<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
RALLY'S HAMBURGERS, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE
- --------------------------------------------------------------------------------
(State or other jurisdiction of incorporation or organization)
62-1210077
- --------------------------------------------------------------------------------
(I.R.S. Employer Identification Number)
10002 Shelbyville Road, Suite 150, Louisville, Kentucky 40223 (502) 245-8900
- --------------------------------------------------------------------------------
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
Evan G. Hughes
Rally's Hamburgers, Inc.
10002 Shelbyville Road, Suite 150, Louisville, Kentucky 40223 (502) 245-8900
- --------------------------------------------------------------------------------
(Name, address, including zipcode, and telephone number, including area code, of
agent for service)
-----------------------------------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
-----------------------------------------
If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box: [_]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box: [X]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
==========================================================================================
Title of each Proposed Proposed maximum
class of securities Amount to be maximum aggregate offering Amount of
to be registered registered offering price price registration fee
per unit
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Rights 15,678,335 0
- ------------------------------------------------------------------------------------------
Units (1) 3,484,074 $3.00 $10,452,222.00 $3,604.21 (3)
Common Stock 3,484,074
Warrants 3,484,074
- ------------------------------------------------------------------------------------------
Common Stock (2) 3,484,074 $3.00 $10,452,222.00 $3,604.21 (3)
- ------------------------------------------------------------------------------------------
</TABLE>
(1) 3,484,074 Units, each consisting of a share of Registrant's common stock,
$.10 par value per share (the "Common Stock") and a warrant to purchase a
share of Common Stock ("Warrants"), are issuable upon exercise of the
Rights.
(2) Issuable upon exercise of the Warrants. Pursuant to Rule 416, this
Registration Statement also covers such indeterminable additional shares as
may become issuable as a result of any future adjustments in accordance
with the terms of the Warrants, as described in the Prospectus.
(3) The filing fee was previously paid.
<PAGE>
RIGHTS OFFERING PROSPECTUS
3,484,074 UNITS
RALLY'S HAMBURGERS, INC.
EACH UNIT CONSISTING OF ONE SHARE OF COMMON STOCK
AND ONE COMMON STOCK PURCHASE WARRANT
______________
Rally's Hamburgers, Inc., a Delaware corporation (the "Company"), is
distributing to holders of record of shares of its common stock, par value $.10
per share (the "Common Stock"), as of the close of business on July 31, 1996
(the "Record Date"), transferable subscription rights (the "Rights") to purchase
units ("Units") consisting of one share of Common Stock and one warrant to
purchase an additional share of Common Stock (the "Warrants") (the "Rights
Offering"). Stockholders will receive one Right for each share of Common Stock
held on the Record Date. For each 4.5 Rights held, a holder ("Holder") will
have the right to purchase one Unit (the "Basic Subscription Privilege") for
$3.00 per Unit (the "Subscription Price"). No fractional Units will be sold,
and fractional interests will be rounded down. The Rights will be evidenced by
transferable subscription certificates.
Each Warrant may be exercised to acquire an additional share of Common
Stock at an exercise price of $3.00 per share and expires four years from the
date of issuance. The Warrants are redeemable by the Company at $.01 per
Warrant, at the Company's option, if the closing price for the Company's Common
Stock on the NASDAQ National Market ("NNM") (or such other principal securities
exchange or market on which the Common Stock is then trading) is at or above
$6.00 per share for 20 out of 30 consecutive trading days.
Upon exercise of the Basic Subscription Privilege, a Holder will also be
entitled to purchase at the Subscription Price a pro rata portion of Units which
are not subscribed for pursuant to the Basic Subscription Privilege (the
"Oversubscription Privilege" and collectively with the Basic Subscription
Privilege, referred to herein as the "Subscription Privileges").
The Common Stock is quoted on the NNM under the symbol "RLLY." On July 30,
1996, the last sale price of the Common Stock as reported on the NNM was
$2 15/16 per share.
THE RIGHTS WILL EXPIRE ON AUGUST 30, 1996, unless extended by the Company
(such date, as it may be extended on one or more occasions, is referred to
herein as the "Expiration Date"). In no event will the Expiration Date be
extended beyond September 30, 1996. Subscriptions for Units, together with full
payment of the Subscription Price, must be received by American Stock Transfer &
Trust Company (the "Subscription Agent") prior to 5:00 p.m., New York City time,
on the Expiration Date, and the Rights will be of no force or effect thereafter.
The exercise of Rights is irrevocable once made, and no interest will be paid to
Holders exercising their Rights.
SEE "RISK FACTORS" BEGINNING ON PAGE 11 FOR A DISCUSSION OF
CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS
IN THE SECURITIES OFFERED HEREBY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSIONS OR ANY STATE
SECURITIES COMMISSION, NOR HAS THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is July 31, 1996.
<PAGE>
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-3 (together with any amendments
thereto, the "Registration Statement") under the Securities Act of 1933, as
amended (the "Securities Act"), with respect to the Rights, the Units issuable
upon exercise of the Rights, the Common Stock and Warrants included in the Units
and the Common Stock underlying the Warrants. This Prospectus, which
constitutes a part of the Registration Statement, does not contain all of the
information set forth in the Registration Statement, certain items of which are
contained in schedules and exhibits to the Registration Statement as permitted
by the rules and regulations of the Commission. Statements contained in this
Prospectus as to the contents of any contract or other document referred to
herein or therein are not necessarily complete, and, in each instance, reference
is made to the copy of such contract or other document filed as an exhibit to
the Registration Statement, or incorporated by reference therein for a more
complete description of the matter involved and each such statement shall be
deemed qualified in all respects by such reference. Such additional information
may be obtained from the Commission's principal office in Washington, D.C.
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files periodic reports and other information with the Commission. The
Registration Statement and the exhibits thereto, as well as such reports and
other information, filed by the Company can be inspected and copied at the
public reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the Regional Offices of the
Commission located at 7 World Trade Center, New York, New York 10048 and
Citicorp Center, 500 Madison Street, Suite 1400, Chicago, Illinois 60661.
Copies of such material can be obtained upon written request addressed to the
Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. The Common Stock is quoted on
NASDAQ, and reports, proxy statements and other information concerning the
Company may be inspected at the offices of the National Association of
Securities Dealers, Inc., 1735 K Street, N.W., Washington, D.C. 20006.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents filed by the Company with the Commission are
incorporated herein by reference:
(i) the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995 (the "1995 10-K");
(ii) the Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended March 31, 1996 (the "March 1996 10-Q");
(iii) the Company's Proxy Statement dated June 19, 1996 with respect to
its Annual Meeting held on July 10, 1996;
(iv) the Company's Current Reports on Form 8-K dated January 29, 1996,
April 16, 1996, May 3, 1996 and July 29, 1996; and
--
(v) the description of the Common Stock which is contained in the
Company's Registration Statement on Form 8-A dated September 19,
1989.
2
<PAGE>
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act, subsequent to the date of this Prospectus and prior
to the termination of the Rights Offering, shall be deemed to be incorporated by
reference into this Prospectus and to be a part hereof from the respective dates
of the filing thereof. Any statement contained in a document incorporated or
deemed to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any other subsequently filed document which is also
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person, including each
beneficial owner, to whom a copy of this Prospectus is delivered, on the written
or oral request of such person, a copy of any or all documents incorporated by
reference into this Prospectus that are not delivered herewith, except the
exhibits to such documents (unless such exhibits are specifically incorporated
by reference in such documents). Requests for such copies should be directed to
the Company's principal office: Rally's Hamburgers, Inc., 10002 Shelbyville
Road, Suite 150, Louisville, Kentucky 40223, Attention: Evan G. Hughes, (502)
245-8900.
3
<PAGE>
PROSPECTUS SUMMARY
The following material is qualified in its entirety by the information and
the consolidated financial statements and notes thereto appearing elsewhere in
or incorporated by reference into this Prospectus.
THE COMPANY
Rally's Hamburgers, Inc., a Delaware corporation (the "Company" or
"Rally's"), is one of the largest chains of double drive-thru restaurants in the
United States. As of July 23, 1996, the Rally's system included 482 restaurants
in 19 states, primarily in the Midwest and the Sunbelt, comprised of 239
Company-owned and 243 franchised restaurants. The Company's restaurants offer
high quality fast food served quickly and at everyday prices generally below the
regular prices of the four largest hamburger chains. The Company serves the
drive-thru and take-out segments of the quick-service restaurant market. The
Company opened its first restaurant in January, 1985 and began offering
franchises in November, 1986.
During the later part of 1995 and into 1996, the Company has implemented
actions to improve its balance sheet and operating results, including
repurchasing $22 million principal amount (or approximately 25%) of the
Company's outstanding 9-7/8% Senior Notes due 2000 (the "Senior Notes"),
entering into a strategic partnership with the Carl's Jr. restaurant chain,
instituting new marketing initiatives aimed at improving comparable store sales
trends and undertaking actions aimed at improving food, paper and labor costs as
a percentage of sales.
The Company had net income of $111,000 ($.01 per share) for the
quarter ended June 30, 1996, representing a $1.4 million improvement over the
comparable period in the prior year and marking the Company's return to
profitability (excluding extraordinary gains) for the first time since the
second quarter of fiscal 1993. For the six months ended June 30, 1996, the
Company recorded earnings of $949,000 ($.06 per share) compared with a net loss
of $4.8 million ($.30 per share) for the prior year period. First quarter and
year to date earnings were favorably impacted by a extraordinary gain, net of
tax, of $4.5 million ($.29 per share) from the early extinguishment of debt.
The Company is attempting to redirect most of its near term focus toward
achievement of four specific short term objectives, i.e., growing same store
sales, reducing food and paper costs as a percent of sales, reducing store labor
costs as a percent of sales and attacking other elements of spending. Management
believes that the Company's focus on achievement of these objectives combined
with a gradual increase in Company new store development should allow the
Company to achieve a sustainable level of profitability in the near future.
However, no assurance can be given that management will be able to carry out
such objectives or that achievement of these objectives will have a positive
effect on the Company's profitability. The Company's principal executive offices
are located at 10002 Shelbyville Road, Suite 150, Louisville, Kentucky 40223,
and its telephone number is (502) 245-8900. See "The Company."
4
<PAGE>
THE RIGHTS OFFERING
Rights................................ Each holder of Common Stock will receive
one transferable Right for each share of
Common Stock held of record on the
Record Date. An aggregate of 15,678,335
Rights will be distributed pursuant to
the Rights Offering. An aggregate of
3,484,074 Units, each consisting of one
share of Common Stock and one Warrant,
will be sold if all Rights are
exercised. The exercise of Rights is
irrevocable once made, and no Units will
be issued until the closing following
the Expiration Date. See "The Rights
Offering - The Rights."
Basic Subscription Holders will be entitled to purchase
Privilege.......................... one Unit for each 4.5 Rights held. See
"The Rights Offering - Subscription
Privileges - Basic Subscription
Privilege."
Units................................. Each Unit consists of one share of
Common Stock and one Warrant.
Warrants.............................. Each Warrant may be exercised to
acquire one share of Common Stock for
$3.00. The Warrants will expire on the
fourth anniversary of the date of
issuance, subject to the extension under
certain circumstances. See "Description
of Securities - Warrants."
Optional Redemption of Warrants The Company will have the right, but
By the Company..................... not the obligation, to redeem the
Warrants, at $.01 per Warrant, if the
closing price of the Common Stock as
reported on the NNM (or such other
principal securities exchange or market
on which the Common Stock is then
trading) for 20 out of 30 consecutive
trading days is equal to or exceeds
$6.00 per share. See "Description of
Securities - Warrants."
Oversubscription Each Holder who elects to exercise his
Privilege.......................... or her Basic Subscription Privilege may
also subscribe at the Subscription Price
for Units, if any, remaining unsold
after satisfaction of all subscriptions
pursuant to the Basic Subscription
Privilege. If an insufficient number of
Units is available to satisfy fully all
elections to exercise the
Oversubscription
5
<PAGE>
Privilege, the available Units will be
allocated on a pro rata basis among
Holders who exercise their
Oversubscription Privilege based on the
respective numbers of Units subscribed
for by such Holders pursuant to the
oversubscription Privilege. See "The
Rights Offering - Subscription
Privileges - Oversubscription
Privilege."
Subscription Price.................... $3.00 in cash per Unit.
Shares of Common Stock and Warrants Assuming that all Rights are fully
Outstanding after Rights exercised, 19,162,409 shares of
Offering........................... Common Stock and 3,484,074 Warrants will
be outstanding immediately after the
Rights Offering, based on 15,678,335
shares of Common Stock outstanding on
the Record Date. The final number of
shares of Common Stock and Warrants that
will be outstanding after the Rights
Offering is dependent upon the extent to
which Rights are exercised.
Transferability of The Rights are transferable and will
Rights............................. be quoted on the NNM under the trading
symbol RLLYR until the close of business
on the last trading day prior to the
Expiration Date. Any transfer of Rights
will be deemed a transfer of both the
Basic Subscription Privilege and the
Oversubscription Privilege. The
Subscription Agent will endeavor to sell
Rights for Holders who have so requested
and have delivered one or more
Subscription Certificate(s) evidencing
such Rights, with the instruction for
sale included thereon properly executed,
to the Subscription Agent by 11:00 a.m.,
New York City time, on August 23, 1996
(five business days prior to the
Expiration Date). There can be no
assurance, however, that any market for
Rights will develop, or that the
Subscription Agent will be able to sell
any Rights for Holders. If less than all
sales orders received by the
Subscription Agent can be filled, sales
proceeds will be prorated among the
Holders based upon the number of Rights
each has instructed the Subscription
Agent to sell during such period,
irrespective of when during such period
the instructions are received by the
Subscription Agent. See "The Rights
Offering-Method of Transferring Rights."
6
<PAGE>
Record Date........................... July 31, 1996.
Expiration Date....................... August 30, 1996, unless extended by
the Company from time to time,
provided that the Expiration Date shall
not be later than September 30, 1996,
unless the Board of Directors determines
that a material event has occurred which
necessitates one or more further
extensions of the Rights Offering in
order to permit adequate disclosure of
information concerning such event to
Holders. See "The Rights Offering-
Expiration Date." If the Company elects
to extend the term of the Rights, it
will issue a press release to such
effect no later than the last day on
which the NNM is open for trading prior
to the most recently announced
Expiration Date. In the event the
Company elects to extend the term of the
Rights Offering by more than 14 calendar
days, it will, in addition, cause
written notice of such extension to be
promptly sent to all Holders of record
on the Record Date.
Procedure for Exercising Rights may be exercised by properly
Rights............................. completing the certificate evidencing
such Rights (the "Subscription
Certificate") and forwarding such
Subscription Certificate (or
following the Guaranteed Delivery
Procedures, as defined below) to the
Subscription Agent prior to 5:00 p.m.,
New York City time, on the Expiration
Date, together with payment in full of
the Subscription Price for each Unit
subscribed for pursuant to the
Subscription Privileges. If the mail is
used to forward Subscription
Certificates, it is recommended that
insured, registered mail be used. The
exercise of a Right may not be revoked
or amended. If time does not permit a
Holder or transferee of a Right to
deliver a Subscription Certificate to
the Subscription Agent on or before the
Expiration Date, such Holder or
transferee should make use of the
Guaranteed Delivery Procedures described
under "The Rights Offering-Exercise of
Rights."
If paying by uncertified personal check,
please note that the funds paid thereby
may take at least five business days to
clear. Accordingly, Holders who wish to
pay the Subscription Price by means
7
<PAGE>
of uncertified personal check are urged
to make payment sufficiently in advance
of the Expiration Date to ensure that
such payment is received and clears by
the Expiration Date and are urged to
consider payment by means of certified
or cashier's check, money order or wire
transfer of funds.
Persons Holding Shares, Persons holding shares of Common
or Wishing to Stock, and receiving the Rights
Exercise Rights distributable with respect thereto,
Through Others................... through a broker, dealer, commercial
bank, trust company or other nominee, as
well as persons holding certificates
representing Common Stock in their own
name who would prefer to have such
institutions effect transactions
relating to the Rights on their behalf,
should contact the appropriate
institution or nominee and request it to
effect the transactions for them. See
"The Rights Offering-Exercise of
Rights."
Issuance of Certificates representing Common
Common Stock and Warrants........ Stock and Warrants will be delivered
to subscribers as soon as practicable
after the Expiration Date and after all
applicable prorations have been
effected. See "The Rights Offering-
Subscription Privileges." Funds
delivered to the Subscription Agent for
the exercise of Subscription Privileges
will be held in escrow by the
Subscription Agent until all required
prorations have been effected. No
interest will be paid to Holders on
funds received by the Company or held by
the Subscription Agent. In the case of
Holders exercising Oversubscription
Privileges, any excess funds will be
returned to such Holders as soon as
practicable after the Expiration Date.
Use of Proceeds....................... It is anticipated that the net proceeds
to Company will be approximately $10.1
million if all of the Units are
purchased in the Rights Offering
(excluding proceeds to be received upon
the exercise of the Warrants). If less
than all of the Units are purchased, the
proceeds will be correspondingly
reduced. Such proceeds will be used to
build new restaurants, refurbish certain
8
<PAGE>
existing restaurants and for other
general corporate purposes, including
possibly reducing outstanding
indebtedness. See "Purpose of the Rights
Offering and Use of Proceeds."
Subscription Agent.................... American Stock Transfer & Trust Company
NNM Common Stock Trading
Symbol.............................. RLLY
NNM Rights
Symbol.............................. RLLYR
NNM Warrant Trading Symbol............ RLLYW
COMMITMENTS TO EXERCISE RIGHTS
GIANT GROUP, LTD. ("GIANT"), Fidelity National Financial, Inc. ("Fidelity")
and CKE Restaurants, Inc. ("CKE"), which are the owners of 4,312,063, 767,807
and 2,350,432 shares of Common Stock, respectively, have committed to exercise,
or cause to be exercised, their Basic Subscription Privileges.
RISK FACTORS
The purchase of Units, Common Stock and Warrants in the Rights Offering
involves investment risks particular to the Company and risks particular to the
Rights Offering. Investors are urged to read and consider carefully the
information set forth under the heading "Risk Factors," which follows this
Prospectus Summary.
9
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
(In thousands, except per share amounts and statistical data)
<TABLE>
<CAPTION>
Fiscal Year Ended Six Months Ended
------------------------------------------------------- --------------------
Dec 29, Jan 3, Jan 2, Jan 1, Dec 31, July 2, June 30,
1991(1) 1993 1994 1995 1995 1995 1996
------- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Total revenues............ $ 94,131 $120,648 $174,346 $186,318 $188,859 $ 92,313 $ 89,269
Income(loss)from
operations(2)(3)(4)..... 10,289 15,057 (7,050) (14,636) (36,470) 212 (956)
Net income (loss)
before income taxes
and extraordinary
item..................... 9,821 14,260 (13,483) (24,255) (46,380) (4,633) (5,069)
Net income (loss)
before
extraordinary item....... 6,071 9,279 (8,907) (19,273) (46,919) (4,753) (3,573)
Net income (loss)(5)...... $ 6,071 $ 9,279 $ (8,907) $(19,273) $(46,919) $ (4,753) $ 949
Net income (loss)
per share before
extraordinary item....... $0.54 $0.76 $(0.67) $(1.42) $(3.00) $(0.30) $(0.23)
Extraordinary item
per share(5)............. -- -- -- -- -- -- 0.29
-------- -------- -------- -------- -------- -------- --------
Net income (loss)
per share(5)............. $0.54 $0.76 $(0.67) $(1.42) $(3.00) $(0.30) $ 0.06
======== ======== ======== ======== ======== ======== ========
OPERATING DATA:
System-wide sales:
Company-owned...... $ 86,822 $112,894 $165,829 $178,476 $181,778 $ 88,595 $ 86,279
Franchised......... 134,278 183,649 188,837 191,611 173,941 90,546 76,604
-------- -------- -------- -------- -------- -------- --------
Total.............. $221,100 $296,543 $354,666 $370,087 $355,719 $179,141 $162,883
======== ======== ======== ======== ======== ======== ========
Number of
restaurants:
Company-owned...... 116 197 252 250 239 254 239
Franchised......... 217 253 268 292 242 272 246
-------- -------- -------- -------- -------- -------- --------
Total.............. 333 450 520 542 481 526 485
======== ======== ======== ======== ======== ======== ========
At
June 30,
BALANCE SHEET DATA: 1996
--------
Working capital deficit........................................................................ $(19,380)
Total Assets................................................................................... 114,927
Long-term debt and obligations under capital leases, including current portion................. 77,196
Shareholders' equity........................................................................... 7,649
</TABLE>
______________________________
(1) Information for period ended December 29, 1991 reflects pro forma
adjustments from treating all non-taxable entities acquired by the Company
as if these acquired entities had been taxed as regular corporations and
able to file a consolidated federal income tax return with the Company.
(2) The fiscal year ended January 2, 1994 includes approximately $12.6 million
charged against operations for a major business restructuring program and
other restaurant closings.
