and internal operating figures with regard
to specific Rally's stores.
45. By Amendment No. 1, Mr. Foley claims that he was never asked
to enter into a "formal" confidentiality agreement at the time that he and
others were supplied with confidential non-public and/or inside information. In
truth, these defendants, including Mr. Foley, entered into an oral
confidentiality agreemnt regarding this information and, in addition, agreed not
to trade in GIANT's or Rally's stock because of the confidential non-public
and/or inside nature of this information.
46. GIANT demanded a written confidentiality agreement because it had
discovered that defendants had disregarded the parties' prior oral
confidentiality agreement by purchasing GIANT's stock each time that time that
they were provided with inside information. GIANT is informed and believes and
thereon alleges that Mr. Foley, Fidelity and CKE refused to sign a written
confidentiality agreement only after their New York-based "takeover" counsel
warned them that any such written agreement would acknowledge and document their
prior receipt of confidential non-public and/or inside information at the very
time that defendants had been purchasing GIANT's stock.
47. By amendment No. 1, Mr. Foley claims that GIANT contacted him
following the initial filing of defendants' Schedule 13D "seeking to arrange
discussions between CKE and Rally's to explore the possibility of a
transaction . . . ." In truth, officers of Fidelity had contacted GIANT's CFO
immediately after the filing of the Schedule 13D and had stated that they had a
plan, that a
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transaction should take place and that Mr. Sugarman and Mr. Foley should talk
over the weekend. A few days later, Mr. Foley contacted Mr. Sugarman and
provided him with the particulars of his plan. At that time, Mr. Foley told Mr.
Sugarman that he was sending Mr. Thompson to Louisville that weekend to
conduct further due diligence.
FIRST CAUSE OF ACTION
---------------------
(Violations of Section 13(d) -- Against All Defendants)
48. GIANT repeats and realleges the allegations set forth in
paragraphs 1 through 47, above.
49. 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;
(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;
(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
divident policy, transfer its cash reserves to
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Fidelity, and/or to change GIANT's board of directors so as to obtain access to
GIANT's cash reserves;
(e) omitted to disclose the group's further intentions to force
Rally's into proceedings under the Bankruptcy Code as part of a scheme to
purchase Rally's assets at severely discounted prices;
(f) omitted to disclose (i) the existence of the Credit
Agreement's limitation on Fidelity's ability to consummate a transaction
involving Rally's or GIANT, (ii) Fidelity's breach of the Credit Agreement by
purchasing stock for the benefit of CKE, and (iii) Fidelity's inability to
participate in any transaction with Rally's or GIANT in excess of the $5
million "cap";
(g) misrepresented that Messrs. Davenport and Martin had only
acted as brokers, even though these individual defendants helped to orchestrate
Mr. Foley's plan to acquire GIANT and Rally's by knowingly placing GIANT's
stock in "friendly" hands;
(h) misrepresented that GIANT contacted Mr. Foley following the
initial filing of defendants' Schedule 13d "seeking to arrange discussions
between CKE and Rally's to explore the possibility of a transaction," even
though officers of Fidelity had contacted GIANT's CFO immediately after the
filing of the Schedule 13D and had stated that they had a plan, and a few days
later, Mr. Foley had contacted Mr. Sugarman and provided him with the
particulars of his plan, which included sending Mr. Thompson to Louisville that
weekend to conduct further due diligence;
(i) misrepresented that the detailed confidential non-public
and/or inside information provided by Rally's and GIANT to defendants was not
considered material, even though defendants were
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supplied with material information, including financial projections, anticipated
cash flows and earnings, projected costs, a debt reduction strategy, a draft
press release on earnings, anticipated store openings and sales, and internal
operating figures with regard to specific Rally's stores; and
(j) misrepresented that Mr. Foley, Fidelity and CKE, among
others, were never asked to enter into a "formal" confidentiality agreement at
the time that defendants were supplied with confidential non-public and/or
inside information, even though defendants, including Mr. Foley, had entered
into an oral agreement prohibiting the disclosure and misuse of this
information and, in addition, agreed not to trade in GIANT's or Rally's stock
because of the confidential non-public and/or inside nature of this
information.
50. 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;
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(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 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)
51. GIANT repeats and realleges paragraphs 1 through 50, above.
52. 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 approximatley 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
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information which GIANT and Rally's were to supply to these defendants, and
because of GIANT and Rally's strict policy of non-disclosure. To proceed with
the contemplated discussions without the protections afforded by the
confidentiality agreement would cause irreparable harm to 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.
53. 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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54. 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.
55. 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.
56. 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.
57. 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;
(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
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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.
58. 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.
59. 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.
