<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K/A NO. 1
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES AND EXCHANGE
ACT OF 1934 [NO FEE REQUIRED] for the fiscal year ended December 28, 1997.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from________________ to________________________
Commission file number ______________
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RALLY'S HAMBURGERS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Delaware 62-1210077
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
600 CLEVELAND STREET, EIGHTH FLOOR, CLEARWATER, FLORIDA 34615
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (813)441-3500
THE PURPOSE OF THIS AMENDMENT IS TO AMEND ITEMS 10, 11, 12 AND 13 IN THEIR
ENTIRETY TO READ AS SET FORTH HEREIN.
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ITEMS 10, 11, 12 AND 13 ARE HEREBY AMENDED TO READ IN THEIR ENTIRETY AS SET
FORTH BELOW.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS OF THE
REGISTRANT.
DIRECTORS AND EXECUTIVE OFFICERS
Set forth below is a list of the current Board members and executive
officers of Rally's Hamburgers, Inc. (the "Company") together with their ages,
all positions they hold, offices currently held by them and the year each person
joined the Company.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
William P. Foley, II 53 Chairman of the Board of Directors
James J. Gillespie 47 President, Chief Executive Officer and Director
Harvey Fattig 57 Executive Vice President and Chief Operating
Officer
Joseph N. Stein 37 Executive Vice President and Chief Financial
Officer
James T. Holder 39 Vice President, Assistant General Counsel and
Secretary
Terry N. Christensen 57 Director
Willie D. Davis 63 Director
David Gotterer 69 Director
Ronald B. Maggard 48 Director
Andrew F. Puzder 47 Director
Burt Sugarman 58 Director
C. Thomas Thompson 48 Director
</TABLE>
William P. Foley, II has served as a Director of the Company since 1996
and as Chairman of the Board since October 1997. Mr. Foley has been the Chairman
of the Board and Chief Executive Officer of Fidelity National Financial, Inc.,
which through its subsidiaries is a title insurance underwriting company
("Fidelity"), since its formation in 1984. Mr. Foley was also President of
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<PAGE> 3
Fidelity from 1984 until December 31, 1994. He has been Chairman of the Board
and Chief Executive Officer of Fidelity National Title Insurance Company since
April 1981. Mr. Foley is also currently serving as Chairman of the Board of
Directors and Chief Executive Officer of CKE Restaurants, Inc. ("CKE"), owner
and franchisor of the Carl's Jr. restaurant chain, and as Chairman of the Board
of Checkers Drive-In Restaurants, Inc. ("Checkers"), developer, owner, operator
and franchisor of quick-service "double drive-thru" restaurants under the name
"Checkers," and is a director of Micro General Corporation.
James J. Gillespie has served as President and Chief Executive Officer
of the Company, and as Chief Executive Officer of Checkers, since November 1997
and as a Director of the Company and Checkers since December 1997. Mr. Gillespie
served as President of the Applebee's Division of Apple South, Inc., franchisee
of 254 Applebee restaurants from January to October 1997. Prior thereto, Mr.
Gillespie served since 1976 in various capacities with Long John Silver's Inc.,
operator and franchisor of Long John Silver's restaurants, including as Senior
Vice President-Franchise Operations and, prior to that position, as Divisional
Vice President, Southwest Division. The Company and Checkers share the costs
related to the employment of Mr. Gillespie and other shared executive officers.
See "Executive Compensation" and "Compensation Committee Interlocks and Insider
Participation."
Harvey Fattig has served as Chief Operating Officer of the Company
since March 1998. From March 1990 through February 1998, Mr. Fattig served as
Regional Vice President of Long John Silver's Inc.
Joseph N. Stein has served as Executive Vice President and Chief
Financial Officer of the Company since December 1997 and as Executive Vice
President and Chief Administrative Officer of Checkers since January 1997. He
served as Chief Financial Officer of Checkers from January 1997 to February,
1998. From May 1995 through December 1996, Mr. Stein was Senior Vice President
and Chief Financial Officer for Carl Karcher Enterprises, Inc. For more than
five years prior to his employment with Carl Karcher Enterprises, Inc., Mr.
Stein was Senior Vice President, Director, National Agency Operation at Fidelity
National Title Company.