(3) The fiscal year ended January 1, 1995 includes $17.3 million charged
against operations for changes in business strategies.
(4) The fiscal year ended December 31, 1995 includes approximately $17.3
million charged against operations for changes in business strategies and
restaurant closings. The year also includes approximately $13.7 million
related to the Company's implementation of SFAS 121. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
contained in the 1995 10-K incorporated herein by reference.
(5) The six months ended June 30, 1996 includes an extraordinary gain, net of
tax, of approximately $4.5 million related to the Company's repurchase of
Senior Notes. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" contained in the March 1996 10-Q
incorporated herein by reference.
10
<PAGE>
RISK FACTORS
This Prospectus contains or incorporates by reference forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as
amended. Discussions containing such forward-looking statements may be found in
the material set forth under "Prospectus Summary," "Purpose of the Rights
Offering and Use of Proceeds," as well as within the Prospectus generally
(including the documents incorporated by reference herein). Also, documents
subsequently filed by the Company with the Commission and incorporated herein by
reference will contain forward-looking statements. Actual results could differ
materially from those projected in the forward-looking statements as a result of
the risk factors set forth below and the matters set forth or incorporated by
reference in the Prospectus. The Company cautions the reader, however, that
this list of risk factors may not be exhaustive, particularly with respect to
future filings. Before making a decision to purchase any of the securities
described in this Prospectus, prospective investors should carefully consider
the following factors.
NASDAQ LISTING AND MAINTENANCE REQUIREMENTS
In April 1996, the NASDAQ Stock Market, Inc. informed the Company that it
was reviewing the eligibility of the Company for continued quotation of its
stock on the NNM. There are five criteria that must be substantially met for
continued quotation on the NNM. While the Company currently exceeds the
requirements on four of the five tests, it does not currently meet the test for
net tangible assets, which excludes goodwill. Rule 4450(a)(3) of the National
Association of Securities Dealers, Inc. ("NASD") provides that an issuer of a
NNM security must have net tangible assets (total assets minus liabilities and
goodwill) of at least $4 million if the issuer has sustained losses from
continuing operations and/or net losses in three of its four most recent fiscal
years (the "Net Tangible Asset Test"). The Company has incurred net losses in
its last three fiscal years. As of the end of the 1995 fiscal year, the Company
had net tangible assets in the net negative amount of $4,598,000.
On June 6, 1996, the Company had a hearing before a Nasdaq Qualifications
hearing panel (the "Panel") with regard to the Company's request for an
exception to the Net Tangible Asset Test. On June 13, 1996, the Panel granted
the Company a conditional exception to the Net Tangible Assets Test based upon
its finding that the Company presented a plan of compliance which is currently
in progress, which has a high likelihood of successful completion, and which can
be completed in a reasonable amount of time. The Panel determined that the
Company must make a public filing with the Commission and NASDAQ on or before
September 30, 1996, which filing must contain a pro forma balance sheet with a
historical basis not older than 45 days and a corresponding statement of
operations and must further evidence compliance with the Net Tangible Asset
Test, and with all other requirements for listing on the NNM. In the event the
Company fails to meet the Panel's requirement, the Company's securities will be
subject to delisting from the NNM. Any decision to delist the Company's
securities is subject to appeal by the Company, which will not stay such
decision unless the Board of Governors of the NASD grants such a stay.
The Company plans to remedy its net tangible asset deficiency primarily by
completing the Rights Offering, which is also anticipated to provide additional
working capital for new store
11
<PAGE>
construction, refurbishment of some existing restaurants as well as for other
general corporate purposes, including possibly reducing outstanding
indebtedness. No assurance can be given that the Rights Offering will be fully
subscribed. If the Rights Offering is fully subscribed, the Company's net
tangible assets are expected to increase by approximately $10.1 million. No
assurance can be given that such increase will be achieved.
If the Rights Offering is not fully subscribed, or if following the Rights
Offering, the Company, because of negative operating results or any other
reason, fails to satisfy the criteria for continued listing on the NNM, the
Company's securities could be delisted from the NNM. In such event, the Company
would seek to list its Common Stock and Warrants on NASDAQ's "small cap" system
or on another national securities exchange. No assurance can be made whether
such listing can or will occur.
Among other consequences, if the Company were no longer listed on the NNM,
the holders of Common Stock and/or Warrants could suffer a loss of liquidity as
it becomes more difficult to effect transfers of such securities.
HISTORY OF OPERATING LOSSES; CHANGES IN OPERATIONS
The Company reported losses from operations (before interest and other
income, and provision for income taxes) for the fiscal year ended December 31,
1995 of $36,470,000 and for the thirteen week period ended March 31, 1996 of
$3,369,000. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations" contained in the 1995 10-K and the March 1996 10-Q
incorporated by reference herein. Until the second quarter of fiscal 1996, the
Company had not reported a profit (exclusive of extraordinary item) in any
quarter since June 1993. Faced with declining same store sales and profitability
over the past three years, the Company has pursued a variety of options,
including replacement of senior management team members, changing advertising
agencies and significant use of outside consultants to formulate plans to stem
the decline in same store sales and return the Company to profitability. The
Company has entered into an operating agreement with CKE pursuant to which 28
Company-owned stores in California and Arizona are operated by CKE. CKE will pay
all operating costs of the stores. The Company retained ownership of the assets
of these stores and receives a percentage of the stores sales. No assurance can
be given that any of the foregoing will improve the Company's operating results.
In addition, the Company must continually examine, in accordance with Generally
Accepted Accounting Principles, its assets for potential impairment where
circumstances indicate that such impairment may exist. As a retailer, the
Company believes such examination requires the operations and store level
economics of individual restaurants be evaluated for potential impairment. No
assurance can be given that even an overall return to profitability will
preclude the writedown of assets associated with the operation of an individual
restaurant or restaurants in the future. See "The Company - Recent Developments
- - Operation of California and Arizona Stores by CKE."
INDEBTEDNESS
The Company has outstanding approximately $63 million principal amount of
Senior Notes, with a required sinking fund payment of approximately $6.2 million
due in 1999, which
12
<PAGE>
is a significant portion of the capitalization of the Company. As such: (i) the
ability of the Company to obtain additional financing in the future for working
capital, capital expenditures, debt service requirements or other purposes may
be impaired; (ii) a substantial portion of the Company's cash flow from
operations will be required to be dedicated to the Company's interest expense
and principal repayment obligations; and (iii) the Company's level of
indebtedness may make it more vulnerable in the event of a sustained downturn in
its business. The ability of the Company to satisfy its obligations under the
Senior Notes will be dependent on the Company, among other factors, successfully
increasing revenues and returning the Company to operational profitability.
COMPETITION IN THE QUICK-SERVICE RESTAURANT INDUSTRY
The quick-service restaurant industry is highly competitive and can be
significantly affected by many factors, including change in local, regional or
national economic conditions, changes in consumer tastes, consumer concerns
about the nutritional quality of quick-service food and increases in the number
of, and particular locations of, competing quick-service restaurants. Factors
such as inflation, increases in food, labor (including health care) and energy
costs and the availability of an adequate number of hourly-paid employees also
affect the quick-service restaurant industry. Major chains, which have
substantially greater financial resources and longer operating histories than
the Company, dominate the quick-service restaurant industry. In certain
markets, the Company will compete with other quick-service double drive-thru
hamburger chains with operating concepts similar to the Company. Certain of the
major chains have increasingly offered selected food items and combination
meals, including hamburgers, at temporarily or permanently discounted prices. A
change in the pricing or other marketing strategies of one or more of these
competitors could have an adverse impact on the Company's sales and earnings.
With respect to the sale of franchises, the Company competes with many
franchisors of restaurants, including other double drive-thru franchisors, and
franchisors of other business concepts.
DEPENDENCE UPON SENIOR MANAGEMENT
The success of the Company's business will continue to be highly dependent
upon the services of its senior management, including Donald E. Doyle, President
and Chief Executive Officer. The Company's current management team has
substantial experience in the restaurant industry and the loss of one or more
members of senior management could adversely affect the Company's business and
development.
CONTROL BY PRINCIPAL STOCKHOLDERS
GIANT, of which Burt Sugarman is the controlling stockholder, Chairman,
President and Chief Executive Officer, owns approximately 27.5% of the
outstanding shares of the Common Stock of the Company. Mr. Sugarman is also
Chairman of the Board of the Company. GIANT entered into an agreement with
Fidelity and CKE (which are the respective record owners of 4.9% and 15.0% of
the outstanding Common Stock) with respect to the election of directors of the
Company. Consequently, GIANT, Fidelity and CKE have, and after completion of the
Rights Offering are likely to continue to have, the practical ability to elect
the Board of
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<PAGE>
Directors. See "The Company - Recent Developments - Relationship Among GIANT,
Fidelity and CKE."
GOVERNMENT REGULATION
The restaurant business is subject to extensive federal, state and local
regulations relating to the development and operation of restaurants including
regulations relating to building and zoning requirements, preparation and sale
of food and laws governing the Company's relationship with its employees,
including minimum wage requirements, overtime and working conditions and
citizenship requirements. The failure to obtain or retain food licenses, or a
substantial increase in the minimum wage rate, could adversely affect the
operations of the Company's restaurants. The Company is also subject to federal
regulation and certain state laws which regulate the offer and sale of
franchises.
AVAILABILITY OF CAPITAL RESOURCES
The Company may be negatively impacted in the future if it is unable to
secure financing at affordable terms from third parties.
POSSIBLE VOLATILITY OF STOCK PRICE; NO PRIOR MARKET FOR RIGHTS OR WARRANTS
The Common Stock, which is quoted on the NNM, has experienced, and could
experience in the future, significant price and volume fluctuations which could
adversely affect the market price of the Common Stock. In addition, the Company
believes that factors such as quarterly fluctuations in the financial results of
the Company, the overall economy and the financial market could cause the price
of the Common Stock to fluctuate substantially.
While the Rights and the Warrants have been approved for listing on the
NNM, there has been no market for such securities prior to the Rights Offering.
There can be no assurance that a market for either the Rights or the Warrants
will develop or, if a market for either security develops, how liquid a market
it will be. The liquidity of any market for the Rights or the Warrants will
depend upon a number of factors, including the interest of the broker-dealers in
making a market and, with respect to the Warrants, the number of Rights that are
exercised.
LITIGATION
For a description of certain litigation to which the Company is a party,
see "Item 3. Legal Proceedings" of the 1995 10-K and the March 1996 10-Q which
are incorporated herein by reference.
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<PAGE>
CERTAIN RIGHTS OFFERING CONSIDERATIONS
No Minimum Size of Rights Offering. Since no minimum amount of proceeds is
required for the Company to consummate the Rights Offering, no assurance can be
given as to the amount of gross proceeds that the Company will realize from the
Rights Offering. However, GIANT, Fidelity and CKE have committed to exercise, or
cause to be exercised, their Basic Subscription Privileges.
Limitations on Fidelity and CKE's Ability to Acquire Common Stock.
Pursuant to that certain Purchase and Standstill Agreement, dated April 26, 1996
(the "Purchase Agreement"), among GIANT, Fidelity and CKE, so long as the Senior
Notes are outstanding, Fidelity and CKE and their respective affiliates may not,
in the aggregate, beneficially own 35% or more of the combined voting power of
the then outstanding voting stock of the Company without first obtaining (i)
approval of the Board of Directors of the Company and (ii) a waiver from the
holders of the Senior Notes of a provision of the indenture governing the Senior
Notes (the "Indenture"), which provision would require the Company to offer to
repurchase the Senior Notes at 101% of the principal amount thereof, plus
accrued and unpaid interest under such circumstances. To the extent that
exercise by Fidelity and CKE would increase their percentage interest in the
Company to 35%, CKE and Fidelity may be limited or prohibited from exercising
their options to acquire Common Stock from GIANT or to exercise Warrants
acquired as part of the Units.
Dilution. Holders who do not exercise their Subscription Privileges in
full will realize a dilution in their percentage voting interest and ownership
interest in future net earnings, if any, of the Company to the extent that
Rights are exercised by other Holders. Holders who do not acquire Units and/or
do not exercise the Warrants received pursuant to the Rights Offering will also
realize a further dilution in their percentage voting interest and ownership
interest to the extent that Warrants are exercised by others.
Possible Extension of Expiration Date. The Company has reserved the
right to extend the Expiration Date to as late as September 30, 1996. Funds
deposited in payment of the Subscription Price may not be withdrawn and no
interest will be paid thereon to Holders.
THE COMPANY
The Company is one of the largest double drive-thru restaurant chains in
the United States. As of July 23, 1996, the Company's system included 482
restaurants in 19 states, primarily in the Midwest and the Sunbelt, comprised of
239 Company-owned and 243 franchised restaurants. The Company's restaurants
offer high quality fast food served quickly and at everyday prices generally
below the regular prices of the four largest hamburger chains. The Company
opened its first restaurant in January, 1985 and began offering franchises in
November, 1986.
Excluding significant charges related to the disposal of certain excess
properties and to the adoption of a new accounting standard, the Company still
operated at a significant loss for
15
<PAGE>
the 1995 fiscal year. During the first quarter of fiscal 1996, operating losses
continued, although a gain on early extinguishment of debt produced net income
for the quarter. The second quarter of fiscal 1996 is the first quarter the
Company has reported a profit (exclusive of extraordinary item) since the second
quarter of 1993.
As the Company entered into 1996, it faced formidable challenges including
a balance sheet weakened by several consecutive quarters of significant
operating losses and a high level of indebtedness, erratic comparable store
sales performance and a decline in the number of open units. During the later
part of 1995 and into 1996, the Company has implemented actions to address these
challenges. These actions include repurchasing of $22 million face value (or
approximately 25%) of the outstanding Senior Notes at a substantial discount
from their face value, entering into a strategic partnership with the Carl's Jr.
restaurant chain, instituting new marketing initiatives aimed at improving
comparable store sales trends, and initiating actions aimed at improving food,
paper and labor costs as a percentage of sales.
Management believes that the Rally's brand has several significant
strengths versus its major competitors. In fact, Rally's has been rated higher
in independent consumer studies than its major competitors in the hamburger fast
food industry in several important attributes in the areas of value, service and
food quality. Management's conclusion from this is that the Rally's concept is
fundamentally very strong. The Company has undertaken actions to improve store
level economics to attain a sustainable level of profitability and growth for
all of its shareholders and employees.
During the first quarter of fiscal 1996, the implementation of several
programs that management believes should significantly improve unit level
profitability began. These programs include new supplier partnerships, non-
portion related changes in foodstuffs and foodstuff preparation, and labor
saving programs related to better daypart resource deployment. The Company
reported its first quarterly positive net income since 1993 in the first quarter
of 1996 due to an extraordinary gain related to the repurchase of $22 million
principal amount of the Senior Notes. The gain was substantially offset by a
loss from operations. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" contained in the 1995 10-K and March 1996
10-Q incorporated herein by reference. Although same-store sales declined 1% for
Company units and 5% systemwide, the Company reported a profit in the second
quarter of fiscal 1996. For the six months ended June 30, 1996, the Company
recorded earnings of $949,000 ($.06 per share) compared with a net loss of $4.8
million ($.30 per share) for the prior year period. First quarter and year to
date earnings were favorably impacted by an extraordinary gain, net of tax, of
$4.5 million ($.29 per share) from the early extinguishment of debt.
Management believes that the Company has begun to realize certain benefits
from the actions taken at improving store level profitability and that such
benefits should continue in ensuing quarters. However, no assurance can be given
that such improvements will continue or that they will not be offset by
increases in labor or commodity costs.
The Company is attempting to redirect most of its near term focus toward
achievement of four specific short term objectives, i.e., growing same store
sales, reducing food and paper costs as a percent of sales, reducing store labor
costs as a percent of sales and attacking other elements of spending. Management
believes that the Company's focus on achievement of these objectives combined
with the gradual increase in Company new store development should allow the
Company to achieve a sustainable level of profitability in the near future.
However, no assurance can be given that management will be able to carry out
such objectives or that achievement of these objectives will have a materially
positive effect on the Company's profitability.
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<PAGE>
Management believes that the proceeds of this Rights Offering will allow
the Company to increase its working capital and, given significant subscription,
will enable the Company to restore a reasonable level of growth in new store
openings, allow certain refurbishment of the existing store base and fund other
expected corporate requirements. The Company expects a similar increase in new
store development by new and existing franchisees. An increase in working
capital, given significant subscription in the Rights Offering, will allow the
Company to take advantage of what management believes are appealing cash on cash
returns available through productive deployment of certain idle assets on sites
in its core markets. The Company already owns 20 to 30 surplus modular
restaurant buildings and a significant amount of excess used restaurant
equipment from the restaurants that were closed late in 1995. Deployment of such
buildings and equipment would allow the Company to keep the out of pocket costs
for developing and opening a new modular restaurant location relatively low. No
assurance can be given that the Rights Offering will be fully subscribed, that
the Company will be able to effect such goals or that there will be an increase
in new store development by franchisees. See "Risk Factors - History of
Operating Losses; Changes in Operations."
RECENT DEVELOPMENTS
Relationship Among GIANT, Fidelity and CKE. On April 26, 1996, GIANT,
Fidelity and CKE and certain other persons settled certain litigation pursuant
to a Settlement Agreement and Release (the "Settlement Agreement"). Pursuant to
the Settlement Agreement, GIANT, Fidelity and CKE entered into the Purchase
Agreement, pursuant to which GIANT purchased from Fidelity 705,489 shares of the
common stock of GIANT for a purchase price of $8.625 per share, and Fidelity and
CKE purchased from GIANT 767,807 shares and 2,350,432 shares, respectively, of
the Company's Common Stock for $1.75 per share. Pursuant to the Purchase
Agreement, Fidelity and CKE were granted options to purchase a total of an
additional 2,350,428 shares of the Company's Common Stock from GIANT. One-half
of such options have an exercise price of $3.00 per share and expire on April
26, 1997 and one-half of such options have an exercise price of $4.00 per share
and expire on April 26, 1998.
The Purchase Agreement provides that if GIANT or its affiliates purchase
additional shares of Rally's Common Stock, Fidelity and CKE will have the right
to purchase shares of Common Stock from GIANT such that the proportional
ownership of Common Stock among GIANT, Fidelity and CKE will be the same as
immediately prior to such purchases (without giving effect to the options
acquired pursuant to the Purchase Agreement). In addition, GIANT, on the one
hand, and Fidelity and CKE on the other hand, have agreed to provide the other
with rights of first refusal in the event that they propose to dispose of Common
Stock. The parties have also agreed that if GIANT, on the one hand, and Fidelity
and CKE, on the other hand, each own at least 34.0% of the outstanding Common
Stock, then at each election of the Company's directors, GIANT may nominate up
to one-half of the number of directors to be elected and Fidelity and CKE may
nominate up to one-half of the number of directors to be elected, and the
parties will vote all their shares in favor of the other parties' nominees. If
one, but not both of GIANT, on the one hand, and Fidelity and CKE, on the other
hand, own at least 34.0% of the outstanding Common Stock (without giving effect
to the shares which may be purchased upon exercise of the options granted
pursuant to the Purchase Agreement to the extent such options have not been
exercised), at each election of directors the party owning at least
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<PAGE>
34.0% of the outstanding Common Stock may nominate up to one-half of the number
of directors to be elected and the other parties will vote all shares of Common
Stock owned by them in favor of such nominees. GIANT, Fidelity and CKE currently
are the record owners of 27.5%, 4.9% and 15.0%, respectively, of the outstanding
Common Stock. The foregoing provisions regarding the voting of shares of Common
Stock will expire on April 26, 2006.
Fidelity and CKE have also agreed that they will not, as long as the Senior
Notes are outstanding, beneficially own in the aggregate 35% or more of the
Common Stock without gaining the consent of the Company's Board of Directors and
a waiver from the holders of the Senior Notes of a provision of the Indenture
which would require the Company to offer to repurchase the Senior Notes at 101%
of the principal amount thereof, plus accrued and unpaid interest, under such
circumstances. GIANT has agreed that it will not be the beneficial owner of 35%
or more of the Common Stock without the consent of Fidelity and CKE.
Operation of California and Arizona Stores by CKE. The Company has entered
into an operating agreement with CKE pursuant to which 28 Company-owned stores
in California and Arizona are operated by CKE. The Company has retained
ownership of the assets of these stores and receives a percentage of the stores'
sales. Under the terms of the operating agreement, CKE is responsible for the
conversion costs associated with transforming any restaurants it elects to be
operated as Carl's Jr., as well as the operating expenses for all of the 28
restaurants. In the event of a sale by the Company of any of the 28 CKE operated
restaurants, the Company and CKE will share in the sales proceeds based upon the
relative value of their respective capital investments in such restaurant.
PURPOSE OF THE RIGHTS OFFERING
AND USE OF PROCEEDS
It is anticipated that the net proceeds to the Company will be
approximately $10.1 million if all of the Units are purchased in the Rights
Offering (not including proceeds from the exercise of the Warrants). If less
than all of the Units are purchased, the proceeds will be correspondingly
reduced. The purpose of the Rights Offering is to raise additional capital for
the Company. The net proceeds of the Rights Offering will be used for new store
construction, refurbishment of some existing restaurants and for other general
corporate purposes, including possibly reducing outstanding indebtedness. No
assurance can be given that the Rights Offering will be fully subscribed.
