<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
CHECKERS DRIVE-IN RESTAURANTS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
CHECKERS DRIVE-IN RESTAURANTS, INC.
600 CLEVELAND STREET, EIGHTH FLOOR
CLEARWATER, FLORIDA 34615
July 17, 1997
Dear Stockholder:
You are cordially invited to attend the 1997 Annual Meeting of
Stockholders of Checkers Drive-In Restaurants, Inc. The Meeting will be held
Wednesday, August 6, 1997 at 10:00 a.m., Eastern Daylight Savings Time, at Ruth
Eckerd Hall, located at 1111 McMullen Booth Road, Clearwater, Florida.
The Notice of the Meeting and the Proxy Statement on the following
pages cover the formal business of the Meeting. We will also report on the
progress of the Company and comment on matters of current interest.
It is important that your shares be represented at the Meeting. We ask
that you promptly sign, date and return the enclosed proxy card in the envelope
provided, even if you plan to attend the Meeting. Returning your proxy card to
us will not prevent you from voting in person at the Meeting if you are present
and choose to do so.
If your shares are held in street name by a brokerage firm, your broker
will supply you with a proxy to be returned to the brokerage firm. It is
important that you return the form to the brokerage firm as quickly as possible
so that the brokerage firm may vote your shares. You may not vote your shares in
person at the Meeting unless you obtain a power of attorney or legal proxy from
your broker authorizing you to vote the shares, and you present this power of
attorney or proxy at the Meeting.
Your Board of Directors and management look forward to greeting you
personally at the Meeting.
Sincerely,
/s/ James T. Holder
---------------------------------
James T. Holder,
Secretary
<PAGE> 3
CHECKERS DRIVE-IN RESTAURANTS, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
AUGUST 6, 1997
Notice is hereby given that the Annual Meeting of Stockholders of
Checkers Drive-In Restaurants, Inc., a Delaware corporation, will be held at
Ruth Eckerd Hall, located at 1111 McMullen Booth Road, Clearwater, Florida, on
Wednesday, August 6, 1997, at 10:00 a.m., Eastern Daylight Savings Time, for the
following purposes:
1. To elect two Directors to serve until the Annual Meeting in
2000 and until their successors are elected and qualified or until
their earlier resignation, removal from office or death;
2. To consider and act upon an amendment to the Company's
Certificate of Incorporation to increase the authorized shares of the
Company's Common Stock;
3. To ratify the Company's capital restructuring, including
the conversion of the Series A Preferred Stock into common stock;
4. To consider and act upon an amendment to the Company's 1991
Stock Option Plan;
5. To consider and act upon an amendment to the Company's 1994
Stock Option Plan for Non-Employee Directors;
6. To ratify the appointment of KPMG Peat Marwick LLP as the
Company's independent auditors for fiscal 1997; and
7. To transact such other business as may properly come before
the Meeting or any adjournment thereof.
Your attention is directed to the Proxy Statement accompanying this
Notice for a more complete description of the matters to be acted upon at the
Meeting. The 1996 Annual Report of the Company is also enclosed. Stockholders of
record at the close of business on July 16, 1997 are entitled to receive notice
of and to vote at the Meeting and any adjournment thereof. A list of such
stockholders will be available for examination by any stockholder, for any
purpose germane to the Meeting, during ordinary business hours, at the Company's
executive offices, located at 600 Cleveland Street, Eighth Floor, Clearwater,
Florida 34615, for a period of ten days prior to the Meeting date.
All stockholders are cordially invited to attend the Meeting. Whether
or not you expect to attend, please sign and return the enclosed Proxy promptly
in the envelope provided to assure the presence of a quorum. You may revoke your
Proxy and vote in person at the Meeting if you desire. If your shares are held
in street name by a brokerage firm, your broker will supply you with a proxy to
be returned to the brokerage firm. It is important that you return the form to
the brokerage firm as quickly as possible so that the brokerage firm may vote
your shares. You
<PAGE> 4
may not vote your shares in person at the Meeting unless you obtain a power of
attorney or legal proxy from your broker authorizing you to vote the shares, and
you present this power of attorney or proxy at the Meeting.
By order of the Board of Directors
/s/ James T. Holder
--------------------------------
JAMES T. HOLDER,
SECRETARY
Clearwater, Florida
July 17, 1997
<PAGE> 5
CHECKERS DRIVE-IN RESTAURANTS, INC.
600 CLEVELAND STREET, EIGHTH FLOOR
CLEARWATER, FLORIDA 34615
PROXY STATEMENT
This Proxy Statement is furnished by the Board of Directors and
management of Checkers Drive-In Restaurants, Inc. (the "Company" or "Checkers")
in connection with the solicitation of proxies to be voted at the Company's 1997
Annual Meeting of Stockholders, which will be held at 10:00 a.m., Eastern
Daylight Savings Time, on Wednesday, August 6, 1997, at Ruth Eckerd Hall, 1111
McMullen Booth Road, Clearwater, Florida (the "Meeting").
Any proxy delivered pursuant to this solicitation may be revoked, at
the option of the person executing the proxy, at any time before it is exercised
by delivering a signed revocation to the Company, by submitting a later-dated
proxy or by attending the Meeting in person and casting a ballot. If proxies are
signed and returned without voting instructions, the shares represented by the
proxies will be voted as recommended by the Board of Directors.
The close of business on July 16, 1997, has been designated as the
record date for the determination of stockholders entitled to receive notice of
and to vote at the Meeting ("Stockholders"). As of July 16, 1997, 60,749,933
shares of the Company's Common Stock, par value $.001 per share, were issued and
outstanding. Each stockholder will be entitled to one vote for each share of
Common Stock registered in his or her name on the books of the Company as of the
close of business on July 16, 1997 on all matters that come before the Meeting.
The approximate date on which this Proxy Statement and enclosed form of proxy
has been first mailed to stockholders is July 17, 1997.
The affirmative vote of a majority of the votes cast at the Meeting
will be required for the election of Directors. A properly executed proxy marked
"WITHHOLD AUTHORITY" with respect to the election of one or more Directors will
not be voted with respect to the Directors indicated, although it will be
counted for purposes of determining whether there is a quorum. The affirmative
vote of a majority of the outstanding shares of Common Stock will be required
for approval of Proposal 2. For each other item to be acted upon at the Meeting,
the affirmative vote of the holders of a majority of the shares of Common Stock
represented in person or by proxy at the Meeting and entitled to vote on the
item will be required for approval. A properly executed proxy marked "ABSTAIN,"
although counted for purposes of determining whether there is a quorum, will not
be voted. Accordingly, an abstention will have the same effect as a vote cast
against Proposal 2.
In accordance with the rules of the NASDAQ National Market, brokers and
nominees may be precluded from exercising their voting discretion with respect
to certain matters to be acted upon (e.g., any proposal which would
substantially affect the rights or privileges of the Common Stock) and thus, in
the absence of specific instructions from the beneficial owner of shares, will
not be empowered to vote the shares on such matters. Broker non-votes will have
the same effect as a vote cast against Proposal 2 but will not be counted in
determining the number of shares necessary for approval for other proposals.
Shares represented by such broker non-votes will, however, be counted for
purposes of determining whether there is a quorum.
-1-
<PAGE> 6
The cost of soliciting proxies will be borne by the Company. In
addition to the use of the mails, proxies may be solicited personally or by
telephone by regular employees of the Company, without additional compensation,
or by Corporate Investor Communications, which has been retained by the Company
for a fee of $6,000 plus expenses. The Company will reimburse brokers and other
persons holding stock in their names, or in the names of nominees, for their
expenses in sending proxy materials to their principals and obtaining their
proxies.
ELECTION OF DIRECTORS
There are currently seven seats on the Board of Directors of the
Company, with no vacancies. The Board is divided into three classes of Directors
serving staggered three-year terms. Directors hold their positions until the
annual meeting of stockholders in the year in which their term expires and until
their respective successors are elected and qualified or until their earlier
resignation, removal from office or death. The term of office of two of the
Company's current seven Directors, Andrew H. Hines, Jr. and Burt Sugarman, will
expire at the Meeting. Mr. Hines will not stand for re-election as a Director,
and the Board has nominated Ms. Jean Giles Wittner to fill such vacancy. The
Board of Directors unanimously recommends that you vote "FOR" the election of
Mr. Sugarman and Ms. Giles Wittner as Directors, to hold office until the
Company's annual meeting in 2000 and until their successors shall be duly
elected and qualified or until their earlier resignation, removal from office or
death. See "Management - Directors and Executive Officers" and " - Security
Ownership of Management and Others" for further information on such nominees.
Stockholders may vote for up to two nominees. Stockholders may not vote
cumulatively in the election of Directors. In the event either of the nominees
should be unable to serve, which is not anticipated, the proxy committee, which
consists of Messrs. C. Thomas Thompson, Richard E. Fortman and Joseph N. Stein,
will vote for such other person or persons for the office of Director as the
Board of Directors may recommend.
MANAGEMENT
The following table sets forth (i) the names and ages of the Directors
and executive officers of the Company and the positions they hold with the
Company and (ii) the names and ages of the nominees for Director listed herein.
Executive officers serve at the pleasure of the Board of Directors.
-2-
<PAGE> 7
<TABLE>
<CAPTION>
DIRECTORS AND EXECUTIVE OFFICERS
NAME AGE POSITION
- ---- --- --------
<S> <C>
C. Thomas Thompson 47 Chief Executive Officer and Vice Chairman of
the Board of Directors (term expiring in 1999)
Richard E. Fortman 47 President and Chief Operating Officer
Joseph N. Stein 36 Executive Vice President, Chief Administrative
Officer and Chief Financial Officer
James T. Holder 38 Senior Vice President, General Counsel and
Secretary
Michael T. Welch 45 Vice President, Operations, Marketing,
Restaurant Support Services and Research &
Development
David D. Miller 44 Vice President of Franchise Operations, Sales
and Development
Wendy A. Beck 32 Vice President of Finance, Treasurer
William P. Foley, II (1)(2) 52 Chairman of the Board of Directors (term
expiring in 1999)
Frederick E. Fisher 66 Director (term expiring in 1998)
Terry N. Christensen(1) 56 Director (term expiring in 1998)
Clarence V. McKee(1)(2) 54 Director (term expiring in 1999)
Burt Sugarman 58 Director (term expiring in 1997); Nominee for
term expiring in 2000
Jean Giles Wittner 62 Nominee for term expiring in 2000
</TABLE>
- ------------
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee and the Stock Option
Committee.
C. Thomas Thompson has served as a Director of the Company since
November 1996 and as Chief Executive Officer and Vice Chairman of the Board of
Directors of the Company since December 1996. Mr. Thompson has been President
and Chief Operating Officer of Carl Karcher Enterprises, Inc., a wholly owned
subsidiary of CKE Restaurants, Inc., owner and
-3-
<PAGE> 8
franchisor of the Carl's Jr. restaurant chain ("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 Rally's Hamburgers, Inc.
("Rally's").
Richard E. Fortman has served as President and Chief Operating Officer
of the Company since January 1997. For approximately 27 years, prior to joining
the Company, Mr. Fortman was employed by Carl Karcher Enterprises, Inc. in
various capacities. From August 1993 through December 1996, he served as
Regional Vice President, from August 1992 through August 1993, he served as
Director of Regional Operations, and from July 1984 through August 1992, he
served as Regional Director.
Joseph N. Stein has served as Executive Vice President, Chief
Administrative Officer and Chief Financial Officer of the Company since January
1997. 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 Senior Vice President and General Counsel
of the Company since January 1997, as Chief Financial Officer of the Company
from May to December 1996, and as Secretary since September 1995. Mr. Holder
served as Vice President and General Counsel of the Company from September 1995
to June 1996, as senior legal counsel for the Company from December 1994 through
August 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.
Michael T. Welch has served as Vice President, Operations, Marketing,
Restaurant Support Services and Research & Development of the Company since
March 1995. From May 1994 to March 1995, Mr. Welch served as Regional Vice
President of Operations, responsible for all Company operations outside Florida.
From 1987 to May 1994, Mr. Welch was President and a principal of W-S
Acquisition Corporation, which owned and operated several Wendy's franchises.
David D. Miller has served as Vice President, Franchise Operations,
Sales and Development of the Company since May 1996. Mr. Miller served as Vice
President Marketing from March 1996 to April 1996, as Senior Director of
Operations from October 1995 to March 1996, and as Senior Director of Franchise
Operations from January 1991 to October 1995.
Wendy A. Beck has served as Treasurer of the Company since November
1995, as Vice President of Finance since April 1997 and prior thereto as Senior
Director of Treasury & Tax since August 1995. Since joining the Company in March
1993, Ms. Beck has served in various positions with the Company. Prior to
joining the Company, Ms. Beck served as Senior Tax Accountant for Lincare
Holdings, Inc., a national provider of home health care services, where she was
employed since October 1987.
-4-
<PAGE> 9
William P. Foley, II has served as a Director of the Company since
November 1996 and as Chairman of the Board since June 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 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 and is a
director of Micro General Corporation and Rally's.
Terry N. Christensen has served as a Director of the Company since
November 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"), Rally's and MGM
Grand, Inc.
Frederick E. Fisher has served as a Director of the Company since
February 1995 and as Chairman of the Board from November 1996 to June 1997. Mr.
Fisher is a private investor and has been a leader in many community and state
charitable organizations since his retirement in 1983. He is a founder and
director of Peoples Bank of Palm Harbor, Florida. Mr. Fisher was Chairman and
Chief Executive Officer of U.S. Capital Corporation, a resort development
company, in 1982 and 1983. Mr. Fisher served as the Vice Chairman and Chief
Financial Officer of U.S. Home Corporation from 1969 to 1981, during which time
it grew from a local building company to the nation's largest home builder.
Clarence V. McKee has served as a Director of the Company since June
1996. Mr. McKee has been the President and Chief Executive Officer of McKee
Communications, Inc., a Tampa, Florida based company engaged in the acquisition
and management of communications companies, since October 1992. From 1987 to
October 1992, Mr. McKee was the co-owner, Chairman and Chief Executive Officer
of WTVT-Inc., the licensee of television channel 13 in Tampa, Florida. Mr. McKee
is a member of the Boards of Directors of the Florida Progress Corporation and
its subsidiary, Florida Power Corporation, and Barnett Banks, Inc. He is a
former chairman of the Florida Association of Broadcasters.
Burt Sugarman has served as a Director of the Company since June 1997.
Mr. Sugarman has been the Chairman of the Board, President and Chief Executive
Officer of GIANT, a New York Stock Exchange company 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, owner and franchisor of a chain
of approximately 470 double drive-thru restaurants, 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. Mr. Sugarman is a Director
of GIANT and Rally's.
Jean Giles Wittner has served as President of Wittner & Company, a
diversified company specializing in life insurance brokerage, employee benefit
consulting, benefit administration and commercial property management, from 1988
to the present. She is a director of First Progress Corporation, Raymond James
Bank and the Pinellas County Education Foundation and a trustee of Florida
Progress Foundation, Eckard College and Menorah Manor. She also serves on the
Pinellas Work Force Development Board.
-5-
<PAGE> 10
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.
The Board of Directors has Audit, Compensation and Stock Option
Committees; it does not have a Nominating Committee. The entire Board of
Directors functions as a Nominating Committee, and the Board will consider
written recommendations from stockholders for nominations to the Board of
Directors in accordance with the procedures set forth in the By-Laws of the
Company. See "Stockholder Proposals for Presentation at the 1997 Annual
Meeting."