James T. Holder has served as Vice President, Assistant General Counsel
and Secretary of the Company since December 1997 and as a Senior Vice President
and General Counsel of Checkers since January 1997, as Chief Financial Officer
of Checkers from May to December 1996, and as Secretary since October 1995. Mr.
Holder served as Vice President and General Counsel of Checkers from September
1995 to June 1996, as senior legal counsel for Checkers from December 1994
through April 1995 and corporate counsel from November 1993 through November
1994. Mr. Holder was engaged in the private practice of law from January 1991 to
November 1993, in Tampa, Florida.
Terry N. Christensen has served as a Director of the Company since
1996. Mr. Christensen has been a partner in the law firm of Christensen, Miller,
Fink, Jacobs, Glaser, Weil & Shapiro, LLP since May 1988. Mr. Christensen is a
director of GIANT GROUP, LTD. ("GIANT"), MGM Grand, Inc. and Checkers.
Willie D. Davis has served as a Director of the Company since 1994. Mr.
Davis has been the President and a director of All-Pro Broadcasting, Inc., a
holding company operating several radio
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<PAGE> 4
stations, for more than the past five years. Mr. Davis currently serves on the
Board of Directors of Sara Lee Corporation, K-Mart Corporation, Dow Chemical
Company, MGM Grand, Inc., Alliance Bank, WICOR Incorporated, Johnson Controls
Incorporated and L.A. Gear, Inc.
David Gotterer has served as a Director of the Company since 1989. Mr.
Gotterer has been a partner in the accounting firm of Mason & Company, LLP, New
York, New York, for more than the past five years. Mr. Gotterer is a director
and Vice Chairman of GIANT.
Ronald B. Maggard has served as a Director of the Company since 1997.
For more than the past five years, Mr. Maggard has been President of Maggard
Enterprises, Newport Beach, which owns 25 franchised Long John Silver
restaurants and two franchised Fazoli's restaurants.
Andrew F. Puzder has served as a Director of the Company since 1997. He
has served as Executive Vice President and General Counsel of CKE since February
1997 and as an Executive Vice President and General Counsel of Fidelity since
January 1995. From March 1994 through December 1994, Mr. Puzder was a partner at
the law firm of Stradling, Yocca, Carlson & Rauth. From September 1991 through
March 1994, he was a partner at Lewis, D'Amato, Brisbois and Bisgaard, a law
firm.
Burt Sugarman has served as a Director of the Company since 1997. Mr.
Sugarman has been the Chairman of the Board, President and Chief Executive
Officer of GIANT for more than the past five years and served as the Chief
Executive Officer of Rally's from 1990 and as the Chairman of the Board of
Directors of Rally's from 1991, resigning from these offices in February 1994.
Mr. Sugarman resumed the position of Chairman of the Board of Directors of
Rally's in November 1994 and resigned such office in October 1997. Mr. Sugarman
is a Director of GIANT and Rally's.
C. Thomas Thompson has served as a Director of the Company since 1996.
He served as Chief Executive Officer of Checkers from December 1996 to November
1997, and he has served as Vice Chairman of the Board of Checkers since December
1996. Mr. Thompson has been President and Chief Operating Officer of Carl
Karcher Enterprises, Inc., a wholly owned subsidiary of CKE, since October 1994
and President of CKE since December 1984. Since 1984, Mr. Thompson has been a
partner in a partnership which owns and operates 15 restaurants under the Carl's
Jr. franchise system. Mr. Thompson is a director of Checkers.
No family relationships exist between any of the Directors of the
Company, the persons listed as nominees for election as Directors at the Meeting
and the executive officers of the Company. There are no arrangements or
understandings between any Director or nominee and any other person concerning
service or nomination as a Director.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's Directors, officers and holders of more
than 10% of the Company's Common Stock to file with the Securities and Exchange
Commission (the "SEC") initial reports of ownership and reports of changes in
ownership of Common Stock and any other equity securities of the Company. To the
Company's knowledge, based solely upon a review of the forms, reports and
certificates filed with the Company by such persons, all such Section 16(a)
filing requirements were complied with by such persons in 1996, except as
follows:
Messrs. Maggard and Puzder each filed their Form 3 late. Messrs.
Christensen, Davis, Gotterer and Sugarman each filed one Form 5 late, each of
which related to one option grant.