Management believes that the proceeds of this Rights Offering will allow
the Company to increase its working capital and, such increase, given
significant subscription, will enable the Company to restore a reasonable level
of growth in new store openings, allow certain refurbishment of the existing
store base and fund other corporate requirements. The Company expects a similar
increase in new store development by new and existing franchises. An increase in
working capital, given significant subscription in the Rights Offering, will
allow the Company to take advantage of what management believes are appealing
cash on cash returns available through productive deployment of certain idle
assets on sites in its core markets. The Company already owns 20 to 30 surplus
modular restaurant buildings and a significant amount of excess used restaurant
equipment from the restaurants that were closed late in 1995. Deployment of
18
<PAGE>
such buildings and equipment would allow the Company to keep the out of pocket
costs for developing and opening a new modular restaurant location relatively
low. No assurance can be given that the Rights Offering will be fully
subscribed, that the Company will be able to effect such goals or that there
will be an increase in new store development by franchisees. See "Risk Factors -
History of Operating Losses; Changes in Operations."
The additional working capital resulting from the Rights Offering will also
enhance the Company's ability to meet the NNM requirements for continued listing
on the NNM. The Company must substantially meet five tests, including the Net
Tangible Asset Test, to remain on the NNM. Under this test, the Company is
currently required to maintain a net minimum tangible asset value of not less
than $4 million, but, as of the end of the 1995 fiscal year, the Company's net
tangible assets were in the negative amount of $4,598,000. If the Rights
Offering is fully subscribed, the Company's net tangible assets should be
increased to above the level required by the Net Tangible Asset Test, assuming
the Company's net operating results do not result in further losses. If such
losses continue, the Company may not be able to continue to meet the Net
Tangible Asset Test even if the Rights Offering is fully subscribed. See "Risk
Factors - NASDAQ Listing and Maintenance Requirements."
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<PAGE>
PRICE RANGE OF COMMON STOCK
The Company's Common Stock is quoted on NNM under the symbol "RLLY." As of
July 31, 1996, there were approximately 1,684 record holders of the Common
Stock. The table below sets forth the high and low sales prices of the Common
Stock reported on the NNM for each quarter during the Company's last two years.
<TABLE>
<CAPTION>
LOW HIGH
--- ----
<S> <C> <C>
Fiscal 1994
First Quarter $8 $12 3/4
Second Quarter 5 1/16 9
Third Quarter 3 1/8 5 3/4
Third Quarter 2 3/4 5
Fiscal 1995
First Quarter $2 1/2 $ 4
Second Quarter 2 1/4 4
Third Quarter 2 1/4 3 5/8
Fourth Quarter 15/16 2 11/16
Fiscal 1996
First Quarter $1 1/32 $ 2 1/4
Second Quarter 1 1/2 4 5/16
Third Quarter (1) 2 1/2 3 3/8
</TABLE>
_________________________
(1) Through July 30, 1996.
DIVIDEND POLICY
The Company has not paid any dividends to date and does not expect to pay
dividends in the foreseeable future. The Indenture currently prohibits the
payment of any dividends.
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<PAGE>
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Company as of June 30, 1996 and on an as adjusted basis to give effect to the
sale of 50% and 100% of the 3,484,074 Units offered pursuant to the Rights
Offering at the Subscription Price of $3.00 per Unit. It is not possible to
predict the exact percentage of Units that may be purchased in the Rights
Offering. To the extent that the actual percentage purchased differs from the
assumed percentages, the actual capitalization will differ from that shown
below.
<TABLE>
<CAPTION>
As Adjusted for the Rights
Offering (1)
100% 50%
Historical Exercised Exercised
---------- --------- ---------
(In Thousands)
<S> <C> <C> <C>
Cash and cash equivalents $ 2,005 $ 12,057 $ 6,831
======== ======== ========
Current maturities of long-term debt and
obligations under capital leases $ 3,970 $ 3,970 $ 3,970
======== ======== ========
Long term debt and obligations under capital
leases (less current maturities):
Senior Notes $ 62,484 $ 62,484 $ 62,484
Other 10,742 10,742 10,742
-------- -------- --------
Total long-term debt and obligations
under capital leases 77,196 77,196 77,196
-------- -------- --------
Shareholder's equity:
Common stock, $.10 par value;
50,000,000 shares authorized 1,593 1,942 1,768
Additional paid-in capital 60,831 70,535 65,483
Less: 273,000 treasury shares (2,108) (2,108) (2,108)
Retained earnings (deficit) (52,668) (52,668) (52,668)
-------- -------- --------
Total shareholders' equity 7,649 17,701 12,475
-------- -------- --------
Total capitalization $ 84,845 $ 94,897 $ 89,671
======== ======== ========
Shares issued:
Common Stock 15,668 19,152 17,410
Warrants - 3,484 1,742
</TABLE>
(1) As adjusted data assumes receipt of approximately $10.1 million and $4.8
million in proceeds, in each case net of expenses estimated at $400,000,
from the Rights Offering, respectively, and no exercise of the Warrants.
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<PAGE>
THE RIGHTS OFFERING
THE RIGHTS
The Company is distributing, to the record holders of its outstanding
Common Stock as of July 31, 1996 (the "Record Date"), transferable Rights to
purchase Units (the "Basic Subscription Privilege") at a price of $3.00 per Unit
(the "Subscription Price"). The Company will distribute at no cost to such
Holders one Right for each share of Common Stock held on the Record Date. For
each 4.5 Rights held, a Holder will have a Basic Subscription Privilege to
purchase one Unit. The Rights will be evidenced by transferable Subscription
Certificates.
Each Unit consists of one share of Common Stock and one Warrant to purchase
an additional share of Common Stock for $3.00 per share. An aggregate of
3,484,074 Units, representing 3,484,074 shares of Common Stock and 3,484,074
Warrants will be sold if all of the Rights are exercised.
No fractional Units, or cash in lieu thereof, will be issued or paid. The
number of Units distributed to each Holder will be rounded down to the nearest
whole unit in connection with the exercise of the Basic Subscription Privilege.
SUBSCRIPTION PRIVILEGES
BASIC SUBSCRIPTION PRIVILEGE. Four and one-half Rights will entitle the
Holder thereof to receive, upon payment of the Subscription Price, one Unit
consisting of one share of Common Stock and one Warrant. Certificates
representing shares of Common Stock and Warrants purchased pursuant to the Basic
Subscription Privilege will be delivered to subscribers as soon as practicable
after the Expiration Date, irrespective of whether the Subscription Privilege is
exercised immediately prior to the Expiration Date or earlier. Holders
exercising their Subscription Privilege will not be stockholders of record with
respect to the shares issuable pursuant to such Subscription Privilege until the
closing, which is anticipated to occur as soon as practicable after the
Expiration Date.
OVERSUBSCRIPTION PRIVILEGE. Subject to the allocation described below,
each Right also carries the right to subscribe at the Subscription Price for any
Units not subscribed for through the exercise of Basic Subscription Privileges
by other Holders (the "Excess Units"). If the Excess Units are not sufficient to
satisfy all subscriptions pursuant to the Oversubscription Privilege, such
Excess Units will be allocated pro rata (subject to the elimination of
fractional shares) among those Holders exercising the Oversubscription
Privilege, in proportion to the number of shares requested pursuant to the
Oversubscription Privilege. Only holders who exercise the Basic Subscription
Privilege in full with respect to their Subscripton Certificate(s) will be
entitled to exercise the Oversubscription Privilege. Certificates representing
the Common Stock and Warrants purchased pursuant to the Oversubscription
Privilege will be delivered to subscribers as soon as practicable after the
Expiration Date and after all prorations have been effected.
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<PAGE>
EXPIRATION DATE
The Rights will expire at 5:00 p.m., New York City time, on August 30, 1996
unless extended by the Company from time to time. Notwithstanding the foregoing,
the Expiration Date in no event shall be later than September 30, 1996, except
that the Company reserves the right to extend the exercise period on one or more
occasions if the Board of Directors determines that the occurrence of a material
event necessitates an amendment of the Registration Statement or recirculation
of the Prospectus that forms a part thereof in order to permit time for the
distribution of such information. After the Expiration Date, unexercised Rights
will be null and void. The Company will not be obligated to honor any purported
exercise of Rights received by the Subscription Agent after the Expiration Date,
regardless of when the documents relating to such exercise were sent, except
pursuant to the Guaranteed Delivery Procedures described below.
EXERCISE OF RIGHTS
Rights may be exercised by delivering to the Subscription Agent, on or
prior to 5:00 p.m., New York City time, on the Expiration Date, the properly
completed and executed Subscription Certificate evidencing such Rights with any
required signatures guaranteed, together with payment in full of the
Subscription Price for each of the Units subscribed for pursuant to the
Subscription Privileges (except as permitted pursuant to clause (iii) of the
next sentence). Such payment in full must be by: (i) check or bank draft drawn
upon a U.S. bank or postal, telegraphic or express money order payable to
American Stock Transfer & Trust Company as Subscription Agent; or (ii) wire
transfer of funds to the account maintained by the Subscription Agent for such
purpose at Chase Manhattan Bank, 55 Water Street, New York, New York, Account
#323 053 718, ABA# 021000021; or (iii) in such other manner as Company may
approve in writing in the case of persons acquiring Units at an aggregate
Subscription Price of $500,000 or more, provided in the case of (iii) above that
the full amount of such Subscription Price is received by the Subscription Agent
in currently available funds within three NNM trading days following the
Expiration Date (the payment method under (iii) being an "Approved Payment
Method"). Payment of the Subscription Price will be deemed to have been received
by the Subscription Agent only upon (a) clearance of any uncertified check, (b)
receipt by the Subscription Agent of any certified check or bank draft drawn
upon a United States bank or of any postal, telegraphic or express money order,
(c) receipt of good funds in the Subscription Agent's account designated above,
or (d) receipt of funds by the Subscription Agent through an Approved Payment
Method.
If paying by uncertified personal check, please note that the funds paid
thereby may take at least five business days to clear. Accordingly, Holders who
wish to pay the Subscription Price by means of uncertified personal check are
urged to make payment sufficiently in advance of the Expiration Date to ensure
that such payment is received and clears by such date and are urged to consider
payment by means of certified or cashier's check, money order or wire transfer
of funds.
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<PAGE>
The address to which the Subscription Certificates and payment of the
Subscription Price should be delivered is:
American Stock Transfer & Trust Company
40 Wall Street, 46th Floor
New York, New York 10005
If a Holder wishes to exercise Rights, but time will not permit such Holder
to cause the Subscription Certificate or Subscription Certificates evidencing
such Rights to reach the Subscription Agent on or prior to the Expiration Date,
such Rights may nevertheless be exercised if all of the following conditions
(the "Guaranteed Delivery Procedures") are met:
(i) such Holder has caused payment in full of the Subscription
Price for each Unit being subscribed for pursuant to the Subscription
Privileges to be received (in the manner set forth above) by the
Subscription Agent on or prior to the Expiration Date;
(ii) the Subscription Agent receives, on or prior to the Expiration
Date, a guaranteed notice (a "Notice of Guaranteed Delivery"),
substantially in the form provided with the Instructions as to Use of
Rally's Hamburgers, Inc. Subscription Certificates (the "Instructions")
distributed with the Subscription Certificates, from a member firm of a
registered national securities exchange or a member of the National
Association of Securities Dealers, Inc., or from a commercial bank or trust
company having an office or correspondent in the United States (each, an
"Eligible Institution"), stating the name of the exercising Holder, the
number of Rights represented by the Subscription Certificate(s) held by
such exercising Holder, the number of Units being subscribed for pursuant
to the Subscription Privileges and guaranteeing the delivery to the
Subscription Agent of any Subscription Certificate(s) evidencing such
Rights within three NNM trading days following the date of the Notice of
Guaranteed Delivery; and
(iii) the properly completed Subscription Certificate(s), with any
required signatures guaranteed, is received by the Subscription Agent
within three NNM trading days following the date of the Notice of
Guaranteed Delivery relating thereto. The Notice of Guaranteed Delivery
may be delivered to the Subscription Agent in the same manner as
Subscription Certificates at the addresses set forth above, or may be
transmitted to the Subscription Agent by facsimile transmission, telecopy
number (718) 234-5001. Additional copies of the form of Notice of
Guaranteed Delivery are available upon request from the Subscription Agent,
whose address and telephone number are set forth under "Subscription Agent"
below, or from the Information Agent, whose address and telephone number
are set forth under "Information Agent" below.
Funds received in payment of the Subscription Price will be held in a
segregated account pending issuance of such Excess Units. If a Holder exercising
the Oversubscription Privilege is allocated less than all of the Excess Units
that such Holder wished to subscribe for pursuant to the Oversubscription
Privilege, the excess funds paid by such Holder in respect of the Subscription
Price for shares
24
<PAGE>
not issued shall be returned by mail without interest or deduction as soon as
practicable after the Expiration Date.
A Holder who holds shares of Common Stock for the account of others, such
as a broker, a trustee or a depositary for securities, should notify the
respective beneficial owners of such shares as soon as possible to ascertain
such beneficial owner's intentions and to obtain instructions with respect to
the Rights. If the beneficial owner so instructs, the record holder of such
Rights should complete the Subscription Certificate and submit it to the
Subscription Agent with the proper payment. In addition, the beneficial owner of
Common Stock or Rights held through such a holder of record should contact the
Holder and request the Holder to effect transactions in accordance with the
beneficial owner's instructions.
Unless a Subscription Certificate (i) provides that the shares of Common
Stock to be issued pursuant to the exercise of Rights represented thereby are to
be delivered to the Holder or (ii) is submitted for the account of an Eligible
Institution, signatures on such Subscription Certificate must be guaranteed by
an Eligible Institution.
If either the number of Units being subscribed for pursuant to the Basic
Subscription Privilege is not specified on the Subscription Certificate, or the
amount delivered is not enough to pay the Subscription Price for all Units
stated to be subscribed for, the number of Units subscribed for will be assumed
to be the maximum amount that could be subscribed for upon payment of such
amount, after allowance for the Subscription Price of any specified Units. If
the number of Units being subscribed for is not specified, or payment of the
Subscription Price for the indicated number of Rights that are being exercised
exceeds the required Subscription Price, the payment will be applied, until
depleted, to subscribe for Units in the following order: (i) to subscribe for
the number of Units indicated, if any, pursuant to the Basic Subscription
Privilege; (ii) to subscribe for Units until the Basic Subscription Privilege
has been fully exercised with respect to all of the Rights represented by the
Subscription Certificate; and (iii) to subscribe for additional Units pursuant
to the Oversubscription Privilege (subject to any applicable proration).
The Instructions accompanying the Subscription Certificates should be read
carefully and followed in detail. DO NOT SEND SUBSCRIPTION CERTIFICATES TO THE
COMPANY.
THE METHOD OF DELIVERY OF SUBSCRIPTION CERTIFICATES AND PAYMENT OF THE
SUBSCRIPTION PRICE TO THE SUBSCRIPTION AGENT WILL BE AT THE ELECTION AND RISK OF
THE RIGHTS HOLDER, BUT IF SENT BY MAIL IT IS RECOMMENDED THAT SUCH CERTIFICATES
AND PAYMENTS BE SENT BY REGISTERED MAIL, PROPERLY INSURED, WITH RETURN RECEIPT
REQUESTED, AND THAT A SUFFICIENT NUMBER OF DAYS BE ALLOWED TO ENSURE DELIVERY TO
THE SUBSCRIPTION AGENT AND CLEARANCE OF PAYMENT PRIOR TO 5:00 P.M., NEW YORK
CITY TIME, ON THE EXPIRATION DATE. BECAUSE UNCERTIFIED PERSONAL CHECKS MAY TAKE
AT LEAST FIVE BUSINESS DAYS TO CLEAR, THE RIGHTS HOLDER IS STRONGLY URGED TO
PAY, OR ARRANGE FOR PAYMENT, BY MEANS OF CERTIFIED OR CASHIERS CHECK, MONEY
ORDER OR WIRE TRANSFER OF FUNDS.
25
<PAGE>
Certain employees of the Company may solicit responses from Holders to the
Rights Offering, but such employees will not receive any commissions or
compensation for such services other than their normal employment compensation.
All questions concerning the timeliness, validity, form and eligibility of any
exercise of Rights will be determined by the Company, whose determinations will
be final and binding. The Company, in its sole discretion, may waive any defect
or irregularity, or permit a defect or irregularity to be corrected within such
time as it may determine, or reject the purported exercise of any Right.
Subscriptions will not be deemed to have been received or accepted until all
irregularities have been waived or cured within such time as the Company
determines in its sole discretion. Neither the Company nor the Subscription
Agent will be under any duty to give notification of any defect or irregularity
in connection with the submission of Subscription Certificates or incur any
liability for failure to give such notification.
Any questions or requests for assistance concerning the method of
exercising Rights or requests for additional copies of this Prospectus or the
Instructions or the Notice of Guaranteed Delivery should be directed to the
Information Agent, telephone number (800) 662-5200 or the Subscription Agent,
telephone number (800) 937-5449.
NO REVOCATION
ONCE A HOLDER OF RIGHTS HAS EXERCISED THE BASIC SUBSCRIPTION PRIVILEGE OR
THE OVERSUBSCRIPTION PRIVILEGE SUCH EXERCISE MAY NOT BE REVOKED.
METHOD OF TRANSFERRING RIGHTS
The Rights will be quoted on the NNM under the trading symbol RLLYR and
may be purchased or sold through usual investment channels, including banks and
brokers. Trading in Rights will cease on the close of business on the NNM
trading day preceding the Expiration Date.
The Rights evidenced by a single Subscription Certificate may be
transferred in whole by endorsing the Subscription Certificate for transfer in
accordance with the accompanying instructions. A portion of the Rights
evidenced by a single Subscription Certificate may be transferred by delivering
to the Subscription Agent a Subscription Certificate properly endorsed for
transfer, with instructions to register such portion of the Rights evidenced
thereby in the name of the transferee (and to issue a new Subscription
Certificate to the transferee evidencing such transferred Rights). In such
event, a new Subscription Certificate evidencing the balance of the Rights will
be issued to the Holder or, if the Holder so instructs, to an additional
transferee.
The Rights evidenced by a Subscription Certificate also may be sold, in
whole or in part, through the Subscription Agent by delivering to the
Subscription Agent such Subscription Certificate properly executed for sale by
the Subscription Agent. If only a portion of the Rights evidenced by a single
Subscription Certificate is to be sold by the Subscription Agent, such
26
<PAGE>
Subscription Certificate must be accompanied by instructions setting forth the
action to be taken with respect to the Rights that are not to be sold.
Promptly following the Expiration Date, the Subscription Agent will send
the Holder a check for the net proceeds from the sale of such Rights. If the
Rights can be sold, sales of such Rights will be deemed to have been effected at
the weighted average price received by the Subscription Agent for all Rights
sold by it at the request of Holders, less any applicable brokerage commissions,
taxes and other direct expenses of sale. The Company will pay the fees charged
by the Subscription Agent for effecting such sales. Orders to sell Rights must
be received by the Subscription Agent prior to 5:00 p.m., New York City time, on
the third business day preceding the Expiration Date. If less than all sales
orders received by the Subscription Agent can be filled, sales proceeds will be
prorated among the Holders based upon the number of Rights each has instructed
the Subscription Agent to sell during such period, irrespective of when during
such period the instructions are received by the Subscription Agent. The
Subscription Agent's obligation to execute orders for the sale of Rights is
subject to its ability to find buyers.
Holders wishing to transfer all or a portion of their Rights should allow a
sufficient amount of time prior to the Expiration Date for (i) the transfer
instructions to be received and processed by the Subscription Agent, (ii) a new
Subscription Certificate to be issued and transmitted to the transferee or
transferees with respect to transferred Rights, and to the transferor with
respect to retained Rights, if any, and (iii) the Rights evidenced by such new
Subscription Certificates to be exercised or sold by the recipients thereof. If
time does not permit a transferee of a Right who wishes to exercise its Right to
deliver its Subscription Certificate to the Subscription Agent on or before the
Expiration Date, such transferee should make use of the Guaranteed Delivery
Procedure described under "The Rights Offering-Exercise of Rights." Neither the
Company nor the Subscription Agent shall have any liability to a transferee or
transferor of Rights if Subscription Certificates or new Subscription
Certificates are not received in time for exercise or sale prior to the
Expiration Date.
Except for the fees charged by the Subscription Agent (which will be paid
by the Company as described above), all commissions, fees and other expenses
(including brokerage commissions and transfer taxes) incurred in connection with
the purchase, sale or exercise of Rights will be for the account of the
transferor of the Rights, and none of such commissions, fees or expenses will be
paid by the Company or the Subscription Agent.