The Board of Directors held 29 meetings during 1996 and acted seven
times by unanimous written consent without a meeting.
During 1996, the Audit Committee consisted of Frederick E. Fisher,
Chairman, Andrew H. Hines, Jr. and Clarence V. McKee and held two meetings. The
Audit Committee recommends the appointment of the independent public accountants
of the Company, discusses and reviews the scope and fees of the prospective
annual audit and reviews the results thereof with the independent public
accountants, reviews and approves non-audit services of the independent public
accountants, reviews compliance with existing major accounting and financial
policies of the Company, reviews the adequacy of the financial organization of
the Company, reviews management's procedures and policies relative to the
adequacy of the Company's internal accounting controls and compliance with
federal and state laws relating to accounting practices, and reviews and
approves (with the concurrence of the majority of the disinterested Directors of
the Company) transactions, if any, with affiliated parties.
During 1996, the Compensation Committee consisted of Frederick E.
Fisher, Chairman, and Andrew H. Hines, Jr. and held two meetings. Its principal
function is to make recommendations to the Board of Directors with respect to
the compensation and benefits to be paid to officers, and it performs other
duties prescribed by the Board with respect to employee stock plans and benefit
programs.
During 1996, the Stock Option Committee consisted of Frederick E.
Fisher, Chairman and Andrew H. Hines, Jr. and acted two times by unanimous
written consent without a meeting. Its principal function is to make
recommendations to the Board of Directors with respect to the Company's 1991
Stock Option Plan and other duties prescribed by the Board.
In 1996, each incumbent Director attended at least 75% of the meetings
of the Board of Directors and of each committee of which he was a member.
Directors who are not employees are compensated on the basis of $1,000
plus out-of-pocket expenses for each Board and committee meeting attended.
Non-employee Directors also participate in the 1994 Stock Option Plan For
Non-Employee Directors, which 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 12,000 shares of the Company's Common
Stock, with the subsequent automatic grant on the first day of each fiscal year
thereafter during the time such person is serving as a non-employee Director of
a non-qualified, ten-year option to acquire an
-6-
<PAGE> 11
additional 3,000 shares of Common Stock. All such options have an exercise price
equal to the closing sale price of the Common Stock on the date of grant.
One-fifth of the shares of Common Stock subject to each initial option grant
become exercisable on a cumulative basis on each of the first five anniversaries
of the date of the grant of such option. One-third of the shares of Common Stock
subject to each subsequent option grant become exercisable on a cumulative basis
on each of the first three anniversaries of the date of the grant of such
option. Directors who are employees of the Company receive no extra compensation
for their services as Directors. See "Approval of Amendment to the Company's
1994 Stock Option Plan for Non-Employee Directors" for a description of proposed
changes to such plan.
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:
Herbert G. Brown, a former director of the Company, failed to file two
Forms 4 with respect to two transactions and filed Forms 5 with respect thereto
late; Robert G. Brown, a former director, filed one report late with respect to
two transactions; George W. Cook, a former director, filed two reports late with
respect to 19 transactions; Terry N. Christensen, a director, filed a Form 3
late and one report with respect to one transaction late; and Andrew J. Hines,
Jr., a director, filed one report late with respect to one transaction.
-7-
<PAGE> 12
SECURITY OWNERSHIP OF MANAGEMENT AND OTHERS
The following table sets forth, as of June 16, 1997, 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" as defined in Item 402(a)(3) of Regulation S-K under the
Exchange Act, 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>
C. Thomas Thompson 210,419 (4) * 219 *
James T. Holder 123,291 (5) * - --
Michael T. Welch 23,333 (5) * - --
Albert J. DiMarco 300,000 (5) * - --
Anthony L. Austin - 0 - - - --
Terry N. Christensen 31,929 * 219 *
Frederick E. Fisher 5,800 (5) * - --
William P. Foley, II 1,073,998 (6) 1.7% 2,192(7) 2.5%
Clarence V. McKee 3,400 * - --
Andrew H. Hines 10,800 (8) * - --
Burt Sugarman 767,075 (9) 1.2% 548(10) --
Jean Giles Wittner - 0 - - - --
all Directors and 3,139,414 (11) 5.0% 3,178 3.6%
executive officers as a
group (15 persons)
NAME AND ADDRESS OF
5% BENEFICIAL OWNER
- -------------------
CKE Restaurants, Inc.
1700 N. Harbor Blvd.
Anaheim, California
92801 13,512,727(12) 19.9% 61,636 70.3%
</TABLE>
- -----------
-8-
<PAGE> 13
* 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 Series A Preferred Stock if
Proposal 3 is approved at the Meeting. See "Ratification of the Capital
Restructuring."
(2) Based on 60,749,933 shares of Common Stock outstanding as of June
16, 1997. Shares of Common Stock subject to options or warrants
exercisable within 60 days 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 87,719 shares of Series A Preferred Stock outstanding as of June
16, 1997.
(4) Includes 160,000 shares subject to options and 28,490 shares subject to
warrants exercisable on or prior to August 15, 1997.
(5) Shares subject to stock options exercisable on or prior to August 15,
1997.
(6) Includes 854,700 shares subject to warrants exercisable prior to August
15, 1997. Excludes 438,596 shares held by Fidelity and 2,108,262 shares
subject to exercisable warrants held by Fidelity and 6,161,299 shares
held by CKE and 7,350,428 shares subject to warrants exercisable prior to
August 15, 1997 held by CKE, as to which Mr. Foley disclaims beneficial
ownership. Mr. Foley is the Chairman of the Board and Chief Executive
Officer of Fidelity and CKE, and he owns 20.3% of the outstanding common
stock of Fidelity. A limited partnership whose general partner is
controlled by Mr. Foley owns 15.8% of the outstanding common stock of
CKE, and Fidelity owns 2.2% of the outstanding common stock of CKE. Mr.
Foley may be deemed to be a controlling person of CKE and Fidelity.
(7) Excludes 4,385 shares held by Fidelity and 61,636 shares held by CKE, as
to which Mr. Foley disclaims beneficial ownership. (See Note 6).
(8) Includes 7,800 shares subject to stock options exercisable on or prior to
June 16, 1997.
(9) Includes 712,251 shares subject to warrants exercisable prior to August
15, 1997. Excludes 131,578 shares and 13,157 shares held by Mr.
Sugarman's spouse and by his son, respectively, and 200,000 shares held
by GIANT, of which Mr. Sugarman is Chairman of the Board, President and
Chief Executive Officer, as to which Mr. Sugarman disclaims beneficial
ownership.
(10) Excludes 1,315 shares and 131 shares held by Mr. Sugarman's spouse and by
his son, respectively, as to which Mr. Sugarman disclaims beneficial
ownership.
-9-
<PAGE> 14
(11) Includes 548,269 shares subject to stock options exercisable on or prior
to August 15, 1997, for other executive officers not listed above.
(12) Includes 7,350,428 shares subject to warrants exercisable on or prior to
August 15, 1997.
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<PAGE> 15
COMPENSATION OF EXECUTIVE OFFICERS
The following table is a summary of the compensation paid or accrued by the
Company for the last three fiscal years for services in all capacities to each
of the persons who qualified as a "named executive officer" (as defined in Item
402(a)(3) of Regulation S-K under the Exchange Act) during the year ended
December 30, 1996 ("Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG
TERM
COMPEN-
ANNUAL COMPENSATION SATION
------------------------------------------- AWARDS
OTHER ----------
ANNUAL SECURITIES
COMPEN- UNDERLYING ALL OTHER
NAME AND YEAR SALARY BONUS SATION OPTIONS COMPEN-
PRINCIPAL POSITION ENDED ($) ($) ($) (1) (#) (2) SATION
-------------------- ----- -------- ------- ---------- ---------- ------
<S> <C> <C> <C> <C> <C> <C>
C. Thomas Thompson (3) 1996 $ -- $ -- $ -- 12,000 --
Vice Chairman/CEO
James T. Holder 1996 $140,350 $23,077 $120(4) 90,500 --
Senior Vice President, 1995 80,617 -- 3,112(5) --
General Counsel and 1994 70,923 -- -- 8,500
Secretary
Michael T. Welch(6) 1996 $125,390 $2,467 $372(4) 80,000 --
Vice President, 1995 99,773 15,200 13,261(8) --
Operations Services and
Research & Development
Albert J. DiMarco(7) 1996 $275,000 -- $5,691(5) 100,000 --
President and CEO 1995 100,769 475 200,000
Anthony L. Austin (6) 1996 $109,645 -- $131,628(9) -- --
Vice President, Human 1995 133,249 -- 27,069(10) 35,000
Resources, Training and
Urban Affairs
</TABLE>
(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) The Options listed were granted pursuant to the Company's
1991 Stock Option Plan or 1994 Stock Option Plan for Non-Employee
Directors.
(3) Mr. Thompson was appointed Chief Executive Officer and Vice
Chairman of the Company in December 1996. The options listed
were granted pursuant to the
-11-
<PAGE> 16
Company's 1994 Stock Option Plan for Non-Employee Directors prior
to such appointment.
(4) Consists of life insurance premiums.
(5) Consists of automobile allowance.
(6) Messrs. Welch and Austin became executive officers of the Company
in March 1995 and January 1995, respectively. Mr. Austin
relinquished his position with the Company in July 1996.
(7) Mr. DiMarco became President, Chief Executive Officer and a
Director of the Company in July 1995 and relinquished such
positions in December 1996.
(8) Includes moving expenses ($8,815) and automobile allowance
($4,446).
(9) Consists of severance pursuant to employment agreement.
(10) Consists of moving allowance.
EMPLOYMENT AGREEMENTS
ALBERT J. DIMARCO - On July 28, 1995, the Company entered into an
employment agreement with Albert J. DiMarco with respect to his employment as
President and Chief Executive Officer of the Company and its subsidiaries and
his service as a Director of the Company. The employment agreement provided for
a term of employment ending on December 31, 1997, a compensation package
consisting of an initial base annual salary in the amount of $250,000 through
December 31, 1995 and a minimum of $275,000 thereafter (subject to annual
increases at the discretion of the Board), as well as other miscellaneous
benefits (including moving expense, expense allowances, health insurance and
potential cash bonuses) and the grant, at the commencement of Mr. DiMarco's
employment agreement, of a non-qualified option to acquire 200,000 shares of
Common Stock, at an exercise price of $2.28. Pursuant to a Severance, Release
and Indemnity Agreement dated January 27, 1997 entered into by Mr. DiMarco and
the Company, Mr. DiMarco's employment agreement was terminated, and Mr. DiMarco
received a note of the Company in the principal amount of $360,000 payable, in
cash or by certified check or wire transfer, through March 31, 1997 in
installments equal to his regular salary with the balance payable upon the
earlier to occur of (a) the Company obtaining new equity through a rights
offering and/or private placement or (b) March 31, 1997. In addition, pursuant
to such agreement options to purchase up to 300,000 shares of Common Stock held
by Mr. DiMarco became fully vested and are exercisable until January 27, 1999,
and the Indemnity Agreement dated July 28, 1995 between the Company and Mr.
DiMarco is to remain in effect.
ANTHONY L. AUSTIN - On January 4, 1995, the Company entered into an
employment agreement with Anthony L. Austin with respect to his employment as
Vice President, Human Resources, Training and Urban Affairs. The employment
agreement provided for a term of employment ending on December 31, 1996, a
compensation package consisting of an initial base annual salary in the amount
of $132,500, as well as other miscellaneous benefits (including moving expense,
expense allowances, health insurance and potential cash bonuses) and the grant
at the commencement of Mr. Austin's employment agreement of a non-qualified
option to acquire 35,000 shares of Common Stock, at an exercise price of $2.19.
The option for 35,000 shares was terminated upon termination of Mr. Austin's
employment by the Company.
-12-
<PAGE> 17
STOCK OPTION GRANTS
The following table details individual grants of stock options made in
fiscal year ended December 30, 1996 to any of the Named Executive Officers. No
grants of stock appreciation rights (SARS) were made in fiscal year ended
December 30, 1996. The table also indicates the potential realizable value of
each grant of options assuming that the market price of the underlying security
appreciates in value from the date of the grant to the end of the option term at
the specified annualized rates.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZ-
ABLE VALUE AT
ASSUMED ANNUAL
RATES OF STOCK
PRICE APPRECIATION
INDIVIDUAL GRANTS (1) FOR OPTION TERM (2)
% of Total
Number of Options
Securities Granted to Exercise
Underlying Employees or Base
Options in Fiscal Price Expiration
Name Granted (#) Year ($/Sh) Date 5% ($) 10% ($)
---- ----------- ------ ------- -------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
C. Thomas Thompson 12,000 -- 1.16 11/22/07 8,754 22,185
James T. Holder 90,500 9.3% 1.53 7/12/06 87,080 220,678
Michael T. Welch 80,000 8.2% 1.53 7/12/06 76,977 195,074
Albert J. DiMarco 100,000 10.2% 1.53 7/12/06 96,221 243,843
Anthony L. Austin - 0 - - 0 - -- --
</TABLE>
- ------------
(1) All options were granted pursuant to the 1991 Stock Option Plan,
except for those granted to C. Thomas Thompson which were granted
prior to the date Mr. Thompson became an employee of the Company. Mr.
Thompson's options were granted pursuant to the Company's 1994 Stock
Option Plan for Non-employee Directors.
(2) The 5% and 10% assumed annual rates of stock price appreciation are
provided in compliance with Regulation S-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.
STOCK OPTION EXERCISES AND YEAR END OPTION VALUES
No stock options were exercised by any of the Named Executive Officers
during fiscal year ended December 30, 1996. The following table details the
fiscal year-end value of unexercised options on an aggregated basis for all
Named Executive Officers.
-13-
<PAGE> 18
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Value of Unex-
Number of ercised
Unexercised In-the-Money
Options at Options at
FY-End (#) FY-End ($) (1)
Shares Acquired on Value Realized Exercisable/ Exercisable/
Name Exercise (#) ($) Unexercisable Unexercisable
---- ------------ ----- ------------- -------------
<S> <C> <C> <C> <C>
C. Thomas Thompson -0- -0- -0-/12,000 -0-/-0-
Albert J. DiMarco -0- -0- 300,000/-0- $25,125/-0-
Anthony L. Austin -0- -0- -0- -0-
James T. Holder -0- -0- 23,291/ $5,685/-0-
76,709
Michael T. Welch -0- -0- 20,000/ $5,625/-0-
80,000
David D. Miller -0- -0- 43,062/ $3,722/-0-
56,938
</TABLE>
- ------------
(1) Calculation of the value of unexercised in-the-money options is based
upon unexercised options at fiscal year end which have an exercise
price below $1.78125, the closing price of the Common Stock on
December 30, 1996.
The information contained in this section and the following section
entitled "Performance Graph" are not deemed to be "soliciting material" or to be
"filed" with the Commission or subject to Regulation A under the Securities Act
of 1933, as amended (the "Securities Act"), or to the liabilities of Section 18
of the Exchange Act.
REPORT OF THE COMPENSATION COMMITTEE
The following report was prepared by Directors Frederick E. Fisher and
Andrew H. Hines, Jr. as the members of the Company's Compensation Committee at
the end of fiscal year ended December 30, 1996.