THIRD CAUSE OF ACTION
---------------------
(Fraud - Promise Without Any Intention to Perform --
Against All Defendants Except Robert Martin)
60. GIANT repeats and realleges paragraphs 1 through 59, above.
61. At the time that Mr. Foley, Fidelity, CKE and Mr. Davenport made
the promises alleged in paragraphs 16, 17 and 19,
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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.
62. At the time that these defendants made the promises alleged in
paragraphs 16, 17 and 19, 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.
63. GIANT, at the time these defendants made the promises alleged in
paragraphs 16, 17, and 19, 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 parties' confidentiality agreement, and could not, in
the exercise of reasonable diligence, have discovered these defendants'
fraudulent intent.
64. GIANT reasonably and justifiably relied upon these defendants to
perform the promises alleged in paragraphs 16, 17 and 19, 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 16, 17
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and 19, 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.
65. 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.
66. 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.
67. 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
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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)
68. GIANT repeats and realleges paragraphs 1 through 67, above.
69. 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 60 through 67, above.
70. 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
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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.
71. 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.
72. As a direct and proximate result of defendants' breach of their
confidentiality agreement, GIANT has been damaged and 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.
73. 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, slae 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.
74. GIANT is informed and believes and thereon alleges, that
defendants, and each of them, in committing the aforementioned
Page 40 of 50 Pages
<PAGE> 31
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)
75. GIANT repeats and realleges paragraphs 1 through 74, above.
76. By entering into an agreement whereby GIANT provided Mr. Foley,
Fidelity, CKE and Mr. Davenport with the 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.
77. 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.
Page 41 of 50 Pages
<PAGE> 32
78. 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.
79. 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 thier 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.
80. 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;
Page 42 of 50 Pages
<PAGE> 33
(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 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 acording to proof
at trial; and
4. For punitive and exemplary damages in an amount to be determined at
trial.
ON 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
Page 43 of 50 Pages
<PAGE> 34
(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 and further relief as the Court may deem just and
proper.
Dated: January 3, 1996 Respectfully 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 44 of 50 Pages
<PAGE> 35
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: January 3, 1996 Respectfully 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 45 of 50 Pages
<PAGE> 36
PROOF OF SERVICE BY PERSONAL SERVICE
------------------------------------
STATE OF CALIFORNIA, COUNTY OF LOS ANGELES.
I am employed in the county of LOS ANGELES, State of California.
I am over the age of eighteen and not a party to the within action. My
business address is: 2049 Century Park East, Los Angeles, CA 90067.
On January 3, 1996, I personally served the foregoing document
described as:
FIRST AMENDED COMPLAINT FOR FEDERAL SECURITIES LAW VIOLATIONS; FRAUD;
CONSPIRACY; BREACH OF FIDUCIARY DUTY; BREACH OF CONTRACT; INJUNCTIVE RELIEF AND
DAMAGES
on the interested parties in this action by personally delivering a true copy
thereof enclosed in a sealed envelope addressed as follows:
SEE ATTACHED LIST
I declare under penalty of perjury under the laws of the State of
California that the above is true and correct.
Executed on January 3, 1996 at Los Angeles, California.
- -------------------------------- --------------------------------
Print Name Signature
Page 46 of 50 Pages
<PAGE> 37
PERSONAL SERVICE LIST
Andrew F. Puzder
General Counsel
Fidelity National Financial, Inc.
17911 Von Karman Avenue
Suite 300
Irvine, CA 92714
ATTORNEY FOR FIDELITY NATIONAL FINANCIAL, INC. AND
WILLIAM P. FOLEY, II
Richard C. Goodman
Stradling, Yocca, Carlson & Rauth
660 Newport Center Drive
Suite 1600
Newport Beach, CA 92660
ATTORNEY FOR CKE RESTAURANTS, INC.
Milford Dahl, Jr.
Rutan & Tucker
611 Anton Boulevard
14th Floor
Costa Mesa, CA 92628-1950
ATTORNEY FOR WILLIAM DAVENPORT
The Honorable Linda H. McLaughlin
United States District Judge
United States District Court
Central District of California
751 West Santa Ana Boulevard
Santa Ana, California 92701-4599
Page 47 of 50 Pages
<PAGE> 38
PROOF OF SERVICE BY MAIL
------------------------
The undersigned hereby declares as follows:
I am employed at Christensen, White, Miller, Fink & Jacobs, Los
Angeles, California 90067, in the County of Los Angeles, State of California,
and by a member of the Bar of this Court; I am over the age of eighteen years,
and not a party to this action.
I am readily familiar with Christensen, White, Miller, Fink & Jacobs'
practice for the collection and processing of correspondence for mailing with
the United States Postal Service; that practice includes the affixation of
fully prepaid postage and depositing with the United States Postal Service at
Los Angeles, California, on the date of my submission for collection and
processing pursuant to such regular business practice.