The Company anticipates that the Rights will be eligible for transfer
through, and that the exercise of the Subscription Privileges may be effected
through, the facilities of Depository Trust Company ("DTC"; Rights exercised
through DTC are referred to as "DTC Exercised Rights"). The holder of a DTC
Exercised Right may exercise the Oversubscription Privilege in respect of such
DTC Exercised Right by properly executing and delivering to the Subscription
Agent at or prior to 5:00 p.m., New York City time, on the Expiration Date, a
DTC Participant Oversubscription Exercise Form, together with payment of the
appropriate Subscription Price for the number of Units for which the
Oversubscription Privilege is to be exercised. Copies of the DTC Participant
Oversubscription Exercise Form may be obtained from the Subscription Agent.
27
<PAGE>
DESCRIPTION OF SECURITIES
The Company has authorized 50,000,000 shares of Common Stock, $.10 par
value and 5,000,000 shares of preferred stock, $.10 par value ("Preferred
Stock"), with preferences and rights which will be set by the Company's Board of
Directors (or an executive committee thereof). No shares of Preferred Stock are
currently outstanding, and 15,678,335 shares of Common Stock are currently
outstanding.
UNITS
The Common Stock and Warrants which are offered hereby are being offered
and will be sold only in Units, each Unit consisting of one share of Common
Stock and one Warrant. Upon the exercise of Warrants, the holder thereof will
be eligible to receive one share of Common Stock for each Warrant so exercised.
The Common Stock and the Warrants included in the Units will be immediately
separable.
COMMON STOCK
Subject to the preferential rights of holders of Preferred Stock, if any,
and the Company's loan agreements and indentures, if any, holders of Common
Stock are entitled to share ratably in dividends when and as declared by the
Board of Directors (or an authorized committee) out of funds' legally available
therefor. Holders of Common Stock have one vote per share upon all matters on
which Common Stock votes and vote as a class on charter amendments affecting
Common Stock. Upon liquidation, holders of Common Stock are entitled to share
ratably in the net assets of the Company after payment of any amounts due to
creditors and holders of any class of Preferred Stock. Holders of Common Stock
have no redemption, subscription or conversion rights and are not entitled to
any preemptive rights. The Common Stock is not liable for further calls or
assessments by the Company, and there are no sinking fund provisions relating to
such stock. All outstanding shares of Common Stock and all shares to be issued
by the Company in the offering will be fully paid and non-assessable.
Holders of the shares of Common Stock, voting as a class, have non-
cumulative voting rights, which means that the holders of more than 50% of the
shares voting for the election of directors can elect 100% of the directors if
they choose to do so, and, in such event, the holders of the remaining shares
will not be able to elect any directors. GIANT, Fidelity and CKE beneficially
own at least 47% of the outstanding Common Stock and will, as a practical
matter, have the ability to elect the entire Board of Directors. See "Risk
Factors Principal Stockholders."
WARRANTS
The Warrants will be issued in registered form pursuant to the terms of a
Warrant Agreement (the "Warrant Agreement") between the Company and American
Stock Transfer & Trust Company, as Warrant Agent. The following description is
a brief summary of certain provisions of the Warrant Agreement. Reference is
made to the Warrant Agreement (which has been filed as an exhibit to the
Registration Statement of which this Prospectus is a part) for a
28
<PAGE>
complete description of its terms and conditions, and the description which
follows is qualified in its entirety by the reference to the Warrant Agreement.
The Company has authorized the issuance of up to 3,484,074 Warrants to
purchase an aggregate of 3,484,074 shares of Common Stock and will reserve that
number of shares of Common Stock required for issuance upon exercise of the
Warrants issued in the Rights Offering. None of the Warrants are currently
issued and outstanding.
Each Warrant entitles the registered holder thereof to purchase one share
of Common Stock from the Company at a price of $3.00 per share, subject to
adjustment in certain circumstances, at any time until four years from the
Closing Date.
The Company may redeem the Warrants, at $.01 per Warrant, upon 30 days'
prior written notice in the event the closing price of the Common Stock equals
or exceeds $6.00 per share for 20 out of 30 consecutive trading days ending not
more than 30 days preceding the date of the notice of redemption. The closing
bid price of the Common Stock shall be the closing bid price as reported by NNM
or on the principal stock exchange on which it is listed. All of the Warrants
must be redeemed if any are redeemed.
The exercise prices and number of shares of Common Stock or other
securities issuable on exercise of the Warrants are subject to adjustment in
certain circumstances, including in the event of a stock dividend, stock split,
recapitalization, reorganization, merger or consolidation of the Company and
certain sales by the Company of Common Stock below the then market price of the
Common Stock. However, the Warrants are not subject to adjustment for issuances
of Common Stock at a price below the exercise price of the Warrants or pursuant
to the 1990 Stock Option Plan or the Non-Employee Directors' Plan, or upon
exercise of any of the Warrants.
The Warrants may be exercised upon surrender of the Warrant certificate on
or prior to the expiration date at the offices of the Warrant Agent, with the
exercise form on the reverse side of the Warrant certificate completed and
executed as indicated, accompanied by full payment of the exercise price (in
cash or by certified check or bank draft payable in United States currency to
the order of Warrant Agent) to the Warrant Agent for the number of Warrants
being exercised. Holders of the Warrants do not have the rights or privileges
of holders of Common Stock.
No fractional shares will be issued upon exercise of the Warrants.
However, if a warrantholder exercises all Warrants then owned of record by such
warrantholder, the Company will pay to such warrantholder, in lieu of the
issuance of any fractional share which is otherwise issuable, an amount in cash
based on the market value of the Common Stock on the last trading day prior to
the exercise date.
The Warrants to be issued hereunder are part of the Units to be sold in
this Rights Offering. To the extent that the Warrants are exercised, the
proportionate equity ownership of holders of Common Stock who do not exercise
Warrants will decrease. See "Risk Factors - Certain Rights Offering
Considerations - Dilution."
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<PAGE>
Warrants are generally more speculative than shares of common stock which
are purchasable upon the exercise thereof. Historically, the percentage
increase or decrease in the market price of a warrant has tended to be greater
than the percentage increase or decrease in the market price of the underlying
common stock. A warrant may become valueless, or of reduced value, if the
market price of the underlying common stock decreases, or increases only
modestly, over the term of the warrant.
TRANSFER AGENT, REGISTRAR AND WARRANT AGENT
The Transfer Agent, Registrar and Warrant Agent for the Common Stock and
Warrants is American Stock Transfer & Trust Company, New York, New York.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
In the opinion of Christensen, White, Miller, Fink, Jacobs, Glaser &
Shapiro, LLP, counsel to the Company, the following is an accurate discussion of
the material federal income tax consequences of the Rights Offering to the
holders of Common Stock upon the distribution (the "Distribution") of Rights,
the exercise of the Rights and the exercise of the Warrants. See "Legal
Matters."
This discussion is based on the Internal Revenue Code of 1986, as amended
(the "Code"), the Treasury Regulations promulgated thereunder, judicial
authority, and current administrative rulings and practice, all of which are
subject to change on a prospective or retroactive basis. The tax consequences
under state, local and foreign law are not discussed. Moreover, special
considerations not described herein may apply to certain taxpayers, such as
financial institutions, broker-dealers, life insurance companies, and tax exempt
organizations. The discussion is limited to those who have held the Common
Stock, and will hold the Rights and any Common Stock or Warrants acquired upon
the exercise of Rights as capital assets (generally, property held for
investment) within the meaning of Section 1221 of the Code.
DISTRIBUTION OF THE RIGHTS. Holders of Common Stock will not recognize
taxable income for federal income tax purposes in connection with the receipt of
the Rights.
STOCKHOLDER BASIS AND HOLDING PERIOD OF THE RIGHTS. Except as provided in
the following sentence, the basis of the Rights received by a stockholder as a
distribution with respect to such stockholder's Common Stock will be zero. If,
however, either (i) the fair market value of the Rights on the date of
Distribution is 15% or more of the fair market value (on the date of
Distribution) of the Common Stock with respect to which they are received or
(ii) the stockholder properly elects, in his or her federal income tax return
for the taxable year in which the Rights are received, to allocate part of the
basis of such Common Stock to the Rights, then upon exercise or sale of the
Rights, the stockholder's basis in such Common Stock will be allocated between
the Common Stock and the Rights in proportion to the fair market values of each
on the date of Distribution. No such allocation shall be made with respect to
Rights which lapse.
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<PAGE>
The holding period of a stockholder with respect to the Rights received as
a distribution on such stockholder's Common Stock will include the stockholder's
holding period for the Common Stock with respect to which the Rights were
issued.
In the case of a stockholder who purchases Rights, the tax basis of such
Rights will be equal to the purchase price paid therefor, and the holding period
for such Rights will commence on the day following the date of the purchase.
SALE OF THE RIGHTS. A stockholder who sells the Rights received in the
Distribution prior to exercise will recognize gain or loss equal to the
difference between the amount realized on the sale and such stockholder's
adjusted basis (if any) in the Rights sold. Such gain or loss will be capital
gain or loss if gain or loss from a sale of Common Stock held by such
stockholder would be characterized as capital gain or loss at the time of such
sale. Any gain or loss recognized on a sale of Rights acquired by purchase will
be capital gain or loss if Common Stock would be a capital asset in the hands of
the stockholder. Capital gain or loss will be classified as short-term if the
stockholder's holding period in the Rights is one year or less and long-term if
the stockholder's holding period in the Rights is more than one year.
LAPSE OF THE RIGHTS. Stockholders who allow the Rights received by them at
the distribution to lapse will not recognize any gain or loss, and no adjustment
will be made to the basis of the Common Stock, if any, owned by such
stockholders.
Purchasers of the Rights will be entitled to a loss equal to their adjusted
tax basis in the Rights if such Rights expire unexercised. Because by their
terms the Rights will expire on or prior to September 30, 1996, any loss
recognized on the expiration of the Rights acquired by purchase will be a short-
term capital loss if Common Stock would be a capital asset in the hands of the
purchaser.
EXERCISE OF THE RIGHTS, BASIS OF THE COMMON STOCK AND WARRANTS. If the
Rights are exercised, no gain or loss is recognized and both the basis allocated
to the Rights, if any, and the Subscription Price must be allocated between the
Common Stock and the Warrants received. The basis allocated to the Rights will
be apportioned between the Common Stock and the Warrants in proportion to their
relative fair market values on the date of the distribution of the Rights. The
Subscription Price will increase basis and will be apportioned to the Common
Stock and the Warrants in proportion to their relative fair market values on the
date of the exercise of the Rights.
EXERCISE, SALE AND EXPIRATION OF THE WARRANTS. No gain or loss will be
recognized by the holder of a Warrant upon the exercise of a Warrant. The cost
basis of the Common Stock so acquired will be the cost basis of the Warrant plus
any additional amount paid upon the exercise of the Warrant. Gain or loss will
be recognized upon the subsequent sale, exchange or other disposition of the
Common Stock acquired by the exercise of the Warrant, measured by the difference
between the amount realized upon sale or exchange and the stockholder's cost
basis in the Common Stock.
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<PAGE>
If a Warrant is not exercised, but is sold or exchanged, gain or loss will
be recognized upon such event, measured by the difference between the amount
realized by the holder of the Warrant as a result of the sale, exchange or
redemption and the cost basis of the Warrant.
If a Warrant is not exercised and is allowed to expire, the Warrant will be
deemed to be sold or exchanged on the date of expiration. In such event, the
holder of the Warrant will recognize a loss to the extent of the cost basis of
the Warrant.
SALE OF COMMON STOCK. If the Common Stock acquired as part of the Unit is
sold or exchanged, gain or loss will be recognized, measured by the difference
between the amount realized from such sale or exchange and the cost basis of the
Common Stock sold or exchanged.
CHARACTERIZATION OF GAIN OR LOSS. Generally, any gain or loss recognized
as a result of the foregoing will be a capital gain or loss and will either be
long-term or short-term depending upon the period of time that the Common Stock
which was sold or exchanged or the Warrant which was sold, exchanged, redeemed,
or allowed to expire, as the case may be, was held. A holding period of more
than one year results in long-term capital gain or loss treatment. If a Warrant
is exercised, the holding period of the Common Stock so acquired will not
include the period during which the Warrant was held.
Under Section 305 of the Code and regulations promulgated under the Code,
there is no assurance that a subsequent adjustment in the exercise price of the
Warrants or the number of shares purchasable upon exercise, attributable to the
anti-dilution provisions applicable to the Warrants, will not be deemed a
taxable distribution to the holders of the Warrants.
THE FOREGOING SUMMARY IS INCLUDED FOR GENERAL INFORMATION ONLY.
ACCORDINGLY, EACH HOLDER IS URGED TO CONSULT WITH HIS OR HER OWN TAX ADVISOR
WITH RESPECT TO THE TAX CONSEQUENCES OF THE RIGHTS OFFERING APPLICABLE TO HIS OR
HER OWN PARTICULAR TAX SITUATION, INCLUDING THE APPLICATION AND EFFECT OF STATE
AND LOCAL INCOME AND OTHER TAX LAWS.
SUBSCRIPTION AGENT
The Company has appointed American Stock Transfer & Trust Company as
Subscription Agent for the Rights Offering. The Company will pay the fees and
expenses of the Subscription Agent, and has also agreed to indemnify it from any
liability which it may incur in connection with the Rights Offering. The
Subscription Agent's address, which is the address to which the Subscription
Certificates and payment of the Subscription Price should be delivered, as well
as the address to which Notice of Guaranteed Delivery must be delivered, and the
Subscription Agent's telephone number and facsimile number, are:
American Stock Transfer & Trust Company
40 Wall Street, 46th Street
New York, New York 10005
Telephone: (800) 937-5449
Facsimile: (718) 234-5001
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<PAGE>
INFORMATION AGENT
The Company has appointed Morrow & Co., Inc. as Information Agent for the
Rights Offering. Any questions regarding or requests for additional copies of
this Prospectus, the Instructions, or the Notice of Guaranteed Delivery may be
directed to the Information Agent at the telephone number and address set forth
below.
Morrow & Co., Inc.
909 Third Avenue
New York, New York 10022-4799
Telephone: (800) 566-9061
or (800) 662-5200
LEGAL MATTERS
The validity of the authorization and issuance of the securities offered
hereby and the tax matters discussed under "Certain Federal Income Tax
Consequences" are being passed upon for Company by Christensen, White, Miller,
Fink, Jacobs, Glaser & Shapiro, LLP, Los Angeles, California. Said law firm has
from time to time performed and may in the future perform legal services for the
Company and for certain stockholders of the Company, including GIANT and its
affiliates. Terry Christensen, a partner of Christensen, White, Miller, Fink,
Jacobs, Glaser & Shapiro, LLP, is a member of the Board of Directors of both
GIANT and the Company.
EXPERTS
The financial statements and schedule incorporated by reference in this
Prospectus and elsewhere in the Registration Statement, to the extent and for
the periods indicated in their reports, have been audited by Arthur Andersen
LLP, independent public accountants, and are included herein in reliance upon
the authority of said firm as experts in giving said reports.
33
<PAGE>
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS, AND IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE
MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT THERE
HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATES AS OF WHICH
INFORMATION IS GIVEN IN THIS PROSPECTUS. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER OR SOLICITATION BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS UNLAWFUL
TO MAKE SUCH OFFER OR SOLICITATION.
__________
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Available Information...................................................... 2
Documents Incorporated by Reference........................................ 2
Prospectus Summary......................................................... 4
Risk Factors............................................................... 11
The Company................................................................ 15
Purpose of the Rights Offering and Use of Proceeds......................... 18
Price Range of Common Stock................................................ 20
Dividend Policy............................................................ 20
Capitalization............................................................. 21
The Rights Offering........................................................ 22
Description of Securities.................................................. 28
Certain Federal Income Tax Consequences.................................... 30
Subscription Agent......................................................... 32
Information Agent.......................................................... 33
Legal Matters.............................................................. 33
Experts.................................................................... 33
</TABLE>
3,484,074 UNITS
RALLY'S HAMBURGERS,
INC.
EACH UNIT CONSISTING OF
ONE SHARE OF COMMON
STOCK AND ONE COMMON
STOCK PURCHASE WARRANT
________________________
RIGHTS OFFERING PROSPECTUS
________________________
JULY 31, 1996
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 14. OTHER EXPENSES
The following is a statement of estimated expenses to be paid by the
Registrant in connection with the issuance and distribution of the securities
being registered:
<TABLE>
<S> <C>
SEC Registration Fee............. $ 7,209
Legal Fees....................... 100,000
Accountants' Fees................ 25,000
Blue Sky Qualification Fees and
Expenses....................... 105,000
Printing and Shipping............ 12,500
Subscription, Information
and Warrant Agents' Fees....... 17,500
Miscellaneous.................... 32,741
--------
Total ........................... $400,000
========
</TABLE>
ITEM 15. INDEMNIFICATION OF OFFICERS AND DIRECTORS
Section 145 of the Delaware Corporation Law provides that a Delaware
corporation may indemnify any person against expenses, judgements, fines and
settlements actually and reasonably incurred by any such person in connection
with a threatened, pending or completed action, suit or proceeding in which he
is involved by reason of the fact that he is or was a director, officer,
employee or agent of such corporation, provided that (i) he acted in good faith
and in a manner he reasonably believed to be in or not opposed to the best
interests of the corporation and (ii) with respect to any criminal action or
proceeding he had no reasonable cause to believe his conduct was unlawful. If
the action or suit is by or in the name of the corporation, the corporation may
indemnify any such person against expenses actually and reasonably incurred by
him in connection with the defense or settlement of such action or suit if he
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation, except that no indemnification
may be made in respect to any claim, issue or matter as to which such person
shall have been adjudged to be liable for negligence or misconduct in the
performance of his duty to the corporation, unless and only to the extent that
the Delaware Court of Chancery or the court in which the action or suit is
brought determines upon application that, despite the adjudication of liability
but in light of the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expense as the court deems proper.
Section 51 of the Registrant's By-Laws provides for indemnification of
persons to the extent permitted by the Delaware Corporation Law.
In accordance with the Delaware General Corporation Law, the Registrant's
Certificate of Incorporation, as amended, limits the personal lability of its
directors for violations of their
II-1
<PAGE>
fiduciary duty. The Certificate of Incorporation eliminates each director's
liability to the Registrant or its stockholders for monetary damage except (i)
for any breach of the director's duty or loyalty to the Registrant or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under the section of
the Delaware law providing for liability of directors for unlawful payment of
dividends of unlawful stock purchases or redemptions, or (iv) for any
transaction from which a director derived an improper personal benefit. The
effect of this provision is to eliminate the personal liability of directors for
monetary damages for actions involving a breach of their fiduciary duty of care,
including any such actions involving gross negligence. This provision does not,
however, limit in any way the ability of directors for violations of the federal
securities laws.
The Registrant carries directors and officers liability insurance with a
limit of $5,000,000. Such insurance expires on April 1, 1997.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) The following is a list of exhibits filed herewith as a part of this
Registration Statement:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
<S> <C>
4(a) Form of Subscription Certificate
4(b) Form of Warrant Agreement between Rally's
Hamburgers, Inc. and American Stock Transfer &
Trust Company, as Warrant Agent, including form
of Warrant Certificate.
5 Opinion of Christensen, White, Miller, Fink,
Jacobs, Glaser & Shapiro, LLP, including the
consent of such firm
23 Consent of Arthur Andersen LLP
24 Power of Attorney (see page II-4)
99 Form of Subscription Agent Agreement dated as
of July 31, 1996 between Rally's Hamburgers,
Inc. and American Stock Transfer and Trust
Company, as Subscription Agent.
</TABLE>
II-2
<PAGE>
ITEM 17.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement to include any
material information with respect to the plan of distribution not previously
disclosed in the registration statement or any material change to such
information in the Registration Statement.
(2) That for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to
be a new Registration Statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) to remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination
of the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plans' annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
Registration Statement shall be deemed to be a new Registration Statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the provisions described in item 15 above, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act of 1933 and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all the
requirements of filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Louisville, State of Kentucky, respectively, on the
30th day of July, 1996.
RALLY'S HAMBURGERS, INC.
By:*
-----------------------
Burt Sugarman
Chairman of the Board
By:*
-----------------------
Donald E. Doyle
President and Chief
Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
*
- ------------------------------
Burt Sugarman Chairman of the July 30, 1996
Board and Director
*
- ------------------------------ President, Chief July 30, 1996
Donald E. Doyle Executive Officer
and Director
</TABLE>
II-4
<PAGE>
<TABLE>
<S> <C> <C>
* Sr. Vice July 30, 1996
- -------------------------- President and
Michael E. Foss Chief Financial
Officer (Principal
Financial and
Accounting
Officer)
* Director July 30, 1996
- --------------------------
Terry N. Christensen
* Director July 30, 1996
- --------------------------
Willie D. Davis
* Director July 30,1996
- --------------------------
William P. Foley, II
* Director July 30, 1996
- --------------------------
David Gotterer
* Director July 30, 1996
- --------------------------
Jeffrey Rosenthal
* Director July 30, 1996
- --------------------------
C. Thomas Thompson
*By: /s/ Evan G. Hughes
---------------------
Evan G. Hughes
Attorney-in-fact
</TABLE>
II-5
<PAGE>
Exhibit 24
Consent of Independent Public Accountant
----------------------------------------
As independent public accountants, we hereby consent to the incorporation by
reference in this Registration Statement of our reports dated March 6, 1996
included in Rally's Hamburgers, Inc.'s Form 10-K for the year ended December 31,
1995 and to all references to our Firm included in this Registration Statement.