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ITEM 11. EXECUTIVE COMPENSATION
Set forth below is information concerning the annual and long-term
compensation for services in all capacities to the Company for the last three
fiscal years, of any person who served as the Chief Executive Officer during any
portion of 1997, the other four most highly compensated executive officers of
the Company as of December 28, 1997 who received in excess of $100,000
(collectively, the "Named Executive Officers") (as the term is defined in Item
402 (a)(3) of Regulation S-K under the Exchange Act).
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
SECURITIES
OTHER ANNUAL UNDERLYING
NAME AND SALARY BONUS COMPENSATION OPTIONS ALL OTHER
PRINCIPAL POSITION ($) ($) ($)(1) (#) COMPENSATION
- ------------------ -------- --------- ------------ --------- ------------
<S> <C> <C> <C> <C> <C> <C>
James J. Gillespie(2) 1997 $ 22,533 $ 25,000 $ 3,818(3) 300,000 $ --
Chief Executive Officer
Donald E. Doyle(4) 1997 $265,668 $ 45,887 $ 6,000(5) -- $ --
President and Chief 1996 227,116 -- 18,000(5) 350,000 --
Executive Officer
Gary J. Beisler(6) 1997 $168,077 $ 40,581 $ 5,700(7) 20,000 $ --
Sr. Vice President 1996 161,154 5,400 5,700(7) 54,500 --
Operations 1995 135,687 19,577 -- 10,000 --
Evan G. Hughes(8) 1997 $110,762 $ 21,777 $ -- 20,000 $ --
Senior Vice President 1996 138,462 -- -- 15,000 --
Chief Administrative 1995 97,500 15,540 1,462 45,000 --
Officer and Secretary
</TABLE>
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(1) Certain perquisites were provided to certain of the Named Executive
Officers, but in no event did the value of the perquisites provided in
any year exceed 10% of the amount of the executive's salary for that
year.
(2) Mr. Gillespie was appointed President and Chief Executive Officer in
November 1997.
(3) Includes relocation expenses ($3,708) and life insurance premiums
($110).
(4) Mr. Doyle joined the Company as President and Chief Executive Officer
in March 1996. He resigned from all positions he held with the Company
in October 1997.
(5) Consists of relocation expenses.
(6) Mr. Beisler resigned all positions he held in the Company in March
1998.
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<PAGE> 6
(7) Consists of automobile allowance.
(8) Mr. Hughes resigned all positions he held in the Company in December
1997.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information regarding options granted to
the Named Executive Officers during fiscal 1997 pursuant to the Company's 1990
Stock Option Plan.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE AT
ASSUMED ANNUAL RATES OF STOCK
PRICE APPRECIATION FOR OPTION
INDIVIDUAL GRANTS (1) TERM (2)
NUMBER OF PERCENTAGE OF
SECURITIES TOTAL OPTIONS
UNDERLYING GRANTED TO EXERCISE
OPTIONS EMPLOYEES IN PRICE EXPIRATION
NAME GRANTED FISCAL 1997 ($/SHARE) DATE 5% ($) 10% ($)
- ---- ---------- ----------- --------- ----------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
James J. Gillespie 300,000 42.86% $4.00 11/10/07 $754,674 $1,912,491
Donald E. Doyle -0- -- -- -- -- --
Gary J. Beisler 20,000 2.86% 2.75 3/4/07 34,589 87,656
Evan G. Hughes 20,000 2.86% 2.75 3/4/07 34,589 87,656
</TABLE>
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(1) All options were granted pursuant to the 1990 stock option plan.
(2) The 5% and 10% assumed annual rates or stock price appreciation are
provided in compliance with Regulation 5-K under the Exchange Act. The
Company does not necessarily believe that these appreciation
calculations are indicative of actual future stock option values or
that the price of the Common Stock will appreciate at such rates.
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<PAGE> 7
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION
VALUES
Set forth below is information with respect to options exercised by the
Named Executive Officers during fiscal 1997, and the number and value of
unexercised stock options held by the Named Executive Officers at the end of the
fiscal year.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED IN-THE
UNDERLYING UNEXERCISED MONEY OPTIONS
SHARES ACQUIRED VALUE OPTIONS HELD AT FISCAL
ON REALIZED AT FISCAL YEAR END YEAR END (1)
NAME EXERCISE(#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- --------------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
James J. Gillespie -- N/A 300,000 -- --
--
Gary J. Beisler -- 93,231 -- 39,490 --
Donald E. Doyle -- N/A 176,192 -- 220,240 --
Evan G. Hughes 34,998 $ 43,014 -- -- -- --
</TABLE>
- -------------------------
(1) Based on the difference between the option price and closing price of
the Company's Common Stock on the NASDAQ National Market on December
28, 1997 ($3.00).