Annual compensation for all the executive officers of the Company is
determined by the Compensation Committee of the Company, subject to the terms of
any applicable employment agreement negotiated between an officer and the
Company. During fiscal year 1996, annual compensation was set with the intent of
reasonably compensating the executive officers of the Company, including the
Chief Executive Officer, in line with industry norms, based upon the Committee
members' subjective evaluation of each officer based upon assigned
responsibilities, individual performance, growth of the Company, earnings of the
Company and increases in the cost of living. C. Thomas Thompson was appointed
Chief Executive Officer on December 17, 1996 and received no compensation for
his duties as an officer of the Company during fiscal year 1996. Except for
stock options granted to Mr. Thompson in fiscal year 1997 as reported in the
-14-
<PAGE> 19
Chart under Proposal Number 4 of this Proxy Statement, Mr. Thompson continues to
serve as Chief Executive Officer of the Company without compensation and there
is currently no agreement in effect concerning compensation between the Company
and Mr. Thompson.
During fiscal year 1996, awards of stock options under the Company's 1991
Stock Option Plan to all executive officers, including the Chief Executive
Officer, and other employees of the Company were made at the discretion of the
members of the Stock Option Committee (which consisted of all of the members of
the Compensation Committee in fiscal year 1996) pursuant to the terms of the
Plan. In determining awards under the Plan, the Stock Option Committee made a
subjective evaluation of individual responsibilities, past and anticipated
potential individual productivity and performance, past and anticipated
potential contributions to the profitability of the company, both direct and
indirect. The Stock Option Committee did not give particular weight to a
specific factor or use a formula in determining awards under the Plan. While not
required under the terms of the Plan, all existing stock options were granted
with an exercise price at least equal to the market value of the stock at the
time of the grant and generally included vesting periods which the Stock Option
Committee believed would encourage the employee to remain with the Company. The
benefits derived from each stock option granted under the Plan is directly
attributable to a future increase in the value of the company's Common Stock.
Effective December 17, 1996, Albert J. DiMarco resigned his position as
President and Chief Executive Officer of the Company. Payments that Mr. DiMarco
has received in connection with his resignation are described under "Employment
Agreements." The Compensation Committee's actions taken with respect to Mr.
DiMarco's resignation reflect its reasonable judgment of Mr. DiMarco's service
and position with the Company since July 1995.
Frederick E. Fisher
Andrew H. Hines, Jr.
-15-
<PAGE> 20
PERFORMANCE GRAPH
COMPARISON OF CUMULATIVE TOTAL RETURN*
AMONG CHECKERS DRIVE-IN RESTAURANTS, INC.,
S&P 500 INDEX AND S&P RESTAURANT INDEX**
<TABLE>
<CAPTION>
12/31/91 12/31/92 12/30/93 12/31/94 12/29/95 12/30/96
<S> <C> <C> <C> <C> <C> <C>
Checkers $100 $223 $190 $ 37 $ 17 $ 29
S&P 500 $100 $108 $119 $121 $166 $200
S&P Rest $100 $128 $149 $148 $222 $218
</TABLE>
* Total return assumes reinvestment of any dividends for all companies
considered within the comparison and is adjusted for a 3 for 2 stock split of
the Company's Common Stock in February 1992, a 2 for 1 stock split of the
Company's Common Stock in September 1992, and a 3 for 2 stock split of the
Company's Common Stock in June 1993.
** The Standard and Poor's Restaurant Index includes McDonald's
Corporation and Wendy's International, Inc. among others.
The foregoing graph assumes $100 invested on December 31, 1991, in the
Company, the S&P 500 Index and the S&P Restaurant Index.
Note: The stock price performance shown on the graph above is not
necessarily indicative of future price performance. Additionally, the
Stock Performance Graph shall not be deemed incorporated by reference
by any general statement incorporating by reference this Proxy
Statement into any filing under the Securities Act or under the
Exchange Act, except to the extent that the Company specifically
incorporates this information by reference, and shall not otherwise be
deemed filed under such Acts.
CERTAIN TRANSACTIONS
The information set forth herein briefly describes certain transactions
between the Company and certain affiliated parties and/or certain of their
relatives. Management of the Company believes that such transactions have been
on terms no less favorable to the Company than those that could have been
obtained from unaffiliated parties. Any such transactions since November 15,
1991 have been approved by a majority of the Company's disinterested Directors.
-16-
<PAGE> 21
TRANSACTIONS IN WHICH CURRENT AFFILIATED PARTIES MAY HAVE AN INTEREST
On November 22, 1996, the Company entered into an Amended and Restated
Credit Agreement (the "Restated Credit Agreement") with CKE, as agent of the
various lenders named therein (the "Lenders"). The Lenders include CKE,
Fidelity, C. Thomas Thompson, William P. Foley, II, Burt Sugarman and KCC
Delaware Company ("KCC"), a wholly owned subsidiary of GIANT. Pursuant to the
Restated Credit Agreement, the Company's primary debt aggregating approximately
$35.8 million principal amount, which had been acquired by the Lenders on
November 14, 1996, was restructured by, among other things, extending its
maturity by one year to July 31, 1999, fixing the interest rate at 13.0% per
annum, eliminating or relaxing certain covenants, delaying scheduled principal
payments until May 19, 1997 and eliminating $6.0 million in restructuring fees
and charges. In connection with the restructuring, the Company issued to the
Lenders warrants to purchase an aggregate of 20 million shares of Common Stock
at an exercise price of $0.75 per share, the approximate market price of the
Common Stock on the day prior to the announcement of the acquisition of the
Company's debt by the Lenders. The Lenders specified above received warrants in
the following amounts: CKE, 7,350,428; Fidelity, 2,108,262; C. Thomas Thompson,
28,490; William P. Foley, II, 854,700; Burt Sugarman, 712,250; and KCC Delaware
Company, 2,849,002. The Lenders also received certain piggyback and demand
registration rights with respect to the shares of Common Stock underlying their
warrants.
On February 20, 1997, the Company received $20 million in consideration for
issuing an aggregate of 8,771,929 shares of Common Stock and 87,719 shares of
Series A Preferred in a private placement. The per share purchase price for the
Common Stock was $1.14, based upon the closing price ($1.34) of the Common Stock
on December 16, 1996, the day prior to the approval of the transaction by the
Board of Directors, less a discount for the fact that such shares are not freely
transferable for a one-year period. The purchasers in the private placement
included: CKE (6,162,299 shares of Common Stock and 61,636 shares of Series A
Preferred Stock); Fidelity (438,596 shares of Common Stock and 4,385 shares of
Series A Preferred Stock); C. Thomas Thompson (21,929 shares of Common Stock and
219 shares of Series A Preferred Stock); Terry N. Christensen (21,929 shares of
Common Stock and 219 shares of Series A Preferred Stock); William P. Foley, II
(219,298 shares of Common Stock and 2,192 shares of Series A Preferred Stock);
and Burt Sugarman (54,824 shares of Common Stock and 548 shares of Series A
Preferred Stock). The purchasers in the private placement also received certain
piggyback and demand registration rights and agreed not to sell any shares of
Common Stock received in the private placement in the open market for a one-year
period. The Series A Preferred Stock will be converted into an aggregate of
8,771,900 shares of Common Stock, subject to adjustment, if the Company's
stockholders approve such conversion at the Meeting. See "Ratification of
Capital Restructuring."
Christensen, Miller, Fink, Jacobs, Glaser, Weil & Shapiro, LLP, a law firm
of which Terry N. Christensen is a partner (see "Management - Directors and
Executive Officers"), has performed legal services for the Company. Such
services have related to compliance with securities laws and other business
matters.
-17-
<PAGE> 22
TRANSACTIONS IN WHICH FORMER AFFILIATED PARTIES MAY HAVE AN INTEREST
In January 1996, the Company entered into an Agreement for Lease with
Option for Asset Purchase with George W. Cook, a Director of the Company until
June 1996, in which the Company was granted certain rights for three years in
and to a restaurant in Clearwater, Florida. Checkers (a) entered into a sublease
for the real property and an equipment lease for the fixed assets at a combined
monthly rental of $3,000, and (b) agreed to purchase the inventory located at
the Restaurant.
On December 5, 1995, Checkers of Ashville ("C of A"), a North Carolina
corporation in which George W. Cook is the principal officer and shareholder,
took possession of three under performing Company restaurants pursuant to a
verbal agreement, and entered into unit franchise agreements which provided for
waiver of the initial franchise fee but required the payment to the Company of
the standard royalty fee. On January 1, 1996, C of A entered into leases for
these restaurants for a term of three years for the land, building and equipment
at a monthly rental of: (i) 4% of gross sales during the first year, 6% of gross
sales the second year, and a direct pass through of land rent during the third
year, (ii) 1% of gross sales payable from and after the fourth month of the
lease; and (iii) 3% of gross sales, respectively. Mr. Cook executed a continuing
guaranty, which provides for the personal guaranty of all of the obligations of
the franchisee under the franchise agreements. Pursuant to Options for Asset
Purchase dated January 1, 1996, C of A was granted the option to purchase these
restaurants for the greater of (a) 50% of its sales for the prior year, or (b)
$350,000 each.
On July 17, 1995, C of A took possession of two under performing Company
restaurants pursuant to a verbal agreement and entered into franchise agreements
which provided for waiver of the initial franchise fee but required the payment
to the Company of a royalty fee of 1%, 2% and 3% during the first, second and
third years, respectively, and 4% thereafter. On January 1, 1996, C of A entered
into leases for these restaurants for a term of three years for (i) the building
and equipment at a monthly rental of 1.5%, 3% and 4.5% of gross sales during the
first, second and third years respectively, and (ii) the land at a monthly
rental of 3% of gross sales for the first year and 4% of gross sales thereafter.
Total sums received by the Company in fiscal year ended December 30, 1996 for
these restaurant were: (a) $6,351 in royalty fees pursuant to the unit franchise
agreement, and (b) $17,500 in rent. Mr. Cook executed a continuing guaranty,
which provides for the personal guaranty of all of the obligations of the
franchisee under the franchise agreements. Pursuant to Options for Asset
Purchase dated January 1, 1996, Checkers of Raleigh ("C of R"), a North Carolina
corporation in which George W. Cook is the principal officer and shareholder,
was granted the option to purchase these restaurants for the greater of (a) 50%
of its sales for the prior year, or (b) $350,000 each.
Effective as of July 28, 1995, the Company, InnerCityFoods ("ICF"), a joint
venture 75% owned by a subsidiary of the Company and 27% owned by La-Van
Hawkins, who ceased being a director of the Company January 1996, InnerCityFoods
Leasing Company and InnerCityFoods Joint Venture Company (collectively, the
"Checkers Parties") and La-Van Hawkins Group, Inc. ("Hawkins Group"), Mr.
Hawkins and La-Van Hawkins InnerCityFoods, LLC (collectively, the "Hawkins
Parties"), entered into an Asset Purchase Agreement (the "Agreement") providing
for
-18-
<PAGE> 23
the purchase of the interest of the Hawkins Parties in ICF, the sale by ICF of
its three restaurants in Baltimore, Maryland to the Hawkins Parties, the grant
of certain development rights to the Hawkins Parties, and the termination of all
of the agreements between the Checkers Parties and the Hawkins Parties relating
to the operation of ICF.
The transactions contemplated by the Agreement were consummated on August
15, 1995. On that date, the Company purchased all of the rights, title and
interest of Hawkins Group in and to ICF. The component of the purchase price
based upon the Net After Tax Earnings of ICF was zero, and the amounts owed by
the Hawkins Parties to the Checkers Parties was in excess of the remaining
$1,250,000 purchase price. Accordingly, there was no net purchase price payable
to the Hawkins Parties by the Company for Hawkins Group's interest in ICF. The
Checkers Parties also sold all of their respective rights, titles and interests
in the three Baltimore Restaurants to the Hawkins Parties for a purchase price
of $4,800,000. The purchase price was paid by the delivery of a promissory note
in the amount of $4,982,355, which amount includes the purchase price for the
three restaurants, the approximately $107,355 owed by the Hawkins Parties to the
Checkers Parties in connection with the operation of ICF that was not offset by
the $1,250,000 purchase price for Hawkins Group's interest in ICF, and an
advance of $75,000 to the Hawkins Parties which was used primarily to pay
closing costs related to the transaction. The note bears interest at a floating
rate which is the lesser of 10.5% or .25% above the current borrowing rate of
the Company under its primary credit facility. Interest only is payable for the
first six months with principal and interest being payable thereafter based on a
15-year amortization rate with the final payment of principal and interest due
on August 15, 2002. The note is secured by a pledge of all the assets sold.
Royalty fees for the three restaurants are at standard rates provided that the
Company will receive an additional royalty fee of 4% on all sales in excess of
$1,800,000 per Restaurant.
The Hawkins Parties were granted development rights for restaurants in
certain defined areas of Baltimore, Maryland, Washington, D.C., Bronx, New York,
and Harlem, New York, as well as a right of first refusal for certain
territories in California and Virginia. Franchise fees and royalty rates for all
restaurants developed under such development rights will be at standard rates
provided that the Company will receive an additional royalty fee of 4% on all
sales in excess of $1,800,000 per Restaurant.
In February 1995, the Company entered into two separate unit franchise
agreements for the operation of two restaurants in North Carolina, with GNB,
Inc., a corporation owned by George W. Cook, Norma Cook and Michael Perez, his
wife and her son, which agreements provided for payment to the Company of the
standard royalty fee. The restaurants were existing restaurants purchased by Mr.
Cook from the prior franchisee, and the agreements provide for the franchise fee
to be waived. In connection with the transaction, Mr. Cook executed a continuing
guaranty, which guaranty provides for the personal guaranty of Mr. Cook of all
obligations of the franchisee under the franchise agreement. Total royalty fees
received by the Company in fiscal years ended January 1, 1996 and December 30,
1996 pursuant these agreements were $37,295 and 47,965, respectively.
The Company incurred approximately $105,000 and $334,000, respectively, of
expenses for services provided by the law firm of MacFarlane Ausley Ferguson &
McMullen in 1995 and 1994,
-19-
<PAGE> 24
respectively. The firm continues to provide legal services to the Company. Harry
S. Cline, a Director of the Company from 1991 until June 1996, is a partner in
the firm.
In July 1993, the Company entered into an Area Development Agreement with
New Iberia Drive-In, Inc. ("New Iberia"), a corporation in which the cousin of
Herbert G. Brown, a Director of the Company until April 1996, was the sole
shareholder. The Agreement was transferred in November 1993 from New Iberia to
Walker-LA Louisiana Partnership, a Louisiana general partnership in which that
cousin and Mr. Brown's son-in-law each hold a 50% ownership interest. The
Agreement provides for the payment to the Company of the standard development
fee, a standard franchise fee per Restaurant and payment of standard royalty
fees. Six unit franchise agreements have been granted pursuant to the Agreement
in the names of various entities in which the cousin and son-in-law each hold a
50% ownership interest. Total royalty fees received by the Company in fiscal
years ended January 1, 1996 and December 30, 1996 pursuant to these unit
franchises agreements were $193,582 and $187,165, respectively.
In December 1993, the Company sold one of its restaurants in Ft.
Lauderdale, Florida, to Dania-Auger, Inc., a Florida corporation in which the
father-in-law of Jared D. Brown, formerly a beneficial owner of more than 5% of
the Common Stock and a Director of the Company until June 1996, is the principal
officer and stockholder. The sales price was $905,000 and the Company received
$705,000 in cash and a promissory note for $200,000. A gain of approximately
$470,000 was recognized by the Company. The term of the promissory note was for
two years bearing interest at prime + 2% with interest only payments due
quarterly and one balloon principal payment due on or before December 31, 1995.
Dania-Auger is currently negotiating for the sale of the Restaurant to another
franchisee. The Company agreed to extend the term of the note to the earlier of
May 31, 1996 or the date the restaurant is sold. The note, which remains
outstanding, is secured by property in Broward County, Florida. Total royalty
fees received by the Company in fiscal years ended January 1, 1996 and December
30, 1996 pursuant to the unit franchise agreement for the Restaurant were
$31,378 and $24,652, respectively.