Louisville, Kentucky ARTHUR ANDERSEN LLP
July 25, 1996
II-6
<PAGE>
NUMBER OF SUBSCRIPTION RIGHTS
RIGHTS CUSIP NO. 75 1203 118
CERTIFICATE NO.
VOID AND VALUELESS IF NOT RECEIVED BY SUBSCRIPTION AGENT WITH PAYMENT
IN FULL BY 5:00 P.M. NEW YORK CITY TIME ON AUGUST 30, 1996.
SUBSCRIPTION PRICE: $3.00 for each Unit EXPIRATION TIME: 5:00 p.m. New York
City Time on
August 30, 1996
The registered holder named below or assigns is entitled to subscribe
for one Unit for each 4.5 Rights held. Each Unit consists of one share of
Common Stock, par value $.10 per share, and one warrant to purchase an
additional share of Common Stock of Rally's Hamburgers, Inc. upon the terms and
conditions set forth in the Prospectus, dated July 31, 1996 and the instructions
relating thereto. All capitalized terms used herein have the same meaning as
are given to them in the Prospectus, which is available from the Information
Agent.
4.5 Rights and $3.00 are need to subscribe for one Unit.
RALLY'S HAMBURGERS,INC.
By
____________________________________
DONALD E. DOYLE
President and Chief Executive Officer
____________________________________
EVAN G. HUGHES
Secretary
Countersigned and Registered
THE SUBSCRIPTION
AGENT, AMERICAN
STOCK TRANSFER &
TRUST COMPANY
By
__________________________
THIS OFFERING MAY BE WITHDRAWN UNDER CERTAIN CIRCUMSTANCES. Subscribers are
advised to review the instructions and the Prospectus, copies of which are
available from Morrow & Co., Inc., Information Agent, 909 Third Avenue, New
York, New York 10022, telephone: (800) 556-9061, before subscribing for units.
<PAGE>
FORM 1-SUBSCRIPTION: The undersigned hereby irrevocably subscribes for full
Units as indicated below, on the terms specified in the Prospectus dated July
31, 1996, receipt of which is hereby acknowledged.
Number of Units subscribed for pursuant to
the Basic Subscription Privilege (4.5 Rights
needed to subscribe for each Unit)
______
Number of Units subscribed for pursuant to
the Oversubscription Privilege
______
Cost (total Units subscribed for times $3.00)
$_____
CHECK, BANK DRAFT OR MONEY ORDER PAYABLE TO
AMERICAN STOCK TRANSFER & TRUST COMPANY
MUST BE ENCLOSED HEREWITH.
_______________________________
Subscriber(s) Signature(s) (See
Instructions 4 and 5 as to
Signature Guarantee)
Telephone No. ( ) ___-____.
PLEASE READ BEFORE SIGNING:
Signature(s) must correspond with the name(s) of the
registered holder of the subscription certificate.
If a joint account, each must sign. Persons signing
in a representative or fiduciary capacity must
indicate capacity when signing.
FORM 2-TO TRANSFER YOUR RIGHTS: For
value received (insert number) Rights
represented by this Subscription Certificate
are hereby assigned to (please print name and
address and Social Security no. of transferee
in full):
______________________________________________
______________________________________________
______________________________________________
Social Security Number
______________________________________________
Signature(s) of Transferor(s)
(See Instructions 4 and 5 as to Signature Guarantee)
FORM 3-DELIVERY INSTRUCTIONS. Address for
delivery of stock if other than shown
on the reverse side hereof of in Form 2
______________________________________________
______________________________________________
Signature(s) guaranteed by:
______________________________________________
(See Instructions 4 and 5)
<PAGE>
INSTRUCTIONS AS TO USE OF RALLY'S HAMBURGERS, INC.
SUBSCRIPTION CERTIFICATE
___________________
CONSULT THE INFORMATION AGENT, THE SUBSCRIPTION AGENT,
YOUR BANK OR BROKER AS TO ANY QUESTIONS
The following relates to a rights offering by Rally's Hamburgers, Inc. (the
"Company") to the holders of its outstanding Common Stock, $0.10 par value per
share (the "Common Stock") (the "Rights Offering"). Holders of record at the
close of business on July 31, 1996 (the "Record Date") are receiving one right
("Right") for each share of Common Stock held on the Record Date. Rights
holders may purchase one Unit (a "Unit") consisting of one share of Common Stock
and one warrant to purchase an additional share of Common Stock for each 4.5
Rights held ("Basic Subscription Privilege") at the subscription price of $3.00
(the "Subscription Price"). No fractional Units will be sold, and fractional
interests will be rounded down. There will be no adjustment to the Rights upon
any dividend to or on changes in the outstanding shares of Common Stock.
Subscriptions, once exercised, are irrevocable.
Each stockholder of the Company who subscribes in full for Units pursuant
to the Basic Subscription Privilege will be entitled to purchase any
unsubscribed Units at the Subscription Price ("Oversubscription Privilege").
However, if the total number of Units subscribed for pursuant to the Basic
Subscription Privilege and the Oversubscription Privilege exceeds the total
number of Units underlying Rights issued to stockholders, the number of Units
available for subscription pursuant to the Oversubscription Privilege will be
allocated, to the nearest whole Unit, among those stockholders oversubscribing
on the basis of their relative subscriptions pursuant to the Basic Subscription
Privilege.
The number of Rights to which you are entitled is printed on the face of
your subscription certificate. You should indicate the use you wish to make of
your Rights by completing the appropriate form or forms on the back of your
subscription certificate and returning the certificate to the Subscription Agent
in the envelope provided.
YOUR SUBSCRIPTION CERTIFICATE AND THE RELATED PAYMENT MUST BE RECEIVED BY
THE SUBSCRIPTION AGENT ON OR BEFORE 5:00 P.M., NEW YORK CITY TIME, ON AUGUST 30,
1996, SUBJECT TO EXTENSION BY THE COMPANY ("EXPIRATION DATE"). AFTER THE
EXPIRATION DATE, THE COMPANY'S OFFER WILL NO LONGER BE EFFECTIVE, AND THE RIGHTS
WILL BE VOID AND VALUELESS. THE COMPANY IS NOT OBLIGATED TO HONOR ANY
SUBSCRIPTIONS RECEIVED BY THE SUBSCRIPTION AGENT AFTER THE EXPIRATION DATE,
REGARDLESS OF WHEN SUCH SUBSCRIPTIONS WERE SENT. THE RISK OF DELIVERY OF THE
SUBSCRIPTION CERTIFICATES AND PAYMENT OF THE SUBSCRIPTION PRICE IS ON
SUBSCRIBERS, NOT THE COMPANY OR THE SUBSCRIPTION AGENT.
<PAGE>
1. SUBSCRIPTION. Complete and execute Form 1, have your signature
guaranteed, if required (see paragraph 5(c) below), and send your subscription
certificate, together with payment of the total Subscription Price, to the
Subscription Agent. DO NOT SEND SUBSCRIPTION CERTIFICATES OR PAYMENTS TO THE
COMPANY. Payment of the Subscription Price should be made in U.S. dollars by
(i) check or bank draft drawn upon a U.S. Bank or postal, telegraphic or express
money order payable to American Stock Transfer & Trust Company, Subscription
Agent, for the full number of Units subscribed for, Subscription Agent, for the
full units in place of shares or (ii) wire transfer of funds to the account
maintained by the Subscription Agent for such purpose at _____________________
Bank; or (iii) in such other manner as Company may approve in writing in the
case of persons acquiring Units at an aggregate Subscription Price of $500,000
or more, provided in each case that the full amount of such Subscription Price
is received by the Subscription Agent in currently available funds within three
NASDAQ National Market ("NNM") trading days following the Expiration Date (the
payment method under (iii) being an "Approved Payment Method"). Payment of the
Subscription Price will be deemed to have been received by the Subscription
Agent only upon (a) clearance of any uncertified check, (b) receipt by the
Subscription Agent of any certified check or bank draft drawn upon a United
States bank or of any postal, telegraphic or express money order, (c) receipt of
good funds in the Subscription Agent's account designated above, or (d) receipt
of funds by the Subscription Agent through an Approved Payment Method.
If paying by uncertified personal check, please note that the funds paid
thereby may take at least five business days to clear. Accordingly, Holders who
wish to pay the Subscription Price by means of uncertified personal check are
urged to make payment sufficiently in advance of the Expiration Date to ensure
that such payment is received and clears by such date and are urged to consider
payment by means of certified or cashier's check, money order or wire transfer
of funds.
The Subscription Agent is American Stock Transfer & Trust Company. The
address and telephone number of the Subscription Agent are as follows:
IF BY HAND OR BY MAIL:
American Stock Transfer & Trust Company
40 Wall Street, 46th Floor
New York, New York 10005
TELEPHONE:
(800) 937-5009
Facsimile: (718) 234-5001
If you subscribe for a number of Units requiring a lesser number of Rights
than are evidenced by your subscription certificate, the Subscription Agent
will, if practicable, sell such
2
<PAGE>
excess Rights and will remit the net proceeds, if any, to the subscriber,
provided appropriate instructions are received.
2. DELIVERY OF STOCK CERTIFICATES, ETC. Certificates representing the
share(s) of Common Stock and the Warrant(s) comprising the Unit(s) will be
mailed to subscribers as soon as practicable after a subscription has been
accepted by the Subscription Agent.
3. TO PURCHASE, SELL OR TRANSFER THE RIGHTS. Rights may be purchased or
sold through normal investment channels, including brokers. To sell or transfer
all or a portion of the Rights evidenced by a subscription certificate, other
than through the Subscription Agent, you must complete and execute Form 2 in its
entirety and have your signature guaranteed (see paragraph 5(c) below). If you
are transferring Rights through a bank or broker, deliver the executed
subscription certificate and a completed form W-9, as described in paragraph 6
below, to you bank or broker. If you transfer less than all of the Rights
evidenced by your subscription certificate, the Subscription Agent will issue a
new subscription certificate evidencing the remaining Right(s) to you.
The Rights are traded on the NNM and in the over-the-counter market, but
trading on the NNM will be discontinued at the close of business on the trading
day preceding the Expiration Date. The Rights will trade under the symbol
"RLLYRt."
4. TO HAVE SUBSCRIPTION CERTIFICATE DIVIDED INTO SMALLER DENOMINATIONS.
Send you subscription certificate, together with complete separate instructions
(including specification of the denominations into which you wish your Rights to
be divided) signed by you, to the Subscription Agent allowing for a sufficient
amount of time for new subscription certificates to be issued and returned so
that they can be used prior to the Expiration Date. Your signature must be
guaranteed, as described in paragraph 5(c) below, if any of the new subscription
certificates are to be issued in a name other than that in which the old
subscription certificate was issued.
5. EXECUTION.
(A) EXECUTION BY REGISTERED HOLDER. The signature on the
subscription certificate must correspond with the name as it appears in the
register for the Rights maintained by the Subscription Agent in every particular
without alteration or any change whatsoever. Persons who sign the subscription
certificate in a representative or fiduciary capacity must indicate their
capacity when signing and, unless waived by the Subscription Agent in its sole
and absolute discretion, must present to the Subscription Agent satisfactory
evidence of their authority to so act.
3
<PAGE>
(B) EXECUTION BY PERSON OTHER THAN REGISTERED HOLDER. If the
subscription certificate is executed by a person other than the registered
holder, proper evidence of authority of the person executing the subscription
certificate must accompany the same unless the Subscription Agent, in its sole
and absolute discretion, dispenses with proof of authority.
(C) SIGNATURE GUARANTEE. Holders of record may exercise, divide or
combine their Rights without a signature guarantee, if the securities issued as
a result of such exercise, division or combination are to be registered in such
record holder's name and returned to such record holder. ALL OTHER EXERCISES,
TRANSFERS, DIVISIONS OR COMBINATIONS OF RIGHTS REQUIRE A SIGNATURE GUARANTEE OF
AN ELIGIBLE INSTITUTION OF THE SIGNATURE OF THE PERSON SEEKING TO TAKE SUCH
ACTION. An Eligible Institution means a firm or other entity identified in Rule
17Ad-15 under the Securities Exchange Act of 1934, as amended, including (as
such terms are defined therein): (i) a bank; (ii) a broker, dealer, municipal
securities dealer, municipal securities broker, government securities dealer or
government securities broker; (iii) a credit union; (iv) a national securities
exchange, registered securities association or clearing agency; or (v) a savings
association. A verification by a Notary Public is not acceptable.
6. FORM W-9 AND TAXPAYER IDENTIFICATION NUMBER. Federal income tax law
requires that a holder of Rights who sells or transfers such Rights through a
broker or bank must provide the bank or broker with his or her correct taxpayer
identification number ("TIN") by completing the enclosed Form W-9. In the case
of a holder of Rights who is an individual, the TIN is his or her social
security number.
If such bank or broker, as the case may be, is not provided with the TIN,
the holder of Rights may be subject to backup withholding. Backup withholding
may also result if an incorrect TIN is so provided. If backup withholding
results in an overpayment of taxes, a refund may be obtained. To prevent backup
withholding, each holder who sells Rights must provide his or her correct TIN by
completing the enclosed Form W-9, certifying that the TIN provided is correct
(or that such holder is awaiting a TIN).
7. METHOD OF DELIVERY. The method of delivery of subscription
certificates and payment of the Subscription Price to the Subscription Agent
will be at the election and risk of the Rights holder, but if sent by mail, it
is recommended that they be sent by registered mail, properly insured, with
return receipt requested, and that a sufficient number of days be allowed to
ensure delivery to the Subscription Agent prior to 5:00 p.m., New York City
time, on the Expiration Date.
8. LATE DELIVERY OF SUBSCRIPTION CERTIFICATE. If, prior to 5:00 p.m. on
the Expiration Date, the Subscription Agent has received full payment for the
total number of Units subscribed for
4
<PAGE>
by a Rights holder, together with an executed Notice of Guaranteed Delivery (in
the form provided with the Rights certificate and available from the
Subscription Agent) from a commercial bank, a trust company having an office in
the United States or a member firm of any registered national securities
exchange or the National Association of Securities Dealers, Inc. stating the
name of the subscriber, the number of Rights represented by the Rights
certificate and the number of Units subscribed for and guaranteeing that the
subscription certificate and the number of Units subscribed for and guaranteeing
that the subscription certificate will be delivered within three NNM trading
days after the Expiration Date to the Subscription Agent, such subscription will
be accepted. The certificates representing the shares of Common Stock and the
Warrants comprising the Units will be withheld by the Subscription Agent until
receipt of the duly completed and executed subscription certificate.
THE RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON AUGUST 30,
1996, AND WILL BE VALUELESS THEREAFTER.
5
<PAGE>
Exhibit 4.(b)
================================================================================
RALLY'S HAMBURGERS, INC.
WARRANT AGREEMENT
BETWEEN
RALLY'S HAMBURGERS, INC.
AND
AMERICAN STOCK TRANSFER & TRUST COMPANY
AS WARRANT AGENT
Dated as of , 1996
================================================================================
<PAGE>
RALLY'S HAMBURGERS, INC.
WARRANT AGREEMENT
THIS WARRANT AGREEMENT (the "Agreement"), dated as of
1996, is made and entered into by and between RALLY'S HAMBURGERS, INC., a
Delaware corporation (the "Company"), and American Stock Transfer & Trust
Company, as warrant agent (the "Warrant Agent")
WHEREAS, in connection with a rights offering (the "Rights Offering")
pursuant to which the shareholders of the Company ("Shareholders") may purchase
up to 3,484,074 units (the "Units"), each Unit consisting of one share of the
Company's common stock, $.10 par value (the "Common Stock"), and one redeemable
common stock purchase warrant (the "Warrant"), the Company will issue up to
3,484,074 Warrants evidencing the right to purchase an aggregate of 3,484,074
shares of Common Stock as constituted on the date hereof; and
WHEREAS, the Company desires the Warrant Agent act on behalf of the
Company, and the Warrant Agent is willing so to act, in connection with the
issuance, registration, transfer, exchange, exercise and redemption of the
Warrants;
NOW, THEREFORE, in consideration of the promises and the mutual
agreements herein set forth, the parties agree as follows:
SECTION 1. APPOINTMENT OF WARRANT AGENT. The Company hereby appoints
the Warrant Agent to act as agent of the Company for the Warrants, and the
Warrant Agent hereby accepts such appointment and agrees to perform the same in
accordance with the terms and conditions set forth in this Agreement.
SECTION 2. WARRANTS AND FORM OF WARRANT CERTIFICATES.
(A) Each Warrant shall entitle the registered holder of the
certificate representing such Warrant to purchase upon the exercise thereof, one
share of Common Stock, subject to the adjustments provided for in Section 9
hereof, at any time until 5:00 p.m, Eastern time, on _________________, 2000
("Expiration Date") unless earlier redeemed pursuant to Section 11 hereof.
(B) The Warrant certificates shall be in registered form only. The
text of the Warrant certificate and the form of election to exercise a Warrant
on the reverse side thereof shall be substantially in the form of Exhibit A
attached hereto. Each Warrant certificate shall be dated as of the date of
issuance thereof by the Warrant Agent (whether upon initial issuance or upon
transfer or exchange) and shall be executed on behalf of the Company by the
manual or facsimile signature of its President or a Vice President, under its
corporate seal, affixed or in facsimile, and attested to by the manual or
facsimile signature
- 2-
<PAGE>
of its Secretary or an Assistant Secretary. In case any officer of the Company
who shall have signed any Warrant certificate shall cease to be such officer of
the Company prior to the issuance thereof, such Warrant certificate may
nevertheless be issued and delivered with the same force and effect as though
the person who signed the same had not ceased to be such officer of the Company.
Any such Warrant certificate may be signed on behalf of the Company by persons
who, at the actual date of execution of such Warrant certificate, are the proper
officers of the Company, although at the nominal date of such Warrant
certificate any such person shall not have been such officer of the Company.
SECTION 3. EXERCISE OF WARRANTS AND WARRANT PRICE. Subject to the
provisions of this Agreement, each registered holder of one or more Warrant
certificates shall have the right, which may be exercised as in such Warrant
certificates expressed, to purchase from the Company (and the Company shall
issue and sell to such registered holder) the number of shares of Common Stock
to which the Warrants represented by such certificates are at the time entitled
hereunder.
Each Warrant not exercised by its expiration date shall become void,
and all rights thereunder and all rights in respect thereof under this Agreement
shall cease on such date.
A Warrant may be exercised by the surrender of the certificate
representing such Warrant to the Company, at the office of the Warrant Agent, or
at the office of a successor to the Warrant Agent, with the subscription form
set forth on the reverse thereof duly executed and properly endorsed with the
signatures properly guaranteed, and upon payment in full to the Warrant Agent
for the account of the Company of the Warrant Price (as hereinafter defined) for
the number of shares of Common Stock as to which the Warrant is exercised. Such
Warrant Price shall be paid in full in cash, or by certified check or bank draft
payable in United States currency to the order of the Warrant Agent.
The price per share of Common Stock at which the Warrants may be
exercised (the "Warrant Price") shall be $3.00 (adjusted in accordance with
Section 9 hereof, taking into account prior adjustments). At any time, or from
time to time the Company may reduce either or both of the Warrant Prices or
extend the expiration date for such period or periods of time as it may
determine. Notice of any such reduction in the Warrant Prices or extension of
the expiration date shall be promptly provided to the Warrant Agent.
Subject to the further provisions of this Section 3 and of Section 6
hereof, upon such surrender of Warrant certificates and payment of the
applicable Warrant Price as aforesaid, the Company shall issue and cause to be
delivered, with all reasonable
- 3-
<PAGE>
dispatch to or upon the written order of the registered holder of such Warrants
and in such name or names as such registered holder may designate, a certificate
or certificates for the number of securities so purchased upon the exercise of
such Warrants, together with cash, as provided in Section 10 of this Agreement,
in respect of any fraction of a share or security otherwise issuable upon such
surrender. All shares of Common Stock issued upon the exercise of a Warrant
shall be validly issued, fully paid and nonassessable and shall be listed on any
and all national securities exchanges upon which any other shares of the Common
Stock or securities otherwise issuable are then listed.