COMPENSATION OF DIRECTORS
Directors who are not employees are compensated on the basis of $10,000
per annum, paid quarterly, plus $500 for each Board meeting attended.
Non-employee Directors also receive $500 for each committee meeting attended on
a date other than a date on which a Board meeting is held and participate in the
1994 Stock Option Plan For Non-Employee Directors. Such Plan provides for the
automatic grant to each non-employee Director upon election to the Board of
Directors of a non-qualified, ten-year option to acquire 15,000 shares of the
Company's Common Stock, with the subsequent automatic grant on May 11 of each
year, or the anniversary of such person's election as a Director if elected
after May 11, 1996, during the time such person is serving as a non-employee
Director of a non-qualified, ten-year option to acquire an additional 15,000
shares of Common Stock. In addition, each non-employee Director who is elected a
member of the Executive Committee is granted an additional option for 7,500
shares of Common Stock, and the Chairman of the Executive Committee is granted a
third option for 20,000 shares of Common Stock upon election as Chairman. During
the period each Non-Employee Director serves on the Executive Committee, such
Non-Employee Director receives subsequent automatic grants of an option to
purchase 7,500 shares of Common Stock (plus an additional 20,000 shares in the
case of the Chairman of the Executive Committee) on May 11 of each year or the
anniversary of such person's election to the Executive Committee if elected
after May 11, 1996. All such options have an exercise price equal to the closing
sale price of the Common Stock on the date of grant. Such options are
immediately exercisable. Directors who are employees of the Company receive no
extra compensation for their services as Directors.
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<PAGE> 8
EMPLOYMENT AND SEVERANCE AGREEMENTS
Effective November 10, 1997, the Company, Checkers and James J.
Gillespie entered into an employment agreement, pursuant to which Mr. Gillespie
serves as the President and Chief Executive Officer and a Director of the
Company and Checkers. The term of employment is for two years, subject to
automatic renewal by the Company and Checkers for one-year periods thereafter,
at an annual base salary of $282,500. Mr. Gillespie is also entitled to
participate in the incentive bonus plans of the Company and Checkers. Upon
execution of the employment agreement, Mr. Gillespie was granted an option to
purchase 300,000 shares of Common Stock and became entitled to receive a signing
bonus of $50,000. The option vests in three equal annual installments commencing
on November 10, 1998; provided, that if the term of the agreement is not
extended to November 10, 2000, the option shall become fully vested on November
10, 1999. Mr. Gillespie is entitled to choose to participate in either the
Company's or Checkers' employee benefit plans and programs and is entitled to
reimbursement of his reasonable moving expenses and a relocation fee of $5,000.
The agreement may be terminated at any time for cause. If Mr. Gillespie is
terminated without cause, he will be entitled to receive his base annual salary,
and any earned unpaid bonus, through the unexpired term of the agreement,
payable in a lump sum or as directed by Mr. Gillespie. Cause is defined as (i) a
material default or breach under the agreement, (ii) the willful and habitual
failure to perform duties under the agreement or corporate policies, or (iii)
misconduct, dishonesty, insubordination or other act that has a direct,
substantial and adverse effect on the reputation of the Company or Checkers or
their relationships with their customers or employees. Mr. Gillespie has agreed
to keep confidential all nonpublic information about the Company and Checkers
during the term of his employment and for a two-year period thereafter. In
addition, Mr. Gillespie has agreed that he will not, during his employment,
engage in any business which is competitive with either the Company or Checkers.
The Company and Checkers intend to share the costs associated with this
agreement. See "Compensation Committee Interlocks and Insider Participation."