In January 1992, the Company entered into a unit franchise agreement for
the operation of a single Restaurant in the Clearwater, Florida area with George
W. Cook, Norma Cook and Michael Perez, his wife and her son, which agreement
provided for payment to the Company of a standard $25,000 franchise fee and a
standard royalty fee of 4% of sales. In connection with the transaction, Mr.
Cook and Mr. Perez executed a continuing guaranty, which guaranty provides for
the personal guaranty of each of the individuals of all obligations of the
franchisee under the franchise agreement. Total sums received in royalty fees by
the Company in fiscal years ended January 1, 1996 and December 30, 1996 pursuant
to the unit franchise agreement were $37,461 and $23,674, respectively.
In September 1991, the Company entered into a unit franchise agreement for
the operation of a single Restaurant in Dania, Florida, with Dania-Auger, Inc.,
a Florida corporation in which Paul Auger is the principal officer and
stockholder, the father-in-law of Jared D. Brown. The unit franchise agreement
provided for payment to the Company of a standard $25,000 franchise fee and a
standard royalty fee of 4% of sales. In connection with the transaction, Mr.
Auger and his wife, Donna Auger, executed a continuing guaranty, which guaranty
provides for the personal guaranty of both of the individuals of all obligations
of the franchisee under the franchise agreement. Total sums received in royalty
fees by the Company in fiscal years ended January
-20-
<PAGE> 25
1, 1996 and December 30, 1996 pursuant to the unit franchise agreement were
$31,286 and $26,584, respectively.
In March 1990, a general partnership was formed between the Company (50%
interest) and GNC Investments, Inc. (50% interest), a Florida corporation
("GNC") in which George W. Cook is the principal officer and stockholder, for
the purpose of owning and operating a joint venture Restaurant in Clearwater,
Florida. The term of the partnership agreement was for 30 years unless sooner
terminated by the affirmative vote of a majority of the partners. The Company
was required to operate the Restaurant and was entitled to receive a royalty fee
of 2% of sales. In the event of the death of George W. Cook, the partnership was
required to pay the Company a management fee of 2.5% and a royalty fee of 4%,
respectively, of sales. On December 31, 1993, the Company sold its 50%
partnership interest to GNC for $422,000 and recognized a gain of $200,218. GNC
assumed all liabilities of the Company for any partnership obligations, and
entered into a standard form unit franchise agreement with the Company. A
Management Agreement was signed on December 31, 1993, between the Company and
GNC whereby the Company agreed to manage the operations of the Restaurant until
the earlier of such date that GNC has hired a management team for such
Restaurant or April 30, 1994. GNC reimbursed the Company for all of its
out-of-pocket expenses in managing and operating the Restaurant during such
period. On January 1, 1996, the Company leased the Restaurant and subleased the
real property from GNC for a combined monthly rental of $3,000. Total sums
received by the Company in fiscal years ended January 1, 1996 and December 30,
1996 pursuant to the unit franchise agreement were $14,082 and $2,285 in royalty
fees, respectively.
In May 1989 and March 1990, the Company entered into joint ventures (50%
interest) and a Florida corporation (50% interest) owned 100% and equally by
Donna M. Brown-McMullen and her husband Thomas W. McMullen. The joint ventures
own and operate Checkers Drive-In Restaurants (hereinafter "Restaurants") in
Clearwater, Florida. The term of each agreement is for 30 years unless sooner
terminated by the affirmative vote of a majority of the partners. The Company is
required to operate the Restaurants and is entitled to receive royalty fees of
2% and 4% and a management fee of 2.5% and 0% of sales, respectively. The
partnership agreement contains certain restrictions on transfer of partnership
interests and rights of first refusal in favor of each of the partners. Total
fees received by the Company from the partnership in fiscal years ended January
1, 1996 and December 30, 1996 were $102,835 and $43,882, respectively. Donna M.
Brown-McMullen is the daughter of Herbert G. Brown.
-21-
<PAGE> 26
PROPOSAL NO. 2
APPROVAL OF THE AMENDMENT TO THE COMPANY'S
RESTATED CERTIFICATE OF INCORPORATION
The Board of Directors has approved a proposal to amend the Company's
Restated Certificate of Incorporation to increase the number of authorized
shares of Common Stock from 100,000,000 to 150,000,000. If approved by the
stockholders at the Meeting, the proposed amendment will become effective upon
the filing of an amendment to the Company's Restated Certificate of
Incorporation with the Secretary of State of the State of Delaware, which will
occur as soon as reasonably practicable after the Meeting. The proposed
amendment to the Company's Restated Certificate of Incorporation would amend the
first sentence of Article 4 thereof to read as follows:
"The total number of shares of all classes of Capital Stock which the
Corporation shall have the authority to issue is 152,000,000 shares, consisting
of (i) 150,000,000 shares of Common Stock, $.001 par value per share (the
"Common Stock"), and (ii) 2,000,000 shares of preferred stock, $.001 par value
per share (the "Preferred Stock")."
The Board of Directors believes that it is in the Company's best interests
to increase the number of authorized shares of Common Stock in order to have
additional authorized but unissued shares available for issuance to meet
business needs as they arise. At June 16, 1997, 60,749,933 shares of Common
Stock were issued and outstanding, options and warrants to purchase an
additional 28,729,759 shares of Common Stock were also outstanding and the
Company had contractual obligations to issue 3,790,190 shares of Common Stock
and warrants to purchase 120,000 shares of Common Stock. In addition, there were
options for approximately 6,700,000 shares available for grant under the
Company's Stock Option Plans, as proposed to be amended. If Proposal 3 is
approved at the Meeting, 9,382,414 shares of Common Stock will be issued upon
the automatic conversion of the Company's Series A Preferred Stock. The
contractual obligations to issue shares of Common Stock contain guarantees that
the recipients will receive certain dollar amounts from the sale of the stock as
described in Note 3 to the Company's financial statements contained in the 1996
Form 10-K. The number of shares set forth above are based upon a stock price of
$1.188 per share which was the closing price of the Company's stock on June 16,
1997. The number of shares to be issued will vary with variations in the
Company's stock price.
The authorized shares of Common Stock in excess of outstanding shares will
be available for issuance at such times and for such corporate purposes as the
Board of Directors may deem advisable, without further action by the Company's
stockholders, except as may be required by applicable law or by the rules of any
stock exchange or national securities association trading system on which the
Common Stock may be listed or traded. Upon issuance, such shares will have the
same rights as the outstanding shares of Common Stock. Holders of Common Stock
have no preemptive rights. The issuance of additional shares of Common Stock may
have a dilative effect on earnings per share and, for persons who do not
purchase additional shares to maintain their pro rata interest in the Company,
on such stockholder's percentage voting power.
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<PAGE> 27
The Company has no arrangements, agreements, understandings or plans at the
present time for the issuance or use of the additional shares of Common Stock
proposed to be authorized except in connection with the possible exercise of
outstanding options and warrants, the issuance of additional shares of Common
Stock pursuant to existing contractual obligations, the grant of additional
options under the Company's stock option plans and the conversion of the
Company's Series A Preferred Stock. The Board of Directors does not intend to
issue any Common Stock except on terms which it deems to be in the best
interests of the Company and its then existing stockholders. Any future issuance
of Common Stock will be subject to the rights of holders of any outstanding
shares of preferred stock which the Company has issued or may issue in the
future.
Although the Company has no present intention to issue shares of Common
Stock in the future in order to make acquisition of control of the Company more
difficult, future issuances of Common Stock could have that effect. For example,
the acquisition of shares of the Company's Common Stock by an entity in order to
acquire control of the Company might be discouraged through the public or
private issuance of additional shares of Common Stock, since such issuance would
dilute the stock ownership of the acquiring entity. Common Stock could also be
issued to existing stockholders as a dividend or privately placed with
purchasers who might side with the Board of Directors in opposing a takeover
bid, thus discouraging such a bid.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSED AMENDMENT OF THE
COMPANY'S RESTATED CERTIFICATE OF INCORPORATION.
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<PAGE> 28
PROPOSAL NO. 3
RATIFICATION OF THE CAPITAL RESTRUCTURING
BACKGROUND
On November 22, 1996, the Company entered into the Restated Credit
Agreement with CKE, as agent of the various Lenders named therein. The Lenders
include CKE, Fidelity, C. Thomas Thompson, William P. Foley, II, Burt Sugarman
and KCC. Pursuant to the Restated Credit Agreement, the Company's primary debt
aggregating approximately $35.8 million principal amount, which had been
acquired by the Lenders on November 14, 1996, was restructured by, among other
things, extending its maturity by one year to July 31, 1999, fixing the interest
rate at 13.0% per annum, eliminating or relaxing certain covenants, delaying
scheduled principal payments until May 19, 1997 and eliminating $6.0 million in
restructuring fees and charges. The Company also issued warrants to purchase 20
million shares of Common Stock to the Lenders, at an exercise price of $0.75 per
share, the approximate market price of the Common Stock on the day prior to the
announcement of the acquisition of the Company's debt by the Lenders. The
Lenders specified above received warrants in the following amounts: CKE,
7,350,428; Fidelity, 2,108,262; C. Thomas Thompson, 28,490; William P. Foley,
II, 854,700; Burt Sugarman, 712,250; and KCC, 2,849,002 The Lenders also
received certain piggyback and demand registration rights with respect to the
shares of Common Stock underlying their respective warrants.
The Company agreed in the Restated Credit Agreement to raise an additional
$20 million in equity capital. Because of the time requirements for a registered
public offering or rights offering and the cash flow needs of the Company in
early 1997, it was determined to proceed with a private placement of Common
Stock. However, the private placement was ultimately structured as a sale of
Common Stock and Series A Preferred Stock in order to comply with the
requirements of NASDAQ which limits the amount of voting securities which an
issuer may sell unless stockholder approval of such sale is obtained. If the
Company's stockholders approve Proposal No. 3, the Series A Preferred Stock will
be automatically converted into Common Stock, which is traded on the NASDAQ
National Market. There is no trading market for the Series A Preferred Stock.
See "Description of Series A Preferred Stock" below for a summary of the rights,
preferences, privileges and restrictions, including the conversion ratio, of the
Series A Preferred Stock. All of such rights will continue in effect if the
stockholders do not approve Proposal No. 3.
In February 1997, the Company completed a private placement of
approximately $20 million of equity securities, consisting of 8,771,929 shares
of Common Stock for $1.14 per share and 87,719 shares of Series A Preferred
Stock for $114.00 per share. The purchase price was based upon the $1.34 closing
price of the Common Stock on December 16, 1996, the day prior to the approval of
the transaction by the Board of Directors, less a discount for the fact such
shares are not freely transferable for a one-year period. The purchasers in the
private placement also received certain piggyback and demand registration rights
with respect to the Common Stock purchased in the private placement and agreed
not to sell such Common Stock in the open market for a one-year period. The
terms of the private placement, including the terms of the
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<PAGE> 29
Series A Preferred Stock, were reviewed and approved by an Independent Committee
of the Company's Board of Directors, consisting of Frederick E. Fisher
(Chairman), Andrew H. Hines, Jr. and Clarence V. McKee.
The Company received approximately $20 million in proceeds from the private
placement. The Company used the private placement proceeds as follows: $8
million was utilized to reduce the principal balance due under the Restated
Credit Agreement; $2.5 million was utilized to repay a secondary credit line;
$2.5 million was utilized to pay outstanding balances to various key food and
paper distributors; and the remaining amount was used primarily to pay down
outstanding balances due certain other vendors. The reduction of the debt under
the Restated Credit Agreement and the secondary credit line, both of which carry
a 13% interest rate, reduced the Company's interest expense by more than $1.3
million annually.
The purchasers in the private placement included: CKE (6,162,299 shares of
Common Stock and 61,636 shares of Series A Preferred Stock); Fidelity (438,596
shares of Common Stock and 4,385 shares of Series A Preferred Stock); C. Thomas
Thompson (21,929 shares of Common Stock and 219 shares of Series A Preferred
Stock); Terry N. Christensen (21,929 shares of Common Stock and 219 shares of
Series A Preferred Stock); William P. Foley, II (219,298 shares of Common Stock
and 2,192 shares of Series A Preferred Stock); and Burt Sugarman (54,824 shares
of Common Stock and 548 shares of Series A Preferred Stock).
DESCRIPTION OF SERIES A PREFERRED STOCK
The rights, preferences, privileges and restrictions for the Series A
Preferred Stock are set forth in the Certificate of Designation of Series A
Preferred of the Company, filed with the Secretary of State of the State of
Delaware on February 18, 1987 (the "Certificate of Designation"), a copy of
which is attached hereto as Appendix I.
The principal terms of the Series A Preferred Stock are summarized below.
Such summary is qualified in its entirety by reference to the Certificate of
Designation which is incorporated herein by this reference.
LIQUIDATION PREFERENCE. Upon any liquidation (voluntary or otherwise),
dissolution or winding up of the Company, holders of the Series A Preferred
Stock will be entitled to receive an amount equal to $114.00 per share, plus
accrued unpaid dividends, based upon the number of days elapsed and a 360-day
year (the "Liquidation Preference"), prior to any distribution to holders of
Common Stock.
DIVIDENDS. Holders of Series A Preferred Stock have the right to receive,
in preference to any dividends in cash or property (other than capital stock) to
holders of Common Stock, cumulative dividends, accruing from February 14, 1997,
of $16.53 per share per annum, subject to adjustment in certain circumstances.
Such dividends will be payable in arrears in cash commencing on August 19, 1997
and quarterly thereafter on the 19th day of November, February, May and August
to holders of record of the Series A Preferred Stock on such dates as the Board
of Directors may from time to time determine, when and as declared by the Board
of Directors. If the holders of a majority of the shares of Common Stock
represented in person or by proxy at the Meeting approve Proposal 3, accrued
dividends will be taken into account upon
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<PAGE> 30
conversion of the Series A Preferred Stock into Common Stock. If Proposal 3 is
not approved, the Series A Preferred Stock will continue to accrue dividends,
payable as set forth above.
VOTING RIGHTS. Holders of Series A Preferred Stock have no voting rights
except as follows: (i) upon failure of the Company to declare and pay any two
dividends, whether or not consecutive, or upon failure of the Company to redeem
the outstanding Series A Preferred Stock on or prior to February 19, 1999,
holders of Series A Preferred Stock will have the right, voting as a class to
elect two additional Directors to the Board of Directors; and (ii) approval of
holders of 2/3 of the outstanding shares of Series A Preferred Stock will be
required for an amendment to the Company's Restated Certificate of Incorporation
which would materially alter or change the powers, preferences or special rights
of the Series A Preferred Stock so as to affect them adversely.
CONVERSION. If the holders of the Common Stock approve Proposal 3, each
outstanding share of the Series A Preferred Stock will automatically be
converted into the number of shares of Common Stock obtained by dividing the
liquidation preference by $1.14, subject to adjustment. At August 6, 1997, the
liquidation preference will be $121.94 which would result in 9,382,414 shares of
Common Stock being issued upon approval of Proposal No. 3 and conversion of the
Series A Preferred Stock.
MANDATORY REDEMPTION. If the holders of Common Stock do not approve
Proposal 3, the Company will be required to redeem all outstanding shares of
Series A Preferred Stock on or prior to February 19, 1999 at a redemption price
equal to the Liquidation Preference. If the Company defaults on the obligation
to redeem the Series A Preferred Stock, then the dividend rate shall be
increased to $20.52 per annum and the holders of the Series A Preferred Stock
shall be entitled, voting as a separate class, to elect two additional
Directors, unless such holders are already entitled to elect two Directors.