Certificates representing such securities shall be deemed to have been
issued and any person so designated to be named therein shall be deemed to have
become a holder of record of such securities as of the date of the surrender of
such Warrants and payment of the Warrant Price as aforesaid; provided, however,
that if, at the date of surrender of such Warrants and payment of the applicable
Warrant Price, the transfer books for the Common Stock or other securities
purchasable upon the exercise of such Warrants shall be closed, the certificates
for the securities in respect of which such Warrants are then exercised shall be
issuable as of the date on which such books shall next be opened and until such
date the Company shall be under no duty to deliver any certificate for such
securities. The rights of purchase represented by each Warrant certificate
shall be exercisable, at the election of the registered holders thereof, either
as an entirety or from time to time for part of the number of securities
specified therein and, in the event that any Warrant certificate is exercised in
respect of less than all of the securities specified therein at any time prior
to the expiration date of the Warrant certificate, a new Warrant certificate or
certificates will be issued to such registered holder for the remaining number
of securities specified in the Warrant certificate so surrendered.
SECTION 4. COUNTERSIGNATURE AND REGISTRATION. The Warrant Agent shall
maintain books (the "Warrant Register") for the registration and the
registration of transfer of the Warrants. The Warrant certificates shall be
countersigned manually or by facsimile by the Warrant Agent (or by any successor
to the Warrant Agent then acting as such under this Agreement) and shall not be
valid for any purpose unless so countersigned. Warrant certificates may be so
countersigned, however, by the Warrant Agent and delivered by the Warrant Agent
notwithstanding that the persons whose manual or facsimile signatures appear
thereon as proper officers of the Company shall have ceased to be such officers
at the time of such countersignature or delivery.
Prior to due presentment for registration of transfer of any Warrant
certificate, the Company and the Warrant Agent may deem and treat the person in
whose name such Warrant certificate shall
- 4 -
<PAGE>
be registered upon the Warrant Register (the "registered holder") as the
absolute owner of such Warrant certificate and of each Warrant represented
thereby (notwithstanding any notation of ownership or other writing on the
Warrant certificate made by anyone other than the Company or the Warrant Agent),
for the purpose of any exercise thereof, of any distribution or notice to the
holder thereof, and for all other purposes, and neither the Company nor the
Warrant Agent shall be affected by any notice to the contrary.
SECTION 5. TRANSFER AND EXCHANGE OF WARRANTS. The Warrant Agent
shall register the transfer, from time to time, any outstanding Warrant upon the
Warrant Register, upon surrender of the certificate evidencing such Warrant for
transfer, properly endorsed with signatures properly guaranteed and accompanied
by appropriate instructions for transfer. Upon any such transfer, a new Warrant
certificate representing an equal aggregate number of Warrants shall be issued
to the transferee and the surrendered Warrant certificate shall be canceled by
the Warrant Agent. The Warrant certificates so canceled shall be delivered by
the Warrant Agent to the Company from time to time upon request.
Warrant certificates may be surrendered to the Warrant Agent, together
with a written request for exchange, and thereupon the Warrant Agent shall issue
in exchange therefor one or more new Warrant certificates as requested by the
registered holder of the Warrant certificate or certificates so surrendered,
representing an equal aggregate number of Warrants.
The Warrant Agent shall not be required to effect any registration of
transfer or exchange which will result in the issuance of a Warrant certificate
for a fraction of a warrant.
No service charge shall be made for any exchange or registration of
transfer of Warrant certificates.
The Warrant Agent is hereby authorized to countersign and to deliver,
in accordance with the terms of this Agreement, the new Warrant certificates
required to be issued pursuant to the provisions hereof, and the Company,
whenever required by the Warrant Agent, will supply the Warrant Agent with
Warrant certificates duly executed on behalf of the Company for such purpose.
SECTION 6. PAYMENT OF TAXES. The Company will pay any documentary
stamp taxes attributable to the initial issuance of the shares of Common Stock
issuable upon the exercise of Warrants; provided, however, that the Company
shall not be required to pay any tax or taxes which may be payable in respect of
any transfer involved in the issuance or delivery of any certificates for shares
of Common Stock in a name other than that of the registered holder of Warrants
in respect of which such shares are issued, and in such case neither the Company
nor the
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Warrant Agent shall be required to issue or deliver any certificate for shares
of Common Stock or any Warrant certificate until the person requesting the same
has paid to the Company the amount of such tax or has established to the
Company's satisfaction that such tax has been paid.
SECTION 7. MUTILATED OR MISSING WARRANTS. In case any of the Warrant
certificates shall be mutilated, lost, stolen or destroyed, the Company may in
its discretion issue, and the Warrant Agent shall countersign and deliver in
exchange and substitution for and upon cancellation of the mutilated Warrant
certificate, or in lieu of and substitution for the Warrant certificate lost,
stolen or destroyed, a new Warrant certificate representing an equal aggregate
number of Warrants, but only upon receipt of evidence satisfactory to the
Company and the Warrant Agent of such loss, theft or destruction of such Warrant
certificate and reasonable indemnity, if requested, also satisfactory to them.
Applicants for such substitute Warrant certificates shall also comply with such
other reasonable conditions and pay such reasonable charges as the Company or
the Warrant Agent may prescribe.
SECTION 8. RESERVATION OF COMMON STOCK. There have been reserved,
and the Company shall at all times keep reserved, out of the authorized and
unissued shares of Common Stock, a number of shares sufficient to provide for
the exercise of the rights of purchase represented by the Warrants then
outstanding, and the transfer agent for the Common Stock and every subsequent
transfer agent for any shares of the Company's capital stock issuable upon the
exercise of any of the rights of purchase aforesaid are hereby irrevocably
authorized and directed at all times to reserve such number of authorized and
unissued shares as shall be requisite for such purpose.
Prior to the issuance of any shares of Common Stock upon exercise of
the Warrants, the Company shall secure the listing of such shares on any and all
national securities exchanges upon which any of the other shares of the Common
Stock are then listed. So long as any unexpired Warrants remain outstanding,
the Company will file such post-effective amendments to the Registration
Statement or supplements to the Prospectus filed pursuant to the Securities Act
of 1933, as amended (the "Act"), with respect to the Warrants (or such other
registration statements or post-effective amendments or supplements) as may be
necessary to permit trading in the Warrants and to permit the Company to deliver
to each person exercising a Warrant a Prospectus meeting the requirements of
Section 10(a)(3) of the Act, and otherwise complying therewith; and the Company
will, from time to time, furnish the Warrant Agent with such Prospectuses in
sufficient quantity to permit the Warrant Agent to deliver such a Prospectus to
each holder of a Warrant upon the exercise thereof. The Company will keep a
copy of this Agreement on file with the transfer agent for the Common Stock and
with
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every subsequent transfer agent for any shares of the Company's capital stock
issuable upon the exercise of the rights of purchase represented by the
Warrants.
The Warrant Agent is hereby irrevocably authorized to requisition from
time to time from such transfer agent stock certificates required to honor
outstanding Warrants. The Company will supply such transfer agent with duly
executed certificates for such purpose and will itself provide or otherwise make
available any cash as provided in Section 10 of this Agreement. All Warrant
certificates surrendered in the exercise of the rights thereby evidenced shall
be canceled by the Warrant Agent and shall thereafter be delivered to the
Company, and such canceled Warrant certificates shall constitute sufficient
evidence of the number of shares of Common Stock which have been issued upon the
exercise of such Warrants. Promptly after the expiration date of the Warrants,
the Warrant Agent shall certify to the Company the aggregate number of such
Warrants which expired unexercised, and after the expiration date of the
Warrants, no shares of Common Stock shall be subject to reservation in respect
of such Warrants.
SECTION 9. ADJUSTMENT OF WARRANT PRICE AND NUMBER OF SHARES OF COMMON
STOCK. The number and kind of securities purchasable upon the exercise of the
Warrants and the applicable Warrant Price shall be subject to adjustment from
time to time upon the happening of certain events, as follows:
9.1 ADJUSTMENTS. The number of shares of Common Stock purchasable
upon the exercise of each Warrant and the applicable Warrant Price shall be
subject to adjustment as follows:
(a) In case the Company shall (i) pay a dividend in Common Stock
or make a distribution in Common Stock, (ii) subdivide its outstanding
Common Stock, (iii) combine its outstanding Common Stock into a smaller
number of shares of Common Stock, or (iv) issue, by reclassification of its
Common Stock, other securities of the Company, the number of shares of
Common Stock purchasable upon exercise of a Warrant immediately prior
thereto shall be adjusted so that the holder of a Warrant shall be entitled
to receive the kind and number of shares of Common Stock or other
securities of the Company which such holder would have owned or would have
been entitled to receive immediately after the happening of any of the
events described above, had the Warrant been exercised immediately prior to
the happening of such event or any record date with respect thereto. Any
adjustment made pursuant to this subsection 9.1(a) shall become effective
immediately after the effective date of such event retroactive to the
record date, if any, for such event.
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(b) In case the Company shall issue rights, options, warrants or
convertible securities to all or substantially all holders of its Common
Stock, without any charge to such holders, entitling them to subscribe for
or purchase Common Stock at a price per share which is lower at the record
date mentioned below than the then Current Market Price (as defined in
Section 10 hereof), the number of shares of Common Stock thereafter
purchasable upon the exercise of each Warrant shall be determined by
multiplying the number of shares of Common Stock theretofore purchasable
upon exercise of a Warrant by a fraction of which the numerator shall be
the number of shares of Common Stock outstanding immediately prior to the
issuance of such rights, options, warrants or convertible securities plus
the number of additional shares of Common Stock offered for subscription or
purchase, and of which the denominator shall be the number of shares of
Common Stock outstanding immediately prior to the issuance of such rights,
options, warrants or convertible securities plus the number of shares which
the aggregate offering price of the total number of shares offered would
purchase at such Current Market Price. Such adjustment shall be made
whenever such rights options, warrants or convertible securities are issued
and shall become effective immediately and retroactive to the record date
for the determination of shareholders entitled to receive such rights,
options, warrants or convertible securities.
(c) In case the Company shall distribute to all or substantially
all holders of its Common Stock, evidences of its indebtedness or assets
(excluding cash dividends or distributions out of earnings) or rights,
options, warrants or convertible securities containing the right to
subscribe for or purchase Common Stock (excluding those referred to in
subsection 9.1 (b) above), then in each case the number of shares of Common
Stock thereafter purchasable upon the exercise of each Warrant shall be
determined by multiplying the number of shares of Common Stock theretofore
purchasable upon exercise of such Warrant by a fraction, of which the
numerator shall be the then Current Market Price on the date of such
distribution, and of which the denominator shall be such Current Market
Price on such date minus the then fair value (as determined by the Board of
Directors, which determination, if reasonable and based upon the Board of
Directors' good faith business judgment, shall be binding upon the
registered holders) of the portion of the assets or evidences of
indebtedness so distributed or of such subscription rights, options,
warrants or convertible securities applicable to one share. Such adjustment
shall be made whenever any such distribution is made and shall become
effective on the date of distribution retroactive to the record date for
the determination of shareholders entitled to receive such distribution.
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(d) No adjustment in the number of shares of Common Stock
purchasable pursuant to the Warrants shall be required unless such
adjustment would require an increase or decrease of at least one percent in
the number of shares of Common Stock then purchasable upon the exercise of
the Warrants; provided, however that any adjustments which by reason of
this subsection 9.1(d) are not required to be made immediately shall be
carried forward and taken into account in any subsequent adjustment.
(e) Whenever the number of shares of Common Stock purchasable
upon the exercise of a Warrant is adjusted as herein provided, the
applicable Warrant Price payable upon exercise of the Warrant shall be
adjusted by multiplying such Warrant Price immediately prior to such
adjustment by the fraction, of which the numerator shall be the number of
shares of Common Stock purchasable upon the exercise of such Warrant
immediately prior to such adjustment, and of which the denominator shall be
the number of shares of Common Stock so purchasable immediately thereafter.
(f) To the extent not covered by subsections 9.1 (b) or (c)
hereof, in case the Company shall sell or issue Common Stock or rights,
options, warrants or convertible securities containing the right to
subscribe for or purchase shares of Common Stock at a price per share
(determined, in the case of such rights, options, warrants or convertible
securities, by dividing (i) the total amount received or receivable by the
Company in consideration of the sale or issuance of such rights, options,
warrants or convertible securities, plus the total consideration payable to
the Company upon exercise or conversion thereof, by (ii) the total number
of shares covered by such rights, options, warrants or convertible
securities) lower than the then Current Market Price in effect immediately
prior to such sale or issuance, then the number of Shares thereafter
purchasable upon the exercise of the Warrants shall be determined by
multiplying the number of Shares theretofore purchasable upon exercise of
the Warrants by a fraction, of which the numerator shall be the applicable
Warrant Price and the denominator shall be that price calculated to the
nearest cent) determined by dividing (I) an amount equal to the sum of (A)
the number of shares of Common Stock outstanding immediately prior to such
sale or issuance multiplied by the applicable Warrant Price, plus (B) the
consideration received by the Company upon such sale or issuance, by (II)
the total number of shares of Common Stock outstanding immediately after
such sale or issuance. For the purpose of such adjustments, the Common
Stock which the holders of any such rights, options, warrants or
convertible securities shall be entitled to subscribe for or purchase shall
be deemed issued and outstanding as of the date of such sale or issuance
and the consideration received by the
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Company therefor shall be deemed to be the consideration received by the
Company for such rights, options, warrants or convertible securities, plus
the consideration or premiums stated in such rights, options, warrants or
convertible securities to be paid for the Common Stock covered thereby In
case the Company shall sell or issue Common Stock or rights, options,
warrants or convertible securities containing the right to subscribe for or
purchase Common Stock for a consideration consisting, in whole or in part,
of property other than cash or its equivalent, then in determining the
"price per share" of Common Stock and the "consideration received by the
Company" for purpose of the first sentence of this subsection 9.1(f), the
Board of Directors shall determine the fair value of said property, and
such determination, if reasonable and based upon the Board of Directors'
good faith business judgment, shall be binding upon the Warrantholder. In
determining the "price per share" of Common Stock, any underwriting
discounts or commissions shall not be deducted from the price received by
the Company for sales of securities registered under the Act.
(g) Whenever the number of shares of Common Stock purchasable
upon the exercise of a Warrant or the Warrant Price is adjusted as herein
provided, the Company shall cause to be promptly mailed to the Warrant
Agent and each registered holder of a Warrant by first class mail, postage
prepaid, notice of such adjustment or adjustments and, with regard to the
Warrant Agent only, a certificate of the chief financial officer of the
Company setting forth the number of shares of Common Stock purchasable upon
the exercise of a Warrant and the applicable Warrant Price after such
adjustment, a brief statement of the facts requiring such adjustment and
the computation by which such adjustment was made.
(h) For the purpose of this Section 9, the term "Common Stock"
shall mean (i) the class of stock designated as the Common Stock of the
Company at the date of this Agreement, or (ii) any other class of stock
resulting from successive changes or reclassification of such Common Stock
consisting solely of changes in par value, or from par value to no par
value, or from no par value to par value. In the event that at any time, as
a result of an adjustment made pursuant to this Section 9, a registered
holder shall become entitled to purchase any securities of the Company
other than Common Stock, (i) if the registered holder's right to purchase
is on any other basis than that available to all holders of the Company's
Common Stock, the Company shall obtain an opinion of an investment banking
firm valuing such other securities and (ii) thereafter the number of such
other securities so purchasable upon exercise of a Warrant and the
applicable Warrant Price of such securities shall be
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subject to adjustment from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to the Common
Stock contained in this Section 9.
(i) Upon the expiration of any rights, options, warrants or
conversion privileges, if such shall not have been exercised, the number of
shares of Common Stock purchasable upon exercise of a Warrant and the
applicable Warrant Price, to the extent a Warrant has not then been
exercised shall, upon such expiration, be readjusted and shall thereafter
be such as they would have been had they been originally adjusted (or had
the original adjustment not been required, as the case may be) on the basis
of (A) the fact that the only shares of Common Stock so issued were the
shares of Common Stock, if any, actually issued or sold upon the exercise
of such rights, options, warrants or conversion privileges, and (B) the
fact that such shares of Common Stock, if any, were issued or sold for the
consideration actually received by the Company upon such exercise plus the
consideration, if any, actually received by the Company for the issuance,
sale or grant of all such privileges, options, warrants or conversion
privileges whether or not exercised; provided, however, that no such
readjustment shall have the effect of increasing the applicable Warrant
Price by an amount in excess of the amount of the adjustment initially made
in respect of the issuance, sale or grant of such rights, options, warrants
or conversion privileges.
9.2 NO ADJUSTMENT FOR DIVIDENDS. Except as provided in Section 9.1
hereof, no adjustment in respect of any dividends or distributions out of
earnings shall be made during the term of a Warrant or upon the exercise of a
Warrant.
9.3 NO ADJUSTMENT IN CERTAIN CASES. No adjustments shall be made pursuant
to Section 9 hereof in connection with the issuance of the Rights, the Units (or
the shares of Common Stock included therein) or the Warrants (or the underlying
shares of Common Stock). No adjustments shall be made pursuant to Section 9
hereof in connection with the grant or exercise of presently authorized or
outstanding options to purchase, or the issuance of shares of Common Stock on
the exercise thereof under the Company's 1990 Stock Option Plan and 1995 Stock
Option Plan for Non-Employee Directors or other options described in the
Prospectus, or incorporated by reference, dated July 31, 1996, as supplemented,
pursuant to which the Warrants were offered and sold.
9.4 PRESERVATION OF PURCHASE RIGHTS UPON RECLASSIFICATION, CONSOLIDATION,
ETC. In case of any consolidation of the Company with or merger of the Company
into another corporation or in case of any sale or conveyance to another
corporation of the property, assets or business of the Company as an entirety or
substantially
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as an entirety, the Company or such successor or purchasing corporation, as the
case may be, shall execute with the Warrant Agent an agreement that the
registered holders of the Warrants shall have the right thereafter, upon payment
of the Warrant Price in effect immediately prior to such action, to purchase,
upon exercise of each Warrant, the kind and amount of shares and other
securities and property which it would have owned or have been entitled to
receive after the happening of such consolidation, merger, sale or conveyance
had each Warrant been exercised immediately prior to such action. In the event
of a merger described in Section 368(a)(2)(E) of the Internal Revenue Code of
1986, as amended, in which the Company is the surviving corporation, the right
to purchase shares of Common Stock under the Warrants shall terminate on the
date of such merger and thereupon the Warrants shall become null and void, but
only if the controlling corporation shall agree to substitute for the Warrants
its warrants which entitle the holders thereof to purchase upon their exercise
the kind and amount of shares and other securities and property which they would
have owned or been entitled to receive had the Warrants been exercised
immediately prior to such merger. Any such agreements referred to in this
subsection 9.4 shall provide for adjustments, which shall be as nearly
equivalent as may be practicable to the adjustments provided for in Section 9
hereof. The provisions of this subsection 9.4 shall similarly apply to
successive consolidations, mergers, sales or conveyances.
9.5 PAR VALUE OF SHARES OF COMMON STOCK. Before taking any action which
would cause an adjustment reducing the applicable Warrant Price below the then
par value of the Common Stock issuable upon exercise of the Warrants, the
Company will take any corporate action which may, in the opinion of its counsel,
be necessary in order that the Company may validly and legally issue fully paid
and nonassessable Common Stock at such adjusted applicable Warrant Price.
9.6 INDEPENDENT PUBLIC ACCOUNTANTS. The Company may retain a firm of
independent public accountants of recognized national standing (which may be any
such firm regularly employed by the Company) to make any computation required
under this Section 9.0 and a certificate signed by such firm shall be conclusive
evidence of the correctness of any computation made under this Section 9.
9.7 STATEMENT ON WARRANT CERTIFICATES. Irrespective of any adjustments in
the applicable Warrant Price or the number of securities issuable upon exercise
of Warrants, Warrant certificates theretofore or thereafter issued may continue
to express the same price and number of securities as are stated in the similar
Warrant certificates initially issuable pursuant to this Agreement. However,
the Company may, at any time in its sole discretion (which shall be conclusive),
make any change in the form of Warrant certificate that it may deem appropriate
and
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that does not affect the substance thereof; and any Warrant certificate
thereafter issued, whether upon registration of transfer of, or in exchange or
substitution for, an outstanding Warrant certificate, may be in the form so
changed.
9.8 NO RIGHTS AS SHAREHOLDER; NOTICES TO HOLDERS OF WARRANTS. If, at any
time prior to the expiration of a Warrant and prior to its exercise, any one or
more of the following events shall occur: (a) any action which would require an
adjustment pursuant to subsection 9.1 or 9.4 hereof, or (b) a dissolution,
liquidation or winding up of the Company (other than in connection with a
consolidation, merger or sale of its property, assets and business as an
entirety or substantially as an entirety) shall be proposed:
then the Company shall give notice in writing of such event to the registered
holders of the Warrants, as provided in Section 18 hereof, at least 20 days
prior (and pursuant to the provisions of subsection 9.1(e) with respect to
adjustments pursuant to subsection 9.1(f) and 9.1(i)) to the date fixed as a
record date or the date of closing the transfer books for the determination of
the shareholders entitled to any relevant dividend, distribution, subscription
rights or other rights or for the determination of shareholders entitled to vote
on such proposed dissolution, liquidation or winding up. Such notice shall
specify such record date or the date of closing the transfer books, as the case
may be. Failure to mail or receive such notice or any defect therein shall not
affect the validity of any action taken with respect thereto.