In March 1996, the Company and Donald E. Doyle entered into an
agreement pursuant to which Mr. Doyle was employed as President and Chief
Executive Officer of the Company commencing March 18, 1998 at an annual base
salary of $295,000. The agreement was scheduled to expire in March 1998, subject
to renewal at the discretion of the Board of Directors. Mr. Doyle was granted an
option to purchase 350,000 shares of Common Stock at $1.75 per share. Mr. Doyle
agreed not to compete with the Company in the double drive-thru hamburger
business for a period of two years after the termination of his employment with
the Company. In addition, Mr. Doyle agreed that, during the term of his
employment and for a three-year period thereafter, he would not disclose any
material confidential information relating to certain of the operations of the
Company, the disclosure of which would be materially damaging to the Company. In
February 1997, the Company and Mr. Doyle entered into a supplemental agreement
pursuant to which this employment agreement was modified to provide that his
employment was on an "at will" basis. In addition, the supplemental agreement
provided for the acceleration of the vesting of 57,142 nonqualified options
granted to Mr. Doyle upon occurrences of certain changes in Mr. Doyle's
employment status. In October, 1997, Mr. Doyle tendered his resignation as an
officer and director of the Company, and the above-described options vested
pursuant to the supplemental agreement.
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<PAGE> 9
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board of Directors is responsible for
executive compensation decisions as described above. The Committee has been
comprised of Messrs. Christensen, Foley and Gotterer since May 1996. Mr.
Christensen is a partner in a law firm which provided legal services to the
Company during 1997 and which will provide legal services to the Company in the
future. Mr. Foley is Chairman of the Board and Chief Executive Officer of
Fidelity and CKE, which, as of May 3, 1998, beneficially owned approximately
30.9% and 12.2%, respectively, of the outstanding shares of Common Stock. Mr.
Gotterer serves as a director and Vice Chairman of the Board, and serves on the
Compensation Committee of the Board of Directors, of GIANT, which beneficially
owns approximately 12.9% of the outstanding shares of Common Stock.
On December 18, 1997, the Company acquired approximately 19.1 million
shares of Checkers' common stock, $.001 par value per share ("Checkers Common
Stock"), pursuant to that certain Exchange Agreement, dated as of December 8,
1997 (the "Exchange Agreement"), between the Company, CKE, Fidelity, GIANT and
the other parties named therein, including certain directors of the Company and
members of their immediate families. Pursuant to the Exchange Agreement, the
Company issued an aggregate of 3,909,336 shares of Common Stock and 45,667
shares of Series A Preferred Stock. The Series A Preferred Stock will be
converted into an aggregate of 4,566,700 shares of Common Stock upon approval of
Proposal No. 2 by the Company's stockholders. The exchange ratio used to
determine the number of shares of Common Stock to be issued pursuant to the
Exchange Agreement (including upon conversion of the Series A Preferred Stock)
was based upon the average closing price of the Common Stock and Checkers Common
Stock for the five trading days preceding the public announcement of the
proposed exchange on September 22, 1997. The following table sets forth the
names, number of shares of Checkers Common Stock surrendered and the number of
shares of Common Stock and Series A Preferred Stock received pursuant to the
Exchange Agreement by each person who is: (i) a Director (or nominee for
Director); (ii) an executive officer; (iii) a beneficial owner of more than five
percent of the Common Stock; or (iv) any member of the immediate family of any
of the foregoing.
<TABLE>
<CAPTION>
RALLY'S SECURITIES RECEIVED
NUMBER OF SHARES OF CHECKERS COMMON SERIES A
NAME COMMON STOCK EXCHANGED STOCK PREFERRED STOCK
- ---- ---------------------------- ------- ---------------
<S> <C> <C> <C>
CKE(1) 12,754,885 2,798,080 28,619
Fidelity(1) 1,680,616 368,673 3,771
GIANT(1) 200,045 43,869 449
David Gotterer(2) 113,438 24,838 255
Burt Sugarman(2) 113,438 24,838 255
Mary Hart Sugarman(3) 272,230 59,702 611
AJ Sugarman(3) 27,168 5,955 61
Terry Christensen(2) 55,353 12,162 124
Al Sugarman(3) 45,353 9,925 102
William P. Foley II(2) 453,754 99,553 1,018
Andrew Puzder(2) 45,353 9,925 102
C. Thomas Thompson(2) 45,353 9,925 102
</TABLE>
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<PAGE> 10
(1) Five percent stockholder.
(2) Director.
(3) Family member of Mr. Sugarman.