PROPOSAL
The Board of Directors has concluded that the restructuring of its
capitalization was in the best interests of the Company and its stockholders
because it has, among other things, provided a new source of capital infusion
into the Company without increasing the Company's outstanding indebtedness. In
order (i) to further enhance the equity interests of the Lenders in the Company,
thereby strengthening the bond between their interests and those of the other
holders of Common Stock and (ii) to avoid the need to pay cash dividends on the
Series A Preferred Stock aggregating $1,449,995 per year and to redeem the
Series A Preferred Stock by February 19, 1999, the Board of Directors is asking
the stockholders to ratify the capital restructuring described herein, including
the conversion of the Series A Preferred Stock into Common Stock pursuant to
Section 9 of the Certificate of Designation.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF THE CAPITAL
RESTRUCTURING.
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<PAGE> 31
PROPOSAL NO. 4
APPROVAL OF AMENDMENT OF THE COMPANY'S 1991 STOCK OPTION PLAN
DESCRIPTION OF THE AMENDMENT
Subject to the approval of the stockholders, the Board of Directors, on the
recommendation of the Compensation Committee, has amended the Company's 1991
Stock Option Plan (the "1991 Option Plan") to increase the number of shares of
Common Stock subject to the plan by 1,500,000. The Board of Directors is of the
opinion that the 1991 Option Plan has helped the Company compete for, motivate
and retain high caliber executive, administrative and professional employees,
and that it is in the best interests of the Company and its stockholders to
amend the 1991 Option Plan as proposed. Consistent with the Company's
compensation objectives, rewards under the 1991 Option Plan is dependent on
those factors which directly benefit the Company's stockholders and appreciation
in the market value of the Common Stock.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
THE AMENDMENT OF THE 1991 OPTION PLAN
DESCRIPTION OF THE 1991 OPTION PLAN
The 1991 Option Plan, as amended, will cover up to an aggregate of
5,000,000 shares of Common Stock. The 1991 Option Plan is administered by the
Board or, at its option, the committee, whose members are appointed by the Board
of Directors (the "Committee"). All salaried employees of the Company and its
subsidiaries are eligible to receive options. As of June 16, 1997, there were
approximately 550 employees currently eligible to participate in the 1991 Option
Plan and approximately 350 employees holding outstanding options under the 1991
Option Plan.
The Committee has sole discretion to determine the employees to receive
options under the 1991 Option Plan and the timing and amount of options granted
under the 1991 Option Plan. The Committee may grant options pursuant to the 1991
Option Plan which are intended to meet the requirements of incentive stock
options ("ISOs") as defined in Section 422 of the Internal Revenue Code of 1986,
as amended ("Internal Revenue Code"), or options not intended to be ISOs
("Non-Qualified Options"). In addition, the Company may issue SARs pursuant to
the 1991 Option Plan. SARs are issued in tandem with options and require the
payment upon exercise of an amount equal to the strike price of the option and
the fair market value of the stock on the date of exercise. Such payment can be
made by the Company in either cash or stock. The committee has the discretion to
determine the exercise price of any option, although in the case of an ISO the
price may not be less than 100% of the fair market value of the Common Stock at
the time of grant, as determined by the closing price of the Common Stock on the
NASDAQ National Market on such date. Shares subject to, but not delivered under,
an option
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<PAGE> 32
terminating or expiring for any reason prior to its exercise in full are
available for the grant of future options under the 1991 Option Plan.
The total number of shares with respect to which options may be granted to
any employee during any one fiscal year may not exceed 300,000 shares. As to
ISOs, the Internal Revenue Code limits to $100,000 the fair market value (as of
the date of grant) of stock for which ISOs may become exercisable in any one
year. No ISO may be granted to any employee who immediately after the granting
of such ISO would own more than 10% of the issued and outstanding Common Stock
("10% Stockholder"), unless such ISO is granted at 110% of the value of the
Common Stock at the time of such grant. The term of an option is determined by
the Committee, but may not exceed ten years from the date on which the option is
granted. In the case of ISOs granted to a 10% Stockholder, the term may not
exceed five years.
In the event any change is made in the Company's capitalization that
results from a stock dividend, recapitalization, reorganization, merger,
consolidation, split-up, combination or exchange of shares or any similar change
affecting the Common Stock, appropriate adjustment, as determined by the
Compensation Committee, will be made in the exercise price and in the number and
class of shares subject to the option.
The Board of Directors may amend or terminate the 1991 Option Plan from
time to time in such respects as the Board may deem advisable; provided that the
Board may not (i) increase the number of shares subject to the 1991 Option Plan
without stockholder approval; (ii) materially modify the requirements as to
eligibility for participation; or (iii) materially increase the benefits
accruing to participants under the 1991 Option Plan.
An optionee who is granted an ISO generally will not recognize taxable
income either upon the grant or the exercise of an ISO, although the exercise
may be subject to the alternative minimum tax. No deduction will ordinarily be
available to the Company as a result of the grant or exercise of ISOs. Upon the
sale of exchange of the shares underlying an ISO more than two years after the
date of grant and one year after the date of exercise, any gain or loss will be
treated as long-term capital gain or loss. If these holding periods are not
satisfied, the optionee will recognize ordinary income at the time of sale or
exchange equal to the difference between the exercise price and the lower of (i)
the fair market value of the shares on the date of exercise or (ii) the sales
price of the shares. Any gain recognized on such a premature disposition of
shares in excess of the amount treated as ordinary income will be characterized
as long-term or short-term capital gain, depending on the holding period.
An optionee granted Non-Qualified Options will not recognize any taxable
income at the grant of the option, but will generally realize ordinary income
for federal income tax purposes at the time of exercise of such options equal to
the difference between the fair market value of the Common Stock on the date of
exercise and the exercise price. Any taxable income recognized in connection
with an option exercised by an optionee who is an employee of the Company will
be subject to tax withholding by the Company. Upon resale of such shares by the
optionee, any difference between the sale price and the optionee's exercise
price, to the extent not recognized as taxable income as described above, will
be treated as long-term or short-term capital gain or loss, depending upon the
holding period. The Company will be entitled to a tax
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<PAGE> 33
deduction in the same amount as the ordinary income recognized by the optionee
with respect to shares acquired upon exercise of a Non-Qualified Option.
The foregoing is only a summary of certain effects of federal income
taxation upon the optionee and the Company with respect to the grant and
exercise of options under the 1991 Option Plan, does not purport to be complete
and does not discuss the tax consequences of the optionee's death or the income
tax laws of any local, state or foreign jurisdiction in which any optionee may
reside.
The following table sets forth certain information with respect to stock
options granted pursuant to the 1991 Option Plan since January 2, 1996 to (i)
the Named Executives, (ii) all current executive officers as a group, and (iii)
all non-executive officer employees as a group. The options shown below are not
necessarily indicative of the number of options that may be granted in the
future.
AMENDED PLAN BENEFITS
1991 STOCK OPTION PLAN
<TABLE>
<CAPTION>
NAME & POSITION DOLLAR VALUE ($)(1) NUMBER OF OPTIONS
--------------- ------------------- -----------------
<S> <C> <C>
C. Thomas Thompson - 0 - 160,000
James T. Holder - 0 - 190,500
Michael T. Welch - 0 - 80,000
Albert J. DiMarco - 0 - 100,000
All Executive Officers as a group (6 - 0 - 639,750
persons)
Non-Executive Officer Employees - 0 - 461,656
as a group (345 persons)
</TABLE>
- -------------
(1) Based on the difference between the exercise price and the closing price of
the Common Stock of $1.1875 as reported on the NASDAQ National Market on
June 16, 1997.
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<PAGE> 34
APPROVAL OF AMENDMENT OF THE COMPANY'S 1994 STOCK OPTION
PLAN FOR NON-EMPLOYEE DIRECTORS
PROPOSAL NO. 5
DESCRIPTION OF THE AMENDMENT
Subject to the approval of the stockholders, the Board of Directors, on the
recommendation of the Compensation Committee, has amended the Company's 1994
Stock Option Plan for Non-Employee Directors (the "Directors Plan") to increase
the number of shares of Common Stock subject to the Directors Plan by 4,800,000,
to specify certain additional automatic grants to Directors eligible to
participate under the Directors Plan, to provide that future options granted
under the Directors Plan will vest immediately and to provide that, in general,
options granted under the Directors Plan do not terminate if the grantee ceases
to be a Non-Employee Director. The Board of Directors is of the opinion that the
Directors Plan has helped the Company compete for, motivate and retain high
caliber directors, that it is in the best interests of the Company and its
stockholders to amend the Directors Plan as proposed. Consistent with the
Company's compensation objectives, rewards under the Directors Plan is dependent
on those factors which directly benefit the Company's stockholders and
appreciation in the market value of the Common Stock. A copy of the Directors'
Plan, as amended, is attached hereto as Appendix II.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
THE AMENDMENT OF THE DIRECTORS PLAN
DESCRIPTION OF THE DIRECTORS PLAN
SHARES OF STOCK SUBJECT TO THE PLAN. There will be 5,000,000 shares of
Common Stock authorized for the grant of options under the Directors Plan. This
number is subject to adjustment for subsequent stock splits, stock dividends,
recapitalization, reorganization, merger consolidation or similar events. The
shares will be authorized but unissued shares of Common Stock and may include
treasury shares. Shares subject to options which expire or are canceled will be
available for future grants under the Directors Plan.
ADMINISTRATION OF THE PLAN. The Directors Plan shall be administered by the
Board of Directors or a Committee thereof consisting of at least two members
selected by, and serving the pleasure of the Board of Directors (in either case,
the "Committee"). The Committee will have the discretion to adopt rules and
regulations and to impose conditions upon the exercise of the options which it
deems appropriate to administer the Directors Plan and which will not be
inconsistent with the Directors Plan.
ELIGIBILITY FOR PARTICIPATION. "Non-Employee Directors" shall participate
in the Director Plan. There are currently six Non-Employee Directors.
Non-Employee Directors means a member of the Board of Directors who is not an
employee of the Company or any of its subsidiaries for at least the last year.
TERM OF THE PLAN. The term of the Director Plan is ten years, commencing
July 26, 1994. No options may be granted after July 26, 2004, but the exercise
periods of previously granted options may extend beyond that date.
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<PAGE> 35
DESCRIPTION OF OPTIONS. Each Non-Employee Director serving on the Board as
of July 26, 1994 received options to purchase 12,000 shares. Each new
Non-Employee Director elected or appointed subsequent to that date also received
options to purchase 12,000 shares. Each Non-Employee Director has also received
additional options to purchase 3,000 shares of Common Stock on the first day of
each fiscal year. The Board of Directors has approved, subject to stockholder
approval: (i) an increase in the option grant to new Non-Employee Directors to
100,000 shares, commencing on the date of the Meeting; (ii) an increase in the
annual option grant to 20,000 shares, commencing on December 30, 1997; and (iii)
the grant of an option to purchase 300,000 shares to each Non-Employee Director
who is a Director both immediately prior to and following the Meeting, i.e.,
Messrs. Christensen, Fisher, Foley, McKee and Sugarman. The exercise price of
each option will be 100% of the fair market value of the underlying Common Stock
on the date of the grant. The fair market value shall be the closing price of
Common Stock as reported on the NASDAQ National Market system or other
established securities exchange on the date of the grant.
EXERCISE PERIOD. Options expire ten years after the date of the grant.
One-fifth of the options initially received and granted prior to the date of the
Meeting become exercisable each year. One-third of the options received annually
and granted prior to the date of the Meeting become exercisable each year.
Options granted on or after the date of the Meeting are exercisable immediately
upon grant. Options are exercisable whether or not the Non-Employee Director is,
at the time of exercise, an eligible member of the Board, unless the
Non-Employee Director is removed for cause.
PAYMENT FOR OPTIONS. The purchase price for all options will be payable in
full upon exercise. The prices may be paid in cash or in Common Stock or in a
combination of cash and Common Stock, at the optionee's election.
TRANSFERABILITY. Options may not be transferred or assigned except upon the
death of the optionee.
AMENDMENTS TO THE PLAN. The Board may discontinue, amend, alter or suspend
the Director Plan at any time, except that stockholder approval is required for
any amendment required to be approved by Rule 16b-3 under the Exchange Act. In
addition, provisions of the Director Plan related to eligibility and
participation may not be amended more than once every six months, except to
comport with changes in the Internal Revenue Code or the regulations promulgated
thereunder.
FEDERAL INCOME TAX CONSEQUENCES. An optionee does not realize taxable
income when he receives a grant of options and the Company may not claim a tax
deduction in connection with such grants. When an optionee exercises an option,
he will be deemed to have received taxable income in an amount equal to the
difference between the market value of the underlying Common Stock on the date
of exercise and the exercise price. The income realized will be subject to
income taxes, and the Company may claim a tax deduction with respect thereto.
When an optionee sells stock acquired by the exercise of an option and held for
more than one year following the date of exercise, the gain or loss (equal to
the difference between the sale price and the market value on the date of
exercise) will be taxed at long term capital gain or loss rates. If the stock
was held for one year or less, the gain or loss will be treated as short term
capital gain or loss. If and to the extent that the exercise price is paid with
shares of Common Stock, the optionee will not realize any income as a result,
but his unrealized appreciation in the stock tendered will be excluded from his
basis in the stock acquired.
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<PAGE> 36
The following table sets forth certain information with respect to stock
options which would have been granted pursuant to the Directors Plan, as
amended, during fiscal 1996. The options shown below are not necessarily
indicative of the number of options that my be granted in the future.
AMENDED PLAN BENEFITS
NONQUALIFIED STOCK OPTION PLAN
Name & Position Dollar Value ($)(1) Number of Options
--------------- ------------------- -----------------
All Directors who are not Executive $6,250 1,700,000
Officers as a group (6 persons)
- -------------
(1) Based on the difference between the exercise price and the closing price of
the Common Stock of $1.1875 as reported on the NASDAQ National Market on
June 16, 1997.
RATIFICATION OF APPOINTMENT OF
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Proposal No. 6
The Company has engaged the firm of KPMG Peat Marwick LLP, independent
certified public accountants, to report upon the financial statements included
in the Annual Report submitted herewith. A representative from said firm will be
in attendance at the Meeting, will have the opportunity to make a statement if
desired, and will be available to respond to any questions from those in
attendance. The Company has appointed KPMG Peat Marwick LLP to report upon its
financial statements for the fiscal year ending December 29, 1997, subject to
ratification of such appointment by the stockholders at the Meeting. Stockholder
ratification of the Company's independent certified public accountants is not
required by the Company's ByLaws or otherwise. The Board of Directors has
elected to seek such ratification as a matter of good corporate practice and
unanimously recommends that you vote "FOR" such ratification. If the
stockholders do not ratify this appointment, other certified public accountants
will be considered by the Board of Directors upon recommendation of the Audit
Committee.
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<PAGE> 37
OTHER BUSINESS
Management of the Company does not know of any other business that may be
presented at the Meeting. If any matter not described herein should be presented
for stockholder action at the Meeting, the persons named in the enclosed Proxy
will vote the shares represented thereby in accordance with their best judgment.
STOCKHOLDER PROPOSALS FOR
PRESENTATION AT THE 1997 ANNUAL MEETING
The Board of Directors requests that any stockholder proposals intended for
presentation at the 1998 Annual Meeting be submitted to James T. Holder,
Secretary, in writing no later than March 19, 1998, for consideration for
inclusion in the Company's proxy materials for such meeting.