Section 10. FRACTIONAL INTERESTS. The Company shall not be required to
issue fractional shares of Common Stock on the exercise of a Warrant. If any
fraction of a share of Common Stock would, except for the provisions of this
Section 10, be issuable on the exercise of a Warrant (or specified portion
thereof), the Company shall in lieu thereof pay an amount in cash equal to the
then Current Market Price multiplied by such fraction. For purposes of this
Agreement, the term "Current Market Price" shall mean (i) if the Common Stock is
traded in the over-the-counter market and not in the NASDAQ National Market
System nor on any national securities exchange, the average of the per share
closing bid prices of the Common Stock on the 30 consecutive trading days
immediately preceding the date in question, as reported by NASDAQ or an
equivalent generally accepted reporting service, or (ii) if the Common Stock is
traded in the NASDAQ National Market System or on a national securities
exchange, the average for the 30 consecutive trading days immediately preceding
the date in question of the daily per share closing prices of the Common Stock
in the NASDAQ National Market System or on the principal stock exchange on which
it is listed, as the case may be. For purposes of clause (i) above, if trading
in the Common Stock is not reported by NASDAQ, the bid price referred to in said
clause shall be the lowest bid price as
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reported in the "pink sheets" published by National Quotation Bureau,
Incorporated. The closing price referred to in clause (ii) above shall be the
last reported sale price or, in the case no such reported sale takes place on
such day, the average of the reported closing bid and asked prices, in either
case in the NASDAQ National Market System or on the national securities exchange
on which the Common Stock is then listed.
SECTION 11. REDEMPTION.
(A) The then outstanding Warrants may be redeemed, at the option of
the Company, at $.01 per share of Common Stock purchasable upon exercise of such
Warrants, at any time after the Daily Market Price per share of the Common Stock
for a period of 20 out of 30 consecutive trading days ending not more than 30
days prior to the date of the notice given pursuant to Section 11(B) hereof has
equaled or exceeded $6.00, as adjusted from time to time as provided in Section
9 hereof, and prior to expiration of the Warrants. The Daily Market Price of
the Common Stock shall be determined by the Company in the manner set forth in
Section 11(E) as of the end of each trading day (or, if no trading in the Common
Stock occurred on such day, as of the end of the immediately preceding trading
day in which trading occurred) and verified to the Warrant Agent before the
Company may give notice of redemption. All outstanding Warrants must be
redeemed if any are redeemed, and any right to exercise an outstanding Warrant
shall terminate at 5:00 p.m. (New York City Time) on the business day
immediately preceding the date fixed for redemption. A trading day shall mean a
day in which trading of securities occurred on the New York Stock Exchange.
(B) The Company may exercise its right to redeem the Warrants only by
giving the notice set forth in the following sentence by the end of the
thirtieth (30th) trading day after the provisions of Section 11(A) have been
satisfied. In case the Company shall exercise its right to redeem, it shall
give notice to the Warrant Agent and the registered holders of the outstanding
Warrants, by mailing to such registered holders a notice of redemption, first
class, postage prepaid, at their addresses as they shall appear on the records
of the Warrant Agent. Any notice mailed in the manner provided herein shall be
conclusively presumed to have been duly given whether or not the registered
holder actually receives such notice.
(C) The notice of redemption shall specify the redemption price, the
date fixed for redemption (which shall be between the thirtieth (30th) and
forty-fifth (45th) day after such notice is mailed), the place where the Warrant
certificates shall be delivered and the redemption price shall be paid, and that
the right to exercise the Warrant shall terminate at 5:00 p.m. (New York City
Time) on the business day immediately preceding the date fixed for redemption.
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(D) Appropriate adjustment shall be made to the redemption price and
to the minimum Daily Market Price prerequisite to redemption set forth in
Section II(A) hereof, in each case on the same basis as provided in Section 9
hereof with respect to adjustment of the Warrant Price.
(E) For purposes of this Agreement, the term "Daily Market Price"
shall mean (i) if the Common Stock is traded in the over-the-counter market and
not in the NASDAQ National Market System nor on any national securities
exchange, the closing bid price of the Common Stock on the trading day in
question, as reported by NASDAQ or an equivalent generally accepted reporting
service, or (ii) if the Common Stock is traded in the NASDAQ National Market
System or on a national securities exchange, the daily per share closing price
of the Common Stock in the NASDAQ National Market System or on the principal
stock exchange on which it is listed on the trading day in question, as the case
may be. For purposes of clause (i) above, if trading in the Common Stock is not
reported by NASDAQ, the bid price referred to in said clause shall be the lowest
bid price as reported in the "pink sheets" published by National Quotation
Bureau, Incorporated. The closing price referred to in clause (ii) above shall
be the last reported sale price or, in case no such reported sale takes place on
such day, the average of the reported closing bid and asked prices, in either
case in the NASDAQ National Market System or on the national securities exchange
on which the Common Stock is then listed.
SECTION 12. RIGHTS AS WARRANTHOLDERS. Nothing contained in this Agreement
or in any of the Warrants shall be construed as conferring upon the holders
thereof, as such, any of the rights of shareholders of the Company, including
without limitation, the right to receive dividends or other distributions, to
exercise any preemptive rights, to vote or to consent or to receive notice as
shareholders in respect of the meetings of shareholders or the election of
directors or the Company or any other matter. Anything herein to the contrary
notwithstanding, the Company shall cause copies of all financial statements and
reports, proxy statements and other documents as it shall send to its
shareholders to be sent by the same class mail as sent to its shareholders,
postage prepaid, on the date of the mailing to such shareholders, to each
registered holder of Warrants at his address appearing on the Warrant Register
as of the record date for the determination of the shareholders entitled to such
documents.
SECTION 13. DISPOSITION OF PROCEEDS ON EXERCISE OF WARRANTS. The
Warrant Agent shall account promptly to the Company with respect to Warrants
exercised, and shall promptly pay to the Company all monies received by it upon
the exercise of such Warrants, and shall keep copies of this Agreement available
for inspection by holders of Warrants during normal business hours
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SECTION 14. MERGER OR CONSOLIDATION OR CHANGE OF NAME OF WARRANT AGENT.
Any corporation into which the Warrant Agent may be merged or with which it may
be consolidated, or any corporation resulting from any merger or consolidation
to which the Warrant Agent shall be a party, or any corporation succeeding to
the corporate trust business of the Warrant Agent, shall be the successor to the
Warrant Agent hereunder without the execution or filing of any paper or any
further act on the part of any of the parties hereto provided that such
corporation would be eligible for appointment as a successor Warrant Agent under
the provisions of Section 16 of this Agreement. In case at the time such
successor to the Warrant Agent shall succeed to the agency created by this
Agreement and any of the Warrant certificates shall have been countersigned but
not delivered, any such successor to the Warrant Agent may adopt the
countersignature of the original Warrant Agent and deliver such Warrant
certificates so countersigned, and in case at that time any of the Warrant
certificates shall not have been countersigned, any successor to the Warrant
Agent may countersign such Warrant certificates either in the name of the
predecessor Warrant Agent or in the name of the successor Warrant Agent, and in
all such cases the Warrants represented by such Warrant certificates shall have
the full force provided in the Warrant certificates and in this Agreement. Any
such successor Warrant Agent shall promptly give notice of its succession as
Warrant Agent to the Company and to the registered holder of each Warrant
certificate.
In case at any time the name of the Warrant Agent shall be changed and at
such time any of the Warrant certificates shall have been countersigned but not
delivered, the Warrant Agent may adopt the countersignature under its prior name
and deliver Warrant certificates so countersigned, and, in case at that time any
of the Warrant certificates shall not have been countersigned, the Warrant Agent
may countersign such Warrant certificates either in its prior name or in its
changed name, and, in all such cases, the Warrants represented by such Warrant
certificates shall have the full force provided in the Warrant certificates and
in this Agreement.
SECTION 15. DUTIES OF WARRANT AGENT. The Warrant Agent hereby
undertakes the duties and obligations imposed by this Agreement upon the
following terms and conditions, all of which shall bind the Company and the
holders of Warrants by their acceptance thereof.
(A) The statements of fact and recitals contained herein and in the
Warrants shall be taken as statements of the Company and the Warrant Agent
assumes no responsibility for the correctness of any of the same except such as
describe the Warrant Agent or action taken or to be taken by it. The Warrant
Agent assumes no responsibility with respect to the distribution of the Warrants
except as herein expressly provided.
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(B) The Warrant Agent shall not be responsible for any failure of the
Company to comply with any of the covenants contained in this Agreement or in
the Warrants to be complied with by the Company.
(C) The Warrant Agent may consult at any time with counsel
satisfactory to it (who may be counsel for the Company) and the Warrant Agent
shall incur no liability or responsibility to the Company or to any holder of
any Warrant in respect of any action taken, suffered or omitted by it hereunder
in good faith and in accordance with the opinion or the advice of such counsel.
(D) The Warrant Agent shall incur no liability or responsibility to
the Company or to any holder of any Warrant for any action taken in reliance on
any notice, resolution, waiver, consent, order, certificate or other paper,
document or instrument believed by it to be genuine and to have been signed,
sent or presented by the proper party or parties.
(E) The Company agrees to pay to the Warrant Agent reasonable
compensation for all services rendered by the Warrant Agent in the execution of
this Agreement, to reimburse the Warrant Agent for all expenses, taxes and
governmental charges and other charges incurred by the Warrant Agent in the
execution of this Agreement and to indemnify the Warrant Agent and save it
harmless against any and all liabilities, including judgments, costs and
reasonable counsel fees, for anything done or omitted by the Warrant Agent in
the execution of this Agreement, except as a result of the Warrant Agent's
negligence, willful misconduct or bad faith.
(F) The Warrant Agent shall be under no obligation to institute any
action, suit or legal proceeding or to take any other action on behalf of the
Company or any registered holder, but this provision shall not affect the power
of the Warrant Agent to take such action as the Warrant Agent may consider
proper. All rights of action under this Agreement or under any of the Warrants
may be enforced by the Warrant Agent without the possession of any of the
Warrants or the production thereof at any trial or other proceeding relative
thereto, and any such action, suit or proceeding instituted by the Warrant Agent
shall be brought in its name as Warrant Agent, and any recovery of judgment
shall be for the ratable benefit of all the registered holders of the Warrants,
as their respective rights or interests may appear.
(G) The Warrant Agent and any shareholder, director, officer, or
employee of the Warrant Agent may buy, sell or deal in any of the Warrants or
other securities of the Company or become pecuniarily interested in any
transaction in which the Company may be interested, or contract with or lend
money to the Company or otherwise act as fully and freely as though it were not
Warrant Agent under this Agreement. Nothing herein shall
- 17 -
<PAGE>
preclude the Warrant Agent from acting in any other capacity for the Company or
for any other legal entity.
(H) The Warrant Agent shall act hereunder solely as agent and not in a
ministerial capacity, and its duties shall be determined solely by the
provisions hereof. The Warrant Agent shall not be liable for anything which it
may do or refrain from doing in connection with this Agreement, except for its
own negligence, willful misconduct or bad faith.
(I) Any request, direction, election, order or demand of the Company
shall be sufficient if evidenced by an instrument signed in the name of the
Company by its President, a Vice President or chief financial officer (unless
other evidence in respect thereof is therein specifically prescribed); and any
resolution of the Board of Directors may be evidenced to the Warrant Agent by a
copy thereof certified by the Secretary or an Assistant Secretary of the
Company.
SECTION 16. CHANGE OF WARRANT AGENT. The Warrant Agent may resign and
be discharged from its duties under this Agreement by giving the Company at
least 30 days' prior notice in writing, and by mailing notice in writing to the
registered holders at their addresses appearing on the Warrant Register, of such
resignation, specifying a date when such resignation shall take effect. The
Warrant Agent may be removed by like notice to the Warrant Agent from the
Company and by like mailing of notice to the registered holders of the Warrants.
If the Warrant Agent shall resign or be removed or shall otherwise become
incapable of acting, the Company shall appoint a successor to the Warrant Agent.
If the Company shall fail to make such appointment within 30 days after such
removal or after it has been notified in writing of such resignation or
incapacity by the resigning or incapacitated Warrant Agent or by the registered
holder of a Warrant (who shall, with such notice, submit his Warrant certificate
for inspection by the Company), then the registered holder of any Warrant may
apply to any court of competent jurisdiction for the appointment of a successor
to the Warrant Agent. Any successor Warrant Agent, whether appointed by the
Company or by such a court, shall be registered and otherwise authorized to
serve as a transfer agent pursuant to the Securities Exchange Act of 1934, as
amended. If at any time the Warrant Agent shall cease to be eligible in
accordance with the provisions of this Section 16, it shall resign immediately
in the manner and with the effect specified in this Section 16. After
acceptance in writing of the appointment, the successor Warrant Agent shall be
vested with the same powers, rights, duties and responsibilities as if it had
been originally named as Warrant Agent without further act or deed; but the
former Warrant Agent shall deliver and transfer to the successor Warrant Agent
any property at the time held by it hereunder, and execute and deliver any
further assurance, conveyance, act or deed necessary for the purpose. Upon
request of any successor Warrant Agent,
- 18 -
<PAGE>
the Company shall make, execute, acknowledge and deliver any and all instruments
in writing for more fully and effectually vesting in and confirming to such
successor Warrant Agent all such powers, rights, duties and responsibilities.
Failure to file or mail any notice provided in this Section 16, however, or any
defect therein, shall not affect the legality or validity of the resignation or
removal of the Warrant Agent or the appointment of the successor Warrant Agent,
as the case may be.
SECTION 17. IDENTITY OF TRANSFER AGENT. Forthwith upon the appointment
of any transfer agent for the Common Stock or of any subsequent transfer agent
for shares of the Common Stock or other shares of the Company's capital stock
issuable upon the exercise of the rights of purchase represented by the
Warrants, the Company will file with the Warrant Agent a statement setting forth
the name and address of such transfer agent.
SECTION 18. NOTICES. All notices, requests and other communications
pursuant to this Agreement shall be in writing and shall be sufficiently given
or made when delivered or three business days after deposit in the U.S. mail, by
first class mail, postage prepaid, addressed as follows:
(a) if to the Company, to (until another address is filed in writing
by the Company with the Warrant Agent):
Rally's Hamburgers, Inc.
10002 Shelbyville Road, Suite 150
Louisville, Kentucky 40223
Attention: President
(b) if to the Warrant Agent, to (until another address is filed in
writing by the Warrant Agent with the Company):
American Stock Transfer & Trust Company
40 Wall Street, 46th Floor
New York, New York 10005
Attention: George Karfunkel
(c) if to the registered holder of a Warrant, to the address of such
holder as shown in the Warrant Register.
SECTION 19. SUPPLEMENTS AND AMENDMENTS. The Company and the
Warrant Agent may from time to time supplement or amend this Agreement without
the approval of any holders of Warrants in order to cure any ambiguity or to
correct or supplement any provision contained herein which may be defective or
inconsistent with any other provision herein, or to make any other provisions in
regard to matters or questions arising hereunder which the Company and the
Warrant Agent may deem necessary or desirable and which shall not be
inconsistent with the provisions of the Warrants, or which shall not adversely
affect the interests of
- 19 -
<PAGE>
the holders of Warrants (including reducing the Warrant Price or extending the
redemption or expiration date).
SECTION 20. SUCCESSORS. All the covenants and provisions of
this Agreement by or for the benefit of the Company or the Warrant Agent or the
registered holders of the Warrants shall bind and inure to the benefit of their
respective successors and assigns hereunder.
SECTION 21. GOVERNING LAW. This Agreement shall be deemed to be
a contract made under the laws of the State of Delaware and for all purposes
shall be construed in accordance with the laws of said State.
SECTION 22. BENEFITS OF THIS AGREEMENT. Nothing in this
Agreement shall be construed to give to any person or corporation other than the
Company, the Warrant Agent and the registered holders of the Warrants any legal
or equitable right, remedy or claim under this Agreement. This Agreement shall
be for the sole and exclusive benefit of the Company, the Warrant Agent and the
registered holders of the Warrants.
SECTION 23. COUNTERPARTS. This Agreement may be executed in
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument.
SECTION 24. DESCRIPTIVE HEADINGS. The descriptive headings of
the several Sections of this Agreement are inserted for convenience only and
shall not control or affect the meaning or construction of any of the provisions
hereof.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed, as of the day and year first above written.
RALLY'S HAMBURGERS, INC.
By:________________________________
Its:_______________________________
AMERICAN STOCK TRANSFER & TRUST COMPANY
By:___________________________
Its:__________________________
- 20 -
<PAGE>
EXHIBIT A
WARRANT CERTIFICATE NO. ______ _____ WARRANTS
CUSIP 75 1203126
WARRANT TO PURCHASE SHARES OF COMMON STOCK
VOID AFTER _________,
PACIFIC TIME, ON _________________
RALLY'S HAMBURGERS, INC.
INCORPORATED UNDER THE LAWS
OF THE STATE OF DELAWARE
This certifies that, for value received,
__________________________________________, the registered holder hereof or
assigns (the "Holder"), is entitled to purchase from Rally's Hamburgers, Inc., a
Delaware corporation (the "Company"), at any time before 5:00 p.m., New York
City Time, on _________________, at the purchase price per share of $3.00 (the
"Warrant Price"), the number of shares of Common Stock of the Company set forth
above (the "Shares"). The number of Shares purchasable upon exercise of each
Warrant evidenced hereby and the Warrant Price per Share shall be subject to
adjustment from time to time as set forth in the Warrant Agreement referred to
below. This Warrant is subject to redemption by the Company, at $.01 per Share
of Common Stock purchasable upon exercise hereof, upon not less than 30 nor more
than 45 days' notice, at any time after the Daily Market Price (determined
pursuant to the Warrant Agreement) per share of Common Stock has equaled or
exceeded $6.00 for a period of at least 20 out of 30 consecutive trading days
during the 30 trading days prior to the date of the notice of redemption, and
prior to expiration of the Warrants. The Warrant redemption price and the Daily
Market Price referred to above shall be subject to adjustment from time to time
as set forth in the Warrant Agreement.
The Warrants evidenced hereby may be exercised in whole or in part by
presentation of this Warrant certificate with the Purchase Form attached hereto
duly executed (with a signature guarantee as provided thereon) and simultaneous
payment of the Warrant Price (subject to adjustment) at the principal office in
American Stock Transfer & Trust Company, 40 Wall Street, 46th Floor, New York,
New York 10005 (the "Warrant Agent"). Payment of such price shall be made at
the option of the Holder in cash or by certified check or bank draft payable to
the Warrant Agent, all as provided in the Warrant Agreement.
The Warrants evidenced hereby are part of a duly authorized issue of
Common Stock Purchase Warrants with rights to purchase an aggregate of up to
3,484,074 Shares of Common Stock of the
- 1 -
<PAGE>
Company and are issued under and in accordance with a Warrant Agreement dated as
of ____________, 1996, between the Company and the Warrant Agent and are subject
to the terms and provisions contained in such Warrant Agreement, to all of which
the Holder of this Warrant certificate by acceptance hereof consents. A copy of
the Warrant Agreement may be obtained for inspection by the Holder hereof upon
written request to the Warrant Agent.
Upon any partial exercise of the Warrants evidenced hereby, there
shall be countersigned and issued to the Holder a new Warrant certificate in
respect of the Shares as to which the Warrants evidenced hereby have not been
exercised. This Warrant certificate may be exchanged at the office of the
Warrant Agent by surrender of this Warrant certificate properly endorsed (with a
signature guarantee) either separately or in combination with one or more other
Warrants or one or more new Warrants to purchase the same aggregate number of
Shares as here evidenced by the Warrant or Warrants exchanged. No fractional
Shares will be issued upon the exercise of rights to purchase hereunder, but the
Company shall pay the cash value of any fraction upon the exercise of one or
more Warrants. The Warrants evidenced hereby are transferable at the office of
the Warrant Agent in the manner and subject to the limitations set forth in the
Warrant Agreement.
The Holder hereof may be treated by the Company, the Warrant Agent and
all other persons dealing with this Warrant certificate as the absolute owner
hereof for all purposes and as the person entitled to exercise the rights
represented hereby, any notice to the contrary notwithstanding, and until such
transfer is entered on such books, the Company may treat the Holder hereof as
the owner for all purposes.
This Warrant certificate does not entitle the Holder hereof to any of
the rights of a stockholder of the Company.
This Warrant certificate shall not be valid or obligatory for any
purpose until it has been countersigned by the Warrant Agent.
Dated: ___________, 1996 RALLY'S HAMBURGERS, INC.
By:________________________________
____________________
ATTEST:
___________________________
___________________________
Countersigned:
- 2 -
<PAGE>
___________________________
Warrant Agent
By:_________________________
Authorized Signatory
- 3 -
<PAGE>
[Reverse side of Warrant Certificate]
RALLY'S HAMBURGERS, INC.
PURCHASE FORM
Mailing Address:
Rally's Hamburger, Inc.