Effective November 30, 1997, the Company and Checkers entered into a
management services agreement (the "Management Services Agreement") pursuant to
which Checkers is providing key services to the Company, including executive
management, financial planning and accounting, franchise, purchasing and human
resources. In addition, the Company and Checkers share certain of their
executive officers, including the Chief Executive Officer and the Chief
Operating Officer. Management believes that the Company's acquisition of the
Checkers Common Stock, entering into the Management Services Agreement and
sharing certain executive officers will enable the Company and Checkers to take
advantage of cost savings opportunities by facilitating the combination of
administrative and operational functions. Management believes that the net cost
of the services provided by Checkers are generally below the cost of such
services if provided by the Company or a third party. The total cost of these
services in 1997 was $95,000.
On July 1, 1996, the Company entered into a ten-year Operating
Agreement with Carl Karcher Enterprises, Inc., a subsidiary of CKE ("CKEI"),
pursuant to which 28 Rally's owned restaurants located in California and Arizona
are being operated by CKEI. Such agreement is cancelable after an initial
five-year term, at the discretion of CKE. To date, two of these restaurants have
been converted to the Carl's Jr. format. Under the terms of the Operating
Agreement, CKEI is responsible for conversion costs associated with transforming
the restaurants to the Carl's Jr. format, as well as the operating expenses of
all the restaurants. The Company retains ownership of all 28 restaurants and is
entitled to receive a percentage of gross revenues generated by each restaurant.
The Company's revenues have been, and will continue to be, reduced by the
absence of the restaurants' sales, somewhat offset by the fee paid to the
Company by CKEI. The Company anticipates that the Operating Agreement will
continue to positively impact both net income and cash flow. While the overall
impact of the Operating Agreement is not expected to be material to the
Company's financial statements, management believes that it will allow
management to concentrate its efforts in more fully developed Rally's markets
and to take advantage of any improvements in restaurant operations attained by
CKEI. In the event of a sale of any of the 28 restaurants, the Company and CKEI
would share in the proceeds based upon the relative value of their respective
capital investments in such restaurant.
In October 1996, the Company entered into a Consulting Agreement with
CKE pursuant to which CKE is to assist and advise the Company in connection with
its operations. The Consulting Agreement, which was initially scheduled to
expire in February 1997, was extended to March 31, 1998. The Consulting
Agreement provides for payments of $3,000 per month plus ordinary expenses. In
1997, the Company paid $45,000 to CKE pursuant to this agreement.
The Company entered into a marketing sharing agreement with CKE for a
one-year term commencing December 1, 1996. The agreement provided for the use by
the Company of advertising created for CKE's Carl's Jr. restaurant chain. The
agreement, which has been terminated, provided for payments to CKE of 30% of its
production costs per commercial. The Company paid CKE $267,047 pursuant to this
agreement.
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<PAGE> 11
ITEM 12. STOCK OWNERSHIP OF PRINCIPAL HOLDERS AND MANAGEMENT.
The following table sets forth, as of April 23, 1998, information as
to: (a) the beneficial ownership of the Company's Common Stock and Series A
Preferred Stock by (i) each person serving the Company as a Director on such
date and each nominee for Director, (ii) each person who qualifies as a Named
Executive Officer, and (iii) all of the Directors and executive officers of the
Company as a group; and (b) the beneficial ownership of the Company's Common
Stock by each person known to the Company as having beneficial ownership of more
than 5% of the Company's Common Stock.
<TABLE>
<CAPTION>
COMMON STOCK SERIES A PREFERRED STOCK
----------------------------- --------------------------
NUMBER OF PERCENT OF NUMBER OF PERCENT OF
NAME SHARES (1) CLASS (2) SHARES (1) CLASS (3)
- ----- ------------ ---------- ---------- ----------
<S> <C> <C> <C> <C>
William P. Foley, II 544,553(4) 2.2% 10,180 22.3%
James J. Gillespie -- -- --
Terry N. Christensen 395,392(5) 1.6% 124 *
Willie D. Davis 460,000(6) 1.8% -- --
David Gotterer 518,068(7) 2.1% 255 *
Ronald B. Maggard 245,000(8) 1% -- --
Andrew Puzder 229,725(9) * -- --
Burt Sugarman 875,671(10) 3.4% 255 *
C. Thomas Thompson 454,925(11) 1.8% 102 *
Gary Beisler(12) 95,507(13) * -- --
Donald Doyle(12) 303,530(14) 1.2% -- --
Evan G. Hughes(12) 35,994 * -- --
All current Directors and 3,524,563(15) 12.5%
executive officers as a
group (12 persons)
CKE Restaurants, Inc. 8,076,095(16) 30.9% 28,619 62.7%
1700 N. Harbor Blvd
Anaheim, CA 92801
Fidelity National Financial, Inc. 3,128,461(16) 12.2% 3,771 8.3%
3938 State Street, #200
Santa Barbara, CA 93105
</TABLE>
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<PAGE> 12
<TABLE>
<S> <C> <C> <C> <C>
GIANT GROUP, LTD. 3,180,718 12.9% 449 *
9000 Sunset Blvd., 16th Floor
Los Angeles, CA 90069
</TABLE>
- -------------
* Less than 1%.