The Company's By-Laws require certain advance notice to the Company of any
nominations by stockholders of persons to stand for election as directors at
stockholders' meetings. Notice of director nominations must be timely given in
writing to the Secretary of the Company prior to the meeting at which the
directors are to be elected. To be timely, notice must be received at the
principal executive offices of the Company not less than 60 nor more than 90
days prior to the meeting of stockholders; provided, however, that in the event
that less than 70 days' notice or prior public disclosure of the date of the
meeting is given or made to the stockholders, notice by the stockholder in order
to be timely must be so received not later than the close of business on the
tenth day following the day on which such notice of the date of the annual
meeting was mailed or public disclosure of the date of the annual meeting was
made, whichever first occurs.
A stockholder's notice with respect to a director nomination must set forth
(i) certain information about the nominee, (ii) the consent of the nominee to
serve as a director if elected, (iii) the name and record address of the
nominating stockholder, (iv) the class or series and number of shares of the
Company which are beneficially owned by such stockholder, (v) a description of
all arrangements or understandings between such stockholder and each proposed
nominee and any other person pursuant to which the nominations are to be made,
(vi) a representation that such stockholder intends to appear in person or by
proxy at the meeting to nominate the persons named, and (vii) certain other
information.
The complete By-Law provisions governing these requirements are available
to any stockholder without charge upon request from the Secretary of the
Company.
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<PAGE> 38
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
This Proxy Statement incorporates by reference Selected Financial Data,
audited financial statements and Management's Discussion and Analysis of
Financial Condition and Results of Operations contained in the Company's Annual
Report to Stockholders for the fiscal year ended December 30, 1996 (which
contains (i) portions of the Company's Annual Report on Form 10-K for the fiscal
year ended December 30, 1996, as amended, and (ii) the Company's Quarterly
Report on Form 10-QSB for the quarterly period ended March 24, 1997), a copy of
which is being delivered with this Proxy Statement.
ANNUAL REPORT ON FORM 10-K
THE COMPANY WILL PROVIDE WITHOUT CHARGE, UPON WRITTEN REQUEST, A COPY OF
THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 30,
1996, AS AMENDED, INCLUDING THE FINANCIAL STATEMENTS AND THE FINANCIAL STATEMENT
SCHEDULES, AND QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTERLY PERIOD ENDED
MARCH 24, 1997. WRITTEN REQUESTS, ACCOMPANIED BY A GOOD FAITH REPRESENTATION
THAT, AS OF JULY 16, 1997, THE PERSON MAKING THE REQUEST WAS THE BENEFICIAL
OWNER OF COMMON STOCK, SHOULD BE DIRECTED TO CHECKERS DRIVE-IN RESTAURANTS,
INC., 600 CLEVELAND STREET, 8TH FLOOR, CLEARWATER, FLORIDA 34615, ATTENTION:
CORPORATE SECRETARY.
By Order of the Board of Directors
/s/ James T. Holder
-------------------------------
JAMES T. HOLDER
SECRETARY
Dated: July 17, 1997
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APPENDIX I
CERTIFICATE OF DESIGNATION
of
SERIES A PREFERRED STOCK
of
CHECKERS DRIVE-IN RESTAURANTS, INC.
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
CHECKERS DRIVE-IN RESTAURANTS, INC., a corporation organized and
existing under the General Corporation Law of the State of Delaware (the
"Corporation"), in accordance with the provisions of Section 103 thereof, DOES
HEREBY CERTIFY:
That pursuant to the authority vested in the Board of Directors in
accordance with the provisions of the Corporation's Restated Certificate of
Incorporation, as amended (the "Restated Certificate of Incorporation"), the
said Board of Directors on February 12, 1997, adopted the following resolution
creating a series of 87,719 shares of Preferred Stock designated as "Series A
Preferred Stock":
RESOLVED, that pursuant to the authority vested in the Board
of Directors of this Corporation in accordance with the provisions of
the Certificate of Incorporation, Series A of Preferred Stock, par
value $.001 per share, of the Corporation be and hereby is created, and
that the designation and number of shares thereof and the voting and
other powers, preferences and relative, participating, optional or
other rights of the shares of such series and the qualifications,
limitations and restrictions thereof are as follows:
SERIES A PREFERRED STOCK
1. DESIGNATION AND AMOUNT. There shall be a series of Preferred
Stock that shall be designated as "Series A Preferred Stock" (hereinafter
referred to as the "Series A Preferred"), and the number of shares constituting
such series shall be 87,719. Such number of shares may be decreased by
resolution of the Board of Directors; provided, however, that no decrease shall
reduce the number of shares of Series A Preferred to less than the number of
shares then issued and outstanding.
2. DIVIDENDS AND DISTRIBUTIONS.
(A) Subject to the prior and superior rights of the
holders of any shares of any series of Preferred Stock ranking prior and
superior to the shares of Series A Preferred with respect to dividends and
distributions (other than payments on liquidation, dissolution or winding
<PAGE> 40
up to which Section 6 hereof is applicable) (hereinafter "Dividends"), each
share of Series A Preferred at that time issued and outstanding, in preference
to shares of any class or series of stock of the Corporation ranking junior to
the Series A Preferred with respect to Dividends, shall be entitled to receive,
out of funds or property legally available for the purpose, a Dividend accruing
from the date hereof and equal, on a per share basis, to $16.53 per annum;
provided, that such Dividends shall accrue from the closing date for the sale of
the Series A Preferred only if either (i) the conversion of the Series A
Preferred pursuant to Section 9 hereof and any change in the number of
authorized or outstanding shares of Common Stock needed to enable the
Corporation to fulfill its obligations hereunder are not approved at the first
action by the Corporation's stockholders occurring after the date hereof (the
"Stockholder Approval") or (ii) the Series A Preferred is not converted into
Common Stock prior to June 30, 1997. Such Dividends shall be payable in arrears
in cash commencing on August 19, 1997 and quarterly thereafter, on the 19th day
of November, February, May and August, to holders of record of the Series A
Preferred on such dates as the Board of Directors (or any authorized Committee
thereof) may from time to time determine, but only when and as declared by the
Board of Directors (or such Committee). Such Dividends shall be payable before
any Dividends shall be declared or paid upon, or set apart for, the issued and
outstanding Common Stock or such other stock of the Corporation into which the
Common Stock may be converted (the "Common Stock"), and shall be cumulative, so
that if at any time any Dividends upon the outstanding shares of Series A
Preferred shall have not been paid thereon, or declared and set apart therefor,
with respect to all preceding dividend periods, the amount of the deficiency
shall be fully paid, or declared and funds or property set apart for payment,
but without interest, before any Dividend shall be paid upon, or declared and
funds or property set apart for, the Common Stock.
(B) If at any time any cash Dividend on any other class
or series of Preferred Stock of the Corporation having cumulative Dividend
rights shall be in default, in whole or in part, no cash Dividend shall be paid,
or declared and set apart for payment, on the Series A Preferred unless
concurrently therewith, there shall be paid, or declared and set apart for
payment, without interest, all Dividends for all prior dividend periods on any
other class or series of cumulative Preferred Stock of the Corporation which may
hereafter be created having with respect to Dividend rights priority over or
parity with the Series A Preferred; provided, however, in the event such default
in Dividend payments is with respect only to the Series A. Preferred and any
other class or any series of cumulative Preferred Stock of the Corporation which
may hereafter be created having with respect to Dividend rights parity with the
Series A Preferred, Dividends may be paid or declared and set apart for payment,
without interest, on the Series A Preferred and such other class or series of
cumulative Preferred Stock in amount proportional to the amounts by which such
Dividends are in default for the Series A Preferred and such other class or
series of cumulative Preferred Stock.
(C) Dividends paid on the Series A Preferred in an
amount less than the total amount of Dividends at the time accrued and payable
shall be allocated pro rata on a share-by-share basis among all such shares at
the time outstanding. The Board of Directors may fix a record date for the
determination of holders of shares of Series A Preferred entitled to receive
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<PAGE> 41
payment of a Dividend declared thereon, which record date shall be no more than
60 days prior to the date fixed for the payment thereof.
(D) Any reference to "Dividends" contained herein shall
not be deemed to include any Dividend payable in capital stock of the
Corporation, or in rights or warrants to acquire capital stock of the
Corporation, nor shall any such reference to "Dividends" in relation to issued
and outstanding shares be deemed to limit, curtail, or divest the authority of
the Board of Directors to make any proper distributions, including distributions
of authorized but unissued Common Stock, if any.
3. VOTING RIGHTS. The holders of shares of Series A Preferred
shall have only the following voting rights:
(A) If the Corporation fails to declare and pay two
Dividends, which holders of Series A Preferred are entitled to receive pursuant
to Section 2 hereof, whether or not such failure is for consecutive periods,
then and in such event, the number of directors constituting the Corporation's
Board of Directors shall be increased by two, and the holders of the Series A
Preferred (voting as a separate class) shall be entitled at any annual meeting
of the stockholders to elect two directors of the Corporation; provided,
however, that the holders of Series A Preferred may, through the written consent
of holders of Series A Preferred representing a majority of the issued and
outstanding shares thereof, elect two directors to serve as directors of the
Corporation until their successors are elected at the next annual meeting of
stockholders. The presence in person or by proxy of the persons entitled to vote
a majority of the shares of the Series A Preferred at any such meeting shall
constitute a quorum for the purpose of electing directors as hereinabove
provided. Such right of the holders of the Series A Preferred to elect directors
may be exercised until the stockholders of the Corporation approve the
conversion of the Series A Preferred into Common Stock pursuant to Section 9
hereof, and when such conversion is so approved, the right of the holders of
Series A Preferred to elect any directors shall cease. The directors so elected
shall serve until their respective successors shall be elected and qualified;
provided, however, that whenever the holders of the Series A Preferred shall
cease to have the special rights to elect directors as above provided, the terms
of office of all persons elected as directors by the holders of the Series A
Preferred, or elected to fill any vacancies or directors so elected by the
holders of the Series A Preferred, shall thereupon automatically terminate.
If, during any interval between annual meetings of stockholders for
the election of directors, and while the holders of the Series A Preferred shall
be entitled to elect directors pursuant to this Paragraph (A) of Section 3, the
number of directors who have been elected by the holders of the Series A
Preferred shall, by reason of death, resignation or removal, be less than two,
the vacancy or vacancies in the directors elected by the holders of the Series A
Preferred may be filled by the written consent of holders of Series A Preferred
representing a majority of the issued and outstanding shares thereof.
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<PAGE> 42
(B) The approval of the holders of two-thirds (2/3) of
the outstanding shares of Series A Preferred (voting as a separate class) shall
be required for an amendment of the Restated Certificate of Incorporation which
would materially alter or change the powers, preferences or special rights of
the Series A Preferred so as to affect them adversely.
(C) Except as required by law, holders of the Series A
Preferred shall have no other voting rights and their consent shall not be
required for taking any corporate action.
4. CERTAIN RESTRICTIONS.
(A) Whenever Dividends payable on the Series A
Preferred as provided in Section 2 are in arrears, thereafter and until all
accrued and unpaid Dividends, whether or not declared, on shares of Series A
Preferred outstanding shall have been paid in full, the Corporation shall not:
(i) declare or pay Dividends on, or redeem or
purchase or otherwise acquire for consideration any shares of stock ranking with
respect to Dividends junior (either as to Dividends or upon liquidation,
dissolution or winding up) to the Series A Preferred;
(ii) declare or pay any Dividends on any shares
of stock ranking with respect to Dividends on a parity (either as to Dividends
or upon liquidation, dissolution or winding up) with the Series A Preferred and
all such parity stock on which Dividends are payable or in arrears in proportion
to the total amounts to which the holders of all such shares are then entitled;
or
(iii) purchase or otherwise acquire for
consideration any shares of Series A Preferred, or any shares ranking with
respect to Dividends on a parity with the Series A Preferred, except in
accordance with a purchase offer made in writing or by publication (as
determined by the Board of Directors) to all holders of Series A Preferred, or
to such holders and holders of any such shares ranking on a parity therewith,
upon such terms as the Board of Directors, after consideration of the respective
annual dividend rates and other relative rights and preferences of the
respective series and classes, shall determine in good faith will result in fair
and equitable treatment among the respective series or classes.
(B) The Corporation shall not permit any subsidiary of
the Corporation to purchase or otherwise acquire for consideration any shares of
the Corporation unless the Corporation could, under Paragraph (A) of this
Section 4, purchase or otherwise acquire such shares at such time and in such
manner.
5. REACQUIRED SHARES. Any shares of Series A Preferred purchased
or otherwise acquired by the Corporation in any manner whatsoever shall be
retired promptly after the acquisition thereof. All such shares shall upon their
retirement become authorized but unissued shares of Preferred Stock and may be
reissued as part of a new series of Preferred Stock to be
- 4 -
<PAGE> 43
created by resolution or resolutions of the Board of Directors, subject to any
conditions and restrictions on issuance set forth herein.
6. LIQUIDATION, DISSOLUTION OR WINDING UP.
(A) Upon any liquidation (voluntary or otherwise),
dissolution or winding up of the Corporation, no distribution shall be made to
the holders of shares of stock ranking junior (upon liquidation, dissolution
or winding up) to the Series A Preferred unless, prior thereto, the holders of
shares of Series A Preferred shall have received an amount per share equal to
$114.00 plus accrued unpaid Dividends, based upon the number of days elapsed
and a 360-day year (the "Liquidation Preference").
(B) In the event, however, that there are not
sufficient assets available to permit payment in full of the Liquidation
Preference and the liquidation preferences of all other series of Preferred
Stock, if any, ranking (upon liquidation, dissolution or winding up) on a parity
with the Series A Preferred, then such remaining assets shall be distributed
ratably to the holders of such parity shares in proportion to their respective
liquidation preferences.
(C) Neither the merger or consolidation of the
Corporation into or with another corporation nor the merger or consolidation of
any other corporation into or with the Corporation shall be deemed to be a
liquidation, dissolution or winding up of the Corporation within the meaning of
this Section 6.
7. CONSOLIDATION, MERGER, ETC. In case (i) the Corporation
shall enter into any consolidation, merger, combination or other transaction in
which the Common Stock is to be exchanged for or changed into other stock or
securities, cash and/or any other property, (ii) a tender or exchange offer for
25% of the outstanding shares of Common Stock is successfully completed, (iii)
the Corporation shall sell all or substantially all of the Corporation's assets,
or (iv) any other event, occurring after a failure by the Company to obtain the
Stockholder Approval at the first action by the Corporation's stockholders
occurring after the date hereof, which results in a change of control of the
Corporation, then in any such case each share of Series A Preferred shall at the
same time be automatically redeemed for the then current Liquidation Preference.
8. REDEMPTION. The Series A Preferred shall be redeemed for the
then current Liquidation Preference on or prior to the second anniversary of the
date hereof. If the Corporation does not redeem the Series A Preferred as
required by this Section 8, then: (i) the Dividend which holders of the Series A
Preferred are entitled to receive hereunder shall increase to $20.52 per share
per annum; and (ii) if the holders of the Series A Preferred are not otherwise
entitled to elect two directors, the number of directors constituting the Board
of Directors shall be increased by two, and the holders of the Series A
Preferred (voting as a separate class) shall be entitled to elect two directors
of the Corporation in accordance with the terms and procedures set forth in
Section 3 hereof.
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<PAGE> 44
9. CONVERSION
(A) The provisions of this Section 9 are subject to, and shall
not take effect until, approval by the Corporation's stockholders.