_____________________________
_____________________________
_____________________________
The undersigned hereby irrevocably elects to exercise the right of
purchase represented by the within Warrant for and to purchase thereunder,
_________ Shares of Common Stock provided for therein, and requests that
certificates for such Shares be issued in the name of:
_________________________________________________________________
(Please Print or Type Name, Address and Social Security number)
_________________________________________________________________
and if said number of Shares shall not be all the Shares purchasable hereunder
that a new Warrant certificate for the balance of the Shares purchasable under
the within Warrant certificate be registered in the name of the undersigned
Holder or his Assignee as below indicated and delivered to the address stated
below.
Dated:________________________
Name of Holder or Assignee:
______________________________
(Please Print)
Address:
_______________________________________________________
_______________________________________________________
Signature:
_______________________________________________________
Note: The above signature must correspond with the name as it
appears upon the face of the within Warrant certificate in
every particular, without alteration or enlargement or any
change whatever, unless these Warrants have been assigned.
Signature Guaranteed:
_______________________________________________________
- 4 -
<PAGE>
(Signature must be guaranteed by a bank or trust company having an office or
correspondent in the United States or by a member firm of a registered
securities exchange or the National Association of Securities Dealers, Inc.)
- 5 -
<PAGE>
ASSIGNMENT
(To be signed only upon assignment of Warrant)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto
_________________________________________________________________
(Name and Address of Assignee Must Be Printed or Typewritten)
_________________________________________________________________
the within Warrant, hereby irrevocably constituting and appointing
____________________ Attorney to transfer said Warrant on the books of the
Company, with full power of substitution in the premises.
Dated:____________________________
___________________________________
Signature of Registered Holder
Note: The signature on this assignment must
correspond with the name as it appears upon the
face of the within Warrant certificate in every
particular, without alteration or enlargement or
any change whatever.
Signature Guaranteed:
_____________________________
(Signature must be guaranteed by a bank or trust company having an office or
correspondent in the United States or by a member firm of a registered
securities exchange or the National Association of Securities Dealers, Inc.)
- 6 -
<PAGE>
[LETTER HEAD OF CHRISTENSEN, WHITE, MILLER, FINK, JACOBS, GLASER & SHAPIRO, LLP]
July 29, 1996
Rally's Hamburgers, Inc.
10002 Shelbyville Road
Suite 150
Louisville, Kentucky 40223
Re: Rally's Hamburgers, Inc.
Registration Statement on Form S-3
----------------------------------
Gentlemen:
You have requested our opinion as counsel for Rally's Hamburgers, Inc., a
Delaware corporation (the "Company"), in connection with the distribution by the
Company to the holders of its outstanding Common Stock, $.10 par value per share
(the "Common Stock"), of 3,484,074 transferable subscription rights (the
"Rights") to purchase units (the "Units"), each consisting of (i) one share of
Common Stock and (ii) a Warrant to purchase an additional share of Common Stock
(the "Warrants") (the "Rights Offering") in accordance with the Company's
Registration Statement on Form S-3 (File No. 333-07609), as amended (the
"Registration Statement").
In rendering our opinion herein, we have assumed the satisfaction of the
following conditions: the genuineness of all signatures on original documents
submitted to us; the authenticity of all documents submitted to us as copies or
facsimiles; the continued accurancy of all certificates and other documents from
public officials dated earlier than the date of this letter; the issuance by the
appropriate regulatory agencies of any necessary permits, consents, approvals,
authorizations and orders relating to the Rights Offering in their respective
jurisdictions; the Registration Statement being declared effective; the due
execution and delivery of the proposed form of warrant agreement filed as
Exhibit (4) (b) to the Registration Statement, between the Company and American
Stock Transfer & Trust Company, as Warrant Agent (the "Warrant Agreement"); the
distribution of the Rights and the offer and sale of the Units in the manner set
forth in the Registration Statement and pursuant to said permits, consents,
approvals, authorizations and orders; the receipt of the Company of the
<PAGE>
Rally's Hamburgers, Inc.
July 29, 1996
page 2
consideration for the Units as described in the Registration Statement; and the
exercise of the Warrant in accordance with the terms of the Warrant Agreement
and the continued existence of a current prospectus satisfying the requirements
of Section 10(a)(3) of the Securities Act of 1933 so long as any of the
Warrants are outstanding and exercisable. In rendering our opinion herein, we
are relying as to certain factual matters solely upon (and have ourselves
performed no examination or investigation) an Officer's Certificate given to us
by the Company.
Based upon the foregoing, it is our opinion that when issued, the Rights,
Units, Warrants and the shares of Common Stock which are a part of the Units and
which underlie the Warrants will be legally issued, fully paid and
nonassessable.
This opinion is addressed solely to the Company, and no one else has the
right to rely upon it, nor may anyone release it, quote from it, or employ it in
any transaction other than those discussed herein without our written consent;
however, we hereby consent to the filing of this opinion as an exhibit to, and
the references to this firm contained in, the Registration Statement.
Respectfully submitted,
CHRISTENSEN, WHITE, MILLER, FINK,
JACOBS, GLASER & SHAPIRO, LLP
<PAGE>
Exhibit 23
Consent of Independent Public Accountant
----------------------------------------
As independent public accountants, we hereby consent to the incorporation
by reference in this Registration Statement of our reports dated March 6, 1996
included in Rally's Hamburgers, Inc.'s Form 10-K for the year ended December 31,
1995 and to all references to our Firm included in this Registration Statement.
Louisville, Kentucky ARTHUR ANDERSEN LLP
July 1, 1996
<PAGE>
Exhibit 99
[Subscription Agent Agreement]
July 31, 1996
American Stock Transfer
& Trust Company
40 Wall Street
New York, New York 10005
Gentlemen:
In connection with your appointment as Subscription Agent in the
transaction described herein, Rally's Hamburgers, Inc. (the "Company"), a
Delaware corporation, hereby confirms its arrangements with you as follows:
1. RIGHTS OFFERING. The Company is offering (the "Rights Offering") to
---------------
the holders of shares of its Common Stock, par value $.10 per share ("Common
Stock"), on July 31, 1996 (the "Record Date"), the right ("Rights") to subscribe
for Units ("Units"), each Unit consisting of one share Common Stock ("Common
Share") and a warrant to purchase an additional Common Share. Except as set
forth under Paragraphs 8 and 9 below, Rights shall cease to be exercisable at
5:00 p.m., New York City time, on August 30, 1996 or such later date of which
the Company notifies you orally and confirms in writing (the "Expiration Date").
One Right is being issued for each Common Share held on the Record Date. Four
and one-half Rights and payment in full of the subscription price of $3.00 (the
"Subscription Price") are required to subscribe for one Unit. Rights are
evidenced by transferable subscription certificates in registered form
("Subscription Certificates"). Each holder of Subscription Certificate(s) who
exercises the holder's right to subscribe for all Units that can be subscribed
for with the Rights evidenced by such Subscription Certificate(s) (the "Basic
Subscription Right") will have the right to subscribe for additional Units, if
any, available as a result of any unexercised Rights (such additional
subscription right being referred to hereafter as the "Additional Subscription
Privilege"). The Rights Offering will be conducted in the manner and upon the
terms set forth in the Company's Prospectus dated July 31, 1996 (the
"Prospectus"), which is incorporated herein by reference and made a part hereof
as if set forth in full herein.
2. APPOINTMENT OF SUBSCRIPTION AGENT. You are hereby appointed as
---------------------------------
Subscription Agent to effect the Rights Offering in accordance with the
Prospectus. Each reference to you in this letter is to you in your capacity as
Subscription Agent unless the context indicates otherwise.
<PAGE>
American Stock Transfer
& Trust Company
July 31, 1996
Page 2
3. DELIVERY OF DOCUMENTS. Enclosed herewith are the following, the
---------------------
receipt of which you acknowledge by your execution hereof:
(a) a copy of the Prospectus;
(b) the form of Subscription Certificate (with instructions);
(c) resolutions adopted by the Board of Directors of the Company in
connection with the Rights Offering, certified by the Secretary
of the Company; and
(d) Notice of Guaranteed Delivery.
On or before August 5, 1996, you shall mail or cause to be mailed to each
holder of Common Shares at the close of business on the Record Date a
Subscription Certificate evidencing the Rights to which such holder is entitled,
a Notice of Guaranteed Delivery, a Prospectus and an envelope addressed to you.
Prior to mailing, the Company will provide you with blank Subscription
Certificates which you will prepare and issue in the names of holders of Common
Shares of record at the close of business on the Record Date and for the number
of Rights to which they are entitled. The Company will also provide you with a
sufficient number of copies of each of the documents to be mailed with the
Subscription Certificates. Immediately after the Subscription Certificates are
mailed, you shall execute and deliver to the Company a certificate in the form
of Exhibit A hereto.
4. SUBSCRIPTION PROCEDURE.
----------------------
(a) Upon your receipt prior to 5:00 p.m., New York City time, on the
Expiration Date (by mail or delivery), as Subscription Agent, of (i) any
Subscription Certificate completed and endorsed for exercise, as provided on the
reverse side of the Subscription Certificate (except as provided in paragraph 8
hereof), and (ii) payment in full of the Subscription Price in U.S. funds by
check, bank draft or money order payable at par (without deduction for bank
service charges or otherwise) to the order of American Stock Transfer & Trust
Company, you shall as soon as practicable after the Expiration Date, but after
performing the procedures described in subparagraphs (b) and (c), below (which
is anticipated to be the fifth business day thereafter) mail to the subscriber's
registered address on the books of the Company certificates representing one
Common Share
<PAGE>
American Stock Transfer
& Trust Company
July 31, 1996
Page 3
and one Warrant for each Unit duly subscribed for (pursuant to the Basic
Subscription Right and the Additional Subscription Privilege) and furnish a list
of all such information to the Company.
(b) As soon as practicable after the Expiration Date you shall
calculate the number of Units to which each subscriber is entitled pursuant to
the Additional Subscription Privilege. The Additional Subscription Privilege may
only be exercised by holders who subscribe to all the Units that can be
subscribed for under the Basic Subscription Right. The Units available for
additional subscriptions will be those that have not been subscribed and paid
for pursuant to the Basic Subscription Right (the "Remaining Units"). Where
there are sufficient Remaining Units to satisfy all additional subscriptions by
holders exercising their rights under the Additional Subscription Privilege,
each holder shall be allotted the number of additional Units subscribed for. If
the aggregate number of Units subscribed for under the Additional Subscription
Privilege exceeds the number of Remaining Units, the number of Remaining Units
allotted to each participant in the Additional Subscription Privilege
shall be the product (disregarding fractions) obtained by multiplying the number
of Remaining Units by a fraction of which the numerator is the number of Units
subscribed for by that participant under the Additional Subscription Privilege
and the denominator is the aggregate number of Remaining Units. Any fractional
Unit to which persons exercising their Additional Subscription Privilege would
otherwise be entitled pursuant to such allocation shall be rounded down to the
next whole Unit.
(c) Upon calculating the number of Units to which each subscriber is
entitled pursuant to the Additional Subscription Privilege and the amount
overpaid, if any, by each subscriber, you shall, as soon as practicable, (i)
furnish a list of all such information to the Company and (ii) inform holders of
Subscription Certificates who participated in the Additional Subscription
Privilege of the number of additional Units, if any, allotted to them.
<PAGE>
American Stock Transfer
& Trust Company
July 31, 1996
Page 4
(d) Upon calculating the number of Units to which each subscriber is
entitled pursuant to the Additional Subscription Privilege and assuming payment
for the additional Units subscribed for has been delivered, you shall mail, as
contemplated in subparagraph (a) above, certificates representing the additional
Common Shares and Warrants the subscriber has been allotted. If a lesser number
of Units is allotted to a subscriber under the Additional Subscription Privilege
than the subscriber has tendered payment for, you shall remit the difference to
the subscriber without interest or deduction at the same time as certificates
representing the Common Shares and Warrants allotted pursuant to the Additional
Subscription Privilege are mailed.
(e) Funds received by you pursuant to the Basic Subscription Right
and the Additional Subscription Privilege shall be held by you in a segregated
interest-bearing account. Upon mailing certificates representing the Common
Shares and the Warrants and refunding subscribers for additional Units
subscribed for but not allocated, if any, you shall promptly remit to the
Company all funds received in payment of the Subscription Price for Units sold
in the Rights Offering.
5. PURCHASE, SALE OR TRANSFER OF RIGHTS. Until 5:00 p.m., New York City
------------------------------------
time, on the 5th business day prior to the Expiration Date, you shall facilitate
purchases, sales or transfers of Subscription Certificates by issuing new
Subscription Certificates in accordance with the instructions set forth on the
reverse side of the Subscription Certificates.
6. DIVIDING OR COMBINING SUBSCRIPTION CERTIFICATES. Until 5:00 p.m., New
-----------------------------------------------
York City time, on the 5th business day prior to the Expiration Date, a
Subscription Certificate may be exchanged for two or more new Subscription
Certificates and two or more Subscription Certificates may be exchanged for a
new Subscription Certificate representing in each case a number of Rights
aggregating the same numbers of Rights evidenced by the original Subscription
Certificate or Subscription Certificates by completing and signing the
appropriate form on the reverse side of such Subscription Certificate and
surrendering them to you.
7. DEFECTIVE EXERCISE OF RIGHTS; LOST SUBSCRIPTION CERTIFICATES. The
------------------------------------------------------------
Company shall have the absolute right to
<PAGE>
American Stock Transfer
& Trust Company
July 31, 1996
Page 5
reject any defective exercise of Rights or to waive any defect in exercise.
Unless requested to do so by the Company, you shall not be under any duty to
give notification to holders of Subscription Certificates of any defects or
irregularities in subscriptions. Subscriptions will not be deemed to have been
made until any such defects or irregularities have been cured or waived within
such time as the company shall determine. You shall as soon as practicable
return Subscription Certificates with the defects or irregularities which have
not been cured or waived to the holder of the Rights. If any Subscription
Certificate is alleged to have been lost, stolen or destroyed, you should follow
the same procedures followed for lost stock certificates representing Common
Shares you use in your capacity as transfer agent for the Company's Common
Shares.
8. LATE DELIVERY. If prior to 5:00 p.m., New York City time, on the
-------------
Expiration Date you receive (i) payment in full of the Subscription Price for
the Units being subscribed for and (ii) a guarantee notice substantially in the
form of the Notice of Guaranteed Delivery delivered with the Subscription
Certificate, from a financial institution having an office or correspondent in
the United States, or a member firm of any registered United States national
securities exchange or of the National Association of Securities Dealers, Inc.
stating the certificate number of the Subscription Certificate relating to the
Rights, the name and address of the exercising shareholder, the number of Rights
represented by the Subscription Certificate held by such exercising shareholder,
the number of Units being subscribed for pursuant to the Rights and guaranteeing
the delivery to you of the Subscription Certificate evidencing such Rights
within three NASDAQ National Market ("NNM") trading days following the date of
the Notice of Guaranteed Delivery, then the Rights may be exercised even though
the Subscription Certificate was not delivered to you prior to 5:00 p.m., New
York City time, on the Expiration Date, provided that within three NNM trading
days following the date of the Notice of Guaranteed Delivery you receive the
properly completed Subscription Certificate evidencing the Rights being
exercised, with signatures guaranteed if required.
9. DELIVERY. You shall deliver to the Company the exercised Subscription
--------
Certificates in accordance with written directions received from the Company and
shall deliver to the subscribers who have duly exercised Rights at their
registered addresses certificates representing Common Shares and Warrants as
instructed on the reverse side of the Subscription Certificates.
<PAGE>
American Stock Transfer
& Trust Company
July 31, 1996
Page 6
10. REPORTS. You shall notify the Company by telephone on or before the
-------
close of business on each business day during the period commencing with the
mailing of the Rights and ending at the Expiration Date (and in the case of
guaranteed deliveries ending three NNM trading days after the Expiration Date)
(a "daily notice"), which notice shall thereafter be confirmed in writing, of
(i) the number of Rights exercised on the day covered by such daily notice, (ii)
the number of Rights subject to guaranteed exercises on the day covered by such
daily notice, (iii) the number of Rights for which defective exercises have been
received on the day covered by such daily notice, and (iv) the cumulative total
of the information set forth in clauses (i) through (iii) above, all without
regard to the Additional Subscription Privilege. At or before 5:00 p.m., New
York City time, on the first NNM trading day following the Expiration Date you
shall certify in writing to the Company the cumulative total through the
Expiration Date of all the information set forth in clauses (i) through (iii)
above. At or before 10:00 a.m., New York City time, on the fifth NNM trading day
following the Expiration Date you will execute and deliver to the Company a
certificate setting forth the number of Rights exercised pursuant to a Notice of
Guaranteed Delivery and as to which Subscription Certificates have been timely
received. You shall also maintain and update a listing of holders who have fully
or partially exercised their Rights, holders who have transferred their Rights
and their transferrees, and holders who have not exercised their Rights. You
shall provide the Company or its designees with such information compiled by you
pursuant to this paragraph 10 as any of them shall request.
11. FUTURE INSTRUCTIONS. With respect to notices or instructions to be
-------------------
provided by the Company hereunder, you may rely and act on any written
instruction signed by any one or more of the following authorized officers or
employees of the Company: Mr. Michael Foss, Mr. Evan Hughes or Mr. Mark
Noltemeyer.
12. PAYMENT OF EXPENSES. The Company will pay you compensation for acting
-------------------
in your capacity as Subscription Agent hereunder in the amount of $12,500.
13. COUNSEL. You may consult with counsel satisfactory to you, which may
-------
be counsel to the Company, and the written advice or opinion of such counsel
shall be full and complete authorization and protection in respect of any action
taken, suffered or omitted by you hereunder in good faith and in accordance with
such advice or opinion of such counsel.
<PAGE>
American Stock Transfer
& Trust Company
July 31, 1996
Page 7
14. INDEMNIFICATION. The Company covenants and agrees to indemnify and
---------------
hold you harmless against any costs, expenses (including reasonable fees or
legal counsel), losses or damages, which may be paid, incurred or suffered by or
to which you may become subject, arising from or out of, directly or indirectly,
any claim or liability resulting from your actions as Subscription Agent
pursuant hereto; provided that such covenant and agreement does not extend to
--------
such costs, expenses, losses and damages incurred or suffered by you as a result
of, or arising out of, your own negligence, misconduct or bad faith or that of
any employees, agents or independent contractors used by you in connection with
performance of your duties as Subscription Agent hereunder.
15. NOTICES. Unless otherwise provided herein, all reports, notices and
-------
other communications required or permitted to be given hereunder shall be in
writing and delivered by hand or confirmed telecopy or by first class U. S.
mail, postage prepaid, shall be deemed given if by hand or telecopy, upon
receipt or if by mail, three business days after deposit in the U.S. mail and
shall be addressed as follows:
(a) If to the Company, to:
RALLY'S HAMBURGERS, INC.
10002 Shelbyville Road, Suite 150
Louisville, Kentucky 40223
Attention: Donald E. Doyle,
President and Chief Executive Officer
Telephone: (502) 245-8900
Telecopy: (502) 245-8680
(b) If to you, to:
American Stock Transfer & Trust Company
40 Wall Street
New York, N.Y. 10005
Attention: George Karfunkel
Telephone: (718) 921-8200
Telecopy: (718) 236-4588
<PAGE>
American Stock Transfer
& Trust Company
July 31, 1996
Page 8
If the foregoing is in accordance with your understanding of our
arrangements, please sign and return the enclosed duplicate of this letter.
Very truly yours,
By: ____________________________________
Mr. Donald E. Doyle
President and Chief
Executive Officer
<PAGE>
American Stock Transfer
& Trust Company
July 31, 1996
Page 9
The foregoing is in accordance with our understanding and is hereby
confirmed and accepted.
AMERICAN STOCK TRANSFER & TRUST COMPANY
By: ___________________________________
Name:
Title:
Dated: July 31, 1996
<PAGE>
EXHIBIT A
---------
CERTIFICATE OF SUBSCRIPTION AGENT
American Stock Transfer & Trust Company (the "Subscription Agent") does
hereby certify that:
1. The Subscription Agent has been duly appointed and authorized to
act as Subscription Agent in connection with the issuance of rights (the
"Rights") to subscribe for the purchase of Units ("Units"), each Unit consisting
of a share of the common stock (par value $.10 per share) (the "Common Share"),
and a warrant to purchase an additional Common Share of Rally's Hamburgers,
Inc., a Delaware corporation (the "Company").
2. As of the close of business on July 31, 1996 there were 15,678,335
Common Shares issued and outstanding.
3. As such Subscription Agent, it has this date issued, countersigned
and mailed Subscription Certificates evidencing 15,678,335 Rights pursuant to
the written order of the Company.
4. Said Subscription Certificates were signed by duly authorized
offices of the Company their facsimile signatures and countersigned on behalf of
the Subscription Agent by authorized officers of the Subscription Agent who were
at the time of affixing their signatures and still are duly authorized to
countersign such Subscription Certificates.
Dated: _________________, 1996
AMERICAN STOCK TRANSFER & TRUST COMPANY
By: ___________________________________
Authorized Officer