(1) Based upon information furnished to the Company by the named persons
and information contained in filings with the SEC. Under the rules of
the SEC, a person is deemed to beneficially own shares over which the
person has or shares voting or investment power or which the person has
the right to acquire beneficial ownership within 60 days. Unless
otherwise indicated, the named persons have sole voting and investment
power with respect to their respective shares. Excludes shares of
Common Stock which will be received upon conversion of the Company's
Series A Participating Preferred Stock, $.10 par value per share (the
"Series A Preferred Stock"), if Proposal 2 is approved at the Meeting.
See "Compensation Committee Interlocks and Insider Participation."
(2) Based on 24,636,363 shares of Common Stock outstanding as of April 13,
1998. Shares of Common Stock subject to options or warrants exercisable
within 60 days ("Exercisable Securities") are deemed outstanding for
computing the percentage of class of the persons holding such options
or warrants but are not deemed outstanding for computing the percentage
of class for any other person.
(3) Based on 45,667 shares of Series A Preferred Stock outstanding as of
April 13, 1998.
(4) Includes 445,000 shares of Common Stock underlying Exercisable
Securities.
(5) Includes 380,615 shares of Common Stock underlying Exercisable
Securities.
(6) Represents Common Stock underlying Exercisable Securities.
(7) Includes 486,615 shares of Common Stock underlying Exercisable
Securities, but excludes 22,500 shares underlying options held by Mr.
Gotterer, as to which shares he disclaims beneficial ownership since a
business partner is entitled to the beneficial ownership of such shares
upon any exercise of such options.
(8) Includes 215,000 shares of Common Stock underlying Exercisable
Securities.
(9) Includes 219,000 shares of Common Stock underlying Exercisable
Securities.
(10) Includes 850,833 shares of Common Stock underlying Exercisable
Securities. Excludes 3,180,718 shares owned by GIANT of which Mr.
Sugarman may be deemed to be a controlling person. Mr. Sugarman
disclaims beneficial ownership of the shares owned by GIANT. Also
excludes shares held by AJ Sugarman and Mary Hart Sugarman, Mr.
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Sugarman's minor child and spouse, respectively, as to which Mr.
Sugarman disclaims beneficial ownership. Mr. Sugarman is the Chairman
of the Board, President & Chief Executive Officer of GIANT and
beneficially owns approximately 55.2% of the outstanding common stock
of GIANT.
(11) Includes 267,500 shares of Common Stock underlying Exercisable
Securities.
(12) Messrs. Beisler and Hughes ceased being executive officers of the
Company in March 1998 and September 1997, respectively. Mr. Doyle
resigned all positions with the Company on October 8, 1997.
(13) Includes 93,231 shares of Common Stock underlying Exercisable
Securities.
(14) Includes 135,790 shares of Common Stock underlying Exercisable
Securities.
(15) Includes 3,524,563 shares Common Stock underlying Exercisable
Securities.
(16) Includes 6,550,607 shares of Common Stock held directly and 1,525,488
shares of Common Stock underlying Exercisable Securities.
(17) Includes 2,031,774 shares of Common Stock held directly and 1,096,687
shares of Common Stock underlying Exercisable Securities.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
"Item 10. Executive Compensation - Compensation Interlocks and Insider
Participation" is incorporated herein by reference. Christensen, Miller, Fink,
Jacobs, Glaser, Weil & Shapiro, LLP has performed legal services for the Company
during 1997 and will perform legal services for the Company in 1998. Such
services have related to compliance with securities laws, litigation and other
business matters.
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<PAGE> 14
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
RALLY'S HAMBURGERS, INC.
Date: April 24, 1998
By: /s/ James T. Holder
--------------------
James T. Holder
Vice President, Assistant General Counsel
and Secretary
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