(B) Upon the date of the Stockholder Approval (the "Conversion
Date"), the Series A Preferred shall be automatically converted into the Common
Stock and such other capital stock of the Corporation as hereinafter provided.
The Corporation shall cause a notice of such stockholder approval to be mailed,
as soon as practicable thereafter, to the holders of record of the outstanding
Series A Preferred on the date of such approval, and to the transfer agent, if
any, for the Series A Preferred. Upon the Conversion Date, the holders of the
Series A Preferred shall be deemed to be holders of the number of shares of the
Common Stock into which their shares of Series A Preferred have been converted,
and shall have no rights with respect to the Series A Preferred except to
exchange the certificate(s) representing the holder's shares of Series A
Preferred for certificates representing Common Stock.
(C) Each share of Series A Preferred shall be convertible at
the office of the transfer agent for the Series A Preferred, if any, or at such
other office or offices, as the Board of Directors of the Corporation may
designate, into the number of fully paid and nonassessable shares of Common
Stock of the Corporation (calculated as to each conversion to the nearest
1/100th of a share) obtained by dividing the then current Liquidation Preference
attributable to a share of Series A Preferred by $1.14, subject to adjustment as
provided in Paragraph (F) of this Section 9 (the "Conversion Rate").
Notwithstanding any other provision of this Section 9, no change in the
Conversion Rate shall actually be made until the cumulative effect of the
adjustments called for by this Section 9 since the date of the last change in
the Conversion Rate would change the Conversion Rate by more than two percent
(2%). However, once the cumulative effect would result in a two percent (2%)
change, then the conversion rate shall be changed to reflect all adjustments
called for by this paragraph and not previously made.
(D) No fractional shares of Common Stock shall be issued upon
conversion of Series A Preferred but, in lieu of any fraction of a share of
Common Stock which would otherwise be issuable in respect of the aggregate
number of shares surrendered for conversion at one time by the same holder, the
Corporation shall pay in cash an amount equal to the sum of the current market
price of the Corporation's Common Stock multiplied by a number equal to the
fraction of a share.
(E) For the purposes of any computation pursuant to this
Section 9, the current market price of the Corporation's Common Stock shall be
deemed to be the average of the daily closing prices of the Corporation's Common
Stock for the thirty (30) consecutive business days commencing forty-five (45)
business days before the date on which such shares are duly converted. For
purposes of this Section 9, the closing price for each day shall be the last
sale price of the Corporation's Common Stock on the NASDAQ National Market, or
if the Corporation's Common Stock is not traded on the NASDAQ National Market,
the average of the bid and asked prices as furnished by any New York Stock
Exchange member firm selected from
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<PAGE> 45
time to time by the Corporation for such purpose, or if no such bid and asked
prices can be obtained from any such firm, the fair market value of one share of
the Common Stock on such day as determined in good faith by the Board of
Directors of the Corporation.
(F) The Conversion Rate shall be subject to adjustment from
time to time in certain cases as follows:
(i) In case the Corporation shall (a) pay a dividend
on its Common Stock in shares of its capital stock, (b) subdivide its
outstanding Common Stock into a greater number of shares, (c) combine the shares
of its outstanding Common Stock into a smaller number of shares, or (d) issue by
reclassification of its Common Stock (including any such reclassification in
connection with a consolidation or merger in which the Corporation is the
continuing corporation) any shares of its capital stock, the Conversion Rate in
effect immediately prior thereto shall be proportionately adjusted so that the
holder of any Series A Preferred thereafter surrendered for conversion shall be
entitled to receive, to the extent permitted by applicable law, the number and
kind of shares of capital stock of the Corporation which he would have owned or
have been entitled to receive after the happening of such event had such Series
A Preferred been converted immediately prior to the happening of such event.
Such adjustment shall be made whenever any of such events shall occur. An
adjustment made pursuant to this Paragraph (F)(i) of Section 9 shall become
effective, retroactively, immediately after the record date in the case of a
stock dividend and shall become effective immediately after the effective date
in the in case of subdivision, combination or reclassification.
(ii) In case the Corporation shall issue rights or
warrants to all holders of its Common Stock entitling them (for a period
expiring within forty-five (45) days after the record date mentioned below) to
subscribe for or purchase Common Stock at a price per share less than the
current market price per share of the Common Stock (as defined above) at the
record date mentioned below, the Conversion Rate then in effect shall be
adjusted by multiplying it by the ratio which (a) the number of shares of Common
Stock outstanding on the date of issuance of such rights or warrants plus the
number of shares which the aggregate offering price of the total number of
shares so offered would purchase at such current market price bears to (b) the
number of shares of Common Stock outstanding on the date of issuance of such
rights or warrants plus the number of additional Common Shares offered for
subscription or purchase. Such adjustment shall be made whenever such rights or
warrants are issued, and shall become effective, retroactively, immediately
after the record date for the determination of shareholders entitled to receive
such rights or warrants.
(iii) In case the Corporation shall distribute to all
holders of its Common Stock (including any such distribution made in connection
with a consolidation or merger in which the Corporation is the continuing
corporation) evidences of its indebtedness or assets, then in such case the
Conversion Rate then in effect shall be adjusted by multiplying it by the ratio
which (a) the current market price per share of the Common Stock (as defined
above) less the fair market value (as determined in good faith by the Board of
Directors of the Corporation, (based upon the opinion of an independent
investment banking firm), whose determination shall
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<PAGE> 46
be conclusive) of the portion of such evidences of indebtedness so distributed
applicable to one share of Common Stock bears to (b) such current market price
per share of the Common Stock at the date of such distribution. Such adjustment
shall be made whenever any such distribution is made, and shall become
effective, retroactively, immediately after the record date for the
determination of shareholders entitled to receive such distribution.
(iv) All calculations hereunder shall be made to the
nearest cent or to the nearest one-hundredth (1/100) of a share, as the case may
be.
(v) In the event that at any time, as a result of an
adjustment made pursuant to Paragraph (F)(i) above, the holder of any Series A
Preferred thereafter converted shall become entitled to receive any shares of
capital stock of the Corporation other than its Common Stock, thereafter the
number of such other shares so receivable upon conversion shall be 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
Paragraphs (F)(i) to (iv), inclusive, above.
Except as otherwise provided for in this Paragraph (F) of Section 9, no
adjustment shall be made on any conversion for share distributions, dividends,
including, without limitation, dividends in property distributions, theretofore
declared and paid or payable on the Common Stock.
Whenever the Conversion Rate is adjusted as herein provided, the
Corporation shall send to the transfer agent, if any, for the Series A Preferred
and to the record holders of the Series A Preferred a statement executed by the
President as to the new Conversion Rate.
(G) Upon obtaining the Stockholder Approval, the Corporation
shall at all times reserve and keep available, out of its authorized and
unissued stock, solely for the purpose of effecting the conversion of the Series
A Preferred, such number of shares of Common Stock as shall from time to time be
sufficient to effect the conversion of all shares of Series A Preferred from
time to time outstanding.
IN WITNESS WHEREOF, the undersigned has executed this Certificate this
14 day of FEBRUARY, 1997.
CHECKERS DRIVE-IN RESTAURANTS, INC.
By: /s/ JAMES T. HOLDER
-------------------------------------------
Senior Vice President and General Counsel
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<PAGE> 47
APPENDIX II
CHECKERS DRIVE-IN RESTAURANTS, INC.
AMENDED AND RESTATED
1994 STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
1. PURPOSE OF THE PLAN. Checkers Drive-In Restaurants, Inc., a
Delaware corporation, hereby adopts this 1994 Stock Option Plan for Non-Employee
Directors, as amended, providing for the granting of stock options to directors
of the Company who are not employees of the Company or any of its Subsidiaries.
The general purpose of the Plan is to secure for the Company and its
stockholders the benefits of the incentive inherent in increased ownership of
Common Stock of the Company by members of the Board of Directors of the Company
who are not employees of the Company or any of its Subsidiaries. It is expected
that such ownership will provide such Non-Employee Directors with a more direct
stake in the future welfare of the Company and encourage them to remain
directors of the Company. It is also expected that the Plan will encourage
qualified persons to become directors of the Company.
2. CERTAIN DEFINITIONS. In addition to the words and terms
elsewhere defined in this Plan, certain capitalized terms used in this Plan
shall have the meanings given to them by the definitions and descriptions in
this Section 2. Unless the context or use indicates another or different meaning
or intent, then such definition shall be equally applicable to both the singular
and plural forms of any of the capitalized words and terms herein defined. The
following words and terms are defined terms under this Plan:
2.1 ANNUAL OPTION GRANT means, in the case of an Annual
Option Grant granted prior to the Amendment Approval, an Option to
purchase 3,000 shares of Common Stock and, in the case of an Annual
Option Grant granted after the Amendment Approval, an Option to
Purchase 20,000 shares of Common Stock (subject, in each case, to
adjustment as provided in Section 11 hereof).
2.2 AMENDMENT APPROVAL means the approval of the
holders of the Common Stock of the amendments to the Plan proposed in
the Company's Proxy Statement dated July 17, 1997.
2.3 AWARD means grants of an Option under this Plan.
2.4 BOARD means the Board of Directors of the Company.
2.5 CODE means the Internal Revenue Code of 1986, as
amended from time to time, or any successor statute thereto.
2.6 COMMITTEE means the Committee of the Board appointed
pursuant to Section 4 hereof.
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2.7 COMMON STOCK means the Common Stock, par value $.001
per share, of the Company.
2.8 COMPANY means Checkers Drive-In Restaurants, Inc., a
Delaware corporation.
2.9 EXCHANGE ACT means the Securities Exchange Act of
1934, as amended from time to time, or any successor statute or
statutes thereto.
2.10 FAIR MARKET VALUE of a share of Common Stock shall
mean the last reported closing sale price of a share of Common Stock as
reported on a national securities exchange or the National Market
System of the National Association of Securities Dealers, Inc.
Automated Quotation System ("NASDAQ"), or the average of the last
closing bid and asked prices in the over-the-counter market as reported
by NASDAQ or as furnished by a broker-dealer regularly making a market
in the Common Stock as selected by the Board, as the case may be. If
there shall be any material alteration in the present system of
reporting sales prices of the Common Stock, or if the Common Stock
shall no longer be traded or listed as set forth above, the Fair Market
Value of the Common Stock as of a particular date shall be determined
under such method as shall be determined by the Committee.
2.11 HOLDER means a Non-Employee Director who has received
an Award under this Plan.
2.12 ISO means an incentive stock option within the
meaning of Section 422A(b), or any successor section, of the Code.
2.13 INITIAL OPTION GRANT means, in the case of an
Initial Option Grant granted prior to the date of the Amendment
Approval, an Option to purchase 12,000 shares of Common Stock and, in
the case of an Initial Option Grant granted on or after the date of the
Amendment Approval, an Option to Purchase 100,000 shares of Common
Stock (subject, in each case, to adjustment as provided in Section 11
hereof).
2.14 NON-EMPLOYEE DIRECTOR means a member of the Board
of Directors of the Company who is not an employee of the Company or
any of its Subsidiaries and who has not been an employee of the Company
or any of its Subsidiaries for a period of at least one year.
2.15 NONQUALIFIED STOCK OPTION means a stock option that
does not qualify as an ISO.
2.16 OPTION means a right granted to a Non-Employee
Director pursuant to the Plan to purchase a specified number of shares
of Common Stock at a specified price during a specified period and on
such other terms and conditions as may be
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<PAGE> 49
specified pursuant to the Plan. All Options granted under this Plan
shall be Nonqualified Stock Options.
2.17 PLAN means this Amended and Restated 1994 Stock
Option Plan for Non-Employee Directors, as it may be amended from time
to time.
2.18 SEC means the Securities and Exchange Commission.
2.19 STOCK OPTION AGREEMENT means the agreement specified
in Section 10 hereof.
2.20 STOCKHOLDERS' MEETING means the meeting of the
Company's stockholders at which the Amendment Approval takes place.
2.21 SUBSEQUENT OPTION GRANT means an Option to purchase
300,000 shares of Common Stock (subject to adjustment as provided in
Section 11 hereof).
2.22 SUBSIDIARY means any present or future subsidiary
of the Company as such term is defined in Section 425, or any successor
section, of the Code.
2.23 TOTAL DISABILITY means a permanent and total
disability as defined in Section 22(e)(3) of the Code.
3. STOCK SUBJECT TO THE PLAN. Subject to the provisions of
Section 11 hereof and this Section 3, the maximum aggregate number of shares of
Common Stock which may be issued upon exercise of Options under the Plan shall
be 5,000,000. Such shares may be, in whole or in part, authorized and unissued
shares of Common Stock or issued shares of Common Stock which shall have been
reacquired by the Company. If any Option shall expire or terminate for any
reason without having been exercised in full, the unexercised shares subject
thereto shall again be available for purposes of the Plan.
4. ADMINISTRATION.
4.1 POWERS. The Plan shall be administered by the Board, which
shall have all of the powers vested in it by the terms of the Plan, such powers
to include authority (within the limitations described herein) to prescribe the
form of the agreement embodying Awards made under the Plan. Subject to the
express provisions of the Plan, the Board shall have plenary authority to
interpret the Plan, to prescribe, amend and rescind the rules and regulations
relating to it and to make all other determinations deemed necessary or
advisable for the administration of the Plan. Any decision of the Board in the
administration of the Plan, as described herein, shall be final and conclusive.
4.2 DELEGATION TO COMMITTEE. Notwithstanding anything to the
contrary contained
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herein, the Board may at any time, or from time to time, appoint a Committee of
at least two members, who shall be members of the Compensation Committee of the
Board (or such other directors as the Board may designate), and delegate to the
Committee the authority of the Board to administer the Plan. Upon such
appointment and delegation, the Committee shall have all the powers, privileges
and duties of the Board, and shall be substituted for the Board, in the
administration of the Plan, except the power to appoint members of the Committee
and to terminate, modify or amend the Plan. The Board may from time to time
appoint members of the Committee in substitution for or in addition to members
previously appointed, may fill vacancies in the Committee and may discharge the
Committee. The Committee shall select one of its members as its chairman and
shall hold its meetings at such times and places as its shall deem advisable. A
majority of its members shall constitute a quorum and all determinations shall
be made by a majority of such quorum. Any determination reduced to writing and
signed by a majority of the members shall be fully as effective as if it had
been made by a majority vote at a meeting duly called and held.
5. ELIGIBILITY. Options shall be granted hereunder only to
Non-Employee Directors.
6. OPTIONS.
6.1 GRANT OF OPTIONS.
(a) Each Non-Employee Director serving on the
Board as of July 26, 1994, shall automatically be granted an
Initial Option Grant, effective July 26, 1994, subject to
approval of the Plan by the stockholders of the Company as
required under Section 13 hereof.
(b) Each new Non-Employee Director who is
appointed or elected to the Board after July 26, 1994, shall
automatically be granted an Initial Option Grant on the day he
or she is appointed or elected to the Board, subject to
approval of the Plan by the stockholders of the Company as
required under Section 13 hereof.
(c) Each Non-Employee Director serving on the
Board as of the first day of each fiscal year, beginning with
fiscal year 1995, shall automatically be granted an Annual
Option Grant on such date, subject to approval of the Plan by
the stockholders of the Company as required under Section 13
hereof.
(d) Each Non-Employee Director serving on the
Board both immediately prior to and immediately following the
Stockholders' Meeting shall automatically be granted a
Subsequent Option Grant as of such date, subject to approval
of the Plan by the stockholders of the Company as required
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<PAGE> 51
under Section 13 hereof.