On January 3, 1996, at the direction of a member of the Bar of this
Court, I served the within
FIRST AMENDED COMPLAINT FOR FEDERAL SECURITIES LAW VIOLATIONS; FRAUD;
CONSPIRACY; BREACH OF FIDUCIARY DUTY; BREACH OF CONTRACT; INJUNCTIVE RELIEF AND
DAMAGES
on the interested parties in this action, by placing a true copy thereof in an
envelope addressed to each of said interested parties at the following
addresses:
Robert Martin
Burns Pauli Mahoney Co.
7733 Forsyth Boulevard
Suite 2000
St. Louis, MO 63105
and by then sealing said envelope and depositing the same for collection and
processing pursuant to Christensen, White, Miller, Fink & Jacobs' ordinary
business practice at the above address. There is a regular communication
between the place of mailing and the place so addressed.
I declare under penalty of perjury that the foregoing is true and
correct and that this Declaration is executed on January 3, 1996, at Los
Angeles, California.
/s/ MALCOLM SMITH
-----------------------
Malcolm Smith
Page 48 of 50 Pages
<PAGE> 1
EXHIBIT 99.2
SECTION: Financial News
DISTRIBUTION: TO BUSINESS EDITOR
LENGTH: 677 words
HEADLINE: GIANT GROUP, LTD. ADOPTS STOCKHOLDER RIGHTS PLAN
BODY:
GIANT GROUP, LTD. (NYSE: GPO) announced today that its Board of
Directors has adopted a Stockholders Rights Plan.
The Plan is designed to ensure that all stockholders of the Company
receive fair value for their Common Stock in the event of a change in ownership
of the Company and to guard against the use of coercive tactics to gain control
of the Company or its assets without offering fair value.
Terry Christensen, a director of the Company, said "We believe that
this Plan protects the interests of the Company's stockholders in the event
that the Company is confronted with coercive or unfair tactics."
BEVERLY HILLS, Calif., Jan. 4
Mr. Christensen stressed that "The Plan is not intended, nor will it
operate, to prevent an acquisition of the Company or its assets on terms which
are fair to all stockholders. The Plan is designed to deal with the very
serious problem of unilateral actions by persons that are calculated to deprive
the Board and the stockholders of their ability to determine the destiny of the
Company or which enrich a small group of stockholders at the expense of the
other stockholders. Offers that reflect the Company's fair value would not be
affected by the Plan."
Under the terms of the Plan, preferred stock purchase rights will be
distributed as a dividend at the rate of one right for each share of Common
Stock held as of the close of business on January 16, 1996. Stockholders will
not actually receive certificates for the rights at this time, but the rights
will be evidenced by each share of Common Stock. The number of rights
outstanding is subject to adjustment under certain circumstances and all rights
expire on January 4, 2006.
Each right will entitle the holder to buy 1/1,000th of a share of
Series A Junior Participating Preferred Stock of the Company at an exercise
price of $30 for each 1/1,000th of a share. Each Preferred Share is designed
to be equivalent in voting and dividend rights to 1,000 shares of Common Stock.
The rights will be exercisable and will trade separately from the Common Stock
only if a person or group of persons becomes the beneficial owner of 15% or
more of the Common Stock or if a person commences a tender or exchange offer
the consummation of which would result in such person becoming the beneficial
owner
Page 49 of 50 Pages
<PAGE> 2
of 15% or more of the Common Stock. Because Burt Sugarman, Chairman of the
Board and Chief Executive Officer of the Company, presently beneficially owns
in excess of 15% of the Common Stock, the rights will be exercisable and trade
separately upon the acquisition by Mr. Sugarman of additional shares of Common
Stock, other than acquisition through stock dividends, stock option plans,
company compensation plans and other similar arrangements. Stockholders will
receive certificates for the rights only when one of the foregoing events
occur.
If any person does become the beneficial owner of 15% or more of the
Company's Common Stock or commences a tender or exchange offer which would
result in such person owning 15% or more of the Company's Common Stock, the
other stockholders will be able to exercise the rights and buy Common Stock of
the Company having twice the value of the exercise price of the rights. The
Company may, at its option, substitute 1/1,000 of a share of Preferred Stock
for each share of Common Stock to be issued upon exercise of the rights.
Additionally, if the Company is involved in certain mergers where its shares
are exchanged or certain major sales of its assets occur, stockholders will be
able to purchase for the exercise price twice the value of the exercise price
of the rights and thereafter the rights will no longer be exercisable into
shares of Preferred Stock.
The Company will be entitled to redeem the rights at a price of $.01
per right at any time until the public announcement that a person has become
the beneficial owner of 15% or more of the Common Stock of the Company.
CONTACT: Terry Christensen of GIANT GROUP, 310-553-3000
LANGUAGE: ENGLISH
LOAD-DATE: January 5, 1996
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