6.2 OPTION PRICES. The purchase price of the Common
Stock under each Option shall be 100% of the Fair Market Value of the
Common Stock on the grant date (subject to adjustment as provided in
Section 11 hereof).
6.3 TERM OF OPTIONS; LIMITATIONS ON EXERCISE. The term
of each Option shall be for ten years from the date of grant, and,
except as set forth in Section 8 hereof, shall be exercisable whether
or not such Non-Employee Director is at the time of exercise or member
of the Board and in the event of the death of the Non-Employee
Director, may be exercised by his or her estate. All Options granted on
or after the date of the Stockholders' Meeting shall be immediately
exercisable. All options granted prior to the date of the Stockholders'
Meeting shall vest as follows: (i) one-fifth of the shares of Common
Stock subject to each Initial Option Grant shall become exercisable on
a cumulative basis on each of the first five anniversaries of the date
of the grant of such Option; and (ii) one-third of the shares of Common
Stock subject to each Annual Option Grant shall become exercisable on a
cumulative basis on each of the first three anniversaries of the date
of the grant of such Option. With respect to the Initial Option Grant
granted to each Non-Employee Director on July 26, 1994, pursuant to
Section 6.1 hereof, solely for the purpose of determining the
exercisability of such Option, the date of grant shall be deemed to
have been the later of (i) the date such Non-Employee Director was
appointed to the Board or (ii) November 15, 1991; PROVIDED HOWEVER,
that no Options may be exercised until and unless the Plan is approved
by the stockholders of the Company as required under Section 13 hereof.
6.4 EXERCISE OF OPTIONS. Any part of an Option granted
and presently exercisable under the Plan shall be exercisable in whole,
or in part, at any time during the term of the Option. Payment shall be
made in cash or in whole shares of Common Stock already owned by the
Holder of the Option or partly in cash and partly in such Common Stock.
Such notice shall state that the Holder of the Option elects to
exercise the Option, the number of shares in respect of which it is
being exercised and the manner of payment for such shares, and shall
either (i) be accompanied by payment of the full purchase price of such
shares or (ii) fix a date (not more than 10 business days from the date
of exercise) for the payment of the full purchase price of such shares.
Cash payments shall be made by wire transfer, certified or bank check
or personal check, in each case payable to the order of the Company;
PROVIDED, HOWEVER, that the Company shall not be required to deliver
certificates for shares with respect to which an Option is exercised
until the Company has confirmed the receipt of good and available funds
in payment of the purchase price thereof. Common Stock payments (valued
at the Fair Market Value of a share of Common Stock on the date of
exercise) shall be made by delivery of stock certificates in negotiable
form. If certificates representing Common Stock are used to pay all or
part of the purchase price of an Option, separate certificates shall be
delivered by the Company representing the same number of shares as each
certificate so used, and an
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<PAGE> 52
additional certificate shall be delivered representing any additional
shares to which the Holder of the Option is entitled as a result of the
exercise of the Option.
6.5 NONTRANSFERABILITY OF OPTIONS. No Options shall be
transferable otherwise than by will or the laws of descent and
distribution, and an Option may be exercised during the lifetime of the
Holder thereof only by such Holder. A breach by the Holder of any of
the restrictions, terms or conditions provided in the Plan or in the
Holder's Stock Option Agreement will cause the Options covered thereby
to be terminated.
7. ACCELERATION OF OPTIONS. Notwithstanding any contrary
waiting period set forth herein, each outstanding Option granted under the Plan
shall become exercisable in full for the aggregate number of shares covered
thereby in the event (i) the Board and, if required by law, the stockholders of
the Company shall approve (a) any consolidation or merger of the Company in
which the Company is not the continuing or surviving corporation or pursuant to
which shares of Common Stock would be converted into cash, securities or other
property, other than a merger of the Company in which the holders of Common
Stock immediately prior to the merger have the same proportionate ownership of
common stock of the surviving corporation immediately after the merger, or (b)
any sale, lease, exchange, or other transfer (in one transaction or a series of
related transactions) of all, or substantially all, of the assets of the
Company, or (c) the adoption of any plan or proposal for the liquidation or
dissolution of the Company, or (ii) any person (as such term is defined in
Sections 13(d)(3) and 14(d)(2) of the Exchange Act), corporation or other entity
(other than the Company or any employee benefit plan sponsored by the Company or
any Subsidiary) (a) shall purchase any Common Stock of the Company (or
securities convertible into the Company's Common Stock) for cash, securities or
any other consideration pursuant to a tender offer or exchange offer, without
the prior consent of the Board, and (b) shall become the "beneficial owner" (as
such term is defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company representing 20 percent or more of the
combined voting power of the then outstanding securities of the Company
ordinarily (and apart from rights accruing under special circumstances) having
the right to vote in the election of directors (calculated as provided in
paragraph (d) of such Rule 13d-3 in the case of rights to acquire the Company's
securities), or (iii) during any period of two consecutive years, individuals
who at the beginning of such period constitute the entire Board shall cease for
any reason to constitute a majority thereof unless the election, or the
nomination for election by the Company's stockholders of each new director was
approved by a vote of at least two-thirds of the directors then still in office
who were directors at the beginning of the periods. Any transaction referred to
in the foregoing clause (i) is herein called an Approved Transaction, any
purchase pursuant to a tender offer or exchange offer or otherwise as described
in the foregoing clause (ii) is herein called a Control Purchase and the
cessation of individuals constituting a majority of the Board as described in
the foregoing clause (iii) is herein called a Board Change. The Stock Option
Agreement evidencing Options granted under the Plan may contain such provisions
limiting the
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<PAGE> 53
acceleration of the exercise of Options as provided in this Section 7 as the
Board deems appropriate to ensure that the penalty provisions of Section 4999 of
the Code, or any successor thereto in effect at the time of such acceleration,
will not apply to any stock received by the Holder from the Company.
8. REMOVAL BY THE STOCKHOLDERS FOR CAUSE. If a Holder is
removed from the Board by the stockholders of the Company for cause prior to the
exercise of any Option (for these purposes, cause shall include, but not be
limited to, dishonesty, incompetence, moral turpitude, other misconduct of any
kind and the refusal to perform his or her duties and responsibilities for any
reason other than illness or incapacity), then all unexercised Options held by
such Holder shall immediately be cancelled and terminate; PROVIDED, HOWEVER,
that if such removal occurs within 12 months after a Control Purchase or Board
Change, termination for cause shall only mean a felony conviction for fraud,
misappropriation or embezzlement, and if removed for any other reason, all
outstanding Options may be exercised at any time during the remainder of the
period during which such Holder would have been able to exercise such Option had
the Holder not been removed from office.
9. NONALIENATION OF BENEFITS. No right or benefit under the
Plan shall be subject to anticipation, alienation, sale, assignment,
hypothecation, pledge, exchange, transfer, encumbrance or charge, and any
attempt to anticipate, sell, assign, hypothecate, pledge, exchange, transfer,
encumber or charge the same shall be void. No right or benefit hereunder shall
in any manner be liable for or subject to the debts, contracts, liabilities or
torts of the person entitled to such benefit.
10. WRITTEN AGREEMENT. Each grant of an Option hereunder shall
be evidenced by a Stock Option Agreement, each in such form and containing such
terms and provisions not inconsistent with the provisions of the Plan as the
Board from time to time shall approve. A written Stock Option Agreement shall be
promptly executed and delivered by the Company and the grantee, provided that
such grant of Options shall terminate if such written agreement is not signed by
such grantee (or his or her attorney) and delivered to the Company within 90
days after the delivery of such agreement to the grantee. Any such written
agreement may contain such provisions as the Board deems appropriate to ensure
that the penalty provisions of Section 4999 of the Code, or any successor
thereto, will not apply to any stock received by the Holder from the Company.
11. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. The Stock Option
Agreements evidencing Awards may contain such provisions as the Board shall
determine to be appropriate for the adjustment of the number and class of shares
subject to each outstanding Option and the option prices thereof in the event of
changes in the outstanding Common Stock of the Company by reason of any stock
dividend, distribution, split-up,
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<PAGE> 54
recapitalization, combination or exchange of shares, merger, consolidation or
liquidation and the like, and, in the event of any such change in the
outstanding Common Stock of the Company, the aggregate number and class of
shares available under the Plan shall be appropriately adjusted by the Board,
whose determination shall be conclusive.
12. TERMINATION AND AMENDMENT. Unless the Plan shall theretofore
have been terminated as hereinafter provided, no Awards may be made under the
Plan after July 26, 2004. The Board may at any time prior to July 26, 2004
terminate the Plan, and the Board may at any time also modify or amend the Plan
in such respects as it shall deem advisable; PROVIDED, HOWEVER, that the Board
may not (i) amend the provisions of Sections 5, 6.1, 6.2 or 6.3 more often than
once every six months, other than to comport with changes in the Code, the
Employee Retirement Income Security Act, or the rules thereunder, or (ii)
without the approval of the Holders of a majority of the voting securities of
the Company present, either in person or by proxy, and entitled to vote (a)
materially increase (except as provided in Section 11 hereof) the maximum number
of shares which may be issued under the Plan, (b) materially modify the
requirements as to eligibility for participation in the Plan, or (c) materially
increase the benefits accruing to participants under the Plan. No termination,
modification or amendment of the Plan or any outstanding Stock Option Agreement
may, without the consent of the Holder to whom any Award shall theretofore have
been granted, adversely affect the rights of such Holder with respect to such
Award. The Plan shall automatically terminate in the event that it is not
approved by the stockholders of the Company as required under Section 13 hereof.
13. EFFECTIVENESS OF THE PLAN. The Plan shall become effective
as of July 26, 1994, provided that the Plan shall have been approved at the 1995
Annual Stockholders' Meeting of the Company (or at any earlier special meeting
of stockholders) by the holders of a majority of the shares of Common Stock
represented at the meeting (in person or by proxy) and entitled to vote thereon.
If the Plan is not so approved it shall automatically terminate, and all Options
shall automatically be cancelled and be of no further force or effect.
14. RIGHTS OF A HOLDER OR A STOCKHOLDER. The Holder of an Option
shall have none of the rights of a stockholder with respect to the shares
subject to the Option until such shares shall be transferred to the Holder upon
the exercise of the Option.
15. GOVERNMENT AND OTHER REGULATIONS. The obligation of the
Company with respect to Awards shall be subject to (i) all applicable laws,
rules and regulations and such approvals by any governmental agencies as may be
required, including, without limitation, the effectiveness of a registration
statement under the Securities Act of 1933, as amended, y and (ii) the rules and
regulations of any securities exchange on which the Common Stock may be listed.
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<PAGE> 55
16. WITHHOLDING. The Company's obligation to deliver shares of
Common Stock upon the exercise of any Option granted under the Plan shall be
subject to applicable Federal, state and local tax withholding requirements.
Federal, state and local withholding tax due upon the exercise of any Option may
be paid in shares of Common Stock upon such terms and conditions as the Board
shall determine; PROVIDED, HOWEVER, that the Board in its sole discretion may
disapprove such payment and require that such taxes be paid in cash.
17. SEPARABILITY. The Plan is intended to qualify for an
exemption from the operation of Section 16(b) of the Exchange Act, pursuant to
Rule 16b-3. If any of the terms or provisions of this Plan conflict with the
requirements of Rule 16b-3 under the Exchange Act (as the same shall be amended
from time to time), then such terms or provisions shall be deemed inoperative to
the extent they so conflict with the requirements of said Rule 16b-3.
18. NON-EXCLUSIVITY OF THE PLAN. Neither the adoption of the
Plan by the Board nor the submission of the Plan to the stockholders of the
Company for approval shall be construed as creating any limitations on the power
of the Board to adopt such other incentive arrangements as it may deem
desirable, including, without limitation, the granting of stock options and the
awarding of stock and cash otherwise than under the Plan, and such arrangements
may be either generally applicable or applicable only in specific cases.
19. EXCLUSION FROM PENSION AND PROFIT-SHARING COMPUTATION. By
acceptance of an Award, each Holder shall be deemed to have agreed that the
grant of any Option and the exercise thereof are special incentive compensation
and that they will not be taken into account as "salary" or "compensation" or
"bonus" in determining the amount of any payment under any pension, retirement
or other qualified employee benefit plan of the Company.
20. GOVERNING LAW. The Plan shall be governed by, and construed
in accordance with, the laws of the State of Delaware.
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APPENDIX A
PROXY
CHECKERS DRIVE-IN RESTAURANTS, INC.
ANNUAL MEETING OF STOCKHOLDERS -- AUGUST 6, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints C. Thomas Thompson, Richard E. Fortman
and Joseph N. Stein, and each of them, proxies with full power of substitution,
for and in the name of the undersigned to vote all shares of Common Stock of
Checkers Drive-In Restaurants, Inc., a Delaware corporation (the "Company"),
that the undersigned would be entitled to vote at the Company's 1997 Annual
Meeting of Stockholders to be held on August 6, 1997 (the "Meeting"), and at any
adjournments thereof, upon the matters set forth in the Notice of the Meeting as
stated hereon, hereby revoking any proxy heretofore given. In their discretion,
the proxies are further authorized to vote upon such other business as may
properly come before the Meeting or any adjournments thereof.
The undersigned acknowledges receipt of the Notice of the Meeting and
the accompanying Proxy Statement, Annual Report and Form 10-Q.
(Continued and to be SIGNED on the other side)
- -----------------------------------------------------------------
-- FOLD AND DETACH HERE --
ADMISSION TICKET
ANNUAL MEETING
OF
STOCKHOLDERS OF CHECKERS DRIVE-IN RESTAURANTS, INC.
Wednesday, August 6, 1997 AM (Local Time)
RUTH ECKERD HALL
1111 MCMULLEN BOOTH ROAD
CLEARWATER, FLORIDA
THE BOARD RECOMMENDS A VOTE "FOR" PROPOSALS 1, 2, 3, 4, 5 AND 6.
Please mark your vote as indicated in this example: |X|
1. Election of Directors Below.
Nominees: Burt Sugarman and Jean Giles Wittner
For, except vote withheld from the following nominee(s):
- -----------------------------------------------------------------
<TABLE>
<CAPTION>
FOR WITHHELD ABSTAIN
<S> <C> <C> <C>
2. Approve an amendment to the Certificate [ ] [ ] [ ]
Incorporation which would increase the
authorized shares of Common Stock
3. Ratification and approval of the capital [ ] [ ] [ ]
restructuring of the Company, including
conversion of the Company's Series A
Preferred Stock into Common Stock
4. Adoption of an amendment to the Company's [ ] [ ] [ ]
1991 Stock Option Plan.
5. Adoption of an amendment to the Company's [ ] [ ] [ ]
1994 Stock Option Plan for Non-Employee
Directors.
6. Ratification of the appointment of KPMG [ ] [ ] [ ]
Peat Marwick LLP as the Company's
independent auditors.
</TABLE>
THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO CONTRARY DIRECTION IS INDICATED,
WILL BE VOTED FOR THE ELECTION OF THE NOMINEES LISTED ABOVE, FOR ADOPTION OF
PROPOSALS 2, 3, 4, 5 AND 6 AND AS SAID PROXIES DEEM ADVISABLE ON SUCH OTHER
MATTERS AS MAY COME BEFORE THE MEETING.
Date: SIGNATURE
-------------------- -----------------
NOTE: Please sign exactly as name appears hereon. Joint owners should each sign.
When signing as attorney, executor, administrator, trustee or guardian,
please give full title as such.
